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"Clearly Vicious as a Matter of Policy": The Fight Against Federal-Aid

PART THREE: To Control The Levers (Page 1 of 6)

President Roosevelt Applies the Brakes

During the 1932 campaign, Franklin D. Roosevelt made balancing the budget a part of his campaign. After taking office on March 4, 1933, he abandoned the concept and embraced public works, including road building, as one element of a strong Federal attack on the Depression.

On March 21, 1933, the President halted the letting of Federal construction contracts while his Administration decided on a broad pump-priming program. Secretary of Agriculture Henry A. Wallace implemented the order the same day for the Federal-aid highway program, but was concerned about the impact. He wrote to the President on May 2:

In accordance with these instructions I am holding $17,093,898 which is the total of all balances of previous appropriations allotted to the States for highway improvement. This stop order suspended my approval of a considerable number of contracts for which bids had been received by the States, and which have been held without further action.

At the time the order was issued, March 21, the Department had approved plans and specifications for more than 400 miles of roads and bridges for immediate construction. This situation has caused considerable embarrassment, and has prevented employment which would be offered by these projects.

Citing the Forest Relief Act of March 31, Wallace said the law "appears definitely to provide for the use of the balances now held" and he asked permission to release funds that would be used for construction within a 90-day period.

President Roosevelt replied on May 15 that, "In view of the expected early announcement of a complete program for public works, I think it would be unwise to release the balance to which you refer."141

The result was the National Industrial Recovery Act of June 16, 1933. Of the more than $3 billion for public works, the Act authorized $400 million in grants to the States for road construction. The States, which the Depression had drained of tax revenue, were not required to match the funds, which could be used on urban streets that were extensions of the Federal-aid highway system to and through municipalities. This was the first time funding available through the BPR could be used in cities, and on "secondary and feeder roads" off the Federal-aid system. As with the earlier emergency legislation, workers were limited to 30 hours a week and were to be paid "just and reasonable" wages. Convict labor was prohibited. In addition, human labor, instead of machinery, was to be used "wherever consistent with sound economic and public advantage."

In a section titled "Reemployment and Relief Taxes," the National Industrial Recovery Act increased the tax on gasoline to 1.5 cents a gallon. The revenue was included in the general treasury without a link to road improvement. (The increase would be rescinded by the Revenue Act of 1934, with the tax per gallon returning to 1 cent.)142

Although the new program contained some elements of the Federal-aid highway program (e.g., the reliance on State highway agencies), it differed in that it was focused more on job creation than transportation goals.

Some years later, Senator Carl T. Hayden (D-Az.), Chairman of the House Subcommittee on Roads, would recall the origins of the highway funding in the National Industrial Recovery Act:

In 1933, at the beginning of the present administration, when the relief bill, carrying $3,300,000,000, was in preparation, I went to see the President, and suggested to him that the quickest way to put men to work was to allocate money by the usual method to the States, and let the State highway departments construct and improve the highways. The President stated that he had delegated the formation of relief legislation to four members of his Cabinet, and suggested that I confer with them and then come to see him.

I went first to see George Dern, the then Secretary of War, who had been Governor of Utah. He said that the idea was perfectly sound. He knew what good work the highway departments could do, and that they could put men to work quickly.143

I next went to see the Secretary of Agriculture, Mr. Wallace, who is now the Vice President. He said that he was new in office, but he knew that his father, as Secretary of Agriculture, had always spoken highly of the Bureau of Public Roads, and he approved of the idea.144

I next called on the Secretary of Labor [Frances C. Perkins].145 It was her opinion that the location of unemployment would not conform to the apportionment of money among the States the way it is provided by law - that is, according to the area of the State, the population of the State, and the mileage of post roads.

I said, "Madam Secretary, I am sure that you do not understand the situation throughout the Nation. When unemployment is mentioned to you, I imagine that you think of a queue of people on a sidewalk in New York City going into some soup kitchen; but I assure you that out in the small towns and in the country there are as many heartaches and there is as much distress as there is in the great cities. I do not propose to use all the relief money in this way, but if a portion of it is used for highways, people will be put to work in 3,000 counties."

