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December £8,



The President
Ciiairaan Eccles

I am sending you herewith a redraft of the
which I discubced with you Uie oUi&r
day, &nd alao a 2jwpege suiainary or recapitulatian
of the salient points.
This redrafted memorandum i& L. imXerLal
provement, I think, &e it brings out
points u&d oraits some duplications which were in
the draft I left with you tJid wLicaf becau&e of
luck of tlSBj I did not h L v U opportuiiity to re..e
vise before talking with you# Needieeo to MQTj I
earnestly hope that you y«ill find thii autteriai
helpful to you.


The political tide la running tfitnrt the Administration*
The people and many of their representatives in OOBgTtil tr« confused fay the aultitudinoue factions launched against the enemy of
depression* and by the clamor of the opposition which comraands
aoet of thy pr—•<

The M«lnlnlml1<wi threw Into faction a grettt

arsay, launching & offensive on a l l sectors.

The public n*a had

i t e QJQi fixed only on the sany segments of the battle line—upon
individuals in the line—Johnson,, Richberg, TugTsrel.lf X9kMI« Hoi>kiii6, etc.—and baa been bewildered by individu&l actions arid often
conflicts of «ictioa«

There bti '.niduubtedly been war-te aetiQa.t

The public gftMl has been upon the individual

Above a l l , the public tea failed to Bee what a tremendous
victory hM been ton £i.iottg the bfittlefront M a ^ i o l e t 1 5 such
l o s t ground lias been recaptured, IKTK tmr bsick on UM road to r e covery the nation bm» been biNDught.

The Oppotttlon now f i l l i n g

the prOM d t b vita;ier^tion O B be jsede to look ridiculous j i t
Cfin be coiapletel^ routed cna annihilated t^1 an aggreci::ive campaign,
stating the cold, hard uaanswer&ble f&cts?; of the M N L
jsoaent that cajap&.i;pi ! • not being aade •ffeotlToXj*

At the

I t should be

:aade forcefally without B f delay,
Gince i t i s the h^bit of our people, if not a l l peoples,
to vote against ratter thwi for, the aaapaJLgn should be pitched
against the daagar* of t return of reaction which would usher in
another era of collapse aatd dlftastytr even though i t a i ^ i t be

- * -

temporarily preceded by another period of unbalanced prosperity
each fti M

had in the £0fs, when ZZ percent of the national in-

come went to le&s th&n one percent of the people, with affluence
at the top but vr@tche&iei;c among gwnt M M M f at the bottom of
the population pgpMMlriU

As aiming uh&z Governor L&ndon symbolizes

what the opposition mill stand for, it appears that the otgor attack will be against spending^ue., in favor of balancing the tradget by drastic reductions of g u m II—I til expenditures, 1% M M
bo AflMMrttwIad beyond all HMMMMMftfL contradiction that thli would
be the p&th b&ck to reaction and aev defliition, with • return of
misery for the great rsa^set; of oar people and ulti;acte destruction
of our d — i w t l i fors of goveriiiaant. For the opposition offer©
nothing but a return to policies vhltb brought U5 to the edge of
revolution, to en unprecedented econoiaic pVO0tmctloil«

the poli-

cies offered by the opootdtion have been tried and failed M


pletely ttet only blind men, incapable of Iturniag from experience^
would have tlie effrontery to pro MMM now & resuaption of euch
This Adalriit;tration c^ae into office inheriting the most
donorsdised, aoit chaotic conditions in tha p*MM t i i history of
laerica. It mey be doubted whether Lincoln faced • country more
ithmtttTrt &nd ^nic-ridden. When thia AdBlnlstrattlon -took office
it Inheritt?d a nauion&l debt ol" faorettMUB20 billions, a
not only bMMIil of tlie si^teken tax policies .nirEued under Re

publican JbdBinljtrittlOBf in the 2Q*B9 friien tAxea wnra reduced
four tlaM though they should b m been —Intalrnri in order "to
pay off the I I ' ilMWIIil debt, bat also because UM Hoover M•ililltnttffli by failing to intervene soon enough nd on • broad
enough scale, by letting the deflation run far on tta course—
with untold misery to all, our pto de and Io«P— in the national
income e^tiaated in excess of 150 billions—added a deficit of
a billion dollar* in one year and i o n than three billion dollars
the next to the burden.

The cost to the present Admlnli/tr&tion

in stopping the deflation and turning the tide H I vastly increased
over vbftt Mold bsv* been the QfcM Imd the Hoover AdBlalfftrmtlon not
pei'iititted deflation to go to sucli ciii>aEtrou£i extrene&.

In viei' of

the :ofigriificent accoapliahBBrt M far achieved of rtopping the rain
and farinflllC t.he country tmr baci-: on ^he roiid to recovery, i t would
beftbMOrdfor the Admiaistrfction to be on the defensive.

I t should

be justly proud of the achievement, and prepared for a gnashing of~
W hum coae fully half w y back to the levels of 1929
aeeeured hy the national income, yet we have a long way to go yet»
To turn back now, to revert to the opposition ,>olicie£-. which were
tried and which failed rtlintumi 1,, would be a fatal aistak««


slash the bilrtft in c&pituliitivm to c r i t i c e , ?rc>uid be not only to
confess error r/here there h&c been nune, not merely to adait that

the c r i t i c e are right (ami they are proved vrQttf on their
record), but :iost of a i l and MTSt of ,...11 i t would bt p o l i t i c a l ly and economically W Qt «
T tg

