State of the Union Address
December 6, 1932
To the Senate and House of Representatives:
In accord with my constitutional duty, I transmit herewith to the Congress
information upon the state of the Union together with recommendation of
measures for its consideration.
Our country is at peace. Our national defense has been maintained at
a high state of effectiveness. All of the executive departments of the
Government have been conducted during the year with a high devotion to
public interest. There has been a far larger degree of freedom from industrial
conflict than hitherto known. Education and science have made further advances.
The public health is to-day at its highest known level. While we have recently
engaged in the aggressive contest of a national election, its very tranquillity
and the acceptance of its results furnish abundant proof of the strength
of our institutions.
In the face of widespread hardship our people have demonstrated daily
a magnificent sense of humanity, of individual and community responsibility
for the welfare of the less fortunate. They have grown in their conceptions
and organization for cooperative action for the common welfare.
In the provision against distress during this winter, the great private
agencies of the country have been mobilized again; the generosity of our
people has again come into evidence to a degree in which all America may
take great pride. Likewise the local authorities and the States are engaged
everywhere in supplemental measures of relief. The provisions made for
loans from the Reconstruction Finance Corporation, to States that have
exhausted their own resources, guarantee that there should be no hunger
or suffering from cold in the country. The large majority of States are
showing a sturdy cooperation in the spirit of the Federal aid.
The Surgeon General, in charge of the Public Health Service, furnishes
me with the following information upon the state of public health:
MORTALITY RATE PER 1,000 OF POPULATION ON AN ANNUAL BASIS FROM REPRESENTATIVE
STATES General Infant
First 9 months of--
1928 11.9 67.8
1929 12.0 65.8
1930 11.4 62.0
1931 11.2 60.0
1932 10.6 55.0
The sickness rates from data available show the same trends. These facts
indicate the fine endeavor of the agencies which have been mobilized for
care of those in distress.
The unparalleled world-wide economic depression has continued through
the year. Due to the European collapse, the situation developed during
last fall and winter into a series of most acute crises. The unprecedented
emergency measures enacted and policies adopted undoubtedly saved the country
from economic disaster. After serving to defend the national security,
these measures began in July to show their weight and influence toward
improvement of conditions in many parts of the country. The following tables
of current business indicators show the general economic movement during
the past eleven months.
MONTHLY BUSINESS INDICES WITH SEASONAL VARIATIONS ELIMINATED
[Monthly average 1923-1925=100]
Year and Month Industrial Production Factory Employment
Freight-car loadings Department Store sales, value Exports,
value Imports, value Building Contracts, all types Industrial
Electric power consumption
December 74 69.4 69 81 46 48
January 72 68.1 64 78 39 42
February 69 67.8 62 78 45 41
March 67 66.4 61 72 41 37
April 63 64.3 59 80 38 36
May 60 62.1 54 73 37 34 26
June 59 60.0 52 71 34 36
July 58 58.3 51 67 32 27
August 60 58.8 51 66 31 29
September 66 60.3 54 70 33 32
October 66 61.1 57 70 33 32
The measures and policies which have procured this turn toward recovery
should be continued until the depression is passed, and then the emergency
agencies should be promptly liquidated. The expansion of credit facilities
by the Federal Reserve System and the Reconstruction Finance Corporation
has been of incalculable value. The loans of the latter for reproductive
works, and to railways for the creation of employment; its support of the
credit structure through loans to banks, insurance companies, railways,
building and loan associations, and to agriculture has protected the savings
and insurance policies of millions of our citizens and has relieved millions
of borrowers from duress; they have enabled industry and business to function
and expand. The assistance given to Farm Loan Banks, the establishment
of the Home Loan Banks and Agricultural Credit Associations--all in their
various ramifications have placed large sums of money at the disposal of
the people in protection and aid. Beyond this, the extensive organization
of the country in voluntary action has produced profound results.
