Economy Act
Encyclopedia
The Economy Act of 1933, officially titled the Act of March 20, 1933 (ch. 3, ; ), is an Act of Congress
that cut the salaries of federal workers and reduced benefit payments to veteran
s, moves intended to reduce the federal deficit
in the United States
.
The Economy Act of 1933 is different from the Economy Act of 1932. The Economy Act of 1932 was signed in the final days of the Hoover administration
in February 1933. This sometimes leads to confusion between the two pieces of legislation. The Hoover-sponsored bill established the purchasing authority of the federal government and remains in force as of 2009.
, Franklin D. Roosevelt
had campaigned for the Presidency
, in part, on a pledge to balance the federal budget
. On March 10, 1933, six days after his inauguration, Roosevelt submitted legislation to Congress which would cut $500 million ($8.181 billion in 2009 dollars) from the $3.6 billion federal budget by eliminating government agencies, reducing the pay of civilian and military federal workers (including members of Congress), and slashing veterans' benefits by 50 percent. Veterans benefits constituted a quarter of the federal budget at the time. The Act was written primarily by Lewis Douglas
, Roosevelt's Director of the Budget
, and Grenville Clark
, a private attorney.
The Act faced stiff opposition in the Congress. On June 17, 1932, the Bonus Army
(about 17,000 World War I
veterans and 26,000 of their family members and affiliated groups) had established a Hooverville
shanty town on the Anacostia Flats area of Washington, D.C.
On July 28, the U.S. 12th Infantry Regiment
commanded by General Douglas MacArthur
and the 3rd Cavalry Regiment (supported by six tank
s) commanded by Major George S. Patton
attacked and set afire the Bonus Army's encampment, injuring hundreds and killing several veterans and civilians. Congress was forced to flee the city for several days after outraged veterans ringed the United States Capitol
. The political backlash caused by the attack on the Bonus Army led to the defeat of several members of Congress that fall. Many in Congress, remembering the incident, did not want to support the Economy Act. The House Democratic Caucus
even refused to support the bill. Heavily opposed by liberal Democrats
(92 of whom voted against it), the bill passed the House of Representatives
only with heavy support of Republicans
and conservative Democrats. The bill easily passed the Senate
only because the Senate Democratic Caucus
had scheduled a vote on the popular Cullen-Harrison Act (amending the Volstead Act
to allow the manufacture and sale of beer and light wines) immediately after the vote on the Economy Act—allowing Senators to cast vote for one very unpopular bill and one very popular bill in quick succession.
The President signed the Economy Act into law on March 20, 1933.
, Willis Van Devanter
and George Sutherland
, refused to retire, remained on the bench, and struck down some of Roosevelt's recovery acts; Supreme Court pensions were originally halved in 1932, but had been temporarly restored by Congress to full pay in February of 1933. These two justices would likely have retired from the Supreme Court early into Roosevelt's first term if their pensions had not been halved.
The Economy Act also gave the President limited authority to reorganize executive branch agencies to achieve efficiency, but this power was not utilized much before the Act expired in 1935. By March 3, 1935, Roosevelt had issued 27 reorganization orders, most of them minor in nature. Roosevelt did not engage in extensive reorganization efforts until the passage of the Reorganization Act of 1939
gave him that authority.
Its most important provisions, however, repealed all federal laws regarding veterans' benefits. Section 17 of the Act declared: "All public laws granting medical or hospital treatment, domiciliary care, compensation, and other allowances, pension, disability allowance, or retirement pay to veterans and the dependents of veterans of ... the World War, ... are hereby repealed, and all laws granting or pertaining to yearly renewable term insurance are hereby repealed. ..." However, the Act allowed the president to re-establish these benefits for two years via executive order at levels the President deemed appropriate. Benefits for non-disabled veterans fell more than 40 percent, creating deep resentment among former soldiers and officers and leading to the establishment of the Veterans of Foreign Wars
as a major force in American politics. The Economy Act caused a second Bonus Army to form. But Roosevelt handled this protest much more carefully than Hoover had: His administration set up an encampment for the protesters (albeit too far from the Capitol to make their protest effective), prohibited loitering in the District of Columbia (forcing the marchers to stay outside the city), sent Eleanor Roosevelt
to deliver food and medicine to the marchers and hear their grievances, and encouraged the ex-servicemen to seek work with the Civilian Conservation Corps
(which many did). Veterans nonetheless sued to have their benefits restored. In Lynch v. United States, 292 U.S. 571 (1934) and United States v. Jackson
, 302 U.S. 628 (1938), the Supreme Court of the United States
ruled that Congress had violated federal law in eliminating certain insurance guarantees formerly offered to veterans by the War Risk Insurance Act
(as amended December 24, 1919; Chapter 16, Section 12, 41 Stat. 371), and those benefits were restored.
