Tag Archives: Budget Deficit

LET’S EVEN OUT THE SCALES!

President Roosevelt points to a sign reading “EQUAL RIGHTS TO ALL SPECIAL PRIVILEGES TO NONE,” while a banker and veteran look on in anticipation of more equitable cuts in federal spending.
President Roosevelt points to a sign reading “EQUAL RIGHTS TO ALL SPECIAL PRIVILEGES TO NONE,” while a banker and veteran look on in anticipation of more equitable cuts in federal spending.

 

In 1933, as the United States sought to pull its struggling economy out of the Great Depression, the American people looked for guidance from newly-elected President Franklin D. Roosevelt. FDR promised to reform the damaging actions brought on by his predecessor, President Herbert Hoover, and to improve the nation’s economic state. John Knott’s political cartoon, “Regardless of Dress,” addresses one of the many reforms enacted as part of Roosevelt’s New Deal: specifically, the Economy Act of 1933. This act reduced the amount of federal aid given to banking and veteran programs to equalize treatment of struggling American citizens. Evoking parallels to Andrew Jackson’s populist slogan, “equal rights to all, special privileges to none,” Knott’s illustration underscores the importance of Roosevelt’s impact on veterans and the banks through his New Deal economic recovery programs.

The Great Depression was the period from 1929-1939, during which time the American economy took an unprecedented downturn. After the stock market crash on October 29, 1929, the nation’s economic state began a precipitous decline, as consumer spending and investment plummeted. Job scarcity became such a widespread problem that by 1932, the nation’s unemployment rate had risen to 25% (Baughman “The 1930s: Government and Politics: Overview”). Hoover’s spending approach for aiding the effects of the Great Depression was an inclination to give “indirect aid to banks or local public works projects, but he refused to use federal money for direct aid to citizens” (Hoover “The Gilder Lehrman Institute of American History”). During Hoover’s Presidency, America’s budget deficit ballooned from a $734 million surplus in 1929 to a $2.7 billion deficit in 1932 (Morgan “Deficit Spending”). To compare it to today’s standards, while the 2017 federal government’s deficit rose to $668 billion, an $82 billion increase, that remains only a 12% increase rather than the 663% rise during Hoover’s term (Niv “US Deficit Spending Reached $668 Billion in Fiscal 2017”). Roosevelt’s election in 1932 brought on a series of reforms aimed to counter Hoover’s tactics. In his approach to economic recovery, however, FDR adopted a populist approach for addressing the struggles of the common man.

When Franklin D. Roosevelt took office in 1932, his actions immediately reflected the populist ideals of assisting ordinary American citizens, and his New Deal economic recovery plans were intended to directly help the American people. The First New Deal was a procession of economic reforms as well as a series of national aid and federal programs created with the purpose of bringing the United States out of the Great Depression; furthermore, these initiatives were promised to be implemented within Roosevelt’s first 100 days in office. Because an entire quarter of the US population was unemployed, these aid programs stretched across a swath of occupational categories and social classes (Baughman “The 1930s: Government and Politics: Overview”).

Programs such as the Federal Emergency Relief Act (FERA), which provided $500 million in grants directly to states to “infuse relief agencies with the much-needed resources to help the nearly fifteen million unemployed,” were aimed at mitigating the subsidiary monetary channels that, in the past, had slowed progress of economic improvement (Lumen Learning “Franklin Roosevelt and the New Deal, 1932-1941”).

Given the nation’s poor economic state, however, Roosevelt also aimed to refrain from unnecessary excessive spending. Thus, he introduced the Economy Act of 1933 which cut around $400 million from federal payments to veterans and $100 million from the payroll of federal employees (Morgan “Economy Act of 1933, Special to The New York Times). Not only did this act recognize the unequal distribution of governmental monetary resources, it also helped equalize funding through redistribution to people via Roosevelt’s newly created programs.

Alluding to the spending cuts spurred by the Economy Act of 1933, Knotts’ cartoon highlighted the shared sacrifice that was required for economic recovery, legislated in FDR’s populist policies, and inspired by Jacksonian Democratic themes. The illustration featured three figures: a banker/civilian, a veteran, and FDR. Roosevelt points to a banner hanging above their heads. The sign, which reads, “EQUAL RIGHTS TO ALL SPECIAL PRIVILEGES TO NONE,” points to the reasoning behind the Economy Act of 1933 and FDR’s populist policies. During the Great Depression most US citizens were in need during those difficult economic times, and while FDR recognized the nation’s responsibility to those who served their country, he also stressed their equality with other citizens (The Dallas Morning News “Roosevelt at Chicago”). Drawing on that ideology, Knott suggested Roosevelts’ similarity to another populist president, Andrew Jackson. The quote boldly displayed and pointed to by President Roosevelt reads, “EQUAL RIGHTS TO ALL SPECIAL PRIVILEGES TO NONE.” It is a famous populist slogan widely attributed to Andrew Jackson.