The following table indicates direct expenditures of the Federal Government
in aid to unemployment, agriculture, and financial relief over the past
four years. The sums applied to financial relief multiply themselves many
fold, being in considerable measure the initial capital supplied to the
Reconstruction Finance Corporation, Farm Loan Banks, etc., which will be
recovered to the Treasury.
Public works (1) Agricultural relief and financial
Fiscal year ending June 30
1930 $410,420,000 $156,100,000
1931 574,870,000 196,700,000
1932 655,880,000 772,700,000
1933 717,260,000 52,000,000
Total 2,358,430,000 1,177,500,000
(1) Public Building, Highways,
Rivers and Harbors and their maintenance, naval and other vessels construction,
Continued constructive policies promoting the economic recovery of the
country must be the paramount duty of the Government. The result of the
agencies we have created and the policies we have pursued has been to buttress
our whole domestic financial structure and greatly to restore credit facilities.
But progress in recovery requires another element as well--that is fully
restored confidence in the future. Institutions and men may have resources
and credit but unless they have confidence progress is halting and insecure.
There are three definite directions in which action by the Government
at once can contribute to strengthen further the forces of recovery by
strengthening of confidence. They are the necessary foundations to any
other action, and their accomplishment would at once promote employment
and increase prices.
The first of these directions of action is the continuing reduction
of all Government expenditures, whether national, State, or local. The
difficulties of the country demand undiminished efforts toward economy
in government in every direction. Embraced in this problem is the unquestioned
balancing of the Federal Budget. That is the first necessity of national
stability and is the foundation of further recovery. It must be balanced
in an absolutely safe and sure manner if full confidence is to be inspired.
The second direction for action is the complete reorganization at once
of our banking system. The shocks to our economic life have undoubtedly
been multiplied by the weakness of this system, and until they are remedied
recovery will be greatly hampered.
The third direction for immediate action is vigorous and whole souled
cooperation with other governments in the economic field. That our major
difficulties find their origins in the economic weakness of foreign nations
requires no demonstration. The first need to-day is strengthening of commodity
prices. That can not be permanently accomplished by artificialities. It
must be accomplished by expansion in consumption of goods through the return
of stability and confidence in the world at large and that in turn can
not be fully accomplished without cooperation with other nations.
BALANCING THE BUDGET
I shall in due course present the Executive Budget to the Congress.
It will show proposed reductions in appropriations below those enacted
by the last session of the Congress by over $830,000,000. In addition I
shall present the necessary Executive orders under the recent act authorizing
the reorganization of the Federal Government which, if permitted to go
into force, will produce still further substantial economies. These sums
in reduction of appropriations will, however, be partially offset by an
increase of about $250,000,000 in uncontrollable items such as increased
debt services, etc.
In the Budget there is included only the completion of the Federal public
works projects already undertaken or under contract. Speeding up of Federal
public works during the past four years as an aid to employment has advanced
many types of such improvements to the point where further expansion can
not be justified in their usefulness to the Government or the people. As
an aid to unemployment we should beyond the normal constructive programs
substitute reproductive or so-called self-liquidating works. Loans for
such purposes have been provided for through the Reconstruction Finance
Corporation. This change in character of projects directly relieves the
taxpayer and is capable of expansion into a larger field than the direct
Federal works. The reproductive works constitute an addition to national
wealth and to future employment, whereas further undue expansion of Federal
public works is but a burden upon the future.
The Federal construction program thus limited to commitments and work
in progress under the proposed appropriations contemplates expenditures
for the next fiscal year, including naval and other vessel construction,
as well as other forms of public works and maintenance, of a total of $442,769,000,
as compared with $717,262,000 for the present year.
The expenditure on such items over the four years ending June 30 next
will amount to $2,350,000,000, or an amount of construction work eight
times as great as the cost of the Panama Canal and, except for completion
of certain long-view projects, places the Nation in many directions well
ahead of its requirements for some years to come. A normal program of about
$200,000,000 per annum should hereafter provide for the country's necessities
and will permit substantial future reduction in Federal expenditures.
