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

PART THREE: To Control The Levers (Page 2 of 6)

Congress Takes Control

In view of the recovery, the President turned his attention to balancing the budget by reducing government spending. He also wanted greater control over the arsenal of economic weapons at the government's disposal. In this regard, the President began to see the Federal-aid highway program, with its multi-year authorizations, as a lever he could not control. Seely described the change in the President's thinking:

Previous presidents had set limits on highway funds, but after 1936 the executive's desire to tie government spending to broader economic goals had potentially drastic consequences for highway policy. To give the states time to act, Congress had always approved federal aid for a two-year period. Technically, a separate authorization [an appropriation] was required to release the second year's funds, but even without it, the BPR could award contracts that obligated the Treasury. Starting in 1936, however, Franklin Roosevelt argued that such appropriations reduced his ability to use the budget to respond to changing economic conditions. He wanted annual funding, a moratorium on federal aid because of a backlog in funds, and an end to the formula that gave each state a share of federal aid.151

In the fall of 1937, President Roosevelt worked on several fronts to balance jobs creation with reduced Federal expenditures before the situation worsened. For example, on November 10, Secretary of the Treasury Henry Morgenthau, Jr., addressed the annual dinner of the Academy of Political Science. He asserted that the President was "determined" to move toward a balanced budget, particularly through reduced relief, farm, and public works expenditures. The President also would encourage business by modifying inequitable taxes.

Where, the Secretary asked, could the cuts be made? He had concluded that "several classes of expenditures" had been mainly responsible for past deficits and, therefore, "great savings can be made" by cutting them. He began with highways:

First, take the item of highway expenditures. Prior to the depression, the Federal grants to the States for public highway construction generally ran under one hundred million dollars annually. This year the total Federal outlays for highways, inclusive of emergency expenditures, are estimated at two hundred fifty-three millions; and, in addition, the existing highway programs call for new appropriations totaling more than four hundred million dollars for the next two years. I believe it is now time to return to the average annual level of highway expenditures that existed prior to the depression, especially because during the past few years many other millions of dollars have been spent for highways out of relief appropriations.

He also suggested cutting public works, other than highways ("I believe that we can and should move definitely toward a lower level of public works outlays"), unemployment relief and the CCC [Civilian Conservation Corps] camps ("During the present fiscal year, by reason of more active private business, these expenditures are already being reduced"), and subsidies for agriculture ("The farmer himself does not want subsidies, but rather such fair prices and such balanced production of crops as will make subsidies unnecessary for his decent economic status.").152

The President decided to call a special session of Congress, to begin on November 15, 1937, to enact laws to address four topics associated with the recession: crop control (compulsory control for the marketing of five basic agricultural commodities), wages and hours (maintain wage income and purchasing power against recessive factors, and end exploitation of child labor and the undercutting of wages and increased hours for the poorest workers), executive branch reorganization (add Departments and an agency for budget and efficiency, increase White House staff, extend the merit system to all nonpolicy positions, and give the President increased authority for executive decisions), and regional planning (for better, ordered use of the country's natural resources):

With the exercise of ordinary prudence, there is no reason why we should suffer any prolonged recession, let alone any general economic paralysis. Despite some maladjustments, which can be corrected, underlying conditions are not unfavorable.

The Congress, according to The New York Times, "was in a mood more cautious, more conservative and more independent than at any other time since President Roosevelt addressed his first Congress nearly five years ago." The President's message to the special session, read by a clerk instead of the President, "brought a polite but unenthusiastic reception." Prospects for the President's priority measures were not good.153

Less than 2 weeks later, the President turned again to the Federal-aid highway program. He sent a message to Congress on November 27, 1937, recommending a reduction of the Federal-aid highway program and changes in how it operated. He began by summarizing the most recent authorization under the Hayden-Cartwright Act of 1936 for FY's 1938 and 1939. He believed that changes were needed:

In view of the large amounts which have been contributed by the Federal Government, particularly during the past five years, for the construction of public roads, and because of the necessity for taking definite steps to reduce expenditures for the purpose of securing a balanced budget, I recommend that the Congress adopt the following policies:

  1. Provide for the cancellation of the 1939 authorizations prior to January 1,1938, by which date the Secretary of Agriculture is required to apportion to the various States $214,000,000 of such authorizations.
  2. Limit to not more than $125,000,000 per annum all public roads authorizations for the fiscal year 1940 and for each of the next few succeeding years.

