When Good Government Meant Big Government

WHEN GOOD GOVERNMENT MEANT BIG GOVERNMENT:

NATIONALISM, RACISM, AND THE QUEST TO STRENGTHEN THE

AMERICAN STATE, 1918–1933

JESSE TARBERT

Submitted in partial fulfillment of the requirements

For the degree of Doctor of Philosophy

Department of History

CASE WESTERN RESERVE UNIVERSITY

August 2016

CASE WESTERN RESERVE UNIVERSITY

SCHOOL OF GRADUATE STUDIES

We hereby approve the dissertation of

Jesse Tarbert,

candidate for the degree of Doctor of Philosophy*.

Committee Chair

David Hammack

Committee Member

Joseph White

Committee Member

Peter Shulman

Committee Member

John Flores

February 29, 2016

*We also certify that written approval has been obtained

for any proprietary material contained therein. iv

CONTENTS

LIST OF TABLES v

ACKNOWLEDGMENTS vi

ABSTRACT ix

INTRODUCTION 1

CHAPTER 1. PUBLIC ADMINISTRATION: The National Budget 15 Bringing Business Methods to the Federal Government

CHAPTER 2. SOCIAL POLICY: Veterans’ Relief 62 Scandal, Reform, and State-Building

CHAPTER 3. LAW ENFORCEMENT: Prohibition 102 Good Government and the Expansion of National Authority

CHAPTER 4. PUBLIC ADMINISTRATION: Executive Reorganization 135 Bringing Business Efficiency to the Federal Government

CHAPTER 5. SOCIAL POLICY: Education 179 Nationalism, Localism, and the Limits of Americanism

CHAPTER 6. LAW ENFORCEMENT: Anti-Lynching 218 White Supremacy and the American National State

CONCLUSION 248

BIBLIOGRAPHY 252

LIST OF TABLES

4.1. Committee on Executive Reorganization, National Civil Service Reform League, announced May 12, 1927 161

5.1. Native, Non-White Residents, age 10 or over, in states with legally mandated school segregation, who had “no schooling whatever” in 1920 192

ACKNOWLEDGMENTS

The extensive primary research that this project required would not have been possible without generous funding from the following institutions: the

Department of History at Case Western Reserve University; the History

Associates (the organization of friends and alumni of the Case Western Reserve

University Department of History); the Baker-Nord Center for the Humanities at

Case Western Reserve University; the American Heritage Center at the University of Wyoming; the Herbert Hoover Presidential Library Association; the History

Project of the Harvard University and University of Cambridge Joint Center for

History and Economics, supported by the Institute for New Economic Thinking; the Roosevelt Institute of Hyde Park, New York; the Friends of the Princeton

University Library; the Rockefeller Archive Center in Sleepy Hollow, New York; and the Hagley Library in Wilmington Delaware. I owe special thanks to Sean and Sara Vanatta for their generous hospitality during my visit to Princeton.

Many of the arguments contained herein were presented in a preliminary form at the Business History Conference, the Policy History Conference, the

Social Science History Conference, and the annual meeting of the Organization of

American Historians. Comments from David Stebenne, Klaus Petersen, Alice

O’Connor, Elizabeth Tandy Shermer, Mark Rose, and Pam Laird helped me to improve these arguments considerably. This project also benefited from discussion with Mary Yeager, Steve Tolliday, Ken Lipartito, and Pam Laird at the vii

2014 Oxford Journals Doctoral Colloquium in Business History, in Frankfurt,

Germany.

The Department of History at Case Western Reserve University has been an ideal institutional home as I have tackled this project. Few dissertations in the department would be complete without giving thanks to Peter Roufs. My fellow grad students, especially Tony Andersson, Nathan Delaney, Sam Duncan, Elise

Hagesfeld, Emily Hess, Corey Hazlett, Michael Metsner, Erik Miller, and Beth

Salem, have all been good company over the years. Nathan Delaney, in particular, provided much-needed encouragement and assistance at a critical moment. The faculty and staff of the Department of History are unsurpassed. Department

Assistant Bess Weiss cheerfully and ably helped me to solve many administrative problems. Jonathan Sadowsky and Ken Ledford (who both served as chair during my time in the department), as well as Alan Rocke and Gillian Weiss (who both served periods as interim chair), were generously accommodating in response to all of my reasonable requests. John Grabowski enabled me to spend a rewarding year as Ralph M. Besse Fellow and associate editor for the Encyclopedia of

Cleveland History. Dan Cohen provided invaluable support as coordinator of graduate studies; as a teacher, he provided the benefit of his deep knowledge of historical scholarship, and the shining example of his own scholarly rigor and discipline. Ted Steinberg is geniality and generosity unbound.

The members of my dissertation committee—Peter Shulman, John Flores, and (from the Department of Political Science) Joe White—each improved this project immeasurably through insightful criticism and careful encouragement.

Joe White’s contribution was characteristically above and beyond the call of duty. viii

Although it has become academic boilerplate to say that I wish I had been capable of incorporating all of their suggestions, I am now acutely aware of that statement’s profound truth.

It has been a great pleasure to work with my dissertation advisor, David

Hammack. His insight, skill, and wit are unmatched. Throughout my work on this project, I have had the liberating sense that I have been boldly striking out on my own through uncharted territory. Readers who are familiar with David’s work, however, will see evidence of his influence on every page. If this dissertation can be considered a success, it is primarily thanks to him—as well as to the others named above. As for the omissions, errors, inaccuracies, elisions, and overstatements that remain: I claim them as my own.

Friends old and new provided needed support throughout this process and have helped me to maintain a tenuous connection to the non-academic world.

Kevin Kawamoto deserves special thanks; my transition from journalism to academia would have been much more difficult (and likely disastrous) without his expert guidance.

Lastly, I have been lucky to be able to rely on family. My in-laws and parents all deserve thanks. My daughters, Vivian and Elenora, have endured much in this process, and have provided welcome distraction. My wife, Jamie Rue, has been unyieldingly supportive from the start, despite being busy with her own academic and professional work. Nothing would be possible without her love and encouragement. I dedicate the text that follows to my grandmother, Karen Platt, who long ago encouraged my interest in history and writing, and who died days after I completed the first draft. ix

When Good Government Meant Big Government: Nationalism, Racism, and the

Quest To Strengthen The American State, 1918–1933

Abstract

JESSE TARBERT

This dissertation follows the efforts of nationalist Republicans, business leaders, and philanthropists to build central power in the federal government against resistance from Southern Democrats and others who feared central power. This forgotten quest to strengthen the American state brought together a loose-knit group of bankers, corporation lawyers, corporate executives, genteel reformers, and liberal educators who worked with the Republican presidential administrations of the 1920s to form an administrative reform coalition that sought to apply the logic of business organization to national policy problems that emerged after the war. They viewed the triumph of large-scale private corporations as the product of two basic managerial innovations developed in the late 19th Century: central executive responsibility subject to shareholder oversight; and a functionally efficient administrative structure that enabled the corporation to implement policy set by the executive. Although these reformers opposed an expansive regulatory or welfare state in these years, they naturally sought to apply business ideals to the institution commonly viewed as “the largest corporation in the world”: the federal government. The administrative reformers’ commitment to business-derived ideals of economy and efficiency—the principles x of good government—led them to support solutions that amounted to big government. The administrative reformers did not always get their way, however, even in this business-friendly era. Proposals to strengthen the national government faced opposition from Southern Democrats and others who feared central power because it threatened Jim Crow and other local institutions of power. The evolution of central power in the national government in this period, then, was driven by the conflict between these two agendas: a nationalist movement to increase central power, and an effort to restrain national power in order to preserve local arrangements. The impact of this conflict was not limited to these years, however. The efforts of elite administrative reformers in the 1920s helped launch a reform agenda that would eventually—during the New Deal and after World War Two—help give shape to the modern American state. At the same time, the opposition to these efforts formed a seedbed from which grew the antistatist coalition of the late 20th Century.

INTRODUCTION

THE RISE OF big government in America has been punctuated by stops and starts. For historians of the American state, the period under study in this dissertation has been notable mainly as a time when efforts to strengthen the national government seemed to come to a sudden and emphatic halt. The 15 years that separate the end of World War One and the beginning of the New Deal have long been viewed as a conservative interlude—a time of business domination in American politics—an era when the idealism of Woodrow Wilson was set aside for the normalcy of Warren Harding, Calvin Coolidge, and Herbert

Hoover and when the Progressive state-building impulse lay in hibernation until it was revived by Franklin Roosevelt and his New Dealers.

This dissertation tells a different story. It follows the efforts of nationalist

Republicans, business leaders, and philanthropists to build central power in the federal government. This forgotten quest to strengthen the American state brought together a loose-knit group of bankers, corporation lawyers, corporate executives, genteel reformers, and liberal educators who worked with the

Republican presidential administrations of the 1920s to form an administrative reform coalition that sought to apply the logic of business organization to national policy problems that emerged after the war. They viewed the triumph of large-scale private corporations as the product of two basic managerial innovations developed in the late 19th Century: central executive responsibility subject to shareholder oversight; and a functionally efficient administrative 2 structure that enabled the corporation to implement policy set by the executive.

Although these reformers opposed an expansive regulatory or welfare state in these years, they naturally sought to apply business ideals to the institution commonly viewed as “the largest corporation in the world”: the federal government. The administrative reformers’ commitment to business-derived ideals of economy and efficiency—the principles of good government—led them to support solutions that amounted to big government.

The administrative reformers did not always get their way, however, even in this business-friendly era. Proposals to strengthen the national government faced opposition from Southern Democrats and others who feared central power because it threatened Jim Crow and other local institutions of power. The evolution of central power in the national government in this period was driven by the conflict between these two agendas: between a nationalist movement to increase central power, and an effort to restrain national power in order to preserve local arrangements. The impact of this conflict was not limited to these years, however. The efforts of elite administrative reformers in the 1920s helped launch a reform agenda that would eventually—during the New Deal and after

World War Two—help give shape to the modern American state. At the same time, the opposition to these efforts formed a seedbed from which grew the antistatist coalition of the late 20th Century.

The members of the 1920s administrative reform coalition are not commonly acknowledged as progenitors of the modern American state. William Howard

Taft, Warren G. Harding, Herbert Hoover, and their allies are often cast as 3 opponents of strong government. This dissertation shows them in a different light, however: responding to policy problems that emerged after World War One by pursuing a nationalizing, centralizing agenda. While they were generally opposed to what they considered to be intrusive regulation and to what they would classify as “raids on the Treasury” (policies that would distribute federal funds to supporters of particular causes), they believed that national problems required national solutions, and they viewed the nation’s fragmented governing structure as an impediment to enacting such solutions. They believed, on a fundamental level, that organization mattered. For them, the logical solution to most problems included some form of administrative reorganization and consolidation.

Discussion of Republican nationalism in the 1920s tends to focus on the rejection of the League of Nations, maintenance of the protective tariff, and the movement to “Americanize” immigrants. But the nationalism of the administrative reformers took a different form and led them to pursue different goals. In line with the traditional view, nationalist administrative reformers were certainly interested in protecting what they viewed as American interests, both at home and abroad. They were also intent on avoiding social disorder, promoting the health and welfare of all citizens, and ensuring that immigrants could become productive citizens. For the core members of the administrative reform coalition, however, this style of nationalism led them to desire a stronger, more effective national government, and it led them not toward isolationism in foreign affairs, but rather to seek further engagement in diplomacy. Most of the administrative reformers (even the most partisan Republicans among them) favored 4 membership in the League of Nations (albeit with reservations). Business- minded administrative reformers such as Elihu Root and Charles Evans Hughes played key roles in creating the World Court.

The most prominent spokesmen for the nationalist vision of a strong state with increased central power were careful to emphasize that they were firmly committed to a democratic government. Henry L. Stimson (who had been

Secretary of War under Taft) liked the phrase “responsible government.” By giving the President power to carry out national policy, Stimson argued, the

President would be made responsible for the success or failure of that policy, and the President could subsequently be held responsible by voters.

Many of the administrative reformers and much of their agenda should be familiar to careful readers of Stephen Skowronek’s Building a New American

State. This dissertation shows how Skowronek’s “executive-professional reform coalition” redoubled its efforts to consolidate federal administrative authority after Skowronek’s story ends in 1920. Some of the opponents of administrative reform should also be familiar to readers of Building a New American State. As in Skowronek’s account of the Progressive Era, the nationalizing, centralizing agenda of the administrative reformers described here was opposed by Woodrow

Wilson and others who wished to restrain national power.1 As Skowronek has

1 Stephen Skowronek, Building a New American State: The Expansion of National Administrative Capacities, 1877–1920 (New York: Cambridge University Press, 1982). Although Building a New American State has been widely cited and widely praised, its theoretical framework has received more attention than its specific findings. Few readers have noted Skowronek’s portrait of Wilson as an opponent of central executive power. Likewise, few have noted Skowronek’s revisionist portrait of William Howard Taft and his subordinates as champions of central executive power. For Skowronek’s discussion of an 5 written elsewhere, Wilson’s intellectual and political agenda was driven by a desire to defend local prerogatives and white supremacy from the dangers of national control. In his 1885 text, Congressional Government, Wilson describes federal election supervisors as “the very ugliest side of federal supremacy,” and complains that “the tide of federal aggression probably reached its highest shore in the legislation which put it into the power of the federal courts to punish a state judge for refusing, in the exercise of his official discretion, to impanel

Negroes in the juries of his court.” Wilson is considered a founder of modern public administration, but, as Skowronek argues, Wilson often used liberal and nationalist language and ideas in pursuit of illiberal purposes. “Preaching the gospel of nationalism and democracy,” Skowronek writes, “Wilson would seek at every turn to preempt their transformative implications.” Wilson’s persistent devotion to white supremacy should lead us to question, for instance, his motivation in arguing, in the climactic final paragraphs of his article, “The Study of Public Administration,” that, given the modern tendency toward “interlacing of local self-government with federal self-government,” the goal of public administration should be to ensure that “the public officer ... serve, not his superior alone but the community also” and that “instead of centralization of power, there is to be wide union with tolerated divisions of prerogative.”2 This

“executive-professional reform coalition,” see pp. 172–174, 254. I would emphasize (more so than Skowronek does) that most members of this coalition— particularly actors such as Elihu Root, George Wickersham, and Henry Stimson— had close ties to Wall Street. 2 Stephen Skowronek, “The Reassociation of Ideas and Purposes: Racism, Liberalism, and the American Political Tradition,” American Political Science Review 100 (August 2006): 385–401. Woodrow Wilson, Congressional Government: A Study in American Politics (Boston, Houghton Mifflin Company, 6 should also lead us to question Wilson’s motivation in opposing Taft and

Stimson’s proposal for central control in the national budget system.

