My last observation, then I'll stop interrupting. It seems your intervention into pre-election circumstances has had the net effect on the Electoral College vote of making Hoover's Electoral College performance be *exactly* as bad as Alf Landon's 1936 Electoral College performance, with Hoover carrying only *exactly* the same two "rock-ribbed" (I guess) Republican states of Vermont and Maine.
The Giant’s Vigor: An early exit from the Great Depression
- Thread starter King(Henry)George
- Start date
Feel free to interrupt as often as you have something to say, I'm happy to discuss things.
I was debating whether to push Pennsylvania over the edge and it's currently at a 0.46% margin for Roosevelt. I thought a 4% national popular vote swing seemed about right with a rough rule of thumb of each 1% extra unemployment causing a 1% better margin for the FDR. This also fits well with bringing a lot of elements of the second new deal to 1933.
Vermont and Maine are dramatically more republican than the other states in OTL's 1932 election. It goes Connecticut at 1.14%, New Hampshire at 1.43%, Delaware at 2.44%, Pennsylvania at 5.51% to Maine at 12.64% and Vermont at 16.58% margins for Hoover. I think there's going to be an identical map in 1936 because they were both above 13% for Landon and there's no way the swing towards FDR from OTL to TTL is going above 8% for their specific case.
Chapter 4: Sirens Blaring For 100 Days
Chapter 4: Sirens Blaring For 100 Days
Following a winter so dismal that it would spawn an amendment to the constitution making presidents take power in January, FDR would be sworn into office on March 4th, 1933. To a crowd of over 150k gathered before him, he would reaffirm the mandate granted in November to restore prosperity to the United States.I am prepared under my constitutional duty to recommend the measures that a stricken Nation in the midst of a stricken world may require. These measures, or such other measures as the Congress may build out of its experience and wisdom, I shall seek, within my constitutional authority, to bring to speedy adoption. But in the event that the Congress shall fail to take one of these two courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me. I shall ask the Congress for the one remaining instrument to meet the crisis — broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.
Emergency Banking Act
4500 bank suspensions in the first two months of 1933 and the complete shutdown of the nations banking system as bank holidays spread from Michigan to Delaware (the 48th state to declare a banking moratorium) would cause the President to declare a national 5 day bank holiday on March 5th, the day after his inauguration. In these 5 days, the assets of every bank in the US would be inspected by the Office of Comptroller of the Currency for soundness.
March 8th would have FDR calling an emergency session of congress which it would use to pass a handful of emergency bills to immediately respond to the crisis of January and February. Introduced by Representative Henry Bascam Steagall, the Emergency Banking Act would amend the Trading with the Enemy Act of 1917 to increase the power of the President, Secretary of the Treasury and Comptroller of the Currency when dealing with banks. The comptroller could permanently shut down banks deemed to be sufficiently risky while the Federal Reserve would be allowed to issue as much currency as it wanted to exchange for financial assets in a 1 to 1 ratio. This 1 to 1 ratio was more conservative than the 40% requirement imposed on monetary gold by the 1913 federal reserve act owing to the increased risk of other kinds of assets such as corporate bonds or mortgages.
Banks could either be reopened, reorganized or shut down permanently. Most banks would simply be reopened but many would be merged with others to form larger banking chains that could diversify geographic risks. No longer would a localized flood cause a town specific agricultural bank to go under.
On March 9th, FDR would sign Executive Order 6073 which would immediately ban the foreign sale of gold and would require that all non trivial quantities of gold be turned into the Federal Reserve System in exchange for $20.67 per troy ounce under penalty of a 10k fine or up to 10 years imprisonment. The gold outflows and hoarding which bound the Federal Reserve would no longer apply and they were free to stimulate the economy as much as they saw fit.
Despite its dramatic nature, banking magnate JP Morgan celebrated the actions saying “It seems to me clear that the way out of the depression is to combat and overcome the deflationary forces. Therefore, I regard the action now taken as being the best possible course under existing circumstances”.
These measures sufficiently restored confidence in the banking system for the American people to return over $1 billion in US dollars to banks in the first week due to lack of risks surrounding bank runs. On March 15th, the day the New York Stock Exchange reopened, the Dow would surge 27% to 47 in the "greatest day of my life" according to one trader.
American Railroad Corporation
Railroads were once the pinnacle of American industry which the economy spun around, making up 60-70% of the entire stock market from 1860 to 1890. However, the collapse in demand for goods throughout the Great Depression hit them hard, railroad shares dropped over 95% from their 1929 high by March as they were racked with a string of bankruptcies. During the presidential transition, almost one half of all railroads were in recievership and a further quarter were losing money each year. Lines were shut down while locomotives laid rusting in warehouses across the nation as running trains would cost more than the possible revenue from the pittance which needed movement. The one saving grace was the transportation of coal to select power plants across the nation which continued to expand even during the depression.
In the Roosevelt Administration, there were 3 main camps: Those who didn't want anything to do with the matter, those who advocated for extending lines of credit to the railroads and those who advocated for a return to the nationalization proposals of William Jennings Bryan and the Great War's USRA. In the end, the nationalization advocates such as Rexford Tugwell and Harry Hopkins would win the day due to the belief that it would increase the liquidity of financial markets and as a compromise which would trade this concession for a lack of wage and price controls outside of direct government employment. In total, the takeover would cost $1.2 billion, financed through $2.8 billion in bonds sold to the treasury with $1647 million left over for debt consolidation, operating costs and capital improvements over the next 5 years.
