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0<mfidential Memorandum
Bevised draft—August 1,1956

fTOTES FOR ADDRESS BI THE PR3SIDKW
OS THE NATIONAL CREDIT

Hy friends, an isaue has been raised in this campaign, a false issue, that would not have been raised were
not the aaeaory of soue men—some vosien, too, perhaps—pitifully short* It has been raised by persons whose entrenched
and fortified position in tfcft economic life of our country
shielded them from the worst effects of the depression Mid
»»4e thmm the foremost to profit from recovery*
Already oiming or controlling much of the nation9s
aaterial resourced before the recovery from depression began,
they now have the additional wealth and Income that three
years of business improvement have brought to them. And
they have gained this, mind you, not through any bold
initiative or exceptional enterprise on their own part, but
through a recovery finally brought about by measures initiated
and energetically pursued by government after all private
efforts, and an administration too smch reliant on those
efforts, had miserably failed* They have forgotten, and




seen to think that others will &lso quickly forget, what
the dismal prospects of business e.nd finance M N three or
four years ago, what the fears of business men end bankers
were then, how powerless they Ters then to cope with the
economic forces that threatened to overwhelm them. They
havs forgotten, too, that it wats the po??er of the national
government and the strength of the national credit that
finally saved thesu
For they coais forward now challenging, attacking,
decrying &s a fearful and abhorrent thing, the very aeons
by which the processes of recovery have been set in motion.
The I n n that they raise is the use of the- national credit—
the use of tb&t credit to coabat tile social mid economic
evils of depression, to give an impetus tofcueinefltfand e«&n& to iaere&ije the n&blon&X wealth aad income
the benefit of all claases of our people. HMQI ta= that
*>
because of this M M of the national cx-edit the country is
on Uie road to b&nkruptcy M d r\3in. They would have you
believe, if they could aas&e you do so, that long into the
future, for generations yet unborn, the American people
be oppressed with the debt created draring this rational

Thea© *tre the dire prophecies, the wsolemn
oi warning,*1 of busineas and financial leaders who eight or




nine

JQ&T®

ago—aot long enough for most of us to have

forgotten—were acclaiming e new era of I n d u s t r i a l prosperity
and r&llylng under a banner t b s t was t o abolish poverty f o r ever from t h i s land,

Heve they *ore wisdom, sore foresight

now than llMf hed th«n?

Only a l i t t l e while l a t e r , s i x or

gftv^n ye«re «&o# they v©r« explaining &«ay & world-rocking
crash in the stock aarket and iiiwIlljj *ae that business end
oTJciitione lr* th« United States w«sre fundanentally
, the 5toek~?8«!rTi:at crash but a brief Interlude in the
tiew-fouad prosperity • Have they a profotmdfcr under standing
now, evers of t h e i r ovn iamedi©t« cancems end &ctivit.ies,
then they had the^t
And ar# they MM r«3lia'blr guides non? to n a t i o n a l
a*>n#tary &n& f i s c a l poliey llMHI they M N from 19£9 t o 1033?
They told as thwi t h a t i f w M fettpt the bud^ot in balance,
and held tOSBM dovn# end lulhered sttadfu-stly to soinir] -aoney
and • cwrreficy convertible i n t o gold, "the n&ttirsl forces
of recovery 11 would
well*

COBA

to »yr HNMMi fend a l l VO«ld SOMI be

Btit tthile HHf hfirned on: t h a t titnt y o t r in and |WMP

mit the Rppfillis?; miseries of deflation s.arf deprcasioii spread
wider M 4 widcsr, IntteMMI itti eapl^ment and Tiltani f « l l
lowm* and loTf^r, dtaNNHPi^MMBl mA despair gTOT darks^r «md,
dstrker, t m t i l at length t h e i r whole vtuntdi m i l l VWt i n t o
& ooninsilsion that closed every b&nk in the country.




