4. WPA CUTS AND THE “ROOSEVELT RECESSION”
By that summer, as the court plan was in its final throes, the cuts in the WPA rolls that Harry Hopkins had forecast to Congress at the beginning of the year had come to pass. Unemployment had ticked up in March after reaching a depression-low 14 percent, although the warm weather had brought its usual increase in private jobs. Hopkins’s fund request for the fiscal year starting in July 1937 reflected an improving job picture: he had asked for only $1.5 billion for the WPA, less than a third of the original work relief appropriation of $4.8 billion just two years earlier. This would allow him to keep WPA employment at 1.65 million, a little above the summer low. The employment situation was far better than it had been. Still, 7 million people continued to be out of work.
Since the death of Roosevelt’s close longtime political advisor Louis Howe the year before, Hopkins had grown closer to the president. Howe, gnomish, sickly, and politically astute, had devoted his career to Roosevelt’s electoral fortunes ever since his early New York State activities; within the presidential circle only Hopkins offered a similar combination of loyalty and advice untarnished by a personal agenda. Hopkins had tried to warn Roosevelt in advance that trying to sell the court plan on the basis of efficiency would not fly since the court calendars were not that crowded, although afterward he dutifully spoke in favor of it. Now the president would test his loyalty again.
Roosevelt had looked at declining unemployment, industrial production that was almost back to the levels of 1929, and increased farm income and decided from these bellwethers that the depression was on its way to being whipped and it was time to cut relief spending. Treasury Secretary Henry Morgenthau Jr. had a hand in this conclusion. He argued that only a balanced budget and an end to deficits would convince businesses that the economy had regained enough stability to warrant new investment, which would spur a rise in private jobs. More relief spending would have the opposite effect, causing them to hold back because they feared the additional spending would lead to inflation and higher taxes.
Against this policy stood the views of Hopkins and others, including his economic advisor Leon Henderson and Federal Reserve Board chairman Marriner Eccles, that cuts in relief spending would effectively turn off the spigot of pump priming and send the nation into recession. Although the budget theories of John Maynard Keynes were not then widely known, their views reflected Keynesian thought. Hopkins in particular believed that purchasing power in the hands of consumers was a more powerful economic force, at least in the current emergency, than the sound national credit engendered by a balanced budget. He favored continuing deficit spending to stimulate the economy, a case he was arguing more frequently, and vocally, within the administration.
But Roosevelt kept pushing for spending cuts and savings. On top of the reduced WPA budget, he wanted local and state governments to increase their contributions to projects for which they sought WPA-paid labor. “More contributions please!” the president wrote Hopkins, urging that he immediately press project sponsors to shoulder 30 percent of project costs. Some members of Congress wanted it to be even more. Local sponsors had contributed 9.8 percent to the costs of their WPA projects in 1936, and by 1938 it would be up to 20.8 percent. Although Hopkins was beginning to move in the president’s direction, he opposed making the local share a strict demand on the grounds that many of the smaller state and local governments could not afford the additional spending; if so, projects would fold and they would have to lay off workers.
Hopkins had gone after his $1.5 billion appropriation for the new fiscal year with a vengeance, lobbying mayors, governors, and sympathetic senators and representatives in a blizzard of phone calls and office visits. The seasonal cuts, and the suggestion in his budget request that these would be more or less permanent, had already set off protests among WPA workers. As usual, the leftist factions concentrated in New York were among the most vocal; 7,000 of them in the New York arts units staged a one-day strike on May 27, 1937. And while Hopkins was reconciled to the lower appropriation and the lower rolls, he was determined to resist cuts that went beyond what he recommended. He did not believe that either the WPA or the country would be served by cutting the employment program even closer to the bone, which set him against an increasingly hostile anti–New Deal bloc in Congress.
He won the day, but his victory came at a cost. His relations with congressional conservatives, never warm, cooled further. When Senator James Byrnes of South Carolina asked Hopkins if he could get along on $1 billion for twelve months, Hopkins snapped, “I can, but the unemployed couldn’t.” Some members resented the ease with which he moved in and out of Capitol Hill offices, courting those he chose to and ignoring others. Some, especially from the low-wage South, disliked his support for a minimum wage. His sharp tongue, his resistance to patronage appointments in the WPA, and the continuing rancor over the court-packing battle spilled over, and when the House passed its version of the appropriations bill, it added language cutting Hopkins’s salary from $12,000 to $10,000.
It was a petty action designed to send a message. The Baltimore Sun ascribed the move to “a frantic hatred” of Hopkins caused in part by his opposition to “earmarking” WPA funds—that is, specifying the individual projects on which they could be spent. Earmarking was a thinly disguised effort to turn the WPA appropriation into a feast of pork, in which members of Congress would swap favorite projects among themselves regardless of the local unemployment rolls. Hopkins emerged victorious from this scrape, too; the bill called for the $1.5 billion to be spent in broad categories, and within those categories, Roosevelt and Hopkins had discretion. They included highways, roads, and streets ($415 million); public buildings and other public projects ranging from parks, airports, and utilities to pest eradication and flood control ($630 million); women’s and professional projects including the arts programs ($380 million); and the National Youth Administration ($75 million).