Between 1918 and 1921, Southern resistance to the administrative reform agenda centered in Wilson’s White House. After the inauguration of Warren

Harding in 1921, resistance centered in Congress. In this sense, this dissertation provides a key part of the backstory to Ira Katznelson’s account, in Fear Itself, of the ways that Southern Congressmen limited the reach of the New Deal. Racist

Southerners such as Pat Harrison, who played key roles in making the New Deal safe for segregation during the 1930s, also played key roles blocking administrative reform initiatives during the 1920s.3

To argue, as I do, that racism blocked the nationalist agenda of the administrative reform coalition requires a few caveats and clarifications. First, I do not mean to suggest that the members of the administrative reform coalition were not personally racist, or that everyone who opposed the administrative reform agenda was personally racist. For the purposes of my argument here, the personal racial attitudes of historical figures are less important than the impact of the policies that they supported. Very few of the administrative reformers advocated anything like desegregation or social equality. But if they could be classified as personally racist, there is a useful distinction to be made between their racism and that of Southern Democrats. The racism of the Southern

1885), 40. Woodrow Wilson, “The Study of Administration,” Political Science Quarterly 2 (1886): 221–222. 3 Ira Katznelson, Fear Itself: The New Deal and the Origins of Our Time (New York: W. W. Norton & Co, 2013). 4 For another recent example of historians deploying this term, see Steven Conn, ed., To Promote the General Welfare: The Case for Big Government (New York: Oxford, 2012). 5 Henry L. Stimson, “A National Budget System,” The World’s Work 38 (August 7

Democrats led them to oppose policies that might undermine institutions of white supremacy. If the administrative reformers were racist, their racism wasn’t strong enough to dissuade them from supporting proposals that would strengthen central power in the national government.

My use of the term “big government” also requires some explanation. By big government, I mean: a government where central executives are able to implement national policy to solve national problems. It is not term that the administrative reformers of the 1920s would have used, but for our present-day ears it efficiently captures the scale and scope of their ambitions.4 By what criteria should we assess the reach, touch, and strength of the government?

Annual expenditures? Number of employees? Levels of taxation? To contemporaries in the 1920s, the federal government was already big by any measure. The administrative reformers recognized that big government was here to stay. The problem, as they saw it, was not to shrink the government but to make it more effective and efficient. As Henry Stimson, one of the more articulate spokesmen of the movement, put it:

We may as well recognize that legitimate pressure on the Government to enlarge its activities will not cease. Our population is increasing; our communities and methods of business are constantly growing more complex; more government and newer forms of government are being made necessary; every year legitimate expenses are bound to increase. There can be no going backward into the simpler times of old.5

4 For another recent example of historians deploying this term, see Steven Conn, ed., To Promote the General Welfare: The Case for Big Government (New York: Oxford, 2012). 5 Henry L. Stimson, “A National Budget System,” The World’s Work 38 (August 1919), 372. 8

A key distinction to make here is between an administrative state and a regulatory state or a distributive welfare state. The administrative reformers wanted to create an effective administrative state and sought to avoid fostering the growth of a regulatory state or a distributive welfare state. Southern

Democrats, on the other hand, wanted a regulatory state or a distributive welfare state without an effective administrative state. They wanted a government that was incapable of playing a big role in society.

My focus on administration as a way to assess the role of the national government in society runs counter to longstanding trends among scholars of the

American state. Historians have traditionally used economic policy to assess the power of the American state, focusing on topics such as industrial planning, business regulation, and universal welfare provision. Since government involvement in planning, regulation, and welfare increased during the

Progressive Era and New Deal, this focus has served, over time, to buttress the

Progressive Synthesis. Those who write within this synthesis view big business as the source of American antistatism. They see the expansion of central power in the American state as the result of liberal or progressive presidents using crises to overcome business-led resistance.6 This is true even among the major revisionist schools of the late-20th Century. The “corporatism” or “corporate liberalism”

6 Few studies depart significantly from the arguments made by Arthur M. Schlesinger, Jr., in The Age of Roosevelt: The Crisis of the Old Order, 1919-1933 (Cambridge, Mass., 1957) and by William E. Leuchtenburg in The Perils of Prosperity, 1914-32 (Chicago, 1958). For Schlesinger, the 1920s constituted the original “cycle of reaction” that gave meaning to the “cycles of reform” that framed it. Most historians seem to concur with Schlesinger’s assessment of the impact of the 1920 election: “the politics of public purpose gave way to the politics of private interest; virtue surrendered to commerce”; see Arthur M. Schlesinger, Jr., The Cycles of American History (Boston, 1986), 32. 9 interpretations, for instance, view big business as the limiting factor in state development, with corporate elites allowing only those innovations that are seen as good for business.7 Similarly, the “associative state” interpretation views efforts to conduct economic policy through intermediary institutions in the 1920s as an expression of business-inspired antistatism. Non-specialists tend to view the “associative state” as just another way that business influence limited the development of a social-democratic state in this period.8

7 Historians working within the “corporatism” and “corporate liberalism” traditions have largely (and significantly) tended to ignore the corporate- dominated 1920s. A notable exception is Gabriel Kolko, Main Currents in Modern American History (New York, 1976), 100–309. For a critique of the literature on regulatory “capture,” see William J. Novak, “A Revisionist History of Regulatory Capture,” in D. Moss and D. Carpenter, eds., Preventing Regulatory Capture: Special Interest Influence and How to Limit It (New York, 2013), 25- 48. 8 The founding text for studies of the “Associative State,” is Ellis Hawley, “Herbert Hoover, the Commerce Secretariat, and the Vision of an ‘Associative State,’ 1921–1928,” The Journal of American History 61, no. 1 (June 1974): 116– 140. Also see his The Great War and the Search for a Modern Order: A History of the American People and their Institutions, 1917–1933 (New York, 1979). It is worth emphasizing that “Associative State” was Hawley’s own term, and was not used by anybody in the 1920s. See Hawley, “Herbert Hoover,” 118n. Hawley’s framework has been widely adopted by historians and social scientists. The most ambitious extension of his interpretation is in Brian Balogh’s two volumes: A Government Out of Sight: The Mystery of National Authority in Nineteenth- Century America (New York, 2009); and The Associational State: American Governance in the Twentieth Century (Philadelphia, 2015). Even though Hawley’s arguments were starkly revisionist, pushing back forcefully against the traditional view of the 1920s as a reactionary interlude between the Progressive and New Deal cycles of reform, for many readers the notion of an Associative State seems to fit well within the dominant view that sees big business as the primary source of American antistatism. Efforts to conduct economic policy through intermediary institutions in the 1920s are seen as an example of how corporate elites allowed only those innovations that were viewed as good for business, and just another way that business influence forestalled the development of a social-democratic state in this period. Hawley seemed to affirm this view in a later essay where he characterized the Associative State as a form of “Antistatist Corporatism.” See Ellis Hawley, “Economic Inquiry and the State in New Era America: Antistatist Corporatism and Positive Statism in Uneasy 10

There is more to the state than economic planning, regulation, and welfare, however.9 This dissertation sets aside the traditional focus on economic policy and instead focuses more deliberately on the development of central power in national public administration. This focus reveals that the expansion of national administrative capacity and power in this period was not the product of a

Progressive response to corporate power. Nor was it the result of a corporate attempt to capture or tame the mechanisms of government for selfish ends.

Rather, it was it was driven by the efforts of Republican administration officials— together with their political, social, and economic allies—to remake the American

Coexistence,” in Mary O. Furner and Barry Supple, The State and Economic Knowledge: The American and British Experiences (New York: Cambridge University Press, 1990), 287–324. In a recent exception to this trend, Mark Hendrickson examines the associational activities of Hoover and his peers on their own terms in American Labor and Economic Citizenship: New Capitalism from World War I to the Great Depression (New York, 2013). Another book that uses an examination of 1920s associational strategies to challenge, rather than edify, the traditionally identified disjuncture between the New Era and New Deal is Robert F. Himmelberg, The Origins of the National Recovery Administration: Business, Government, and the Trade Association Issue, 1921–1933 (New York, 1976). 9 By looking beyond traditionally favored ideal types of state power—that is, by looking beyond the tax office, the planning office, and the welfare office, and by focusing instead on administrative policy, veterans’ relief, education, and law enforcement—this dissertation extends the recent movement, led by the historian William J. Novak, to study the American state on its own terms. See, William J. Novak, “The Myth of the Weak American State,” The American Historical Review 113 (June 2008), 752-772, and William J. Novak, “The Concept of the State in American History,” in J. T. Sparrow, W. J. Novak, and S. Sawyer, eds., Boundaries of the State in U.S. History (Chicago, 2015), 752–772. Other key studies in the vein include, Daniel R. Ernst, Tocqueville’s Nightmare: The Administrative State Emerges in America, 1900–1940 (New York, 2014), Ajay K. Mehrotra, Making the Modern American Fiscal State: Law, Politics, and the Rise of Progressive Taxation, 1877–1929 (New York, 2013), and Joanna L. Grisinger, The Unwieldy American State: Administrative Politics since the New Deal (New York: Cambridge, 2014). The central role played by corporate lawyers in this dissertation also elaborates on Louis Galambos’s concept of a pre-New Deal “lawyer’s administrative state,” in The Creative Society—and the Price Americans Paid for It (New York, 2012), 56-59. 11 state in the image of the modern industrial corporation. It was driven by nominally conservative reformers pursuing goals traditionally identified with the conservative cause of good government.10

Each chapter in this dissertation follows a case in which nationalist

Republicans, business leaders, and philanthropists attempted to solve a postwar policy problem by building central power in the national government. I begin, in

Chapter 1, where the administrative reformers began, with the creation of the national budget system. Administrative reformers believed that presidential control of budgeting was a precondition for effective national policymaking, and they leveraged concern about the nation’s war debt to create a presidential staff agency, enabling the President to direct the implementation of national policy.

Then, in Chapter 2, I turn to debates over the provision of veterans’ relief. In this case, administrative reformers attempted to solve what was essentially a public- health problem with administrative reorganization. This led, eventually, to the creation of the U. S. Veterans’ Administration. In Chapter 3, I follow the

10 The story in this dissertation in a sense flips the corporatism or corporate liberalism interpretation on its head. Advocates for the expansion of the state were actors that would be classified as “corporate elite” by proponents of a corporatism or corporate elite view, such as Gabriel Kolko. My argument, however, is that these corporate elites were not driven purely by an attempt to bolster their profits or class position. They seem, in fact, to have been animated by ideals of administrative efficiency and rationality—ideals emphasized by proponents of an “organizational” interpretation such as Alfred Chandler, Jr. This dissertation, then, describes a sort of Kolkoian phenomenon (business elites attempting to shape the state) motivated by Chandlerian purposes (the promotion of organizational efficiency). This provides an interesting angle from which to assess the historiographic legacy of Alfred Chandler, Jr. Although historians in recent years have sought to question the idea, the members of the administrative reform coalition in the 1920s were evidently convinced that a revolution in business organization and management had occurred in America during the late 19th and early 20th Centuries. 12 administrative reformers’ attempts to rationalize national prohibition enforcement. The initial arrangement left room for local control, and the reformers viewed administrative reorganization as a prerequisite for effective enforcement. The administrative reformers achieved some level of success in each of these first three cases—partly because they were able to forge compromises with a portion of the localist opposition, and partly because key moments in each case came during the policy windows of 1921–22 and 1929–30, when Republicans held strong majorities in Congress.

In the next three cases, however, administrative reformers were unable to achieve their objectives—because opposition from Southern Democrats was too strong and because reformers were unable to take advantage of the windows of opportunity in 1921–22 and 1929–30. Chapter 4 follows a series of failed attempts to reorganize the federal executive branch. This was meant to be a corollary to budget reform, providing the President with a rationalized administrative structure resembling that of a large corporation. Despite concerted effort throughout this 15-year period, administrative reformers were stymied at every point by Southern Democratic resistance. Chapter 5 examines debates about the role of the federal government in education. The administrative reformers viewed the education of American citizens as a key component of national strength. Accordingly, they sought to create institutions that enable the enactment of national education policy. Their proposals were opposed, however, by advocates of local control. Finally, Chapter 6 follows the failed attempt to pass a federal anti-lynching law. While the administrative reformers had the will to 13 pass an anti-lynching law, they lacked the means to overcome a Democratic filibuster in the Senate.

The administrative reformers were firmly commitment to their nationalizing, centralizing agenda—and that agenda drove their response to the policy problems that emerged after the war. In each case, they dusted off old pet proposals or applied longstanding policy preferences. The old saw of “when in doubt, reorganize” doesn’t apply here, because, for the administrative reformers in the 1920s, there was never any doubt. Reorganization was always their reform of choice.11 Similarly, although scholars of public administration and budgeting have, since the 1980s, questioned whether central executive power is necessary or desirable, during the period under study in this dissertation, the administrative reformers took the necessity and desirability of central executive power for granted.12

In all of these cases, similar coalitions are arrayed on each side of the debate in question: the administrative reformers and their allies backing increased central power; Southern Democrats and their allies protecting local control.

Viewed in isolation, some of these cases seem to turn on questions of constitutionality. When the six cases of this dissertation are viewed together,

11 My approach, emphasizing how preexisting policy agendas structured how advocacy coalitions responded to policy problems, owes much to the work of John Kingdon and Deborah Stone. See John W. Kingdon, Agendas, Alternatives, and Public Policies (Boston, 1984), Deborah A. Stone, Policy Paradox: The Art of Political Decision Making (New York, 2012). 12 On the necessity and desirability of executive budgeting, see, for instance, Roy T. Meyers and Irene S. Rubin, “The Executive Budget in the Federal Government: The First Century and Beyond,” Public Administration Review 71 (2011): 334– 344; and Naomi Caiden, “Paradox, Ambiguity and Enigma: The Strange Case of the Executive Budget and the United States Constitution,” Public Administration Review 47 (1987): 84–92. 14 however, it becomes clear that Congressional prerogatives were often advanced in order to defend the prerogatives of white supremacy, and that sectional conflict determined the outcome of most contests over the power of the national government.

CHAPTER 1

PUBLIC ADMINISTRATION: The National Budget

Bringing “Business Methods” to the Federal Government

DURING THE WINTER that followed the end of World War One, the administrative reform coalition viewed the nation’s rapidly ballooning war debt with a mix of alarm and excitement. The national debt had stood at just over $1 billion when the United States had entered the war in April 1917. By the anniversary of the Armistice, the amount would surpass $26 billion. The debt crisis seemed to provide the sort of opportunity for which nationalist administrative reformers had been waiting for nearly a decade. Widespread anxiety over the debt, they believed, would make it possible to rouse public support for the centerpiece of their agenda. “I think this is really a psychological time to push through a budget system,” former Secretary of War Henry L.