It WM14 Wit back trie recovery, per-

fa telly *
Budget if.
The essential, igparod bat incontrovertible fact 1B
th&t tfre budfffet i s bein,: balanced rirrht now; i t i s being
balanced in the only way that i t can be balanced without i n viting mother deflation and mother dih&tter that aif^ht end in
real revolution find tike emi of th© cieaocriitic tj»{mmw the ©mi of
the GonEtit'itioUj the end of American l i b e r t i e s and traditions*
The dmkfftt loday i s not froa the iae*igre handful of Recie in t h i s
country, but frost the blind reactionaries who^e policies a l l but
broiipit M to public revolt Md BOUld| i f reinstituteri, jeopertiise
the very things of wliich they j r a t e taut arm too blind and greedy i t
••inderetaiici ham to protect.
yhe ^ud^ret i s ]?ein.-.? bfcituioed aonf in the only wc.y that
i t can rightly be balanced, by lmm—lilllj n&tioitai lntXMM9 out of
•hiofcl alone QM W M the revenues with wJiich to effect • bslMMHU
That mtinmt income, ¥hlch 9*ak from M M then 80 billions in 10£9
to lees than 40 biliiont, in the last y a r of the Hoover roglaie, Is
nearly halfway ht.ok to 19S9 levels.
revemAen €xre rising correiipixuciingly.

As a direct r e s u l t , our tfcx
they are close to $£»500f000»000

niorc now than they were in tlw l u i t fMr of Mr* Hoover•

I t should be receabereu that taaM to pay off the
national debt w i l l not b*? collected out of a s t a t i c national
income, especially when t h a t laoCMM hftfl been aore Bun cut in
aa lM:,;)pened l a the latst dagra of the Hoover Adslxil8txmtl<MQU
t to p&y off tha debt will be collected out of a dynsuale,
restored and ( • ! kliouid be UM 0*M OttdatT orderly economic pro—
grsMi) stei-diily iiT| rn*1*ifl nAtloaal income*

That la rtqr thi arj

t h a t the present or l a t e r fMMHfittliOtta MBBOt ©iKliire tin lad bui*~
den i s foolishly unrealistic*

!?o generation whioh i i ispoveriched

can beer tiixation, but • nation vdth • restored, and ex;->andiiig
national income om.\f without SM^ BArdahip iPuiteYcjr, w d u n taaoM
that would be umiiitnf to i;.n Inpoveri&liGd nation.

Mor will tbt

Uixe^i 00M out of the " l i t t l e f«ULo*9* aj Liberty bngRMOFt and
othar raisled and •ffliilrtinfl calamity hM&tra are to fond of ia^»

The texes w i l l come oat of the


BnrpOUuHMi oiled up


good tiiae&w by corporations and iadivlduals and will be c o l -

lected oa the equitable bftftla of aldlltgr to pagr«

Hot only

thia tend to deflect these surpluses from UM
oala (to say nothing of w o r t h i e r forei.pi boodo) Into which
b i l l i o n s were poured in the 20* &f but* olWB doflatlonajry taodoneioa
d©¥elop, the Go¥eriimeat ( U tesi ; >oi i arily ioapoad pa^iiig off faore of
i t s debt aad d i v e r t the funds into the spending atroaai and into the

— D —

dl of the unaer-oriviio/^ed oho ivill t Q foodj olothlng Mid other

thus bffillg fcbOUt OXOfctloa Of MO* re&l wfc&lth*

Xhfttj very

eiaoly Btfttod* i s tiie ooonofuic orocec-e, uot under a ;;U-ti.c but undo*
y expandlag tttrtnoay t>i shioh >< pic like Libt-rty Loo
u.. D© unaware*
H t h recovery uuderway iJid tax ooXXootloaa oonroepondio^ly
nnj tho grost osrodlt ononototj Boob OJ ttoo R*F«C«| who S»O«L«G«
l : .c#i=., tfi &C
. C



1^ fioablod lo oolXoot MOTO than tnev- are

In other voxcUj tho pro0f«rof i r •arponriiiuro uro

d l o l n l ffhliag i h i l « roronaos t r o l a a r — l i i g «


Throo jeer:. tgOj uador tho

guppoood hiionoo t h o twirtgnt p o l l o i o e or tho Soovor Adslnlotrovtloai
eh&rtod l l a o o vouXd ihoti tho U M O

t t H f t t i Q» S3WSJFSStBR%





-.-. I ..•••'. 1,1^'



. lituroo i t o o d U y


: -,r'd ~


fcwo llaoo oxrfing farthor tad furthor oaoy flroa oooti othor - tho attboJtoaoo
who budgot ineviuibi^ grovliig y o o t o r ond grooto>«
rtod line,: hoTO boon x,j>.?n&d»
,. i . rooovocy proooodo«

Tod«jrf tho

That of oxpoadltufo In foing d o n M

Shot »f rovoauo hoo tttraod apoojpd*


ring < reireraal of policies, a return to d@flo>ticmoi7 0j0OsitrO8| the
Liaoi O O bound to arooo«


... , i'irtit, on

Iht r a t e a t wlilch these lineu will cooiity vlth vhioh prltmto ontorprii

p tht lood of OApXoyin^ "the unempioyeo <iad. tivn relievos tho
H»ioriiojoiil of i t o inoooopoblo duty to parovldo for tho unoaplogrod in

A pren&iure effort to boXonoo the bu:,.:;et by tho wrong

- 7 -

aathod of forcing radnoad ax >aoditur*0f ahaad of tfca tint whan prlvata
bualnaaa i t prepared to wttbatltttta It;, e n axpandlturaaj would inpada
recovery tad Invltt anotaaor onaat of daflatlon«

It would be to oonfao

that tha »tapa alraady bakanf winch bava b m tniwtnifly st&ocaaafulj
which &re ^roduciag «. balancing biui^eL, have been R O g «h«B| ac^ -roved
ay tilt fact.,--, they bMO -tso^olutcly rijht*

