American Experiment (299 page)

One act that escaped the judicial guillotine caused Roosevelt as much worry as several that died under it. In January 1935 the High Court began hearing arguments on the power of the government to impair the obligation of contracts, public and private, a power Congress had claimed during the Hundred Days in nullifying the gold clauses in such contracts. A decision affirming the sanctity of contracts would put in jeopardy the power of Congress to control monetary policy and would bring dire practical consequences. The public debt would immediately jump by $10 billion, while the total debt—which FDR was still vainly hoping to reduce—would soar to almost $70 billion. Bondholders, demanding full gold value for their bonds of $1.69 for every dollar, would reap a bonanza.

Apprehensively, Roosevelt, Morgenthau, and their aides waited in the White House for the Court’s verdict to come over the ticker. Then the good news: by a 5-4 vote the justices upheld the government. Undoubtedly the President’s relief was deeply tinged with bitterness. For one thing, Chief Justice Hughes, in a tortured ruling for the Court, held that government bonds, in contrast to private obligations, were contractual obligations that Congress had unconstitutionally violated, but that the plaintiff had suffered only nominal damage and could not sue in the Court of Claims. More than ever the President must have reflected about the ungrateful capitalist and the lost top hat. His gold policy had been designed to stabilize the financial markets, to shore up capitalism—was this the response of the business community? Justice James C. McReynolds from the bench had accused the government of confiscation, repudiation, destroying the Constitution; and in court, during a twenty-minute extemporaneous harangue, he said, “This is Nero at his worst.”

If any case had been designed to stir Roosevelt’s deepest feelings against a certain type of capitalist—bondholders, coupon-clippers, the idle rich—it was the Gold Clause cases. Even in the eminence of the presidency he could recall the kind of men who, as youths, had excluded him from the inner circles of Groton and Harvard, the men who later had fought both his presidential heroes, TR and Wilson. Certainly as a power broker he could now see the judicial handwriting on the Supreme Court façade. “I
shudder at the closeness of five to four decisions in these important matters,” he wrote. Hence he was not surprised by the Supreme Court decision against the NRA on May 27, though he could hardly have expected the unanimous thumbs-down. But once again his class had betrayed him— was not the NRA, even with its dire problems, his best effort to harmonize and stabilize industry and business, to find a middle way between collectivism and unbridled competition?

The right-wing counterattack on the New Deal—through the Supreme Court, small business spokesmen, and a thousand lesser channels—served as a catalytic factor in the forces now pushing the President out of his drift and indecision. By now the President was feeling heavy pressure from the left as well. In mid-May, a week after the Court invalidated the Railroad Pension Act and appeared to question whether old-age pensions lay within the scope of federal commerce power in the Constitution, a group of liberal senators met with Roosevelt for a long talk. La Follette, Johnson, Norris, Wheeler, and Costigan, all of whom had been members of the National Progressive League for Roosevelt in 1932, were there, along with cabinet members Ickes and Wallace, and Felix Frankfurter, who had organized the meeting.

La Follette in particular was brutally frank: The President must reassert leadership. It was well that business spokesmen had attacked him, for now business had put its cards on the table. The best answer to Long and Coughlin was to press ahead on the legislative program. In the light of opposition within the Democratic party, La Follette reminded the President that Theodore Roosevelt had not hesitated to take open issue with members of his own party. FDR might have to do the same thing. Frankfurter brought a warning from Brandeis that it was the “eleventh hour.” The President seemed to be in a fighting mood when the group left.

He was still in a fighting mood at the end of May after the Court’s voiding of the NRA. To his press conference he delivered a one-and-a-half-hour monologue on the substance of the decision. First he quoted a series of poignant letters from small businessmen—a cigar maker, store owner, printer, “drug-store people”—asking in effect, the President said, “please save us.” Smiling, speaking calmly and simply, pausing only to stab out a cigarette and fix a new one in his long ivory holder, Roosevelt dwelt on how the Framers had written the interstate commerce clause into the Constitution back in the “horse-and-buggy” age, how impossible it had become for forty-eight states to deal with nationwide economic needs, and how “we have been relegated to the horse-and-buggy definition of
interstate commerce.” Thus did the President of the United States put in his dissenting opinion to a holding of the Supreme Court of the United States.

