Speech on Economic Policies of the Parties

Speech on Economic Policies of the Parties

Mills, Ogden Livingston, 1884-1937

WWP16716

1932 July 11

Secretary of the Treasury Odgen Mills defends the Republican administration’s economic policies in dealing with the Great Depression.

Cary T. Grayson Papers, Woodrow Wilson Presidential Library, Staunton, Virginia

English

The speech of Ogden L. Mills, secretary of the treasury, last night in Faneuil Hall, follows in full:

My time being limited, I propose to confine my remarks this evening to a discussion of some of the economic questions presented in the speech of acceptance of the candidate and in the platform of the Democratic party. Later I hope to discuss the Republican principles and policies. Tonight we are just taking off some of the trimmings and tin foil to get at the facts.

The basis of the Democratic appeal is clearly outlined. They propose to place the blame for the depression on the present administration; they promise, if returned to power, that, as the candidate exclaimed, “Happy days will come again.” They lay claim to being the party of liberalism and progress.

Now, the depression began shortly after President Hoover had taken office. Even before that time, it was already under way in many countries. Resulting, as it did, from the combined effects of many economic forces so deep-seated and so violent as to defy arrest anywhere and everywhere, it eventually swept the world.

While making all allowance for the temptation to a party out of power to make full use of such an argument, to charge any government anywhere with the responsibility for such a world disaster is sheer nonsense.

In so far as the past is concerned, the real question for the American people to decide is: Has the administration, in the face of this world-wide calamity, conducted the affairs of the government with that judgment and skill which would mitigate the effects of the depression and lay the foundation for recovery? It can be demonstrated beyond question that it has. I challenge Gov. Roosevelt, instead of indulging in vague and ambiguous attacks, to state specifically what the present administration has failed to do or has done in this emergency that is open to fair criticism, and what steps he would have taken that have not been taken to meet the successive forces that have threatened to undermine and destroy economic structure and to bring complete disaster to our people.

RECORD IN CONGRESS

What his party, if in power, would have done and would do, is unmistakably indicated by the record of the Democratic House of Representatives under leadership of the Democratic candidate for the vice-presidency. Before discussing economic questions, may I devote a minute or two to the much-abused term “liberalism.” What justifies the application of the term “liberal” to either candidate or party? Certainly not mere breast-beating and loud claim to the title. There must be a moral quality in true liberalism, without which it becomes an empty name. There must be real convictions and a definite program, unless it is to melt away into mere words.

I cannot detect evidence of true liberalism in either the Democratic candidate or in the Democratic party. Appeal to discontent and a program designed to catch votes cannot be confused with a bold leadership that stakes its all in a battle for the triumph of deep-seated principles. In the face of the shocking system of government existing in New York city which the great Democratic paper, the New York Times, describes as one which “thrives at the expense of justice to the poor and fair-dealing to the millions that cannot boast the acquaintance of the district leader”—and, remember, I am not talking about mere individual delinquencies and failures, but of a system—Gov. Roosevelt’s failure to clean up his own party, and his failure to assert his moral leadership bar him definitely—honest, amiable and attractive gentleman that he is—from spiritual kinship with such liberal statesmen as Woodrow Wilson or Theodore Roosevelt.

All parties claim to be liberal and aggressive and in so far as their aspirations are concerned, honestly are, for the right-thinking men and women that compose them desire to see a correction of the existing evils and a steady improvement in opportunities to all men for advancement. It is not too much to say that all Americans, Democrats and Republicans alike, share a common ideal in their conception of what American life holds in the way of promise.

PURPOSE AND METHOD

The difference, then, is not one of purpose, but of method. The sharp line of demarcation is that under the stress and pressure of existing conditions the Democrats seem willing to try anything, whereas the Republicans are firm in their belief that a violation of well-established, sound, economic principles will not only defeat the purpose of the remedial measures proposed, but will, in fact, result in even greater disaster. The consistent, comprehensive program carried out by the administration has been lacking in neither boldness nor originality, but it prsents a complete contrast to the program of the legislation passed by a Democratic House of Representatives under the leadership of that statesman John Nance Gardner.