The fourth member of the President's Cabinet to have this subject in charge was the Secretary of the Interior. I went to see Mr. [Harold] Ickes. He and Madam Perkins had the same idea. He came from Chicago, and he thought the unemployment was in the great cities, and therefore that every proposed highway project should be brought to Washington for approval.

I said to him, "Mr. Secretary, you are new and without political experience. If it becomes known in Arizona that a man named Ickes has money in Washington to improve the road between Tucson and Phoenix, and the people there ask me to get some money for that road, I am coming to see you." He said, "Well, there are other men in Congress who are willing to handle the matter in that way." He said, "Senator Shipstead called to see me not long ago. He is perfectly willing to take a chance on deepening the channel of the Mississippi river up to St. Paul and Minneapolis." I said, "Yes; the Senator will take a chance on getting here before I do, and finally you will have 96 Senators and 435 Representatives on your neck, whereas if this matter is handled in the normal way, and the money is apportioned among the States, so that the work can be decentralized, you will not be bothered with it at all...

[After] calling on the four members of the Cabinet, as requested by the President, I returned and reported to him that the two members of his Cabinet who understood the situation, Secretary Dern and Secretary Wallace, approved earmarking some of the funds in the $3,300,000,000 relief bill and apportioning the money among the States for highway work; that two members who were without political experience objected and wanted to create a great bureaucracy in Washington, which would compel the sponsor of every road project to come to Washington to secure its approval. The President promptly indicated that he did not want to do that; that he did not want to create a bureaucracy of that kind here in Washington. He then mentioned his experience as Governor of New York the relationship the State had with the Bureau of Public Roads in Washington, and told me he thought my proposal was perfectly sound [sic]. That was when he was fresh from the governorship. That was when he still had the State's point of view. That was before the bureaucrats in Washington had had time to influence his thinking...

The President said to me that he would approve the plan and asked how much money would be necessary. I said I had communicated with all the States of the union and asked them how much money they could profitably expend on highways in 1 year, if they had all the money they needed. The total was $400,000,000. The President said that he believed that to be too much money and that the State highway departments could not expend so large a sum in 1 year. I said, "If they cannot spend it in 1 year, they can profitably use it in 2, and the depression will not be over in a year or in 2 years." He told me to see Senator Wagner, who had charge of the relief bill in the Senate, and to earmark some of the money for highways. I saw Senator Wagner, and he told me to write my own ticket. The result was that the only item in the whole relief bill that was earmarked was $400,000,000 for highway construction, to be apportioned among the States and to be spent by the States without matching.

When I had drafted my amendment, I called John R. McCarl, the Comptroller General, and said, "I want two of your best lawyers to come and see what I have written." They came, and I told them, "I have written here a provision which makes available to the States, under standard Federal-aid apportionment, $400,000,000. I want to know if I have drawn it so that when Franklin Roosevelt signs his name once [sic] that money will be allocated for that purpose, and can be used for no other purpose." They assured me that that was exactly what would happen.

In the spring of the second year, when not all of the money had been spent, as the President had anticipated, I received a call from Marvin McIntyre at the White House, and was told that the President would like to have me meet with Daniel Bell, the Director of the Budget; with Aubrey Williams, of the Works Progress Administration; and with some other gentlemen. They came to the Capitol and we met in the room of the Committee on Appropriations. They said, "Harry Hopkins is running out of money. The sums allocated to him by the President are insufficient." They told me that there was one hundred and twenty million of the four hundred million for highway construction which had not been expended, and asked that I consent to the use of the money by the Works Progress Administration for a time, and then later have it returned.

I said, "This road money cannot be transferred except by act of Congress. So far as I am concerned Mr. Hopkins will not get one red cent of it, because the money had been allocated to the States. The States have made their plans, and within the year they will need all of it. If Mr. Hopkins wants money, let him come to the Appropriations Committee and make his case, and he will get it.

