"What About Our American Economy?"


By KENNETH S. WHERRY, Senator from Nebraska

Delivered before the 60th Anniversary Dinner of The American Tariff League, New York City, January 18, 1945

Vital Speeches of the Day, Vol. XI, pp. 265-270.

AS this war drags on and our ghastly casualty lists become ever higher, it is daily more evident that, in addition to financing the war through our materials and supplies, the burden of finishing it on all fronts will be ours. The outlook, present, near future, and far future, becomes ever more perplexing to men of good will who believe our United States has a God-given heritage which must not be dissipated by self-serving profligates.

It should be evident by now to everyone that this war has not been thought through; that the peace has not been thought through; and that plans for the postwar era have not been thought through.

There is too much airy, irresponsible promising and too little practical, down-to-earth reasoning. Let us tonight do a little hard reasoning together and dissect some of the problems. Let me say in preface I have no pat answers to these questions. I go further and say that any man who says he has pat answers to the problems is either a charlatan or a self-deceiver. No one man, and no little group of men, can have all the answers. Dictatorship, may I remind you, does not find the answers. It simply tells you what to do and says, "Like it or else."

But we collectively can find the answers through the processes of representative government; and representative government is run by politicians. For some reason unknown to me, the bureaucrats appointed to office by the politician-in-chief—that is, the President—are commonly referred to as statesmen," while we who are elected by the people are labeled as just "politicians." And "politicians," the opponents of our American form of government would have you believe, are much inferior, in the discharge of their duties, to theorists, welfare workers and playboys, who get themselves comfortably fixed on the government payroll without the voters having any chance to pass on their qualifications.

Politicians, of course, are men engaged in the business of government, but the term has been distorted to mean a partisan office seeker.

Someone has defined a "politician" as a fellow who can straddle a fence; keep both ears to the ground; and look behind him—all at the same time.

A "bureaucrat" has been defined as a fellow who shuts both eyes; stops both ears; and leaps without looking. You can take your choice.

I am reminded of a story Bill Johnson tells on himself when he was Lieutenant-Governor of Nebraska.

He stopped at a farm and fell to talking with a little girl who was milking a cow.

"What is your name?" he asked her.

"Mary Johnson," she answered. "What is your name?"

"I am Bill Johnson, Lieutenant-Governor."And he added, "I am a politician."

Came the mother's voice from the farm house:

"Who is that you're talking to, Mary?"

"I'm talking to Lieutenant-Governor Bill Johnson, a politician," answered Mary, who had slipped off the milking stool in her shock at being so near a politician.

Came the voice from the farm house again—and very shrill:

"Mary Johnson, you come here this minute—and bring the cow with you."

Our problems today are not political in a partisan sense. Most of the domestic and more than a few of the foreign, problems presenting themselves to us today arose during the period when too many members of both houses of the Congress confused politics and partisanship. They, as in the dictator countries, became pawns of the Chief Executive, forgetting that they had been elected to office to represent the people and not the bureaucrats, and that their first obligation was to their constituents. That situation has changed. As the Republican Whip of the Senate, I can say the Senate—and this applies equally to the House—cuts across party and state lines in dozens of problems of vital concern to our American economy. There are plenty of measures on which we divide on partisan lines and that is as it should be.

Our American system of government is based upon the fundamental principle of proposal, disagreement, discussion, and compromise. This is the best system man has yet devised for getting at the truth.

I hope that in the years just ahead we may find a way of aligning parties according to their principles so we shall know the fundamentals on which a Democrat or a Republican stands. The Republicans and the Democrats who are not over-persuaded by any outside clique—and they constitute the vast majority in both houses—are preparing to meet the great problems which will, in rapid sequence, come before us as Americans and not as partisans.

This is of the highest importance because of the tremendous pressure that is under way to change the character of our American economy. That pressure comes not because our American way has failed, but because it does not conform to or fit in with the schemes of those who would rule or ruin us.

This country was founded by people who wanted to get away from the oppressions, wars, tyrants, the ruling classes, the socialistic and other experiments in absolutism going on in Europe from the days of the Roman Empire up to 1776, and which have been recurring in cycles ever since. What is happening in Europe today is just what has happened, with changed scenery and individuals, since the beginning of time, Likewise what is happening in the Orient today is only what has been happening there since the beginning of time. The only new feature is the scale on which we have entangled ourselves in conflicts on both sides of the world.

