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2 :3 0 P.M . TUESDAY, JANUARY 13, 19i#


Your distinguished President, Mayor LaGuardia, invited me to ad­
dress this Conference on the subject of "Post-War Programs and the Cities".
His invitation came to me three weeks before Pearl Harbor.
now seem less significant and more remote than ever.

Post-war programs

The country has only

faintly begun to grasp the immensity of the effort we must make to win the

Whatever illusions we have held about our geographic aloofness from

the conflict or about the possibilities of an early peace are swept away.


Mr. Walter Lippmann pointed out the other day, by cutting us off from o.ur
supply of rubber, the enemy has as effectively paralyzed our great auto­
mobile industry and all that implies in the transport and daily lives of our
people as if it had been captured in an invasion.

We are committed to

destrey completely the barbaric forces let loose beyond the two oceans that
we foolishly supposed to guarantee our defense.
negotiated peace.

There is too much wishful thinking about an internal

collapse in Germany or Japan.

There is no more talk of a

We cannot base our plans on any such vague

The possibility of collapse of our enemies depends upon the speed

and effectiveness of our war effort.

We cannot today estimate how long it

will take or how much of our men and resources must be devoted to winning
the victory.

The cost we cannot count, for, as the President has said, the

victory is worth whatever it may cost,
I had first hoped that this Conference would be called off, as
others have been in the face of the emergency.

For one thing, I feel re­

luctant to stand here dealing in words when what we so critically need is

Yet, on reflection, I think this is one group that should continue

- 2 to meet, both now and in the future, for it is a medium by which the co­
ordinated action by States and municipalities with the Federal Government
can be promoted.
that coordination.

It is vitally important now, as it will be later, to have
Without it, the necessary concerted action by the nation,

both during the war period and thereafter, is impossible.

With it, we can

move in the same general directions without abandoning our traditions of
local governmental responsibility.

It is of the highest importance that you

who are the chief executives of your respective cities and that the governors
of your States take counsel with the Federal Government in the prosecution of
war as well as in the plans of peace.

The day is gone —

if it ever existed —

when we can have economic health in this great nation unless the body politic
functions as a united organism rather than a vast collection of separate units.
The great depression should have taught our local governments as well as our
business and financial leaders that they cannot provide for their own security.
Only by joint action, through Government leadership and assistance can we
achieve economic and political security.

You who are in this room today

have certain great responsibilities and powers within your own sovereignties,
but you are not independent sovereigns.
We all accept without question the necessity for united action in
time of war.

We are not so ready to accept in times of peace the necessity

for united action against economic evils that are the breeders of war and can
be quite as destructive.

You would agree, probably, that our economic ob­

jective is the fullest possible employment of our productive facilities at
all times.

- 3 In war time we propose to employ these productive facilities to
the maximum in the shortest possible space of time.

Except for such human

failures of organization as are more or less inevitable, we succeed fairly
well on the whole.

We grasp the fact that the quicker we turn out planes,

tanks, battleships, munitions, and all the other necessities of the hour,
the sooner the victory will be achieved.

We do not count the financial cost

but we are prepared to manage the economic front in a way that will safe­
guard us from dangerous inflation.

This latter is not altogether an easy

task, but it is one we should be able to understand and accomplish.
We do not propose, however, to fall into the error of setting up
the avoidance of inflation, rather than the maximization of defense output,
as the supreme aim.

The financing of this great effort is and should be

As the President so well stated in his Budget Message, "There

need be no fiscal barriers to our war effort and to victory*”

Yet, in

peace times, we lose sight of the objective of full production and employ­
ment and see only the fiscal barriers.

That has been thb great mistake

that the democracies have made in the past.
are beginning to learn today.

It is the great lesson they

The truth is that there are never any

fiscal barriers to full production and employment, and thero could be no
greater tragedy for the free peoples of the world than to fail to learn this

Indeed, there could be no greater tragedy for the world than to

assume that mankind can only mobilize for united action in war and in the
building of instruments of destruction.

The world would be freed from the

devastation of war and it would be an immeasurably better place in which to




live if we could learn to turn all our productive powers to the making of
things of peace as effectively as we fabricate the things of war
always that there are no insurmountable fiscal barriers.


There are only the

limitations of our economic understanding and management.
You, as executives of your cities, have a responsibility not merely
to your own communities but to the nation at large.

