Recession Of 1937 Led to Election Loss of 1938
August 25th, 2010
""A defeated Pennsylvania Democratic congressman, asked to explain the party's ill fortunes, responded: "The main reason is the Democrats thus far have failed in their major objective. The prosperity which the American people have been yearning…has failed to make an appearance. Truly has it been said, `The Republicans wrecked the Country and the Democrats are at a stalemate with reference to the problem of recovery and reconstruction.'" - Charles R. Eckert to James A. Farely, December 7, 1938. quoted in `Why We Lost' The Nation, CXLVII, P.586-590.
"It was the recession, more than any other issue, that hurt the Democrats. P. 271 `Franklin D. Roosevelt And The New Deal', Leuchtenburg.1963.
The election of 1938 (1)(2) has been chosen because the political forecast is looking a lot like it did back then. Double dip recession now in 2010 seems to be coming true. The housing starts are down (3) and manufactured goods orders are relatively flat (4), with manufacturing being one of the few strong indicators in the economy recently. The right wing is pounding on the administration, see my blog posting earlier today "Tea Parties, Think Tanks & Koch Brothers". The President's party is somewhat distracted by the constant jabs from the conservative media i.e. Newscorp (Murdock INC), over petty issues like the Muslim Center in Manhattan. The Democrats are likely to take a bath similar to that of 1938. I chose 1938 because Obama has up until now has successful in pushing through his agenda, like Roosevelt in his first term. But the perception of the public is of an embattled presidency. A vocal and vociferous minority in the Tea Parties are stoked with lots of conservative funding making outrageous claims against the administration hoping that some of them will stick. They are even attacking the Republican party forcing it to turn to the right. This is more of a serious attack on the mainstream than I had thought. There is a serious right wing assault that is well financed and has surfaced polarizing the nation more than it has been since the Vietnam era.
The conservative business interests became dominant in government after the Civil War and until the assassination of McKinley by Leon Czolgosz, an anarchist, when Teddy Roosevelt became president and brought about some reforms. That took some of the steam out of the then growing Socialist Party(5) and forwarded some of the aims of the progressive movement(6).
World War One and the Wilson administration brought a minimal state control to the USA with its war administration boards. This provided the team that put together the New Deal under Roosevelt a model.(7)
Other than World War One, the conservatives were back in power with a vengeance during the roaring twenties, a time of booming real estate, manufacturing and unrestrained wall street growth.(8)
The depression resulted from the irresponsible practices of the capitalists and the Republicans under Hoover ended up being thrown out of office and the Democrats under Roosevelt coming into office in March 1933. During his first administration Roosevelt was able to put in place most of the reforms that we now call the New Deal and laid the basis of the modern American industrial democracy, catching up with Europe in some areas of social justice.(9)
The Economy picked up and people were working, or at least were getting some form of government support. The right was down but not out as they had a strong lobby in the Republican party and starting with the period after the election of 1936 began to make a comeback taking advantages confusion around the Administrations attempt to reorganize the Supreme Court by adding more members who would be more sympathetic.(10) The Republicans propaganda turned it into an attempt to impose a dictatorship by Roosevelt.
Conservative Democrats and Republicans formed a coalition in the summer of 1937 to stymie the New Deal faction. Vice President Gardner was "uncrowned head" of the group. The vice president was irritated because of the lack of a balanced budget and the President's unwillingness to discipline the sit down strikers(11).
The down turn in the economy during the summer of 1937 was the main factor in the elections of 1938. Deficit spending by the government had shored up the economy and when Roosevelt slashed spending in the spring of 37 due to inordinate fear of inflation "the government not only stopped priming the pump but even was taking some water out of the spout. If businesses had been ready to take over, none of this would have mattered, but business still lacked the confidence to undertake new investment." Page 244 Franklin D. Roosevelt And The New Deal. "The New Dealers had come to the realization that had escaped most earlier reformers: that one can buy reforms with money". Page 246 Ibid.