We are the oldest, and by far the most successful, republic in the world. We are not a democracy and we have never wanted to be. Our forefathers were completely aware that tyranny may be set up under the guise of democracy and they chose the representative form of government. Today the Congress, and only the Congress, stands between you and a form of bureaucratic, dictated, coupon-rationed life which would combine the worst features of all known social systems which, as failures, litter the trails of history.

I am not talking of any specific "ism." I am talking about the various plans now afoot in this country, such as the Reciprocal Trade Agreements which are already in effect. They take from the Congress the power to govern the destinies of this nation and lodge it in the hands of men holding office by virtue of partisan appointment and who do not hold themselves responsible to serve the electorate.

These movements turn up in all sorts of disguises. They all look respectable. They all pretend, of course, to have worthy motives. Most of them are now labeled as sure-fire means of attaining peace, prosperity and full employment, and anyone who questions them is tagged as being unpatriotic and un-American.

It is not without a definite plan and purpose that the Congress is being smeared twenty-four hours a day, seven days a week, as a useless hangover from the horse-and-buggy era, It is, however, a little difficult to understand why people do not more generally realize that these attacks on the Congress as an institution are attacks on our representative system; and that unmerited attacks on members of the Congress as mere self-seeking, horse-trading politicians, because they insist on representing the people in our American way, are in realty attacks on our own ability to exercise suffrage. If the right men are not elected to the Congress, that is the responsibility of the electors and not the fault of the Congress.

I hope you realize that, with the thousands of bills introduced each session, many of them necessary, some not, it is impossible for any one Senator or any one member of the House, with all the diverse and extensive work to be done in committees, to analyze and study all the details and provisions of the bills that come to the floor. No member has the means or the time to go into every subject in the way it ought to be gone into. We need to have our information dug out, collated and put into a form where we can easily get at the facts. This must be done with the assurance that the facts as presented to us are facts and also with the opportunity for us quickly to get whatever additional information we need.

This is one of several reasons I am so glad to be with you tonight, because your organization devotes itself to measures aimed at the preservation and advancement of our American standard of living. Your name, American Tariff League, is an honorable one. Through sixty years, you have fought to protect American jobs against the products of cheap, oppressed foreign labor by protecting American industries. Your have kept to your task in spite of the abuse of those to whom the protection of American jobs is of less importance than their own selfish, personal interests.

We who believe the protection of the American market is a primary consideration, because it is at the foundation of our national life, need your help now, and in the days to come. We need your close cooperation; your informationassembled by trained men; your expert analyses of bills; and beyond that we need to inform the public, because those who would misinform the public have been very active through several years and they are more active now, and better financed, than ever.

You stand for the preservation and expansion of our American economy through the reasonable protection of American industry and agriculture, their proprietors and their workers. The Republican Party is historically the party of the protective tariff. Lincoln was a tariff protectionist. But with the shifting of the economy in the southern states, and the growth of the Democratic Party in the large industrial centers, job protection now cuts across party lines. It is important that we now build party organizations, especially Republican Party organizations, so solidly that our candidates, after they are nominated, will remain Republicans and advance the Party principles as they are debated and settled in conventions, the legislatures, and in the Congress. You have seen how efficiently and coherently other groups are organizing. You support a basic, unselfish principle. None of your members can benefit without the whole community benefiting. Despite the fine accord of your organization, may I suggest that you need to become far stronger and more wide-spread if you are successfully to urge the rights and interests of proprietors and workers in agriculture and manufacturing in competition with other national groups.

The protection of American industry and jobs is not a problem to be considered apart and alone. It is of the very warp and woof of our economy. It affects every man, woman and child in the nation. Therefore, let us examine the state of our economy and see whether some of the measures which are in effect or which are proposed, will straighten out our economy or merely change it, and further let us see if these changes will be for the better or for the worse.

An abundance of cheap money is now in circulation. Money will continue to get cheaper as long as we practice deficit spending. Whether we like it or not, we shall have to continue deficit spending until the war is ended—and the budget balanced. There is about $25 billion of Federal Reserve Bank currency in circulation. This is more than four times the previous high of $5 1/2 billion in 1920.