I recommend that the furlough system installed last year be continued
not only because of the economy produced but because, being tantamount
to the "5-day week," it sets an example which should be followed by the
country and because it embraces within its workings the "spread work" principle
and thus serves to maintain a number of public servants who would otherwise
be deprived of all income. I feel, however, in view of the present economic
situation and the decrease in the cost of living by over 20 per cent, that
some further sacrifice should be made by salaried officials of the Government
over and above the 8 1/3 per cent reduction under the furlough system.
I will recommend that after exempting the first $1,000 of salary there
should be a temporary reduction for one year of 11 per cent of that part
of all Government salaries in excess of the $1,000 exemption, the result
of which, combined with the furlough system, will average about 14.8 per
cent reduction in pay to those earning more than $1,000.
I will recommend measures to eliminate certain payments in the veterans'
services. I conceive these outlays were entirely beyond the original intentions
of Congress in building up veterans' allowances. Many abuses have grown
up from ill-considered legislation. They should be eliminated. The Nation
should not ask for a reduction in allowances to men and dependents whose
disabilities rise out of war service nor to those veterans with substantial
service who have become totally disabled from non-war-connected causes
and who are at the same time without other support. These latter veterans
are a charge on the community at some point, and I feel that in view of
their service to the Nation as a whole the responsibility should fall upon
the Federal Government.
Many of the economies recommended in the Budget were presented at the
last session of the Congress but failed of adoption. If the Economy and
Appropriations Committees of the Congress in canvassing these proposed
expenditures shall find further reductions which can be made without impairing
essential Government services, it will be welcomed both by the country
and by myself. But under no circumstances do I feel that the Congress should
fail to uphold the total of reductions recommended.
Some of the older revenues and some of the revenues provided under the
act passed during the last session of the Congress, particularly those
generally referred to as the nuisance taxes, have not been as prolific
of income as had been hoped. Further revenue is necessary in addition to
the amount of reductions in expenditures recommended. Many of the manufacturers'
excise taxes upon selected industries not only failed to produce satisfactory
revenue, but they are in many ways unjust and discriminatory. The time
has come when, if the Government is to have an adequate basis of revenue
to assure a balanced Budget, this system of special manufacturers' excise
taxes should be extended to cover practically all manufactures at a uniform
rate, except necessary food and possibly some grades of clothing.
At the last session the Congress responded to my request for authority
to reorganize the Government departments. The act provides for the grouping
and consolidation of executive and administrative agencies according to
major purpose, and thereby reducing the number and overlap and duplication
of effort. Executive orders issued for these purposes are required to be
transmitted to the Congress while in session and do not become effective
until after the expiration of 60 calendar days after such transmission,
unless the Congress shall sooner approve.
I shall issue such Executive orders within a few days grouping or consolidating
over fifty executive and administrative agencies including a large number
of commissions and "independent" agencies.
The second step, of course, remains that after these various bureaus
and agencies are placed cheek by jowl into such groups, the administrative
officers in charge of the groups shall eliminate their overlap and still
further consolidate these activities. Therein lie large economies.
The Congress must be warned that a host of interested persons inside
and outside the Government whose vision is concentrated on some particular
function will at once protest against these proposals. These same sorts
of activities have prevented reorganization of the Government for over
a quarter of a century. They must be disregarded if the task is to be accomplished.
The basis of every other and every further effort toward recovery is
to reorganize at once our banking system. The shocks to our economic system
have undoubtedly multiplied by the weakness of our financial system. I
first called attention of the Congress in 1929 to this condition, and I
have unceasingly recommended remedy since that time. The subject has been
exhaustively investigated both by the committees of the Congress and the
officers of the Federal Reserve System.
The banking and financial system is presumed to serve in furnishing
the essential lubricant to the wheels of industry, agriculture, and commerce,
that is, credit. Its diversion from proper use, its improper use, or its
insufficiency instantly brings hardship and dislocation in economic life.
As a system our banking has failed to meet this great emergency. It can
be said without question of doubt that our losses and distress have been
greatly augmented by its wholly inadequate organization. Its inability
as a system to respond to our needs is to-day a constant drain upon progress
toward recovery. In this statement I am not referring to individual banks
or bankers. Thousands of them have shown distinguished courage and ability.