After his appointment as Executive of the corporation, Tugwell would begin to consolidate lines in a similar manner to what had occurred during the Great War. Almost immediately, funding would be made available for the electrification of the former Pennsylvania Railroad mainline between Washington DC and New York. Further lines would also undergo planning for electrification such as a route from New York to Chicago through Philadelphia and a route from New York to Boston.
Seeing the recent advances in track speed with the German Fliegender Hamburger Service, Hugh Johnson advocated for new track alignments which would allow for many new segments to be able to handle speeds of up to 125 mph. The Washington to New York route would continue the construction started before the takeover with the other main lines set to break ground in October.
In addition to long distance capital improvements, ARC (pronounced arc) would continue the construction of the New York Subway and begin new programs in cities such as Detroit where 20 miles of underground lines would connect Dearborn to downtown. Altogether the company would have 700k regular employees on staff and an additional 300k temporary ones who would repair, realign and electrify existing track along with the construction of new, mostly urban lines. Cascading failures due to unreliability in national scheduling would lead to the permanent solution of 4 administrative districts: Northeast, South, Midwest and West.
The proposal had been sold to congress as one of national security, as American infrastructure became extraordinarily congested during the last war. A decrepit transportation industry which let lines rot would not provide a solid foundation for American logistics. The jobs created certainly didn't hurt, neither did the ability to reward local democratic machines with fancy new subways.
National Reconstruction Administration
Acquiring FDR's Metropolitan Reconstruction Agency in New York among other willing organizations, the National Reconstruction Administration was a public works and land redevelopment agency which would operate across the United States. Land was acquired through a combination of market sales, eminent domain, bankruptcy proceedings, nonpayment of taxes and transferal of existing government land. The Administration would use a mixture of private contracting and direct hiring from the unemployed to erect its various structures.
Although given a direct budget of $4.6 billion to spend in the first year, it was given an uncapped mandate to lend and borrow money in service of bringing construction back to its 1924-1928 levels in addition to staunching the bleeding from mortgage delinquency. This borrowing power would be used extensively as the NRA would buy up enormous amounts of land in expectation of its own extensions of sewers, railroads, schools, bridges, hospitals and airports and sell them back at a profit.
The NRA would have to give biannual reports to congress on their activities ranging from their balance sheet to fielding inquiries on materials sourcing. While most of its activities would consist of refinancing loans or the construction of public works where localities request, congress was unusually focused on the fate of "Roosevilles" as the government constructed communities had been called.
One particular discussion would lead to the creation of a house committee on electricity standardization which would formally create a US power standard, mostly related to wiring and plug dimensions. it required sequential plug shapes depending on the amperage rating and would be required for all NRA developments and renovations and would slowly spread across the nation. Bulk orders for the materials such as light fixtures would spread the concept to the nations factories over the years which would begin offering them as the default, pushing pressure on private developers to adopt the standard.
Almost 7 million Americans would be put to work at some point in the first year, with significant numbers not even needing to leave their own neighborhood. Decrepit buildings would be renovated, electrical wiring put in and broken windows replaced. Streets would be cleaned and many stones once caked in dirt, horse excrement and garbage would be bright once more. The NRA alone would be responsible for 60% of paint purchased in 1933 as houses were repainted or new schools were constructed.
Certain more radical mayors such as Anton Cermak of Chicago would take matters further than Hopkins had envisioned. Having gone on a crusade against corruption in Chicago and fighting a years long battle with real estate owners who fought against taxation, Cermak would seize or buy large quantities of land and use the firehouse of money to resurrect the old Burnham plan of 1909. Huge amounts of the city were demolished and rebuilt along the lines of Paris with new buildings and vast parkland. Many of these actions would later be ruled unconstitutional takings and significant quantities of money would flow from the NRA as restitution, but the dramatic appreciation of land through the 30s would lead to them making a slight profit on their actions in Chicago's reconstruction.
Although none to such a radical extent, many other cities would undergo similar transformation as new deal democrats with an iron grip on power worked closely with the NRA to employ their hoards of job seekers. Not to be outdone by Hopkins, Tugwell too would work mayors and city councils across the nation to rebuild America. Most of the work done was around the streetcars and rail lines now under his absolute control which would often be raised, buried or placed within parks as monuments to urban life. Altogether 4 million Americans would be displaced at some point in 1933 or 1934 due to the actions of the NRA earning Tugwell the nickname Red Rex for his coordination of this oft derided property expropriation. Anger however would fade quickly as people were rehoused and offered jobs in the interim. Man's mastery of nature had been extended to the urban jungle and much of the blights of modernity were removed, albeit too judiciously to many.
Tennessee Valley Authority
The Tennessee Valley had long been an underdeveloped part of the US. 30% of the population had malaria or lingering symptoms while the people made half the national average income in 1933. Many had wanted to develop the region, expanding power lines across an area where less than 1 in 10 had access to electricity.
In 1916, the National Defense Act authorized construction of a hydroelectric dam in Muscle Shoals Alabama. In 1930 the Muscle Shoals bill was sponsored to create a federal hydroelectric authority centered on the dam but it was vetoed by Hoover. Finally, on April 27th the Tennessee Valley Authority act would be passed and signed the next day by FDR.
The act created the Tennessee Valley Authority, a federally owned corporation with authorization to
- Maintain and operate government facilities in the Tennessee Valley for national defense, agriculture and industrial development.