The Economy Act had little effect on either the federal deficit or the economy. Spending in other areas rose so substantially that it dwarfed the cuts imposed by the Economy Act. The benefit cuts also did not last. In June 1933 Roosevelt restored $50 million in pension payments, and Congress added another $46 million more. In January 1934, Roosevelt added another $21 million for veterans whose disabilities were service-connected but not service-caused. And in March 1934 Congress overrode Roosevelt's veto and added another $90 million in veterans benefits and $120 million to federal workers' salaries. On October 1934, Roosevelt restored $60 million in federal salary cuts, and restored cuts to veterans who had served in the Spanish-American War
, Philippine-American War
, and Boxer Rebellion
.
Act of Congress
An Act of Congress is a statute enacted by government with a legislature named "Congress," such as the United States Congress or the Congress of the Philippines....
that cut the salaries of federal workers and reduced benefit payments to veteran
Veteran
A veteran is a person who has had long service or experience in a particular occupation or field; " A veteran of ..."...
s, moves intended to reduce the federal deficit
United States public debt
The United States public debt is the money borrowed by the federal government of the United States at any one time through the issue of securities by the Treasury and other federal government agencies...
in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
The Economy Act of 1933 is different from the Economy Act of 1932. The Economy Act of 1932 was signed in the final days of the Hoover administration
Herbert Hoover
Herbert Clark Hoover was the 31st President of the United States . Hoover was originally a professional mining engineer and author. As the United States Secretary of Commerce in the 1920s under Presidents Warren Harding and Calvin Coolidge, he promoted partnerships between government and business...
in February 1933. This sometimes leads to confusion between the two pieces of legislation. The Hoover-sponsored bill established the purchasing authority of the federal government and remains in force as of 2009.
Enactment
As Governor of New YorkGovernor of New York
The Governor of the State of New York is the chief executive of the State of New York. The governor is the head of the executive branch of New York's state government and the commander-in-chief of the state's military and naval forces. The officeholder is afforded the courtesy title of His/Her...
, Franklin D. Roosevelt
Franklin D. Roosevelt
Franklin Delano Roosevelt , also known by his initials, FDR, was the 32nd President of the United States and a central figure in world events during the mid-20th century, leading the United States during a time of worldwide economic crisis and world war...
had campaigned for the Presidency
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
, in part, on a pledge to balance the federal budget
United States federal budget
The Budget of the United States Government is the President's proposal to the U.S. Congress which recommends funding levels for the next fiscal year, beginning October 1. Congressional decisions are governed by rules and legislation regarding the federal budget process...
. On March 10, 1933, six days after his inauguration, Roosevelt submitted legislation to Congress which would cut $500 million ($8.181 billion in 2009 dollars) from the $3.6 billion federal budget by eliminating government agencies, reducing the pay of civilian and military federal workers (including members of Congress), and slashing veterans' benefits by 50 percent. Veterans benefits constituted a quarter of the federal budget at the time. The Act was written primarily by Lewis Douglas
Lewis Williams Douglas
Lewis Williams Douglas was an American politician, diplomat, businessman and academic.-Early life and education:...
, Roosevelt's Director of the Budget
United States Office of Management and Budget
The Office of Management and Budget is a Cabinet-level office, and is the largest office within the Executive Office of the President of the United States .The current OMB Director is Jacob Lew.-History:...
, and Grenville Clark
Grenville Clark
Grenville Clark was the writer of the book World Peace Through World Law...
, a private attorney.
The Act faced stiff opposition in the Congress. On June 17, 1932, the Bonus Army
Bonus Army
The Bonus Army was the popular name of an assemblage of some 43,000 marchers—17,000 World War I veterans, their families, and affiliated groups—who gathered in Washington, D.C., in the spring and summer of 1932 to demand immediate cash-payment redemption of their service certificates...
