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Thoughts on the Administration* a Pro;.

1» Shooting bttwwwa ftfclie fforke nod ta&l*f f«r the
ye&rs ita&ckli&tely .: he<..o of 91 If no awM pyobl— ill Logio or
Trie d w v l s l m f a e t o n c ; n •

e l and

i.%i3li-tiT'3iy minor things M ths trigwicrti o:' thil or HMKt j m i
r.r^ot for Govermaent securities, the fcict.le of Federal U.
the presaat price or iif&ge l e w i , or the exact I l a l t i of

Vi«doa oaoi^h to ^uke tmoh i ciioice om not be round
without cutting to tin deptht i t nhicli U s suel) b-:. cic consideratione ai tki 0f.fe.ct -laich tae QoatiafMMM of rfioles^le reiiaf
would lurw on the work babiti
'ftiere would threef

lopvfl o


fl^w or ten jrwan o.C I dole syst

ecting £ third of the popttX*tloa| leave IJA:?
phere of r e l i e r ii


^ e t and of kbtuadoned h

W y flfcTor of gork ie effort tu
WJLth c?uch i i o n u » n t i t l can,.
•h we h



Ll lUwvifl

Lth in t


tinct like bl

The choice i s i



, SBfcBj 0 ' h.vs \&Lt4 I





Jbm -^

a o t - i i . , MM





al%«i but i s <;raon,;:; wua;


rply d i s ,



into the other*

i t ilN&L not do OB* thing to the oxoluaiofi of

a l l else - fee f uestion ia which 00

UJ.11 stroih,

i.t;. ted

sof the problaa 1st

(&) Ch&ll we iiiro3G r e l i e f , reauoeu to the ^ i n i ja, waiting for tiki corner that
. tifltgr i i LehiacU

S h a l l we BtYftSf tCNM >ti3b /•vbl^d WOJflui pro—
She Hopkins ilomi—lit outline;-, fietailb to be
worked out NK? i:aperfections corrected.
(c) Shall we ^tre^s d r e c t gr&nte of bonuses to
private ijHlUOtjrj| public works bein^: k^pt mt a Bi
id reliof ccntinued on about tbi
(d) £h&.ll w© s t r e s s giant projects ^hica W
bo executed MMM liMlg And v^iich only the nation
big enoue-li to twingf the ; ue&tion of ^eli'-li:; idd
bein^ igaoreu, I laatttOMM Tlood oontrol Q£* tiia vmole
'^ieaistdppi Valley tad llua cl»artL&e« &a ffmpltf of
. t t:'iinlcii^:( in these WTM would turn up*

The decision whsther to htYB i nubile ^orks pro—

should not be mad© on the bt..:ds of b(Mr goCMi B pVf^glPOJi w«
can now it&te.

Eaoi^gh good projects oa v,hich to begin t-hould

be desnied aufficient, coiipleci with



thi-,.1 ;^ore tiaie,

experience tad thought will aevsiop other good orojecto in

The- thing should not &tt.nd or fe l i OS ^Uet:>or we

before Ittfimtf

1, stete I coaplats progfMi on fbiofe we

be i*illiii|i to st&ncl or f^ll«

Irndeeu, ft plMHBiaf section

to dtapolop good projoc%i for t : ie tMOttd tad
b© • pojrt of the progroa*

In t b i i collection we slight conrJicer doing I
(a) liBnomon e x p i i c i t l y &ad without tiao liadt
thut pii)lic worke vill bi
odotl Uftiil - i i Mi]i\#j
^bles are eiaployed, c.nd acatinusd ^. Ion
to provide them with ea



Aaaamot th@ taovat to be tprot tke first

year &nd %MK9% the MMMMtt Tor l^ter ywpl to be developed by the planning section in the l i g h t of added
experience *...nd of the conditions then existing,,
Of ecmree, th« foregoing hfcl objection^ but ao doea
other proposal that anybody c&a raakis*

As to msjf proposal* w© are

of necessity (1 t i l tug with rtugec ox conflicting irtTtnttfi <:-na


Wliy OM If in t»fi1lH i-olf-liruidatiort?