- Improve navigation on the Tennessee River and control destructive flood waters in the Tennessee and Mississippi River basins.
- Produce fertilizers and other war and agricultural materials in the Tennessee Valley by operating existing facilities or building new plants.
- Generate, distribute and sell electric power, with a priority for domestic and rural consumers.
- Acquire local electric power producers and distributors at market rates to further its goals.
- Promote the wider and better use of electric power for agricultural and domestic purposes.
- Aid in the proper use, conservation and development of natural resources in the Tennessee Valley region.
- Foster the physical, economic and social development of the Tennessee Valley region through survey, planning, resource management, infrastructure construction and maintenance.
- Levy taxes with the permission of either congress, the state government or other taxing jurisdiction within which it resides.
After the takeover of Muscle Shoals, the nitrate plants would be owned an operated by the TVA and used to produce fertilizer for local agriculture. There was initial resistance among the local populations, but after a year long campaign to convince local elites, fertilizer usage sharply increased in the Tennessee Valley and with it, agricultural production.
The TVA would continue to construct hydroelectric plants with the construction of the Wheeler Dam beginning on October 15th and the Pickwick Landing Dam following on January 20th. The TVA, as a new organization with little experience in construction, would rely heavily on the Army Corps of Engineers and Bureau of Reclamation for their engineering knowledge.
As new dams went up and old ones were acquired, electric lines would begin to snake across the Tennessee Valley. Some municipalities gave the TVA full approval to purchase roads and levy a small property tax, usually a couple mills, for continued expansion and maintenance. These rights of way would carry both vehicles and electricity through rural areas as they expanded mile by mile.
Much like other new deal organizations, its activities would be challenged in court though most of them would be upheld. The district court however would rule that its taxation authority must go through the regular taxation process of the jurisdiction it is making use of. A mayor could not simply sign off on an expansion that came with a property tax increase, normal procedures must be used as if it were a tax to fund the local government's activities.
Civilian Conservation Corps
The Civilian Conservation Corps (CCC) was established on April 5th, 1933, just one month after President Roosevelt took office. Within three months, over 250,000 young men between the ages of 18 and 25 had enrolled in the program, a pseudo military organization focused on the natural world. By the end of 1933, enrollment had surpassed 500,000, with the program receiving $300 million in funding for its first year of operation.
Under the leadership of the U.S. Army, CCC enrollees were organized into camps of approximately 200 men each. They were provided with food, housing, uniforms, and a monthly wage of $30, of which $25 was required to be sent home to their families. The men worked on a wide range of conservation projects, including planting over 3 billion trees, constructing more than 800 parks, and building over 40,000 bridges and 11,000 miles of hiking trails in he first three years of its existence.
The CCC worked closely with other New Deal agencies, particularly the National Reconstruction Administration (NRA) and the Tennessee Valley Authority (TVA). In the Tennessee Valley, CCC enrollees were instrumental in the reforestation of over 120,000 acres of land, the improvement of over 800 miles of streams for flood control, and the construction of numerous recreational facilities around the newly built TVA dams. Similar collaborative efforts were undertaken in other regions, such as the planting of over 120 million trees in the Great Plains to combat soil erosion as part of the Great Plains Shelterbelt project.
In addition to the pecuniary benefits, the CCC would be a positive shock for the lives of the young men who joined. Many gained weight, increased their physical fitness, and increased their human capital. The program placed a strong emphasis on education, with many enrollees learning to read and write, and some even earning high school and college degrees.
The CCC was not without its challenges, chiefly to the Army that organized it. At the beginning of 1933, the United States Army had 12,000 officers and 87,000 enlisted men within the continental US. To accommodate the 500,000 unemployed men dependent on them, the Army stretched itself extremely thin and would require extra appropriations. This mobilization would occur faster than WW1's with significantly less resources - the army only having enough tents for 68,000 people.
After a meeting between Roosevelt and Army Chief of Staff Douglass MacArthur, the CCC act would be amended to provide for the addition of 6,000 new officers and an additional 50 million a year to prevent a significant degradation of readiness while the program was ongoing. Despite these efforts, Army drills would routinely be postponed or canceled due to personnel shortages and army morale would suffer until the 1934 raises due to the $21 a month pay for privates.
Then Colonel George C Marshall would write:
We were enroute to Fort Benning [from Fort Screven, Georgia] for Corps Area Maneuvers when the concentration was called off . . . because of the President’s emergency employment proposal for 500,000 men.
Similarly, according to historian Charles E Heller:
There was a cost to be paid for involvement in the CCC. In September 1933, the Inspector General reported that the CCC degraded the Army’s ability to perform combat missions. Should its involvement continue for a year, the lack of any training would impact on the Army’s primary mission, that of national defense. Still, he reported high morale and discipline, but the assignment of so many officers and men was bound to have a negative effect. Indeed it did. The CCC’s operations the first year curtailed all routine Army activity, “thereby,” the Army’s mobilization history relates, “almost destroying the readiness of units for immediate and effective employment on emergency duty.”
This would lead to additional money funneled from the CCC to the army, with the salaries of all officers being paid for while the program was still underway. For Colonel Marshall's meritorious organization of significant parts of the program and comprehensive report on the program and what it meant for wartime mobilization, he would be promoted by Roosevelt to brigadier general and given more authority over the program to replace much of MacArthur's mismanagement.
