by Adam Cohen
With the banking crisis resolved, Moley seriously considered leaving Washington. He was tired of living out of a suitcase in the Carlton Hotel and commuting to New York to teach. He wanted to return to Columbia and perhaps write for a magazine. Roosevelt would not hear of it. No one else, he told Moley, could help him develop the New Deal he had promised. Moley knew the people drafting the key bills, Roosevelt said. He knew what had to be done to get the legislation through Congress. He knew what they were trying to achieve. It was an “intoxicating speech,” Moley said, even if a good part of it was “blarney.” Moley was still troubled by his title, assistant secretary of state, which bore little relation to what he actually did. Woodin offered to make him under secretary of the treasury, but Roosevelt vetoed it, saying he did not want to lose his chief aide to Woodin. In the end, Moley was caught up in Roosevelt’s infectious enthusiasm and agreed to stay on, remaining as Roosevelt’s de facto chief of staff. He continued in his role of adviser, spotter of talent, and assigner of critical tasks. In his memoirs, Moley would liken his situation to that of the chancellor of the duchy of Lancaster, who was said to have been the “maid-of-all-work” in the British Cabinet. Moley’s behind-the-scenes influence remained substantial. “Policy is made not only in speeches and messages—those are merely the foam on the crest of the wave—but by myriads of day-by-day decisions,” the New Deal-era journalist John Franklin Carter, who wrote under the pseudonym “The Unofficial Observer,” said of Moley’s role. At the end of a grumpy column, Westbrook Pegler wrote that complaints “should be addressed to Prof. Raymond Moley, who has general charge of everything now.”70
The Emergency Banking Act was the administration’s first triumph, and it was a dramatic one. “Capitalism was saved in eight days,” Moley exulted. Saving capitalism, or at least saving the banking system, did not sit well with all of Roosevelt’s supporters. American banking was, The New Republic told its readers, “rotten to the center,” and it had to be “made over.” Some urban liberals and western progressives had been hoping for a public takeover of the banks, something Tugwell had also advocated. To some progressives, Roosevelt’s first week in office seemed like an epic lost opportunity. “I think back to the events of March 4, 1933, with a sick heart,” Senator Bronson Cutting, a pro-Roosevelt Republican from New Mexico, wrote in Liberty magazine the following year. “For then,” he declared, “the nationalization of banks by President Roosevelt could have been accomplished without a word of protest.” Roosevelt was not among those feeling regret. Although he promised he would do more to reform the system with a later banking act, there were limits to how far he was willing to go. “Nothing reveals so clearly Roosevelt’s continued faith in the private enterprise system,” Samuel Rosenman said, “as his refusal—even in banking—to change in the slightest degree our private property economy, or to curtail in any way the private enterprise system under which he had lived and America had grown.”71
Though it was only a stopgap measure, the Emergency Banking Act set the tone for the entire New Deal. By restoring a cornerstone of the economic system to health, Roosevelt was faithful to the Thomas Babington Macaulay injunction that he quoted so often: “reform that you may preserve.” At the same time, the banking act was quietly revolutionary. Roosevelt threw aside his predecessor’s laissez-faire principles and made clear that he considered it the federal government’s duty to ensure that the nation’s economic institutions functioned properly. To meet that responsibility, Roosevelt injected the government more deeply into private enterprise than it had ever gone before, taking steps that his critics regarded as not only radical, but beyond his constitutional powers. He was saving American capitalism, but in the process he was transforming it into something entirely new.72
CHAPTER THREE
“The Hardest-Boiled Man in Washington”
While working on emergency legislation responding to the banking crisis, Roosevelt also began the first affirmative part of the New Deal. Progressives had been urging him to make his next initiative a well-funded relief program for the unemployed. Roosevelt’s highest priority, however, was reducing the federal budget. When Roosevelt took office his views were, Moley later said, “as frostily thrifty” as those of Calvin Coolidge. In the 1932 campaign, he had embraced the Democratic Party platform, which called for cutting the federal budget by 25 percent. In a major address in Pittsburgh, he had railed against President Hoover’s budget deficits, calling them “a veritable cancer in the body politic and economic.” Now, he was about to introduce the Economy Act, a bill to slash federal spending. If there had not been a banking crisis when he took office, the Economy Act would have been Roosevelt’s first legislative initiative.1
It is odd to think of the New Deal beginning with a large-scale reduction in spending. There were several reasons Roosevelt was so intent on government economy, as reducing government spending was known. In part, he was simply reflecting the state of economics at the time. John Maynard Keynes, the great British economist, had not yet published his classic treatise The General Theory of Employment, Interest and Money, which argued for deficit spending in times of depression. Most orthodox economists, including some of Roosevelt’s top advisers, insisted that the most important thing was to restore business confidence. The way to do that, they argued, was to root out waste and make clear that the government’s resources would be carefully managed. There were dissenters, who believed that the best way to respond to a depression was to “prime the pump” with increased government expenditures. In early 1932, twenty-four prominent economists, including an influential group at the University of Chicago, had sent a telegram to Hoover urging him to increase spending. These views were, however, still in the minority.2