The debate then ensued in the Roosevelt administration over whether to cut the deficit to encourage private industry or to increase spending to keep the country working. The President waited and watched as the two factions within the government battled it out and the Congress became intransigent. The media began to call the recession of 37-38 "Roosevelts Recession". The president had lost the initiative and the third wave of the New Deal never happened.
(1)From Wikipedia United States House of Representatives elections, 1938
"The U.S. House election, 1938 was an election for the United States House of Representatives in 1938 which occurred in the middle of President Franklin Roosevelt's second term. Roosevelt's Democratic Party lost a net of 72 seats to the Republican Party, who also picked up seats from minor Progressive and Farmer-Labor Parties.
1939 Britannica Yearbook cited a number of reasons for the losses suffered by the Democrats. The first was the Recession of 1937, which had continued into the first half of 1938, and which had arguably weakened public confidence in the administration's New Deal economic policies. Controversy over a government reorganization bill and the Roosevelt's "Court-packing" plan was also a major factor. There were, in addition, strains between the more liberal New Deal supporters and the conservative wing of the Democratic party centered in the Southern states. These strains were exacerbated by an effort led by President Roosevelt to target certain conservative senators for defeat in Democratic primaries.
Overall, the Democrats would go on to lose 81 seats in the House, though with 262 seats, they retained a very strong majority position.
(2) Ashbrook Center At Ashland University (presented with a right wing bias)
"The New Deal Comes to a Screeching Halt in 1938
May 2006
by: Andrew E. Busch
When Republicans and Democrats faced off for the 1938 midterm elections, it had been a decade since Republicans had done well in congressional elections. They had lost seats in both houses of Congress in 1930, 1932, 1934, and 1936, bringing their totals to a mere 88 in the House and 16 in the Senate. In the wake of Franklin Roosevelt's landslide reelection victory in 1936, it was an open question whether the Republican Party was capable of serving as a viable opposition party.
Then, a series of events damaged Roosevelt's standing and rejuvenated the GOP's chances.
First, overestimating his popularity and persuasive powers, Roosevelt embarked on his "court packing" scheme, bringing a backlash even among many Democrats in Congress. The attempt seemed to verify Republican charges that the President was engaged in a campaign for one-man rule.
Next, the nation was hit with a sharp economic downturn, a recession inside the Depression that soon came to be known as the "Roosevelt recession." The 1937-38 downturn pushed the unemployment rate back near the 20 percent level, and accentuated the question of whether FDR's economic policies were actually helping or hurting recovery.
During 1937-38, America was also rocked with a series of sit-down strikes and instances of union violence, mostly instigated by the Congress of Industrial Organizations (CIO). Many Americans associated the surge in aggressive unionism with Roosevelt's encouragement of unions in the 1935 National Labor Relations Act.
Finally, in mid-1938, Roosevelt embarked on a campaign to deprive a number of anti-New Deal congressional Democrats of renomination in local Democratic primary elections. With a few exceptions, FDR failed, and incurred three costs: he turned a number of Democratic skeptics into irrevocable enemies, he appeared impotent, and he once again contributed to the picture of himself as power-hungry, perhaps dangerously so. It was particularly significant that in 1938, when the Moscow show-trials were running full-time, the press labeled FDR's intra-party efforts a "purge."
When the election results were in, Democrats had lost six Senate seats and 71 House seats in what former Roosevelt advisor Raymond Moley called "a comeback of astounding proportions." Republicans nearly matched the Democratic national House vote total, 47 percent to 48.6 percent; if one takes into account overwhelming Democratic predominance in the one-party South, the GOP clearly led the House vote in the rest of the country. Democrats also lost a dozen governorships, including such crucial states as Ohio, Michigan, and Pennsylvania.
