Acts of the 81st United States Congress
"Should any party attempt to abolish social security and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group of course, that believes you can do these things ... their number is negligible and they are stupid."
- Dwight D. Eisenhower (OTL)
Taft would earn the ire of internationalists on both sides of aisle early in his tenure by standing in opposition to the European Recovery Act of 1949. The act, which was stuck down in its earlier form by a Republican congress led by a then-Senator Robert Taft, was the centerpiece of the abortive "Harriman Plan" to provide aid to the still recovering nations of Europe. [1] While some Republican congressmen were persuaded of the necessity of the European recovery package by a wave of Communist coups in Eastern Europe, the "ayes" did not constitute a veto proof majority. [2] When the president proved unwilling to budge on the issue, derisively dubbing the legislation the "European Handout Act", the aid plan was dealt a devastating blow from which it would never recover. [3] Any New Deal style legislation offered up by the Democrats to deal with the ongoing recession were similarly shot down, often without even reaching the president's desk. While there was a strong divide in the GOP between the internationalists and isolationists which theoretically made a bipartisan approach to the "European Question" a possibility (until all compromise was rejected out of hand by the president that is) there was much more agreement among Republicans on domestic issues. With control of both houses and the White House, the Republicans immediately got to work implementing their agenda. Contrary to what most modern historiographers detail, that agenda wasn't strictly a cocktail of fiscal conservatism and regressivism. One particular bright spot came in the form of the Housing Act of 1949. [4] The act invested billions in the construction of new public housing and slum clearance. Despite the derision the term "Taft Tenements" earned by the late 1980's as the temporary structures began to crumble and the political circumstances of the time precluded their upkeep or replacement, the Housing Act was a huge step forward in the provision of public housing in the United States.
Ultimately though, the achievements of the housing act were politically overshadowed by the unraveling of Democratic Party. Dixiecrats balked at expense of an urban redevelopment program that would see an unprecedented level of investment in minority (read: colored) neighborhoods. Unscrupulous southerners would get around this "problem" by simply destroying minority-heavy slums and building more expensive housing that only whites could afford on the ruins. [5] But the unwillingness of the northern Democrats to join their southern colleagues in adding "correct" language to the legislation strangled in the cradle any united front that might have formed in opposition to the GOP's more controversial policy positions. Any talk of united messaging on part of the Democrats was doomed to failure from that point on, as someone in each strategy meeting inevitably said something about "the Negros" that rendered the whole affair a shouting match. More distressingly President Taft gained a reputation as a civil rights fighter despite believing that the federal government had no role to play in forwarding racial justice. With a divided opposition, the first two-years of the Taft administration would be one of the most productive since the days of the new deal coalition.
School funding reform was implemented with the passage of the appropriately named Education Act of 1949. The Democrats, once again, splintered over provisions that allocated funding to Negro schools in equal proportions to White schools. Ironically there wasn't much for the Democrats to really fight about. Taft, a firm believer in small government, ensured that much of the bureaucracy designed to make sure that the funding got where it needed to go would be handled at the state level. Northern Democrats could be satisfied with the basic tenants of the reform while Dixicrats could, and did, "lose" the funding appropriated for Negro schools. Naturally though "policy nuance" was not in the vocabulary of southern firebrands like James Eastland and Herman Talmadge. This was no tonic for Democratic unity. Additionally the Dixiecrats themselves were divided on the issue when party elders like James Byrnes came out in favor of the Housing Act. Byrnes saw the writing on the wall and knew that the days of strict white racial supremacy were over. Consequently Byrnes and other governors worked for "truly separate, truly equal", a set of policies designed to keep segregation alive while bring "colored" facilities up to the standard of white facilities as a sop to the Negro community.