Two per

cent woulc provide ftt Xtift ftyiHyttf1 ^onsy, sne llMit loi%. and
tiiiort coasid©rations dfttt bo urged agtlnst fimmziii^


fl^ji y w f notes ItMlit H i Ml iaport^nt &s having woi'k Vi;# relieft
If ?% i s fSfi.lble, thm toa pictia-s of t2M decree of selflif.maation for the Prcaide-it «DVXd be c:uite different
the one h-


SiXSHtslotl t o dctc? hfti MllHtWHUi Ih&t t h e pi'

proposes would lie i n t e r e s t i'rge fojp t h e f ^ l l t ^ l l i

Suppose iasteo43 '

your bondti beftplnf '
abla now b'



•'Id t o | c i t y ,

Why ti


We w i l l talM

A UfttWPWt » d l l not b« :3iy~

U »ooi

M N bottdc can be ..old

in the? Sto^kst on Hate 4^ b*B&&$ or AatfflT 1M &• ftfWil market for tlttt city 1 ^ bottd>i

A rets Oration of viv .aa,rket for

titlffHLptlff would pay the Hfffinwnt »wl eo«pl»t«ijr«


t£.lk of 55 end 60 p . . r ^mri.odat thli thln| la ttwli Kara than a
possibility, itti Mb»t

-ly alt


n iU4

of the degree to which the^e projsctfc ere ^el/'-xiovtiotting*

- 4 -

I t seems unreasonable to aesiime, «.c we apparently ftttVtg that
the w:-:.rkel» for municipals «&1 not be restored at any time
during these thirty-five to sixty ye^r periods.
6* Wtyp do M require & elf-liquidation anyhow?
that been thought througfef

&$ wfaftt i s really the

objection to a project that i s Ottly t h i r t y per ceat


I trdnk ??e should try to analyze and answer taece

questions, tmAt for my mm p«rt| I %Mak i t ^vi,lc be wiser for
ne to take &£W baso3.dex^ vie^ K&d tbiiik in t^RM of projects for
%bi F«d«ral Sof^MMMMlt whlob I t ifl urgent t k i t tlmy be carried

out soiaetipis and vbioh only t

4.oa aa a ^hole i s bi^ oncvigh

to caiTj 01 ;«

Iinaily # and la general, I tliink vt should bear in Lii
that the Tf^aiur/^i reeponsibiiitxee in this Ekwtsr are not

negative oaes cf & c r i t i c , but tbe positive oneL; of ifl inventor.

Moreover, end


imp9T%Wltt i t s p«rt i s tc contribute aeii merely

the teelmiq/ues of finance but alao itmttuminiihip at once aagacioue
and ootiragtous.

131 1934,

S«foro taa&lag @o»*@»t§ oa & Imildiag pragma 1 ahall taka far

n order to arriif® at th#


Ssat In ority %© <mreon» ttw dtpr«ti&cR» i t !•


Butt primlt Maiii@®s nad looal
assisted fcjr | M | » t


Shat i t in of r«al #€^*©ffi|e tawflt stor tint

(1) ghat tasais stomald not ^# wa^i iaoMaMd faring
# owrled <*a witli Urn


MM i t $1*0*04 a o U s i fttlntlftat rather tlictt

(3) fk&$ i t should « l l t t l a m

X sug&est first - that carefully planned tMiMMMM in
direct federal projects be scattered at different paints of the
Gountry where uneasployment is greatest.
Se*oad - that a very Q&refulJy devised system of bonuses,
net in excess of 30^ of the cost,be used to encourage local &n&
state building of various natures, sod extension of this into
the railroad field and possibly the home building field on a
saaller scale,
fFnird * this sohes» should be acc©^listed ty the additions!
incentive of low cost.

