Freeman

OUR ECONOMIC PAST

How FDR’s Economic Bill of Rights Changed American Politics

NOVEMBER 01, 2012 by BURTON FOLSOM

Many people are perplexed by the new government programs that have changed American life in the last century.  So much of this intervention has been damaging, and so much of it is unconstitutional.  Can we pinpoint a time, or an event, that led Americans to accept a more powerful central government in their lives?

The intervention has been gradual since the Progressive Era of the early twentieth century, but one event helped crystallize the rising dominance of statist ideas: President Roosevelt’s promotion of his Economic Bill of Rights during World War II.  FDR announced this new bill of rights during his State of the Union message in January 1944.  “Our Economic Bill of Rights,” the President said, “like the sacred Bill of Rights of our Constitution itself—must be applied to all citizens.”  He added, “A new basis of security and prosperity can be established for all—regardless of station, race, or creed.”  Among others, these new rights included the following:

 

the right to a useful and remunerative job in the industries or shops or farms or mines of our nation;

the right of every family to a decent home;

the right to a good education;

the right to adequate medical care and the opportunity to achieve and enjoy good health.

 

Roosevelt concluded:  “All of these rights spell security.  And after the war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being.”

Where do Roosevelt’s new rights come from?  They are not natural rights, or God-given rights, because nature, or God, does not endow man with “a good education,” “adequate medical care,” or “a decent home.”  Only if government is the source of rights do Roosevelt’s rights have meaning.  If an American has a right to “a useful and remunerative job,” then government has the obligation to find or provide employment, even if that requires taxing those who have jobs.  If an American has a right to “a decent home,” whatever size and furnishings that might include, then if necessary, other Americans have the responsibility to pay for that decent home.  Thus Roosevelt’s new Economic Bill of Rights was revolutionary.  To provide these new rights, government would have to tax and redistribute wealth on a massive scale.

The original Bill of Rights was very different.  It listed freedoms from government interference, not the freedom to invoke government to fulfill wants.  The Founders understood that freedom of speech and religion were natural rights that all people can enjoy without hampering one another’s liberty.

During Roosevelt’s 12 years in office, he increased government immensely, preparing the nation for the larger government he wanted after the war.  His New Deal firmly established the government’s right to guarantee a minimum wage for jobholders, Social Security for elderly Americans, and targeted subsidies for groups the president needed for reelection.  The Economic Bill of Rights presaged programs for national health care, federal aid to education, and a federal housing authority.

The taxing machinery was also in place.  It had to be.  Building houses, sending people to college, creating job programs, and providing medical care for many millions of Americans would be costly, and FDR needed a steady torrent of cash to do it all.  World War II gave FDR the opportunity to raise taxes and keep them high afterward to support his Economic Bill of Rights.

FDR had increased taxes step by step during his presidency. He started with the rich.  In 1932, the year FDR won the presidency, the top marginal tax rate was 25 percent.  By 1939, the first year of the European war, FDR had hiked that rate to 79 percent.  During World War II he was able to get the rate up to 94 percent on all income over $200,000.  The top marginal corporate rate had risen to 90 percent.

Near-Confiscatory Taxes for All  

But, as FDR discovered, near-confiscatory taxes on the rich were not enough to pay for the war and not enough to fund houses, education, jobs, and medical care for many millions of Americans after the war.  He had to make taxpayers out of most American wage earners.  This he achieved by lowering the personal exemption from $1,000 to $500, so only that amount was tax-free.  He increased the bottom marginal rate from 4 to 23 percent from 1939 to 1945.  Thus when FDR made taxpayers out of most Americans, the revenue from the income tax skyrocketed from just over $1 billion in 1939 to more than $19 billion in 1945.

To achieve his ends FDR also promoted “withholding”— forcing employers to collect federal taxes from the pay envelopes of their employees on each payday.  With a surge of revenue week by week from American workers all over the nation, FDR could raise much of the money to fight the war first and fund his welfare state next.

Roosevelt had support from many politicians in his quest to increase taxes.  In the congressional debate over the withholding tax, many Democrats supported the President’s idea that rights came from government.  On May 14, 1943, Senator Happy Chandler (D-Ky.) said, “Mr. President, all of us owe the government; we owe it for everything we have—and that is the basis of obligation—and the government can take everything we have if the government needs it.”  Chandler wanted to be clear on this point.  “The government,” he added, “can assert its right to have all the taxes it needs for any purpose, either now or at any time in the future.”

To help persuade Americans during the war to accept paying taxes at higher rates, Irving Berlin, the great songwriter, produced a propaganda masterpiece entitled, “I Paid My Income Tax Today.”  Singer Danny Kaye recorded the song, and the Treasury sent it to 872 radio stations with a letter urging that it be played frequently.  Berlin’s song, which appealed to pride and patriotism, had these lyrics:

I paid my income tax today.

I never felt so proud before,

To be right there with the millions more

Who paid their income tax today.

I’m squared up with the U.S.A.

You see those bombers in the sky;

Rockefeller helped to build them, 

So did I!

I paid my income tax today.

American radio stations, which owed their licenses to the federal government, played the tax song and other tax messages from the Treasury.

Roosevelt died in 1945, before the war was won, but the tax system he favored would set the agenda for the political debate for the next two generations.  The President used the war emergency to raise taxes, and his successor, Harry Truman, kept them high after the war to support FDR’s Economic Bill of Rights.  The debate over the federal government’s role in job creation, education, housing, and medical care has shaped American politics through the present day.


Filed Under : Education, Health Care

ASSOCIATED ISSUE

November 2012

ABOUT

BURTON FOLSOM

Burton Folsom, Jr. is a professor of history at Hillsdale College and author (with his wife, Anita) of FDR Goes to War.

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