In terms of the "red-baiting" of the 81st United States Congress it is instructive to remember that the red scare was a bi-partisan initiative. The Communist Subversion Act, which banned and criminalized Communist Party membership, was passed near-unanimously by both houses with the strong vocal backing of Vice President Stassen. [6] The McCarran Internal Security Act, on the other hand, was championed by Democrats. McCarran himself was of course a strong supporter as was the darling of the left, Minnesota Senator Hubert Humphrey. [7] The fact that the McCarran Act was thoroughly demonized by Democrats decades down the line obscures the fact that they were instrumental in its passage. Not that it should be surprising. FDR, father of the modern Democratic Party, set the precedent for jailing American citizens on dubious charges of treason when he implemented Executive Order 9066... [8]
Despite driving a wedge in the opposition and peeling off votes from waffly Democrats with the less controversial aspects of their agenda, House Republicans completely shut their colleagues out of the negotiating process when it came to the policies that "mattered". One of the most notable of these "unilateral" policies was the Labor Security Act. Brainchild of the president, the LSA
de facto stripped unions of many of the collective bargaining rights they had struggled to achieve over the decades. The willing of a supposed "small government" Republican to use "big government" to crush the American worker turned heads in even Taft's own GOP. Nevertheless, newly elected Senate Majority Leader Kenneth S. Wherry kept enough of the party in line to prevent any sort of serious bi-partisan challenge to the measure. Majority Leader Wherry had gained a reputation as one of Taft's most effective and tireless political generals. The Senator from Nebraska had come a long way since his days of decrying President Morgenthau as a "war criminal" and now stuck fear and obedience into GOP senators that were shaken by how far right Taft had taken the party. The Majority Leader even went so far as to threaten to exposure of certain colleagues as "homosexuals" to ensure their compliance. Wherry, next to Roy Cohn, is considered the chief architect behind the so-called "Lavender Scare" against "sexual deviants" that accompanied Joseph McCarthy's targeting of "red subversives".
The GOP supermajority had rendered the House Democrats irrelevant and the Tax Reform Act of 1949 was effectively a compromise between the two fiscal wings of the Republican Party. The conservatives were led by President Taft while the liberals were championed by Charles Taft, the president's brother. [9] The final draft saw the top tax rate slashed to 50% while the bottom rate was lowered from 20% to 10%. Many lower level tax brackets were also eliminated, reducing the number of income groupings from twenty-four to fourteen. [10] Cuts to the cooperate tax rates were, thanks to the intervention of Charles, much more modest. The top cooperate tax rate was lowered from 38% to 35%. This set of compromises pleased nobody. The conservatives wanted more cuts, the liberals less, while the Democrats just stood shellshocked at how the Republicans had overturned decades worth of progressive taxation over a few drinks at Speaker Joseph Martin's mansion.
Although with hindsight one might assume that the American people were just as outraged as the Democrats, the reality is less cut and dry. There was initially a mixed reaction among the public, the country was still languishing in a recession and few objected to having more money in their pocket. The chief criticism was naturally that the reform seemed to be slanted in favor of the rich. While nearly everyone's rates were cut in half, the poorest of the poor only saw a 10 point reduction. Taft, far from the bourgeois caricature that most historiographers make him out to be, took to polling to heart and demanded a second round of tax reform before the midterm elections.
Taft himself originally favored the so called "3-2-5" plan, which would have cut all rates in half a second time and consolidated the tax code into just two brackets. There was to be a bottom rate of 5%, a top rate of 25%, and a top cooperate tax rate of 25%. In other words a 2 bracket structure with rates of 5%/25% and a cooperate rate of 25% "three two's and five's". But this plan was essentially a more bold version of the 49' reform and obviously didn't address the "rich favoritism" criticism circulating among the public, a criticism shared and repeated loudly by the Democrats.
Congressional lore would have us believe that the new Republican proposal resulted from offhand comment by Speaker Joseph Martin. Allegedly Martin had floated the idea of a passing a watered down reform ahead of the midterms that simply cut all brackets "by ten" a 10% reduction in all rates. But Taft, thinking Martin was referring to his "3-2-5" plan and advocating for a raw 10 point cut, retorted that a ten point drop would leave people in his lower bracket with no taxes at all... no taxes at all? no taxes at all! Working from the "3-2-5" plan the 50% reduction in the top individual tax rate was retained while both the bottom rate and the top corporate rate (now the only corporate rate) was slashed by ten points each, leaving the bottom individual tax rate at "0%". Thus the Flat Tax Act was born. The sole 25% rate would only be charged to individual and corporate income in excess $100,000. [11] The act also closed the remaining loopholes leftover from the last reform. In addition, it was stipulated that capital gains tax would face the same tax rate as ordinary income. The Democrats were livid and the liberals refused to go down without a fight a second time. Newly elected Senator Hubert Humphrey set a filibuster record when he spoke for 24 hours straight against the legislation. [12] The valiant effort was in vain however as Senate Majority Leader Wherry, who had long since lost his patience with the upstart Minnesotan, invoked the
nuclear option and called for a vote. The result was a 50-50 tie, seven "Conscience Republicans" had broken party lines and voted against the measure, nevertheless the tie was broken by Vice President Stassen and the Flat Tax Act went to President Taft's desk for a signature...