All Federal work should fee done &t lower

than the going wages so t&afc private industry will not Ve disturbed in eaployiaeat relatloae and goveranient mone^ saved, »ad there
should be a general downward revision of wage scales of those in the
building industry oa the expectation of more work.

maximum expenditure for direct relief and for this program should not exeeed two billions of dollars, but that the HF0
say oe permitted to loaa a billion dollars additional if satisfied
with the security.
$he administration will not be expected to expend this
full amount, but should spend with v®xj careful consideration to
business conditions only what seems essential from a relief and
business viewpoint. All payments for direct relief should be
mate&ed ^ a like payment from the state to which the money goes.


November 16 f 1934*




I am enclosing herewith * &0Bio>r&ndu& outlining in a
general »ay soise of ay ideas eottrlnf the public ^orks p r o gyait* I baci intandecl to hand t h i s to you pi fODftlXy bsfore
yon l e f t , but yon got away b$fora I VMI abl« to see you. On
account o r the pressure of othe?" ?vo;"k, I have not been able
to dovote the tlrae and stur'y to t h i s subject Which i t requires
and whlei) I jihouid bftin iike<:^ to have glvtn to lt«
I hope you will have a pleasant trip Bad • isuch de~
I will either z®n& to yoa or ha¥@ for ;.;o'i waen you
get back a saiaorandua fullj OWlXialng criticisms of Hi* Honairig Adsinistrs-tion Rod reeo^siendatLona for ita

this memorandum will b« confined to • discussion of certain aspects
of the particular projects which Bight tentatively be incorporated in the
public works program.
Direct Federal
Direct governmental expenditures on ptibllo works are capable of being
carried out with i irtniMHi of delay t.nd upon a ge&Ie which will gifi a
large impetus to the capital good a industries and indirectly incresee incomes throughout ths whole >0Oftfl^y«

The funds should be QjMd for projects

?chlch are useful and socially dealr^bi^ t but which are rjon-co&petitiv©
with private business*

I t is understood that various governmental agencies

bam mad© surveye of p08Jlbl* projects and IMET* detailed figures upon the
IIMitl that can be efficiently epent in the *m& future.
The total volume of apending in direct Federal projecta Right be tentatively sot at one and one-half billiong for the next 7e&r, in addition
to the present appropriationg.
W Highway8«

In Ihli field th<sre are well wqplppid agenciee, both

Stat© and Federal, thnt have numerous projects in Warn offing which
could be cuickl/ started if funds were available.

As a matter of

fact, the MNlt successful pert of the public vexiM program to date
in putting out man&y rapidly has been the work of th@ hlfto«| divi8ion<
(b) EliE^.^fitlon of gr&S® cro^sin£s».i

This i s a highly desirable* type

of public expenditure both to titisuiate busineas and to increase
public safety*

thile railroads POU24I benefit froa such a progr&m$

the public interest i s so Itxga tru-;+ the government should properly
paj- tho total costs*

Ttie railroads could not sake c-xpenditur@B at

present without rato inoreafleSj vhlob aoalcl s u l l i f j the benefit©
of tlM speeding.

Complete plans, cost eatiRfeiea, etc*, have already

bean HE-1& &o the eork eoold , r^e^tsd rapidly node? auperviaion of
engineering departawata of tin railroada with the direction eai ©p*
proval of UM Bureau o.T PobXXo Elo&d«* If high s^-ed traian a %e to
be UMd isDr«s in ths futuro grade droaaiiig elitsinj&tion viXl k s i n

( c ) ?Xood. a.:d erosion control,. ¥hfl poatibllltiM sbouXd be IkdVOSg
I^? explored although th«r« »ay be difficultle«i In actually fitting
projootfl atArted in the lanediiite fuiure.
(d) ^erffian^/ QofiS^rvatlon .Gorug^ thii highly b«aeficlAl wo


well be ^xtandec5 to ez^luj larger amebera of MMU
7h4*is trv Mrel^ suggestion* wad la no i«BM are nn ^xbeustlT^ Hat
of a l l poaeibla parojeota* Other propi ..