Stimson wrote to a colleague. “The country is facing a financial burden incomparably greater than anything it has ever had before and the pressure which this burden produces will create a demand for better financial methods.

That demand ought to be steered at once into the right channels.”13

13 For contemporary understanding of the magnitude of the debt, see the statement of Assistant Secretary of the Treasury, Russell Leffingwell in House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 499. Stimson to John T. Pratt, April 12, 1919, reel 52, p. 138, Henry L. Stimson Papers, Sterling Memorial Library, Yale University (hereafter, Stimson Papers). 16

The postwar debate over budget reform was a contest among three points of view. Most Southern and Western Congressmen preferred a congressional budget. They hoped to restore the division of power that had prevailed during the

19th Century, when the executive branch was viewed as a collection of agencies that owed direct responsibility to Congress, and when Congressmen were generally able to tell executive branch officials what to do and how to do it.

Wilsonian Democrats and some opportunistic Republicans favored a Treasury budget. In this system, the Secretary of the Treasury would act as a sort of broker between the president and Congress in managing the budget process (this system would build on the Treasury Secretary’s traditionally close relationship to

Congress). Nationalist members of the administrative reform coalition, in contrast to both of these options, favored a presidential budget. They believed that the president should take responsibility for managing public administration at the national level and should have the tools needed for the job. Under a presidential budget system, the role of Congress in national administration should be limited to supervising the executive branch once the president has approved a course of action.

From 1919 to 1921, the core members of the administrative reform coalition mounted a sustained, organized campaign to exploit the window of opportunity provided by the debt crisis. They used the prevailing desire for postwar government “economy” as a rationale for reforms that would not only ensure that the government would pay down the national debt, but that would also build central executive power in the national government, remaking the federal administration in the image of a modern business corporation, and placing the 17 president in the position of chief executive officer, with the power to enact national policy solutions to national problems. Despite concerted opposition, they were able strike what seemed to them to be an acceptable compromise and create, in June 1921, one of the foundational institutions of the modern American state: the Bureau of the Budget.14

PREVIOUS ATTEMPTS TO create a national budget system had ended in disappointment. In 1910, with authorization and funding from Congress, William

Howard Taft had created his “President’s Commission on Economy and

14 The creation of the Budget Bureau has been repeatedly analyzed by specialists in administrative history. The best account can be found in Peri E. Arnold, Making the Managerial Presidency: Comprehensive Reorganization Planning, 1905–1996, second edition (Lawrence, KS: University of Kansas Press, 1998). Two particularly useful overviews from a public administration studies perspective can be found in Roy T. Meyers and Irene S. Rubin, “The Executive Budget in the Federal Government: The First Century and Beyond,” Public Administration Review 71 (2011): 334–344, and Naomi Caiden, “Paradox, Ambiguity and Enigma: The Strange Case of the Executive Budget and the United States Constitution,” Public Administration Review 47 (1987): 84–92. The budget has held little interest for most historians, however. Even scholars such as Ellis Hawley, Barry Karl, and Morton Keller, who made a point of describing the constructive achievements of Republicans in the 1920s, have ignored budget reform. This despite the admonition, in 1961, from Alfred D. Chandler, Jr., and Fritz Redlich that “as a matter of fact, the first appearance of a budget in business enterprise cannot be overestimated in its historical importance. It is an indicator of emerging bureaucratization of business, the correlative to modern large-scale enterprise.” See Chandler and Redlich, “Recent Developments in American Business Administration and Their Conceptualization,” Business History Review 35 (Spring 1961), 26. The budget debate plays a pivotal role in Stephen Skowronek’s subfield-founding Building a New American State: The Expansion of National Administrative Capacities, 1877–1920 (New York: Cambridge University Press, 1982). Skowronek called the Budget and Accounting Act, “a watershed in the creation of a new American state and the establishment of a new bureaucratic politics” (207), but none of his many followers have shared his interest in budgetary reform, or in public administration generally. 18

Efficiency” to investigate possibilities for administrative reform.15 Taft and his personal secretary, the insurance executive and banker, Charles Dyer Norton

(who was married to a granddaughter of the abolitionist William Lloyd Garrison), assembled a team of researchers with expertise in corporate and government administration. To lead the commission, Taft and Norton selected Frederick A.

Cleveland, a director at the Bureau of Municipal Research in New York. Widely recognized as an expert in budgetary matters, Cleveland had training as a lawyer and as an accountant. He began his career as a specialist in corporate reorganization, first in California, then in New York City. Around the turn of the century he became interested in the municipal reform movement, which aimed to bring efficiency and accountability to city government, while providing urban residents access to needed services. Cleveland’s ideas on public administration were drawn from a dozen years working with both private corporations and municipal organizations.16

15 The work and significance of the inquiry and commission are described in Arnold, Making the Managerial Presidency, 26–51; and in Skowronek, Building a New American State, 186–194. Other useful accounts include: Ronald C. Moe, Administrative Renewal: Reorganization Commissions in the 20th Century (Lanham, Md., 2003); Bess Glenn, “The Taft Commission and the Government’s Record Practices,” American Archivist 21 (July 1958): 277–303. 16 Scholars have tended to emphasize Cleveland’s academic credentials while glossing over his business experience. See, for instance, Arnold, Making the Managerial Presidency, 14–15; and Skowronek, Building a New American State, 187. My emphasis on Cleveland’s business experience is consistent with the facts presented by other scholars even though it contradicts their generalizations. Peri Arnold notes, for instance, that Frederick Cleveland’s “major scholarly work in public administration began after his work for Taft.” See Arnold, Making the Managerial Presidency, 33. Many of Cleveland’s contemporaries also emphasized his business background. Taft, for instance, said of Cleveland that, “for years he had been conducting work in reorganization and revision of methods and procedure in large corporations, both public and private.” See William H. Taft, “Economy and Efficiency in the Federal Government: II,” 19

The Taft Commission was essentially an attempt to apply the methods of municipal reform to the problems of the national government. After an exhaustive survey of the government’s activities, the commission devised an ambitious plan, the centerpiece of which was a proposal for an executive budget.

The president would be given responsibility for proposing a detailed budget, which Congress would either approve or reject. Additional appropriations in excess of the president’s budget were to be considered separately.

Under the existing system, various committees in Congress decided on the amount to be spent based on estimates that were often provided directly by bureau chiefs—without input from department heads or from the president.

Congress could then increase or decrease these estimates at will. This meant that, as Taft lamented, “instead of the President being made responsible for estimates of expenditures, the heads of departments and establishments are made the ministerial agents of the Congress.”17 The result, Taft and his commission argued, was not only that the system was prone to abuse, but also that administrative authority and responsibility were dispersed. They sought to correct both problems by concentrating administrative authority and responsibility in the executive branch. This would bring the system more into line with the methods

Saturday Evening Post (February 13, 1915), 14. For Cleveland’s own summary of his career, which began, as he put it, with “a practice of law on the west coast, where there were a great many financial wrecks of the corporation kind and where we had a good deal of that practice,” see House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 514–5. 17 William Howard Taft, The Need for a National Budget: Message from the President of the United States Transmitting Report of the Commission on Economy and Efficiency, 62d Cong., 2s sess., June 27, 1912, H. Doc. 854, 3. 20 used by large corporations, placing the president in a position similar to that of a corporate chief executive while casting Congress as a sort of board of directors.

This was the first effort to see the executive branch as a distinct organization, or, as the historian Peri Arnold put it, “a whole that had hierarchy and ordered authority—a bureaucracy.”18 Taft and his Commission viewed the budget as the first step in a longer process of administrative reform. By centralizing control of finances, they would pave the way for the further centralized control of national public administration.

But the work of Taft’s Commission quickly became a largely symbolic exercise.

When the 62nd Congress took over from the 61st after the 1910 election, a strong

Republican majority in the House had transformed into a strong Democratic majority. In the Senate, the Republican majority shrank considerably, giving increased power to the so-called insurgent Western Republicans. This new

Congress was hostile to Taft’s administrative reform efforts. After the election of

1912, Congress disbanded the Commission and, when Woodrow Wilson took office, he refused to revive it. When a delegation of Democrats affiliated with the

Bureau of Municipal Research asked him to reconsider, Wilson assured the group that he shared their enthusiasm for the project, but denied their request, saying that his focus was on other issues.19

18 Arnold, Making the Managerial Presidency, 33. 19 The delegation consisted of Henry Bruere, one of the Bureau’s directors; John Purroy Mitchel, a progressive Democrat; and Louis D. Brandeis. See Arnold, Making the Managerial Presidency, 49, citing Walter O. Jacobson, “A Study of President Taft’s Commission on Economy and Efficiency” (master’s thesis, Columbia University, 1941), 69–70. 21

Exiled, then, from the federal government during the Wilson years, administrative reformers were forced to seek alternative venues. Several veterans of the Taft administration pursued state-level budget reform, most notably in

New York and Maryland.20 At the national level, members of the Taft

Commission joined a United States Chamber of Commerce special committee on the budget, in the hopes of using the Chamber’s broad membership to build support for national budget reform. In January 1913, in the Chamber’s first referendum, members “almost unanimously declared in favor of a national budget.”21 But, with its broad, geographically dispersed membership, it turned out that the Chamber was unsuited for action beyond referenda and articles published in its publication, Nation’s Business.22

In 1914, a group of administrative reformers—consisting primary of veterans of the Taft Commission—formed a new organization, the Institute for

20 Henry L. Stimson chaired the committee that devised the budget proposal for the New York state Constitutional Convention in 1915. See Elting Elmore Morison, Turmoil and Tradition: A Study of the Life and Times of Henry L. Stimson (Boston: Houghton Mifflin Company, 1960), 216–224, and William F. Willoughby, The Movement for Budgetary Reform in the States (New York: D. Appleton and Company, 1918), 152–167, 211–217. On the Maryland reform, see William F. Willoughby, The Movement for Budgetary Reform in the States (New York: D. Appleton and Company, 1918), 16–24. 21 “Some Unfinished Business for the Next Congress,” Nation’s Business (April 15, 1915), 10. The vote was 573 for and 10 against. See also Willoughby, The Problem of a National Budget, 154. 22 Harvey S. Chase, who had been a member of the Taft Commission, published an article in the May 1914 Nation’s Business outlining the plan for a national budget in business terms. It would, he explained, “apply business principles to national finances.” Chase, “National Expenditures Presented in Budget Form,” Nation’s Business (May 15, 1914), 5–6. Chase delivered essentially the same text in a speech February 2, 1915, at the annual meeting of the National Council of the Chamber of Commerce of the United States in Washington, D.C. See Harvey S. Chase, “Why Should We Have a National Budget? What a Government Budget is and How it Serves the Nation’s House Keeping,” Nation’s Business (April 15, 1915), 12–13. 22

Government Research (IGR), which would continue the work of the Taft

Commission and serve as a national counterpart to the Bureau of Municipal

Research. As Jerome Greene, one of the organizers, explained in a letter to prospective directors, “a small group of men interested in [the work of the Taft

Commission] have lately been considering whether there might not be a way of renewing the work on a basis that would not be dependent upon political support or congressional appropriation.” In addition to Greene, who was secretary of the

Rockefeller Foundation, the group included Anson Phelps Stokes, the secretary of

Yale University, Charles D. Norton, the organizer of the Taft Commission, and

Frederick Cleveland, the director of the Taft Commission.23

During the period before the Institute was incorporated, Frederick Cleveland

(who was still on the payroll of the Bureau of Municipal Research) served as its acting director. At the board meeting where the IGR was incorporated, however,

William F. Willoughby, another member of the Taft Commission, was unexpectedly selected as director. Willoughby’s selection was apparently a surprise to Cleveland, who had expected to be named. Hard feelings over this

23 The Institute for Government Research would, in the late 1920s, be merged with two other organizations to form the Brookings Institution. See Greene to Charles Van Hise, August 31, 1914, box 26, folder 294, RG 1.1, Ser. 200, Rockefeller Foundation Records, RAC. On the founding of the IGR, see James A. Smith, The Idea Brokers: Think Tanks And The Rise Of The New Policy Elite (New York: The Free Press, 1991), 52–55; James A. Smith, Brookings at Seventy- Five (Washington, D.C.: Brookings Institution, 1991), 9–14; and Donald T. Critchlow, The Brookings Institution: Expertise and the Public Interest in a Democratic Society (DeKalb, Illinois: Northern Illinois University Press, 1985), 17–40. 23 situation may have had something to do with Cleveland’s later hostility toward

Willoughby’s work with the Institute.24

The IGR received substantial support from the Rockefeller Foundation, but the leaders of the Institute and the leaders of the Foundation agreed that it would be best if the new organization were not identified as a Rockefeller project. This concern with avoiding controversy in connection with its ties to Rockefeller and other business leaders also informed the IGR’s focus on “scientific” research, and its avoidance of “propaganda.” Rockefeller Foundation leaders were especially insistent that the Institute avoid the appearance of attempting to direct the activities of the government, hoping to avoid a reprise of the controversy surrounding its farm demonstration project, which congressional investigators had viewed as an attempt by John D. Rockefeller to use his wealth to control the government subvert democracy.25 As a result, the IGR focused on building a body of ostensibly impartial research and the Rockefeller Foundation limited its contributions to less than 50 percent of the Institute’s budget. The Foundation paid nearly the entire cost, however, for publication and distribution of books produced by the Institute. By the end of 1918, the IGR had published five volumes on the subject of budgetary reform in its “Studies in Administration” series.