Furthermore, Democratic losses were concentrated among pro-New Deal Democrats. Once the dust had settled, the Senate was about evenly divided between pro- and anti-New Deal forces, and the "conservative coalition" of Republicans and conservative Democrats was also solidified in the House, and started any given issue within range of victory.
The result in Congress was not a wholesale reversal of the New Deal but a stalemate in which Roosevelt was unable to make significant new departures, and indeed found himself in a defensive posture vis-à-vis Congress for the first time since assuming office. Congressional investigations began to embarrass the administration; Congress passed the Hatch Act (limiting political activity by federal employees) and Smith Act (cracking down on internal subversion) over FDR's objections. For his part, Roosevelt offered no major new reform proposals in 1939 for the first time in his presidency."
(3)This is from NPR's Website
"The Commerce Department reported Wednesday that new-home sales had fallen 12.4 percent month to month in July, to a seasonally adjusted 276,000 units — the slowest sales pace on record dating back to 1963. That report came a day after the National Association of Realtors said sales of existing homes had fallen 27 percent for the same month — the worst showing in 15 years."
This is from Wikipedia.
(4)This From Federal Reserve Statistical Release
"INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION
Industrial production rose 1.0 percent in July after having edged down 0.1 percent in June, and manufacturing output moved up 1.1 percent in July after having fallen 0.5 percent in June. A large contributor to the jump in manufacturing output in July was an increase of nearly 10 percent in the production of motor vehicles and parts; even so, manufacturing production excluding motor vehicles and parts advanced 0.6 percent. The output of mines rose 0.9 percent, and the output of utilities increased 0.1 percent. At 93.4 percent of its 2007 average, total industrial production in July was 7.7 percent above its year-earlier level. The capacity utilization rate for total industry moved up to 74.8 percent, a rate 5.7 percentage points above the rate from a year earlier but 5.8 percentage points below its average from 1972 to 2009."
From Wikipedia on The Socialist Party Of America
"The Socialist Party of America (SPA or SP) was a multi-tendency democratic-socialist political party in the United States, formed in 1901 by a merger between the three-year-old Social Democratic Party of America and disaffected elements of the Socialist Labor Party which had split from the main organization in 1899.
In the first decades of the 20th Century, it drew significant support from many different groups, including trade unionists, progressive social reformers, populist farmers, and immigrant communities. Its presidential candidate, Eugene V. Debs, twice won over 900,000 votes (in 1912 and 1920), while the party also elected two United States Representatives (Victor L. Berger and Meyer London), dozens of state legislators, more than a hundred mayors, and countless lesser officials. The party's staunch opposition to American involvement in World War I, although welcomed by many, also led to prominent defections, official repression and vigilante persecution. The organization was further shattered by a factional war over how it should respond to Russia's Bolshevik Revolution in 1917 and the establishment of the Communist International in 1919."
(6)From Wikipedia on Teddy Roosevelt
In 1901, President William McKinley was assassinated, and Roosevelt became president at the age of 42, taking office at the youngest age of any U.S. President in history.[4] Roosevelt attempted to move the Republican Party in the direction of Progressivism, including trust busting and increased regulation of businesses. Roosevelt coined the phrase "Square Deal" to describe his domestic agenda, emphasizing that the average citizen would get a fair shake under his policies. As an outdoorsman and naturalist, he promoted the conservation movement. On the world stage, Roosevelt's policies were characterized by his slogan, "Speak softly and carry a big stick". Roosevelt was the force behind the completion of the Panama Canal; he sent out the Great White Fleet to display American power, and he negotiated an end to the Russo-Japanese War, for which he won the Nobel Peace Prize.[5] Roosevelt was the first American to win the Nobel Peace Prize.