On the contrary, I am referring to the system itself, which is so organized,
or so lacking in organization, that in an emergency its very mechanism
jeopardizes or paralyzes the action of sound banks and its instability
is responsible for periodic dangers to our whole economic system.
Bank failures rose in 1931 to 10 1/2 per cent of all the banks as compared
to 1 1/2 per cent of the failures of all other types of enterprise. Since
January 1, 1930, we have had 4,665 banks suspend, with $3,300,000,000 in
deposits. Partly from fears and drains from abroad, partly from these failures
themselves (which indeed often caused closing of sound banks), we have
witnessed hoarding of currency to an enormous sum, rising during the height
of the crisis to over $1,600,000,000. The results from interreaction of
cause and effect have expressed themselves in strangulation of credit which
at times has almost stifled the Nation's business and agriculture. The
losses, suffering, and tragedies of our people are incalculable. Not alone
do they lie in the losses of savings to millions of homes, injury by deprival
of working capital to thousands of small businesses, but also, in the frantic
pressure to recall loans to meet pressures of hoarding and in liquidation
of failed banks, millions of other people have suffered in the loss of
their homes and farms, businesses have been ruined, unemployment increased,
and farmers' prices diminished.
That this failure to function is unnecessary and is the fault of our
particular system is plainly indicated by the fact that in Great Britain,
where the economic mechanism has suffered far greater shocks than our own,
there has not been a single bank failure during the depression. Again in
Canada, where the situation has been in large degree identical with our
own, there have not been substantial bank failures.
The creation of the Reconstruction Finance Corporation and the amendments
to the Federal Reserve Act served to defend the Nation in a great crisis.
They are not remedies; they are relief. It is inconceivable that the Reconstruction
Corporation, which has extended aid to nearly 6,000 institutions and is
manifestly but a temporary device, can go on indefinitely.
It is to-day a matter of satisfaction that the rate of bank failures,
of hoarding, and the demands upon the Reconstruction Corporation have greatly
lessened. The acute phases of the crisis have obviously passed and the
time has now come when this national danger and this failure to respond
to national necessities must be ended and the measures to end them can
be safely undertaken. Methods of reform have been exhaustively examined.
There is no reason now why solution should not be found at the present
session of the Congress. Inflation of currency or governmental conduct
of banking can have no part in these reforms. The Government must abide
within the field of constructive organization, regulation, and the enforcement
of safe practices only.
Parallel with reform in the banking laws must be changes in the Federal
Farm Loan Banking system and in the Joint Stock Land Banks. Some of these
changes should be directed to permanent improvement and some to emergency
aid to our people where they wish to fight to save their farms and homes.
I wish again to emphasize this view--that these widespread banking reforms
are a national necessity and are the first requisites for further recovery
in agriculture and business. They should have immediate consideration as
steps greatly needed to further recovery.
ECONOMIC COOPERATION WITH OTHER NATIONS
Our major difficulties during the past two years find their origins
in the shocks from economic collapse abroad which in turn are the aftermath
of the Great War. If we are to secure rapid and assured recovery and protection
for the future we must cooperate with foreign nations in many measures.
We have actively engaged in a World Disarmament Conference where, with
success, we should reduce our own tax burdens and the tax burdens of other
major nations. We should increase political stability of the world. We
should lessen the danger of war by increasing defensive powers and decreasing
offensive powers of nations. We would thus open new vistas of economic
expansion for the world.
We are participating in the formulation of a World Economic Conference,
successful results from which would contribute much to advance in agricultural
prices, employment, and business. Currency depreciation and correlated
forces have contributed greatly to decrease in price levels. Moreover,
from these origins rise most of the destructive trade barriers now stifling
the commerce of the world. We could by successful action increase security
and expand trade through stability in international exchange and monetary
values. By such action world confidence could be restored. It would bring
courage and stability, which will reflect into every home in our land.