should be currently attbfiitti4

b^ the P»V«A. f«f> cons;dcvaiich f ftcco»] -r.icd ..•} appropr uta d*tail« <m
engljieer-'jig feajilbillt^r*
flexible **s possible

In otk«r vostt&j the progra* aho»ld be kopt M
bat i t can be ex;


i • or eo^trsctao <\&

Up to the present the public »orke ello<s«tlooa to State mid s.ur»icip i e a


teen dreMi dom verj alewlji and tfaia bM beets one of the


.t dlaeppolnting feetarea of the publio works prograa*

However, the

public works ftdAlQlatratlov baa been faced with emny org«Qi*«ti<m anal
legislative difficulties.

£oii:e of tbeGe ha*ve been ironed cut >r.n& if the

pro^rais wers naej set up on a isore liberal bafla there would be prospects
of more effective reeolta*

An additional two billion ehocld be appro-

prialod to the P#W«A» for loans and gr&nta»

Also, the R»F»C# should b©

required to set t*16t another 500 Hrillion dollars fcr the purpose of
purchasing bonds received by the P*V«A«
(a) Loans and ^rentg to States and, satniclpal^tles*

Larger grants

ure vital to provide a greater Incentive for municipal and ft«ti

Thil grant should be • rtailffm of 4O% &n all with

discretion In tbt bMdi of the Administrator to increase the ;*-ercsnt&ge of grant to losn for SOMOftltiM which are in nactd of public
cons true tio:: but do not have the legal poVMT to borrow*


however, that the limitation on borrowing wag in the lam ftt the H
the bill was passed and not
The bonds for the remainder should be %akm

b$ the Public forks Ad-

ministration OR • 4% foftli so that if the suniclpality1Q credit is good
they would first w t > private oapltal marketis to H o s t their securities*
il»O| the Public Works Administration could sell the bonds which they so
later, proridtd we experience a period of failing interest rates
business recovery improves the ersdlt position of certain co&&imities
wliich have boxTCHMd ffCH U M F*W.A»
Loans also sight be grsmt^d upon the ll»ifB»*flt of 6e.tSn ;uent taxes
in • percentage to be deter^iiied. by the Mednistrator.
In order to frscilitat© rapid spending certain Mttdttaty features
should be included in tlie iflNOM ana 2;r&nt:s ®M4M b/ the Public Works Administration*

Applications for approval ohculd be handed within as short

a tisie as is re?5 0OT;e.ble»

A condition of allocation ihowld be tlie require-

ment ths.t oontracts will be let upon • basis which oalli for completion
by the end of 1936, with heavy penalties on the contractor for non-ful~


BmMff9T$ exceptions Kiffet be allowed by the IrtBinislfsllH If

there appears to be Insufficient projects that can "be completed on that
basis or where efficient construction is iroposBible. In such ••Ml a
relatively high minimum monthly expenditure should be reqniretft
Certain labor and wage restrictions In the present L** should be reB0Te4«

Permission shcruid be &iven to pay wages at 10 to 20% less then the

stiindard rates for similar* types in the localities in question. In order
to prevent cor-tractors driving down wage scales to abnormally low levels,
there sight be M M

discretion allowed the Administrator in dealing with

wage and hour •ttftdexds in regions where there is no well organized labor
•afteet at present*
In order to avoid excessive price increases on business ssatarlsls
and supplies it would be- well to remove the present production restrictions
and price Mfttroii which have been built Of under the N*H«A»

If this were

done, competition E^ight be expected to keep prices frogs rising to abocrrmaX
levele, in as wmch E S we have txcees capacity in many of the building supply


More thought rrlght be given to the problem of increas-

ing school facilities in certain regions. There Is no reason why the
advantages of education should not be given on a nation-wide basis
and the Federal Government grant sizable a?.;cmnts to school districts
in order to provide better educational facilities to its citizens*
(c) Low cost housing*

