Forgotten Man, The (42 page)

On April 7, another crowd gathered to cheer Lewis, this time at
Michigan’s state fairgrounds; he had reached a settlement with Chrysler. Ford now was the only remaining of the Big Three not to be unionized. William Green, the old head of the AFL, was locked in a struggle with Lewis, over both Lewis’s tactics at organizing and his sit-down strikes against companies. Leading some of the more militant projects was John Brophy. It was clearer than ever that Lewis and his team were the face of new unionism, and Green the old.

The next week, the Court brought back attention to itself with its own union news: it would uphold the law that provided the legal framework for all these events, the National Labor Relations Act (NLFA). Looking at four cases, it upheld them by the same 5–4 margin; on a fifth, the group was unanimous. The finding also meant that Washington now had the authority to regulate manufacturing. And the Wagner Act really did give the unions the right to fight with the companies. That September the United Auto Workers membership would reach 375,000, more than ten times the 30,000 of September 1936. Lewis, again, rejoiced. Within a year he would have organized nine in ten workers in the coal industry. Florence Reece’s picture of towns divided into union people and company thugs had been sanctioned by the highest court in the land.

Ogden Mills, the treasury secretary who had succeeded Mellon, wanted to point out the consequences of unions’ higher wages for the economy. He did not agree with the advocates of spending—now coming to be called Keynesians—that consumer spending was always better than investing by the producer. After all, as Ford Motor Co. itself pointed out, if Henry Ford had brought his early employees together every week and shared out the profits, there would have been nothing left to spend on investment. Ford, the company, would not have grown. Ford executives were correct when they said that “the little shop would have stayed little.”

Also that month, two other justices celebrated birthdays: Justice Van Devanter turned seventy-eight on April 17, and Hughes celebrated his seventy-fifth birthday. Van Devanter lived at 2101 Connecticut Avenue, in the same building as William Borah, one of the
senators who opposed the Roosevelt plan. Borah urged Van Devanter to resign, hoping that this would make Roosevelt’s packing plan look more unnecessary.

Now too Jackson had another go at Mellon. Having failed in its tax suit, the administration was still set on “getting” the industrialist. Jackson, who had been promoted to assistant attorney general in the Justice Department, led a suit against the Aluminum Company of America, the largest suit of its kind since 1911. Mellon, his son Paul, and other relatives—Sarah Mellon Scaife, Richard K. Mellon—were defendants. Jackson sought the dissolution of the company. Jackson would prosecute the case, but it was filed by another lawyer from Justice: Walter Lyman Rice, the same lawyer who had led the case against the Schechters. Rice had gone after the smallest possible foe; now he was trailing the largest.

Mellon was a minority shareholder. But Jackson and Rice would show reporters a chart dramatizing Mellon’s influence at Aluminum Company of America—it looked stupendous. The attorneys argued that such a large company could not be good. Mellon’s lawyers countered forcefully, noting that the chief symptom of a damaging monopoly was high prices for the product. But the price of aluminum had come down nearly continuously since the company’s founding half a century ago.

Tax prosecutions were also moving ahead. Though there was still a sense of vengeance, there was also still the practical need for the revenue. Mellon’s theory that higher rates sometimes narrowed revenue streams—that you could not charge over “what the traffic will bear”—was being borne out. The president told Congress that though Washington had raised its tax rates, the Treasury was still short $600 million. Roosevelt blamed not the arrangement but the wealthy themselves. Roosevelt, Morgenthau would tell Treasury officials, “wants to say flatly that our estimates and our methods of estimating are correct, but the citizens—that’s the word he used—found a trick way of finding loopholes.” Roosevelt insisted that these “loopholes be closed and that they be retroactive.” If revenues were want
ing, Roosevelt didn’t mind investigating, prosecuting, or legislating his way to them. The concept of deficit budgets still sat easily with neither Morgenthau nor Roosevelt.

Panicked for cash, Morgenthau now had his Treasury set about trying to create dozens of Mellons. Roswell Magill of the department audited individual returns in New York and found, according to Morgenthau’s diary, that citizens were using old tax breaks—legally, mostly. But Roosevelt was now set on erasing the old distinction between evasion and avoidance that the Treasury had danced around so long. Roosevelt also set out to prove that the intention of taxpayers who failed to complete complex returns correctly was malign: where there was ambiguity, taxpayers ought to be presumed guilty.