The end is not yet. This circulation has been increasing recently at a rate of about $600 million per month. In addition, we also have other forms of currency. This total has grown from $3 1/2 billion to approximately $21 billion. This makes a total circulation of money today of more than $46 billion, compared with only $9 billion in 1919.

To this must be added credit money. Demand deposits now reach $79billion. Time deposits now total $36 billion. Thus we have in currency and credit money, $161 billion as compared with $41 billion in 1919—or an increase of 4 to 1 in dollars of potential purchasing power.

It is mandatory that our national income shall remain high to pay the interest on the debt and the vastly expanded costs of government. Expert economists assert it will take from $20 to $30 billion to pay the increased cost of federal government and the interest on the debt for the year 1945. This income must come from newly created wealth—all of which comes from the soil:

1. Agricultural Products approximately 65%

2. Minerals and Oils approximately 35%

Everything else, including transportation, processing, distribution and manufacturing, depends on this new wealth from the earth which produces our annual national income.

Let us not be fooled by figures projecting this or that national income or this or that number of jobs. The national income is an effect, and not a cause, and some of those who are loudest in demanding a tremendous national income—say, $140 or $150 billion—and the employment of 60 million or more wage earners, are very much more concerned with breaking down free, voluntary enterprise than they are with building up an expanded prosperity. These advocates assert that, if they do not get an income and jobs at figures they set, the government must step in and take charge. And they mean to be the government.

Much deliberate misinformation is being spread concerning the necessary size of our national income, and the required number of jobs to create a national condition in which the poorest of our people will still be well above the sustenance level. A lot of well-meaning and patriotic people are being fooled by statistics which do not mean at all what they pretend to mean.

The national income figures are made up out of a large number of estimates, some of which are very wide of the mark, but in any event the national income is not at all in the nature of a national wage. It represents only one side of the picture. If the government prints and spends $50 billion in a year, our national money income will be up by that amount or more, when in fact we shall not have increased our net wealth, because on the other side of the ledger, we shall have added to our debt. It would be as though a man took a mortgage on his house and treated the proceeds of the mortgage as money he had earned.

Also let me point out that the national income is expressed in dollars, and thus an increase in prices has exactly the same effect as an increase in the supply of goods. We could have a national money income of $300 billion a year and still be starving to death for lack of food. In 1923, just before the mark broke, the German national income was in the trillions, but the people were destitute, for their money would not buy anything.

It is the same way with jobs. Full production and full employment—whatever these phrases may mean—are not synonymous. The old W.P.A. provided a great many jobs but very little production. The jobs as provided did not add to the wealth of the nation. They were a drain upon its wealth, and if any of the several make-work schemes now proposed go into effect, it is entirely possible for us to have 55 or 60 million persons employed and yet have a declining standard of living.

There has been created a vast confusion in the public mind as to who provides jobs and where the jobs are located. It is the customers, not the employers, who provide the jobs. I am afraid some of those businessmen and associations now announcing the responsibility of industry to provide jobs are unwittingly backing plans which will break down our American economy.

The trend has been, as far back as the census figures go, for a continually smaller part of our people to be employed in industry and agriculture, and a larger proportion to be employed in distribution services and in governmental service. According to the figures of the 1940 Census, out of 45 million people gainfully employed, less than 11 million were employed in industry; if we add to these the approximately 3 million employed in construction and mining, we find that only 30% were employed in what might broadly be called industry. About 27% of the employed were in retail and wholesale trade, transportation and the public utilities and finance. So business, as it is called, provided only 57% of the total employment. The remaining employment was in agriculture, forestry and fishing, in government and in the various kinds of service.

All of this employment depends upon the ability of the people to exchange goods and services with one another andthis ultimately rests on the ability of the producers of the primary products, as, for instance, the farmers, to exchange satisfactorily with the other sectors of our economy. If our economy be out of balance, then there will be no mutually advantageous exchange. Therefore the pressure groups, which are seeking abnormally high incomes for themselves, are throwing monkey-wrenches into the only machinery that can produce a real prosperity. They are forcing up prices and making normal exchanges ever more difficult.