That i s

mm 4 <•»

what came of their prophecies*
Wlmt, thesis this use of the n&tlonal credit
about which they r&ise such & great hu© &&d cry? Hh&t is
this incra&a© in the national debt which they s^ek to surround
with &n atmosphere of suspicion end distrust? The n&tion&l
credit, sgr friends, is mot the private possession of business
and finance* it is not something that business and finance
jNign&niso-usly confer on government, or sternly withhold at
will. It is the country1e worth thst we have all &e a people
inherited from the generation© past, «&nd th&t we h»ve ourselves
added to theoe past few years for the present and the future•
It i® s great Rational reaotjtrce^ the cofisaoa po&maalon of us
fill, that WQ h&v© used to save the country from the bankruptcy
and nsia* the destitution and hueaen suffering, the mental
asgulsh and deep&ir, to which defl&tion &n& depre&aion brought
Adserie&.n bvainass, agriculture, and finance from 1929 to 1955*
It is m great aotiv© power ty which, whan all other means h&d
failed, we were able to turn the wheels of industries ths.t had
long been idle# It is & powerful dynamic force th&t we
infused into our social and economic life to give relief
«apXojsent ®nd orders for goods*
Herd necessity dictated this emergency us© of the
national credit* &»cl husaanitariaa principles have guided it>
but the u&e that we h&v« made of it has beon prudent and




m

§

m

successful* Far from being the nation©! c&l&aitj that the
prophets of doom and fonenters ot fear would h&ve you believe
it to be f it is an investment in human rehabilitation and
productive enterprise that h&s yielded . larger return, even
a
when only the material gain© are considered, than any other
investment the American people have ever made in such a short
period. We? could afford to make that investment» Ihfct w#
could aot afford was the idl© plants &nd idle men, the
deterioriatlon of macl^inery tnd aoralef the long-continued
feilure to ye© the rsaterial and hua&n reeourcee of this rich
cotaatry. For that m\& waste of the most w&aton kind. The
h\asan needs tai huatui wants that went unsatisfied diaring
those depression years, when our productive capacitv was in
re&lity im&enee, tell their own storj of a ir&gte that is
irretrievable. Eut the investment th&t we h&ve saade the&e
past three ye&ra in relief and recovery i» not irretrievable.
Far froa it,
I have said that otir us© of the national credit
during this great n&tionel emergency h&a been prudeiit &nd
eucceaeful. To he. prudent, ay friends, is to be careful of
the consequences, to have an ey© to the future• To b©
euccee&fulf is to is&ke perceptibii find ate&dy progress on the
course of &ctla& that one sets for one's self. These things




are 00 with the nation's busiaeea, with th© busineea that
is &o&© through th« activities of ell oitr people collectively
caadld«r@49 as wiUi & si&gie enterprise,
A iNilfttti *3o<*8 aofc go backward, does not ijavite
disaster, when it ftig into dtbt; not if it is careful of
the consequence© &nd baa an eye to the future*

On the

contrary* the f&et that it iss nbl« to incur Iindebtedn#ss on
fair terma is everywhere &eka0wl®<i^«d to be evidujsce- of it*
solv©nc^ and strengthj of its ability to sake headway, to
turia a profit on the debt it h&a iaem"r#&* And whan it wak#a
perceptible and steady progress, doing
each y©&r, adding ©^cli $mr
w

do act mj

itore and mor© business

to the v&lu© of the enterprise,

that it i» he^;.@d toward beukruptcsy and rtain,

that it ha* ittpaired its credit &n£ imperilled the futirre of
its ow&$r&»

1® dhowld call %hmt m&n a mischief-saker and

slanderer who said such a thing* Aa4 W B should cull the
business enterprise a &uccess.
It la #0 with the nation* 0 butinesa-^the oosiblned
btislnes© of all our factories atsd faras* otar saines end
forests, o*ar transportation and coansunication and powfir
»jsts#s» our jaercaEtll® @stabli»hn#nts, otar service trades,
our professional groups, and all their employes, I«s the us«
that bag been aade of the iWition&l credit since March 4 ? 1955,
great or ssaall vhen a#&dured. by the progress which the country




m7 —
as an economic whole hM Mfcde ftlaftt then?