; isco.-uily, ttM rttt* ftt

vhloh lib* lines converge ce^au,. u^oa tht taeady upward progrwsi of
the- national LnoooMj vhloh MM op to alioat 60 blllloiui in 1954 - a jain
of fully ten blllloni over UM IAI W yaar of the Hoover rc;°i;ne - exiri is
running OIOM VO GO blllioni at UM praftant rate of baaineso aetlYltj«
Vo attoapt nov to i;arce • [nanatm i budgat hiTtwia would ;:low up thli
proosai ruiaoaoly*

It would inpl; i gt^.^ie condition of tht country,

•UaiWflll,, W the Brookin^fl InstitUtt bai mptuni "nr; in tiie final volume
of* its axbaostlvw study of tna da$Hpaaalon and of praaant day- woonoaio
iditiona (Tilno— aw

ionic Projgraaaj paga 85) i

"If we ami to achieve tho goal of aatiafaotory
Btand«rds of living for ayaryonai UM Clrst raguiraatmt
ia to increase prograaaiTwl|F the v^vai awxxtttt of tna iaOOM divided* Only ai tha aggragata national 1nnni L >
naraagee ftpon 3.) billionfli will UM goal of ft high i taadard
I Living '.ar everyone ba attainad*

The dittributioQ of Lncottt fro;a year to year if. of
oriaavy signlfioanoa not for ita aomontiry effects upon
UM wall tn1 mi; of tha •aaaaay but fw it« poaalblt O M H
Lativa affaoti in trosoting ft fuller atlliaation of cur
productive facilitlee end J onmiaqjuant progrwwiiva in*
create in tna ft^gragata inooaa to b available for dl#»
n rt intoraatad in Maintaining • statin

; Ituation la ahleh tha total Inooawj avtan If actually diatrlbutcsd, vould bo altogathar inadequate; va ay* i n terested rathar La ptrodiftalag a iijaaal n situation in which
tntrrtating quantltlaa of ne^ly oraatad gooi i sad aarrloaa

vould bMOM &¥&iifc.ble for everyone?. M

of 3GV j-erJl Obje

.- Li
i i La i


r<u;.I Tlalon vhlob tin (§••

Moooaieai •tt^portocl by thi teat


tei bsld outj


ught in

thifl iktixioii and abrofi.d - not by the raaiiVloinrIan and tin hty^lingt of
bankfl bat txy tndapandaiitf foi1 wax dUlookln


aaonoBlata Ri rafa*aaantad

la UM data<shad and cijviivi.ftref.itod Borooklngi group*

Thia LApXle^

• p aooiaitaaij v,u.te aapltal 1 PW| faoolaaj acw noiManiii IBJ naiihar
ragiaasitatio&i nor raatrlotloni i t la .


to aaJu tha s a p i t a l l a t l o

lea pirodttoa and dlatribuia to iX§ f u l l oa>pajOlt^T| aada*1 our Gooatltn*
t-ion, our traditiooai U b t r t l e i and ffaadoa of lnltlatlT««
aaTa our iliajoonUn laatltutlaaa froai tha iM||iaa1i Uij tba
MM ildt aad uie bllad raaotloaaxlaa on tha otbar«
to tha taalth «<ilatribator» aad


axlstlag .^tfatic waaJLth of (ha country
To vie tribute plaoaa ^r tapar aarlriid



*u..-cn on

It l i tha an awn

To dlatributa tha

^e to dlatrl uta >oTcrty#

i i aoatiii ^athar aa an aid

aga paaaloa or foi' irtiatajyai" jorpoaaj wouXd ba to dlstrlbuta worth**
laaa pa>par.

The problem i s to create sueb an abundanoa of rail waalth ~

houaM| c l o t h i a : , foodj a l l tha khlagl people need and -vi^ut ami use vhlon l i tha only raal aanitli^ of ahloh placaa of mp&r Mill til aonay


9 -

ara but Uie ajabol ~ that tha attaiaabla

. al if . ' . i p standard of

Lirtng fo* ttvtr.v- -i1.- will '.•£• raaoh«Ct| i I Lt con bt tmcer an orderly



. and kfu baan froa


Thli i i tha real aotlva'tlaa of tha




firuitloi] of

it«: aaplratioBi I w tin rorgottao aa& and tin

XIM 44jalnlsiratiOQf S QXpendltore

. arad vlt .

r wl^a>

been Licx*e«s.&ed iv as&rly ^0

so far <.;.rc e bs

lot wilj hi 1 . u u.^i- nal Lnoowi


not cmXy aw tax rwnmtta up

by tomi |8^600,000,000 over Lhree f9tOF§ ago, wh*a the E O M i . d i n l f WT
straxion went out, but the falttt C f i i r t ^ d B#Ottrltlai on UM IBlthni
i s up by 20 b i l l i o n s , th« wJLttf of 111 t

E I '. Qp by 7;r b i l l i o n * )

the values of a l l r e a l e^;U;Le, urbaa and rural f are Op, df bank and Lniurmao« company a s s e t s , of a l l oilier ratl asa«ta| inoidUamtaUgr gcrraroaaat bonda wttich aold dovnf for aoM Uiauaai M io?? ah. 32 three yaaya
1 (of ao^ arc at I owalaa and u a e r lower LnWi^irt rwtaa^


wltb Uaa bllllo&a 1190x1 billiooa 0/ looraaaad valnai La o:.^ rlaa -,-i1
&<mm 9 b l U l o m la the public dabij ihla Ifl a troaa figure whloh la
i f allowaaea t§ aadt fiwp the Traaaarx*! oaab balaao«B| the
• ,..

mad by .

• . . . .t In ineh a^aoolai a

Uia lunraaant tram ra^aloatlon oX UM dollars

tin R«7*0*| and

Dadaetlag thoaa

the rlaa la trie dabt l i arouad S biiii^ru,, an lasignlfloant atM bv
»arlson tdtb fch< restoratloa*

- 10 f-rbt ..•green


l i l t Of lir Etebt
fie-.- be Lg&oraat OP i r r


. .
- .



