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Notes of the Month

Roosevelt’s Economic Program

(May 1942)

From The New International, Vol. VIII No. 4, May 1942, pp. 99–102.
Transcribed & marked up by Einde O’Callaghan.

President Roosevelt has spoken once more on the main domestic problems relating to the economic mobilization of the country behind the war. War profits, production of consumers’ goods, price control, rationing, the problem of inflation – these were, for the first time, treated as an integrated whole. In his speech of April 28, the President outlined his “equality of sacrifice” and “anti-inflation” program in the following way:

Yesterday I submitted to the Congress of the United States a seven-point program, a program of general principles which, taken together, could be called the national economic policy for attaining the great objective of keeping the cost of living down.

I repeat them now to you in substance:

  1. We must, through heavier taxes, keep personal and corporate profits at a low, reasonable rate.
  2. We must fix ceilings on prices and rents.
  3. We must stabilize wages.
  4. We must stabilize farm prices.
  5. We must put more billions into war bonds.
  6. We must ration all essential commodities which are scarce, and
  7. We must discourage installment buying, and encourage paying off debts and mortgages.

Two things are immediately evident in the President’s proposals: First, it is obvious from the seven points that this is not a program to reduce the cost of living but a program to reduce the standard of living of the American masses, and second, the program is so general that numerous alternative practical measures will be adopted under the guise of “equality of sacrifice” which can have no other effect but to strike directly at the working class. There is no need at this time to prove the first contention; it is the very heart of the program. In so far as the second point is concerned, it is obvious that conflicting inter-class interests prevent concrete agreement on the practical application of the program.

A great illusion persists that what Roosevelt consciously seeks in a “sportsmanlike” manner is to compel equality of sacrifice; that such equality is traditionally American; that no one shall profit out of the war, and that no group or class of Americans shall obtain advantages over another. Behind this myth, bolstered up with every deception at their command, stand the solid phalanxes of American liberalism and the divided ranks of the labor leaders. The American bourgeoisie, its kept press and the host of economic writers, experts and college professors who serve it, have joined in an attack on those parts of the President’s program which seemingly strike at the riches which the ruling class drains off each passing day of war production. They are determined to retain their economic “rights” under capitalism and thus far, proceeding on the premises of this social order, everything is in their favor.

Inequality Is the Starting Point

We live under the system of capitalism. By that very fact, inequality, class inequality, and therefore, social, economic and political inequality, are the inescapable preconditions for the continued existence of this profit economy. Roosevelt’s program of “equality of sacrifice” is a myth because the starting point for the program is inequality. The economic differences between the classes are enormous; the variations in the standard of living between the capitalist class and the proletariat are tremendous; the bourgeoisie has many ways of enriching itself, the proletariat lives only on its wages. Equality is possible, then, in several ways: reduce the standard of living of the ruling class to the level of the proletariat, raise the standards of the proletariat to those of the bourgeoisie, or have them equalized at some middle point. We are prepared to listen to the multitude of objections that would arise at the very mention of these ideas, for they strike at the very heart of capitalism.

The fundamental fact remains, however, that the ruler; of American society base themselves on one single premise which reduces Roosevelt’s program to an absurdity, namely, the inviolability of the profit motive. War sacrifices are all right, they say, provided they do not interfere with the God-given and historic right of the capitalists to earn profits! Given this premise, the real nature of the President’s program becomes clarified.

The April bulletin of the National City Bank, commenting on the question of profit control, declared:

It is in the public interest to ask how much further ... the government can hope to restrict earnings [they mean profits – A.G.] without so increasing the possibility of loss as to weaken the incentive to expand plant and take on more work and more risks. Granting that patriotism is the highest incentive to production, neither the war effort nor the welfare of society is served by causing the war work to be done at excessive risk.

It is obvious that the National City Bank does not refer to the working class. The New York Times, which has been carrying on a vile and aggressive editorial campaign against the labor movement at the same time that it vigorously defends the profit rights of big business, wrote on May a on the subject of a flat 94 per cent excess profits tax:

If a corporation were earning more than it was earning in the pre-war “base” years, its incentive to economy would be enormously reduced.