That i f t h e p r a c t i -

cal question;

tiifct l l tilt crux of t h e i03ttt which t h e c r i t i c s

of our f i s c a l

policy

tefi

r*ltod«

t e s t , t h e only s e n s i b l e t e s t ,

And t:,-:-t i.: the practical

by unich t h e policy l a to I

Look buck for t BMMNlt t o 1989 <*nd 1030, UK; ifeftt ao
you find?

toy find t h a t w.aen t h e MS*

I

Jmeric&n ly

i n pl&nt and laoney were g r e a t e r ti s an they hftd ever )NNHi
before, and its ability t

i y biHHUB n e e d s t a d SMMW

«&nts h«.d reached n point never before fcttkined, the a
for workers, who c o n s t i t u t e %h* gre&t bulk of the asxkt-t for
the ultimate product© of iriuustry, entered a long pej'iod of
decline*

W wert; l i k e t h a t mt.a who b u i l t h i i fMrttj t fine
e

bouse, and then on Qompletin^ i t W
in the kitchen.

tteat t o l e t Itatt l i v e

Fro:u A iaeo«t of 01 b i l l i o n d
H

that our

people ae & ishole , l ONliHIXl l a I f t 9 | tlic BtttlOBftX lacCNM ftXl
to l e s s than half (hat lua by 19i£«

In three years UM ^otal

of the anmial declines i n our afttiottftl incoM from tin X9t9
level wii^ 8£ b i l l i o n doli&r^*

Could we not better alford t o

invest i fr&ction of t h t t su± t o arrinet deflation and Induce
recovery than t o l e t t h a t feragi decline in national ittflOf ! •
on unchecked?
In M •itrllw reriod of economic ttr«A£ i bold
financier leid down the maxim, "Ttotw be a bear on I




Onited States.* By 1935, vy friend©, it v&t* lii^h H a s
some on© to b«seom© u bull aa U M United lt»iig«

It was tiae

for government to t&ke the risks, to make the investment In
th« future of America, that private enterprise «as unwilling
or unable to make* And that Is what was done. It VULS done
not only because it would pay as it has alrea^ p&id, but because it mu neeeasary arid just &ad prmient to do it. We
provided relief where relief was needed, supplied capital where
capital was needed, extended, credit where credit «&2 n@#d@df
ts'hen no one else stood r®a<tj to do th©@o tilings* In this
manner purchasing power wue put intofatuadstiiat woiild H M it#
Workers began to work agaia and money began to move agein.
And what is now the result?
Well* oa® result Is that the BfttloasJL d^bt has tMMB
increased 15 billion dollars over the £1 billions at which it
stood on Harch 4, 1955* Included in this incre&ae ie the
provision aade for the payment of the veterans1 compensation
certificates—HB© obligation incurred Ixsfor® tfew depreesiDB
began^ and one that we should have lied to meet in any event
in 1945. Apart from this, the increase in the public debt
since March 4, 193S, is in round figures U billion dollars.
How there are soiae persons—I have already referred
to thea—;who talk about this increase in the public debt as
if it were the sole item in the balance sheet of the




iaerlean people & E & afctloa* They droll on It to the exclusion of everything else; in fact, It has become &»
obsession **ith them. But there are none so blind M

those

that will not £«*©• $©&ri^ everyone else is ««are9 X as
sore, that there is an asset side to the national balance
ah**€>t as *ell &a a liability aim*

True* Ibt liability

is iaporUuafc; 1 do not 'oaderrfttc its ifflportfcecc. But the
E^aet side Is iaport&nt, tooj and it is sot to b® xasderrated*
We ehould not x&&%rr&i%P for exeaple, the integrity
and good faith of the individuals and iaptitutione tc tthxm
govornnenb lofene hitve b#©n siade M part of tht> relief end
recovery program*

BMMM bon-owerji lire not clieat© and

r&sc&ls; they are not repwli&tioniste* They Jteet their obligiitlonu vhen they htwi I I M mo^ne to meet the». There are
of course some defaults her© tmd there, soae delinguinciesi
it nut to be ©xpectcid that there would be. But the tmxmw
ir* vhieb borrowers ar® nesting their currant pej'ments, and
the rate at which Imam are beir^ paid off, should leave
no one in doubt thfct the ^reat bulk of the lo&as ia&de in
the recovery effort are recoverable &is»e;ts»
O^ah is another itoa that, like recoverable loans*
belong© on the Burnt Bide of the balance sheet. The increase
is these two it&sas together since H&rch 4, 1955, is 4 billion
dollar©} and thl^f let m& say parenthetically, is exclusive