Jacksonian Democrats not only believed in maintaining a strong Federal Union but also in following the conviction that “no one man has any more intrinsic right to official station than another,” as well as in maintaining the assurance that “the already wealthy and favored classes would not enrich themselves further by commandeering, enlarging, and then plundering public institutions” (History.com Staff “Jacksonian Democracy” and Gale “Andrew Jackson”). By cutting their previous federal funding allowances, the aid given to veterans and the banking system was equalized by FDR when compared to other assistance programs. His actions were based on his affirmation of equal treatment of citizens and are directly and were comparable to Jackson’s views. Because veterans and banks were receiving significantly more aid compared to other institutions and groups, Roosevelt cut their funding, opening more opportunities for other struggling parties to receive monetary assistance, thus equalizing government aid program fairness (Knott “Regardless of Dress”).

“Roosevelt in Chicago,” an editorial that accompanied Knott’s cartoon, spelled out the aforementioned policies regarding veterans and banks alike and described Roosevelt’s take on the need for equalizing aid (re)distribution. The editorial discussed FDR’s emphasis on “the plain duties of citizenship,” another reference to Roosevelt’s Jacksonian-inspired populist agenda for economic recovery. Roosevelt’s New Deal ushered in the dawn of a new American economic era in both its policies and reforms (The Dallas Morning News “Roosevelt at Chicago”).

The Great Depression was a devastating period of American history for all US citizens. As the economy struggled, Roosevelt was not only faced with how to bring prosperity to the nation but also how to treat all social classes under his altering reforms. His actions highlighted the repetition of history and the new takes future leaders are able to implement to adjust for the times.

 

Works Cited

“Andrew Jackson.” Encyclopedia of World Biography, 2nd ed., vol. 8, Gale, 2004, pp. 168-   172. Gale Virtual Reference        Libraryhttp://link.galegroup.com/apps/doc/CX3404703247/GVRL?u=txshracd2598&si    d=GVRL&xid=891df37f. Accessed 3 Apr. 2018.

Elis, Niv. “US Deficit Spending Reached $668 Billion in Fiscal 2017.” The Hill, 9 Oct. 2017, thehill.com/policy/finance/354542-us-deficit-spending-reached-668-billion-in-fiscal-2017.

History.com Staff. “Jacksonian Democracy.” History.com, A&E Television Networks, 2012, www.history.com/topics/jacksonian-democracy.

Hoover, Herbert. “The Gilder Lehrman Institute of American History.” Nat Turner’s Rebellion,1831 | Gilder Lehrman Institute of American History, www.gilderlehrman.org/content/herbert-hoover-great-depression-and-new-deal-1931–1933.

Knott, John. “Regardless of Dress” The Dallas Morning News, 4 Oct. 1933.

Lumen Learning. “Franklin Roosevelt and the New Deal, 1932-1941.” Lumen, Open SUNY Textbooks, courses.lumenlearning.com/suny-ushistory2os2xmaster/chapter/the-first-new- deal/.

Morgan, Iwan. “Deficit Spending.” Encyclopedia of the Great Depression, edited by Robert S. McElvaine, vol. 1, Macmillan Reference USA, 2004, pp. 226-228. Gale Virtual ReferenceLibraryhttp://link.galegroup.com/apps/doc/CX3404500134/GVRL?u=txshracd2598&si=GVRL&xid=6476eefb. Accessed 3 Apr. 2018.

Morgan, Iwan. “Economy Act of 1933.” Encyclopedia of the Great Depression, edited by Robert S. McElvaine, vol. 1, Macmillan Reference USA, 2004, pp. 268-269. Gale Virtual Reference        Libraryhttp://link.galegroup.com/apps/doc/CX3404500154/GVRL?u=txshracd2598&sid=GVRL&xid=b0474e7f. Accessed 3 Apr. 2018.

“Roosevelt at Chicago.” The Dallas Morning News, 4 Oct. 1933.

Special to The New York Times. (1932, Dec 08). Text of the president’s message calling on congress for a curb on spending. New York Times (1923-Current File) Retrieved from   http://ezproxy.lib.utexas.edu/login?url=https://search.proquest.com/docview/99804009?a         ccountid=7118

“The 1930s: Government and Politics: Overview.” American Decades, edited by Judith S. Baughman, et al., vol. 4: 1930-1939, Gale, 2001. Gale Virtual Reference        Libraryhttp://link.galegroup.com/apps/doc/CX3468301167/GVRL?u=txshracd2598&sid=GVRL&xid=87193b62. Accessed 3 Apr. 2018.

Speaking of Raising Taxes

Speaking of Raising Taxes
Uncle Sam and Marriner S. Eccles discussing their conflicting views on taxes and economic policy

According to the business cycle, economic activity is in a cycle that is both necessary and inevitable. The business cycle consists of expansion which is defined by increased output, employment, and profit, followed by contraction which includes decreased input, growing unemployment, and profit losses (Sherman, 2014). It is commonly accepted that this cycle contributes to the progression of a capitalist economy. Another key characteristic of the cycle is the belief that in a free market economy the government should limit its intervention and just let the cycle play out naturally. However, the Great Depression was a severe and unprecedented contraction period that lasted longer than expected, and the absence of the natural forces that led toward recovery called for government intervention in the form of expansionary fiscal policies (May, 2004).