(about 17,000 World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
veterans and 26,000 of their family members and affiliated groups) had established a Hooverville
Hooverville
A 'Hooverville' was the popular name for shanty towns built by homeless people during the Great Depression. They were named after the President of the United States at the time, Herbert Hoover, because he allegedly let the nation slide into depression...
shanty town on the Anacostia Flats area of Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
On July 28, the U.S. 12th Infantry Regiment
U.S. 12th Infantry Regiment
The 12th Infantry Regiment is one of the oldest and most decorated units of the United States Army. The 12th Regiment has fought in seven wars from the Civil War to the Global War on Terrorism and has been awarded four Presidential Unit Citations, five Valorous Unit Awards and the Belgian...
commanded by General Douglas MacArthur
Douglas MacArthur
General of the Army Douglas MacArthur was an American general and field marshal of the Philippine Army. He was a Chief of Staff of the United States Army during the 1930s and played a prominent role in the Pacific theater during World War II. He received the Medal of Honor for his service in the...
and the 3rd Cavalry Regiment (supported by six tank
Tank
A tank is a tracked, armoured fighting vehicle designed for front-line combat which combines operational mobility, tactical offensive, and defensive capabilities...
s) commanded by Major George S. Patton
George S. Patton
George Smith Patton, Jr. was a United States Army officer best known for his leadership while commanding corps and armies as a general during World War II. He was also well known for his eccentricity and controversial outspokenness.Patton was commissioned in the U.S. Army after his graduation from...
attacked and set afire the Bonus Army's encampment, injuring hundreds and killing several veterans and civilians. Congress was forced to flee the city for several days after outraged veterans ringed the United States Capitol
United States Capitol
The United States Capitol is the meeting place of the United States Congress, the legislature of the federal government of the United States. Located in Washington, D.C., it sits atop Capitol Hill at the eastern end of the National Mall...
. The political backlash caused by the attack on the Bonus Army led to the defeat of several members of Congress that fall. Many in Congress, remembering the incident, did not want to support the Economy Act. The House Democratic Caucus
Democratic Caucus of the United States House of Representatives
The House Democratic Caucus nominates and elects the Democratic Party leadership in the United States House of Representatives. The group is composed of all Democratic Representatives in the House...
even refused to support the bill. Heavily opposed by liberal Democrats
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
(92 of whom voted against it), the bill passed the House of Representatives
United States House of Representatives
The United States House of Representatives is one of the two Houses of the United States Congress, the bicameral legislature which also includes the Senate.The composition and powers of the House are established in Article One of the Constitution...
only with heavy support of Republicans
Republican Party (United States)
The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...
and conservative Democrats. The bill easily passed the Senate
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
only because the Senate Democratic Caucus
Democratic Caucus of the United States Senate
The Senate Democratic Caucus is the formal organization of the current 51 Democratic Senators in the United States Senate. In the 112th Congress, the Democratic Caucus additionally includes two independent senators who formally caucus with the Democrats for the purpose of committee assignments...
had scheduled a vote on the popular Cullen-Harrison Act (amending the Volstead Act
Volstead Act
The National Prohibition Act, known informally as the Volstead Act, was the enabling legislation for the Eighteenth Amendment which established prohibition in the United States...
to allow the manufacture and sale of beer and light wines) immediately after the vote on the Economy Act—allowing Senators to cast vote for one very unpopular bill and one very popular bill in quick succession.
The President signed the Economy Act into law on March 20, 1933.
Provisions and impact
The Economy Act cut federal spending by $243 million, not the $500 million requested by the President. This aspect of the Act proved deflationary as the government purchased fewer goods and services, and some argue that this led to a worsening of the Great Depression. The act also halved Supreme Court pensions and two of the four anti-New Deal Supreme Court justicesFour Horsemen (Supreme Court)
The "Four Horsemen" was the nickname given by the press to four conservative members of the United States Supreme Court during the 1932–1937 terms, who opposed the New Deal agenda of President Franklin Roosevelt. They were Justices Pierce Butler, James Clark McReynolds, George Sutherland,...
, Willis Van Devanter
Willis Van Devanter
Willis Van Devanter was an Associate Justice of the United States Supreme Court, January 3, 1911 to June 2, 1937.- Early life and career :...
and George Sutherland
George Sutherland
Alexander George Sutherland was an English-born U.S. jurist and political figure. One of four appointments to the Supreme Court by President Warren G. Harding, he served as an Associate Justice of the U.S...
, refused to retire, remained on the bench, and struck down some of Roosevelt's recovery acts; Supreme Court pensions were originally halved in 1932, but had been temporarly restored by Congress to full pay in February of 1933. These two justices would likely have retired from the Supreme Court early into Roosevelt's first term if their pensions had not been halved.
