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THE WHITE HOUSE WASHINGTON Warm Springs, Georgia November 28, 1938. Memorandum for Governor Eccles: Read and return. F.D.R. c 0 p Y DEPARTMENT OF AGRICULTURE WASHINGTON November 23, 1938. The President The White House Dear Mr* President: I am enclosing herewith the figures which I have no doubt are the ones referred to by Senator Hill* I do not think, however, that they furnish the exceedingly complete picture about which Miss Tully spoke in her request to my office. In the main, though, the indication stands out very clearly that between 1920 and 1929 there was an increase in the items of the enclosed tabulation of 50 billion dollars chiefly in private long-term debts, whereas between 1930 and 1938 there was a decrease of 3 billion dollars* From a superficial point of view, it might be said that we could have had the same prosperity in the 30rs that we had in the 20!s if we had created at least 50 billion dollars more debt* If we assume that private capital was too scared to flow in the decade of the 30fs and, therefore, that government capital had to take the full burden, we might say that it would have been necessary for the federal debt to have been at least 50 billion dollars more than it now is in order to do the job in the 30!s that was done in the 20 f s. The Democrats, of course, have felt that they did not want government capital to fill completely the place left vacant by private capital. Apparently they wanted to leave an opportunity for private capital to come back. Nevertheless with private capital scared as it has been, government capital has been flowing at a rate so low as to leave us continuously with the most serious unemployment. We are between the upper and nether millstones. Either government capital must flow in much greater volume or private capital must flow in larger volume, or both must flow. It would seem that when general activity is back to normal there should be at least 3 billion dollars of new capital flowing each year (whether governmental or private) in order to prevent the most serious kind of business depression. - 2 When there is an excess of capital flowing as was the case in the 20f s, the result is an inevitable explosion* On pages 109 to 129 and especially on pages 139 to 150 of the little booklet which is enclosed herewith are presented some ideas and figures with regard to this problem of spending and debts. I don't like the phrases * government spending11 or "deficit financing • ff We need a simple phrase that will mean government and/ or long-time private investment for reemployment and production• Perhaps flcompensatory investment11 is the phrase we ought to popularize. From an over-all point of view, we have handled the debts in this country since 1953 in a far more thrifty way than from 1920 to 1929. One dollar of debt created since 1932 has rolled up into more national income than one dollar of private debt created in the 1920!s. The public doesn't understand that and the whole problem is a difficult one to explain. Last summer I gave this material to Senator Hill and he said he had excellent success in handling the matter in his campaign speeches. I believe there is much to be done along this line during the next two years. I am sending you herewith also one of B^T speeches this summer, on pages 2 to 5 of which I have marked the pertinent debt passages. Respectfully yours, (signed) H. A. Wallace Secretary Enclosures GOVERNMENT AND PRIVATE DEBT. U.S.. 1918-1958 (Millions of dollars) 4 i tPrivate Total Gov~;: longernment ;: term i U.S. Government 1/ Federal Total agencies Federal 2/ State and local 5/ (June 30) (June 30) ! (June 30) P.H.B.10-11-38 Total Govt. and private longterm : Loans Grand s and dis- total including : counts : all active loans and : banks 5/ discounts ^ i 4 4 (June 30) • 1918 1919 1920 1921 1922 192S 11,986 25,234 24,061 23,737 22,711 22,008 1924 1925 1926 1927 1928 1929 111 274 401 450 730 1,062 12,097 25,508 24,462 24,187 23,441 23,070 6,643 7,042 7,746 8,476 9,893 10,598 18,740 32,550 52,208 32,663 35,554 55,668 ;i !t !: !: !t :i 40,054 41,393 46,237 48,682 50,694 55,368 58,794 73,943 78,445 81,545 84,028 89,056 :: !: ii j: !: !: 22,591 25,089 30,901 28,776 27,759 50,287 81,585 99,032 109,546 110,121 111,787 119,323 20,982 20,211 19,384 18,251 17,318 16,639 1,231 1,506 1,659 1,789 1,866 1,867 22,213 21,717 21,043 20,040 19,184 18,506 11,635 12,850 13,664 14,735 15,699 16,760 53,846 34,547 34,707 54,775 34,883 35,266 :: !: !i :: i: :i 60,358 65,282 70,525 76,044 81,221 84,174 94,204 99,829 105,252 110,819 116,104 119,440 :i :: :: :: :: !t 31,348 35,757 56,051 37,314 59,592 41,455 125,552 153,586 141,285 148,155 155,696 160,873 1950 1951 1932 1953 1934 1935 15,922 16,520 19,161 22,158 26,480 27,645 1,871 1,885 2,130 3,279 6,735 10,177 17,795 18,405 21,291 25,437 35,215 57,822 17,988 19,060 19,330 19,517 18,823 18,972 35,778 57,465 40,621 44,954 52,058 56,794 :: :t it :i !i !i 85,774 84,506 81,845 77,563 76,757 74,900 121,552 121,971 122,464 122,517 128,795 151,694 !! ;: !! :t s: !: 40,510 55,211 28,090 22,588 21,451 20,419 162,062 157,182 150,554 144,905 150,226 152,113 1936 1937 1938(P) 32,756 35,803 36,500 11,066 10,547 7,742 43,822 46,350 44,242 19,212 19,152 19,300 65,054 65,502 65,542 !: 73,400 !: 72,500 !t 74,000 156,454 138,002 137,542 i! 20,859 :: 22,698 it 21,000 157,273 160,700 158,542 (P) Preliminary, Partly estimated* 1/ Interest bearing debt of the U. S. Government, 1900-1937, p» 410, 1937 Report of the Secretary of the Treasury. 2/ Total amount of outstanding securities wholly or partially exempt from Federal income taxes of the (l) Federal Farm Loan System; (2) Federal Home Loan System, and the (3) Eeconstruction Finance Corporation as reported on page 466 of the Annual Report of the Secretary of the Treasury for 1937 (except that 1938 data are preliminary)* 3/ Includes both long and short term issues* Annual Report of the Secretary of the Treasury for year ended June 30, 1937, p. 466, except that series to 1913 estimated on basis of census data for 1890 and 1902 raised by 20 percent to adjust to later series and intervening years interpolated on straight line. 4/ Total private long-term debt in the U*S*; 1900-1934, p. 36, Private and Long-term Debt and Interest in the U.S., National Industrial Conference Boardj 1935-1936, pp. 6 and 10, Long-term Debt in the U.S., Department of Commerce; 1937-1938 estimated by the Agricultural Adjustment Administration. 5/ Loans and discounts all active banks, Comptroller of Currency reports* AAA, Division of Program Planning, Agricultural-Industrial Relations Section
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