Gloomy Economics – Pt II

For the purposes of this discussion, lets us (somewhat arbitrarily) date the beginning of the US modern economic history to the inaugruation of Franklin Roosevelt as President in 1933. Not that the nineteenth century battles over the Free Coinage of Silver or the First and Second Bank of the United States aren’t important – but by the early 1930s these issues had pretty much been settled.

In 1933 the Federal Budget of the United States was approximately $4.6 billion, with revenue of just under $2 billion – leaving a (then considered terrible) deficit of $2.6 billion. Of the Federal budget, Defense constituted $1.4 billion – of which more than half ($700 million) was spent on Veterans – mainly pensions and benefits to veterans of the First World War. Of the remaining $600 or billion in current defense spending, the greatest share went to the Navy.

The US Army, by way of contrast, was a relatively tiny force. With approximately 200,000 men (and they were almost all men) in uniform in 1933, the US Army ranked considerably below Greece or Czechoslovakia in military firepower.  But of course, in 1933, the USA really didn’t need much in the way of a large standing army. The navy (plus two conveniently wide oceans) would keep any potential aggressors at bay. And the US was sufficiently large, and well supplied with natural resources, to have much to fear from a maritime embargo.

The first two four years of Roosevelt’s Presidency were marked mainly by an attempt to prevent the total social collapse of the US as a nation. When we worry about unemployment today (around 10%) we need to keep in mind the 30% of the Great Depression. And while we pity homeowners stuck with underwater mortgages, we’re still a lot better off than the savers who lost everything when their banks failed in those pre-FDIC days.

One little-known episode of the Great Depression was the Bonus March of 1932. Some 17,000 Veterans of WWI, along with their families, marched on Washington and demanded that certificates entitling them to a cash payment be paid early (the certificates had a maturity date of 1945.) President Hoover ended up ordering the Army to remove the marchers – which they promptly did, resorting to bayonets, tanks, and a primitive teargas containing arsenic. The oepration was commanded by then Army Chief of Staff Douglas MacArthur. His deputy was (later President) Dwight Eisenhower, and the cavalry charge that rousted the bonus marchers was led by George Patton. (See, I told you how small and clubby the pre-war Army was..) Reading about these events, from the benefit of almost eighty years of hindsight, one can only wonder what Fox News would make of such events.

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