This Is a field in wblob there are great dif-

ficulties in fAfking eruch progress in a short length of tiM and I do
not think it offers vt-rj good prospects M

a recovery »eewire«


Federal Government perhaps could give a bonus for the cost of dersoli-

m § m

lion of slim a r » l provided projects are started by sunicijmlities
or privets corporations and Individuals which meet the approval of the

In addition, any *aoh project! would be eligible to

receive the 20$ subsidy irhiab will be discussed below tauter private
Private Construction*
(a) Rfe^id&« If • subsidy of 20% of the co-st were given on residential Boder&lSfttlOB tind nets construction it is likely that a considerable amount of private residential building would be forthcoming*
this subsidy should be handled through the Federal Hemming Administration which has & Mtioa**ld4 orgealMtioa which could gvteoewfqlly
deiend&e bonus pejrMtttl thus avoiding duplication of Federal agenciest
Hur»i Bodexnitatlen and construction night be handled through advances
It&de by the Farm Credit Mudnistration, end alao thli agency could
detendfte sad distribute the subsidy*
The subsidy would be allowed only on building which is started after
passage of the legislation ttd CMMpleted by the end of 13S8*

One billion

dollsrs sight be &..-, ropriateci for this purpose which if fully taken up would
cean a. total, erf fire billions gpeat for Bo4erniBattOQ eJMl construction*
To isak0 tlie caj&paign laore effective it woi^ld be desirable to attampt
to get a union agreement to t&ke a 10$ out in wages for the period of the
Ktbeidy on all construction of all types of housing facilities. This concession en the part of labor would be in consideration for the fuller employment thet will ejrlee through an inoreeie in building c^ctivity*
ie dAesed UttvlM to attempt to get M

If it

agrees^ent calling for reduction at

least the government ahould. reeeiTe a guarantee fxHW UltilMI leedera that
there will b© no inoree>#e in Wtgei cmring thii period*

Attached is a schedule of comparative wages of skilled building
operatives in foreign countries in relation

to tltlditll tlfct United S

This brings out. strikingly the pPtM&llg need .(or a revision downward of
union r-stos f or building workers in toll country*
(b) laafffel, el»c. t r i f l e a tJtCjft*

In this program a saaxisaiia cost per

er for i&staliaiton should bd established vitfe the gVfWtm&nt supplyIng the rest of the cost with a subsidy of not to exceed §6$ of tht
t a t a l cost.

t&Ui would bo an equitable Eietliod of dealiri:: with in-

dividual rur^l coneuaers»

lirmiifUMiiiti shouic bi aaci© whereby the cost

o:' iustallatior. which If borna by the consumer ma.y foe p*14 off at loir
i n t e r e s t over a perioc: of 20 yea

billion clollm'o,


o^ • r.o%?,l Feder'-i outlay of 4

th+ 500 •liltfftWf of !UF*C# funrb would bt selj-llQuldat*

ing M the tiflnii received are paid off or sold#

I t If difficult to detsr-

siine la sSv&mu bin isuch of the £ bilii'V^; o r P»W»A# fttadi would be ia the
form of Iftftftii


cori&erv-;-.tive ssiim&.ta might b« 500 millions,

billions would not be in any sens©*

Tfettftj $

However, the subsidy

idea should bring out a private capital >l|»af1ttun of &t l e a s t 4 or 5 billions
sore, thus briagi^g Wsm iot&l «tptiditttr<Mi (Wl conatruction to sone^hcsr© app>roach*
ing the noriaai construction figures?.

Attached ia a schedule shovm^ coni;tnaction

of a l l classes 'by the yw*r since 19S.S*

... 4 -



40 as


40 as






40 as

Building &X;>srs



< va|

sly pli^htljr

of skilled fi .

(1*20 to |1«&

JiOur, --hile ikU



active countries.



Soorot of ftitoi iworaadaji to H.G.!»•(!« hy C« a*


1mri re

Uovenober 15, 1934


Secretary Morgentimu


Hr# Haas


Meeting at Mr, Coolidge'e horaa, I«wr@ab@r 13, 1S34.