The economists’ arguments for fiscal restraint were in line with Roosevelt’s instinctive beliefs about economics, and about how budgets should work. Roosevelt liked to think of abstract policy issues in concrete human terms. He thought of the nation as being like a family, and the federal budget as being like a household budget. This was how Roosevelt explained the budget economy issue to his Pittsburgh audience. An overspending nation, he argued, like an overspending family, was one “on the road to bankruptcy.” It was a vast oversimplification, but his progressive advisers had been unable to talk him out of this homespun argument for a balanced federal budget. “Nothing we had said,” Tugwell would later write, “had shaken it.”3
Roosevelt also had political reasons for wanting to cut federal spending. He had assiduously courted business leaders and wealthy individuals during the general election, and both groups were pressuring him to balance the budget. Bernard Baruch, the influential financier, who had contributed heavily to the Roosevelt campaign, was one of the loudest voices for government economy. “With the monotony and persistence of old Cato, we should make one single and invariable dictum the theme of every discourse,” he declared. “Cut governmental spending—cut it as rations are cut in a siege.” The views of Baruch, who, it was said, “owned 60 Congressmen,” were not easily ignored. The National Economy League, which was funded by some of the nation’s most affluent families, was also pushing for budget cuts and lower taxes. Its chief lobbyist, William Marshall Bullitt, a former solicitor general of the United States, urged Roosevelt and Congress not to pander to special interests, particularly veterans’ groups that were trying to defend their current benefit levels.4
Not least, budget cutting simply appealed to Roosevelt’s thrifty nature. Roosevelt disliked extravagance. In his private life, the journalist John Gunther noted, he was careful about the cost of long-distance telephone calls and flowers and “hated needless extravagence.” Roosevelt proudly admitted to being careful with money, at times resorting to a stereotype that was not unusual for his social class at the time. “He claimed,” Henry Wallace would later recall, “that the original Roosevelt in this country had married a Jewess when he came here in 1620 or thereabouts.” Then, according to Wallace, Roosevelt would “rub his hands together.”5
Roosevelt was convinced that if he wanted to make major cuts he would have to act quickly, while he was still in his honeymoon with Congress and the American people. At Roosevelt’s request, the new budget director, Lewis Douglas, had been hard at work during the interregnum drawing up a draft economy bill. On March 5, at the height of the bank crisis, Roosevelt had devoted his first national radio address not to the banks, but to his plans to cut the budget. Speaking from a microphone in the White House library, he had insisted on an American Legion radio show that veterans had to be prepared to sacrifice for the sake of national recovery. Fifteen years earlier, during the World War, Roosevelt said, veterans had “offered for the welfare and preservation of our country the ultimate contribution that a human can give.” Now, these same veterans had to enlist in a war on selfishness, inertia, laziness, and fear, “enemies with whom we never conclude an armistice.” The draft Economy Act, which had not yet been made public, specified in detail the sacrifices veterans would now be asked to make.7
In making the Economy Act his highest priority, Roosevelt was lining up behind his hard-driving budget director. At first, Roosevelt had been drawn to Douglas because the thirty-eight-year-old Arizona congressman was the nation’s leading advocate for government economy. But before long, Roosevelt developed a real affection for the lanky, sandy-haired Douglas, a man one profile described as “rugged faced,” with “quizzical brown eyes,” and “an air of engaging diffidence.” Roosevelt and Douglas had much in common. Both men were scions of wealthy families who, after attending exclusive prep schools and colleges—Harvard for Roosevelt, Amherst for Douglas—had dedicated themselves to public service. Both were engaging, popular men whose sunny exteriors did not fully reflect their more complicated interiors. When Roosevelt appointed Douglas budget director, he elevated the office to Cabinet rank. It was not only an endorsement of the man, but a clear indication that, as The Washington Star observed, “Roosevelt means business in his promise to reduce government costs.”8
At the start of Roosevelt’s presidency, Douglas had an exalted status. In addition to his Cabinet rank, Douglas was, along with Moley, a member of the “bedside Cabinet” of two, which met with Roosevelt each morning in his bedroom to prepare him for the day. Douglas and Roosevelt formed an extraordinary bond. The affinity came quickly, but differences between the two men emerged gradually, as the problems with budget slashing at the height of a depression became clearer. Forced to choose between an abstraction like fiscal conservatism and actual people who were suffering, Roosevelt would eventually come down on the side of the people. Douglas, however, would insist on proceeding with the budget cuts, and he would not be talked out of it. “His soft brown eyes turned hard,” Tugwell recalled. “Economy was the great need of the day, he said, not relief.” Douglas’s fixed ideas about what needed to be done would make him one of the most influential of the early New Dealers, but also one of the most embattled. Douglas was more than up for the fight. “The mildness is delusive,” The Literary Digest observed. “Ask any Congressman. He will tell you that young Lew Douglas is the hardest-boiled man in Washington.”9