Measures actually passed by the Democratic House of Representatives provide for: The printing and issuance of fiat currency; the immediate payment of the bonus; an appropriation of over $1,000,000,000 for postoffices, rivers and harbors, roads, etc., these two items alone aggregating more than $3,000,000,000; the guarantee of bank deposits; instructions to the secretary of the treasury and the federal reserve board to manipulate commondity prices; the unbalancing of a budget balanced by great effort; and putting the government into the general commercial banking business on a huge scale.

All were doubtless well-meaning remedial efforts. Yet they would bring ruin and disaster, running counter as they do to sound economic and financial principles, and being destructive as they are of the confidence so badly needed throughout the country.

Gov. Roosevelt takes exception to this very Republican insistence on adherence to sound economic principles. He said sarcastically in his speech of acceptance: “Our Republican leaders tell us economic laws—sacred, inviolable, unchangeable—that these laws cause panics which no one could prevent. But while they prate of economic laws men and women are starving. We must lay hold of the fact that economic laws are not made by nature. They are made by human beings.”

If by the words “made by human beings,” the Governor means to express the belief that economic laws are the result of a conscious, deliberate purpose, he is entirely mistaken. They are, however, based in a large measure on human nature, of which, if I may quote Burke, “Reason is but a part, and by no means a preponderant one.” From which it follows that we cannot run counter to them without running counter to human nature itself.

Why do we resist the printing of fiat currency? Not simply because it offers no solution, or because a limited amount would necessarily be harmful but because all experience demonstrates that once the printing presses are started, human nature being what it is, there is no stopping them short of disaster.

Why did we fight for many long months to establish the principle of a balanced budget? Not because denial of that principle means necessarily the immediate impairment, but, human nature being what it is, the ultimate destruction of public credit.

Here then is the first great line of cleavage between the Democratic and Republican parties. The Democratic House of Representatives, speaking with greater authority for the Democratic party than any party convention can, demonstrated its willingness to disregard economic law and sound financial principles. The Democratic candidate scoffs at them. By what compass or chart, I wonder, do they propose to direct the economic life of the nation in these perilous times?Taking up now the few definite suggestions to be found in this long speech, the Governor points out that credits “issued in the form of bonds and mortgages, government bonds, bonds of all kinds” are all inter-related. He then asks “Why has Washington failed to understand that all of these groups . . . must be considered together; that each one and every one of them is dependent on every other; each and every one of them affecting the whole financial fabric?” “Statesmanship and vision,” he says sententiously, “require relief to all at the same time.”

Does the Governor think he is making an original discovery? Where has he been these many months? Doesn’t he know that at the President’s suggestion the Congress provided additional capital for the federal land banks, and made provision through the reconstruction corporation for additional credit to joint stock land banks, intermediate credit banks, and livestock loan companies, all in the interest of strengthening agricultural credit? Doesn’t he know that the Reconstruction Finance Corporation has been created with $2,000,000,000 of available funds to underpin the whole credit structure of the nation by providing necessary credits for banks, for insurance companies, for mortgage companies, for building and loan associations, and for railroads, whose securities are held by the billion by the great fiduciary institutions of the country, to whom are entrusted the savings of the nation? Doesn’t he know that the President has recommended the creation of home loan discount banks to take care of the credit needs of home builders and home owners?

STATES AND MUNICIPALITIES

Of all the credit groups he mentions the only ones that haven’t been provided for by the federal government are the states and municipalities. Are we to understand from his criticism that he would make the credit of the United States government available to 6000 municipalities? If so, I say to him that if he ever gets the chance—and he won’t!—he’ll bankrupt the United States government.