He pointed out that average expenditures in recent years far exceeded average expenditures in earlier years of the program.

This annual average for the past five years of $298,000,000 contrasts with an annual average of less than $100,000,000 for the five-year period preceding the depression.

The President also was concerned about contract authority:

The Secretary of Agriculture is required to apportion to the States the annual amount authorized for appropriation, and to approve projects of proposed State expenditures thereunder which shall constitute contractual obligations of the Federal Government regardless of the availability of appropriations for their payment and of the fiscal outlook of the Treasury. This mandatory provision completely ties the hands of the executive as to the amount of road funds to be included in the budget for any fiscal year. While I do not object to the apportionment among the States of such amounts as may be authorized for appropriation, I do most strenuously object to the mandatory incurrence of obligations under such apportionments without regard to its ability to finance them from its revenues. I, therefore, recommend that the Congress take the necessary action permanently to eliminate this provision of our public roads laws.

The New York Times reported on the President's message, as well as a companion message on housing aid and the latest maneuvers in his initiative to balance the budget. The headline on the lead article in the November 28, 1937, edition read:

Roosevelt Will Veto Bills
Upsetting Budget Balance;
Stands Firm on Crop Costs

The article began:

Washington, Nov. 27. - President Roosevelt will probably veto any large appropriation made by Congress for which no compensating revenue legislation is enacted, Stephen Early, White House secretary, announced today. Soon afterward Senator [Alben W.] Barkley [of Kentucky], the Democratic leader, emerged from a discussion with the President to state that there would be no tax revision at the special session of Congress.

Taken together, these developments confirmed earlier appraisals that Mr. Roosevelt is determined to balance the budget during the next fiscal year by freezing expenditures at the reduced level to be set forth in his January estimates, and by digging up eventually, but not immediately, additional sources of revenue if tax yields do not meet estimates.

The clerk of the Senate read the President's letter about the highway program in the Senate on November 30. According to an Associated Press article ("Roosevelt Seeks U.S. Road Aid Cut") in the November 30 edition of Washington's The Evening Star:

President Roosevelt's proposal to curtail Federal highway spending met immediate criticism in the Senate today... Western Senators led an incipient revolt against Mr. Roosevelt's curtailment recommendations even before the message reached the Capitol. Senator Hayden, co-author of the act under which Congress has appropriated more than $200,000,000 to be spent on roadbuilding during the year beginning July 1, 1938, arranged to speak in the Senate immediately after presentation of the message.

Hayden stated that "those who advised the President with respect to this matter did not convey full information to him." Having been involved in the drafting of the legislation creating contract authority in 1922, Senator Hayden explained its origins. He began by discussing the requirement that the Secretary of Agriculture must apportion the following fiscal year's funds on or before January 1 of each year, not at the start of the fiscal year (July 1) for which the funds were authorized:

The President very properly pointed out that the Secretary of Agriculture has no discretion. The act is mandatory, so the Secretary must apportion the $200,000,000 on that date because the law reads:

On or before January 1 of each year, the Secretary of Agriculture shall apportion among the several States, as provided in section 21 of the Federal Highway Act of 1921, the sums authorized for the fiscal year immediately following.

To give further assurance to the States that there shall be no possible question about their receiving this assistance from the Federal Treasury, the act repeats a guarantee which was first given by Congress in 1922 by creating a contractual obligation upon which they can depend with absolute certainty. I read further from the first section of the act of June 16, 1936:

When said apportionment has been made for any fiscal year, the State highway departments may submit projects to the Secretary of Agriculture for his approval. The Secretary of Agriculture shall act upon projects submitted to him under any such apportionment and his approval of any such project shall be deemed a contractual obligation of the Federal Government for the payment of its proportional contribution thereto.