This is not so apparent now, with the government as the chief buyer, but it is going to be our great problem, once we go forward as a free nation with a free economy. Everything points to higher prices in the postwar period. The American Federation of Labor says living costs have already risen by 46%. There is already before the Education and Labor Committee of the Senate a bill asking for a minimum wage of 65 cents an hour. The recent drive to pay bonuses to war workers—which originated in the White House and is now being advocated by Julius Krug, head of the War Production Board—is a camouflaged, retroactive wage increase. If this plan be put into effect, the policy will have to extend to all factories and to all farms. And still further wage increases by executive fiat are in the offing. In addition to all this, our higher taxes will eventually find their reflection in higher prices.

Our debt has now reached about $300 billion and we are spending $260,555,000 daily. Farmers, along with other citizens, will have to pay more taxes. Every American child born today comes into the world owing approximately $2,000. Contrary to the doctrine of some, our public debt—principal as well as interest—will have to be paid. It can be paid only by taxes and other federal revenue. It cannot be paid by sale of bonds, or the printing of money. This does not reduce the debt, but creates ruinous inflation.

Our whole financial economy is, and must be, based on the fundamental principle that the public debt must be honored, just the same as private debt. And some day, somehow, the budget will have to be balanced and payments will have to be made on the debt—if we are to have a sound, stabilized economy. That economy governs the baby's bottle of milk and the casket in which the aged goes to his long, last sleep—and all in between.

It is hoped by some the debt may be amortized over a long period, so venture and risk capital may be induced to flow back into private channels.

But, regardless of an amortized debt, and the revision or repeal of certain features of our tax program, the budget will sometime have to be balanced. The increased costs of government will have to be met by higher taxation. As President Roosevelt has stated: "Taxes are paid in the sweat of every man who labors. . . ."

If we are to stabilize our national economy and continue to pay high wages to organized labor, economic balance must be maintained for agriculture. Lincoln said, "I believe this government cannot endure permanently half slave and half free." Neither can it survive "half broke" and "half prosperous."

This means full production and fair prices for that production. Anything which retards full production will retard prosperity.

We have an immense pent-up demand for goods in this country. Just the other day in Gage County, Nebraska, a tractor was offered for sale at the ceiling price of $800 and each prospective purchaser had to put up a check for that amount. No fewer than 170 farmers put up their checks—which means that $136,000 was available to buy one tractor. That is evidence of the present potential demand by Americans for American goods. The same condition exists with respect to automobiles, refrigerators, washing machines and a hundred and one other items. But this is also evidence of what is going to happen if the government, through taxes and other restrictions, bars the way to full production. If we have less than full production—that is, if American citizens are not permitted to exercise to the full of their industry and inventive genius, there will be such a bidding for goods that prices will go through the roof and we shall find ourselves in the chaos of inflation.

I want to emphasize this point with-all earnestness, because already there is a well-developed movement to continue far into the postwar future, government controls and rationing under the pretense they are necessary to control inflation.

And there is well under way a movement on the "or else" basis to have the government direct and create reemployment through appropriate deficit spending, if private enterprise cannot or does not absorb the unemployed. Thus, on the one hand we have the government constantly increasing the costs of production, so that exchange and employment will be made ever more difficult, and on the other hand we have the government standing by holding a bottle of bureaucratic control, which it says will cure the disease it is creating.

The government cannot provide jobs on a self-sustaining basis. It can only create debt to provide jobs on a temporary basis. If the government creates debt beyond a certain point—and we may be at that point now—it must ration the use of money while pretending to ration goods. The rationing of money is repudiation, for, if a dollar cannot be freely spent, it cannot function as a dollar. Therefore these proposals to continue rationing and restrictions are really proposals to repudiate our money and our debt.

I trust you will note that rationing is outside the jurisdiction of the Congress. These proposals to play with money and the debt also propose a supreme board which will manage the debt and the money outside the jurisdiction of the Congress. That would mean that you as citizens would have nothing to say about what kind of government you got or how it would be managed.