Messrs* Coolidg©, Socles, Oastcm, Bell,

, and i^tas#
Statements prepared by Hr« OXiphant, Mr. Coolidge, aad
ISr# iSecles t»»ro read.

Copies of the f i r s t tv«» papers ar© attached.

lfir» Bceles hj&& not completed, his gtatae&ent but expects to JiaT© a
fiaishod draft for you an Friday•
A euiBaary of agreosments reached, etc* ar© attached.

(Attachments S)

agreement m e reached ons
1* Objective to ffl people fco isork and establish a nonaal leirel
of eisj>loyja©nt.
2* A five-year program should sot be as&ouneed*

Upper limit of

expenditure should be included in annual budget without positive estimates beyond one year*
3. Agreement should be had v&th labor (a) that irnge rates on
Federal, state, and local government projects should be less than that
paid by private industry in order to prevent government ooapetitioa
\dth private industrys (b) labor should also agree not to raise m g e s
during period vshen large government expenditures for construction are
There m s considerable discussion regarding the questions of
reducing oonatruetion costs mnd vnt^es and mmsxa of providing for e3s»peiidituros hy local governments tthieh are now in financial difficulties, cto»
4* Projects should not be self-liquidating to the Treasury.
Self-»liquidatjbag projects woi^ld oos^et© wtiftk private industry*
5* fhere should be three classes or types of expenditures»
(a) Private construction to be stimulated by a bonus large
enough to induce rapid expansion of private construction*
(b) State end local government etxptmditurea - to be stimulated
by a bonus sufficiently large to induce rapid expenditure*
(o) Federal - construction projects -vfeloh serve a very useful
purpose *&iieh Tsould not be undertaken by private industry - a direct
Federal exp©nditur© not solf^liquidating.

limit o.C expendituresi
no limit in principle - howwer# he rocoffcilaed that
funds would have to be appropriated in definite amount for any fiscal

the objective he felt ihettl4 bi to spend as such as can be don®

soundly and efficiently* v&leh wuld prolmbly be between four or five
billions within the year, dependingtfpontho soacnmt of totally paid»for
Federal projects and the aiaomit of private and municipal projects
induced kgf subeidles*
Mr* Belli

limit auoimt • budget iraist riMW a substantially

position ov^r current year « this deterg&ni&g upper li?sdt of
to b® esqpended preferably for direct relief and obligation® for
public *orks cai'ri^d o^or from 19S6»
Mr» Yiatri limit amount • budget xsist show improved position
1934 - this determining upper limit o:i' amount to be ©depended for
President; should be ^iven power to tafe© care of any
neeessary i2ior®as© in relief Q^p@iaditures# aiicl should be siven pa-mr to
levy m, discretionary sales tax to prevent budget from gstting out of
Mr« Gastoni limit anoimt - deficit 3§- billion dollars plus
recoverablesf not in full agreement vdth Ho. S»
Mr, Coolldget

linit aEWtmt - deficit 3 billion m not HMPi than

Z billion In relief and construction bonuses, on© billion for recoverable

Mr» Haaat Until soaie one has had tirae t o analye© t h i s
program in detail about a l l I can do is/agree to the ob,1@etiv©«

for eaeaisple* is the "bonus to private industry to b© reeiovod 7<dthout
iMWteg a servers reaction* Hill building m t e r i a l prices advance,
tending to counteract the bonus, or necessitate an increase in the

Or are zaatorial pries® to be controlled, etc.?
Unless the plan and a i l i t s raisificatians k ? 8 "boaa carefully

analy«ed the gorernmeo.t wt§ find i t s e l f «Ml a '*i3Ull by the tail# r t
Oaa the other hand, a carefully v^orkod

Ian rnay be operated success-

fully and without particular hazard to r.ovensaant finances*
i s now 'dorkixig out a detailed plan.

Mr. Eocles