The reason for this legislation is both simple and sound. The reason is so obvious that I cannot believe that the President was made to understand by his advisors that it would have the effect of breaking what in truth is a contract [sic]. A majority of the State legislatures - more than 40 of them - meet but once in 2 years. The Federal funds authorized to be expended are to match moneys raised by State taxation. In order that the legislature may know what taxes to levy to meet Federal aid they are given at least 6 months' notice; that is, Congress since 1922 has passed bills covering 2-year periods in ample time so that when the legislatures meet they may know exactly what to expect... It seems perfectly clear that, having established a contractual obligation between the Federal Government and the States, we cannot, between now and the 31st of December, consistently carry out the recommendations contained in the message by enacting what amounts to a repealer of the authorization during this special session of Congress...

The first Federal-aid highway act was passed in 1916. It carried an appropriation for the ensuing year, and Congress followed that course up until 1922. By doing it in that way the States never knew what Federal help they were to receive until Congress had actually appropriated the money. Then legislatures might have adjourned without making adequate provisions to match the Federal funds. Congress finally realized, as anyone who studied the road-building problem must conclude, that good highway planning is something that must be done a long time in advance. For that reason, in order that the States might have ample notice, so that their legislatures might wisely act with respect to a highway program that would be carried out 2 or 3 years ahead, Congress, after very careful consideration, in 1922 adopted the policy of advance authorizations for Federal aid to highways.

There is a vast difference between an authorization by Congress upon which the States can depend and the actual amount of funds paid out of the Treasury. Money paid out of the Treasury is what unbalances the Budget, not mere authorizations. It is a fact that there is a lag of from 2½ to sometimes 4 years between the time that Congress authorizes highway expenditures and the time that the money must actually be paid out of the Treasury... Congress is dealing with 50 separate political entities - 48 States and 2 Territories - that operate at different speeds at different times. That is the reason why Congress adopted a policy of giving them all ample notice and allowing them in their own good time and within reason - of course there is a limitation upon the authorizations; they will finally lapse - but, within reason, Congress allows each State to work out its problem as best it can considering its financial resources.155

The State legislatures, the Senator said, had made arrangements for tax collections to meet the expected funds, but those funds could not be expended for the intended purpose if the Federal Government violated its commitments.

Congressman Cartwright's reaction was similar. He arranged to have his comments inserted into the record immediately after the House clerk read the President's statement on November 30. The Congressman used many of the arguments that Senator Hayden expressed at greater length. Cartwright added that following enactment of the Hayden-Cartwright Act of 1934,"there was an immediate business pick-up in the industries connected with road building." In contrast, he said:

If Congress and the President now back up and Federal aid funds are now withheld it is obvious that the reverse will be true; expansion will cease and there will be a general lay-off of employees throughout the industry, even before the program is actually curtailed. Assurance that the road-building program will continue for the balance of this fiscal year does not much help the general effect of this startling proposal.

He did not think the American people would "sit supinely by" while highway funding was reduced and expenditures for other activities increased:

This matter of Federal cooperation in building roads covers a long period of time. It is so well established that many people have taken it for granted, but any proposition to make road construction the "goat" in plans for economy will, in my opinion, receive critical examination on the part of the public, and in that attitude we who have given time and energy toward the legislation on this subject cannot help but agree.

In short, I believe that our present program of Federal expenditure for roads should be continued at least until our present Federal highways are out of the mud and dust. If President Roosevelt could motor over some of the highways in my district, I feel sure he would agree with me on that point.156

An editorial in the Engineering News-Record for December 2, 1937, described the proposal as "unquestionably the most sensational development in national affairs in recent months." A news article in the same issue explained that the proposal to cancel the 1939 authorization "is essentially the book-keeping operation to make the budget look better." Because of the multi-year nature of highway expenditures and obligations, it would have "little effect on actual highway construction" in the coming year. The real issue, the editorial pointed out, "is the effect on the continuing road program" beyond FY 1939, particularly since the President proposed to return to pre-Depression funding levels:

Obviously, a return to normal is unavoidable if excessive spending is to come to an end. But should it be made abruptly, by cancelling a whole year's funds? And must it not take full account of urgent public needs?