. ..'• L a l a r m i s t s * suoh ai the

r&g r are Llkt the •ah&lloi p o l i t i c i a n s ' 1 whom Lord ?:*fc.e«:uley
£ «p
i ribs

In hia History of s^igXi idj 1

o t i m a l l y srled oat that

•reaL B r i t a i n - • '-•• ing ruiasd bj


llaciMd i


i ol tha Irlt

the clebt ttiftt theiz EM^dUii
. 3ug}jiMi8




m only



MKN mpCNMd as baosloaB* :"'he



• . • KncKna i . frfitnfl^nf) todagp are

LUw tin 'ahaXloi politioiaofl" who, B, .. aultsy s e i d j eav or


dtobt gren but a t t • b ..... « Aortal ti-oc-lUi grm ouch f a s t e r *

a nrerlookodj Rl0o f that ... . eountrj

•f . 9 f 0 0 0 t 0 0 0 j X J La O M ymr and

dXed up i d e f i c i t

: : > X), WO, )00 La another year

:. l a s t MUT| that thi •ar^inourred detu

. :-

• • • , y e t tri

i debt ; ee Lti -'•:.. wrong


. ,. . ^ •




-. . u

"ed tolag taxi


bia L

the t>a;ae period,, and despite the fact that our people squandered oae
oi La t reign seourltiei • At tfc
Iarc« Burplasea that »• ierc able
. u



d t a l equi]

h o t e l s | factori< , power


2 that in the



vastly to





a? national •ewi Ui

>rti - hoaesj


.... ,

regating fully |10QfCX}0fCKX)9(XX)«

!•»! eh^f oan't w

»It i


undt l a f a c t |

do far better?

ftth the restoration now uxicierwev, vlth the recovery

of • national Lncoat not aersly of 19^3 bat of the

i Uidoa en-

visioned b v tie Brookinga reportj Lt v l l l be possible to pay off tht
present debt vlth & rapidity itraatij oTO<io<Hni; that of the K>**«
The alaraiftts also erwrlook tho faet that our oatlx* tiationaXi
gross dUibt of B NMI 50 biXULoaa a i ^ m t i to but l i t t l s warn than four
•oatlM of oar o o i i l national


lnoraax In tha aatlooal dao/t of




i Ls »f L9£9«

fha gpross

..illi'.uin slnos this AdaloX-

•trfctloa took ojTice i s but l i t t l e nora than one Month's ooraal national
ineosfl at 1929 I«r*l8 f and the oat inoraase in the debt sisea t h i s
Lnlataratlon took oiTice aaouatfj to studbi less than tMO vaelcs of the
aoraal aatio;i^I 1 nooawij

Can i t 1

• iously ooatandad that • Savevu*

•ant should not co^aa s aoath f a aoraal inoose f Just as an Lodllvidual

v;oula, In utder to recover frost s c r i t i c a l illness?
often ttsed anaXogjr betv;et;r, an indlTldtial
Incurring debt Is false*

In the

Rowever, the

^ilng into debt and s nation

i r s t ilaea>« an lndiTidoal ordinar*-

i l y can not expeet his ineosMii out of vaioh he east pay his o^htsj to
expend^ sliereas a pro^reesi've nation like oors can ootmt upon Iti :
national incoac growing wto&ully larger*

But| beyond bhatj hew ean

a natloii| whUffh Is a l l of the teopXey becoae fiaiuici^ilv embarrassed
by borrowing froa i t s e l f and payin

Uurest to i t s e l f f

- 12 -

It should be rene&bered, also, that tlM budget M M unbalanced in large part, not to relieve the unemployed, or the distress of the farm &xid home owners, but to save the banks, the insurance companies, the railroads and the private credit structure
all along the line, IB not the Government at much under obligation to
unbalance its budget in order to come to the rescue of its citisens
who are out of work and destitute through no fault of their own, as
to unbalance the budget in order to save the private credit structure?
It If altogether illogical and unret.£on&.ble for those who
approved and, in fact, solicited government funds in order to support the credit structure to draw the line against support of the
unemployed until such time M

private enterprise is able to provide

employment. Ho one objected in the 1MB% war to unbalancing the budget to the tune of |9,000,000,000 in one yetr and §15,000,000,000
thf next in order to protect our citizensftffclnctt foreign foe. By
what logic am. it be held that the sejue citizens should not be protected likewise aguinst the equally deadly ravages of depression?
A favorite theme of the objectors is that people with
fixed incomes suffer because of t&xec and lower interest ftttWK
But this vim-r completely overlooks the fftCt that taxes will be collected out of surpluses, according to ability to p&yf f n that owners
of fixed incomes are infinitely better off with assured incomes even
at lower interest I t f f than with inflated and excessive interest
returns which the national econoxay cannot support and which vanish,
along with >rinciple^, in A oallapM &nd deflation ag^avated, if directly
Federal Reserve Bank of St. Louis

induced by excessive interest rctes.

- 15 -

j-.g ). c^.-u>a;Y o f i.

