When the debacle of late 1929 occurred, President Hoover im mediately summoned to Washington representatives of industry and labour. From the employers he asked an agreement to main tain employment and wage levels and from the labour leaders as surances that they would discourage strikes and demands for wage increases. Both agreed and both carried out in 1930-31 the spirit of the agreements. Leaders in the public utility and other fields launched additional construction and repair work ; the President assured the nation that "any lack of confidence in the economic future or the basic strength of business in the United States is foolish." Immigration was stopped by refusal of American con suls abroad to issue visas. Increased Federal public works were provided. In Feb. 1931, a Federal Employment Stabilization Board was created to advise the President from time to time of the trend of employment and business activity. Meanwhile, the President strenuously opposed all suggestions that the Federal Government subsidize unemployment relief or establish unemploy ment insurance. In Dec. 1931, the President recommended the establishment of a Federal Home Loan Board and of home loan discount banks in each Federal Reserve district to stimulate home building. He also recommended that an institution be created with a credit banking of at least $5oo,000,000 to discount banking assets, make possible the immediate liquidity of bank reserves if necessary. The result was the creation of the Reconstruction Finance Corporation (RFC) in Jan. 1932. This was the supreme effort of the Republican Administration to get the workman back to his job, to put the farmer in a more secure position, to make the banking system function normally, and to re-establish busi ness enterprise. Never before had the Federal Government ever made such a constructive effort to lift the country out of a de pression. But conditions got steadily worse, not because of but in spite of these measures.
In July 1932, Congress abandoned the President's theory that relief is a purely local duty. It permitted the RFC to loan up to $300,000,000 to the States "to be used in furnishing relief and work relief to needy and distressed people and in relieving the hardship resulting from unemployment." The new policy was forced by nation-wide demands that the Federal Government aid in unemployment relief and by the practical fact that the relief burden was becoming greater than local governments could bear. Many of them were approaching bankruptcy.
Thus, down to the end of 1932, the American program for eco nomic recovery stressed the rehabilitation of banks and other fi nancial institutions and the promotion of public and private con struction, and grudgingly yielded to the need for national sub sidies for unemployment relief. Meanwhile the State and municipal governments had expanded both direct and work relief to unprecedented volume.
The year 1933 witnessed rapid development in Federal unem ployment policies. A new administration was in office and the Federal Government quickly accepted the responsibilities which the previous administration believed would be disastrous in their final effects. At present (1940) it is too soon to know what the
final effects of the experiment will be. The Federal emergency relief law of May 12, 1933, which created the Federal Emergency Relief Administration (FERA) (H.R. 4606, Public No. 15, 73rd Congress), substituted Federal grants for relief for the loans to State and local governments which had been the sole form of Federal aid under the previous administration. It provided $500, 000,000 for relief to be expended by a Federal Relief Administra tor. (See RELIEF.) During the next 2+ years a diversified, na tionally administered outdoor relief system was the principal means of support both of the unemployed and many thousands from other social groups who became destitute. In Feb. there were 27,749,000 persons in receipt of public assistance of all kinds, with an estimated 11,587,000 persons out of employment.
The catastrophic decline of the construction industry of the United States, 1930-32, was one of the outstanding features of the depression. In 1933, the Public Works Administration (PWA) was created to counteract the effects of the decline in private construction. The appropriation, $3,300,000,000, approximated an average year's expenditures on public works in the United States in the five years before the depression. But under PWA, the financing was at cost of the Federal Government alone and the administration of the public works was under national control instead of under the scattered controls of State, city, county, township, and village governments. This appropriation was to be spent in the ordinary way, i.e., through the letting of the work to private contractors, and the labour to be employed was not re quired to be from the relief rolls.
The PWA expenditures have been the largest ever made by any nation to carry out the theory of counterbalancing business de pression by an expansion of public works. The program quickly ran into difficulties, however. So much time was consumed in the preparation of specifications, drawings, the receiving of bids, allotment of contracts, and the preliminary work which must pre cede maximum employment on large works projects, that the pro gram could not get under way fast enough to have any marked effect upon the unemployment situation. Consequently the Gov ernment, in Nov. diverted $400,000,000 from the PWA ap propriation for the purpose of "increasing employment quickly." These moneys were turned over to the FERA for the establish ment of a Civil Works Administration to furnish as much immedi ate employment as possible to about 4,000,000 unemployed men and women. The Civil Works Administration was created by executive order, Nov. 9, 1933. Within a few days the governors, mayors of cities, and relief administrators from all the States were called to Washington, given hurry-up instructions and sent home to get the program under way.