Willoughby wrote one book on budgetary reform at the national level, and one on

24 See Critchlow, The Brookings Institution, 33. 25 Greene to Charles Van Hise, August 31, 1914, box 26, folder 294, RG 1.1, Ser. 200, Rockefeller Foundation Records, RAC. See Senate Select Committee, Industrial Relations: Final Report and Testimony, vol. IX, 64th Cong., 1st sess., 1916, S. Doc. 415. 24 state-level reform. He also edited volumes on the British, French, and Canadian budget systems.26

DESPITE SEVERAL YEARS of sustained activity by the Institute for Government

Research, and occasional interest from the leaders of the U.S. Chamber of

Commerce, after the Armistice, administrative reformers felt there was still a need for a “propaganda” organization devoted solely to building public support for budgetary reform. So, in the early months of 1919 in New York City, in wood- paneled rooms at the Metropolitan Club, the Down Town Association, and the

Recess Club, William Howard Taft, Charles D. Norton, William F. Willoughby, and select members of the corporate elite could be found talking of budget reform.27

Out of these discussions emerged plans for a new organization: the National

Budget Committee. The leader of this group was John Teele Pratt, a corporation lawyer and financier—and one of the wealthiest men working on Wall Street. A few years later, Pratt’s estate was valued at about $9.8 million.28

26 William Franklin Willoughby, The Problem of a National Budget, Institute for Government Research, Studies in Administration (New York: D. Appleton and Company, 1918). 27 Some of these discussions are described in John Pratt to Benjamin Strong, Feb. 5, 1919, file 640.2.1, p. 1, Benjamin Strong Papers, Federal Reserve Bank of New York. 28 “John Teele Pratt, Financier, Is Dead,” New York Times, June 18, 1927. “Mrs. Ruth B. Pratt Inherits $9,152,771,” New York Times, June 18, 1929. As a share of Gross Domestic Product, this would have been equivalent to about $1.8 billion in 2014, see Samuel H. Williamson, “Seven Ways to Compute the Relative Value of a U.S. Dollar Amount, 1774 to present,” MeasuringWorth, 2015, www.measuringworth.com/uscompare/. In the 1920s, his wife, Ruth Baker Pratt, 25

An admiring journalist once described him like this:

Mr. Pratt, by the way, is an electric personality. Of medium height, and slightly built, he typifies the successful American man of affairs—alert, accurate and incisive. The son of Charles Pratt, founder of Pratt Institute, he has a direct heritage of mental ‘bigness’ which has been amplified by manifold business activities.29

John Pratt’s father, before founding the Pratt Institute, had been one of the original nine trustees in the Standard Oil Trust. One of John Pratt’s brothers was a director of Standard Oil of New Jersey; another was head of Standard Oil of

New York. Before the war, John Pratt was a director of the Universal Military

Training League. During the war, he was Associate Director (and the major financial backer) of the Public Service Reserve in the Department of Labor, and then served in Paris as General Manager of the Department of Military Affairs in the American Red Cross. After returning from Paris, Pratt settled back into his law practice and started a new firm specializing in corporate management and reorganization.30

At the formation of the National Budget Committee (NBC), Pratt was selected as chairman of a five-man organization committee that also included Benjamin

Strong, Paul M. Warburg, Joseph P. Cotton, and Henry L. Stimson. Strong and

Warburg were two of the most important and respected bankers in New York.

Strong, the governor of the Federal Reserve Bank of New York, had been

would become the first female member of the New York City board of aldermen and the first congresswoman elected in New York. 29 Ralph Rushmore, “Will the Budget Reduce Your Taxes?” The Magazine of Wall Street 29 (February 4, 1922), 445. 30 See “John T. Pratt,” The National Budget, September 15, 1919; Report of Proceedings of The National War Labor Conference, Washington, June 13–15, 1918 (Washington: Government Printing Office, 1918), 16. 26 president of the Morgan-dominated Bankers Trust. His father-in-law was the

Morgan associate Edmund Cogswell Converse.31 Warburg was celebrated (and reviled by some) for hatching the original “Aldrich Plan” for the U.S. Federal

Reserve system. Born into a prominent Jewish banking family in Hamburg,

Germany, he had settled in New York in 1902, joining Kuhn, Loeb & Co., the banking firm founded by his wife’s father, Solomon Loeb, and her uncle,

Abraham Kuhn, and which was run by her brother-in-law, Jacob Schiff.32

Cotton and Stimson were two of Wall Street’s most respected corporation lawyers. Formerly a partner at the firm of Cravath & Henderson, Joseph Cotton was considered by many to be the most talented lawyer of his generation.33

During the war, he had been Herbert Hoover’s “right hand man” at the U.S. Food

Administration.34 The member of the committee with the most experience with budgetary reform was Henry Stimson. A protégé of Elihu Root, Stimson had followed his mentor’s path from a lucrative corporate practice into public service, serving as U.S. Attorney under Roosevelt and Secretary of War under Taft. His

31 See Liaquat Ahamed, Lords of Finance: The Bankers Who Broke the World (Penguin, 2009), 50. 32 Liaquat Ahamed, Lords of Finance, 56; and Ron Chernow, The Warburgs: The Twentieth-Century Odyssey of a Remarkable Jewish Family (Knopf, 2012). 33 Robert T. Swaine, The Cravath Firm and Its Predecessors, 1819-1947, Volume 1 (Clark, N.J.: The Lawbook Exchange, Ltd., 2007), 13; Cotton’s skills are discussed in Stimson to Hoover, May 21, 1917, reel 49, pp. 75–76, Stimson Papers. Cotton was considered by Joseph Beal to have been “the best man in the class” of 1900 at Harvard Law, and Learned Hand considered Cotton to be the best student of his “whole generation,” quoted in Elting Elmore Morison, Turmoil and Tradition: A Study of the Life and Times of Henry L. Stimson (Boston: Houghton Mifflin Company, 1960), 308. 34 See Herbert Hoover to Henry Stimson, May 16, 1917, reel 49, pp. 12–13, Stimson Papers; and Hoover to Stimson, May 20, 1917, reel 49, p. 66, Stimson Papers. 27 reputation as an expert in budgetary matters stemmed from his chairmanship of the finance committee at the 1915 New York State constitutional convention.35

At the first official meeting of the NBC, on March 4, 1919, held at the

Metropolitan Club, the five organizers decided to retain the research services of

Samuel McCune Lindsay, professor of political science at Columbia, secretary of the Bureau of Municipal Research, and president of the Academy of Political

Science of New York.36 The Academy of Political Science, like the Bureau of

Municipal Research, was a venue for cooperation between liberal academics and public-minded business leaders. Lindsay, it was agreed, would receive his “usual financial arrangement”: the National Budget Committee would have him on loan, paying his $500-a-month salary to the Bureau of Municipal Research.37

After incorporating in Washington, D.C., and hiring a salaried secretary, the

NBC began its propaganda campaign at the end of the summer of 1919. The first issue of its twice-monthly newsletter, The National Budget, appeared on

September 1, 1919. Copy for the newsletter was produced by the public relations firm of John Price Jones, a former employee at the H.K. McCann Company (one of the predecessors of McCann Erickson) who had directed publicity for the

Liberty Loan drives and was general manager of the Harvard Endowment fund,

35 For details of his career, see Elting Elmore Morison, Turmoil and Tradition: A Study of the Life and Times of Henry L. Stimson (Boston: Houghton Mifflin Company, 1960). 36 Minutes, March 4, 1919, reel 51, pp. 777–778, Stimson Papers. 37 “National Budget Committee Advocates Finance Reform,” The National Budget, September 1, 1919; and Minutes, March 15, 1919, reel 51, pp. 898–902, Stimson Papers. House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 148. On the Bureau of Municipal Research, see Bruce McDonald, “The Bureau of Municipal Research and the Development of a Professional Public Service,” Administration & Society 42 (2010): 815–835. 28 where he had obtained the endorsement of that fund’s chairman, Morgan banker

Thomas Lamont. The Committee also commenced organization of state committees and began soliciting annual memberships at $2 per year. By the New

Year, the NBC would add about 300 members. Throughout its existence, however, most of the committee’s operating costs would be paid personally by

Pratt.38 The committee also gained visibility in September through a two-part article written by Stimson that appeared in the magazine World’s Work, which was edited by Stimson’s friend, Arthur W. Page.39

Shortly after Stimson’s article appeared, Samuel McCune Lindsay, of the NBC, and William F. Willoughby, of the IGR, began to organize hearings for the House

Select Committee on the Budget. Willoughby had drafted a bill sponsored by the chairman of the committee, James W. Good, a Republican from Iowa. The Good

Bill largely followed the lines established by the Taft Commission, providing for a budget bureau in the office of the president and the creation of an independent auditing agency. Lindsay and Willoughby helped arrange it so that almost every witness at the House hearings supported some form of executive budget system and that most of the witnesses supported the proposals of the National Budget

Committee and Institute for Government Research.40

38 See Scott M. Cutlip, The Unseen Power: Public Relations: A History (Hillsdale, N.J.: Lawrence Erlbaum Associates, 1994), 237. 39 Henry L. Stimson, “A National Budget System: An Analysis of Our Present Wasteful Financial Methods,” The World’s Work 38 (August, 1919), 371–375; and Henry L. Stimson, “A National Budget System, II: The Advantages and Need of the Budget System for National Expenditures,” The World’s Work 38 (September, 1919), 528–536. 40 Willoughby’s role in arranging the hearings is mentioned in Critchlow, The Brookings Institution, 37, and in Brookings to John D. Rockefeller, Jr., October 20, 1919, box 40, folder 315, FA313 Office of the Messrs. Rockefeller records, 29

In their public statements and private correspondence, NBC members and their allies tended to emphasize four proposals: (1) to establish central executive power and responsibility through a budget bureau in the office of the president;

(2) to clarify the role of Congress as a critic of the administration, rather than as an administrative actor; (3) to create an independent auditing agency; and (4) to encourage public discussion and debate about the budget by requiring cabinet members to appear on the floor of Congress to defend their budget proposal.41

When making these points, they always emphasized that these ideas were derived from business methods. “When you get into private business, and you want to get something done,” Henry Stimson explained in testimony before the

House committee, “the first principle is to focus the responsibility for doing it upon someone whom you know ... and providing him with the proper machinery and power to do it.” Budget planning must be done by “that branch of the

Government which has charge of the doing of the work,” Stimson explained. “It must, therefore, be done by the Executive, just as in the case of any large corporation.”42

Charles D. Norton (who was, at this time, vice-president of the Morgan- affiliated First National Bank of New York), in his House testimony, agreed that

Series D, Civic Interests, Rockefeller Archive Center; Lindsay’s role is mentioned in “Budget Committees Named in Congress,” The National Budget, September 15, 1919. 41 The Good Bill strongly embodied points 1 and 3. Members of the National Budget Committee were concerned that point 2 was insufficiently addressed— although Good proposed to introduce separate legislation streamlining the congressional appropriations-committee structure—and point 4 was not addressed at all. 42 House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 620. 30 the budget “should be initiated and submitted by the executives who are to carry the projects out” because “it is the way it is done in business generally.” Norton observed that “there is not a single business corporation that I have observed closely that is not run along the lines of the Good bill prepared by your committee.” When an incredulous Congressman challenged Norton’s business analogy by asking: “Do you know of any business organization that has three heads?” Norton replied: “I know of many businesses where the executive, after he has made a given plan, is content to abide by the judgment of his board, even if it is negatived or partially negatived, or is content to abide by the advice of his counsel, without feeling that his usefulness has been impaired.”43

Representative Good elaborated on Norton’s response by further refining the analogy. “Isn’t, after all, every business organization controlled by three heads— first, the president makes an estimate of a budget; the board of directors then assumes responsibility of approving ... and after all the determination rests with its legal aspects as defined by the general counsel of the organization.”44 For the benefit of his fellow committee members, Good restated Norton’s point: “If I understand your position, Mr. Norton, it is this: That we ought, so far as possible, to adopt those methods that all successful business organizations have adopted with reference to the finances of the Government.”45

43 House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 285. 44 House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 285–286. 45 House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 287. 31

III

DESPITE THE NATIONAL Budget Committee’s efforts to shape public opinion in favor of an executive budget system, many policymakers and policy advocates opposed empowering the federal executive at the expense of the legislature. Not surprisingly, this view found its most vocal spokesmen in Congress.

During the House hearings on the budget in September and October 1919, for instance, the Democratic members of the committee repeatedly broke into witnesses’ testimony to point out that Congress was the truly economic branch of government because it was always Congress that cut the estimates given by the executive.46 As Edward Taylor of Colorado put it: “The people do not seem to realize that Congress itself has been the only restraining power for years and years. We have been cutting down on the executive and trying to do it all the time, and we are the ones who put on the brakes.”47

In an article in Harper’s, timed to coincide with the House hearings, former

Speaker of the House, Joseph G. “Uncle Joe” Cannon, Republican of Illinois, argued that, if a new budget system were to be implemented, it should give budgetary authority to Congress, not to the executive. In a narrative sprinkled with homely references to prodigal sons and hog raising, Cannon asserted that, since the House has taxing authority, it should also have budget authority. Giving the president control of the budget, he said, would be like the House selecting the president’s cabinet. Finally, he warned that an executive budget would lead to

46 See, for instance, House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 144, 273–278. 47 See, for instance, House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 144. 32 totalitarianism. “The heads of the departments want to make the budget of expenditures and compel Congress to levy taxes according to their plans for expenditure. The Pharaohs had that kind of a budget system, and so had the

Czars of Russia. It was not the system embodied in the American Constitution.”48

During Senate hearings on the budget in January 1920, Republican Senator

Reed Smoot of Utah interrupted John Pratt’s testimony to explain his own preferences:

There are two ways of doing it, in my opinion. One way is for Congress to pass legislation creating an efficiency board with full powers of investigation and recommendation, and with power to go into any of the departments and make an investigation as to their mode of carrying on the work, the duplication of work between departments, and recommend to Congress the appropriation necessary to carry out the plans on a basis of economy rather than a basis of wild, reckless extravagance, as we have today. The other way is to have a budget commission appointed by Congress, responsible to Congress, with authority to make up the budget after a thorough investigation of every need that the Government may recommend that they desire.49

Despite this late burst of agitation by supporters of a legislative budget, however, by the time the House hearings finished, something like a consensus had emerged around the idea of an executive budget. Two and a half weeks after the hearings adjourned, the House passed the Good Bill, 283 to 3 (with 143 not voting).

Meanwhile, however, proponents of a presidential budget faced vigorous opposition from those who preferred to have the Treasury serve as the broker

48 Joseph G. Cannon, “The National Budget,” Harper’s Magazine 139 (October, 1919), 618–628. (The quote appears on p. 628.) Reprinted as House Doc. 264, 66th Cong. 1st Sess. (October 8, 1919) 49 Senate Committee on Consideration of a National Budget, National Budget: Hearings on H.R. 9783, 66th Cong., 2nd sess., 1920, 34. 33 between the president and Congress. This view was embodied in a bill introduced by the chairman of the Senate budget committee, Medill McCormick, Republican of Illinois. Where the Good Bill placed the proposed budget bureau in the office of the president, the McCormick Bill would create a budget bureau in the

Department of the Treasury. Where the Good Bill had been written by William F.

Willoughby of the Institute for Government Research, embodying ideas drawn from the Taft Commission, the McCormick Bill was written by Charles Wallace

Collins, director of the Economic Section of the Legislative Reference Service at the Library of Congress, and it embodied ideas that had been promoted by Carter

Glass, the Secretary of the Treasury.50

Glass, a former newspaperman from Virginia and an old friend of Woodrow

Wilson, is well known for his long career in Congress. His 13-month tenure in the

Treasury came after 16 years in the House and before 26 years in the Senate.