The Great Depression started in 1929 for the United States, leaving devastating effects around the globe lasting throughout the 1930’s. When  Franklin D. Roosevelt became president in 1933 he immediately took action implementing the New Deal, which involved several federal programs that stimulated financial reforms and regulations. Although the New Deal’s purpose was to ignite the economy, many of the programs and reforms proposed never came to fruition due to the conflicting views in Congress. Those conflicting views were a commonality during the Great Depression and often were expressed through political cartoons.

On March 18, 1937, John Knott’s Speaking of Raising Taxes was published in the Dallas Morning News; during that time the United States was still consumed with the Great Depression and its ramifications.  Depicted in the cartoon, Marriner S. Eccles was appointed as the head of the Federal Reserve Board,  under Franklin D. Roosevelt’s administration. The supplemental editorial Eccles Explains, provided context for the cartoon. It stated that Eccles intended to balance the budget through an increase in taxes (“Eccles Explains”, 1937). This new tax proposal was part of a contractionary policy that would make it possible to balance the budget, which was at a deficit of 26.4 billion dollars (“1937 United States Budget”), at the cost of allowing the recession to continue. An alternative to this proposal was an expansionary policy that called for deficit spending and tax cuts in order to boost the economy onto a path towards recovery from the recession.

Speaking of Raising Taxes, depicted Eccles saying, “This is no money at all. Uncle.” in addition to holding a paper in his hand that reads “higher taxes to balance budget”. Sitting in front of him is Uncle Sam who’s saying, “Why not cut expenses and stop borrowing?” while clutching one of the many stacks of money lying around him labeled “record income tax returns.” Knott’s cartoon illustrates Eccles, the chairman of the federal reserve board, in a quandary with the Uncle Sam in trying to figure out the best means for restructuring the country in recovery from the Great Depression.

Before being appointed as chairman of the Fed, Eccles was assistant to Treasury Secretary Henry Morgenthau Jr. Prior to going into politics, Eccles made his own conclusions as to what caused the Great Depression. His suggestions revolved around the concept that to keep a sound economy there must be constant movement of money. By this, he meant that instead of having money just sitting under large corporations and the rich, that money should be distributed among the lower income groups. This concept was similar to the idea of famous economist John Maynard Keynes and what is now known as Keynesian Economics. Keynesian Economics calls for expansionary policy in times of recession. (May, 2004) Keynesianism generally recommends countercyclical policies. For example, in order to suppress inflation, the government can increase taxes or reduce outlays.

Within the cartoon, Knott illustrates opposing views through a discussion between Eccles and Uncle Sam. In this case, Uncle Sam represents both the national government and the American people. Eccles stating, “This is no money at all. Uncle ” justified his proposal of higher taxes. The stacks of money lying around Uncle Sam labeled, “record income tax returns” represented what the outcome of what Uncle Sam said. With taxes being cut from such high rates the returns would be massive, revealing why Uncle Sam is clutching a stack of money. Taxpayers would then be able to spend their new disposable income and boost growth in the economy. The recurrence of the dilemma on whether to choose an expansionary policy or contractionary policy is inevitable as the economy is constantly changing.  

 

 

Works Cited

“1937 United States Budget.” Rate Limited, federal-budget.insidegov.com/l/39/1937.

Amadeo, Kimberly. “Deficit Spending Is Out of Control. Here’s Why.” The Balance, 2 May 2017, www.thebalance.com/deficit-spending-causes-why-it-s-out-of-control-3306289.

“Eccles Explains.” The Dallas Morning News, 18 March 1937.

MAY, DEAN L. “Keynesian Economics.” Encyclopedia of the Great Depression, edited by Robert S. McElvaine, vol. 1, Macmillan Reference USA, 2004, pp. 539-541. Gale Virtual Reference Library, go.galegroup.com/ps/i.do?p=GVRL&sw=w&u=txshracd2598&v=2.1&it=r&id=GALE%7CCX3404500304&asid=55eeb9551783fd782464aa2fc29212f7. Accessed 8 Nov. 2017.

“Marriner Stoddard Eccles.” Encyclopedia of World Biography, 2nd ed., vol. 22, Gale, 2004, pp. 160-162. Gale Virtual Reference Library, go.galegroup.com/ps/i.do?p=GVRL&sw=w&u=txshracd2598&v=2.1&it=r&id=GALE%7CCX3404708008&asid=2c560e98f0e4272451e86080b7aa4db2. Accessed 8 Nov. 2017.

Sherman, Howard J. The Business Cycle. Growth and Crisis under Capitalism. Princeton: Princeton University Press, 2014. Web. Retrieved 9 Nov. 2017, from https://www.degruyter.com/view/product/452516