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( C O R Of A 4/jj?y

Karch 4, 1935

Hon. Donald R. Rich berg,
riocecutive Direct r, Nationalfrs&ergancyCouncil,
lashington, D« C«
Be&x* lr< Rich bergs •
I wonder if M can rrake a few OOBMata on your Boston speech with
an/ real assurance that they will be neighed by you parsonelly? this organisation has Ittftcudtd in securing tho Interested attention of numerous
officials anc: legislators is •M&lagtOB but so far there is no direct evidence that yo-n are one of then.
It is literally ttit tint to us that anyone attempts to c e f e m , from
the standpoint of abstract economies, the fallacious position the administration has taker: regarding M g e i paid to tboM r » i lUplo/wd on public work*
Perhaps we are only "erotklog theorist*" fro® your viewpoint* but the fact
reaalna that the total of coluntary spending to finance private production
necessarily determines the totftl Mount of private esploXMot available,
Some way f somehow, those now deprived of resuaerative employment are getting
enough food to ksep them from starving and fuel and clothing to keep the®
from freezing to death* Giving t h m incomes avereigliig v^-00 par /ear in
return for doing, relisf *orlc iaouaii t, continiiiag tiie pregexii situation*
The only gain is that imiwthing Instead of nothing sill be received by
th® public at large in return for the inadequate dol^s. On the ,?ther harKi
were the prissarily Important consiaermiions to spena public funds nith
sufficient rapidity to effect rapid and complete r>'•••>ployBmt> aiid to
place enough purchasing power la the hftodi of thoae re-eisployeu on public
work to permit their spending f:-° -finance appreolabln addltloo*l ssaplojment
in private production* the d*pr«0«iofi VOUld tooa I M ended, Shile the ini«»
tial rate at which the available stoney were spent sight be Mich higher,
th© period during which the recovery apandiiig wfti QCCWlilTy would be treaeadously shortened. The o«t result would b- a 1««MT t.:'ta.l required.
This la so otTious that evtryone of intelligence should be able
to see lt« True recovery can be effected, and noriml oeodltlom established only by getting the prefant uneaployed back Into norisal private
employment at the earliest poftftlbla date, The industries where employment
is3 vastly suL-noraal are the capital-goods industries and luxury-producing
industries. Fifty dollar a month wages will stlaolftte e^loywent in
neither* What is needed are luxury~level incomes for those now out of work,
couplad with r»al assurance regarding thoir permanencej and assurance of
.reasonable living comfort whan productive years are terminated as a result of old age or other cause. 'Jnder such condition both ability to
spend and willingness to spon^.f at an adequate rate, would esiet,

Form No.


Office Correspondeffce
Hon.. Donald. R. Riciibergt —





The construction industry particularly id flat n its back —
operating at less than 15% of its capacity. Xet the administration policy
i3 to ignore Hit existing competent constraction industry entirely. Insteaa of selecting the most beneficial an., .iesii-able projects and employing private producing agencies to carrc them out, the idea seems to be
merely to waste hundreds of millions of ollars on so-called "work relief",
the present .distress cases being transferred .direct to government employment on a bare subsistence basis* The final result of such a policy can
only be a continuance of depression conditions indefinitely! and the need
for additional work relief will still exist a year and a half from now
after the present appropriation has been mainly wasted.
Zou speak of the Townseud idea as taking away the earnings of one
group to turn over to another. While we disapprove of several details of
Dr. ToMisandfs proposal, providing adequately for the unemployable aoes
not necessarily mean a deduction from the incomes of the prodocsrs. The
explanation of the paradox is too simple to confuse educated people. In
ultimate effect, taxation requisitions a certain percentage of current
production. If all unemployable people were paid liberal allowances (say
Z/6rda of the wages of mininurr pro- u.cers> instead of mere as the worthy
Doctor suggests) the otttfO of m. ney from the taxpayers would be compensated
for by the inflow of practically the same am unt of money as the pensioners
purchased their requirements. It vould be the production which they purchased, therefore» which actually was takes to support them. Values depend
today, not upon abstract quantity, but upon marketability. If this draft
against the current pro haotlon t--ok what otherwise • illo be an unmarketable surplus* the net effect would be t. enrich the taxpayers rather than
to impoverish tjam. That which was taken would otherwise be a liability —
a negative value — and In no sons© an asset •hloh might have been retained.
therein lies the key to the whole great national problem represented by this aeedlees end sense ess depression. Carry the pension idea
one step farther ana provide well--paid useful non-competitive public employment for those otherwise idle or engaged in the production of unmarketable specific surpluses,fendthe cost both of the pensions and of the publlo
work could continuously be paid costlsssly with what otherwise vould be
an unmarketable and worse than valueless surplus. A surplus either of goods,
or of abstract ability (lab r) with which to create them! Ana it matters
not which. The fact that such available surplus woul. ten;- mainly to take
the form of unemployment rather than actual production, is but an unimportant
detail. The deflationary influence of an unasslfnad surplus of lab.-r,
because it lowers all wage scales and depreciates all personal earning
power, is just as detrimental as if such labor were being used to produoe
unmarketable products.
The road to recovery, therefore, is a very plainly marked course.
Jobs must be provided for all who otherwise must remain Idle and not merely
for a porti.n of them. Such labor surplus must be jurohased at its full
potential worth. Any eff rt to cheat this group out of what sh uld be
their wages, ana spending ability, can only result in a corresponding

