State of the Union

The President . . . shall from time to time give to the Congress information of the State of the Union and recommend to their consideration such measures as he shall judge necessary and expedient.--U. S. Constitution.

Last week President Hoover sent his third State-of-the-Union message to Congress. It was a grave, thoughtful document, shot with hope. Clerks droned it out to a House and Senate which accepted it as the Hoover platform for next year's campaign. Contents:

Depression. "We find fundamental national gains even amid depression. We have witnessed a remarkable development of the sense of cooperation. There has been a notable absence of public disorders and industrial conflict. . . . The country is richer in physical property than ever before. . . . There has been a distinct gain in public health. Business depressions are but transitory. The Nation has emerged from each of them with increased strength and virility."

Foreign Affairs."We are at peace with the world. The rights of our citizens abroad have been protected. As our [economic] difficulties have originated in large degree from [foreign] sources, any effort to bring about our own recuperation has dictated the necessity of co-operation by us with other nations to restore world confidence. . . . The difficulties between China and Japan have given us great concern. ... It is our purpose to assist in finding solutions. . . ."

The Domestic Situation. "The community has cooperated to meet the needs of honest distress . . . [and] cushion the violence of liquidation in industry and commerce. . . . Our citizens have given a magnificent display of unity and action, initiative and patriotism. . . . Committees are now active at practically every point of unemployment. They have been assured the funds necessary which will meet the situation. . . . The Federal Farm Board secured higher prices to the farmer than would have been obtained otherwise. . . . The failure of a large number of farmers and of country banks was averted. . . . The time is ripe for forward action to expedite our recovery."

Credit. "Our self-contained national economy would have enabled us to recover long since but for the continued dislocations, shocks and setbacks from abroad. . . . Vast liquidation and readjustments have left us with a large degree of credit paralysis. If we can put our financial resources to work, I am confident we can make a large measure of recovery independent of the rest of the world. . . . Our first step toward recovery is to re-establish confidence. We must put some steel beams in the foundation of our credit structure. . . ."

Federal Finance. "The first requirement of confidence is financial stability of the United States Government. During the [last] fiscal year we incurred a deficit of about $903,000,000. During this fiscal year we have an indicated deficit of $2,123,000.000. The budget for the fiscal year beginning July 1 indicates a deficit of $1,417,000,000. . . . We must have determined reduction in Government expenses. We must face a temporary increase in taxes. We must partially finance the deficit by borrowing. The amount of taxation should be fixed so as to balance the budget for 1933 except for the statutory debt retirement. The additional taxation should be imposed solely as an emergency measure, terminating definitely two years from July 1. . . ."*

Banks. "A method should be devised to make available quickly to depositors some portion of their deposits in closed banks. Such provision would go far to relieve distress in a multitude of families. ... I recommend the prompt improvement of the banking laws. The Congress should investigate the need for separation between different kinds of banking; an enlargement of branch banking ... enlarged membership in the Federal Reserve system."

Mortgage Discount. "I recommend the establishment of a system of home-loan discount banks as the necessary companion of the Federal Reserve Banks and our Federal Land Banks." (TIME, Nov. 23.)

Reconstruction Corp. "I recommend that an emergency Reconstruction Corporation of the nature of the former War Finance Corporation should be established./- It may not be necessary to use such an instrumentality very extensively. It should be in a position to facilitate exports, make advances to agricultural credit agencies, to establish industries, railways and financial institutions which cannot otherwise secure credit. It should be placed in liquidation at the end of two years."

Railways. "They should have more effective opportunity to reduce operating costs by proper consolidation. . . . Approximate regulation should be applied to competing services."

Antitrust Laws. "There is wide conviction that some change should be made. I do not favor their repeal. Particular attention should be given to industries founded upon natural resources."

Unemployment. "I am opposed to any direct or indirect Government dole. Our people are providing against distress in true American fashion. . . . Our expenditures [on public works] this year will reach about $780,000,000 compared with $260,000,000 in 1928. ... It is estimated that the Federal taxpayer is now directly contributing to the livelihood of 10,000,000 of our citizens.

Tariff. "I am opposed to any general congressional revision. Such action would prolong the Depression."

Merchant Marine. "The administrative functions [of the Shipping Board] should be transferred to the Department of Commerce [where] there should be created a position of Assistant Secretary for Merchant Marine."

Public Works. "I recommend that all building and construction activities of the Government be consolidated into an independent establishment under the President to be known as the 'Public Works Administration.' "

Immigration, "The deportation laws should be strengthened. Aliens lawfully in the country should be protected by issuance of a certificate of residence."

"Our System." President Hoover promised subsequent messages on foreign affairs, debt moratorium, criminal-law enforcement, judicial procedure. Unmentioned by him were two stock subjects in most State-of-the-Union. messages: Prohibition, the Negro. The President concluded:

"Our system has carried us in a century and a half to leadership of the economic world. It has successfully adjusted itself to changing conditions in the past. It will do so again. . . . Our people have shown qualities as high in fortitude, courage and resourcefulness as ever in our history. With that spirit, I have faith. . . ."

* For details of the Hoover tax plan see p. 16. Last week the Treasury, to help finance the current deficit, sought to borrow $1,300,000,000 on short-term securities.

/-Created in 1918 with $500,000,000 capital from the Treasury and a $200,000,000 bond issue, the War Finance Corp. first made loans to industries producing War supplies. After the Armistice it helped finance the same industries back to peacetime production. It required 125% collateral from private concerns unable to get cash elsewhere. Over President Wilson's veto in 1921 Congress authorized it to supply credit to farmers and stockmen. Loaning closed Dec. 31, 1924, since when the corporation has been in process of liquidation. The Treasury recovered all but $10,000 of its capital investment.

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