The AdBinletretloo bei deolared for aa abundance eocwuojji
u.iC r e e t r i e t l ••>» p e l i c ; i n i~-* it t ^ 3 ar&rj e x -




•the effects of aaxvJUtditoad over^-expanslon • it to overcoaM the effftcta ©f tiie laduiitrial high t a r i f f polloles raftered k p the • .e~
pubuHowi Adainlatim^lowif aotably inciv i:;^ ir« Hoowri la UM t) 1 ,'
thi •ffevia of ^iloh wmr* to los« foreign wuritoti f«p B^rleultuxml
oatput nad to »oo#nta»t« dosestlc onbalAooe h i t m n ftgrlcultox* m
Uxdostfy M aaeh that Lhrou^hcmt UM W>§« a^rloaltiirt MM sufferiag
acutely aaidst supposed >ro«p*rltj«

That aora aqtiltabla balaaoi baa

already been Largely restored] Uie Adminlatratioa'1 varloaa atepa to
bait tha deflation aad reatore the general

-rice level to • point of

reasonable ^ustice bet—an cabtor aad creditor - the departure ttom
ld9 ranraJjotttloOj ^ t c , - bave a l l pmibinod to lay the fouadatioiia
for • atabXaj ovdaorljf iroigreai ahead bo UM goal of abundance} the
£•£•€,, the Banking Act^ of L9SS aad particularly of 1936 prorlde Ihe
Trmtninantaiitieii for ao ooatrolliog stoolc aarkwt and credit soaditloaa aj to aalca for aore Btabillsed progreae^ freedaa froa the ipeool a t i v e mwreinai of the 20*a aad aToidaaoe of the axtraaos of deflation
I inflation^

I rereraal of polley aoW| la U M bodgat« ^ 0 il strike at U M
foundation* ahiob nave been laid end tha pirogreaa alraadj reaiinwi

- 14 ards vhe a c h l a v a r i t of an ooo&oaQ ol abusidaiioaj It w i l l be
greeted bg the opposltloa aa • so&fas&lon of arro?| i t v i l l plaoa
the Adaloiatiratloii on UM dafensivai and iapl^ that UM Doogjlaaaaj
UM ti.r^'Urgs, DM Aldrlchasj UM .Liberty Laagiiaj the Chaafear of COM
UM latioaal Aaaocla'tlon of tottJTaotiir«m« UM Ka KibUcMuui e r , K&QX| Unndon - UM orovd that hfti ftlmya b^tn tad tXwgra vUUL
ba ftfaijiat Uila Adadalstraitlan - era riglit«

Thia la UM crowd iiuit

it pemmr rmtbmr than recovery - UM orowd tba>t foar 18 y—xa a%i
i:i poaNNFj UMt t r i e d UM v&ry pollcisfi ablofa aadad in the grwtta>st
msh in oat •onmnaiifi historyj UM orow) tba>t willed thia Adaloistz*tlofl a debt of SO blXllooi lad I daaMXraJLi4Md| Toatrate coanLryi
yet ^hcy Btti banra UM inU11 B I aucUioitjf to propoaa bhftt we go biadi
to the very pollolftfl ^hich wrecked uhe oountxy*
d fatM prophet;: on


O O record.

They banri bsan

To o»plt\ll>tl to


now voolcl be uathinkable> obaa titlli /.dniinistrfetion 1 js >olloi»a
now being ••ply vlndlcatad by UM aoajaawarablc toet of laprov»M
-i. ratflacrtad la every ladaoi of ba&laassi indostrlaJLi economic and
finaAolal aotlTlt^*

Xht r#owd LWalf la now only a vindication bat

• refutation of UM policy to fBhich UM oppoaitAcm bl . UM iwtlon to

Far froai rotrim'tinfl or rc^rectin.; UM tiaw la opportnuM to

Usrov UM rsoorU tecic into UM i t e t h of thosa cri\.icii| to tako •& s.^~
grcaai^ra staod| and to raatata a^pmaslTaljf UM otojeetivaa of
. Binlatn&loD afhloh are la fact bain t

a e d


.. .•.


>t only ... - bain

oad through thi proeassas

i , La aotloa ^:v' this ArialnI stratloa^ as evidaaoad by tha disdnlshad
praaatiras and liioraaslnjj rtrraauesj bat will ye b&l&neex; at fast &s
ptrlvata industry ataps in and bakes u; tha sl*ek of Miploy—ntj
irivmta ci:;,diai J41 {•ttliic laj tu • r»mlt y proofita t n



Last da/fl of

.. the MM) -<O UM tone of b l l l i o o

1 ..- ,.' 1 L :.... « i t

AMnrioaa iaoaliMiae


thaj wmr*

out of



n w-r . , by tha drop la baakruptolM (^iieh

aojabered aore than E5f000 for thi



Ixat 9 Months •' L9^j with

gregatlng nora than thrwM|iUKrt«ri of a bUlloa dollarS|
[oor«r Miya racorarj MUI underway) J not walj are profits


c r i » l n g j bat unwtpl^meat la diainliihingj vrmn Ui,i-t;;i s t i l l •xc«aslira| 'the fmtJL^rifcl inyoiue iw accordingly ri; Lug 1 1 vlth tt6 bax eollactlooAj but only M bhli proosi
UM bad^atj la othar sosdaj 1

. ttin—a la It soaslbla to balance

rlvata eatarprise taxes over

Just ao faat will fOTTiiaant ipandlng aXatok off| CAU' Ut totem
rachurtioo la &OTaTraawnt apandlng fastar than prifata astarprlaa picks
tip UM load would only halt ihc proeoaa li aot rtfmMi It aad proaipitata anothar daflatloii«
- ysron.:: a&tiiod. p,:" baXfa,.ri.c l:v; tae oiujjet iis ixll what tha
tpposltioB ofTaaraj a r r a y a l o a to UM Hoorais»4)ougla8-^»ibaF^r Laagaa
• 77 of budgdt-balaacin^ would not oa3j jeopardise recoveryt


- 16 es a sitb.tic aa,c ju ^c^rqXty,,.u.c9aojsy Tor the nation us a athole nftii for k < *ic.i, poverty
.:i, tiaa i l g r i l l e d

'or tli« j&iisea, ass \ <

wroeperoui i :fr. •

tint fi it

rhe rooking^ 1 stu [ : , aaon

o t h e r s , g r a p h i c a l l y lajpTilial liii Urn BAJOT d e f e c t s In mr eoonooie
Bystea La the ->*.- - focp vhloh tin opj»i Ltion oi e n as) BK Md; - »t»*

ever, ^o ihat & re^er^ion would not merely ^er^etuate tht defecte bat
leac to axK>ther oollAps««
• t lw bron^it