Glass was a fiscal conservative and a committed Jeffersonian—and an unapologetic defender of racial segregation who had played a leading role in disfranchising blacks in Virginia. Glass justified his preference for giving budget responsibility to the Secretary of the Treasury by insisting that the president would be too busy and would unable to handle direct responsibility for the budget, and that a bureau chief under the president would lack the prestige to gain cooperation from the members of the Cabinet:

50 Willoughby’s authorship of the Good Bill is mentioned in Brookings to John D. Rockefeller, Jr., October 20, 1919, box 40, folder 315, FA313 Office of the Messrs. Rockefeller records, Series D, Civic Interests, Rockefeller Archive Center. Glass’s role in developing the McCormick Bill noted in “Congress to Get New Budget Bill: Senator McCormick’s Measure Puts Bureau Under Secretary of Treasury,” New York Times, November 28, 1919, 21. 34

The President of the United States has not the time. It is not his function, and I do not think it could wisely be made his function, to examine the details of a budget system, together with all of the other duties that he has to perform; and if he had that to do, the people of the United States would better elect a statistician or a professor of economics president, rather than a man of broad general statesmanship.51

Glass did not seem to intend this as criticism of Wilson; but McCormick, who was one of the president’s fiercest opponents on the issue of U.S. membership in the League of Nations, certainly seemed to take satisfaction in discussing the inability of the president to handle too much extra work. “The Good bill,” he said,

“would make the President, already the most overburdened Executive in the world, his own finance officer ... We may very well have a great President who is so occupied with our industrial and social problems or with grave foreign affairs, that he has no time for the detail of financial policy.”52 Ex-President Taft, in a pre-election letter to the Chicago Banker (and future Director of the Bureau of the

Budget) Charles G. Dawes, suggested that McCormick’s preference for a bureau in the Treasury was motivated only out of McCormick’s “feeling against

Wilson.”53

The primary motivation for supporters of a Treasury Budget seems to have been their fear of creating a mechanism for enhancing central administrative power in the government. While advocates of a presidential budget repeatedly

51 House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 513. On Glass’s part in the turn-of-the-century Virginia disfranchisement campaign, see Michael Perman, Pursuit of Unity: A Political History of the American South (University of North Carolina Press, 2009), 175, 215. 52 “Congress to Get New Budget Bill: Senator McCormick’s Measure Puts Bureau Under Secretary of Treasury,” New York Times, November 28, 1919. 53 Taft to Dawes, October 20, 1920, box 278, folder 16, Dawes Papers, Northwestern University. 35 cited the creation of a presidential staff agency as the ultimate benefit of their proposal, advocates of the Treasury budget—by contrast—emphasized the dangers that would be posed by a budget bureau directly under the president because such an arrangement would create a presidential staff organization, which would dramatically enhance central administrative power in the government. Charles Wallace Collins, author of the McCormick Bill, alluded to this danger in his House testimony, when he warned that that the director of a presidential budget bureau would “become, in effect, more powerful than a

Cabinet officer.”54

The effort to forge a coalition in support of the Treasury plan created a number of curious alliances. Perhaps the most curious was that between

Secretary Glass (one of Wilson’s most trusted lieutenants) and Senator

McCormick (one of President Wilson’s bitterest political enemies). In pursuit of this alliance, Glass and his chief assistant, Russell C. Leffingwell, another of

Woodrow Wilson’s trusted aides, spent a considerable amount of time in the summer and fall of 1919, and in the winter of 1920, working to convince the

National Budget Committee and other policymakers and policy advocates to support McCormick’s pet policy proposal.

A successful corporation lawyer who married a niece (and heir) of Edward M.

Sheperd, a leading Gold Democrat in New York during the early 20th Century,

Assistant Secretary of the Treasury Leffingwell was well known to the directors of the National Budget Committee. During his time at the Treasury, Leffingwell was

54 House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 216. 36 on leave from the firm of Cravath & Henderson. He had been elevated to partner in that firm on January 1, 1907, the same day as Joseph P. Cotton. At Cravath, one of Leffingwell’s primary duties had been to serve as counsel for Kuehn, Loeb

& Co., Paul M. Warburg’s banking firm.

At Treasury during the war, Leffingwell was in charge of the Liberty Loan drives, which brought him into close work with Benjamin Strong. After the war,

Strong’s and Leffingwell’s work kept them in close contact, although they were often at odds over monetary policy. A particularly heated disagreement between

Strong and Leffingwell developed in October 1919, at the same time that National

Budget Committee was considering whether to support the Good or the

McCormick bill.55 Perhaps it was as an attempt to gain traction in their arguments over monetary policy that Strong seems to have served as the conduit for Glass’s and Leffingwell’s campaign to convert the NBC.

In June 1919, at a meeting in Washington, Leffingwell outlined for Strong the administration’s preferred plan for a budget bureau responsible to the Secretary of the Treasury, and an auditing agency within the Treasury.56 Upon his return to

New York, Strong met with Pratt, and convinced him to back the Treasury plan.

Pratt sent a memo to the other directors of the National Budget Committee

55 On Leffingwell’s career, see Robert T. Swaine, The Cravath Firm and Its Predecessors, 1819–1947: Volume II, The Cravath Firm Since 1906 (New York: Ad Press, Ltd., 1948), 13, 17–18; Ron Chernow, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance. Leffingwell’s service to Kuhn, Loeb & Co. is mentioned in Paul D. Cravath to William G. McAdoo, May 7, 1917, box 6, folder 119, Leffingwell Papers, Yale. The disagreement is discussed by Strong and Leffingwell in a series of letters in May 1922, when Leffingwell was again critical of Federal Reserve policy. See box 7, folder 162, Leffingwell Papers, Yale. 56 Strong to Pratt, June 9, 1919, file 640.2.2, pp. 22–23, Strong Papers. 37 advising them of this shift in strategy. “This conclusion is rather at variance with the prior decisions of the Committee,” Pratt admitted. “It seems to the Chairman, however, the best conclusion that we can reach.”57

While forming an alliance with officials in the Wilson administration was a plausible way of ensuring success, one problem was that Stimson had recently submitted his article to the World’s Work advocating an independent audit and a budget bureau in the president’s office.58 The day after receiving Pratt’s memo,

Stimson wrote to Arthur W. Page, editor of the World’s Work, and asked Page to send a copy of the page proofs to Pratt and to Samuel McCune Lindsay. Stimson and Page were close friends and neighbors on Long Island.59 Stimson complained to Page about Pratt and Strong’s willingness to compromise with the Wilson administration: “These people are continually sliding off into an opportunist program instead of a real fighting program.”60

In his response to Pratt, Stimson complained that Pratt’s proposal did not include Stimson’s own pet proposal, a provision for the appearance of cabinet members on the floor of Congress:

You make no provision for the necessary machinery to create a public budget debate. No system will be effective, in my opinion, which does not provide for the necessary publicity by a public budget debate between the Executive and the opposition in Congress. Congress will not take such a step unless it is driven to do so by public opinion. Our organization is one

57 Pratt memo, June 23, 1919, reel 52, pp. 704–705, Stimson Papers. 58 Stimson to World’s Work, June 13, 1919, reel 52, p. 654, Stimson Papers. 59 Page, in these years, was the treasurer and organizer of the West Hills Hunt, which began each year in Stimson’s back yard. See Page to Stimson, December 31, 1919, reel 53, p. 100, Stimson Papers. For more on the friendship between Stimson and Page, see Noel L. Griese, Arthur W. Page: Publisher, Public Relations Pioneer, Patriot (Atlanta: Anvil Publishers, Inc., 2001), 47. 60 Stimson to Page, June 24, 1919, reel 52, p. 710, Stimson Papers. 38

of those created to rouse such public opinion. If we lie down, who will take it up?61

In his World’s Work article, Stimson had been unequivocal in his rejection of the McCormick Bill’s provision for a budget bureau in the Department of the

Treasury. “Of course,” Stimson wrote, “the President would not do it all himself.

He would not pass upon the infinite number of details which enter into it, but his power must be behind the budget and only his power will suffice.” Placing the bureau directly under the president, Stimson argued, would ensure that the budget would embody the will of the president. It would also allow the budget bureau to fill the role of a presidential staff agency, providing “the necessary expert and clerical assistance who will serve as the machinery with which the

President renders easily and intelligently his decisions between the different departments.”62

At the House committee hearings in late September and early October, the

National Budget Committee members and their allies—Pratt, Lindsay, Stimson, and Willoughby, Norton, Taft, and Robert S. Brookings—all testified in favor of the Good plan. Secretary Glass and President Wilson’s old friend, Professor

Charles A. Beard, testified in favor of the McCormick plan. Notably breaking from the Wilson administration line, however, was the young Assistant Secretary of the

Navy, Franklin D. Roosevelt, who supported the NBC’s preference for a

61 Emphasis in original, Stimson to Pratt, June 24, 1919, reel 52, pp. 711–712. Stimson Papers. 62 Henry L. Stimson, “A National Budget System: II. The Advantages and Need of the Budget System for National Expenditures,” The World’s Work 38 (September, 1919), 533. 39 presidential budget, arguing that the budget system should be directed by “some separate body or individual, directly under the President himself.”63

After the hearings adjourned, Representative Good introduced his bill into the

House, where it passed easily on October 21. The success of the NBC and IGR in securing the Good Bill’s passage spurred an intensified effort by advocates of the

Treasury plan. The tactics of the Treasury advocates had already taken on a hint of desperation. At the House hearings, one supporter of the McCormick plan had tried to win converts from among advocates for a congressional budget by claiming that the Good Bill was part of a corporate conspiracy. Referring to the

National Budget Committee, William H. Allen asserted that the Good Bill would put power “in the hands of a permanent nonpartisan organization of banking and business experts.” “If we are to have soviet government,” Allen added, “it should not be merely representative of the banking and business interests.”64 Allen was director of the Institute of Public Service, a municipal research organization. He had been a co-director of the Bureau of Municipal Research with Frederick

Cleveland, but quit in 1914 to protest donations from the Rockefeller

Foundation.65

63 House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919. For FDR’s testimony, see p. 654. 64 House Select Committee on the Budget, National Budget System, 66th Cong., 1st sess., 1919, 572–3. 65 In contrast to his performance at the House hearings, Allen was quite congenial in the Senate hearings. See, Senate Committee on Consideration of a National Budget, National Budget: Hearings on H.R. 9783, 66th Cong., 2nd sess., 1920, 63–70. For more on Allen’s exit from the Bureau of Municipal Research, and the ensuing controversy, see his testimony and the “Allen Exhibit” in Commission on Industrial Relations, Industrial Relations: Final Report and Testimony, vol. IX, 64th Cong., 1st sess., 1916, S. Doc. 415, 8327–8342, 8462–8480. 40

Allen had opposed an executive budget during his time at the Bureau of

Municipal Research, preferring a legislative budget—a preference that kept him from joining Cleveland on the Taft Commission.66 By 1919, however, he had come to support the Wilsonian Treasury Plan. During the summer months of 1919, he conducted an intensive letter-writing campaign criticizing the NBC’s proposal for a presidential budget. Among Allen’s many addressees was Henry Stimson, who complained about the letters to his friend Joseph Cotton, who (being a law partner of William G. McAdoo) had contacts among the Wilsonian Democrats:

This man Allen has taken a particularly pernicious slant in regard to the Executive budget and seems to have time and energy to make himself a possible danger. He is writing me letters all the time which I have not answered and which I think it would only do harm to answer. I do not know much about him but it is possible that he is merely honest and misguided.67

After passage of the Good Bill, however Glass and McCormick began to press their attempt to sway the National Budget Committee even more forcefully. On

Friday, October 24, Senator McCormick met with John Pratt and Benjamin

Strong in Washington and pressed his case in person—and apparently convinced them. On the following Monday, October 27, 1919, Strong wrote to Stimson and raised doubts about the Good bill: “At the moment I am greatly interested and, in fact, somewhat concerned over the rather rapid progress which the Good Bill is

66 For an analysis of Allen’s prewar views on the budget, see Irene S. Rubin, “Early Budget Reformers: Democracy, Efficiency, and Budget Reforms,” The American Review of Public Administration 24 (1994): 229–252. 67 Starr J. Murphy to John D. Rockefeller, Jr., June 18, 1919, box 40, folder 317, Messrs. Rockefeller Records. Stimson to Joseph P. Cotton, July 9, 1919, reel 52, p. 798, Stimson Papers. See also, Stimson to Page, September 8, 1919, reel 52, p. 1073, Stimson Papers; and Page to Stimson, September 10, 1919, reel 53, p. 5, Stimson Papers. 41 making and have grave doubt as to the efficacy of the measure proposed by that bill.”68 A week later, Pratt and Strong were again ready to give the committee’s endorsement to the Treasury plan for the budget. Strong shared with the directors of the National Budget Committee a draft of a letter addressed to Glass, expressing support for “the establishment of a bureau, under a commissioner or commissioners in the Treasury Department, and under the immediate supervision of the Secretary of the Treasury.”69

The paid secretary of the National Budget Committee, Charles Francis Nesbit, a former Insurance Commissioner for the District of Columbia and the wartime

Insurance Commissioner in the Bureau of War Risk Insurance, urged caution, however: “I trust that this matter will be given very careful consideration before we decide to back the ideas of the Treasury Department and Senator

McCormick.” He reminded Pratt that, in the October 15 edition of The National

Budget, “not only are yourself and Dr. Lindsay quoted as in favor of the executive budget ‘prepared in the Office of the President’, but the same bulletin states that the consensus of opinion of those appearing at the hearing was to the same effect.” Nesbitt noted that the Institute for Government Research was solidly in favor of the Good Bill, and said “I do not believe this Committee should lightly in any way reverse that decision on which we are thoroughly on record, and where the signal success of the bill in the House is now a matter of history.”70

68 Strong to Stimson, October 27, 1919, reel 53, p. 412, Stimson Papers. 69 Strong to Stimson, November 6, 1919, reel 53, pp. 562–566, Stimson Papers. In a follow-up letter, Pratt wrote: “It is very important indeed that we get together with the Treasury Department to settle the question we talked of last week.” Pratt to Stimson, November 7, 1919, reel 53, p. 571, Stimson Papers. 70 Nesbitt to Pratt, November 4, 1919, reel 53, pp. 572–574, Stimson Papers. 42

Stimson, once again, urged Pratt and Strong to stick to the original plan, and not to accept a premature compromise:

Mr. Nesbit’s letter of Nov. 4 seems to me to be very persuasive. It corresponds so exactly with my own feeling that on mature consideration I have decided that I cannot join in any suggestion to change the Good bill, so as to place the new machinery in the Treasury Department. The Good bill follows exactly my own recommendation when I appeared before the committee. It has always been my view that the responsibility should rest directly upon the President, and the new machinery for that purpose should be directly under him. While I was much influenced by Mr. Strong’s argument, and if the situation were wholly academic and open to modification, and if the Treasury Department could be stripped of all its other and inconsistent functions, I might be led to believe that that Department could be made to serve as the hand of the President in budget procedure, yet as things now stand, and with this legislation under way, and the House committed to it, I think it would be a serious mistake to throw our influence against it. It might result in giving opponents of budget reform an excuse for sidetracking the whole effort.71

When McCormick’s efforts to win the NBC’s support by persuasion failed, he shifted to coarser tactics. On Thanksgiving Day 1919, the senator announced hearings on his bill in the Senate. In his statement to the press, McCormick took the opportunity to elaborate on William H. Allen’s critique of the Good Bill as an opening wedge for corporate domination, adding an anti-Jewish undertone. “The truth is,” McCormick said, “that when the original plan of the House bill was conceived, and before Mr. Good fathered it, it was the intention of the bill’s progenitors to create the position of Director of the Budget, under the President, to be filled by Mr. Paul Warburg of New York.”72

71 Stimson to Pratt, November 10, 1919, reel 53, p. 621, Stimson Papers. 72 “Congress to Get New Budget Bill: Senator McCormick’s Measure Puts Bureau Under Secretary of Treasury,” New York Times, November 28, 1919. 43

PRATT NATURALLY TOOK McCormick’s comments as an attack on the National

Budget Committee, and denied the senator’s charges in the December 1 issue of the committee’s newsletter, now called The Budget—the word “National” now dropped from the title. Warburg was, after all, a director of the NBC. Despite this affront, Pratt and Strong still remained open to a compromise with McCormick and Glass, and the NBC board remained divided on the question.73

Days later, however, Woodrow Wilson’s annual message to Congress put further pressure on the National Budget Committee to settle on its official position on the question of whether to support the Good or the McCormick bill.