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Despite the radical nature of land expropriation and railroad nationalization, the most important butterfly here is the fact that there's going to be no wage and price controls. That means no AAA, no minimum wage and no blue eagle program (which is what cut off the early recovery in July 1933). One of my plans here is to inoculate America against the urban renewal and slum clearance programs of the 50s and beyond by forcing them early. This is also going to boost the desirability of cities and create a housing glut rather than shortage so suburbanization is being further stopped in its tracks.
The main benefit of having the NRA and ARC do so much frankly wasteful spending is that they have extremely cheap borrowing due to the currency inflation that is going to happen over the next couple years. If this was a story where I was inserted back in time, I would probably just buy as much of the stock market as congress would let me and then engage in ngdp level targeting. The new deal is certainly being suboptimal here but they're going to be in a better position than OTL just because of how damaging the regulations put in place in 1933 were and the fact that they are making full use of the US defaulting on its debt (not honoring gold convertibility).
Another important butterfly is the increased funding available to the army due to the bigger CCC. When the CCC goes away, there's going to be a lot of spare officers sitting on their hands waiting for someone to tell them to do something productive.
The main benefit of having the NRA and ARC do so much frankly wasteful spending is that they have extremely cheap borrowing due to the currency inflation that is going to happen over the next couple years. If this was a story where I was inserted back in time, I would probably just buy as much of the stock market as congress would let me and then engage in ngdp level targeting. The new deal is certainly being suboptimal here but they're going to be in a better position than OTL just because of how damaging the regulations put in place in 1933 were and the fact that they are making full use of the US defaulting on its debt (not honoring gold convertibility).
Another important butterfly is the increased funding available to the army due to the bigger CCC. When the CCC goes away, there's going to be a lot of spare officers sitting on their hands waiting for someone to tell them to do something productive.
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Here's some PNGs I whipped up as logos. They don't quite fit the aesthetics of the time but I thought they were pretty cool.
The TVA was involved in some....70s era studies on rail electrification, if I recall (ah, found one of the studies and it appears I do), basically as something to do with all the power they were generating from dams and planned nuclear plants. I wonder if, with more push for mainline electrification in the northeast and midwest here, perhaps the TVA might also be looking into this sooner?
I don't think the TVA's going to have much of a power glut relative to demand anytime soon, but labor shortages are going to push for increased electrification everywhere in the latter half of the 30s and during the 40s.
I've been looking through the 1940 census lately and for possible efficiency gains relative to OTL. So far I think that agriculture and transportation are a definite yes and steel is possible if basic oxygen steel gets pushed up a couple years (which seems possible).
Page 31 and 32 here are the best
Chapter 5: Overheating the Presses
Chapter 5: Overheating the Presses
Off to the Races — March-July 1933
The Emergency Banking Act and bold new programs like the NRA and TVA marked a dramatic shift in economic policy, but the battle against the Depression was far from over. Unemployment remained staggeringly high at 28% and deflation continued to wreak havoc on debtors. Further action was needed to reflate the economy and get people back to work.A day before the national bank holiday, the Federal Reserve would lower the discount rate to 2.5% and a week afterwards, they would call an emergency meeting and lower it once more to 1.5%. This unexpected 100 basis point drop would lead to stocks soaring once more by 9% to 54. As the risks of gold leaving the federal reserve system had ended, the Fed had a free hand to stimulate the economy which they would use upon encouragement by the executive branch.
February's industrial production would be 57% below its all time high in July 1929, the lowest it had been at least since the start of WW1. However, March would see improvement to up to 45 points(where 100 represented July 1929) and April would improve further to 51.
Open Market Operations would drastically increase from their January levels, up to $140 million in treasury bills and notes purchased a week. Although there was some discussion about whether they should buy other government debt such as the recent NRA bonds, it was decided by a joint meeting between Roosevelt, Treasury Secretary Henry Morgenthau and New York Fed Chair George Harrison that the treasury would purchase those bonds by issuing treasuries which would then be bought by the Fed.
This phase change in monetary policy changed forecasts for future demand and further increased industrial prices and production. Industrial production would skyrocket to 60 in May and 69 in June, half drop in production had been made up for in the first 4 months of the new president's term. In addition, the Dow would reach above 100 in June, marking over a doubling in stock prices. These two measures would suggest that the economy had erased its declines from spring 1931 to winter 1933; happy days were here again.
London Economic Conference — June 1933
Roosevelt would send Secretary of State Cordell Hull to participate in the London Economic Conference which would last from June 12th to June 23rd. The goal of the conference was to combat the ongoing depression through a reduction in tariffs and stabilized currency exchange rates. Although heavily amenable to reductions in tariffs, FDR gave Hull explicit instructions to not establish any exchange rate agreements.Negotiations would quickly break down as it became clear that the US would not budge with regard to its currency devaluation program. In response to accusations of beggar-thy-neighbor policy, Hull publicly encouraged France to cast off its gold peg as Britain and the US had done. He also welcomed the lowering of discount rates and open market operations among those who believed that the US was gaining an unfair trade advantage through their weaker currency.
The conference would end in failure but not without assurances by the American delegates that they would authorize a reduction in tariffs and renegotiate trade shortly. These public promises would lead congress to pass the Reciprocal Tariff Act on September 1st which would be signed by Roosevelt.
The act granted authority to the president to negotiate reciprocal trade agreements with other nations and present congress with the deal to vote on with a simple majority. By reframing tariffs from a unilateral action to a bilateral one, significantly larger reductions became politically palatable as there was a guaranteed benefit to domestic manufacturers in the form of new markets.