The opposition prof«ss»a to fear Inflation

a thi vorst Lafli tloa

: ^ e,. . u r i u ,

eal < ti to

Bad other prises ia our h i s t o r y ; Lt offers aotMag acw to correct
the v ;*„ (refects LQ th« Bystea whicii >rodueed . .

evil r o . ; u i u

set forth La Uw atudloi r o c r r o d t y , k all—iapojrt



fautjor si tha

20*& ami that I .r UM i r s t UJM la «IP history capital ftccufflulnfd
f a s t e r yam i t could be profitably oaployed la production.
3 xr £ 5 i jrattrt M hft i-i* t x L. - .^ i ; fr^iLl^r;

pnMtt a v M of

iwigzmtion ftad a f a i r l y ,ilgh oirth rftt* ,;tve u a ,of3fcstic narket
i . v prei N rapidly that ai faat a oa i t a l aoouatilatftd It a 1 be
put parof I'Uibiy iato new fxroductloa]

imiltaQeouffljri until smr h h

.alley k i l l e d Lt off, » • bad a for*ig2i starket*

i» andri 5:iegfried h i .,. L , i »rloi


By Lbs 2Off8|

f i./cj m i*d i


froatiarj for the f i r s t tlaa l a our s:i_, fcorj Uu -ice of laud, ration
iurned UM other wgrj our Boustainoufi bariffa coat ui aur foreign
martetiij and ior the first tiae in history oapltal aeottaulAtod auoh
faster than I t could \m pat into productive «nt«rp!rifi«j at the

- 17


tlrac, ej Berle and Beans have ,-' .
la oorporat

orthj ve witnessed rapid c-iarigee

rrgani station j with & growth of • y n t iwwhtr of La*

duatrlal giants* shieh aoausailated vast profits wire::, they ....;.<-. not


- ~^



.- ; •• y is /•'.:, dividends or, as would

.xvc bMa bsst of a i i , Lome pric#4| MB toeicUnitftl tTl
jakttge i n


Uiti v.l.:..-


Kv.'vkUii-rcial pi-per ; o t



. ,:. b«nki oonld no long«? tacLftt on that ono« IUadaa«a.tftX t^rpt

.van; but -

P«t tfffcct v.-u- (hat the»

caul•: _. ipiXX^d onrwc into stookj m l

;:!..._ v~

I proO9(



. aoouaolatic»u or

esta'ta aod otlmr B eeuitwian—

:: .: ;; Republican Ad

Ling wa d

M it

I brmtioiu to bait UMI prooi


U M B t o o k :.ii..r;-5.-L O

Soovaar did notlting to abate Lt unt»il the crash caae; nor i;: ^ay~
- I'erei^ now hjr !!*• BflovT6| ^.
• oation against


Snoxasj sto« a tc safagaax^d

arrtaea of tha salaait^rj on ....

i . . L policy would axpoea the naLLou. to tbt MMMI evil,;;.
. . iltoatioQ



vmtxwa^ Jieir
The ffecta of

set forth by Brookinge (Ineoaw and Eoonoaie


•JUf to tncrcwwi dlatribution astd i u : reeultai M found in
the MO owl diTiaion of our stodj the ;>rocc;edi; of the nation's
sffortfl going in disproportionate and Increasing —aaar<
•aall perceii'tu^e of the population—In 1929 as BUOfl ai S3 >er
it ol the national Inoow to I peroent of the paopl>« Ra
found thi nnaatlsfled pants—aeods aooording to any good soe i a l standard—:^r the 9& percent of a l l faailiei aho are noa
below the level of ^5000 unmnai incoae saffloieat to absorb
ict of a i l our nroinad aapaoitj tsader present conditions of prodiaetiTitvj and .. i l l i deej
euch sore frosi soeli EOVexplorcd potentialltlef i
L lit thereafter be opened ap« \ e

- 18

fouuu the incoaes of the r i c h going la larga proportion to
,,vL.i,;:: ^is1. \,;\eto savings $tron ;ly aa mailed by other* I s *
pounded a t th*;* :>.;uree by cur r e t i m throu ; & praoiloi
of aecuaulatiivs corporate surplus. Thai e u*vi.i ;; , t f t e r
ppovic:.ri;: for BttGh incre^te oi capital goods ae could be
Hpofitabiy employed, *t Pound s p i l l i n g over into l e s e
fruitful or K)fiitively haraful U8ea9 ranging I i
v: Ljp
loana (bad ae well tit, good) to the a r t i f i c i a l bidding up
ol rice.
* . \ l c >ro a r t l e s f aotabl^ cor : >orate seeurl*we began to disottru the amnmr to our q
the basic defect l a econoaio wV^teri, aot d i * eoirered i n tlie t e c h n i c a l proae. :>i:. o^ >roduotion f ir to i-c
fotaad I n the r a y i n I j&h •
a ' u c Jit v . l . i r ; iti I
LaCDsie, The answer i s a f f i r s a t i v c - ; t h i ; : i s the ;\Lace a t r b i c h
y-e do find faftl I c

Th« | l i B i s t r i vl.'.i'


*t, !ianrt

piag to correct t i baeic laladjustaent*


»ff«ot »f

'o oite vu,


urther ( Mtge
bug ::i,,

- «


>f t h

,>c >le

appears to be fuadaaentally reaponsibla for Qm parsiste&t
failure to s a i l forth our productive >owor«« I t bai b R
shown, alao that the itan ar i oi Living esired 'or the
Aaericaa >eople c<. a nholi u , be attained >nl^ If ro ctn
soaehow grcatlj iaerease the aatiosal output of goode arid
EMurvioes* Dar problea It. to eter ,- bether the flow of
the Inarm* stre&a to the various groups i n society can be
i o .3ori.fico

• £ t o BX^mnfi

^ro_;ro* t d v f l v

tlie e f f e c t i v e

<,e i od

for gooda and l i n t evoke an ever greater volune of prodoolloa—which woul< M i s i steai \'i i tgw ttin aggrej^t* laftawm to be d i v i d e d » "

I t haj beea b rest >riau buyia

->-or, b pottia


th bottoa oi tht . :a in^ . i n i 1 . , that tlM .jrcu-riv >ro;;r©ys of
haf been achieved*

A reversal of policy no*, t h e r e f o r e .