A more direct opinion was given by Albert W. Hawkes in the name of the United States Chamber of Commerce:

There can be no complete success from victory in this war unless we preserve the individual freedoms, the free enterprise system, private property rights and things that make Americans willing to render supreme sacrifice in order that those things may be defended.

More of Big Business Opinion

Referring directly to the President’s proposal for a $25,000 limit on incomes, the president of the Cleveland Chamber of Commerce added the following bit of plain speaking to the roll of bourgeois opinion:

Although 1 have not had a chance to study the President’s proposal, it in effect makes many men work for nothing. The plan was suggested in a patriotic vein but I don’t believe most men are patriotic enough to work free of charge. They just aren’t made that way.

The outlook of the bourgeoisie was perhaps best summarized by the slavish-minded Benjamin M. Anderson, professor of economics at the University of Los Angeles, in his published letter to the New York Times of May 3:

From the standpoint of the efficiency of American business again, the proposal to tax away all income above $25,000 is an ominous thing. Recipients of large incomes, and particularly the recipients of large salaries, are in general the most efficient business leaders of the country. Leaving aside all questions of justice and fair play and looking at the matter simply from the standpoint of winning the war, it is definitely unwise to force these men into a position where they must divert their attention from the work that they are doing to a drastic readjustment of their personal affairs.

These thoughts are not confined to representatives of big business. They are the prevailing ideas of government leaders and they dominate the minds of those who direct the War and Navy Departments. Thus Colonel Knox, Secretary of the Navy, in protesting profit curbs, reflected the thoughts of hundreds of government leaders and the present labor-hating Congress when he said:

The profit motive is still relied upon as an important factor in the inducement of extraordinary war production and industrial effort ... The Navy Department starts from the premise that sufficient profits must be provided to make the profit motive work ...

In the course of these notes it will be demonstrated that the seven-point program, no matter what the President professes as its aim, is directed against the proletariat, the poor farmer and the lower middle classes.

Profits – At a Low, Reasonable Rate

With the above premise in mind, we arrive at the first point in the President’s program: “We must, through heavier taxes, keep personal corporate profits at a low, reasonable rate.”

What is this “low, reasonable rate?” Great silence and confusion of thought dominate in Washington. But consider first the matter of corporate profits. Tax rates have increased enormously in the past two years of the war economy. Despite these increases, profits have enormously risen (see An Economic Review of 1941, by Albert Gates, in The New International, March 1942). Big business has been greatly enriched by governmental expenditures for war purposes. The disclosures of congressional committees investigating war contracts have presented a lurid picture of the manner in which the war industries have gorged themselves with corporate profits and how big business men have paid themselves huge salaries and even larger bonuses. Whatever profit restrictions take place in the form of increased corporate profit taxes, the government accedes the right to profits, and these are guaranteed by the President’s program. The only issue in dispute is how high they shall be.

To date, Congress has been unable to pass an excess profits tax. The pressure of the war and domestic political requirements will bring about the passage of some kind of legislation. But already committee proposals for an excess profits tax have raised the point at which these taxes shall begin after an 8 per cent “normal” profit has been earned. While the figure appears small, the size of war contracts is so great as to guarantee enormous profits no matter what kind of a bill is passed. As a matter of fact, there remains only one genuine way to eliminate war profiteering and that is by a 100 per cent tax. But the Administration dare not even suggest it.

The section of the President’s program which has caused the most comment, as we already indicated, is the proposal to limit incomes to $25,000 a year. A completely objective point of view cannot lead to any conclusion but that this measure has only a political purpose – to soften up resistance to the remainder of the program. Bourgeois economists were quick to point out that earning power necessary to retain a $25,000 a year salary would have to be about $65,000 (Randolph Paul, tax adviser to the Treasury). The National City Bank Bulletin for May reveals that, according to the Treasury reports for 1940, there were only 13,900 taxpayers with incomes over $50,000 a year. Even if we grant that this number increased during the war profiteering year of 1941, the increase cannot materially affect the income of the Treasury from personal earnings in the higher brackets.