In his message, delivered to Congress on December 2, 1919, Wilson endorsed the plan of his old friend, Carter Glass, by calling for a budget bureau in the Treasury and a consolidated auditing agency to remain within the Treasury.74

Pratt and Strong were eager to capitalize on the President’s support of an executive budget system, and the McCormick Bill seemed like an opportunity to simultaneously win the support of fiscally conservative Southern Democrats such as Glass, as well as Western Republicans such as McCormick. Stimson, however, was insistent that the committee not settle for what he viewed as an ineffective plan. To resolve this dispute, the directors of the National Budget Committee held a vote a week after Wilson’s message and a week before the start of the

Senate hearings on the McCormick Bill. A majority of the directors voted to support the Good Bill, but they also agreed that they would accept the bureau in

73 “Paul M. Warburg Not After Budget Office, The Budget, December 1, 1919. 74 Woodrow Wilson: “7th Annual Message,” December 2, 1919. 44 the Treasury if all non-financial duties were removed from that department, as had been suggested in the preliminary draft of the McCormick Bill.75

In January 1920, the National Budget Committee changed the line-up of its board of directors, adding President Wilson as “honorary chairman,” and adding ex-President William Howard Taft and Alton B. Parker, the 1904 Democratic presidential nominee, as directors. This did not change the balance of the board on the Good-McCormick dispute, however, as Taft was of course an ardent supporter of the Good Bill, but it reflected a new acceptance of the need to work with the Wilson administration.

After the Senate Hearings adjourned in mid-January, the NBC prepared to reconsider the whole question again and employed William O. Heffernan to investigate the situation on Capitol Hill. Heffernan, the former Budget

Commissioner of Ohio, was a director of William H. Allen’s organization,

Institute of Public Service, and seems to have shared Allen’s aversion to the Good

Bill. A Kentucky-born accountant, Heffernan’s primary business partner, James

Lyman Pratt (no relation to John Pratt of the National Budget Committee), was a

West Virginian and a son-in-law of Georgia Senator Hoke Smith.

In his report, dated January 16, 1920, Heffernan leaned heavily toward endorsing the McCormick Bill, and went out of his way to criticize the Good Bill.

Heffernan’s main informant was Charles Wallace Collins, the author of the

McCormick Bill, “who,” Heffernan explained, “has no coals in the fire and is a

75 Senate Committee on Consideration of a National Budget, National Budget: Hearings on H.R. 9783, 66th Cong., 2nd sess., 1920, 29–30, 33. The committee’s willingness to accept the McCormick Bill was emphasized in the January 1 issue of The Budget. See “Major Budget Witnesses Uphold National Committee’s Contentions,” The Budget, January 1, 1920. 45 sincere student of the whole question.”76 An Alabama-born lawyer, Collins would later (after the Second World War) become widely known as an ardent white supremacist and opponent of what he saw as the interrelated dangers of desegregation and “state capitalism.” In 1920, however, Collins was known as an advocate of a national budget system. In contrast to the veterans of the Taft

Commission, however, and in common with Carter Glass, Woodrow Wilson, and other proponents of the Treasury plan, Collins sought to build a system that would save money while limiting the expansion of central executive power at the national level. He focused solidly on economy and did not speak of functional efficiency in the way that William F. Willoughby—the author of the Good Bill— did, nor did he speak of creating a presidential staff agency.77

Collins, author of the competing McCormick Bill, warned Heffernan that the

Good Bill was a ruse—that, while the Good bill appeared to call for an executive budget system, there were flaws in the bill that would make the system unworkable, and that these flaws were inserted deliberately by Good. Heffernan reported that “Chairman Good, of the House Select Committee on the Budget, although he strongly advocates the adoption of a budget system, is alleged to be really opposed to any such system.” The Good Bill, Heffernan explained, “was presented to the country as something that it wasn’t.”78

76 Heffernan Report, January 16, 1920, reel 54, pp. 302–305, Stimson Papers. 77 For an overview of Collins’s career, see Joseph E. Lowndes, From the New Deal to the New Right: Race and the Southern Origins of Modern Conservatism (New Haven: Yale University Press, 2008), 11–39. See also Ira Katznelson, Fear Itself, 139–41, 143–44, 187. 78 Heffernan Report, January 16, 1920, reel 54, pp. 302–305, Stimson Papers. 46

Stimson—who had supported the Good Bill from the start—remained unconvinced by Heffernan’s memo, however, and he retained his already low opinion of McCormick, which Stimson had developed during debate over the

League of Nations. Like most Republicans with ties to Wall Street, Stimson had supported U.S. membership in the League with reservations, and he had viewed the apparent knee-jerk opposition of McCormick and the other “irreconcilables” with dismay. In a discussion about the Republican Party platform in mid-

February 1920, Stimson cautioned Ogden L. Mills: “I hope you are not irrevocably committed to the Senate bill, unless it has been very much changed from the draft which has been sent me. That one seems to partake of some of the mental vagaries of the Senator who is its sponsor.”79

The indecision within the National Budget Committee over which bill to support continued in March 1920, when Frederick A. Cleveland (who had led the

Taft Commission a decade earlier) delivered a book manuscript commissioned by the committee. The book, titled The Budget and Responsible Government, and published in May 1920, was part of the MacMillan Company’s “American Social

Progress Series,” edited by National Budget Committee research director Samuel

McCune Lindsay. Scholars have routinely used Cleveland’s book as a key document in describing the budget movement, but they haven’t noticed that, in his analysis of proposed budget legislation, Cleveland offered some withering criticisms of the Good Bill:

79 It’s not clear whether Stimson was just being mean, or if he was aware of McCormick’s history of mental health problems, which had led the senator to become a patient of the psychoanalyst Carl Jung and which ultimately led to McCormick’s apparent suicide in 1925. Stimson to Mills, February 16, 1920, reel 54, p. 555, Stimson Papers. 47

One may read it time and again and still be in doubt as to what it does aim to accomplish. But of one thing the reader feels certain; that there is an attempt to capitalize the popular clamor for responsible government through the institution of a budget procedure. The framers of the bill have evidently tried to be nice to every one. The bill holds out the appearance of an executive budget measure; but on analysis it is found to lack the essentials, and one is left with the conviction that it is a complete surrender to the “chairmen” who would protect their great powers by insisting on the Congressional status quo; that it is essentially a well- camouflaged legislative budget device—a Republican measure well designed to fulfill the prophecy of Mr. Cannon.80

Cleveland’s phrasing recalls Charles Wallace Collins’s attack on James W.

Good, and might indicate that Cleveland had been convinced by McCormick or

Leffingwell—or by his former colleague William Allen (although they had fallen out over their disagreement about whether an executive or legislative budget).

Cleveland’s focus on the wording of specific clauses and on “the framers of the bill” suggests some lingering bitterness against William F. Willoughby, who had replaced Cleveland as director when Cleveland was forced out of the Institute for

Government Research. The intensity of Cleveland’s opposition to the bill is especially glaring when compared to his initial assessment (made in June 1919) for the directors of the National Budget Committee, that the Good Bill was “a long step in the right direction.”81

The NBC countered Cleveland’s disdainful treatment of the Good Bill in the book by including an introduction written by William Howard Taft, in which the ex-president unequivocally supported the Good Bill. After commending the

80 Frederick A. Cleveland and Arthur Eugene Buck, The Budget and Responsible Government (New York: The MacMillan Company, 1920), 362–363. Cleveland’s critique of the Good Bill continues on pp. 372–378. 81 Cleveland to Samuel McCune Lindsay, June 23, 1919, reel 52, p. 722, Stimson Papers. For background on Cleveland’s disagreements with Allen at the Bureau of Municipal Research, see Rubin, “Early Budget Reformers,” 229–252. 48

British budget system, Taft lamented the lack of such a system in the United

States: “Except in the very early days of the Republic, when Hamilton, with his wonderful genius, was inaugurating the business side of our Government, we never had anything like a proper budget.”82 Taft then launched directly into the controversy over the competing House and Senate bills:

Supporters of the Senate bill object that the President has not the time to do this thing. I venture, in the light of the experience I have had, to differ radically with this latter view. The preparation of the budget is going to be one of the most important functions that the whole Administration performs. Therefore the President may well devote all the time that is needed to giving general form to the budget and deciding the question that are certain to arise between his Budget Bureau and the department whose estimates are to be subjected to a pruning. The Secretary of the Treasury will not have sufficient prestige with the other departments to avoid the effect of the jealousies that any one familiar with the working of departments knows must exist. The President himself will have sufficient difficulty in adjusting the differences between his own Bureau and the various departments, but he can do it with his power—I doubt if the Secretary of the Treasury can.83

Samuel McCune Lindsay attempted to smooth over the difference of opinion between Taft and Cleveland in an editor’s note dated March 17, 1920. “In the ranks of the National Budget Committee,” the professor explained, “there developed differences of opinion almost from the start concerning the relative merits of the proposals for a national budget system, especially with respect to the location of the budget bureau and the concentrating of responsibility for the initiation of the budget.” Lindsay summarized the ex-president’s position: “Mr.

Taft is primarily interested in seeing executive responsibility fixed and

82 Frederick A. Cleveland and Arthur Eugene Buck, The Budget and Responsible Government (New York: The MacMillan Company, 1920), xv. 83 Frederick A. Cleveland and Arthur Eugene Buck, The Budget and Responsible Government (New York: The MacMillan Company, 1920), xvi–xvii. 49 strengthened and therefore naturally prefers the Good plan.” And he attempted to summarize the position of the former head of Taft’s Commission: “Dr.

Cleveland is so much attracted by other features of the McCormick plan ... that he seems to prefer it as a whole and to think that the Good bill, even with the revision of rules contemplated by separate resolutions not yet acted upon by the

House, would mean the perpetuation of many evils of the present committee system.” Finally, Lindsay outlined the official position of the National Budget

Committee, which by now included two additional directors: New York banker

Manny Strauss, and Nicholas Murray Butler, the president of Columbia

University and a strong nationalist Republican (who was well known as a close ally of Elihu Root). “The National Budget Committee's position is that a combination of the two plans in a McCormick-Good bill, which may finally be enacted by Congress, will give us the advantages of a budget system in which the responsibility of the President for the initiation of the budget, and for the correction of the evils which any budget system is sure to reveal in the business organization of the Government.”84

By the time Cleveland’s book appeared, however, the tactical situation had changed yet again. On February 1, 1920, Carter Glass resigned from the Treasury in order to take a seat in the Senate. Glass was replaced by David Franklin

Houston, who had been Wilson’s Secretary of Agriculture. A southerner without

84 Frederick A. Cleveland and Arthur Eugene Buck, The Budget and Responsible Government (New York: The MacMillan Company, 1920), ix–x. This disagreement between Cleveland and Taft in 1920, although not noted by her, supports Irene Rubin’s contention that Taft himself had dictated the preferences of his namesake commission, and that Cleveland’s endorsement of a Presidential Budget in his work on the Taft Commission reflected Taft’s views rather than Cleveland’s. See Rubin, “Early Budget Reformers,” 244–245. 50 much experience in financial policy debates, Houston seems not to have continued Glass’s efforts to cultivate Senator McCormick and the National

Budget Committee.

This led to a shift in the tactical alliance between the Wilson administration and McCormick, with the senator changing his position on the issue of the location of the auditing agency. In January 1920, McCormick, in contrast to

Good, felt that reforming the audit system was “too great a thing to undertake at present,” as William Heffernan had reported to the National Budget Committee.

McCormick, Heffernan had explained, “wants a budget system established first and then committees appointed by Congress to study the question of an audit. He says that in recommending this he is deferring to the opinion of Secretary Glass who should understand the situation.”85 By mid-February, however, McCormick had dropped Glass’s insistence on leaving the audit within the Treasury and the final version of his bill called for the establishment of an independent auditing agency. This shift brought McCormick’s views closer to those of Taft and Stimson, and meant that, now, both the House and Senate bills were in conflict with the preferences of the Wilson administration.86

The final version of the McCormick Bill included another change that was less desirable from the perspective of the National Budget Committee, however.