The previous 8 years had "brought tremendous change in road travel and safety conditions." Despite this, "the earlier main roads are fast becoming obsolete." The editorial asked, "Can the pre-depression rate of road improvements serve as a safe standard for a road program today?" Highways engineers must examine this proposition thoroughly:

They are aware of the widening gap between traffic needs and the service afforded by our fragmentary road system. They know what dangers and losses are caused by growing congestion, and realize that we are only at the beginning of developing a reasonably useful road network. They know, too, that an adequate road program will place no burden on the treasury, for the 350 millions of annual road taxes which the government collects will more than pay for it.

Congress should give these facts "careful thought" in "shaping the future road programs":

Most of all does the nation's roadbuilding require a well-considered and stable program and a sound policy of continuing action, for roadbuilding is related to employment, and business almost as intimately as to the improvement of travel.

The national economy was "undeniably imperative," but the "true facts of the situation" should be weighed in "establishing a road program that will be a secure foundation for future service."157

As America's Highways 1776-1976 noted, "The President's message seemed merely to antagonize the Congress and strengthened its support for Federal aid." During a debate a few years later, Senator Hayden recalled this battle with the President as having been provoked by the bureaucrats he had referred to in his discussion of the 1933 emergency relief funding:

[In] 1937 they induced the President to send a message to Congress, on November 27, in which he recommended that the system be entirely changed... Although the President transmitted with his message the draft of a bill to change the system and repeal much of the basic highway law there was not one Senator or one Member of the House of Representatives who would even introduce the bill, and the system has continued to operate just as it is now functioning.

The President stated in his message of November 27, 1937 that the provisions of law for apportionment to the States and creating contractual obligations would tie the hands of the Executive, and I told the Senate at the time that this result is exactly what the Congress intended to do. We could not operate any other way.

He pointed out that in the 8 years from 1933 to 1940, the Federal Government had authorized $1.886 billion in Federal-aid for highways, while the States had expended $4.229 billion on construction and $1.608 billion on maintenance, "or a total expenditure more than twice as great as that of the Federal Government." He continued:

What the Bureau of the Budget wants is to be able to juggle one Federal dollar and thereby control two State dollars but the Congress has gone on the principle that the roads belong to the States, that the construction should be carried on by the States, and that the Federal Government should merely aid and assist the States to create a national system of highways. That principle is so sound that the Congress has been utterly unwilling to change it for more than a quarter of a century.158

The New York Times returned to the theme of a Congress in revolt on December 11, using the Federal-aid highway program as its example. The article, which occupied the prime spot on the upper right side of the front page, featured a sequence of headlines:



$214,000,000 FUND



The article began:

WASHINGTON, Dec. 10. - The threatened revolt in Congress against President Roosevelt's economy program broke partially into the open today with an announcement by Representative Cartwright of Oklahoma, chairman of the House Roads Committee, that he would not call his committee together during the special session to carry out the Presidential recommendation for withdrawal of Federal road aid authorizations for the 1939 fiscal year...

But Mr. Cartwright went further in opposing any reduction in road fund authorizations.

He declared that, when the regular session met in January, he would call his committee together to consider a bill extending through the fiscal years 1940 and 1941 the benefits of the Hayden-Cartwright Act of last session. This means, he said, that authorizations will be asked for funds equal to those authorized for the current two-year period.

"When this bill gets on the floor," Mr. Cartwright said, "it will then be time to discuss the economy in road building appropriations. If we are asked to go along in reductions to balance the Federal budget, then, of course, we will accept in good grace such cuts as are proportionate. But we are not going to sit idly by and see road building stopped when there are increases in other items, or, at any rate, no reduction for other activities of the government."