Gov. Roosevelt states that Republican tariff legislation has erected an impregnable barbed-wire entanglement around our borders, and that he accepts the admirable tariff statement in that platform, adding that “it would protect American business and American labor.” The Democratic platform promises “a competitive tariff for revenue,” which, if we add the Governor’s words, would read: “A competitive tariff for revenue to protect American business and American labor.” If any one can tell me what sort of a tariff this means, I shall heartily welcome an explanation. During the Democratic convention they decried ad infinitum iniquities of the Smoot-Hawley tariff, and the Democratic keynoter, Senator Barkley, fairly spreads himself on this subject. But not once was there mention of the tariff of 1932, which imposed tariff rates equivalent to anywhere from 16 to 61 per cent. ad valorem duties on crude petroleum, fuel and gas oil, gasoline, paraffin, coal, lumber and copper. A tariff, which, by the way, the distinguished keynoter from Kentucky worked and voted for, as did the permanent chairman, Senator Walsh.

When Gov. Roosevelt goes to Texas, Kansas, and Oklahoma and condemns the protective tariff on oil; when he goes to Kentucky and condemns the tariff on coal; when he goes to Arizona, Utah and Montana and condemns the 61 per cent. tariff on copper; when he goes to Oregon and Washington and condemns the protective tariff on lumber, I will believe the sincerity of his criticism of barbed-wire entanglements. But he won’t go!

SOURCE OF BUNCOMBE

I don’t know of any subject in American political life that is responsible for more buncombe than the tariff controversy. Let this be said in favor of the Republican party. It has stood steadfastly and still stands by the protective principle, and can without violation of policy apply this principle to natural resources, whereas our Democratic brethren, of whom Senator Barkley is a typical example, attack the principle of protection, but inevitably logroll and vote for the protection of every article produced in their states. This may be the reason why they are so strongly opposed to placing in an independent board the authority to make the adjustments in the light of ascertained facts without congressional interference. They don’t want scientific tariff-making. They want log-rolling.

Gov. Roosevelt, in the light of past experiences, would abandon our well-established policy of treating all nations alike under the most-favored nation clause, and enter into a series of bargaining tariffs according to the European practice. He would invite the representatives of foreign nations to sit around a table as friends and discuss these problems, we on one side of the table, and the rest of the world, hungry for the American market, on the other. The American people will want to know whether he proposes to consult foreigners as to what the rates of an American tariff law are to be. If so, we take definite issue with him, for the Republican party holds that the rates in our tariff law are a purely domestic question to be determined by the Congress without consultation with foreign governments.

In any event, is this the time to make our reduced purchasing power fully available to foreign manufacturers, rather than to preserve it in the interest of our own employed?

ORIGINAL DISCOVERY

In so far as the farms is concerned, the Governor makes the original discovery that the prosperity of this country is dependent upon a prosperous agricultural population. I had supposed that this was a self-evident, universally recognized economic fact. Other than his suggestion that interest rates on mortgages should be reduced, without saying how it is to be done, I find nothing in his program which does not constitute a mere endorsement in principle of what has been and is now being done, and nothing to indicate how he would proceed to carry out these principles.

Both Gov. Roosevelt and the Democratic platform pledge themselves to drastic economy and an immediate program to abolish useless offices and to consolidate bureaus and sub-divisions of government. If the American people have any sense of humor left, they must have had a laugh out of this. What does the record show? Under Gov. Roosevelt the already swollen expenditures of the state of New York increased from 1929 to 1931 by more than one-third. The Democrats of the House voted 194 to 10 for Speaker Garner’s pork-barrel measure with its 60 closely printed pages of specifically named post-offices. They whittled an economy bill from $150,000,000 to a bare $30,000,000. They then proceeded to pass two measures that would have involved an expenditure of more than $3,000,000,000. They declined to give the President the necessary authority to abolish useless bureaus and consolidate others. In the face of this record, what is their economy worth?