From that time on the bureaucrats in Washington have not been enthusiastic about this method of apportioning money among the States.147

Secretary Wallace apportioned the funds to the States on June 23, with regulations on use of the funding issued the same day. On August 5, work began in Utah on the first project funded under the National Industrial Recovery Act and, as the BPR's annual report for FY 1934 put it, "thereafter the beginning of work followed rapidly in all States." Work was completed on 6,986 miles of road by June 30, 1934, with work underway on another 22,378 miles. Completed projects totaled $79.9 million, while projects under construction or approved for construction totaled $399.5 million (including funds from the National Industrial Recovery Act, Federal-aid, and other relief measures.)148

A Renewed Federal-Aid Charter

Many individuals and organizations used the need for jobs to promote their own concepts of needed transportation projects. On January 22, 1934, Chief MacDonald told ARBA members during their annual meeting in Chicago, that officials in Washington had received "a constant flow of suggestions" that the best way to create jobs "is for the Federal Government to undertake the building of a great highway from coast to coast." MacDonald rejected the idea that such a project was needed for transportation reasons or would take up all surplus labor. Such proposals overlooked "the dimensions of the cumulative series of unemployment problems with which the country has been confronted" as well as the extent of Federal efforts to overcome it.

To illustrate the scope of the effort, MacDonald said:

During a period of less than six months, from July to January, under the Federal Public Works appropriation, construction has been actually undertaken on a road mileage sufficient to build six transcontinental lines. For those who desire a wide highway from coast to coast, construction would now be under way to provide a surfacing upwards of 110 feet wide on a road bed about 200 feet wide, over a right of way 400 feet wide.

Others recommended a highway from Laredo, Texas, to South America. MacDonald said:

The highway work which has been undertaken for the major purpose of relieving unemployment in the past six months... would be equal to six highways from the United States border to the Panama Canal. This mileage would extend a road from the United States through Mexico, Central America and connect all the capitals of South America.

In fact, he said, the mileage was equal to a highway around the world, "although I do not assert there will be sufficient bridges included to span the oceans."

Although such a highway or network of transcontinental or intercontinental highways may be desired, MacDonald pointed out that the money was being distributed widely "to reach into nearly every county of every State." With the work extending to secondary or farm roads and municipal streets, the work is taking place where it was "needed to reduce unemployment."

On June 18, 1934, President Roosevelt approved the Hayden-Cartwright Act of 1934 - named after Senator Hayden and Representative Wilburn Cartwright (D-Ok.), Chairman of the Committee on Roads. The Act authorized $200 million under the National Industrial Recovery Act for emergency construction of highways without a matching requirement. It also converted the loans authorized by the earlier emergency legislation to grants, so the States would not have to repay them.

At the same time, the Hayden-Cartwright Act revived the Federal-aid highway program by resuming the practice of authorizing Federal-aid highway funds for 2 years, in this case at $125 million annually for FY's 1936 and 1937. Because of a continuing desire to promote job creation, the Act required that the funds must be placed under agreement for projects within 1 year after the close of the fiscal year, not 2 as in the past. The Act also restored the Federal-State matching requirement at 50-50, abolished the limit on expenditures per mile, and continued the practice of funding urban extensions of the Federal-aid system and secondary farm-to-market roads.

At the same time, Section 11 stated that up to 1½ percent of the amount apportioned to each State annual "may be used for surveys, plans, and engineering investigations of projects for future construction in such State..." The provision marked the start of formal highway planning, although the word "planning" was not used; for Republicans, "planning" had come to represent everything they hated about the Roosevelt Administration, so the word, if not the intent, was left out of Section 11.

In addition, the Act provided that after June 30, 1935, any State that diverts gasoline tax revenue to purposes other than highway improvement would be subject to the loss of one-third of its Federal-aid funds. The "diversion" provision did not apply to the Federal Government.149 Further, each State could use 1½ percent of its apportioned funds for surveys, plans, and engineering investigations. This provision would be the source of funding for statewide highway usage surveys that began in the mid-1930s and provided a comprehensive statistical look at traffic throughout the country.

In signing the legislation, the President said:

As long as the roads of the nation are used by more than 24,000,000 automobiles and trucks, construction and improvement of roads will be of major importance. The Hayden-Cartwright Act seeks to stabilize highway building with Federal and State funds by insuring a work program for the next three years of far reaching proportions and benefits.