Full Steam Ahead — July-December 1933
At the beginning of 1933, the Federal Reserve Banks held $1743 million worth of US government securities, but by December holdings had increased to $3281 million. This influx of over one and a half billion dollars into the economy would have dramatically stimulatory effects due to the sudden absence of gold convertibility.RISING PRICES LAID TO RAPID RECOVERY; National City Bank Review Says Drop in Dollar Is Minor Factor. COSTS UP IN EUROPE TOO Business Improvement Since March 1 Is Most Impressive in Nation's History, Survey Finds.
PHILADELPHIA HAS RISE.; May Manufacturing Volume Was Ahead of 1932 Period.
DIVIDEND IS RESUMED.; Harbison-Walker Refractories Will Pay on Preferred Stock
New Rail Routing Plan Today.
WESTCHESTER GETS AID.; $2,217,000 Allotted by State From Federal Fund for Roads.
Cotton Forwardings Index Gain Slower Cloth Prices Up Sharply on Rise in Staple
British Revenues Increase.
Stocks and Grain Move Higher
AUTO SALES UP IN JUNE.; Gains are Reported by General Motors and Chrysler Groups
DELVING INTO THE NEW ERA.; Developments in Monetary Situation Arouse Curiosity
MAY EXPORTS ROSE TO 23 BIG MARKETS; Our Sales to Three of Seven of Grand Divisions Also Increased Over April
- New York Times headlines, July 1stFrom July to August, industrial production would increase from 75 to 80% of July 1929 — a slowdown in growth from the previous couple months but a blindingly fast increase none the less. September would bring another increase to 86 points while October would have the first fall since April: to 84.
With the increase in stock prices and industrial production came a corresponding increase in the price of goods and services. As the demand curve shifted outwards, equilibrium prices went up in tandem with quantity, lowering the real price of labor and of debt. Many entities which had been crushed under the weight of their debt found it much easier to scrounge up money now that gross national income had increased 22.5% and consumer prices had risen 10.1%.
America had dug itself deep into a hole which it was now rapidly climbing out of. As recovery became more clear, optimism would drag expectations of future demand upwards boosting production, hiring and investment.
Although the economy was recovering faster than it even had after the infamous depression of 1921, that recovery began slowing as companies began using existing employees to their limit. Throughout his tenure, Hoover had pushed for companies to reduce hours in lieu of layoffs, a policy called work share. Factory shifts would be lengthened to produce more but there came a point where companies would need to begin hiring and training workers in more significant numbers. These hiccups were the main reason why November's industrial production figures were only at 89 and December's at 93. Although they had gotten within spitting distance, production had not fully recovered to its all time high.
Regardless, the Dow had reached a 3 year high of 202, higher than closing on Black Tuesday, in what the New York Times would call a Christmas miracle. Factory floors were abuzz once more while treasury officials and budget hawks in Washington breathed a sigh of relief that the massive deficits of 1933 would not be repeated in fiscal year 1935 (July 1934 to June 1935).
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This is the most important action in alleviating the depression by far. The main changes are that there is no stall in recovery in July from the blue eagle program (a 10% cut in hours with no cut in wages, so labor gets 10% more expensive). I'm planning on recovery being over by about 1936, which is slower than the depression of 1920 but I'm assuming that there's been some scarring and additional fear.
I'm not sure whether I'm going to talk about the state of the world, budget fights or the US military next. If anyone has an idea or a good source, I'm all ears.
I'm not sure whether I'm going to talk about the state of the world, budget fights or the US military next. If anyone has an idea or a good source, I'm all ears.
Here's another graph I made. It really pops out how the recovery was halted in July 1933.
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It also appears to show how Hoover's OTL Keynesian measures caused a significant recovery in late 1932 - but not in ITTL. But also though, the general recovery ITTL seems to begin before Roosevelt's inauguration.
This isn't happening before the inauguration, gold seizures are being announced a month early and so the recovery begins on the 13th.
Chapter 6: I Did Not Have International Relations With That Country
Chapter 6: I Did Not Have International Relations With That Country
In the 1928 Reichstag elections, the Nazis only elected 12 members with 810,000 votes (2.6% vote share). Worrying about their low popularity, their paramilitary organization, the Sturmabteilung (also known as brownshirts or SA) increasingly fought with the Communist paramilitaries: the Rotfront. The two would increasingly fight before the Nazis took absolute power.Following that, the Nazis would become intertwined with the campaign against the Young Plan, a debt repayment scheme. The Against the Enslavement of the German People, which would overturn the Young Plan and much of the Treaty of Versailles in addition to banning the signing new repayment plans as a form of treason upon the insistence of Hitler. The referendum would need a majority of eligible voters (21 out of 42 million) to vote in favor, of which it only received 5.8 million. The campaign around the referendum would help increase the salience of the Nazis and help them siphon votes from the DNVP which was rapidly collapsing.
The sudden collapse of the world economy sent shock waves throughout Germany. The governing coalition would collapse in March of 1930 and Heinrich Brüning appointed chancellor. Brüning would be forced to rule by emergency decree before asking Hindenburg to dissolve parliament. By the September 1930 federal elections the Nazis had grown dramatically, becoming the second largest party in the Reichstag with 107 seats due to their 18.3% vote share.