As cited in the article, Cartwright also commented on the statutory provision regarding the timing of apportionments:

"The President, in looking over the situation, found that the roads item was one that was 'pegged.' You have to go to the WPA [Works Progress Administration] if you want money for some things, but Congress wrote into the law a provision whereby States, motorists, contractors and every one who benefits from the road program might know for two years in advance what to expect. The method of making authorizations in advance has been considered a sound policy."

Representative Robert Low Bacon (R-NY), the second ranking Republican on the Committee on Appropriations, responded that he would introduce legislation relieving the Agriculture Secretary of the statutory requirement to apportion the FY 1939 funds before January 1. Although Republicans normally opposed the President's initiatives, Bacon said, "We will go along with the President in all attempts at economy. If the Democratic leadership is not willing to follow the President's recommendations, we propose to help him out wherever such recommendations involve reduced governmental expenditures."159

Reporter Turner Catledge continued the theme of open revolt in a Times article on December 12, describing the failure of the special session to enact the President's proposals on crop control, wage and hours, executive reorganization and regional planning. Catledge also referred to two proposals the President added after the session began, an initiative to organize a private housing drive to spur recovery and reduction of highway funding:

Amendments to the Housing Act proposed by the President stand a better chance than perhaps any of the other pending measures to be enacted at this special session, but his proposed changes in the highway statutes have apparently been relegated to the limbo of unwanted legislation in both houses.

The Times supplemented the article by reprinting an editorial cartoon by Hutton of The Philadelphia Inquirer. It depicted a paunchy old man, labeled "Congress," leaning on a shovel (the classic pose, according to critics, of workers under the New Deal's make-work programs) in a field marked "The Emergency." The title: "Dig, man, dig!"

On December 14, Secretary Wallace submitted a letter to the Speaker of the House and the President of the Senate. He transmitted draft legislation to carry out the President's recommended cancellation of the authorization for FY 1939. Secretary of the Interior Harold I. Ickes followed up on December 16 with language that would cancel authorizations for roads and trails in National Parks, parkways to give access to the National Parks and form connecting sections of a national parkway plan, and Indian reservation roads.

Representative Bacon introduced his legislation on December 15. The following day, he discussed the bill during a brief speech on the House floor. He had, he said, been waiting nearly 4 weeks for the Democratic leadership to act on the President's proposal "in the interest of economy." Neither the Road Committee nor the Democratic leadership had made an effort to consider the President's proposal. In fact, he said, the White House had not "sought to press action" on the matter, either:

We are bound to accept the President's recommendations at their face value, regardless of the fact that nothing is done by the President's leaders on Capitol Hill to bring about their realization in law and in fact. It is difficult for some of us to believe, in view of the wild and reckless spending in so many other directions, that the President is seriously concerned about economy or balancing the Budget. And I read a statement in the New York Times last Saturday quoting the chairman of the Roads Committee to the effect that not only would the President's economy recommendations be rejected but that the chairman and some members of the Roads Committee would seek larger appropriations for this purpose.

Therefore, he said, he had introduced his bill "embodying precisely the program recommended in the President's message of November 27." The President had described his proposal as an emergency measure. If the Congress did not act during the special session, the Agriculture Secretary would be required to apportion the funds for FY 1939. Here, said the Congressman, was a chance for the Democratic leadership to act:

The President has recommended it. The country demands it. It will give every Member of the House an opportunity to support the President and at the same time to move in the direction of a balanced Budget.

Rejection of this bill, or failure to give it immediate consideration would be a signal to the entire country that this Democratic leadership in Congress repudiates the President in his demand for economy. At the same time it would be a signal that the President himself is without power to enforce the balanced Budget he has so often promised.160

By then, the President's initiative had failed. Chairman Cartwright was unwilling to call a meeting of his committee during the special session and parliamentary obstacles blocked any other route to the House floor. Citing the Secretary's December 14 letter to the Speaker, The New York Times said the Administration had virtually decided to abandon the attempt. "The decision of leaders not to attempt to force action... throws this out the window so far as this session is concerned..." The article added:

After reading the suggested bill, several members privately expressed their resentment at the recommendation for elimination of all road items for 1939. They felt, some of them said, that the Administration was attempting to place road allotments under its own thumb, like relief and a number of other appropriations, and they declared they would fight any such attempt.161

Nevertheless, press reports that Cartwright was part of a revolt against the President concerned the Chairman enough that he wrote to the President on December 16 to deny the implication of the articles:

I wish to express my regret at the apparent disposition of certain newspapers to twist and distort every informal statement of a Member of Congress into an "open revolt" against the President. A case in point is that a few days ago, in reply to a question asked me by a reporter in the Capitol lobby, I said that no meeting of the Committee on Roads had been called, but I did not say or intend to indicate, as big headlines announced the next day, that I would not call such a meeting.

