(POSTWAR WELFARE STATE to THATCHER and REAGAN -- continued)
POSTWAR WELFARE STATE to THATCHER and REAGAN (2 of 7)
During World War II, the Roosevelt administration took advantage of the skills of business executives in organizing production. It put them in charge of government agencies. Business Week described the war has having "placed a premium on business talents rather than on 'brain-trusters' and theoreticians."
The war effort took priority over economic benefits to the poor, and some of President Roosevelt's New Deal social programs were cut. In June, 1942, Congress voted to eliminate funding for Civilian Conservation Corps. The WPA, derisively called "We Poke Along" by some, had been the nation's largest employer before the war, and it was eliminated in late 1943.
During the war years the federal government was expanding the economy. Federal outlays reached over 50 percent of the nation's GDP (compared to the 18.4 percent that it would be in the year 2000). The average annual growth rate of the economy from 1940 through 1944 was 15.55 percent. In comparison, Britain's economy, more damaged by war, hardly grew. In billions of dollars, at 1990 prices, the U.S. and Britain had the following GDPs during the war:
USA UK
1940: 943 316
1941: 1094 344
1942: 1225 353
1943: 1399 361
1944: 1499 346
By the way, considering the U.S. population at 133 million, its per capita GDP in 1944 was a little over $11,000 at 1990 prices, equivalent to $22,500 in 2009. Britain, with a population at 49 million in 1944, had a per capita GDP of around $7,061. equivalent to $14,100 in 2009.
Big business was doing okay, while President Roosevelt remained in his wealth redistribution mood. In his 1944 State of the Union address he called for “steeply graduated taxes." And he said that the government should guarantee everyone a job, an education, and clothing, housing, medical care, and financial security against the risks of old age and sickness.”
With the war nearing its end, the Roosevelt administration and the Democrat Congress created a gigantic welfare program: the Servicemen's Readjustment Act of 1944, also known as the G.I. Bill. It was created to prevent a repetition of the Bonus March of 1932 and a relapse to economic depression at war's end.
There was in the U.S., as in Britain, a spirit of shared sacrifice and equality that lent support to Roosevelt's policies. And following Roosevelt's death, President Truman stayed on the same path. In a message to Congress on September, 1945, he outlined his government program for the transition to a peace-time economy: Congress to hold the line on prices and rents until fair competition could operate to prevent inflation; control of inflation by holding wages "in line;" supplements to unemployment insurance; and a higher minimum wage in order to increase purchasing power. He spoke of the right of every family to a "decent" home, adequate medical care, the opportunity to achieve and enjoy good health, the right "to adequate protection from the economic fears of old age, sickness, accident, and unemployment," and the "right to a good education."
The year 1945 ended with the GDP in decline. There were shortages, and labor unions were quick to make demands for better pay and working conditions. Labor unions represented 27% of the civilian labor force, up from 7% in 1934. Supporters of militant action on behalf of workers attacked Big Business for having acquired excessive profits. In 1946 there were more than 5,000 strikes. The coal, electrical and steel industries were hit. Labor was Truman's constituency, but he used his power and ordered strikers back to work. Striking railroad employees ignored him, and he ordered government forces to take over the railroads and the coal mines. Public anger at labor unions had increased.
The meat shortages worsened, and consumers blamed the Democrats. In the campaigns for seats in Congress in 1946, the Republicans asked potential voters whether they had had enough -- enough inflation, high taxes, enough price controls, enough coddling of unions, enough strikes and union entanglement with Communists.
Republicans promised to cut income taxes while Truman preferred to balance the budget and pay off the national debt. Republican rhetoric had some effect. A Gallup Poll in October indicated that those preferring debt reduction to the lowering of taxes had dropped from 71 percent the month before to just 49 percent.
Unions had made some wage gains, but in the congressional elections in November many of their candidates were defeated. The Republicans gained control over the House of Representatives, 246 to 188 seats, and the Senate, 51 to 45 seats, reversing the dominance that had been gained by the Democratic Party.
Prices did not rise as steeply in 1947 and '48 as they had in '46, but their increase -- inflation -- continued to be a concern, especially food prices. Truman suggested a return to price controls and Republicans went along with some controls and rations that Truman said were "pitifully inadequate." But he signed their bill.
In 1947, Truman held that income tax reductions were not needed for businesses to invest and expand. "There is no shortage of funds for this purpose in any wide sector of our economy," he explained. Truman vetoed Republican tax-reduction bills that he thought favored the rich. But on the issue of labor unions, the 80th Congress mustered the two-thirds majority necessary to override his veto of the Taft-Hartley (Labor Relations) Act. The bill was created, it said, "To promote the full flow of commerce, to prescribe the legitimate rights of both employees and employers in their relations affecting commerce." Organized Labor hated the bill because it outlawed their ability to maintain all union shops. The bill gave workers the right to choose whether to belong to a union or not. This, organized labor saw, weakened their strength and ability to organize.
During the divided opinion on taxation and other economic issues, a growth in home building and suburbs was underway, and there was a big shift in education, both stimulated by billions of federal spending for the G.I. Bill. The suburbs were tiny and few compared to what was developing, and they had been largely the domain of a the wealthy. Academia had been people mostly by men from wealthy families.The historian Stephen Ambrose said of the bill:
The suburbs, starting with Levittown and others, were paid by GIs borrowing on their GI Bill at a very low interest rate. Thousands and thousands of small businesses were started in this country and are still there thanks to the loans from the GI Bill. It transformed our country. (NewsHour, July 4, 2000)
The bill had been passed by a slim margin, and, said historian Michael Beschloss, "a lot -- particularly republicans -- said let's not pass this thing ... They felt that it would encourage sloth; that people wound not try to get jobs. They thought this this would extend the welfare state, rather than do the opposite."
The G.I. Bill became a model for liberals supporting government investing that they believed would not only pay for itself but produce good returns. It was to be claimed that for every dollar invested in the higher education for veterans the government and the economy received a $6.90 return. (Do a search on the underlined.)
In 1948, Truman campaigned hard for reelection and confounded expectations by winning. And the Democrats won back the House of Representatives with a 93-seat majority and the Senate with a 12-seat majority. The Republicans probably would not have had their majorities to lose if organized labor had restrained themselves a bit in 1946.
But the coalition between Republican conservatives and Southern Democrats remained, with Southern legislators opposed to President Truman's efforts on behalf of civil rights for African Americans.
Truman and the new Congress initiated what Truman called his "Fair Deal." This led to federal spending on new home construction, urban renewal and more public housing, which was to have a lasting impact on the United States. Congress passed the Social Security Act of 1950, which extended coverage to domestic labor, nonprofit workers and the self-employed.
The economy was booming not only with housing but also the buying of automobiles, paid for in part of course with borrowed money. During the Truman years the economy grew at an rate of around 5% percent annually on average -- twice that of the Republican administration under Eisenhower that would follow.
When Truman left office in 1953 the national debt was at 71.4 percent of GDP, down from 117.5 percent when he had taken office.
Copyright © 2010-2011 by Frank E. Smitha. All rights reserved.