As a part of this new and fancy economic system which is proposed to supplant our American way of managing—a way of managing that made us strong enough, or at least made us think we were strong enough, to take on the guidance of whole world—we are being told we must change our whole policy with respect to foreign trade and foreign affairs generally and that we must cease to be nationalists.

It is assumed by the government-controlled propaganda that at some time in our history we were isolationists. There are many who have been insolent and brazen enough to insist that our actions after the last war brought on the present one, the implication being, of course, that, since we brought on this war, there is no limit to the sacrifices we should make not only in this war but thereafter. I want to say I have a profound respect for the diplomatic) dexterity of those great British nationalists who are able to convince at least a part of our people that whatever is best for Britain is also best for the United States. But I am completely lacking in respect for those American intellects which accept such rubbish and would found American policy upon foreign directives.

We are being told that, if we are to have a full prosperity in this country, we must have a vast export trade. Some of our government statisticians have figured out that in building up an adequate national income we must have at least $8 billion of exports. It is interesting and possibly significant that the greatest boomer for a big export trade is Earl Browder. In his book "Teheran," in which he says, in effect, that a new world order was decided on at the meeting in Persia, he wants an export trade of $40 billion a year.

The prospect of an immense foreign trade is alluring to those of our citizens who live on foreign trade. I would point out to you, however, that the chief advocates of foreign trade are those people who stand to make money out of it. They are so intent on pursuing their selfish interests that they do not see or care to what ends they go in pretending that what they want for themselves is also in the national interest.

The single fact that we need to remember with respect to foreign trade is that exports must be paid for by imports, else we shall give our goods away and be that much poorer. We cannot lend-lease forever. Even those bleeding hearts who would give the whole United States away in order to raise the standards of living all over the world must realize that, even if we did give the United States away, and all were to get on a basis of equality, our people would go very far down, but the rest of the world would not come far up.

It has been calculated by a competent statistician that the United States has about 6% of the world's population and about 36% of the world's income. Furthermore, if we level off our income, the average man outside the United States would receive only about $30 a year, and it is assumed that we could and would go on producing forever for the privilege of giving our money away. It is absurd to think we can be a force for good in the world by giving away our substance. We can commit national suicide, but that is not going to benefit anyone. If we are going to sell abroad, we must buy abroad. And if we buy from abroad what we can grow or make at home, we are committing national suicide. We are hurting ourselves, but we are not helping anybody. Only a sound, solvent, free America can do anything to help the rest of the world to help itself.

And let me say the charge that this country, by its actions after the last war, and before the present one, impeded the recovery of the world by its foreign trade policies, is an absolute falsehood. It is a lie made out of the whole cloth. The National City Bank of New York can hardly be accused of being isolationist. In its December, 1944, bulletin it examines the international balances and the charges that our actions impeded world trade and world prosperity. It finds that our creditor position has been gradually whittled down, and it concludes:

"In any review of the balance of payments experience between the two wars, the disturbing elements that stand out overwhelmingly have been the sudden movements of capital—both American and foreign—and the instability of our internal economy, with consequent wide fluctuations in our imports and other expenditures abroad. In the face of these sweeping movements the influence of American Tariff rates upon our overall balance of payments and upon the supply of dollar exchange seems clearly subordinate."

Yet, in the face of these facts, it is repeated day after day, and year after year, that the United States has been the great barrier to international progress, and that the hope of the world is free trade. The curious part of this propaganda is that free trade, when used by a foreigner, means only the freedom to trade in the American market and not the freedom of Americans to trade in the foreigner's home market.

Certain countries of the world—notably Great Britain—deliberately sacrificed their farmers and their food production in order to sell more manufactured goods abroad. That was an error for which they have paid dearly. It is proposed that we of the United States now alter our economy to conform with England's economy so England may not have to correct her original error.

The advances of science have broken the line between raw material and manufacturing countries. Most countries can now produce much of what they formerly imported, and with the vast shipments of machinery and even whole plants under Lend-Lease, the self-containment of the different countries of the world has been vastly promoted.

We have, during this war, made ourselves independent of the world in rubber, vegetable fats and a number of other commodities which we formerly imported. Any program of vast exports and equally vast imports cannot increase the well-being of our citizens, but it can change this nation from an independent to a dependent nation. We can do nothing for our prosperity, but we can do a great deal in the way of setting the stage for an economic Pearl Harbor.