- 19 , Lnrilcatad bo dieactroui froa aver? ut idpointj

/.. ,, tiu^er.U. >ai
• certain


dgjit '


O r e l i e f , to ba mad oalj U ifl

nrlae f a l l s to tefct »?•» tbt an. >iot ; load] Ih
ftdalalatttrad fro



f xrivs/cc, cntcrrm ^ Lngfad of

il Lgton by n o •..... = • • K «ri<mo« I .


uiat of CLQQ yoarkfg la tbe ioelaX flold i bonXd bi hfMTii:^ la r e n>»t>r>H»t1 foam bg thos* sxiMKrltxiead la; ruadaj r»aantaint
caa be feb^ted by do£s£ aaaj altli UM pvovl Ion tkmX p&TBon aoat daelara tha—alvai pauparlsad La ordar to %*% on r* XlMt r •- for vorlu

Xacidontallyi a baXancad budget will w t aaploy

• >Ic - aa Boorar aa$>2j proved.

• •. resulte only when bu»l-

Lvai cnctlari I ^r goocU| and ardajri foar pa - ... tu i
.ti nit froa

tc D


iaopl( .. .-... i nogr vita waiob bo boya aad thlSj f\irtharf

Li UM J—.;• papocaai •hlcfa kaapa up aad ad<

• , .- aatlonal iricoi-ie

oat of attlea C M the taxaa aalea balaaca tba budgat«
^0TQi.t UM ftdalnlatra'tloii*I Inflltratloo

In otter

•;:' boylag povar Into tha

treaa .ots at the faadaw ktal aansi oi tha troubla*

In an iaaadiata aaaaura «hloh i ml
f e c t , parhapa offsatting possible
honalng trognmg d


bar« e s t l n i l a t l T * ef-

racosaloo la fch< r i n / ,

the largest rninan of


2.0 -

zonatruction la tha ihortset poaslble ti— f through the stimulation
oi ,>rivet.€i oapital f has bean agreed upon fag tha w i m l Lntareated
}:/4il WJ' H e a l

:' ; t?fclth


This AriBinlatratloaj dedicated to an abundance eeonoeyj
the Lntereat* of the aadrprlvllftfed| IIM not only prc tsrsdl t recuveiv, i


Uu*ough the etook aarimt

EMukln^ controls t. »a©&iis ox" coabat'tlng both Inflation tod do-

i'iation, but l i ill • position to oTf«r mplloit propOMkUi :'ar
&chie-vin ; tiit; i;.e,;ree of abundanot re^re^ericed by a otft&dllj rlelag
oatlonaX Locoaa baaad apoa r e a l saaXtbj not ha—d on papav aoiMQfi
bat baaed on fttllJFTg torta

f u l l ^roduotiTitj of our aoosoalo •anTiinaj,

p U f tin techiiolv7;;iQt.I bexicifitu in innflDMrftbXa . ielui;-,
O al

Io oite tha

final Brookinga report once wap& (p&^e 15S)i
"The ifinnMiatail kao^lcii,;e raaultinc tnm •odaara
• teiantlflci and technical diaoovariafl L to yaat that
were i t rapidly and oontinuouftly applied to tha 1»[UWioKOnt of pyodnotiTt xrooasaaai wt ootiXd iwive a vata
of induatrlal adtancamiiitj and attain • Urmal of produetloa in the not dlstaat faturaj that vould dwarf anything that haa been known La tha paa^**
This foal la in Bight under tha Administration's deeXared
iolieiaS| and dtaoaatvabla resulti

BO far ~ th??ig}i the goal Li i t l l l

far ahaad| Lt l i not in sl^xt ondar • reversion ^o t,hc: blind rreed, cnv
balanoed eoonoay and budget-balanoiag eethode of the opposition - to

- 21 d to thoff* HHrthotlJB BO* oould tM tiM pnNktMrt ;>urrible
?Uu $MCL l i a t t a i n a b l e bg :ue Log &i o o t t -4 c a p i t a l d

w rfttes ioi - *a ha
tlus dl^trlba'tloQ oi

occ:* th« ^duiiiistrattott*! polioyj forcing

.ir*™*; im

nro i t , »iiv-a i,*^ f a H t o

F M I VMltli pcroctuotion, but s p i l l or«r Into * (•culattoni


thi* flxpi J i r e c v e d Lato (In ipettdXag s t r a t a Uurough fating


plus In -I ifiw of ^ro^pcrity M d thah r&daciag debt Incarred in
periods of oefl&Tdun,
The Soramwnt amat b«


oo«pe:as€»t-ory taodiiuD in umiaF

v^iii .:i,_, tin CIo^ i;kici btiiftllflf ajid a t the t> wise pra¥ent4im ex—

e i t h e r la tha dir*€tloa of i.u'l«»cioa or d e f l t t l o i u
The budget Is the key to ths whole1 ;-;olic^: and progrmau