By clearly understanding

the economic forces and problems of the country, you can contribute immensely
to their management and solution»

You will agree no doubt that poverty and

distress are the breeders of crime and disease in your cities, that the goal
of democracy is the steady improvement in the standard of living of your
people and of all of our fellow citizens.

Your energies and best thought

must be bent upon progressive improvement, for oertainly no informed man will
say that our civilization has reached the peak, that our economy has come to
a stagnation point, or that the future does not hold infinitely greater
potentialities of human happiness than the past.

It is only the blind men

through history who havo thought of their day as the golden age and failed
to understand that we have only begun to make progress along the road of
human betterment.
But while we all accept readily enough these philosophic con­
ceptions of a better future, we fall out among ourselves when it comes to
intelligent action and planning to make the dreams of a better day a reality.
And we disagree mainly because we fail to understand the economy in which we
live and the way it can be made to function.
produce fully for war.

We can budget our economy to

There is no earthly reason T/hy we cannot do the same

i» peace and with infinitely fewer complications and dislocations.

- 5 I am not for a moment proposing, and I never have proposed, that
public budgets should be a substitute for private activity and enterprise.
I have contended for a good many years that the growing and inevitable
magnitude of Federal, State and local budgets imposes new problems of co­
ordination, of timing and management, and that these public budgets should
be so timed and used as to supplement the budget of all private enterprise.
Thus, in deflation, deliberate expansion of public budgets is a stimulating
and reviving force.

Conversely, in a period of rapidly expanding private

employment and production, contraction of these budgets tends to prevent
inflationary dangers.

I am speaking of normal, not war, times*


under boom conditions brought about by war expenditures, the Federal Govern­
ment cannot contract, but must continue to expand its budget —

and this

makes all the more imperative the need for contracting so far as possible all
other budgets, both public and private.
It is clear that this compensatory management of the Federal budget
must be coordinated with budgetary management in your cities and States in
order to achieve the objective of stable economic progress upon which full
production and employment depend.
The basic problem, therefore, is one of intelligent management.
That moans balancing the Federal budget on a basis of business accounting
or reducing public debt when we arc at full production.

In war times, as

we have seen, the Federal budget cannot be balanced, which makes it all the
more necessary that all other public budgets be balanced as one offset
against the inflationary effects of Federal expenditures.

Those of us who


- 6 have long advooated compensatory management of public budgets as a means to
stable economic progress and, indeed, the very preservation of our demo­
cratic institutions, come in for a variety of reproaches.
is to the effect that we regard public debt as a blessing?

A favorite one
Any such super­

ficial criticism would scarcely deserve notice were it not that so many
people fail to understand the functioning of the debtor-creditor system under
which we live.

They fail to see the potentialities of national economic wel­

fare in wise budgetary management and fail to realize that debt is a relative

The British public debt, for instance, has continued to rise for the

past three centuries, but at the same time the wealth, incomes, and standard
of living of the British people have risen far more.

TfVhile our own debt is

by no means a blessing, our national income and living standards have risen
much faster than the debt in the last decade.

The prospect of the enormous

war debt need not alarm us so long as we have the wisdom and the will to off­
set its inflationary effects.

Moreover, so long as our debt is owed to our

own people and the income from it is not tax free, our problem is mainly one
of servicing the debt.
The President stated the matter very simply in his Budget Message.
The Federal debt, he pointed out, will increase to at least $110 billions
within the next three years.

This means that tho servicing of that debt at

approximately the present levels of interest rates will require $2.5 billions
a year.

As tho President said, ‘
'Paying 2.5 billion dollars out of an ex­

tremely low national income would impose an excessive burden on taxpayers
while tho same payment out of a 100-billion-dollar national income, after

- 7 “reduction of armament expenditures, may still permit substantial tax re­
ductions in the post-war period.”

And he added significantly, "Our capacity

to carry a large debt in a post-war period without undue hardship depends
mainly on our ability to maintain a high level of employment and income."
The very large Federal debt that will be incurred as a result of
the war, and even the war itself, will only have been in vain if v;e fail to
learn the lesson that we did not understand after the first World War.


not only did we fail then to join other nations in organizing for lasting
peace, but we failed to establish tho very foundations of that peace by pro­
viding economic security and stability for ourselves and indirectly for
other nations.
On the whole, the rest of the world also failed miserably to
achieve the full and efficient use of its productive resources in the two
decades between ths two world wars.

