• U.S.

THE PRESIDENCY: Economic Dissertation

4 minute read

Economic Dissertation

Washington was still waiting last week for Franklin Roosevelt to say or do something about Sit-Down. The President sat down and did nothing, and while he did it the situation worked out much to his advantage. New Dealers in Senate and House took the initiative without involving him, thereby appeasing those who wanted action, while the President continued to enjoy the love of Labor to whom silence meant consent (see p. 17).

But if he held his peace on one topic, he spoke out boldly on another of national concern: the upward spiral of commodity prices. He was visited by Fiorello LaGuardia of New York City, spokesman for other U. S. mayors, who protested a new PWA rule which requires all of the Federal grants for Public Works projects to be spent on relief labor. This was followed by a visit from a delegation of the House of Representatives who wanted to appropriate $300,000,000 more for PWA, which now has only $155,000,000 left to spend. To both, Franklin Roosevelt answered. “No.”

At his press conference next day he delivered what he called an economic dissertation to explain why he was in favor of tapering off PWA activities:

In the early stages of recovery the heavy industries such as steel lagged behind. So it was advisable to prime the pump by public works. Now. he said, the situation was reversed. The durable goods industries were making more rapid progress than the consumer goods industries. The prices of their products were going up accordingly. For example, some mines can produce copper at 5¢, or 6¢ a Ib, but copper was selling at 17¢. And the price of steel was up $6 a ton. These prices, he intimated were too high, much more than covered increased labor costs, meant that a larger share of the national income was going into building factories and machines, a smaller share into wages and the purchase of food & clothing. According to one economic theory, this condition tends to cause depressions. To counteract this tendency the Federal Government would give up building steel bridges and concrete dams, and turn to earth dams, channel dredging and other projects where most of its money would go into wages that would be spent for consumer goods.

To speculators this preachment against spiraling prices was a shock that gave the stockmarket a fit of the jitters. But the President’s statement that there has been an undue rise of metal prices and more rapid recovery in heavy industry than in other industry, was questioned by economists (see p. 77). Regardless of its accuracy, however, the President’s dissertation marked a milestone in New Deal policy: pump-priming is at an end. So far as Franklin Roosevelt is concerned, the business of getting out of the last Depression is now subordinate to the business of avoiding the next.

¶ Fitting in with the President’s newly announced plan of giving up bridge-building for ditch-digging, Major General Edward M. Markham, Chief of Army Engineers, reported on the proposed Florida Ship Canal. Started by the President with $5.400,000 of relief money, this project was last summer refused further funds by Congress which thought the canal was a waste of money (TIME, June 29). General Markham—in the face of a report from his Board of Engineers for Rivers & Harbors that an adequate canal would cost $264,000,000 and would not be worth it —notified Congress that in his opinion a $198,000,000 canal would be good enough and worth the money.

¶ Although the President last week denied that he was ready to spring a world peace plan, the Cuban State Department announced that, having nominated him for the Nobel Peace Prize, it had secured the official endorsements of Mexico, Honduras, Ecuador, Venezuela, El Salvador, Chile, Paraguay.

¶ ”There is still need for providing useful and healthful employment for a large number of our youthful citizens.” So wrote the President as he recommended that Congress make the CCC a permanent U. S. agency with an enrollment of 300,000 young men and veterans, 10,000 Indians, 5,000 workers in U. S. territories and islands.

More Must-Reads from TIME

Contact us at letters@time.com