We are for a drastic limitation of the incomes of the American ruling class, but we must warn the over-zealous not to take this measure too seriously for reasons which we believe to be obvious.

The bourgeoisie does not live from day to day on its yearly earnings – its living standards cannot be affected by such temporary measures as proposed by the President. It has an enormous accumulation of wealth in capital and personal incomes. If its total income were immediately halted, that class could live on for a considerable number of years without the slightest inconvenience. Moreover, big business men have all their day-to-day expenses paid; in many cases their salaries are pure income to be deposited or merely spent on living. Their great estates are often incorporated and all expenses for servants, repairs, improvements, etc., are business items which do not affect the yearly “salaries” of the big business men. Leaving these factors aside for the moment, we are not at all touched by the difficulties which these gentlemen, living by the exploitation of their fellow men, will experience on a $25,000 yearly income.

The way in which the financial burden of the imperialist war must be met is by a capital levy upon the accumulated wealth of the bourgeoisie, both corporate and personal, and by expropriation of the “Sixty Families.” Thus the real sources of wealth would be tapped.

What Their Price Control Means

As his second point, the President said that: “We must fix ceilings on prices and rents.” In concretizing this part of the program, the Office of Price Administration proceeded to freeze prices of various commodities and rents as of March, 1942! The joker in this action lies in the fact that the freezing of these prices occurs at their highest point since the outbreak of the war in Europel Freezing of prices would have real significance if it were based upon the year 1940. As it stands now, prices are way out of line when compared to the wage standards of the entire working class!

Price Administrator Henderson already admits that prize freezing notwithstanding, prices will continue to rise as high as 10 per cent within the freezing orders. Moreover, the tendency which immediately follows such orders is a subsequent reduction in the quality of goods, and manufacturers continue to maintain their high profits through this device.

More important, however, is the question of how prices shall be genuine controlled. No real safeguards are likely if administrative controls are in the hands of the bourgeois-minded government bureaus and functionaries. The one guarantee against profiteering in consumer goods, even under price ceilings, is through the establishment of trade union, cooperative and consumers’ committees. Such committees are the only means by which the sly and cheating consumers’ monopolies, which control the means of subsistence, can be kept in check.

For political purposes the President avoided the word “ceiling” in relation to wages. Instead he said: “We must stabilize wages.” It did not take long for Roosevelt to clarify his meaning. A few days after the delivery of his speech, he sent a telegram to the Shipbuilders Union convention counseling them not to insist upon the provisions of their legal contract with the shipyard owners by requesting pay increases to meet the high cost of living. The specious reasoning of the presidential letter can be summarized in the following way: The program which I presented to the country must be regarded in its entirety. If you insist upon increased wages you will upset everything because it will make it more difficult to control prices, limit salaries (at $25,000), siphon off excess profits, etc. Therefore, despite the rise in the cost of living, and the lowering of your living standards, you must not insist on the fulfillment of your contract.

The immediate effect of the presidential utterance was to give new strength to the robber barons, the industrial rulers, who now refuse, to consider wage increases to meet increasing costs of living. They reject recommendations of the War Production Board in those cases where this question is arbitrated (General Motors Co.).

While certain skilled workers in the war industries have won increases in the past year, the vast majority of the workers earn wages far below the standards indicated by the Department of Labor.

The one action which has made possible the freezing of wages was the manner in which the two labor organizations, the AFL and the CIO, have given up the ghost without a struggle. The Pearson and Allen reports from Washington describe Murray and Green as two presidential office boys. They have surrendered in advance the strike weapon of the workers, in return for which they received nothing.