of the % billion dollars set aside in 1954 for the? defense
of our currency in the international exchanges. When,
therefore, the increase in recoverable- assets end the increase in the ordinary cash balance of the Treasury is
deducted fro® the ll-billion-dollsr deficit incurred for
relief and recovery expenditures and for the ordinary
expenditures of goveriuienty we are l$ft with & figure of
7 billion dollars which a&y fairly be said to represent
the net cost of the progress made frost March 4, 1935, to
the present tiae* That is our net investment, if you please,
in relief and recovery} and it happens to correspond almost
exactly with the tot&l expenditures for direct relief and
work relief*
It ia not, «y friends, & ot&rtling figure or a
burden that we shall stagger under* I shall not attempt to
aeasure against it, ia bookkeeping term©, th® protection of
Billions of our people agaiaat privation &nd want, or the
protection of the nation ag&inst the social disorders tliat
when the consequences of deflation and depression pass
limit® of huiBan endurance. But there is ®one yalu®, &a
iause&sijr&bl© value, in people who have been saved frost
tion tirid deaorall«ation, and mme secure in at least the




necessities of life. And th©r© Is value, too, of
kind in terms of utility, in the public

-u improvements th&t have b#«n paid for in large part through
the expenditures for recovery—highways, bridges, water systems,
schoolhous&s, and numerous other projects that will continue
to b« us»d long after th« depression of these recent years
has finally pas«@d into history* It its true that saich of
this addition to the permanent wealth of the nation &oe& not
take the fora of saleable commodities end is on that account
referred to ae unproductive* But on« suet indeed
a p«rrert©d sense of values to aaintaia that nothing
is productive or useful unless it is designed for sale*
1 hm not suggesting that all the projects undertaken during the ©asergency h*ve been the most productive
i®agin&bl« or free fr®» defects* Such & result as th&t would
have been beyond human attainment in & work of such magnitude,
organised in such & abort ap&e© of tiae, S|>r©&d over auch &n
iasiaense &re«i, and made to serve the welfare of such an
enormous number of people. So that there must have been
in all this some waste, some inefficiency, some confusion,
some disappointment*
Xwrert&ftlftft* it 1* surely plain to «nreryone tliat
the »oney ap€oit on public works &n& on relief did not reach
the end of its usefulness as soon &@ it was spent for public
works and on relief. For our wage-earner* and relief workers




are sot hoarders; they are sot in the position of these
corporations that &r@ able to build up hug© surpluses ami
keep them idle and unspent* The aoney paid to wage-earners
on public works and on work relief has in turn been spent on
the product* of industry, with the result that virtually every
type of enterprise has benefited by its stimulating Influence
on business and employment. The recovery movement that is
now rapidly gaining momentum did not, like Topsy, just "groved".
It case about because the aoving force was supplied by public

question, than, Is whether the net inveet:a©nt
of 7 billion dollars in relief and recovery over the past
three years is large or saall la relation to the progress
we have a&de. As to this, let se present to you some
significant comparisons*
In the year 1918 alone the national debt was increased twice 7 billion dollars. That was for th© destructive purposes of war* The total increase in the national
debt for the prosecution of the war was £6 billion dollars
In two and a quarter years* Did that sudden Increase in the
national debt lead the country to bankruptcy and ruinf On
the contrary, we eaerged is th© 1920»s a aore prosperous
people, despite the debt, than we had ever been before. The




- 15 -

national dc?bt was then gradually scaled down, and on three
separate occasions income taxes were rateftad &s the national
income increased.
The fact o£ the matter is that aebt imd ttMM are
burdensome or not according &s income is saall or l&r^e.
It !• so of the nation as of M I individual, fihen the income
produced by our people fell from 81 billion dollars in 1929
to less than half that sua la 1932, thi burden of every
dollar of debt, public & n private, i &
.d
?.

by M N than

doubled, the burden of every dollar of taxes more than.
doubled.

That is when the burden of debt and taxes became

oppressive and insupportable.