1* Case for i*dg|inlstra^on needs aggressive presentation; opposition
proposes retorn to unbalanced econoisiy of 20*s when 25$ of
national income went to 1$ of the people (Brookings Institution studies), and 200 corporations, including 106 industrials
and 52 public utilities, each with assets over #90,000,000,
had combined assets in 1930 of $Slf074#Q00,00Q$ this equals
roughly 22% of the country*s total wealth and is 49$ of all
non-banking corporate wealth, while 300,000 smaller companies
owned the remaining half (The Modern Corporation and Private
Property, Berle and Means); these individual and corporate
beneficiaries of unbalanced economy, through Liberty League,
National Association of Manufacturers, etc., are moat violent
foes of Administration*
Th^a Administration jjj$*erlteft» not only chaotic conditions, prostrate
business and banking, but a national debt of £0 billion?t
taxes which should have been applied to curtailing this debt
ware reduced 4 times in the 20*sj also the preceding Administration left a deficit of nearly 1 billion in *52 and over 3
billions in •SS, and by letting deflation run far on its course,
vastly added to cost of turning the tide back to recovery*
Rsator&tio,** underway; country about half way back to 1929 levelsj
national income, which fell from over 80 billions in 1929 to
less than 40 billions In *5£, was up to SO billions for 1954
and running close to 60 billions at present rate of business
Budget is balancings restoration of national income, out of which
alone cose t^xes to balance budget, has resulted in increase
of tax collections estimated for current fiscal year to be
$£,400,000,000 above *5S; consequently, government spending
needs decline; S*0«X*»€+, f,C.A, and R.F.C. collecting more
than putting out*
Taxes tp balance budget^ will coae, not out of present income, but
future surpluses from restored national income, on basis of
capacity to payj not out of "little fellow*$ fixed income
groups do not suffer, better off with smaller, assured interest than artificial rates which national economy unable
to sustain, with danger of losses of principle as well as
Interest; government @ust deflect surpluses, which caused
stock market, real estate, etc., inflation of 20*s, to pay
off debt and, when deflationary tendencies develop, to spending stream.

— f ~


Preaature budget balance by wrong method of slashing expenditures
before private enterprise taken up unemployment slack, is
proposed by opposition5 this would set back recovery,
threaten new deflation, reverse successful processes set in
notion by M'ainistratlon; this Implies a static economy and
perpetuation of unbalance


Coat of recovery aaallt Administration expended about 8 billions
(as of November, 1935); deducting treasury balances, value
of assets in E«F«C«9 etc*, and gold increment, net debt increase is about S billions1 this contrasts with gain of 10
to 20 billions in national incoaej increase of 20 billions
in listed stocks, 7£ billions in listed bonds, and incalculable gain In values of real estate, urban and foral, and
other assets1 government bonds, soae selling down to 33 In
*SSf now at presiiu.11, under lover interest rates $ hence cost
of carrying debt greatly reduced*


Debt burden exag&erfctedi in last war coimtry incurred deficit of
9 billions in one year, 13 billions the next? war-incurred
debt of #26,000,000,000 paid d a w ty 10 billions In 20* e
despite 4 tax reductions; at same tiae sow© 10 billions
squandered on foreign bonds and fully 100 billions added to
capital wealth; entire national debt of 50 billions is about
4 souths of nenaal (1929) national income; gross increase of
3 billions under this Administration is about one month1 s
norml national income; net increase of S billion*? is less
than Z weeks of noraal national incoaae; a country cannot impoverish itself by borrowing from and paying interest to Itself? bulk of debt Incurred at behest of and to save banks,
insurance companies end private credit structure? critics did
not object to unbalancing budget In war or to save private
credit structure in §0fs$ objections illogical against also
protecting citizens from ravages of economic forces; §Sacauleyfs
History ot dtgland® exposes false analogy between individual*s
debt and nation*s debt, and blindness of alarmists rho see debt
g » wing but fail to see that national wealth and Incosse grow
faster; serious thing is not debt, but loss of f40»000t000f000
annually of national Income*


Administration prograsa succeedingi going off gold, revaluing dollar,
necessary expedients to restore equitable debtor-creditor re*
latlonships; debt burden further adjusted by H«0«&*C»f F«CJU#
etc., in funding debt® over longer periods at lower rates}

«.. s A.A.A,, a temporary expedient, has restored parity (nonexistent in £>**) between agriculture «aid tariff-protected
lxuftustry; fans ineoatv which declined to nearly 4 Mllloiig
its 1952 «wtia»tod to b© back to 7 billions for I98ftf $,S«C»»
banking acts of *H and f S5, etc*, provide safeguards ag&iost
rotors to evils of £0*s» -sue! will contribute to -attaixiaeat #f
goal of
Adainlstratlon* g objectives are being rmlised for
legedj goal 6f afeimdaac# s t i l l far off; to Imlt now and
verse policy or revert to reaction of opposition would invite new deflation, perpeiuate evils whlct! developed infl**.
tionarj bubbles i s 20* s and resultaat oollapaei reaction aow
say doom Democracy, including the Constitution, and lead to
Faseisa or Sociaiisaj probXeit aow i s pro^feotlos and diatri^m*
tioa or real wMltb to laaxiss^i capacity of machine age, plus
technological advances; this eorvta&oas dynamict not s t a t i c , .
economy, and orderly, stabilized progress, with government' i»
cowpmmt&ry w&diw&$ tliroagh wmet«ry credit aud taxiag
powers i lepublieaa opposition proposes retiim to imbalance Qt
20*s, «it& coae«atrat«d p®w«sr aad wealth at top f poverty or_
pmvoy for masses, including small industrialists and business ®®s| wealth distrlfeators wjuld divide up existing i a - , adeqmte wealth wbleh woald be to distribute povertyj ?o«s~
sendites, e t c . , would distribute worthless paper isoaej,
aelthdr creating laor dlvtrtbating real wealth* Administration policies and objectives, based on sound economics, %emx
salvatliaa ©f profit*«0tiv€ t individualistic society,
Dewocratic iBstitutioaB and traditions•