This was especially disingenuous of the president, for Roosevelt himself would submit an ambiguous tax return for the year 1937. His income from the presidency that year would be $75,000, about Willkie’s level. But there were other issues that complicated the return. As he would write to Commissioner Guy Helvering, “I am wholly unable to figure out the amount of the tax for the following reason…” His own tax problem—one involving the timing of tax obligations—was something only experts could solve. “As this is a problem of higher mathematics,” wrote FDR, “may I ask that the Bureau let me know the balance due? The payment of $15,000 doubtless represents a good deal more than half of what the eventual tax will be.”

Morgenthau prepared memoranda with the lists, and Roosevelt was eager when they met on May 17: “Henry, it has come time to attack, and you have got more material than anybody in Washington to attack.” Roosevelt was worried about the conservative Democrats, and he needed Morgenthau: “Now it’s up to you to fight.” Morgenthau was excited to laughter at Roosevelt’s energy.

“Why are you laughing?” the president asked. “Because you are such a wonderful showman,” Morgenthau replied. “I don’t know what’s going to happen. I can’t guess what I have got that is so useful to you.” The men pulled together a list of businesses and individuals who had, as Roosevelt reportedly put it, “found means of avoiding
their taxes both at home and abroad.” Herman Oliphant of the department had written up a tax evader—it was apparently clear in this case—who had failed to declare both dividends and profits, as well as bribed relations. Roosevelt was irate, pounding the desk. “Why don’t you call him a son of a bitch?” the president asked. He wanted the man behind bars, Morgenthau would later report in his diary.

“I want to name names,” Roosevelt told Morgenthau. While he and Morgenthau decided for the moment to stop short of publicizing the list, Roosevelt read much of it to people around Washington, thereby ensuring news leaks. One influence on the president was Felix Frankfurter, who, along with his protégés, usually cited an old Oliver Wendell Holmes quote to justify tax increases: “I like taxes. They are the price I pay for civilization.”

At 9:45 on May 19, while Roosevelt was still in bed, a messenger brought a letter to the White House: Willis Van Devanter was resigning. Taking advantage of the new law that allowed justices to retire on full salary, he would be leaving June 2, at the end of the term. As historian Marian McKenna reports, Van Devanter tried to calm them and defended his move, telling them of his neighbor on Connecticut Avenue that “Borah favors it.”

Perhaps the news emboldened Roosevelt on the tax front. After an initial hesitation, he decided in the end that there was no substitute for giving out names. On June 24, 1937, tax commissioner Guy Helvering named sixty-seven “large wealthy tax payers, who by taking assets out of their personal boxes and transferring them to incorporated pocketbooks have avoided paying their full share of taxes.” Thomas Lamont, John Raskob, Pierre Du Pont, William Randolph Hearst—and Andrew Mellon, again—were all listed. The tax decisions of these men were, the Treasury acknowledged, “perfectly legal,” but still not conscientious. The publicity was followed by a law passed unanimously by both houses of Congress, limiting or eradicating tax-favored mechanisms, from breaks for trusts to breaks for personal holding companies and country estates.

Many observers were upset anew at this effort at shaming the
men. The idea that one could ignore the law seemed grossly unfair. What Roosevelt and Morgenthau—two wealthy men themselves—were doing was worse than moving the goalposts; they were formally moving the goalposts in a game already played. One of those to register his shock was J. P. Morgan, who was returning home from a trip to Britain on the
Queen Mary.
While he was still on board, reporters asked Morgan what he thought of Roosevelt’s tax plans. Apparently caught off guard, and perhaps not attuned to the mood of the second term, Morgan told reporters that there was nothing wrong with avoiding taxes. “Legal Tax Dodging Upheld by Morgan,” blared a headline, “Would Mend ‘Stupid’ Law.” Stepping onto dry land, Morgan had second thoughts. He issued a defensive statement: “My interview on shipboard with newspapermen last Monday took place before I had seen President Roosevelt’s message…. What I feel strongly is that, when a taxpayer has complied with all the terms of the law he should not be held up to obloquy for not having paid more than he owed.”