85 Heffernan Report, January 16, 1920, reel 54, pp. 302–305, Stimson Papers. 86 Pratt to Stimson, February 18, 1920, reel 54, p. 579, Stimson Papers. For McCormick’s initial plan, see “McCormick Has Budget System Ready for G.O.P.,” Chicago Tribune, May 19, 1919. For the final form of his bill, see Medill McCormick, National Budget System, 66th Cong., 2d sess., 1920, S. Rep. 524. For a useful narrative focusing on the creation of the independent auditing function, see Roger R. Trask, Defender of the Public Interest: The General Accounting Office, 1921-1966 (Washington, D.C.: Government Printing Office, 1996), 23–36. 51

Where the initial plan for the McCormick Bill included a proposal to “clarify the functions of the Treasury by removing from its supervision various ‘nongermane functions,’ such as the control of the Bureau of Public Health Service, the office of

Supervising Architect, the Bureau of War Risk Insurance, and the General Supply

Committee,” McCormick’s bill now left the Treasury intact.87

The Senate approved this version of the McCormick Bill on May 1, 1920, and, two days later, a conference committee was formed to reconcile the two conflicting bills. The conferees adjourned three weeks later, on May 26. The compromise version produced by this committee provided for a budget bureau within the Department of the Treasury. This was a win for McCormick and

Wilson. At the same time, however, the final version of the bill followed the Good

Bill’s recommendation of an independent audit. Since Wilson and Glass had consistently favored leaving the auditing function within the Treasury, however, this represented a loss for the Wilson administration. The conference committee’s version of bill was approved by the Senate on May 27, and by the

House on May 29.88

The Wilson administration was predictably troubled, then, by the bill’s provision for an independent audit. Four days later, on June 2, only three days before the Congress was scheduled to adjourn, the President’s secretary, Joseph

P. Tumulty, formally asked the Secretary of the Treasury, David Franklin

Houston, for his opinion on the budget bill. In his reply, Houston pointed out

87 “Congress to Get New Budget Bill: Senator McCormick’s Measure Puts Bureau Under Secretary of Treasury,” New York Times, November 28, 1919, 21. 88 For a useful timeline of the various votes and committee schedules, see Charles Wallace Collins, “Historical Sketch of the Budget Bill in Congress,” The Congressional Digest 2 (November 1922), 37–38. 52 that the officers in charge of the independent audit, the Comptroller General and

Assistant Comptroller General, were to be appointed by the president, but were

“removable only by concurrent resolution of Congress or by impeachment.”

Houston suggested that the Attorney General review this provision.89 After

Attorney General A. Mitchell Palmer informed Tumulty that the Act was “clearly unconstitutional,” Houston wrote a veto message for Wilson’s signature. The budget bill, with Wilson’s veto, was returned to the Congress on June 4, the second-to-last day of the session.90

Wilson and his supporters framed this veto as the result of his strict constitutionalist scruples, and advocates of budgetary reform insisted that the provision of the bill at issue was merely a technicality. But the focus, by contemporary observers as well as by subsequent scholars, on the question of the constitutionality of the removal provision for the Comptroller General has obscured the fact that Wilson and his administration had a year-long record of opposing the creation of an independent audit.

Wilson characterized his veto as a defense of executive prerogative. In contrast, nationalist administrative reformers such as Taft and Stimson—drawing from the model of corporate governance—viewed the independent audit as a source of real power and prerogative for the president. By having an independent voice assess the executive’s actions, an independent audit would solidify both the

89 David Franklin Houston to Joseph Patrick Tumulty, June 3, 1920, in Arthur S. Link, ed., The Papers of Woodrow Wilson 65 (Princeton University Press, 1991), 358. For Houston’s own explanation of his reasoning, see David F. Houston, Eight Years With Wilson’s Cabinet, 1913 to 1920: With a Personal Estimate of the President, Vol. II (New York: Doubleday, Page & Company, 1926), 82–90. 90 See Arthur S. Link, ed., The Papers of Woodrow Wilson 65 (Princeton University Press, 1991), 361–363. 53 executive in its role as administrator as well as the legislature in its role as critic.

The administrative reformers viewed such a system as an essential prerequisite for carrying out national policy. Wilson’s opposition to an independent suggests that he did not want to limit Congress to the role of mere critic to a powerful executive. Wilson’s embrace of the Treasury budget, then, seems to provide a good example of what Stephen Skowronek has called “Wilson’s method of embracing new principles of government so as to redirect and defuse their transformative implications.”91

Warren Gamaliel Harding had an ear for a good slogan. Entering politics after a successful career as an editor and publisher in Ohio, he was endowed with a newspaperman’s flair for alliteration and wordplay. As a Senator in the 1910s,

Harding, who was an ardent admirer of Alexander Hamilton, is said to have coined the modern use of the term “founding fathers.” Famously, in a great act of political branding, Harding developed his one-word argument for the 1920 presidential campaign: “normalcy.” Shortly before the election, Harding adopted a slogan that would encapsulate the policy agenda of his administration: “Less

Government in Business and More Business in Government.”92

91 Skowronek, “The Reassociation of Ideas and Purposes,” 393. 92 On Harding generally, see Robert K. Murray, The Harding Era: Warren G. Harding and His Administration (Minneapolis, 1969). On the “Founding Fathers,” see Jill Lepore, The Whites of their Eyes: The Tea Party's Revolution and the Battle over American History (Princeton, 2011), 16, 182n. On “normalcy,” see Murray, The Harding Era, 70. Warren G. Harding, “Less Government in Business and More Business in Government,” World’s Work 41 (November 1921): 25–27. 54

The slogan was actually a slightly revised version of a motto that John T. Pratt had been trying to popularize through the National Budget Committee. In the weeks after the Republican national convention, administrative reformers in the

Republican Party had been disappointed with Harding’s nomination. Many of them had gone into the convention supporting General Leonard Wood (who had been commander of Theodore Roosevelt’s Rough Riders, and who had served as

Army Chief of Staff under Taft), and they viewed the lesser-known senator from

Ohio with skepticism. In an effort of to secure the support of this group, Harding spent the late summer of 1920 in consultation and negotiation with party leaders, and he received weekly lessons in governmental theory from Columbia professor

Samuel McCune Lindsay, who was research director for the National Budget

Committee. Near the end of August, Harding had met with Pratt, and assured him that, if elected, he would support the NBC’s proposals. Harding’s use of the slogan—in an article that appeared under his own signature in the election-eve edition of The World’s Work—was intended as a signal that the candidate would pursue the agenda of the administrative reform coalition. In the article itself, one of Harding’s only substantive statements was his pledge to enact a national budget system. World’s Work editor Arthur Page, who had suggested the article and its topic to Harding, described it to Henry Stimson as an effort to force the senator to commit himself publicly to the reform agenda. “I don’t think it was much of a success,” Page wrote. But, he told Stimson, it did provide “a slight groundwork on which to start.”93

93 Warren G. Harding, “Less Government in Business and More Business in Government,” World’s Work 41 (November 1921): 25–27. Harding’s lessons from 55

In the election of 1920, although Democratic vice-presidential candidate

Franklin D. Roosevelt was well known as a supporter of a Presidential budget, the

Republicans were securely identified as the party of budget reform.

Administrative reformers viewed Harding’s election in November, then, as a victory for the budget. With the prospect of an unequivocal proponent of the budget in the White House, and solid Republican majorities in Congress, the administrative reformers prepared to spring into action after Harding’s inauguration.

In April 1921, in the first weeks of the 67th Congress, the House again passed the Good Bill and the Senate again passed the McCormick bill. In May, the competing bills were sent, again, to a conference committee, which again produced a compromise bill. The new budget bill was similar to the one passed the previous year, but with two changes. First, in repudiation of Wilson’s veto, the new bill made the new Comptroller General even harder to remove, providing the officer with a 15-year term, with removal possible only through a joint resolution of Congress. Second, where the previous year’s version had made the Secretary of the Treasury the director of the budget, with an assistant director of the budget, and left it up to the president to decide which one should exercise budget authority, the new version specified that the director of the bureau would be the

Professor Lindsay, as well as Page’s account of the article’s production is in Page to Stimson, September 17, 1920, reel 56, p. 179, Stimson Papers. For Pratt’s meeting with Harding, see Pratt to Members, September 1, 1920, file 640.2.1, Strong Papers. 56 director of the budget, responsible directly to the president, thus bypassing the

Secretary of the Treasury.94

On June 9, 1921, the day before signing the Budget and Accounting Act,

Harding offered the job of Director of the Budget to General Charles Gates

Dawes, a Chicago banker. Dawes had been Harding’s initial choice for the position of Secretary of the Treasury. A day after writing to Harding to decline the president-elect’s first offer, Dawes wrote again to say that he would be “willing to help if you want me in your efforts to unify our government business system,” and that he would be open “even to accepting some subordinate position in any organization which you might call into being in this effort.”95

Dawes was a rare internationalist in Chicago. He became close friends with the Morgan banker Thomas Lamont in the years before the U.S. joined World

War One, when Dawes provided crucial support for the Morgan effort to fund the

Allied governments. As Lamont told Elbert H. Gary, chairman of U.S. Steel, “the

Central Trust Company under Charles G. Dawes as President, was the only institution in Chicago that had the courage to come out for the Anglo-French

Loan.” During the war, where Dawes was in charge of the purchase and distribution of supplies for the American Expeditionary Forces, Lamont and

94 Steven Skowronek notes that the version of the budget act passed in 1921 “actually made the removal of the Comptroller General even more difficult.” See Skowronek, Building a New American State, 207. The differences in the two versions can be seen by comparing Committee on the Budget, National Budget System: Conference Report to Accompany H. R. 9783, 66th Cong. 2d sess., 1920, 1, 3, 5–6, and Committee on the Budget, National Budget System: Conference Report to Accompany S. 1084, 67th Cong. 1st sess., 1921, H. Rep. 96, 1, 3–5. 95 Dawes to Harding, January 25, 1921, Dawes to Harding, January 26, 1921, and Harding to Dawes, January 31, 1921, box 277, folder 3, Dawes Papers, Northwestern University. 57

Dawes met each morning for breakfast at the Ritz Hotel in Paris.96 A pianist and composer, Dawes wrote the melody for the popular song “It’s All in the Game.”

He was renowned for his use of coarse language and, after some particularly spirited congressional testimony after the war, Dawes acquired the nickname

“General Hell’n’Maria.”

On offering the directorship to the General, Harding told Dawes that it was

“probably the most important appointment I am to be called upon to make,” and called it the most significant office in the administration.97 Although the provisions of the Budget and Accounting Act did not officially take effect until fiscal year 1923, Harding and Dawes determined to proceed as if the law had become operative immediately. After a month on the job, Dawes explained privately to his friend, the Chicago political cartoonist, John McCutcheon, that

“the President and I decided that if we could save money next year we might as well try to save it this year.” He continued: “I have never worked with a better man than President Harding. His intelligence is so quick, his friendship so sincere, and his confidence so great that if I fail it will be my fault alone. He has the art of quick decision which is invaluable in such work as we have on our hands.”98

Harding and Dawes immediately set about strengthening the position of the

Budget Bureau as a presidential staff agency. At Dawes’s suggestion, Harding

96 Lamont to Gary, December 8, 1915, box 91, folder 9, Lamont Papers, Baker Library, Harvard Business School. Lamont to Henry M. Dawes, January 8, 1918, box 91, folder 9, Lamont Papers, Baker Library, HBS. 97 Harding to Dawes, June 9, 1921, box 277, folder 3, Dawes Papers, Northwestern University. 98 Dawes to John T. McCutcheon, July 13, 1921, box 101, folder 46, Dawes Papers, Northwestern University. 58 signed nine executive orders creating new agencies that Dawes called

“coordinating machinery” to facilitate the work of the bureau. These included the

Federal Purchasing Board, the Federal Liquidation Board, the Corps Area Co- ordinators, the Surveyor General of Real Estate, the Federal Motor Transport

Agent, the Federal Traffic Board, the Federal Board of Hospitalization, the

Federal Specialization Board, and the Interdepartmental Board of Contracts.99

As they implemented the Budget Act, Dawes and Harding held to the business analogy that had animated the administrative reform movement from the beginning. Dawes’s memoranda to Harding were typically filled with statements such as: “The government as a business organization must function as a business organization, with the lines of authority proceeding as they do in the ordinary corporation.”100 Although Dawes and Harding—in their public statements at the time—both chose to emphasize the monetary savings that had been achieved through the budget system, they clearly viewed administrative rationalization as the bureau’s most important legacy. Ten months into his tenure, in April 1922, in a personal letter to the editor of the Saturday Evening Post, Dawes summarized what he viewed as the chief contributions of the Budget Bureau. These included:

“the imposition of central policy in routine business”; the creation of “the superimposed coordinating machinery in the hands of the President”; and the clarification of the role of Cabinet members, who “as the administrators of routine business ... must be subordinate at all times to the President and to the

99 Charles G. Dawes, The First Year of the Budget of the United States (New York: Harper & Brothers, 1923), 121–132. 100 Dawes, Memorandum for the President, July 11, 1921, box 112, folder 10, Dawes Papers, printed in Charles G. Dawes, The First Year of the Budget of the United States (New York: Harper & Brothers, 1923), 27. 59 coordinating machinery created by him for the transmission of a unified business program.”101

From the beginning, Dawes had planned to serve just one year and then step down. After returning to his work as a banker in Chicago, Dawes compiled his notes from the previous year, along with memos, official correspondence, and statistical tables. The result—with only slight revision—was published, to general acclaim, by Harper & Brothers as the book, The First Year of the Budget of the

United States.102

Shortly after the book was published, Secretary of Commerce Herbert Hoover sent a short note complimenting Dawes’s achievement. “I have enjoyed reading the first few hundred pages,” Hoover told Dawes, “for it is a real contribution to history and good government.” Hoover closed with a joke about the last 200 pages of the book, which featured a seemingly endless stream of statistical tables:

“From page #241 on, however, I am a little depressed at your failure to maintain the romantic interest of the subject.”103

* * *

IN JUNE 1922, near the end of the second session of the 67th Congress, Ogden

Livingston Mills, the Republican representative for the 17th district of New

101 Dawes to George H. Lorimer, April 29, 1922, box 112, folder 112, Dawes Papers, Northwestern University. This point is made by Peri Arnold, who writes: “Dawes’s organization of the budget bureau aimed at making it a centralizing, presidential staff. In particular, he meant the bureau to counteract the autonomy of the agencies.” See Arnold, Making the Managerial Presidency, 55. 102 Charles G. Dawes, The First Year of the Budget of the United States (New York: Harper & Brothers, 1923). 103 Hoover to Dawes, April 19, 1923, box, 122, folder 19, Dawes Papers, Northwestern University. 60

York—the district that included Central Park, and the Upper East Side—sent a letter to his constituents, summarizing the achievements of the previous year.