On December 4, he said, he had asked the members of the Committee on Roads for their views on what the committee should do about the President's requests. He excerpted some of the comments, all without attribution (one read: "this is about as outrageous a recommendation as the President has ever made to the Congress"). None of the committee members had requested a meeting, Cartwright said, "but a majority of members of both parties have expressed the opinion that nothing would be accomplished by a meeting at this time." He added, "Informal information from the Senate side has indicated the same situation." He did not believe the committee "would favorably report a proposal to cancel authorizations for next year, and my thought has been that the anti-New Deal press would paint a stronger 'revolt' picture out of normal action by the committee than of apparent or alleged inaction by the chairman."

Assuring the President of his overall support, Cartwright stated he was "surprised and disappointed at this message," but indicated he would cooperate with the President and the Secretary of Agriculture to work out the highway problems.

The President replied on December 20:

Thank you for your letter of December 16. I have understood fully your problems as chairman of the Committee on Roads and, frankly, having served in a legislative body myself, I appreciate the pulling and hauling when it comes to getting a slice of the government's expenditures for one's own project.

Also, may I tell you that if we had all the money in the world to spend I would gladly go ahead with road building in every county in the United States on an even greater scale than we are doing at the present time.

But there are two factors which I know you will consider:

  1. 1. The Administration is making an honest effort to cut the budget down to a figure which will closely approximate the estimated tax receipts. That means that we ought to cut off appropriations which may be desirable but which are not essential.

That brings me to the second problem - the problem of what Einstein would call "relativity." Where can we cut? That is a matter, first, for the President to make recommendations, and, secondly, for the Congress to decide whether the recommendations for cuts should be carried out or changed by substituting different cuts.

As you know, up to 1929, the average amount of Federal aid to road-building in the United States was less than $100,000,000 a year, and now under authorizations and appropriations it will run to between $200,000,000 and $300,000,000 a year.

Also, as you doubtless know, money spent on Federal aid highways takes very few people directly off the relief rolls. It is true that many of the contractors' regular forces are kept at work and some people are put to work making cement, steel binder and other materials. Nonetheless, the fact remains that Federal aid highways give relatively little help to the several million Americans who are actually in pressing need. Local farm to market roads give a far higher percentage of relief employment than the Federal aid roads.

Therefore, speaking again of "relativity," if I have to get the budget down to a certain figure, obviously, I must eliminate the proposed expenditures which provide the least work and favor those expenditures which give the most work.

The Congress has a perfect right constitutionally to exceed the budget, but, if the budget is exceeded, obviously the Congress must accept the responsibility, and obviously the Democratic members, which have such a large majority in the Congress, must equally accept the full responsibility.

If the Congress decides to keep on spending between two and three hundred million dollars a year on Federal aid highways, the Congress can, in its wisdom, reduce other appropriations to make up the difference.

The above facts may be unpalatable but, as you know, they are perfectly true. More than three thousand counties in the United States are glad to get every possible expenditure of Federal funds within their counties, but I know you will agree with me that if we legislated with that as the principal objective in mind, there would not be any Democratic party and there would not be any solvent government after a few years.

Always sincerely,
Franklin D. Roosevelt162

Congressman Cartwright replied on December 23 that he appreciated receiving the President's views and would share them with committee members.