Far more confident in his reaction was Alexander Forbes, the president’s cousin and a professor at Harvard Medical School. Forbes wrote to the
Boston Herald
that the “true patriot” would “claim every exemption the law allows and he may have more to spend on enduring contributions to the betterment of mankind.” This repetition of Mellon’s message, coming from a relative to boot, stung Roosevelt: “I do not hesitate to brand you one of the worst anarchists in the U.S.,” he wrote to Forbes. “And, incidentally, I use ‘anarchist’ in the pure Greek sense” (from the root, which means “without government”). When it came to Morgan, Roosevelt was also scornful, asking mockingly of Charles Burlingham of the New York Bar what he made of “Morgan’s exposition of Christianity when he landed the other day…ask yourself what Christ would say about the American Bench and Bar were he to return today.”

The tax battle was not the only one going on in June. The unions were making advances—even in Willkie’s world. Commonwealth and Southern announced that Willkie and Lewis’s CIO had agreed to a raise for all operating employees at Consumers Power Company,
a Commonwealth and Southern subsidiary. Consumers employed 6,600 workers, so it was an important challenge for Commonwealth and Southern. But one it could afford: operative revenues were up.

But two things were becoming clear now. The first was that Roosevelt was having trouble in his court-packing fight. The legislation, he was finding, simply couldn’t be sold to the country, no matter what Stuart Chase wrote. And it was not popular in the Senate, either. Instead of welcoming the bill, the Senate Judiciary Committee rejected it. This despite Robinson’s Herculean effort, and even though seven of the ten members of the committee, a firm majority, were Democrats. The language of their rejection was unforgettable: the senators said that Roosevelt’s act “should be so emphatically rejected that its parallel will never again be presented to the free representatives of the free people of America.”

Roosevelt rallied, hoping to jolly Congress along by inviting lawmakers to a weekend on Jefferson Island. The lawmakers enjoyed themselves, and some of the rage diminished. There was more debate, as the summer warmed. But the president’s legislative leader in the fight, Senator Joe Robinson, succumbed one night to a heart attack, and soon it was clear that Roosevelt had lost this fight. “The Court Bill was dead, dead as a salt mackerel shining beneath the pale moonlight. As dead as the ashes of Moses, the world’s first law giver,” commented the
Jackson Daily News
of Mississippi. Hiram Johnson of California put it even more clearly, crying out in the Senate chamber: “Glory be to God.”

The second reality was that while Roosevelt was losing his court-packing battle, he was still winning his war against the Court. The recovery seemed to have slowed, but there was the record of the achievement of the spring, when the market moved close to 200. Cordell Hull, secretary of state, had persisted, and his trade agreements lifted burdens from many economies. There had been economic gain from that too, even if Hull didn’t have the Nobel. That year the
Economist
magazine would write, “In this tariff-ridden world the sight of any nation deliberately seeking to lower its tariffs is both rare and refreshing…. It is fully possible, for example, that Great
Britain has already gained more from the concessions given by the United States in her treaties with other countries than could be obtained in a direct Anglo-American treaty.” The phrases amounted, almost, to an offer of forgiveness for the administration’s behavior at the 1933 London conference.

Frankfurter had been right. Time was doing for Roosevelt what he could not convince Congress to do. With Van Devanter going, Roosevelt could name his first man to the court—Hugo Lafayette Black of Alabama, chosen later that summer. Very shortly it emerged that Black had belonged to the Ku Klux Klan. What, Roosevelt’s friends at Howard asked themselves, could the president mean by such an appointment? The Socialist Norman Thomas and the National Association for the Advancement of Colored People expressed concern. But Hugo Black got through. And now it was clear that within several years Roosevelt would be able to shift others, perhaps Stanley Reed and Robert Jackson, or Frankfurter, over to the Court as well. Roosevelt had assailed the justices for their tenure in office, their longevity. But he was prevailing over them because of his own longevity in office.

When observers thought about it, they realized that the outcome of Roosevelt’s advance generally had been clear as far back as June. Then Roosevelt had finally acted on his old threat and put forward legislation to replicate the TVA. Senator Norris had introduced “the seven TVAs bill,” as it was shortly known. From the Atlantic to the West Coast, there would be seven little TVAs, including a Southwestern Authority, to cover the Colorado River, Hoover’s old territory. A nationwide chain of TVAs would be hard to undo once built. Willkie noted that the project would double the national debt, his biographer Joseph Barnes reports. Besides, steam power was more economical anyhow.