The Democratic platform and the Governor declare themselves in favor “of a sound currency to be preserved at all hazards.” Yet the Democrats in the House of Representatives within the last two months voted 152 to 50 to start the printing presses going and to issue fiat currency, and voted 172 to 3 to instruct the federal reserve system and the secretary of the treasury to manipulate commodity prices.

The Democratic platform and the Democratic candidate pledge themselves to the maintenance of the national credit by a federal budget annually balanced. Yet the Democratic House of Representatives has already voted to unbalance it by more than $3,000,000,000 this fiscal year, and within the last four days the House has passed a bill providing for $322,000,000 of expenditures with no revenue to cover them.

Such promises must be made on the assumption that the American people have no memory or no humor.

QUESTION OF RELIEF

Finally, we come to relief, as to which we would have though the Democratic candidate had definite ideas and definite remedies. But we find that, aside from the fact that he would plant trees where his running-mate would plant post-offices, all Gov. Roosevelt has to say is that he favors the use of certain types of public works and the issuance of bonds. But he is not very sure, for the works are, “In so far as possible” (whatever that may mean), to be self-sustaining if they are to be financed by the issuing of bonds, “and no economic end is served if we merely build without building for a necessary purpose.”The Governor favors shortening the working day and the working week, thus indirectly—though, of course, without giving him any of the credit—indorsing the lead taken by the President in urging furloughs rather than pay cuts in the federal service.

It is apparent that in so far as relief is concerned, the Governor has no program at all. And yet when he spoke, there were three definite programs before the Congress, any one of which he might have accepted as his own. Here is one of the great problems of the day—a problem running deep into our very structure of government—and involving not only immediate difficulties, but having far-reaching effect on the future policies of our country; a problem in which it might be supposed a true liberal would have been more intensely interested than any other. And yet in this, the most important speech which he will make, for it is one in which he outlined his creed, with all of the space which he found for the criticism and abuse of his opponents, he found none for a program of unemployment and destitution relief.

To the casual listener, the program and speech were appealing, but when we subject them to the acid test of careful analysis, except for that part of the program which is indistinguishable from ours they dissolve into vague aspirations, commonplace generalities, and a few promises that had already been broken by his party in Congress even before they were made.

I do not happen to be one of those who believe that goverment, whoever may control it, is the possessor of a magic wand, the mere waving of which will bring back normal times. But it is undeniable that under the present critical conditions the part played by the government is more vital than ever, and the wise management of public affairs, not only in the meeting of emergencies but in the protection of fundamental principles of government and of those conditions essential to recovery, is of supreme importance to the nation.

SUCCESSIVE MEASURES

What I mean is exemplified by the actions taken by the President to meet from time to time new problems arising out of the various phases of the depression, such as the cushioning of the earlier stages of the depression by securing an agreement between industry and labor of the maintenance of wages and by the stimulation of construction programs; the nation-wide organization to relieve the distress that was brought into being; the suspension of intergovernmental debts for one year with a view to preventing economic collapse of central Europe; the creation of the national credit corporation; the bringing into being of the reconstruction finance corporation; the mobilizing of the resources of the federal reserve system so as to make them more effective; and, above all, maintenance of the national credit in an impregnable position through sound public financial policy; and his unyielding resistance to those measures prompted by expediency that would have undermined American institutions and principles of government.

These are but illustrations, yet they serve to emphasize the overwhelming necessity of assuring wise and experience leadership during a period when we may be faced with events that are literally unforeseeable.

In my opinion, no man living has the qualifications for the task equal to the qualifications of President Hoover. Himself a veteran of government service, he is the leader of a seasoned organization, which for three years has been waging on many fronts the battle against depression. Say what you will about us, we are an experienced force, and while under the irresistible pressure of circumstances we have had to give ground, we have preserved intact the essential integrity of the economic fabric of the country and maintained the principles on which the American form of government rests. Is this the time, at the very peak of the struggle, to order the veterans to the rear and to put new recruits in charge? I think not.