Political violence would only grow as hundreds of thousands lined up to join the Nazis. The failure to reach an accord on debt repayment further boosted them and coupled with the ever growing unemployment, the March 1932 federal elections would lead to the Nazis winning 36.4% of the vote and 227 seats in the Reichstag.
Franz von Papen, the new chancellor, would be ousted almost immediately and another election called. This July election would have the Nazis receiving 38.2% of the vote and 233 seats in the Reichstag. No majority could be reached but Hindenburg was convinced to appoint Hitler Chancellor.
The Reichstag would be engulfed in flames and the communists blamed, with the Reichstag passing a law to suspend habeus corpus, freedom of speech and public assembly and the right to secrecy of the post and telephone. Chancellor Hitler would continue to crack down on communists in addition to social democrats, jews and other enemies of the Nazi party. They were therefor able to win 46.7% of the vote and hold a majority in the Reichstag when combined with their allies, the DNVP.
With their new found power, the Nazis would push through the Enabling Act through the Reichstag, allowing the cabinet to pass laws without the need for the Reichstag. Despite requiring a 2/3rds majority, the bill would pass due to low attendance among Social Democrats and Communists (from campaigns of violence against them) and the support of the Centre. No doubt the paramilitaries encircling the building played a role in their votes.
Non Nazi parties would be outlawed and the Reichstag made obsolete. Despite all these dictatorial actions, President Hindenburg remained in charge of foreign relations and the military. Tension would increase between the Nazis and the SA as differences between Hitler's focus on rearmament and demands for wealth redistribution became more salient. While useful for coming to power, street violence carried out by private paramilitaries had outlived its usefulness in comparison to direct state violence.
Following the onset of the Great Depression and the tariff wars brought about by the Smoot-Hawley Tariff, the demands for a Japanese colonial empire and ultranationalists strengthened. On November 14th, 1930, Prime Minister Hamaguchi Osachi was shot and would pass away a couple months later.
Lieutenant Suemori Kawamoto of the 29th Japanese Infantry Regiment detonated a small quantity of dynamite close to a railway owned by Japan near Mukden on September 18th, 1931. The Japanese military, accusing Chinese dissidents of the act, responded with a full invasion of Manchuria, despite the minimal damage caused by the blast which didn't even deter a train passing over the bridge 10 minutes later.
The Chinese troops in the area were ordered not to resist the Japanese forces by the local commander, Chang Hsueh-liang, to avoid a full-scale war with Japan. Others would take up arms but within 5 months the region had been taken over. Notably, the incident went against the wishes of the Japanese government and Kwantung Army General Shigeru Honjō though they had provided relatively free reign to local elements and supported the invasion after it had started.
American Secretary of State Henry Stimson would respond on January 7th, 1932 by saying:
The American Government deems it to be its duty to notify both the Imperial Japanese Government and the Government of the Chinese Republic that it cannot admit the legality of any situation de facto nor does it intend to recognize any treaty or agreement entered into between those Governments, or agents thereof, which may impair the treaty rights of the United States or its citizens in China, including those that relate to the sovereignty, the independence, or the territorial and administrative integrity of the Republic of China, or to the international policy relative to China, commonly known as the open door policy; and that it does not intend to recognize any situation, treaty, or agreement which may be brought about by means contrary to the covenants and obligations of the Pact of Paris of August 27th, 1928, to which treaty both China and Japan as well as the United States are parties.
As time would go on, power was increasingly stripped from the civilian government as the military acted on its own orders. Since the London Naval Treaty of 1930, limiting Japanese fleet sizes, opinion shifted in favor of a military takeover and restoration of absolute rule under Emperor Shōwa.
On February 9th, 1932, Shō Onuma killed Junnosuke Inoue, the Minister of Finance, before being apprehended. On March 5th, Gorō Hishinuma would kill Takuma Dan, Director General of the Mitsui Zaibatsu. Finally on May 15th, Prime Minister Inukai Tsuyoshi would be assassinated by 11 naval officers.
Despite their wide reach, the assassins would miss out on many of their targets. Before May 15th, 20 targets were planned with only the 2 being killed. Similarly, plans were made to kill Charlie Chaplin and start a war with the US on May 15th, but Chaplin had been watching sumo wrestling with the Prime Minister's son.
Popular support washed over the assassins. 110,000 clemency petitions were provided to the court, many of which signed or written in blood. 9 men would asked to be tried in lieu of the assassins, even provided their own severed pinky fingers to prove their sincerity. Because of this, the perpetrators were let off lightly.
Following the invasion of Manchuria, a puppet regime headed by former Emperor Puyi would be installed, named Manchukuo on March 9th. In October, the Lytton report would cast the blame on Japan and demand the restoration of prewar borders. In February 1933, the League of Nations would vote 42-1 in favor of the report. The Japanese delegation would leave in response and Japan would officially leave the League on March 27th.
Nothing much has changed from OTL, the Nazis are slightly stronger and make their moves a couple months earlier due to the lack of an official pause on war debts.
The next chapter is going to be the tax situation and then we'll either go over the state of the US military or continue on what's been happening around the world since 1929. Maybe the UK, France and Italy?
It might be worth it to kill Chaplin to give tenser relations between Japan and the US. Does anyone have an opinion?
The next chapter is going to be the tax situation and then we'll either go over the state of the US military or continue on what's been happening around the world since 1929. Maybe the UK, France and Italy?
It might be worth it to kill Chaplin to give tenser relations between Japan and the US. Does anyone have an opinion?