It M l that 8£-billion-dollar

loos of income in thr«v- years—tue income that proTides
the MiMI of paying debt tad ttxes—thfct Mftdt tae burden
opprtaslva HMl insupportable.
But since 1»55 tht national incoiae i M been
Ml
ste&diiy rising. Those who ar« cosn^etent to M t i t l l I
extent of the &mxu&i increases put our tot&l gain for the
past three year! at sore tbai 38 billion dollars* For the
cisrrent yeur the national income is estlm&tcd to bt running
ftt the rate of £0 billion dollars bi

ttea in Ifl8«

I

think that even Wall B t w t would concede that such returns
in so short I 1 4 M jn & net lnT—taent of 7 billion dollars
are not bad.




• 11 It is illuminating also to coimre this 7 billion
dollars with another flgtot known to Wall Street* The Hew
fork Stock Exchange has recently published the information
that the stocks alone listed oft th&t exchange Mire risen in
m L u e from 15 billion dollars in July I9S£ to 50 billion
dollars in. July 19£G-»«n appreciation of 35 billion dollars.
Does that suggest e country on the Nftf to bankruptcy and
rulnf Does it reflectfefcttrepldntion of men who expect to
spend the rest of their lives under the burden of the national
debt? Loolc at the income, the profits* and the dividends of
their eoap&nies if you would know the truth*
Iiet we present just one sior© co»p&ri8on«

The

interest rate ^i government bmf$ hee been steiulllj reduced
ov©r the peet thre© j»&vat uatil it it; now at th« loveot
in 28 years. The s&jse gOT«rna<mt bonds timt in 19$£
selling at less that $830 per |l f 000 bond are- D O W
at saore tlifcn $l t 040 per f 1,000 bon<U ^ad the
fiamnele.1 comunlty eagerly oTeraubecribes for every M M
imm

of ^overasj^ni securities. This is not the -my men

act when they are fecrful of th© national credit* It is not
th» action of mn who think that th© "budget will not be
balanced, or who indeed believe any of the dire predictions
that the scareaongers aaong them aoke .for political con*




m If yon would le^ra whet these men t r u l j bclie-ve
about the soundness of our fiscal policy aaft the MN&MN
of our soney, look t$ their actions in the is&rket for
government *»<?curitie«u
And ©a yens see Ifeifff ie a good deei utore to the
fttOVf of our national finances end our national. er«jdit tMn
& teaporwry iscroitse in the n&tionel debt,

OKTt i s the

arresting of that fright Ail decline in the; national .incoaw
that was golog on u»checlced{ there i s the ispetuis and en~
C9ur&^eaent t h t t was given to business lay public spending
»t a tlae when ord«tra fron private eourcee ??ere wtnting; there
I0 the layir^ of a ftfii ftVBteilOB fot fftOMlat and sustained
rc^coTei^—not j w t tmother flftll Street booi»»-*r:d for a more
widespread, more #qyitable distribution of the
Inoorse* And there la the gtsbstantial &B& t&x^ible
in the n&ticn&l wealth rmd i&co»e tbet recovery I M s l r
M
broughti and thut 1L: steadily and pl»in.l>" f |«iain^ aoa^ntun
ev'©JT7 day*
X do not aeon by a l l thie lo sgggeet, ay fri^intds,
that the increase in the national debt, even though i t is
but toqplMfjri l i • |M4 thing in aad of itself*

Hot at All*

I believe timt the public debt should be Increased wfy

for

the aoflt cospellltig reason® of aatloiial ctaergea^yi ami that
with the passing of the eaergeney the btidget should be brought
into b&l&nce end debt retirement begun. W have in fact been
e



• 16 us eto&dily tovard m balanced budg©t tfee&© two
past aa the diminishing emergency d«n«adi on governM i the nrogreea of ><ii!K»fj would ^erait#

W shall
e

have a ItflMMNrf! budget, but we shall not have i t at the
coat of htt&iin a i s e r j .

W shall b&ve i t bj* the flttlgf stsre
e

and 0t>"un4 M tM throUi?h uhieh s budget can be bal&nc«dj
M
debt retired, and ttM tax burden l«ssftned«

W shall have
e

i t fty the oonttOTsnea of a nmmd r«c«Vflary and th* oontinoed




in the naticmal l M M th*\t this recoTery i s bringing
a M I