Hon. ^oa&ld A* iltfebtfgl -

March 14, 1935

deduction in the return flow of WOtmj to the r^st of us as they
their requirements* The termsfiUBj%j}rjAiiag.anc^ aigftrg^ey maaauga must be
soft-pedalledf and the policy of nell-p&id public employment for those
otherwise idle advertised as America's permanent policy from now on. This
is necessary to forestall hoardingj which breaks clown the spending cycle
whereby on& Ban's spending is another*$ income and his another's in an
endless chain* Then add real security for the incapable and incapacitated
to completely remove the insecurity factor which causes hoarding^ and the
rate of voluntary spending vottld tend promptly to become* and always to
remain* maximum. 3uch enormously increased r&te of spending would finance
greatly increased production by prifate ina.uatry. that now seems to be
surplus labor iroula be needed by private industry; an-- the need for B O O *
essential public work would promptly disappear*
All talk about "giving business a chance to go ahead" is of course
sensaisss* A M buying public is the real employer of labor, that buying
public must have both ability to spend and willingness to spend If private
employment is is&tarially to Increase. There is no surer way of preventing
an increase in private spending aadl private employment than to pay in*
adequate subsistence wages to those re~employe3. And there is no surer
way to insure indefinite postponement of increased spending for capital
goods* (the only class of spending which our Industrialists and bankers
even la theory control*} than to n&ke a substantial Increase I D consumer
spending virtually impossible.
this Letter is already auch too loog for a b
ana yet It lias only scratched the surface of the truths which so evidently
still renaln hinci©n from the administration after two long dreary arid
costly j£&?B of futility. There has bean .no real recovery during those
two years* The average price of securities, which furnishes an index of
the value of the nation's productive plant, has riser* onlj to such extent
as the unit of value used to measure it has baen reduced in size. The true
iatoS is OJMOployBsnt. While there may have been a temporary acute condition sarly in 13. § the present arny of uill»|iliU|ad is at least && large
ag it a average sis© during the two filial year a of the disastrous Hoover
The nrhole trouoie 3^m:s to he & complete lack of understanding
regarding tlie essentials of the problem #iich confront® us. that problem
is to gat America's Idle man-power and pratoetiw equipment back to work,
So micdle course is possible. 9 Steps in the right direction51 might "b©
compared with an effort to get aceras & ten-foot-wide chasm with a series
of thr@e*»foot jump©. Billions upon billions of dollars of future taxpayers1
money hav@ baen wasted by expending it too slowly to do other than preserve the intolerable stetu.3 quo. Other 'billions are oam to be wasted in
the same futile manner* And if the present plan is carried mtf the need
for piling up debt to finance ©xtraorditmry relief disbursements will, b®
even aore acute in the spring of 1956 than it is today*
If the valuable suggestions contained above register with you.
the writer would be delighted to make a special trip to Washington to

discuss the subject aore in uetall. Aa the head of the co-ordinating group,
areof St.inLouis
a most unusual position to direct Into constructive channels
Federal Reserve Bank