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Exactly. OTL France threw it away in 1936 but I’m planning on mid 1934 TTL. All countries are going to have stronger economies this time around but the Soviet Union is going to be improving the least and Germany is going to run into more problems with higher interest rates. I haven’t read up enough on the MEFO bills to understand how much it matters yet.
Chapter 7: Tax and Spend Democrats
Chapter 7: Tax and Spend Democrats
The president had managed to put a lid on the budget hawks, for now. Speaker of the House Henry Rainey allowed all proposals from the executive branch to pass through his legislative body swiftly. Billions in debt were being racked up and complaints began to rise to the surface.
Despite the high tariffs, revenue remained low due to the greatly depressed rate of imports. The income tax was a mess, possessing 54 tax brackets. Although it could be put off for a while, reform and revenue were needed.
Irving Fisher saw this as his chance to improve America's tax code. Rather than the 54 tax brackets of yesteryear, there would be 5. Tax rates would be raised to make up for the lost revenue from allowing all net savings to be deducted from taxable income — a policy aiming to increase investment back to pre depression levels. The brackets would be a follows:
$0 to $5,000: 4%
$5,000 to $20,000: 20%
$20,000 to $60,000: 36%
$60,000 to $200,000: 62%
$200,000 and above: 85%
That wouldn't be the only change. Capital gains were eliminated as a category, all individual proceeds from capital would be counted as income. The Revenue Act also sought to eliminate the usage of foreign subsidiaries to avoid corporate taxes and would eliminate the tax exempt status of interest on state and local bonds. Despite the anger towards personal holding companies among many democrats, the bill would allow their continued existence as it was identical to reinvest the profits and let them sit in the company.
Altogether the bill would slightly increase revenue in 1935 relative to the prior policies, it was ready to be amended the following year in order to extract more if needed. Other changes were also contemplated for 1936. In particular, corporate income taxes did not get the makeover many thought they needed.
As the news of the tax reform spreads, affluent individuals and business owners begin voicing their concerns about the steep tax hikes for higher income brackets. They argue that such high rates will discourage entrepreneurship and stifle economic growth. Some even threaten to move their businesses or investments overseas to avoid the new taxes. Such complaints fell on deaf ears as America had undergone an enormous increase in business activity. Where would they move to, England?
However, as the details of the plan become clearer, particularly the provision allowing net savings to be deducted from taxable income, the tone of the criticism shifted. The wealthy just have to reduce their consumption to significantly reduce their tax burden. It was already quite gauche to flaunt their wealth as millions roam the streets looking for jobs, some skyscrapers even being canceled in New York for that reason.
One notable exception to the saving rule is that physical currency was not able to be deducted from taxable income due to concerns over evasion. This would place a significant incentive on Americans to bring their money back to banks, buy government bonds or stocks. The announcement would bring a 5% rally in the Dow due to perceptions of increased demand for stocks in the future. The largest increases however would be concentrated in the stock of various banks as they would see influxes of capital.
Many in congress would have mixed reactions to the bill. Senator Robert La Follette (P-WI) was happy with the increased tax rates but saw the net saving deduction as a carve-out to shield the wealthy from paying their fair share. Senator Carter Glass (D-VA) was enthusiastically supportive, despite his conservative nature he was happy to support a plan that would increase credit availability and bring cash back into the financial system. On the other hand Senator William Borah (R-ID) saw little use for the reform and loudly protested the increased rates. In the end, the Revenue Act of 1934 would pass 84-8.
Address to Congress
I transmit herewith the Budget for the year ending June 30, 1935. It contains also estimates of receipts and expenditures for the current year ending June 30, 1934, and includes statements of the financial operations or status of all governmental agencies, including the National Reconstruction Administration and the American Railroad Corporation. The estimates herein given and included in the Budget have to do with general and special funds—the Government’s moneys. They do not relate to trust and contributed funds, which are not Government moneys, except where expressly referred to as such.GENERAL FINANCIAL POSITION
In my annual message to the Congress I have already summarized the problems presented by the deflationary forces of the depression, the paralyzed condition which affected the banking system, business, agriculture, transportation, and, indeed, the whole orderly continuation of the Nation’s social and economic system.
I have outlined the steps taken since last March for the resumption of normal activities and the restoration of the credit of the Government.
Of necessity these many measures have caused spending by the Government far in excess of the income of the Government.
The results of expenditures already made show themselves in concrete form in better prices for farm commodities, in renewed business activity, in increased employment, in reopening of and restored confidence in banks, and in well-organized relief.
Exclusive of debt retirement of $514,171,500 for this year, Budget estimates of expenditures, including operating expenses of the regular Government establishments and also all expenditures which may be broadly classed as caused by the necessity for recovery from the depression will amount this year (ending June 30, 1934) to $13,573,749,567. (See Budget Statement No. 3, table A.)