Lewis Douglas had a surprising background for a New Dealer. He was born on July 2, 1894, in the Arizona copper mining town of Bisbee, hard up against the Mexican border. At the time, the Arizona Territory, which was nearly two decades from statehood, was still viewed by people back East as exotic and more than a little dangerous. “The dawn of civilization has just broken in this part of the country,” The New York Times reported from Tucson shortly before Douglas’s birth. There were law-abiding residents in Arizona, the Times conceded, but they had the misfortune of living alongside “the roughest elements in the New World—some struggling for homes, others for wealth, and others still living by their wits upon the weakness of their fellows.”10
If civilization had dawned in Arizona, its light had barely reached Douglas’s hometown. Bisbee’s town center was Brewery Gulch, a grim street that did double duty as the town’s sewage system. It was “covered with slime several inches deep and about four feet wide,” the Tucson Citizen reported, forcing women “while walking, to hold their skirts high.” Brewery Gulch was lined with saloons and dance halls that were filled late into the night with drunken miners, Mexican migrants, and outlaws. Bisbee was not without its charms. Nestled atop mile-high Mule Pass Gulch canyon, it was surrounded by craggy hills, giving it a stark western beauty. But it had few of the amenities of life back east, and it had perils that big-city residents could scarcely imagine. The town’s children attended school in an old miner’s shack and scratched out their lessons on brown wrapping paper. When Apache raiders descended, a guidebook noted, “a whistle was blown four times—two shorts, one long, and one short—and the teacher led her pupils, trained by frequent Indian drills, to the nearest mine tunnel for protection.”11
Mining towns like Bisbee were in many ways like outposts of imperial Britain, a historian of the region has observed. The miners worked underground in dark, dusty shafts while the administrators stayed above ground, leading lives of relative luxury. Adding to the colonial feel, most of the bosses had been deployed from the mining company headquarters back East. Bisbee was a rough, menacing environment in which to grow up. Douglas would later say that his views about society were shaped by his time “on the frontier which was occasionally sprinkled with threats of Indian depredations and raids.”12
Douglas was born into the pinnacle of Bisbee society. His grandfather, James Douglas, was a Canadian-born mining engineer of Scottish descent who had discovered the region’s copper reserves for the New York-based Phelps Dodge Company in the 1880s. The copper mines around Bisbee proved so successful that in 1909 Douglas became president of Phelps Dodge. Lewis’s maternal great-grandfather, John Williams, was another town pioneer. Williams had run a brokerage in San Francisco with Judge Dewitt Bisbee that sold mining rights in the part of Arizona that would later bear the judge’s name. James Douglas’s son, James S. Douglas, and Williams’s granddaughter, Josephine Leah Williams, married in 1891. Three years later, Lewis was born.13
James S. Douglas worked for his father’s company. During much of Lewis’s childhood, he supervised a mine in Nacozari, Mexico, ninety miles south of Bisbee. The Douglases were Nacozari’s version of landed gentry. Lewis grew up in a mansion known as the “White House,” while his friends lived in grim conditions on the other side of town. Lewis’s father, a difficult man with a bad temper, acquired a reputation as a hard-driving businessman and the nickname “Rawhide Jimmy.” James S. Douglas cofounded two small banks, including the Bank of Douglas, in a town his father helped establish. He began to make his own fortune when he started to buy up copper mines. By the time Lewis Douglas was a young adult, his father was one of Arizona’s wealthiest men—and one of its thriftiest. When Douglas relocated to Washington, his father often wrote him letters on the backs of used envelopes.14
Lewis’s grandfather, James Douglas, was a relatively benevolent copper baron. Conditions in his mines were hardly ideal, with tempe
ratures often rising above 100 degrees and dangerous dust in the shafts. He made an effort, however, to pay his miners well, and not only to discourage them from joining unions. In the early 1900s, the Progressive Era came to Arizona. The territorial government enacted laws protecting workers’ rights, and union organizers began to show up at the mines. Around the same time, James Douglas began to cede control over Phelps Dodge’s operations to his son Walter, who shared his brother James S. Douglas’s tough-minded approach to the mining business. Walter and James S., joined by other powerful copper bosses, used their influence in the Arizona legislature to fight workers’ rights bills and invested in newspapers, skewing their coverage against unions.15
As America entered World War I, Arizona became a bitter labor battle-ground. The International Workers of the World, better known as the Wobblies, sent organizers into Arizona mining towns and fought to improve an industry that was marked by what one worker described as “one continued sickening mess of extortion, fraud, graft, and . . . shameless, unblushing robbery.” When the copper bosses refused their demands for better wages, the Wobblies called the Bisbee miners out on strike. Walter Douglas, who was by now running Phelps Dodge, and his brother James S., Lewis’s father, responded with the Bisbee Deportation, one of the most brutal antilabor acts in American history.16