Two-Year Plan

"A national emergency productive of widespread unemployment and disorganization of industry ... is hereby declared to exist."

So began what might easily have been mistaken for a dictator's proclamation upon first seizing national power. Actually it was a measure about to become law of the land. The striking words prefaced the National Industrial Recovery Bill which President Roosevelt sent to Congress last week for immediate enactment. After weeks of talk the 4,000-word measure represented the grand climax of President Roosevelt's domestic attack on the Depression, his Two-Year Plan "to put people to work."

The legislation, for all the powers it gave the President to put Government and Business into "partnership," contained few surprises. As a price for having the Anti-Trust laws suspended, each industry was to draft and subscribe to a fair trade code to be approved by the President. Each such code was to ration production so that some plants would not work 24 hours per day while others stood idle, to reduce working hours so that more employees could find jobs, to set up a minimum wage so that sweatshop operators could not steal the market, to give labor a free hand so that it could organize and bargain collectively. Industrial minorities which refused to subscribe to majority codes could be put out of business, if necessary, by the President's power to set up a rigorous licensing system.* Any industry which failed to draft a code satisfactory to the White House could have a ready-made one forced upon it by the Government. "Big Business," in the form of powerful trade associations, was to be pampered back to economic health while the little independent manufacturer, for whose protection the Anti-Trust laws were first passed, was to become an outlaw. On the surface and in most official explanations voluntary partnerships were called for but deep down in the new law were large penal powers which gave a determined Government the whip hand over the toughest business.

The new law's operation is definitely limited to two years from the date of its enactment. If President Roosevelt cannot get the country back on its feet in that time he may well feel that no one else can. If he does the job sooner, he can terminate the Government control system by simple proclamation, thereby notifying the nation and the world that the Depression is over.

Part Two of the National Recovery Act was President Roosevelt's colossal public works program. For this purpose $3,300,000,000 was to be raised by Federal bond issues which, with other "extraordinary" budget expenditures, would probably put the Public Debt to an all-time high.* The proceeds were to be lent to states, counties and municipalities on a 30-to-70 basis. It was estimated that each billion dollars would put 1,000,000 men to work constructing bridges, laying roads, clearing slums, eliminating grade crossings, building war ships. Private industry was to get no cash from the Government, on the ground that the Treasury, unable to supply all-comers, should avoid discrimination by supplying none.

In his special message accompanying the measure President Roosevelt pointed out that $220,000,000 per year would have to be raised by fresh taxation to service the Treasury's borrowings. But he left the job of finding new sources of revenue to the House Ways & Means Committee. Only if it floundered in indecision would he submit his own tax recommendations. Capitol Hill grumbled that he was sponsoring the popular spending provision of the bill but leaving the unpopular taxing duty to Congress. For the first time since his election he mentioned Repeal by shrewdly pointing out that liquor taxes eventually would yield enough new revenue "wholly to eliminate these temporary re-employment taxes."*

Promptly the Ways & Means Committee was summoned into session by its new chairman, Robert Lee Doughton, a tall, lanky backwoodsman who farms and raises stock at Laurel Springs, N. C. For 22 undistinguished years he has served in the House, mostly in his office doing small chores for his constituents. Seniority rather than financial ability raised him to his present eminence. A bitter opponent of the Sales Tax, he helped to lead last year's House revolt against that levy.

First witness before the committee was small, smiling Secretary of the Treasury Woodin. He had not been asked to sit in on the White House conferences which drafted the Industrial Recovery Bill, was therefore unable to explain its operation. After a few brief pleasantries, he introduced hard-driving young Director of the Budget Douglas as his spokesman. Committee members who had heard many a story that Mr. Woodin had been side tracked by the Administration, that Budgeteer Douglas was actually running the Treasury, did not miss the significance. For hours Director Douglas ably expounded the details of the measure he had helped to write.

He presented a variety of tax methods, by a combination of which the needed $220,000,000 could be raised. Normal income taxes increased from 4% and 8% to 6% and 10%, their application to stock dividends and an additional 3/4-c- tax on gasoline would do the trick. The same income and dividend taxes added to taxes of 10-c- per lb. on tea, 5-c- on coffee beans, 5-c- on cocoa beans would also accomplish the purpose. If normal and dividend taxes were upped to 8% and 12% slight increases in the telephone and admission levies would put the revenue program across. By itself a 1 1/8 general manufacturers' sales tax, without exemptions, would raise $214,000,000.

Budgeteer Douglas let the committee take its choice, hotly refused to be pinned down as to which method was the Administration's choice.

The committee's choice was soon forthcoming. By a vote of 13-to-9, it proposed to: 1) jack up normal income tax rates to 6% and 10% (revenue: $46,000,000); 2) apply these rates to dividends (revenue: $83,000,000); 3) increase the gasoline levy from 1-c- to 1 3/4-c- per gal. (revenue: $92,000,000). The sales tax went down and out without a fight. Later, on White House instructions, the committee voted to make the recovery bill a general tax measure, continuing the current ''nuisance taxes" for an extra year.

Hardly had President Roosevelt submitted his measure to Congress than the Associated Press burst forth with a copyrighted story to the effect that General Hugh Samuel Johnson had been chosen to administer the new law. The A. P. was premature. President Roosevelt had not yet picked General Johnson as industrial dictator but probably would. Modest behind his gruff exterior, a small man with careless clothes and a tongue usually tart. General Johnson humbly declared: "My major thought is that I may not be the most competent man to handle this bill."

Born 50 years ago in Kansas. Hugh Johnson was graduated from West Point in 1903. later took a law degree at the University of California. He has written boys' books about the army (Williams of West Point, Williams on Service). To him is generally credited the machinery for the Wartime draft, of which he was in executive charge under General Crowder. He set up the General Staff's Purchase. Storage & Traffic Division to eliminate competitive government buying, sat on the War Industries Board with Bernard Mannes Baruch. Resigning from the army in 1919 as a Brigadier General, he joined the Moline (Ill.) Plow Co. of which George Nelson Peek, new administrator of the Farm Relief Act, was president. In 1927 he went to Mr. Baruch at No. 120 Broadway as economic expert and factfinder. Mr. Baruch lent him to President Roosevelt to help draft the Industrial Recovery Act. With his man Peek running agriculture and his man Johnson running industry. Mr. Baruch indeed loomed as Washington's greatest backstage power.

* Grave constitutional doubts were raised as to the Government's power to restrict or deny by license an individual's right to pursue whatever honest business lie chooses. Cited was last year's Supreme Court decision in an Oklahoma ice case in which such a license system was voided as a violation of the "due process of law" clause (TIME, April 4, 1932).

* On May 31, 1919 the Public Debt reached a record of $26,596,701,648. On April 30, 1933 it stood at $21,441,209,176.

* Up to last week Michigan, Wisconsin, Wyoming, Rhode Island. New York and New Jersey had ratified the Repeal Amendment.

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