Fear Itself (59 page)

The key decision to starve the board of its funding was made in the spring of 1943. The November 1942 elections had produced significant gains for Republican representation when many Italian and German constituencies shifted their vote, and as many Americans had tired of the New Deal and yearned for change. The Democratic Party lost 45 seats in the House. Despite losing the overall popular vote, gaining just 46 percent, the Democrats maintained a modest majority of 222 to 209, based on their unyielding southern representation.
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In the Senate, the Democrats lost 8 seats, but maintained a 20-seat, 57–37 majority. Though historians differ about the intensity of President Roosevelt’s efforts to keep the agency,
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it is clear that straight party-line voting in Congress would have preserved the NRPB and its budget.

The South, we have seen, had ample reasons to be partial to planning. Some southern voices expressed appreciation, if in muted terms, for “the very material service” the board had rendered the South and the country, as Alabama’s Lister Hill put the point; for its “creditable . . . working in the right direction,” in the words of Florida’s Claude Pepper.
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Yet for each of these southern Democrats, there were as many others who simply and silently voted no, or worried aloud about how planning threatened interference in matters best left to the states. Maryland Democrat Millard Tydings archly remarked that “the Board ought to be called the Board of Political Textbooks of a Certain Strain rather than the National Resources Planning Board.”
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Describing abolition of the agency as an issue of “major importance,” Virginia’s Senator Harry Byrd, who chaired the Joint Economic Committee, explained that a crucial consideration was the ability of Congress, rather than the executive branch, to control postwar planning. Conceding that “we must have post-war planning,” he insisted that it must differ from the Washington-based, centralized “pre-war domestic planning that characterized the economic policies of the New Deal.”
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In May 1943, he declared, “I hope that the entire National Resources Planning Board will be abolished,” and that Congress would end appropriations for the agency.
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This became a steady southern theme. “If we are to have Government planning,” the
Baltimore Sun
editorialized, “it should be planning which assumes that the greater the field of postwar activity which can be trusted to private initiative and local and State governments, the better the chance that our freedom will survive.”
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In April 1933, a gathering of southern governors at the Southern Regional Conference of the Council of State Governments in Atlanta resolved that the end of the war must bring a close to federal domination of planning and a shift of primary responsibility to the states. Even the most progressive of these leaders, Ellis Arnall of Georgia, announced that he had to yield to the doctrine of states’ rights even though “I don’t subscribe, as most of the gentlemen here do, to the moth-eaten doctrine.”
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Hands off the South and its racial order was the dominant message.

The NRPB began the budget cycle for the 1944 fiscal year with a call by the president for $1,400,000, and authorization for a staff of 350. This request was rebuffed in the House by the Appropriations Committee, chaired by Clarence Cannon of Missouri; fourteen of its twenty-five Democrats were southern. With Republicans unanimously opposed to the NRPB, “some Democrats,” Marion Clawson somewhat blandly reports, “teaming up” with Republicans, were able to defeat any appropriation for the agency.
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This outcome was yet another instance, a reporter on Capitol Hill noted, that bore out “predictions that on many issues Southern Democrats would combine with the minority party and control the House.”
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A similar pattern prevailed in the Senate, where southern votes tipped the balance.

Lacking funds, the board had no choice but to dismantle its operations.
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“Our swan song has been sung for us by Congress,” its chairman, Frederic Delano (the president’s uncle), lamented when he visited the White House to offer the president the agency’s final report.
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II.

A
LTHOUGH ITS
staff was dispersed and its files sent to the National Archives, the NRPB’s ideas did retain some currency. They resonated in President Roosevelt’s call for a Second Bill of Rights in his January 1944 State of the Union address, which sought to renew a progressive—one might say radical—New Deal, and in his “Sixty Million Jobs” speech in that year’s presidential campaign. They also informed President Truman’s first major domestic policy message, “21 Points,” in September 1945, and served as a centerpiece for Henry Wallace’s ill-fated 1948 Progressive Party bid for the presidency.
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Key legislative proposals tried to advance these goals. Notably, the original Senate full-employment bill of 1945 combined aspects of corporatism and planning, and gave the president the authority to organize advisory boards consisting of representatives of business, labor, and agriculture, as well as state and local governments, to assist in assuring robust economic growth and the creation of jobs for all who wished to work. It was understood that these goals would require a new steering mechanism, one more powerful then the NRPB, and closer to the intended capacities of the NRA of the early New Deal. One such candidate was the Office of War Mobilization and Reconversion.

But with the end of the agency and the concomitant rise of the Bureau of the Budget to the executive branch’s central steering role, planning went into an eclipse. Its policy space was filled by fiscal ideas and policies. With this shift, both the ability and the willingness of the federal government to affect the details of the economy’s sectors and regional qualities was replaced by a more remote and general manipulation of budget sums and by more decentralized policy capacities. Both trends appealed to southern representatives because they were far less menacing and far more compatible with local decision making about the region’s entwined economic and racial affairs. A notable instance was the passage not of the planning-oriented Full Employment Bill, but the alternative, generated in the House by Mississippi’s William Whittington, who recommended the “establishment of a permanent board, agency, or commission, to give to the President of the United States the best available expert advice” about fiscal policy without a tandem apparatus for planning or implementation. This proposal found its way into law as part of the 1946 Employment Act, a law that created a Council of Economic Advisers (CEA) in the office of the president as a partner to the Bureau of the Budget. Limited to an advisory function, the CEA was required to report both to the president and to a newly created Congressional Joint Committee on the Economic Report.
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The Employment Act was a contradictory piece of legislation. It called for maintaining the “conditions” for full employment and maximum levels of output and purchasing power while insisting on “promoting” free enterprise, untrammeled by government planning. As a result, there was competition for representation on the council during the Truman years between planning-oriented economists like Leon Keyserling, who wished to devise programs of direct adjustment, and business-oriented economists like John Clark, who put great faith in the capacity of markets to behave rationally. The compromise, and dominant position, was represented by its chair, the agricultural economist Edwin Nourse from the Brookings Institution, who favored using the federal government to modify economic aggregates while leaving major hiring and investment decisions in the hands of firms acting in accord with market criteria.