And the final bill also restored Hopkins’s full salary, although Washington Post columnist Franklyn Waltman summarized the extent to which he was accumulating enemies: “It was a pleasant sight,” he wrote, “to see someone slap that smartalecky Harry Hopkins down.”
It was not a time for Hopkins to gloat, however, for he had devastating matters on his mind. His wife, Barbara, had been diagnosed with breast cancer early in the year, and by the end of June, when Congress approved the WPA funding, the disease was well advanced. Hopkins was splitting his time between Washington and New York, where Barbara was receiving treatment, and a retinue of friends and retainers assisted in caring for their little daughter, Diana. When they learned that her case was hopeless, Hopkins and Barbara left New York for a final late summer stay in Saratoga Springs. They returned to Washington soon after Labor Day, and at the beginning of October she entered Garfield Hospital, where she died early on October 7 with Hopkins at her bedside. Barbara Duncan Hopkins was only thirty-seven, and she was the love of Hopkins’s life. They had been together for barely six years, he adored her, and he blamed his various failings for her death. Nor was Hopkins well himself. His duodenal ulcer had developed into something more serious and he suspected cancer, but he had allowed himself no time to confirm this during Barbara’s final months.
Members of the administration rallied around him in his grief. Hundreds sent sympathy cards. Florence Kerr, who in addition to heading the Division of Women’s and Professional Projects in the Midwest had been his classmate at Grinnell, returned to Washington to help look after Diana. Harold Ickes set aside his hostility and invited Hopkins to spend time at his farm in Maryland, an invitation Hopkins accepted, bringing about a temporary truce between the two. Hopkins apparently moped much of the time that he was there, but as Ickes later told Robert Sherwood, “Harry was an agreeable scoundrel when he wanted to be.”
Meanwhile, the economy was not showing the resilience Roosevelt had hoped for, or that Hopkins’s budget request had contemplated. Many of the workers laid off in the seasonal cutbacks had been unable to find jobs in the private sector. Pleading letters arrived on the desks of mayors and governors as the cuts took hold. Mayor Robert S. Maestri of New Orleans was a typical recipient, and he dutifully championed the causes of the unemployed with relief and WPA officials:
Mr. Richard R. Foster
Director of Public Welfare
Soule Building
New Orleans, Louisiana
Dear Mr. Foster:
This letter will be handed to you by Mrs. Josephine Maestri [she was apparently unrelated to the mayor], who has been connected with a WPA sewing project as a seamstress’ helper. Mrs. Maestri has been dropped because of reduction of funds.
I will appreciate it if you can have this lady reinstated. She is alone in the world and has a daughter to support. The small amount she has been receiving is all that she has to live on. I will appreciate your personal attention in this matter.
Sincerely yours,
Robert Maestri, Mayor
By August, when the rolls dropped below 1.53 million, the cuts had produced more protests. David Lasser, the president of the left-wing union called the Workers Alliance of America, made up of WPA employees and relief recipients, led 2,500 of his claimed 400,000 dues-paying members to Washington, where they camped at the Washington Monument. Hopkins met with Lasser twice in two days, and the meetings probably were more interesting than other events on Hopkins’s calendar, since Lasser was a man of many parts. Before he founded the Workers Alliance in 1935 and started agitating for more work and better pay for WPA workers, he had founded the American Interplanetary Society and written a book, The Conquest of Space, that proposed rocket-propelled space travel. He turned to labor advocacy after deciding “it is necessary to remake the Earth before delving into life on the moon.” But on the subject at hand, Hopkins refused to promise that WPA employment would expand, and Lasser appealed to his members for contributions to a political action fund to take the union’s case to voters.
At the same time, the Federal Reserve board was acting at cross-purposes. Although its chair, Eccles, favored a continuation of pump-priming relief spending, the Fed also wanted to ease business fears about inflation, so despite the stagnant job market it tightened credit by increasing bank reserve requirements. This was the opposite of pump priming; it took “some water out of the spout.” The new payroll taxes for Social Security removed an additional $2 billion from the pockets of consumers, and the WPA job cuts did still more to keep potential buyers away from retail counters.
Industrial production, which had struggled to a peak during the spring, started to fall; by October it had dropped 14 percent. The stock market, after fighting its way to 194.4 in March, also declined, incrementally at first and then more drastically in August and September. The New York Stock Exchange sought to halt trading and close the exchange after a sharp early September sell-off, but WilliamO. Douglas, who had replaced Joseph Kennedy as chairman of the Securities and Exchange Commission, rejected the request. Then, on a single day, October 19, the Dow Jones Industrial Average lost 7.75 percent of its value and the Standard and Poor’s index 9.12 percent. More than half a million Americans in private jobs were thrown out of work in that one month alone, 2 million by the end of the year, and what Republicans gleefully called the “Roosevelt Recession” was a fact.