Where next for the nation, asked the President—toward federal or toward state power over national economic and social problems? “Don’t call it right or left; that is just first-year high-school language, just about. It is not right or left—it is a question for national decision.”

What “national decision” for Roosevelt? Whatever his dislike of the cloudy terms, he was now tilted toward the cloudy liberal-labor-left. But would he go with the Moley-Tugwell-Berle strategy of coordinated national planning and control or with the strategy of decentralized administration, small institutions, and local initiatives urged by Frankfurter, Ben Cohen, and Tommy Corcoran?

The first gun in this struggle had already been fired. On what the New Dealers were already calling “Black Monday”—the day the High Court killed the NRA—Corcoran had started to leave the chamber after the session when a page tapped him on the shoulder and asked him to come to the robing room. There Corcoran found Brandeis holding his arms up to be derobed, looking “for a moment like a black-winged angel of destruction.” The justice spoke sharply to his young friend:

“This is the end of this business of centralization, and I want you to go back and tell the President that we’re not going to let this government centralize everything. It’s come to an end. As for your young men, you call them together and tell them to get out of Washington—tell them to go home, back to the states. That is where they must do their work.” Corcoran duly got word to the President—but “Tommy the Cork,” as FDR called him, and many of his young colleagues never left Washington.

A message from Brandeis, direct or indirect, was never taken lightly in the Roosevelt While House. For years the justice had been bombarding the Administration with advice, sometimes directly to Roosevelt, usually indirectly through Frankfurter or other mutual friends. The Administration viewed the justice not merely as an adviser, or even as a justice, but as “Isaiah,” a prophet of profound wisdom. He and Frankfurter, moreover, had served virtually as a New Deal scouting and recruiting agency, peopling not only the White House but the whole Administration with talented activists. Always implicit but unspoken in Brandeis’s counsel was the fact that the justice not only could give advice—he could enforce it from the high bench. Now that threat had been made explicit.

By now Roosevelt was asserting leadership, and clearly toward the left, but he still faced a choice, among others, between the “Brandeisian” left and the “Tugwellian” left. Even though his friends and advisers, most of whom were hostile to bigness, redoubled their efforts after NRA’s invalidation,
the President still hankered for the kind of “collectivist” control over business that had been embodied in the NRA. But any White House insiders who expected a grand strategic decision from their boss did not know their man. He was not wont to choose between lofty philosophical principles. Rather he would exploit immediate opportunities by modernizing old ideas, applying the results of his own experiments, choosing eclectically among disparate policies, and responding to the pressures of interest groups, especially the rising power of industrial labor. He would find decision in day-to-day action, by throwing himself into new legislative battles.

Late in May began the “Second Hundred Days.” Reverting to his old role of Chief Legislator, the President bluntly told congressional chieftains that certain bills
must
be passed. Congress, which had been dawdling, was suddenly spurred into action, with the progressives in each chamber now riding high. Laboring in the heat, without air conditioning, Congress responded to the presidential spur.

July
5,
1935
—Having given the green light earlier to Senator Robert Wagner, the President signs Wagner’s National Labor Relations Act—the augmented legacy of NRA’s Section 7(a)—and declares that the high goal of the act is a better relationship between labor and management by “assuring the employees the right of collective bargaining” and providing “an orderly procedure for determining who is entitled to represent the employees.” A five-person independent quasi-judicial body will administer the act.

August 14
—FDR signs the Social Security Act. “Today a hope of many years’ standing is in large part fulfilled,” he says. After the “startling industrial changes” that in the past century have threatened the security of person and family, “this social security measure gives at least some protection to thirty million of our citizens who will reap direct benefits through unemployment compensation, through old-age pensions and through increased services for the protection of children and the prevention of ill health.”