The stabilization of farm prices is a meaningless gesture because it does not affect the lot of the poor farmers, tenant farmers or sharecroppers. The fact remains that this section of the farm population is heavily exploited by the rich farmers, landowners and landlords, the railroads and the big food corporations and commission houses. Farm price increases in recent years have only slightly affected the farm poor, and subsidies from the government went primarily to the rich farmers who engineered favorable legislation in their own behalf through the farm bloc in Congress (rich farmers and landowners). The poor farmer remains poverty stricken and at the mercy of his giant competitors. The Roosevelt program offers them no hope whatever of amelioration.

Draining Off Workers’ Income

As another means of draining off the income of the working class and the low income population, the President proposes that “we must put more billions into war bonds.” Government experts know that the overwhelming majority of the population cannot possibly purchase bonds, certainly not in the fabulous amounts requested by the Administration. But already feelers have been extended to ascertain reactions to the forced buying of bonds. The Administration is playing with the idea of “forced wage savings” whereby a certain portion of wages will be deducted, either for the compulsory purchase of war bonds or to be held in trust by the government for the duration of the war. Thus a large part of the purchasing power of the masses will be “captured” and the “inflationary spiral” checked. This section of the program is only another measure directed against the poor.

The President proposes that “we must ration all essential commodities which are scarce.” In this field, too, great dangers face the masses. Undoubtedly, some commodities will be scarce, in one degree or another, for the duration of the war. Rationing, under such circumstances, is a necessity. But this rationing must be based upon equality, for otherwise the rich and the well-to-do will control the market at the expense of the great mass of the population. The only guarantee the people have in a fair rationing system is by the establishment of trade union, cooperative and consumers’ committees which will control the rationing system and insure equality to the working class and the under-privileged mass of the American people.

The establishment of such controls by the people would go a long way to prevent the scandals of the “Black Market.” In Great Britain the Black Market enables the rich, the aristocracy and the privileged government workers to obtain goods which are not available to the British masses. As in the case of price and rent freezing, unless there is genuine control from below, they may all easily become a grand farce at the expense of the people.

The final point in the President’s program is also directed against the great mass of the people. He says: “We must discourage installment buying, and encourage paying off debts and mortgages.” Whom does the President have in mind? The bourgeoisie? Certainly it is not they who engage in installment buying, who are saddled with all kinds of little debts, whose homes are heavily mortgaged. Obviously not! The latest measure enacted under this provision in the President’s program is the limitation of installment buying to 40 days! It is obvious that this is a plan designed to prevent the purchase of consumer goods by the great masses of people. It puts pressure upon the indebted poor and the small home owner. On the heels of these proposals, Washington is now giving consideration to a national sales tax. This is also a measure directed against the people.

The Realities of War Economy

Stripped of its vagueness and fully explained, it is clear that the President’s program, when enforced, will signify a national wage-cut for the working class, a further impoverishment of the low income farm population and increased hardships for the lower middle classes. And it is just as obvious that the bourgeoisie, even though they will be compelled to disgorge themselves of some of their profits, their “hardships” will be like a drop of water in the ocean as compared to the concrete living conditions of more than 80 per cent of the American people.

The war economy is here with a vengeance and all the forecasts made about the destruction of the living standards of the people are a growing reality. The cost of living rises, wage rates, set more than a year ago in a majority of instances, are frozen, while price ceilings are set as of March 1942. Rationing of goods begins, while no safeguards are established to guarantee genuine equality in the distribution of goods. Every possible means of draining off earnings are being prepared daily. What the working class will retain will be just enough for their food, shelter and clothing, in order that they may live and work to produce the means of war and profits for American big business.

Leon Henderson has said that “it is probable that in the next twelve to fifteen months we will get a civilian standard of living equivalent to 1932, which was the low of all lows during the depression.” This is the prospect held out for the working class, the poor farmers, the lower middle class. It is obvious that the promised “1932 living standards” do not apply to the bourgeoisie now any more than they did in 1932.

In opposition to the President’s program, I place before our readers the following sections of the platform of the Workers Party:

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