(7)Franklin D. Roosevelt And The New Deal
"In quest of a precedent for government-business co-operation, the draftsmen of the recovery bill turned to the experience with industrial mobilization in World War One. Since the rejected laissez faire, yet shrank from embracing socialism, the planners drew on the experience of the War Industries Board because it offered an analogue which provided a maximum of government direction with a minimum of challenge to the institutions of a profit economy." Page 57
From EH.Net
"The U.S. Economy in the 1920s
Posted Mon, 2010-02-01 18:21 by Anonymous
Gene Smiley, Marquette University
The interwar period in the United States, and in the rest of the world, is a most interesting era…the 1920s are a period of vigorous, vital economic growth. It marks the first truly modern decade and dramatic economic developments are found in those years. There is a rapid adoption of the automobile to the detriment of passenger rail travel. Though suburbs had been growing since the late nineteenth century their growth had been tied to rail or trolley access and this was limited to the largest cities. The flexibility of car access changed this and the growth of suburbs began to accelerate. The demands of trucks and cars led to a rapid growth in the construction of all-weather surfaced roads to facilitate their movement. The rapidly expanding electric utility networks led to new consumer appliances and new types of lighting and heating for homes and businesses. The introduction of the radio, radio stations, and commercial radio networks began to break up rural isolation, as did the expansion of local and long-distance telephone communications. Recreational activities such as traveling, going to movies, and professional sports became major businesses. The period saw major innovations in business organization and manufacturing technology. The Federal Reserve System first tested its powers and the United States moved to a dominant position in international trade and global business. These things make the 1920s a period of considerable importance independent of what happened in the 1930s
.
National Product and Income and Prices
We begin the survey of the 1920s with an examination of the overall production in the economy, GNP, the most comprehensive measure of aggregate economic activity. Real GNP growth during the 1920s was relatively rapid, 4.2 percent a year from 1920 to 1929 according to the most widely used estimates. (Historical Statistics of the United States, or HSUS, 1976) Real GNP per capita grew 2.7 percent per year between 1920 and 1929. By both nineteenth and twentieth century standards these were relatively rapid rates of real economic growth and they would be considered rapid even today.
The Great Depression began in the summer of 1929, possibly as early as June. The initial downturn was relatively mild but the contraction accelerated after the crash of the stock market at the end of October. Real total GNP fell 10.2 percent from 1929 to 1930 while real GNP per capita fell 11.5 percent from 1929 to 1930."
(9) About.Com Top Ten New Deal Programs
1. CCC - Civilian Conservation Corps
The Civilian Conservation Corps was created in 1933 by Franklin D. Roosevelt to combat unemployment. This work relief program had the desired effect and provided jobs for many Americans during the Great Depression. The CCC was responsible for building many public works and created structures and trails in parks across the nation.
2. CWA - Civil Works Administration
The Civil Works Administration was created in 1933 to create jobs for the unemployed. Its focus on high paying jobs in the construction arena resulted in a much greater expense to the federal government than originally anticipated. The CWA ended in 1934 in large part due to opposition to its cost.
3. FHA - Federal Housing Administration
The Federal Housing Administration was a government agency created to combat the housing crisis of the Great Depression. The large number of unemployed workers combined with the banking crisis created a situation in which banks recalled loans. The FHA was designed to regulate mortgages and housing conditions.
4. FSA - Federal Security Agency
The Federal Security Agency established in 1939 had the responsibility for several important government entities. Until it was abolished in 1953, it administered social security, federal education funding, and food and drug safety.
5. HOLC - Home Owner's Loan Corporation
The Home Owner's Loan Corporation was created in 1933 to assist in the refinancing of homes. The housing crisis created a great many foreclosures, and Franklin Roosevelt hoped this new agency would stem the tide. In fact, between 1933 and 1935 one million people received long term loans through the agency that saved their homes from foreclosure.
6. NRA - National Recovery Act
The National Recovery Act was designed to bring the interests of working class Americans and business together. Through hearings and government intervention the hope was to balance the needs of all involved in the economy. However, the NRA was declared unconstitutional in the landmark Supreme Court case Schechter Poultry Corp. v. US. The Supreme Court ruled that the NRA violated the separation of powers.