August 24
—The President signs the Banking Act of 1935, which centers control of the money market in the Federal Reserve. This was largely the brainchild of Marriner Eccles at the Federal Reserve Board. The President had predicted to Eccles that “it will be a knock-down and drag-out fight to get it through,” and he was right. Not only leading bankers but old Senator Glass, father of the Federal Reserve System in Wilson days, fought tenaciously against “political control” and won some modifying changes. After the President, at the signing, handed one of the pens to Glass, someone whispered, “He should have given him an eraser instead.”

August 26
—Roosevelt signs the Public Utility Holding Company Act. This measure, designed to curb the power of gigantic utility holding companies over their operating subsidiaries, had been urged by the President in January; when he renewed pressure for the bill, the utilities fought back with an intensive propaganda and lobbying campaign. They feared especially FDR’s demand for a “death sentence,” as it came to be called, for utility holding companies that could not show they served a sound economic purpose. Senator Wheeler and Congressman Sam Rayburn had carried the fight in Congress, and Senator Alben Barkley of Kentucky pushed through the final compromise version. This allowed a holding company to control more than one public utility system if potential additional systems could otherwise not survive economically. The utility chieftains—especially an unusually articulate spokesman named Wendell Willkie—remained utterly hostile to the measure.

August 31
—The President signs the Revenue Act of 1935. In mid-May he had shocked the business community with a message to Congress contending that “great accumulations of wealth cannot be justified on the basis of personal and family security” and calling for taxes on “inherited economic power.” Congress, after a sharp struggle in the country and on the Hill, enacted a measure increasing rates for estate and gift taxes, boosted the surtax rates for large incomes, imposed a graduated rate on corporation income, and placed a special tax on corporations’ undistributed earnings.

These bills—the Big Five—were the essence of the Second Hundred Days. But the momentum of that year initiated or invigorated many other elements of the New Deal: rural electrification, youth programs, protection of natural resources, farm credit, above all the WPA and other spending programs for the needy—covering almost the whole of Roosevelt’s concerns and amounting in effect to the Second New Deal. Probably the most important of these programs—certainly the most important in its direct impact on people’s lives—was Harry Hopkins’s Works Progress Administration, designed to replace the faltering federal-state-local direct relief efforts with a big national works program for jobless employables. Even while Congress passed the Second Hundred Days laws, Hopkins was gearing up his agency to spend the $5 billion appropriated for the first year. Within that year WPA rolls numbered almost 3.5 million people. Hopkins’s was the most visible and controversial New Deal program; gangs of WPA workers repairing roads or bridges were often jeered at by passersby still lucky enough to have jobs and cars.

Studying Roosevelt’s 1935 measures and actions, observers were still uncertain whether the President was at last opting for the Brandeis-Frankfurter anti-bigness stance. Was he moving strongly in a progressive, even radical direction toward economic equality and social justice?

The Brandeis school feared bigness both in business and in government—but to what extent was a strong and unified federal government needed to curb
private
concentrated power? Could decentralized governmental power compel diffused economic power? It seemed unlikely. Yet the progressive senators were hardly in a mood to substitute big public bureaucracies for big private ones, except for such huge programs as AAA and Social Security that clearly demanded massive government. The holding company bill, administered by a relatively small regulatory agency like the SEC, was a model for the decentralizers.

A big federal program or bureau, on the other hand, did not necessarily mean monolithic and centralized power. The NRA had provided for code-making by private interests as well as by Hugh Johnson’s diktats. The AAA provided for farmers’ referendums. The Tennessee Valley Authority embraced extensive local decision making as well as regional. The 1935 “wealth tax” was in part an assault on big business. The decentralizers’ rhetoric rarely took into account such subtleties or ambivalences. Senator Wheeler, according to Ronald Mulder, believed that a proper use of governmental power could decentralize both the economy and the government. “Excessive centralization in whatever form it may exist negated American ideals,” Wheeler said. The Brandeis school may have won some symbolic victories in the Second Hundred Days, but the balance between bigness and smallness, between central and local control, did not fundamentally change.