The European governments, obligated to us in war debts, have requested
that there should be suspension of payments due the United States on December
15 next, to be accompanied by exchange of views upon this debt question.
Our Government has informed them that we do not approve of suspension of
the December 15 payments. I have stated that I would recommend to the Congress
methods to overcome temporary exchange difficulties in connection with
this payment from nations where it may be necessary.
In the meantime I wish to reiterate that here are three great fields
of international action which must be considered not in part but as a whole.
They are of most vital interest to our people. Within them there are not
only grave dangers if we fail in right action but there also tie immense
opportunities for good if we shall succeed. Within success there lie major
remedies for our economic distress and major progress in stability and
security to every fireside in our country.
The welfare of our people is dependent upon successful issue of the
great causes of world peace, world disarmament, and organized world recovery.
Nor is it too much to say that to-day as never before the welfare of mankind
and the preservation of civilization depend upon our solution of these
questions. Such solutions can not be attained except by honest friendship,
by adherence to agreements entered upon until mutually revised and by cooperation
amongst nations in a determination to find solutions which will be mutually
I have placed various legislative needs before the Congress in previous
messages, and these views require no amplification on this occasion. I
have urged the need for reform in our transportation and power regulation,
in the antitrust laws as applied to our national resource industries, western
range conservation, extension of Federal aid to child health services,
membership in the World Court, the ratification of the Great Lakes-St.
Lawrence Seaway Treaty, revision of the bankruptcy acts, revision of Federal
court procedure, and many other pressing problems.
These and other special subjects I shall where necessary deal with by
special communications to the Congress.
The activities of our Government are so great, when combined with the
emergency activities which have arisen out of the world crisis, that even
the briefest review of them would render the annual message unduly long.
I shall therefore avail myself of the fact that every detail of the Government
is covered in the reports to the Congress by each of the departments and
agencies of the Government.
It seems to me appropriate upon this occasion to make certain general
observations upon the principles which must dominate the solution of problems
now pressing upon the Nation. Legislation in response to national needs
will be effective only if every such act conforms to a complete philosophy
of the people's purposes and destiny. Ours is a distinctive government
with a unique history and background, consciously dedicated to specific
ideals of liberty and to a faith in the inviolable sanctity of the individual
human spirit. Furthermore, the continued existence and adequate functioning
of our government in preservation of ordered liberty and stimulation of
progress depends upon the maintenance of State, local, institutional, and
individual sense of responsibility. We have builded a system of individualism
peculiarly our own which must not be forgotten in any governmental acts,
for from it have grown greater accomplishments than those of any other
On the social and economic sides, the background of our American system
and the motivation of progress is essentially that we should allow free
play of social and economic forces as far as will not limit equality of
opportunity and as will at the same time stimulate the initiative and enterprise
of our people. In the maintenance of this balance the Federal Government
can permit of no privilege to any person or group. It should act as a regulatory
agent and not as a participant in economic and social life. The moment
the Government participates, it becomes a competitor with the people. As
a competitor it becomes at once a tyranny in whatever direction it may
touch. We have around us numerous such experiences, no one of which can
be found to have justified itself except in cases where the people as a
whole have met forces beyond their control, such as those of the Great
War and this great depression, where the full powers of the Federal Government
must be exerted to protect the people. But even these must be limited to
an emergency sense and must be promptly ended when these dangers are overcome.
With the free development of science and the consequent multitude of
inventions, some of which are absolutely revolutionary in our national
life, the Government must not only stimulate the social and economic responsibility
of individuals and private institutions but it must also give leadership
to cooperative action amongst the people which will soften the effect of
these revolutions and thus secure social transformations in an orderly
manner. The highest form of self-government is the voluntary cooperation
within our people for such purposes.
But I would emphasize again that social and economic solutions, as such,
will not avail to satisfy the aspirations of the people unless they conform
with the traditions of our race deeply grooved in their sentiments through
a century and a half of struggle for ideals of life that are rooted in
religion and fed from purely spiritual springs.