Senate Majority Leader Kenneth Wherry:
"Our seniors deserve the freedom to make decisions about their retirement benefits without bureaucratic red tape and government mandates stifling their choices," "Every time the government acts, it does so at the expense of personal liberty," "This is a common-sense step toward reforming our broken entitlement system, allowing seniors to choose what retirement plan is best for their individual needs," "Retirement benefits are intended to provide freedom to seniors, today we restore that freedom." [12]
Senator Hubert Humphrey:
"Social Security, as it stands, takes a little out of each of your paychecks and puts it toward everyone's retirement. When someone retires, they get their investment back with interest. This plan that the Republicans are proposing would take that little from your paycheck and give it to their friends on wallstreet. They'll gamble with your hard-earned money, and if they win they get a big payout while your net gains will be marginal. But if they lose, they just get handed someone else's savings. You, the retiree, have no recourse. Mr. Taft and his billionaire friends couch this debate in talk of "freedom" and "liberty" but the truth is, as President Roosevelt once said, "government by organized money is no different than government by organized mob". And that's all this is, an organized mob of wall-streeters that want to gamble with your future...
The privatization of social security was one of the centerpieces of the 49'-50' reforms. While the Democrats derided the "return of 1929" the Republicans argued that privatization would give people the opportunity to earn large returns on their retirement portfolios, especially with the anticipated stock market boom that would accompany the passage of the Langer Act. The Lagner Act repealed the earlier Glass-Steagall legislation that had "tied the hands of investors" to borrow the words of Speaker Joseph Martin... [14]
Footnotes:
[1] TTLs version of the Marshall Plan. Taft reluctantly came around to the Marshall Plan IOTL after some extensive wheeling and dealing. With the damage Morgenthau did, control of both houses, himself in the White House, and a huge mandate, Taft isn't exactly in a compromising mood ITTL.
[2] As per OTL Stalin is extinguishing lingering pro-democracy governments in Eastern Europe.
[3] Some cash is flowing in Europe's direction still, but Taft is cutting it off where he can.
[4] Taft was a big-time supporter of housing reform IOTL, go figure.
[5] OTL
[6] He supported such legislation IOTL.
[7] Humphrey was a supporter IOTL as well.
[8] Better known as Japanese internment.
[9] IOTL Charles Phelps Taft II was quite liberal for a Republican but naturally remained a strong ally of his brother. Milton Eisenhower and RFK are good OTL figures to invoke here.
[10] To give an OTL comparison Ronald Reagan signed two income tax reform acts into law during his first two years in office. The first act lowered the number of tax brackets (among other things) while the second dropped the top tax rate down to 50%. During Reagan's last two years in office he signed an additional two acts. The first act lowered the number of tax brackets (again) and reduced the top rate to 38.5%, the second act lowered the number of tax brackets (this time to a record low of only 2*) and reduced the top rate down to 28%. The latter act (the one he signed in 1988) was also notable for being the only time in American history that the top rate was reduced while, at the same time, the bottom rate was increased (it was raised from 11% to 15%). Not even Taft attempts that ITTL, frankly I have no idea how Reagan got it done IOTL.
*Well actually the rates were 15%/28%/33%/28%, but I won't get into the minutia here. The point is that sweeping tax reform is possible and has been implemented IOTL (albeit much later than it has been done ITTL).
[11] I want to stress that President Reagan IOTL cut the number of income brackets from 25 to 2*. He dropped the top tax rate to 28% and raised taxes on those in the lowest income bracket. He did all this with either a divided Congress or outright Democratic control of both houses. Taft has a similar proposal here. The difference being that Taft is explicitly lowering taxes on the poor and has both houses under his control which incentivizes the speedy passage of his agenda. Although it should be noted that, as previously mentioned, Reagan passed two big tax cuts in his first two years in office IOTL.
[12] IOTL Strom Thurmond set this record speaking against the Civil Rights Act
[13] These talking points are taken almost directly from OTL GOP politicians.