After the White House authorized release of the exchange to the press, The New York Times described the President's letter as "sharply worded" and emphasized his points about congressional responsibility for exceeding budget estimates and the need for comparable reductions in other programs if reductions did not occur in the road program. The article added:

Federal fiscal officials who declined to be quoted hailed the President's letter as evidence that he is more determined than ever to restore the budget to balance at the earliest possible date. They were particularly enthusiastic over his statement that the Administration was making an honest effort to cut the budget to a figure more nearly approximating tax receipts.

(A brief Associated Press article accompanied the Times article reprinting the President's letter. It stated that Representative Harold Knutson (R-Mn.) indicated he would call for repeal of the 1-cent Federal gas tax if highway funds were cut. "The gasoline tax should be the exclusive field of the States, anyway," he was quoted as saying. He added that the States would receive more revenue from a 1-cent increase in the State gas tax than they get from the Federal-aid highway program. Although auto industry, petroleum, and State officials opposed the Federal gas tax, it would be extended in 1937 and remain 1 cent per gallon until it was made permanent by the Revenue Act of 1941, which also increased the tax per gallon to 1.5 cents.)163

By the time the exchange between the Chairman and the President ended, the Special Session had adjourned in failure on December 21. None of the President's initiatives had been approved. A few minor bills, left over from the regular session, had been enacted (an appropriation of $225,000 for mileage expenses of Senators and Representatives traveling to and from Washington; extension of the time for construction to begin on a bridge across the Tennessee River in Alabama; an amendment of the Federal Credit Union Act; and authorization for the loan of Capitol portraits to the Corcoran Art Gallery), and some progress had been made on the President's initiatives that would carry over to the regular session that would begin in January.164

By the end of 1937, the effect of the President's efforts to balance the budget, in part by cutting public works spending, could be felt, as Gordon described:

The result was a new depression. Unemployment soared back up to 19 percent the following year, while GNP dropped 6.3 percent. It was the first time in the history of the American economy, and the last time, so far, that the peak of the business cycle was lower than the previous peak had been, as the height in 1937 was well below the peak in 1929... [Economists] dubbed this new depression within a depression a "recession." This has been the term for economic downturns ever since, and the word depression is usually capitalized and refers exclusively to the uniquely dark days of the 1930s.165
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  1. Seely, p. 142.
  2. Morgenthau, Henry, Jr., "Text of Morgenthau's Address Here on Budget," The New York Times, November 11, 1937.
  3. Catledge, Turner, "Congress Puts Business Aid to Fore After Roosevelt Asks Tax Revision; No Specific Program Yet in Sight;" no byline, "Congress in Mood of Independence;" "President Roosevelt's Message to Congress Submitting Session Program," The New York Times, November 16, 1937.
  4. The Federal Road Act of 1916 authorized funds over a 5-year period, but each year's authorization was subject to an annual appropriation of the funds.
  5. Congressional Record, November 30, 1937, p. 502-507.
  6. Congressional Record, November 30, 1937, p. 537-538.
  7. "President Would Cut Road Funds," Engineering News-Record, December 2, 1937, p. 877, and "Economy and Roadbuilding," p. 887.
  8. Congressional Record, August 6, 1941, p. 6958.
  9. The New York Times, December 11, 1937. The railroad issue cited in the headlines was covered in a separate front page article. The President indicated that despite the economic difficulties facing the railroads and agitation for government ownership, that was the last recourse. "A national system of adequate, economic and solvent railroads, privately owned and privately managed, was outlined by the President as the goal toward which the transportation policies of his Administration were directed."
  10. Congressional Record, December 16, 1937, p. 2166.
  11. "Move by Wallace on Road Cut Fails," The New York Times, December 17, 1937.
  12. "Roosevelt Warns Congress to Help to Balance Budget," The New York Times, December 23, 1937. The Cartwright-Roosevelt exchange is reprinted in full in the Congressional Record of February 9, 1938, p. 2283-2284
  13. Associated Press, "Would Seek Gasoline Tax Repeal," The New York Times, December 23, 1937.
  14. "Congress Closes; Not One Major Bill Gets Final Action," The New York Times, December 22, 1937.
  15. Gordon, p. 346.
Updated: 06/27/2017
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