With contracts underway for more than 90 percent of the emergency highway work authorized by the National Industrial Recovery Act, President Roosevelt described the new bill as transitional:

[The] new program is necessary to sustain highway employment on an adequate and reasonable scale for the remaining period of recovery. The act also provides for a gradual tapering off of emergency highway expenditures and lays the foundation for a return to normal expenditures.

Even so, Congress would make additional emergency funds available the following year. The Emergency Relief Appropriations Act of April 8, 1935, provided $200 million for highways and $200 million for eliminating hazards at rail-highway grade crossings. America's Highways 1776-1976 explained:

These grants, with the National Industrial Recovery Act grants, pumped a billion dollars into highway construction between 1933 and 1938 - enough to assure the continuation of highway building at boom levels. Altogether, the emergency funds financed over 54,000 miles of road improvements on the Federal-aid system, urban extensions and secondary feeder roads, plus the elimination of nearly 3,000 railroad grade crossings.

Of equal or greater importance in the reckoning of the Administration, the emergency program provided the equivalent of 162,000 full-time jobs per year at the job site during the depths of the Depression. Indirect employment generated by the program was well over 480,000 full-time jobs.150

The Hayden-Cartwright Act of 1936, which the President approved on June 16, authorized $125 million a year for primary roads in FY's 1938 and 1939, $25 million a year for secondary or farm-to-market roads, and $50 million for elimination of hazardous rail-highway crossings, as well as funds for projects on public lands. In all, the Act authorized $216,500,000 over 2 years.

The economy had begun to recover by 1936, an election year in which President Roosevelt scored a landslide victory over Governor Alfred M. Landon of Kansas.

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FOOTNOTES

  1. Franklin Delano Roosevelt (FDR) Library, OF 1e, Box 11. Joyce N. Ritter, an FHWA writer-editor, located this and other referenced documents during a visit to the FDR Library in May 1986. She was assisting W. Lee Mertz, whose monographs on the Interstate System can be found elsewhere on this site. Ms. Ritter is retired from the FHWA.
  2. Sweet, James Stouder, The Federal Gasoline Tax at a Glance: A History, Bybee House, 1993, p. 5-6.
  3. George Dern had been Governor of Utah from 1925 to 1932, when he left to join the incoming Roosevelt Administration. He served as Secretary of War from 1933 until his death on August 24, 1936.
  4. Henry C. Wallace took office as Secretary of Agriculture at the start of the Harding Administration and served until his death in 1924. His son, Henry A. Wallace, became Secretary of Agriculture at the start of the Roosevelt Administration. He became Vice President on January 20, 1941. However, Democratic politicians considered him too liberal, too intellectual, and too controversial. As a result, the Democratic Party chose the less well known Senator Harry S. Truman of Missouri to be President Roosevelt's Vice Presidential candidate in 1944. McCullough, David, Truman, Simon and Schuster, 1992, p. 294.
  5. Frances C. Perkins served as Secretary of Labor from the start of the Roosevelt Administration in 1933 to 1945, the first woman to serve in the Cabinet. In 1945, President Harry S. Truman appointed her to the U.S. Civil Service Commission, where she served until the end of the Truman Administration in 1953.
  6. Harry L. Hopkins, a close advisor to the President, was Chief Officer of the Federal Emergency Relief Administration and served as director of the Civil Works Administration, 1933-1934, the Federal Surplus Relief Administration and the Works Progress Administration, 1935-1938.
  7. Congressional Record, August 6, 1941, p.
  8. MacDonald, Thomas H., Report of the Chief of the Bureau of Public Roads, 1934, September 1, 1934, p. 21-22.
  9. Only two States lost funding as a result of this provision. On August 7, 1937, the BPR withheld $250,000 from the apportionment to New Jersey for FY 1937. On June 2, 1938, the BPR withheld $472,862 from Massachusetts for FY 1938. (MacDonald, Thomas H., Report of the Chief of the Bureau of Public Roads, 1939, September 1, 1939, p. 8.)
  10. Ibid.
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