The great industrial nations which

oommand control of the bulk of the world’s resources failed to make adequate
use of these resources and honce were plagued by vast unemployment.


failure is the basic cause of the present world chaos and conflict.

It is

well to remember that between the two wars we saw the destruction of free
enterprise and free political institutions in approximately half of the
western world.

We are fortunate, as are the British, that so far, even

though with difficulty* we have been able to adapt through evolutionary
process rather than by revolution.
I have ventured to say before, and I want to repeat again, that we
are not proposing to save democratic institutions and free enterprise in order
to produce another era of economic misery and general unemployment.

We are




fighting to preserve our institutions because we believe them to be the best
adapted for producing the greatest good for the greatest number.
not simply spiritual values —

vitally important as they áre ~

That means
but material

That; in tum> means full production of all the necessary, use­

ful and good things of iife that our inventive genius and our mechanical
capacity are capable of turning out, not for a privileged few but for the
masses of mankind.

We have made some progress toward minimum standards of

We must make much more after peaoe is restored.

We must enable all members of the community to have the minimum
food requirements necessary for an adequate nutrition standard.

Our entire

population should be supplied with public health services and with hospital
and medical care sufficient to overcome preventable disease.


decent housing must be provided for the entire population on a basis adequate
to insure modern sanitation and health conditions and to afford living
quarters commensurate with modern standards.

Similarly, we should provide

minimum educational standards for our entire population, whether they happen
to live in poor backward communities or in the richer advanced States, and
in addition we should provide advanced educational opportunities for the
gifted members of the community without regard to the income class in which
they happen to be born.
By the same token the replanning of our cities, the reclamation of
slum areas, the extension of super-highways, the development of recreational
facilities aro all part of the better future which we can and must provide.
Not only are all these things possible within the framework of our insti­

Z-6 U3
- 9 tutions, both political and economic, but they are essential to preserve and
vindicate all that we are fighting for.

You will understand, of course,

that what I am saying applies to the post-defense period.

In the interim,

as long as we must make the supreme war effort, the standard of living of
all of our people, except those already at the subsistence level, must
gradually decline.
I have mentioned briefly various post-defense projects, but I should
like to discuss a little more fully with you the necessity for urban re­
development and housing, because it is possibly of greater economic and
social importance to the country and especially to this group than any other
post-defense subject.
The story is much tho same in all of our large cities —


decades of unplanned, haphazard growth, beginning with the development of a
downtown business center surrounded by good residential neighborhoods; then
expansion of the business

area and r©®°val of the residential districts

farther out; infiltration of industries; the resort to zoning; the advent of
rapid transit and the further shifting of the population to the suburbs; then
the spreading of zones of blighted areas around the business centers and sub­
centers, with all that has meant in tax delinquencies and stagnation of
Meanwhile, as so many of you know, the cities have faced an in­
creasingly acute financial problem in providing municipal services, including
streets, police and fire protection, water supply, etc., for the expanding
suburban areas, which sometimes have become separate municipalities with the

- 10 resultant loss of tax revenues to the parent city«

I mention this familiar

picture only because it opens up an enormous avenue for a well-planned future
improvement program that must be undertaken primarily with Federal help in
the post-war era*
The two chief obstacles that must be overoome involve, first, the
granting to the cities of increased powers from the State to assure permanent
control over their metropolitan areas, and, secondly, the cities must obtain
adequate legal powers of condemnation to take over the blighted areas*


latter task can only be financed with the aid of the Federal Government.


is something that we must plan for even while we are at war if an intelligent
attack on the problem is to be made after peace comes.
Let us suppose that the various cities and towns have obtained from
their States the legal powers I have referred to; that they have then pro­
ceeded, with such help from tho Federal Government as was necessary, to draw
up long-range plans, each for the entire metropolitan area; that these over­
all plans, one by one, have been examined and found satisfactory by an appro­
priate agency of the Federal Government.

The local government would then be­

gin by defining the worst of its slum and blight areas with a view to ac­
quiring all the real property therein, either by purchase or through con­

It would apply to the Federal agency for a loan, if need be,

large enough to cover part or all of the acquisition cost.

Such cities as

could afford it should greatly lessen tho amount of Federal participation by
making larger contributions themselves.


- XI The Federal loan would be granted on three main conditions.
First, the acquired properties'should be used or Xeased (not resoXd) only in
accordance with the approved pXan as from time to time developed.


the ground rents for the leaseholds should be based reasonably on the future
use-value in accordance with the plan, irrespective of what it has cost to
acquire the land.