The Economy Act also gave the President limited authority to reorganize executive branch agencies to achieve efficiency, but this power was not utilized much before the Act expired in 1935. By March 3, 1935, Roosevelt had issued 27 reorganization orders, most of them minor in nature. Roosevelt did not engage in extensive reorganization efforts until the passage of the Reorganization Act of 1939
Reorganization Act of 1939
The Reorganization Act of 1939, Pub. L. No. 76-19, 53 Stat. 561, 5 USC 133 , is an American Act of Congress which became law on April 3, 1939, and which gave the President of the United States the authority to hire additional confidential staff and reorganize the executive branch for two years...
gave him that authority.
Its most important provisions, however, repealed all federal laws regarding veterans' benefits. Section 17 of the Act declared: "All public laws granting medical or hospital treatment, domiciliary care, compensation, and other allowances, pension, disability allowance, or retirement pay to veterans and the dependents of veterans of ... the World War, ... are hereby repealed, and all laws granting or pertaining to yearly renewable term insurance are hereby repealed. ..." However, the Act allowed the president to re-establish these benefits for two years via executive order at levels the President deemed appropriate. Benefits for non-disabled veterans fell more than 40 percent, creating deep resentment among former soldiers and officers and leading to the establishment of the Veterans of Foreign Wars
Veterans of Foreign Wars
The Veterans of Foreign Wars of the United States is a congressionally chartered war veterans organization in the United States. Headquartered in Kansas City, Missouri, VFW currently has 1.5 million members belonging to 7,644 posts, and is the largest American organization of combat...
as a major force in American politics. The Economy Act caused a second Bonus Army to form. But Roosevelt handled this protest much more carefully than Hoover had: His administration set up an encampment for the protesters (albeit too far from the Capitol to make their protest effective), prohibited loitering in the District of Columbia (forcing the marchers to stay outside the city), sent Eleanor Roosevelt
Eleanor Roosevelt
Anna Eleanor Roosevelt was the First Lady of the United States from 1933 to 1945. She supported the New Deal policies of her husband, distant cousin Franklin Delano Roosevelt, and became an advocate for civil rights. After her husband's death in 1945, Roosevelt continued to be an international...
to deliver food and medicine to the marchers and hear their grievances, and encouraged the ex-servicemen to seek work with the Civilian Conservation Corps
Civilian Conservation Corps
The Civilian Conservation Corps was a public work relief program that operated from 1933 to 1942 in the United States for unemployed, unmarried men from relief families, ages 18–25. A part of the New Deal of President Franklin D...
(which many did). Veterans nonetheless sued to have their benefits restored. In Lynch v. United States, 292 U.S. 571 (1934) and United States v. Jackson
United States v. Jackson
United States v. Jackson, was a United States Supreme Court decision that ruled part of the Federal Kidnapping Act unconstitutional.-Background:...
, 302 U.S. 628 (1938), the Supreme Court of the United States
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
ruled that Congress had violated federal law in eliminating certain insurance guarantees formerly offered to veterans by the War Risk Insurance Act
War Risk Insurance Act
The War Risk Insurance Act was a piece of legislation passed by the United States Congress in 1914 to ensure the availability of marine insurance during World War I. It established a Bureau of War Risk Insurance within the Treasury Department to provide insurance policies and pay claims...
(as amended December 24, 1919; Chapter 16, Section 12, 41 Stat. 371), and those benefits were restored.
The Economy Act had little effect on either the federal deficit or the economy. Spending in other areas rose so substantially that it dwarfed the cuts imposed by the Economy Act. The benefit cuts also did not last. In June 1933 Roosevelt restored $50 million in pension payments, and Congress added another $46 million more. In January 1934, Roosevelt added another $21 million for veterans whose disabilities were service-connected but not service-caused. And in March 1934 Congress overrode Roosevelt's veto and added another $90 million in veterans benefits and $120 million to federal workers' salaries. On October 1934, Roosevelt restored $60 million in federal salary cuts, and restored cuts to veterans who had served in the Spanish-American War
Spanish-American War
The Spanish–American War was a conflict in 1898 between Spain and the United States, effectively the result of American intervention in the ongoing Cuban War of Independence...
, Philippine-American War
Philippine-American War
The Philippine–American War, also known as the Philippine War of Independence or the Philippine Insurrection , was an armed conflict between a group of Filipino revolutionaries and the United States which arose from the struggle of the First Philippine Republic to gain independence following...
, and Boxer Rebellion
Boxer Rebellion
The Boxer Rebellion, also called the Boxer Uprising by some historians or the Righteous Harmony Society Movement in northern China, was a proto-nationalist movement by the "Righteous Harmony Society" , or "Righteous Fists of Harmony" or "Society of Righteous and Harmonious Fists" , in China between...
.