7. PWA - Public Works Administration
The Public Works Administration was a program created to provide economic stimulus and jobs during the Great Depression. The PWA was designed to create public works and continued until the US ramped up wartime production for World War II. It ended in 1941.
8. SSA - Social Security Act
The Social Security Act was designed to combat the widespread poverty among senior citizens. The government program provided income to retired wage earners. The program has become one of the most popular government programs and is funded by current wage earners and their employers. However, in recent years concerns have arisen about the viability of continuing to fund the program as the Baby Boom generation reaches retirement age.
9. TVA - Tennessee Valley Authority
The Tennessee Valley Authority was established in 1933 to develop the economy in the Tennessee Valley region which had been hit extremely hard by the Great Depression. The TVA was and is a federally owned corporation that works in this region to this day. It is the largest public provider of electricity in the United States.
10. WPA - Works Progress Administration
The Works Progress Administration was created in 1935. As the largest New Deal Agency, the WPA impacted millions of Americans. It provided jobs across the nation. Because of it, numerous roads, buildings, and other projects were completed. It was renamed the Works Projects Administration in 1939. It officially ended in 1943.
(10) Wikipedia Judiciary Reorganization Act of 1937
The Judiciary Reorganization Bill of 1937, frequently called the court-packing plan, was a legislative initiative to add more justices to the Supreme Court proposed by U.S. President Franklin Roosevelt shortly after his victory in the 1936 presidential election. Although the bill aimed generally to overhaul and modernize all of the federal court system, its central and most controversial provision would have granted the President power to appoint an additional Justice to the U.S. Supreme Court for every sitting member over the age of 70½, up to a maximum of six.
During Roosevelt's first term in office, the Supreme Court had struck down several prominent New Deal measures intended to bolster economic recovery during the Great Depression, leading to charges from New Deal supporters that a narrow majority faction of the court was obstructionist and political. Since the U.S. Constitution does not limit the size of the Supreme Court, Roosevelt, having won an expanded electoral mandate in his reelection, sought to counter this entrenched opposition to his political agenda by expanding the number of justices to create a pro-New Deal majority on the bench. Opponents viewed the legislation as an attempt to stack the court leading to the name "Court-packing Plan"
The episode had several negative consequences for the Roosevelt administration. It exposed the limits of Roosevelt's abilities to push forward legislation through direct public appeal and, in contrast to the tenor of his public presentations of his first-term, was seen as political maneuvering. Although circumstances ultimately allowed Roosevelt to prevail in establishing a majority on the court friendly to his New Deal agenda, some scholars have concluded that the President's victory was a pyrrhic one.
(11) Historical Voices.Org Flint Sit Down Strike
"STRIKE ORGANIZATION
Working on the line at General Motors in Flint was a job many men needed desperately in the 1930's, but it was also tremendously difficult. Terrible working conditions, combined with unfair and devious payroll practices, made the auto plants of Depression-era Flint into ripe locations for union organization.
Strikes had been attempted in Flint in 1930 and 1934, but had been viciously broken up by company stooges and the Flint police force. In 1935 Congress passed the Wagner Act, which legalized strikes and invigorated the new Congress of Industrial Organizations under the leadership of John L. Lewis. Among the first attempts at establishing independent unionization in industrial plants were the strikes at Cleveland's White Motors and Toledo's AutoLite factories in 1934 and 1935. These strikes were notable because of their use of a new tactic - the sit-down.
Workers did more than picket outside the plant and risk replacement by scabs; they actually occupied the plant itself in order to prevent further production. This gave labor an edge in negotiations that they had not enjoyed before. However, due to its infringement of the property rights of the company, it was a tactic that scared most Americans. Even after the strike was successful, some workers were uneasy about their participation in such an activity. Nevertheless, it proved to be a very effective strategy. And after years of abuses and failures to get the company's ear, most of the men were ready for anything."
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