As to the effect of imports on our economy, you will be interested in the statement made by the Hon. Tom Linder, Commissioner of Agriculture of Georgia, before a subcommittee of the House Agriculture Committee on December 5th, 1944. Mr. Linder, whose statement was concurred in by the Association of Southern Commissioners of Agriculture, declared that the $9 billion of agricultural imports in the four years 1925-1929 reduced our national income by $63 billion during the same period. "The stock market crash of 1929," said Mr. Linder, "swept away $15 billion but during the four years prior to the stock market crash we lost $63 billion by importing agricultural products." And, turning to the Roosevelt Administration, Mr. Linder said: "* * * * when we imported $10 billion in agricultural products from 1934 to 1939, we sustained a loss in national income of $70 billion. Only the passage of lend-lease and the spending of mammoth sums of government money prevented a crash in 1940, equally as bad as the crash in 1930."

That brings me to the Reciprocal Trade Agreements that will come up for renewal in June of this year. This is a cleverly named Act, for it has nothing to do with reciprocity, very little to do with trade, and the agreements made under it are not agreements but treaties. The misrepresentation in the title of this Act, which is an amendment to the Tariff Act of 1930, characterized the birth of the Act and its administration ever since. The Act was put forward in 1934 on the representation it would put three million men to work by September of that year. Of course it did not result in the employment of three million men, and there is no evidence that it resulted in the employment of anyone.

By 1937, when the Act came up for renewal, the employment phase was out of the window and it was offered as a great instrument "for softening the mind of the world toward peace" and for preserving world peace through world trade. It is unnecessary for me to comment on that. In 1940, with part of the world at war, the Act was offered as the one sure method of keeping the United States out of the war. I shall not comment on that. And finally, in 1943, when the Act came up again, it was urged on the ground that it was the one best means to achieve a lasting peace. "By their fruits ye shall know them."

The Act has been exactly none of the things it has been represented to be. It is quite amazing how few people have taken the trouble to find out what the Act is, much less to examine it as a method of by-passing the Congress and establishing an executive dictatorship over foreign trade.

The Act gives to the President the power to negotiate treaties, falsely called agreements, in which he may lower for trading purposes existing tariff rates by 50%, or he may raise them if he sees fit. Of course the President cannot personally administer such an act. Its administration has been in the hands of a crowd of bureaucrats, heading up to the then Secretary of State, who have taken the Act as a mandate to change the economy of the United States through lowering the tariffs.

According to the figures which your League has compiled, these bureaucrats have made 1226 tariff rate reductions inagreements with 27 countries. These reductions have not been made for trading purposes, for the reduction made in any one agreement is generalized and amounts to a flat cut in the tariff.

We have, entirely outside of the Congress, been subject to a more violent revision downward of our tariff rates than any Congress ever undertook, at least during the last fifty years. Although the limit of a cut is supposed to be 50%, by some expert finagling, some of the cuts I am informed, are 75% of the rates prevailing under the Tariff Act of 1930. Moreover, the control of Congress has been further limited by the practice of agreeing that certain articles will be bound on the free list or the duties on them not changed.

The full force and effect of the Trade Agreements Act have not as yet been felt in this country, because since 1935 or 1936 the world has been principally concerned in getting ready for war; but our tariff protection is down, and we shall find ourselves at the mercy of the world, unless the Congress either scraps this whole program, or requires that the agreements be ratified by both the Senate and the House.

The Trade Agreements Act is primarily a diversion from Congress that amounts to a diversion from the voters of the right to manage their affairs. If the people desire to manage their affairs, that Act must be scrapped or altered.

Another fancy scheme was proposed at Bretton Woods, the net result of which would be to put the ultimate management and value of the dollar in the hands of foreigners, and also give them a large fund for the establishment of a worldwide W.P.A. And finally, at Dumbarton Oaks it was proposed that the power to declare war be taken from the Congress and lodged in the hands of a body where the United States will have only a minority vote.

Fellow Americans, the warning I now want to leave with you is that in the schemes now afoot—and most of them are wrapped in the respectable but disguising robes of world peace—lies the end of self-government in the United States.