This total falls in broad terms into the following classifications:
| General Expenditures | |
|---|---|
| Departmental | $3,007,116,200 |
| Legislative | 18,718,500 |
| Independent Establishments | 588,857,067 |
-------------------- | |
| Subtotal | 3,614,691,767 |
| Public Debt Retirements | 514,171,500 |
-------------------- | |
| Total | 3,100,520,267 |
| Emergency Expenditures | |
|---|---|
| Public Works, National Reconstruction Administration | $2,477,190,800 |
| Redevelopment, National Reconstruction Administration | 3,105,740,200 |
| Financing, National Reconstruction Administration | 1,369,740,300 |
-------------------- | |
| National Reconstruction Administration Subtotal | 6,952,671,300 |
| American Railroad Corporation | 2,783,502,400 |
| Farm Credit Administration | 40,000,000 |
| Emergency Conservation Work | 511,705,600 |
| Tennessee Valley Authority | 37,000,000 |
| Federal Land Banks | 48,350,000 |
| Federal Deposit Insurance Corporation | 100,000,000 |
-------------------- | |
| Total | 10,473,229,300 |
| Total, general and emergency, less public debt retirements | 13,573,749,567 |
As against these expenditures, which have either been appropriated for or for which appropriations are asked, the estimated receipts for this fiscal year (ending June 30, 1934) are $3,792,938,756. (See Budget Statement No. 2, table A.)
On this basis, including, however, certain additional expenditures for 1934 which are not included in the Budget estimates but which I believe to be necessary and amounting to $1,166,000,000 as shown in a subsequent table herein, the excess of expenditures over receipts will be $10,946,810,811. Interest charges on the borrowings in excess of Budget estimates will slightly increase this figure.
On the basis of these estimates, the public debt, in the strict sense of the term, at the expiration of this fiscal year will therefore amount to approximately $28,941,000,000, or an increase as shown above of $10,946,810,811.
However, as against this increase in the total debt figure, it is right to point out that the various governmental agencies have loans outstanding with a book value of $5,881,516,189 against which collateral or assets have been pledged.
In order to make clear to the Congress what our borrowing problem is for the next 6 months, permit me to remind you that we shall have to borrow approximately 7 billion dollars of new money and, in addition, 4 billion dollars to meet maturities of a like amount.
THE FISCAL YEAR 1935 (Ending June 30, 1935)
The Budget estimates of expenditures, exclusive of debt retirement of $525,763,800 and exclusive also of such sum as may be necessary for new and extraordinary recovery purposes, for the fiscal year ending June 30, 1935 amount to $3,960,798,700.
Again summarizing the main headings of these expenditures, they fall into the following items:
| General Expenditures | |
|---|---|
| Departmental | $3,502,074,900 |
| Legislative | 19,734,500 |
| Independent Establishments | 572,466,600 |
-------------------- | |
| Subtotal | 4,094,276,000 |
| Public Debt Retirements | 525,763,800 |
-------------------- | |
| Total | 3,568,512,200 |
| Emergency Expenditures | |
|---|---|
| Public Works, National Reconstruction Administration | $1,589,883,100 |
| Redevelopment, National Reconstruction Administration | 809,520,900 |
| Financing, National Reconstruction Administration | -610,436,600 |
-------------------- | |
| National Reconstruction Administration Subtotal | 1,788,967,400 |
| Emergency Conservation Work | 72,190,000 |
| Tennessee Valley Authority | 49,000,000 |
| Federal Land Banks | 8,650,000 |
-------------------- | |
| Total | 1,809,736,400 |
| Total, general and emergency, less public debt retirements | 5,378,248,600 |
It will be noted that many of these items such as public works fall under appropriations made in 1933, the actual expenditures not taking place until after June 30, 1934. (For details of above expenditures see Budget Statement No. 3, table A.)
The above figures do not include additional loans by the National Reconstruction Administration. If its loaning authority is extended beyond June 30, 1934, it is contemplated that any additional loans by it would thereafter be taken from the new and additional recovery fund hereinafter referred to.
CONTROL
Up to now there has been no coordinated control over emergency expenditures. Today, by Executive order, I have imposed that necessary control in the Bureau of the Budget.
Heretofore, emergency expenditures have not been subject to audit by the Comptroller General of the General Accounting Office. Today I am, by Executive order, reposing in him the authority to conduct such an audit and to continue to audit each such expenditure. Hereafter, therefore, just as in the departmental expenditures, there will be, in emergency expenditures, a pre-Budget and a post audit.
By reason of the fact that the Bureau of the Budget has had no control in the past over the various expenditures, obligations, and allotments made by the emergency organizations, the task of preparing the present Budget has been the most difficult one since the Budget and Accounting Act went into effect in 1921. These difficulties, in future years, will be substantially minimized by the control which I have established.
It is evident to me, as I am sure it is evident to you, that powerful forces for recovery exist. It is by laying a foundation of confidence in the present and faith in the future that the upturn which we have so far seen will become cumulative. The cornerstone of this foundation is the good credit of the Government.
It is, therefore, not strange nor is it academic that this credit has a profound effect upon the confidence so necessary to permit the new recovery to develop into maturity.
If we maintain the course I have outlined, we can confidently look forward to cumulative beneficial forces represented by increased volume of business, more general profit, greater employment, a diminution of relief expenditures, larger governmental receipts and repayments, and greater human happiness.
Franklin D. Roosevelt.
January 3rd, 1934.
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I don't know how to get the tables to line up with each-other ;_;
The second half of this chapter is based off of this OTL report to congress: https://budgetcounsel.com/wp-conten...united-states-government-fiscal-year-1935.pdf with the numbers changed of course
The second half of this chapter is based off of this OTL report to congress: https://budgetcounsel.com/wp-conten...united-states-government-fiscal-year-1935.pdf with the numbers changed of course
I have a chapter on the military written but am wondering how plausible it would be for some large scale training in 1935 near Yellowstone to note the unreliability of American fuel tanks. Does this seem like a reasonable thing to add or is this stacking too many benefits on the US too fast?