Friday, June 22, 2012

When the Supreme Court Struck Back at Roosevelt 1/2

by Nomad
In the past I have written about Roosevelt’s forgotten battle with the Supreme Court in 1933 but I’d like to return to this lost bit of history for a closer look. It isn’t all about our grandfather’s history because at this time, in these days prior to the Supreme Court ruling on the constitutionality of President Obama’s healthcare reform program, the parallels, I think, are striking. 
It isn’t the first time the executive and the judicial branches have been at loggerheads and perhaps lessons can be learned from history.

Action Now
The 1932 presidential election was not even close. President Herbert Hoover’s failed policies and his apparent detachment from the trials of his own people during the Great Depression won his few votes. At no time in American history had the conditions been quite as unforgiving as this and yet Hoover seemed out of touch with the average Americans. 

Like most economists of his age, Hoover on the other hand had warned against "mindless experimentation" in established government policy. He felt that the best policy was to wait things out, the national economy would recover on its own. It always had before.

In his inaugural address, Roosevelt left no doubt who he blamed for the financial meltdown of the American economy. He said:
Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.
In an almost lofty tone, he told his listeners:
Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.
Americans, Roosevelt felt, had learned a great lesson from the disaster.
Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.

Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now.
The action that Roosevelt proposed was bold based on an idea that in times of crisis, the American people would come together, rich and powerful and the poor and helpless. He turned out to be only half-right.
Under the previous president the policy was simply to allow foreclosures to run their course, and when the smoke had cleared, the markets would have reset themselves, stronger and more competitive. The true value of commodities and properties would be re-established. Survival of the fittest on economic terms.

That view was one that the new president could not accept. Roosevelt told his radio listeners on May 7 1933:
It is easy to see that the result of this course would have not only economic effects of a very serious nature but social results that might bring incalculable harm. Even before I was inaugurated, I came to the conclusion that such a policy was too much to ask the American people to bear. It involved not only a further loss of homes, farms, savings and wages but also a loss of spiritual values- the loss of that sense of security for the present and the future so necessary to the peace and contentment of the individual and of his family. When you destroy these things you will find it difficult to establish confidence of any sort in the future.
By any measure, the Roosevelt administration determination to get the nation back on its feet was swift. Some said that what resulted was less well-thought-out and hastily drawn up. The pressure to find solutions was understandable with unemployment exceeding 30 percent in some areas of the country. 
As one source explains:
In the months following Roosevelt's inauguration, his advisers, along with members of Congress and representatives from business and labor, drafted the legislation that was introduced in Congress on May 15, 1933, as the National Industrial Recovery Act. The division of opinions about the Depression was reflected in those who drafted NIRA, and the act drew both praise and criticism from across the political spectrum...
The House of Representatives passed the NIRA by a vote of 325 to 76. When it reached the Senate, however, several powerful senators opposed the bill. Some progressives favored alternative legislation authored by Alabama Senator Hugo Black, which promoted a 30-hour workweek. Some senators were concerned that the act suspended the enforcement of Anti-Trust laws at the same time that it called on businesses to play a major role in drafting "codes of fair competition." The Senate eventually approved the bill by a margin of seven votes.
The legislation was not without controversy, especially on the point of collective bargaining of labor unions. nevertheless, on June 16, 1933, Franklin Roosevelt signed the NIRA, the first step, he believed, in a new directions.

By his first 100 days in office, Roosevelt and Congress had already begun to rebuild what was left of America. The Emergency Banking Act, the Glass–Steagall Act (which created the Federal Deposit Insurance Corporation), and the 1933 Banking Act had taken on the financial sector. Then came the Agricultural Adjustment Act which was aimed at the problems of the agricultural industry.

And now it was time to address the crisis in the manufacturing and industrial sectors. Its main goal was to put people back to work but also with high enough wages to jump-start the economy.
Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources.
As he had promised, Roosevelt was taking action.

Recovery
The National Industrial Recovery Act (which came out of the legislation) had two major components, the Public Works Administration (PWA), an agency designed at putting the unemployed back to work on a wide variety of government projects and the NRA- which aimed at the complete restructuring of industry in America.