The CEA was deliberately kept small. Its spending in the Truman years averaged some $300,000 each year, and its average staff of thirty-eight was composed mainly of academic economists and clerks.
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Its role, however, should not be underestimated, for its policy stance, like that of the larger BOB, was very different from that which was being advocated by many conservatives in the late 1940s. The CEA helped build a new kind of fiscal capacity, underpinned by a broad spectrum of opinion within the Democratic Party, that required a radical break from budget-balancing orthodoxy. The fiscal policies of the CEA represented nothing so much as an extension of the ideas that were motivating the Fiscal Policy Division of the Bureau of the Budget. In fact, three of the CEA’s key staff members—Gerhard Colm, John Davis, and Frances James—were recruited from the bureau.
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Despite its many internal tensions, the Democratic Party was able to unite with enthusiasm to support this fiscal turn. While it promised an active role for government in managing the economy, its “hands-off” character, as distinct from planning, made it attractive to southern leaders. With interventionist planning taken out of the equation, straight party-line votes were typical. Thus, on a January 31, 1941, motion by a New York Republican to recommit a 1942 appropriations bill with instructions to substantially reduce nondefense spending, every Republican but one voted aye, while every southern member who cast a vote joined all other Democrats but three to vote nay. The conference report on the Employment Bill that created the CEA was supported on February 6, 1946, by nine out of ten southern members, and a 1949 proposal to increase spending on the CEA garnered the support of all but one southern senator. With the South in tow, policies that enhanced the fiscal capacities of the federal government routinely passed despite sharp Republican objections.

But, significantly, this cross-region Democratic Party coalition fell apart just as soon as economic action touched the South’s labor markets. During the 1940s, national employment policy pivoted on two questions. Where in the federal system would responsibility be lodged, in Washington or in the states? Within the federal government, would responsibility for jobs belong to the Department of Labor or to some other unit of government less sympathetic to unions and the concerns of working people? Crucially, the willingness of southern representatives to join hands with congressional Republicans decentralized the U.S. Employment Service and removed it from the Department of Labor.

The country’s first large-scale experiment with a federal employment service dated from World War I, a program of job placement that peaked with 832 offices and a budget of nearly $6 million in 1918.
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With the end of the war, this version of the U.S. Employment Service (USES) essentially folded. By 1924, it had a budget of only some $79,000 and its functions were moved out of the Department of Labor to the various states.
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The rebirth of a federal system to manage the supply and job placement of labor came in 1933, with the passage of the Wagner-Peyser Act, which created a new employment service within the Department of Labor. Among other tasks, the new USES channeled the unemployed to public-works jobs.
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It also provided grants to states to establish and maintain employment centers that both actively aided job placement by routing workers to available employment and determined eligibility to unemployment insurance once this national program was created under the aegis of the Social Security Act in 1935.
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The entry of the United States into World War II produced an enhanced version of the manpower policies of World War I when President Roosevelt recentralized the USES in January 1942 by executive order. Transferred to the War Manpower Commission, the agency placed more than twelve million workers in jobs that year through seventeen hundred local offices administered from Washington. In balancing wartime supply and demand for labor and in coordinating a national labor exchange of unprecedented scale, the USES reached a budget of $58 million in 1945, during the last year of the war, which rivaled that of the entire Department of Labor. It also had four times as many employees, 20,628 as compared with 5,662.
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During this period, the federal government developed an unprecedented capacity to intervene in labor markets to maintain an efficient distribution of labor. It was a form of intervention that was a good deal more focused and domineering than the fiscal policies pursued by the BOB, rather more like those that had been advocated by the NRPB. Instead of using tax incentives or other such devices to affect employment, the USES directly adjusted the labor supply to meet the needs of wartime production by acting as a national employment agency that matched workers with job openings posted by employers. To be sure, the USES never moved workers from place to place or compelled anyone to work. Nor did it engage in large-scale training programs or set the price of labor. Just the same, the agency represented the most assertive example of an intervention by the national government in the labor market, short of conscription, in American history.

Just as World War II was ending with atomic explosions over Hiroshima and Nagasaki, the Truman administration was determining how to keep these capacities within the federal government in order to guide a transition to the peacetime economy. “The task of helping this array of job seekers seeking to fit themselves into the peacetime economy,” the president told Congress on September 6, 1945, soon after Japan’s surrender, “is fully as difficult as the mobilization of manpower for war.” In spelling out his twenty-one-point reconversion program, he argued that “any decided change in the machinery to handle this problem now would cause unnecessary hardship to workers and veterans.” Accordingly, he continued, “I urgently recommend that the Congress not yet return the Employment Service to the States.”
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Two weeks after his speech, the president transferred the USES from the War Manpower Commission to the Department of Labor by executive order under the authority of the War Powers Act.
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This shift was part of a larger effort on his part to strengthen this cabinet agency, shifting its central purpose from collecting statistical data to policy initiatives and oversight, just as growing union strength was deepening the working-class electoral base of the Democratic Party. To lead a strengthened agency, the president selected a labor lawyer and former Washington State Democratic senator, the ardent New Dealer Lewis Schwellenbach.