Finally, the local government should repay the Federal

advances out of their own subsequent receipts from leasing such of the land
as is not used for public purposes.
It is quite clear to students of the problem of blight that the
areas involved are for the most part suitable only for residential purposes.
Some of the land, of course, would be used for public purposes, such as new
street layouts, parks, playgrounds, and the like.

Some might very well be

needed for reorganized and relocated transportation terminal facilities.
Probably a small portion might be required for incidental business structures.
But mainly the land should bo used for residential purposes —
from high-priced apartments to low-cost housing.
geographical locations are ideal for the purpose.

for everything

Generally speaking, the
This is immediately

evident if we can forget the present dismal surroundings.

Whether on the

whole the effect might be to arrest the flight of population to the suburbs,
it is a certainty that there are large numbers of people who would prefer to
live within walking distance of their work if they could do so in pleasant
surroundings, rather than to travel for an hour or so every day to and from
their dwellings.

Subsidiary to tho entire program of replanning and rebuilding, all


- 12 the activities of the Federal Government with respect- to urban housing should
be reorganized and rationalized.

Among other things, an extensive program of

researoh and experiment should be inaugurated to tackle the entire problem
of producing a good low-cost dwelling unit —
occupant has to pay to live in it.

low-cost in terms of what the

This would require a thorough over­

hauling and reorganization of the residential construction industry, to bring
its lefel of efficiency up to something comparable to that reached in other
countries and by our other great basic industries.
You, as mayors of the cities, are all concerned in what can be
done, primarily for the cities and towns in the period after the war.
Equally desirable and valuable programs should be undertaken for the rural
areas as well.
begin now.

Although all of this looks to the future, preparation must

Nor do I think it wholly inappropriate, even in these grim days,

to keep before us a vision of the future as an inspiration and a symbol of
what it is we are fighting for.
Let’s keep this vision of the future —

but at the moment there

are urgent problems of civilian defense before you that are all-important,
as the President of this Conference so well knows.

In addition, there are

two particularly timely subjects that I should like to mention, though I
suspect they will not be popular with many of you.

Specifically, you can

oppose tax reductions in your cities and you can exert all your influence
to put an end to the issuance of tax-exempt securities.
the Federal Government has led the way.

As to the latter,

Your States and cities should

Let me tell you why these two lines of action are so necessary and


As you all know, the enormous military demands for materials and
man power have made it necessary for the President to call upon the public
to reduce its expenditures and thus to release resources urgently needed
for war purposes.

The same considerations should lead government at every

level, Federal, State and local, to reduce or postpone all expenditures that
are not essential for the war effort and maintenance of civilisua morale.
Public works, all plans for capital improvements, should be deferred so far
as possible until after the war, when such expenditures can be timed to
stimulate production and maintain employment.
There is one exception to this rule so far as your cities are con­

In those communities experiencing rapid expansion because of defense

activities and the influx of population, it is manifestly impossible to cur­
tail —

for you must extend police and fire protection and all the other

essential public services needed to take care of this sudden but probably
temporary growth.

Because, in all probability, this growth is not

permanent, part, if not all, of the costs of extending public services should
be treated as defense work and thus should be financed with Federal help.
Otherwise, it is urgently necessary that you practice every economy
consistent with the maintenance of essential services.

This does not mean

that you should reduce local taxation, however plausible that may seem at

For to the extent that you reduce local taxation, you negative what

the Federal Government is seeking to accomplish in controlling inflation
through increasing Federal taxation.

The taxpayer’s contribution to the war

effort is made by reduoing his personal expenditures for goods and services,


- lU thus aiding in the shift of economic resources to military purposes*


the extent that the Federal tax pressure upon the taxpayer is offset by
reduction of State and local taxes, the economic purpose of the Federal tax
program is defeated.

Accordingly, instead of reducing local taxes, you

should maintain them, thereby enabling you to pay off your public debts.


you have no such obligations, then invest the funds in Government securities,
thus helping to finance the war.

This is the time to pay off or reduce

local public debts as well as private debts, thereby helping to offset the
inflationary faotors arising from expansion of the Federal debt, while at
the same time building up a credit reserve for use in the post-war era.
Repayment of your securities would make available to those who hold them
funds which they could invest in Government securities.

Indeed, you have

a rare opportunity for a major achievement in financial statesmanship.


hope that opportunity will be grasped.
You can make another real contribution to financial statesmanship
by opposing any further issuance of tax-exempt securities by your States
and cities.