In some ways, Roosevelt’s recovery program went far beyond returning the country to strong economic position. It was to bring about a revolution in working conditions for all Americans. The primary mission of the National Recovery Act (NRA) was to set a standard practice of doing business on a national scale. This would include the elimination of sharp or unfair practice, the manufacture and marketing of below-standard merchandise and to regulate the wage and hours of labor.

But it went beyond that. The NRA also outlawed child labor, set a humane limit on the number of working hours per week and allowed workers to set up unions to bargain collectively for better working conditions. The NRA, in short, would reshape America from the inside out and bring the nation into the modern age. 

How could such an ambitious plan be achieved? The NRA established a nationwide system of associations for each industry and codes of conduct would be drawn up jointly by representatives of management, labor and the public. After working out their differences, the associations would submit their codes to Washington.
Naturally such a plan would require a great deal of tussling and debate and until then, the Roosevelt administration used a "blanket code" that would suffice until the larger work was completed.

One contemporary critic of the plan, John T. Flynn- a progressive that had once supported Roosevelt in the election- now labeled it nothing short of economic fascism. He pointed out that giving such authority- to regulate production, quantities prices and distribution and characteristics of the manufactured goods- to the government was nothing less than what Mussolini was doing in Italy. Other detractors were calling it “creeping socialism” and some thought the Roosevelt was using the Depression to bring about a socialist revolution in America.
Despite reservations in some quarters, public enthusiasm was high. Roosevelt was at least doing something. Hoover had insisted that government take a hands off approach to the crisis, fearing that government would only make matters worse. To many Americans, it didn’t seem like it could get any worse.

NRA parades were held in countless cities and towns across the country. The slogan "We Do Our Part" was seen everywhere; so was the chief symbol of the crusade, the Blue Eagle, which was displayed proudly by those who joined the patriotic work of battling the depression by rebuilding the economy through the NRA. 
Additionally the public was encouraged to shop at those retailers that displayed the NRA flag. Some observers soon noted, however, that many businesses displayed the flag but showed little interest in following even the blanket codes. It was the first weakness of the plan but it was soon to be a crucial one.

Based on a principle that labor and big business would cooperate in a crisis, Roosevelt’s plan was flawed. It did not take into account the short-sightedness and opportunism of the business sector, both high and low. As one source remarks:
The idea.. was based on a naive trust in the benevolence of business and its willingness to forego profits, even temporarily, to allow a rise in prices and wages.
Roosevelt may not have understood it yet, but by 1934 other experts were extremely skeptical that the NRA was based on concrete realities. And with the number of proposed regulations soaring to new levels, it was already shaping up to be a bureaucratic nightmare.

By February of 1934, the NRA had approved approved 557 basic codes and 200 supplementary ones and it did not take long for critics to see what was wrong with them. Clearly management had gained the upper hand when it came to the formulation of the rules. 

Although the codes were supposed to be written jointly by labor, management and the public, it became obvious that most of the time, management had the greatest influence in laying down the rules. 

Small businesses, it was also argued, could not compete with large corporations who had that ability to shape standards that could were impossible to match at a smaller scale. 

By the summer of 1934, many of the early supporters of Roosevelt’s plan were having strong doubts about whether it was actually workable. 

There was also the question of authority. As one writer remarked:
The optimism of the summer of 1933 when the NRA was announced, soon evaporated and before long critics began to challenge the constitutionality of the program The transcendent question was: Under the constitution can the government regulate business in an effort to restore prosperity?
The courts had, since 1880s and the days of laissez-faire and Social Darwinism, swung back and forth on the issue. The architects of the administration's programs might well have thought that, given the dire circumstances of the nation, the Courts would have taken a broader view. Times had changed, they argued, and how the courts have viewed the Constitution had changed repeated as circumstances demanded. Some argued that its flexibility- not its rigidity- was its greatest strength.  

Shortly before the Congress was to decide whether to renew the NRA’s lease on life or not, in 1935, the Supreme Court was ready to review the constitutional validity of the NRA. 
The case that gave them the excuse was based on sick chicken.

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