FDR - Jean Edward Smith [249]
Much of public opinion soured on union tactics. When the organizational drive began, the majority of Americans were sympathetic. But the wave of violence that accompanied labor’s rising militancy caused many to draw back. Middle-class businessmen and professionals in particular were terrified by the sit-ins and demanded that government take action. A nonbinding Congressional resolution that declared the sit-down strike illegal cleared the Senate 75–3.19 Roosevelt was caught in the middle. Asked at his press conference on June 29 to comment on the fight between Little Steel and the CIO, the president repeated Mercutio’s line in Romeo and Juliet: “A plague on both your houses.”20 FDR’s refusal to provide support drove John L. Lewis off the New Deal reservation: “It ill behooves one who has supped at labor’s table … to curse with equal fervor … both labor and its adversaries when they become locked in deadly embrace.”21 At the same time Lewis was castigating the administration, Roosevelt’s refusal to take sides alienated those who believed the president was implicitly condoning sit-down strikes and the accompanying assaults on private property. FDR could not win. He was damned if he did and damned if he didn’t.
Labor unrest contributed to the economy’s sudden collapse in 1937. But it was FDR’s misplaced decision to reduce federal spending that triggered the crisis. In the spring of 1937 American production pulled above pre-Depression levels for the first time. The New York Times’ Weekly Business Index reported output at 110—10 percent higher than in the corresponding week in 1929. Payrolls showed solid gains, and the steel industry was working at 80 percent of capacity. The Dow Jones Industrial Average, which had stood at 34 in 1933, had risen almost sixfold, to 190. Unemployment shrank to 12 percent, barely a third of the March 1933 percentage. Subtract the young men in the Civilian Conservation Corps together with those at work in the job creation programs of the PWA and WPA, and the unemployment figure stood at 4 percent.22*
In June 1937 Roosevelt assumed that the economic battle had been won and slashed spending drastically. WPA activities were sharply reduced, farm subsidies curtailed, and public works pump priming eliminated. At the same time, Washington siphoned off some $2 billion in purchasing power in new Social Security taxes, and the Federal Reserve Board raised its reserve requirements for member banks by 50 percent, further reducing liquidity. FDR, a thrifty Dutchman at heart, believed it was time to balance the budget. The federal deficit for 1936 had been $4.3 billion. Roosevelt’s 1937 budget reduced that figure to $2.7 billion. Spending projections for 1938 showed the deficit at a mere $740 million, and by fiscal 1939 the budget would be balanced.23
Such massive contraction was more than the recovering economy could sustain. On October 19 the New York Stock Exchange suffered its worst day since 1929. Waves of selling hit the market, pushing stocks to new lows. By the end of October the Dow Jones stood at 115, down 40 percent from its August high. Industrial activity declined more abruptly than at any other time in the nation’s history. By the end of 1937 steel production was down to 19 percent of capacity. The New York Times’ Business Index plunged to 85, wiping out all of the gains since 1935. Nightclubs