In these critical times it is more important than ever that

our tax structure be as fair and equitable as we can make it.

There is no

more glaring loophole in the tax picture than that afforded to the wealthy
by reason of tax-exempt securities.

They are a hide-out and a haven where

the man of means can put his money and insulate himself from paying the in­
creased taxes that must be exacted today all down the line, extending to
small groups that have not been subjected heretofore to income taxes.


I do not see how taxation can be levied in good faith on the tax-exempts

2—6 U 3

15 -

already issued, there should be a discontinuance of this inequitable practice
so far as all future refunding or new issues are concerned*
How can anybody justify raising tax rates all down the line, even
to the low income groups as is necessary both to war-financing and to the
control of inflation, while allowing those of large means to escape by in­
vesting in tax-exempts?

It is indefensible.

And bear in mind that the more

taxes have to be increased, the more valuable the tax-exempt privilege be- •

For example, by putting his money into tax-exempts, even under the

present income tax, the man with a million-dollar income saves $79 for every
$100 of income derived from tax-exempts.

The man with an income of #100,000

thus saves $69 on every vlOO of income from tax-oxempts —

and so on.


tax-exempt privilege is worth the most to the wealthy and the least to those
of small means —

quite the opposite of democratic conceptions of justice.

To the man with the million-dollar income, the tax-exemption privilege
afforded by a municipal bond yielding 2 per cent is worth as much as a tax­
able security that yields 9-l/2 per cent.
All other types of incomes —

salaries, wages, dividends —


subject to the rising rates of taxation, to say nothing of business and
other risks.

It is only the recipient of the tax-exempt income who is free

of all risks.

Taxes that compel all other groups to curtail their living

standards as a necessary contribution to the winning of the war do not touch

As for the comparatively small saving in the amount of interest paid by

the public bodies which issue tax-exempts, far more is lost to the economy by
allowing the wealthy to escape through this loophole than is saved in interest.

— 16 Remember also that your local citizens pay Federal taxes —

and the bulk of

them pay heavily for the exemptions thus afforded to the wealthy.
You, as mayors of the cities, have a real responsibility in these
matters, just as you are vitally concerned in post-war possibilities of local
reconstruction not merely because of the betterments in your own communities
but, indirectly, because of the effects upon the national economy.

For surely

you recognize today that you arc no more isolated from the geaural welfare
than the nation is from events across the seas.

You cannot prosper when the

rest of the nation, or any major part of it, is in severe economic distress.
Your tax receipts rise and fall as national income goes up or down.

You could

not, even if you would, separate yourselves from a direct concern in means
and measures designed to assure national economic stability and progress.
The oities were bankrupt in the early 30* s because the nation was in the
depths of deflation and no community, however foresighted and prudent, was
able to immunize itself from the devastation.
today because we have had a war boom —
credit to us as a nation.

You are relatively prosperous

incidentally one that does little

For we see now that while wo sought to make our

defense efforts a more supplement to a business boom, we should have dis­
carded long ago all business-as-usual day-dreaming and made much sooner the
sacrifices we talked about and did not make, but must perforce make now or
Ho, there may have been a day whon you were so self-centered and
self-contained that you could get along by yourselves, but that day has long
since gone —

your wolfare and your public lives are bound up with the

- 17 national well-being*
the national economy*

You must know and understand what will help or hurt
You must be prepared to shape your policies and

actions in accordance with national objectives, programs and policies.


must more than ever before take care that the taxpayer’s dollar is efficiently

You must have a responsible civil service —

you must have, in short,

the confidence of your citizens that the affairs of the city are run as
efficiently and intelligently as is required for the survival of competitive
private business.

That is certainly not only possible but essential —


it happens to be the best politics as well.
In the brief time her© this afternoon, I have tried to touch on a
few of the fundamental principles that I feel should be of interest to you
and hence of importance for you to consider.

Since Pearl Earbor, the subject

assigned to me to discuss post-war programs fades out before the grim
necessity for concentrating all our energies upon the winning of this war.
Yet we can and we neod to keep before us always that vision of the kind of
world we mean to have when we have won through again to peace —

a world in

which the four freedoms are not empty phrases, but in which mankind will
have the security from hunger and want, the assurance of economic well­
being, that is the best guarantee of lasting peace and the justification
for all the blood, sweat and tears we must devote to the success of our