The Spenders

In the second year of the New Deal, Secretary of the Treasury Henry Morgenthau Jr. took a protege named Danny Bell up to Hyde Park to meet the Roosevelts. Danny had just been appointed Acting Director of the Budget. Henry the Morgue introduced him to Mrs. James Roosevelt, the President's mother.

"Oh, Mr. Bell, I'm so glad to meet you," cried Mrs. Roosevelt. "So many of my friends ask me when Franklin is going to balance the budget. My dear Mr. Bell, when is Franklin going to balance the budget?"

Neither Danny Bell nor Henry Morgenthau answered. But, over the years, the question seemed to bother Morgenthau a good deal. Last week, in Collier's, he began giving at least a partial answer.

His article, the first of a series of six, was put together by a crew of writers who had spent ten months working over the famed collection of 900 bulging scrapbooks (TIME, Jan. 13) which Morgenthau lugged with him when he left Washington in the summer of 1945. First, Morgenthau told how Daniel W. Bell happened to become director of the budget.

The Old Worry. It was a hot day in August 1934. Lewis W. Douglas, now Harry Truman's Ambassador to London, had just resigned from the budget post in protest over the New Deal's heavy spending; Douglas had vainly championed a balanced budget. Morgenthau got a hasty summons from Franklin Roosevelt. The President was taking a bath when the Secretary of the Treasury bustled in. "Henry," said F.D.R. blandly, "I give you until midnight to get me a new Director of the Budget."

"I had begun to worry myself about the spending program," confessed Diarist Morgenthau. "I never objected to spending when the alternative would have been human suffering. . . . [But] I wanted all spending for relief and public works to be coordinated under a single head [and] I wanted a scheduled tapering off."

With these things in mind, Morgenthau asked the President whom he was considering as Douglas' successor. "He took my breath away by saying, 'What do you think of Tom Corcoran? . . .' This seemed to me absolutely out of the question. Tom Corcoran was a first-class lawyer, a first-class political operator, a first-class accordion player."

Morgenthau thereupon suggested Danny Bell, the Treasury Department's Commissioner of Accounts and Deposits (and now a Washington banker). "Fortunately, Roosevelt liked the idea. . . . Bell and I immediately set out to ride herd over the spending programs." They quickly found that Roosevelt's chief spenders--Harry Hopkins (relief), Harold Ickes (public works) and Henry Wallace (farm payments)--did not take to this treatment.

The Old Squeeze. Of the three, said Morgenthau, "Hopkins was the best from my point of view. He got money into circulation quickly, which was the economic objective of pump-priming, and he gave destitute people work, which was the social objective." But he was not above using "what we called the 'squeeze play' to get additional funds." Hopkins and his deputies "would wait until the last minute before letting Bell and me know they were overspending, then they would appeal to our emotions by reminding us of the plight of the jobless."

Ickes "was as prickly a customer to handle in those days as he is today. . . . He was so anxious to keep graft and politics out of the public works program that he practically spent money through a medicine dropper. Ickes' slowness in making decisions was sometimes a real handicap. . . . Public works projects were frequently [so] slow in getting started [that] expenditures for them were . . . made after instead of before the crises had passed their peaks."

For Henry Wallace, Morgenthau reserved his sharpest shafts and, in a backhanded way, his greatest admiration. "Wallace's whole theory of spending in order to reduce agricultural production," Henry wrote in his diary, "always seemed nonsense to me." Once, Morgenthau complained to Wallace that it was costing $130 million in overhead for the Agriculture Department to give away $516 million in nine months. Said Wallace: "You don't understand what we are doing." "Oh, yes I do," shot back slow-boiling Henry Morgenthau. "I understand it more every day. . . . The one that costs us more than anybody else is Wallace. My hat is off to him--he is getting away with murder."

This file is automatically generated by a robot program, so reader's discretion is required.