After discussing the spending reductions achieved through the new budget system, Mills wrote:

The President, ably assisted by General Dawes, has not only used the Bureau as a supervising agency in the interest of economy, but as a coordinating force, and has succeeded in unifying the divergent tendencies which existed among different department and in bringing about the spirit of co-operation and the common purpose that characterize the organization of our most successful corporations.104

Mills’s appraisal was echoed by scholars of public administration. Later in

1922, William F. Willoughby, of the Institution for Government Research remarked that the budget system “definitely installs the President into the new position of general manager of the government as a business organization” and that it gives the president an agency through which he could meet his new obligations as commander-in-chief of the administrative forces.”105

In his 1926 textbook, Introduction to the Study of Public Administration,

Leonard D. White wrote that the Budget Bureau “gives the promise of developing into a permanent and effective staff for the President. After long discussion the

Bureau was attached by law to the treasury department, but from its foundation it has consistently viewed itself as the President’s direct agency for making his influence a real one in the business activities of the government.”106

104 Ogden L. Mills to “My dear Constituent,” June 27, 1922, box 6, folder 126, Leffingwell Papers, Yale. 105 William F. Willoughby, “National Financing—The Old Way and the New,” The Congressional Digest 2 (November 1922), 42. 106 Leonard White, Introduction to the Study of Public Administration (New York: The MacMillan Company, 1926), 110. 61

During the debates that led to the creation of the national budget system, it was policy advocates with ties to big business and who favored a national government capable of acting in a coherent and effective way to strengthen the nation at home and abroad—advocates such as William Howard Taft, Charles

Norton, and Henry Stimson—who showed the most steadfast commitment to the idea of central executive power through a presidential budget system. The administrative reformers were able to leverage popular alarm about the nation’s war debt to place budget reform on the national decision agenda, and with a supportive president and strong Republican majorities in Congress after 1920, they were able to outflank opposition from advocates of a congressional or

Treasury budget system who wanted budget-cutting without enhanced central executive authority. 62

CHAPTER 2

SOCIAL POLICY: Veterans’ Relief

Scandal, Reform, and State Building

THE INTRODUCTION INTO American society of more than four-and-a-half million World War veterans posed two difficult problems for policymakers. One problem was the need to deliver promised benefits and services to returning

“doughboys” and their dependents. Another was the need to respond to growing popular pressure for a bonus payment for all ex-soldiers. Nationalist administrative reformers viewed both of these problems through an organizational lens, and their response to both of these problems illustrates their commitment to a strong but parsimonious national administrative state: they repeatedly sought to concentrate administrative power in federal executive agencies, and they steadfastly opposed the movement for a soldier’s bonus. They were forced to compromise, however, with Congressional opponents of central power in the national government, who were unrelenting in their support of a soldier’s bonus, and who would consent to elite-sponsored administrative reforms only on the condition that such reforms preserve local racial arrangements.

On four successive occasions in these years, the Republican presidential administrations were successful—with the support of nationalist administrative reformers—in enacting solutions to problems of veterans’ relief by building central executive power in the national government. In response to a veteran-care 63 crisis in the immediate postwar years, the Harding administration chose to solve the problem by consolidating authority in the executive branch, creating a new, centralized veterans’ relief agency. When this new arrangement erupted in scandal, the response of the Coolidge administration was to consolidate executive authority still further. After Congress forced passage of the soldier’s bonus, and when a provision allowing veterans to obtain loans against the collateral of their bonus certificates create new problems, Coolidge administration officials quickly secured new banking powers for the federal government. The culmination of this process was the creation, in 1930, of the United States Veterans’ Administration.

One of the largest benefit delivery programs at that point in world history, in

1932 the VA budget exceeded $800 million, its payroll boasted more than 34,000 employees, and it provided benefits to more than one and a half million veterans or their dependents. The story of New Era veterans’ relief, then, is a story of steady consolidation of national governing authority.107

107 The most detailed account of the first decade-and-a-half of the administration of benefits for World War One veterans is still the Brookings Institution monograph by Gustavus A. Weber and Laurence F. Schmeckebier, The Veterans’ Administration: Its History, Activities and Organization, (Washington, 1934). Many of the events treated in this chapter are described in Rosemary A. Stevens, “The Invention, Stumbling, and Reinvention of the Modern U.S. Veterans Health Care System, 1918–1924,” in Steven R. Ortiz, ed., Veterans’ Policies, Veterans’ Politics: New Perspectives on Veterans in the Modern United States (Gainesville, Fla., 2012), 38–64; and in Rosemary A. Stevens, “Can the Government Govern? Lessons from the Formation of the Veterans Administration,” Journal of Health Politics, Policy and Law 16 (Summer 1991): 281–305. Stevens, Ortiz, and other specialists have noted the consolidation of central executive authority in veterans’ policy, but they have tended to view this consolidation as an anomaly within a broader story of New Era anti-government politics. “Even in the antistatist period of the 1920s,” Ortiz writes in his introductory remarks to an essay by Stevens, “veterans’ care took on many features of a strong, central administrative state.” Stevens approaches this story from the perspective of the medical experts who designed the veterans hospital system, and argues that expert proposals were 64

THE RELATIVELY SUDDEN entrance of the United States into the First World

War meant that plans for assisting veterans and their dependents were made in haste. The equally sudden end to the war—19 months later—meant that policymakers had little time to improve and refine these plans. One result was that responsibility for benefit-provision was haphazardly divided among three agencies. The newly created War Risk Insurance Bureau, part of the Treasury

Department, administered a social insurance program. The Rehabilitation

Division of the Federal Board for Vocational Rehabilitation provided vocational successful because they were advanced “under the banner of business efficiency,” and that the movement to bring business efficiency to the federal government was “second, concurrent force,” in determining the fate of expert proposals. See Stephen R. Ortiz, “Introduction,” in Veterans’ Policies, Veterans’ Politics, 4; and Stevens, “The Invention, Stumbling, and Reinvention,” 38. I argue here, however, that the elite movement for business efficiency in government was, in fact, the primary factor. That is, advocates for business efficiency in government treated the post-war veteran-care crises as an opportunity to enact their preexisting policy preferences. Examining veterans’ policy alongside the other cases described in this dissertation shows that the New Era veterans’ policy story is best understood, not as a counterintuitive exception, but rather as a clear example of the ways that many New Era policymakers who are conventionally viewed as antistatist actually favored a strong national administrative state. Other useful accounts of post-WWI veterans’ policy include, Stephen R. Ortiz, Beyond the Bonus March and GI Bill: How Veteran Politics Shaped the New Deal Era (New York, 2010), Chapter 1; Kathleen J. Frydl, The GI Bill (New York, 2009), 45–59. For the VA statistics in 1932, see U.S. Department of Commerce, Statistical Abstract of the United States (Washington, 1933), 162–63; U.S. Department of Commerce, Statistical Abstract of the United States (Washington, 1933), 153; Weber and Schmeckebier, The Veterans’ Administration, 445. As a share of GDP, $800 million in 1932 is equivalent to $225 billion in 2013. Outlays for the Department of Veterans Affairs in 2013 were about $140 billion. See Samuel H. Williamson, “Seven Ways to Compute the Relative Value of a U.S. Dollar Amount, 1774 to present,” MeasuringWorth, 2014, www.measuringworth.com/uscompare/. 65 training and prosthetics. The U.S. Public Health Service, also part of the Treasury

Department, ran veterans’ hospitals. As a retrospective Brookings Institution report noted: “The administration of these services” by these three agencies

“constituted one of the most complicated and difficult tasks ever undertaken by the Federal Government.”108

This dispersal of authority was partly by design. Democrats during the war had purposefully created a system that would bypass the existing pension system that had been created after the civil war, and which had been closely identified with the Republican Party and blighted by scandal.109 In October 1917, the future

Speaker of the House, Sam Rayburn—then in his third term as a Democratic

Representative from Texas—introduced the bill creating this new system. He touted the advantages that would accrue from this new, separate benefits system for veterans of the World War. Chief among these was its planned auto- destruction. After the death of the last beneficiary, Rayburn explained, the new system would cease to exist.110

When this system was put into action, however, veterans who required services from two or three of these agencies faced considerable delays in receiving needed treatment, and outrage over this arrangement grew steadily during the first few years after the war. Naturally, the disorganized tangle of national veterans’ relief quickly became a target for administrative reformers.

108 Weber and Schmeckebier, The Veterans’ Administration: Its History, Activities and Organization, (Washington, 1934). The quoted passage is on pages 154–55. 109 Theda Skocpol, Protecting Soldiers and Mothers (Cambridge, Mass., 1992), details the scandal-ridden Civil War pension system, but does not follow the development of federal veterans’ policy beyond 1920. 110 Frydl, The GI Bill, 47. 66

In spring 1920, Henry L. Stimson, corporation lawyer, former Secretary of

War, and a director of the National Budget Committee, became chairman of a new organization: the Joint Committee for Aid to Disabled Veterans. Among the members of the executive committee of this group were: Edward C. Delafield, president of Bank of America; Frank Presbrey, an advertising executive; Franklin

K. Lane, former Commissioner of Interstate Commerce (under Taft) and

Secretary of the Interior (under Wilson); Frances LeBaron Robbins, Jr., a member of Stimson’s law firm on Wall Street; and Arthur W. Page, editor of

World’s Work. The committee’s purpose, advertized on its letterhead and promotional material, was “to help discharge the Nation’s debt to its disabled veterans.”

This was a well-connected group. As the committee’s secretary, Parkhurst

Whitney, put it in a memorandum to the executive committee:

The Joint Committee for Aid to Disabled Veterans can come with certainty that it has a definite mission and with more than ordinary expectations of success. Its personnel gives it unquestioned standing. It can speak with judgment and a sense of responsibility that will always assure respectful attention from the Congress, the country and the heads of government bureaus that deal with the disabled.111

The committee attempted to use its influence to ensure that adequate provisions were made for disabled veterans. It lobbied legislators and administrators to improve conditions for disabled veterans, but was always careful to avoid seeming to attribute malign intent to policymakers, even when complaining about policies that were harming veterans. As Stimson explained to

111 Parkhurst L. Whitney, “A Preliminary Report Including a Consideration of Possible Future Activities,” reel 56, pp. 200–214, Stimson Papers. 67

New York state senator Henry M. Sage, in a typical message: “I have been tremendously impressed at the real neglect and suffering which the disabled men have been going through at the hands of their government in spite of the best intentions in the world.”112

The committee, in cooperation with the Rockefeller-funded National

Committee for Mental Hygiene and the National Tuberculosis Association, conducted a survey “to determine the number of existing buildings suitable for conversion into hospitals for the treatment and care of the patients of the Bureau of War Risk Insurance.”113 When, in September 1920, the Comptroller of the

Treasury changed its interpretation of the Rehabilitation Act and began requiring veterans to pay the cost of services from the Federal Board of Vocational

Education, the Joint Committee for Aid to Disabled Veterans petitioned the comptroller to resume its previous policy of have the Federal Board pay for such services.114

The efforts of the joint committee were supported by other elite organizations.

A 1920 National Budget Committee pamphlet, for example, suggested what seemed to most administrative reformers as the obvious solution to the problem of veterans’ relief:

It hardly requires more than a superficial knowledge of these arrangements to convince the most casual observer of the necessity of taking action to concentrate in a single department, so far as practicable,

112 Stimson to Henry M. Sage, October 5, 1920, reel 56, p. 324, Stimson Papers. 113 Parkhurst L. Whitney, “A Preliminary Report Including a Consideration of Possible Future Activities,” reel 56, pp. 200–214, Stimson Papers. 114 Stimson to W. W. Warwick, September 10, 1920, reel 56, pp. 132–133, Stimson Papers. 68

all those services which deal with the several aspects of the general problem of affording compensation or relief to ex-service men.115

In the months between the election and inauguration of Warren G. Harding, the efforts of the Committee for Aid to Disabled Veterans, the National Budget

Committee, and the recently formed American Legion—aided by dramatic testimony in Congressional hearings and shocking exposés in the popular press— helped place the reorganization of veteran-relief agencies on the national agenda.

Among the most prominent advocates for improved hospital care for veterans was the psychiatrist Thomas W. Salmon, who, as medical advisor to the National

Committee for Mental Hygiene, had assisted the hospital survey conducted by the

Joint Committee for Aid to Disabled Veterans. During the war, Salmon had been

Director of Psychiatry for the American Army in France, where he had helped to develop modern methods of treating psychological casualties.116 As part of his work for the Army, Salmon had drafted a public-health plan to ensure that veterans received the care they needed, especially those for whom the onset of symptoms might be delayed. Contrary to popular conceptions of “shell shock” as a manifestation of weakness, or as a permanent, physical condition, Salmon

115 National Budget Committee, A Proposal for Government Reorganization, Published in the Interest of National Economy (New York, 1921), 47–48. 116 The lone biographical treatment of Salmon is Earl D. Bond (with the collaboration of Paul O. Komora), Thomas W. Salmon: Psychiatrist, (New York, 1950); for a discussion of the methods developed by Salmon and their relation to methods adopted by the Army in the 1990s, see Franklin D. Jones, “The Psychiatric Lessons of War,” in Office of The Surgeon General, US Army, War Psychiatry: Textbook of Military Medicine, Vol. 4. (Falls Church, Va., 1995), 9– 10; Salmon outlined his theories and methods in Office of The Surgeon General, U.S. Army, Neuropsychiatry: The Medical Department of the United States Army in the World War, Vol. 10 (Washington, DC, 1929). 69 believed that many “insane” veterans could be cured if they received proper, up- to-date treatment.117

Back home after demobilization, Salmon recommended improving hospital personnel and revamping the hospital system along lines that resembled the successful field hospital system he had helped develop in Europe during the war.

But Salmon felt that his efforts had been hindered by what he criticized as the

Public Health Service’s “lack of vision and a rejection of all advice from experienced outside sources.”118 Testifying before Congress on January 7, 1921,

Salmon warned that “unless something is done within the present year to improve conditions under which insane ex-service men are receiving treatment, hundreds, who now stand a fair chance of being cured, will be doomed to permanent insanity.”119 Three weeks later, Salmon penned a dramatic article that appeared in the American Legion Weekly. He noted that there were, in

December 1920, more than 5,500 psychiatric patients hospitalized in the care of the Bureau of War Risk Insurance. “It is the opinion of those who have studied this problem most closely both in civil life and in the Army,” Salmon wrote, “that at least as many men with mental disorders remain in their homes, losing time of

117 In a column published the previous summer in the New York World, Salmon had warned about delayed-onset mental illness in terms that seem to anticipate the current clinical understanding of delayed-onset Post-Traumatic Stress Disorder. He wrote: “There are, however, to be taken into account many other insane soldiers who were discharged from the camps in this country, and also a new source, the importance of which can not yet be accurately estimated—men discharged with other injuries or diseases or mustered out sane and sound but who for several years to come will contribute their quota of mental cases.” See Thomas W. Salmon, “Vital Hospital Problem When the US Public Health Service Takes Over the Soldiers ‘wounded in mind,’” New York World, Aug. 31, 1919. 118 Quoted in Bond, Thomas W. Salmon: Psychiatrist, 175–76. 119 Quoted in Bond, Thomas W. Salmon: Psychiatrist, 77. 70 the utmost value to them, because the Government has not yet provided a single neuro-psychiatric hospital which surpasses in standards of scientific work some of the Army neuro-psychiatric hospitals a few miles behind the firing line in

France.”120

Drawing on data collected by the Joint Committee for Aid to Disabled

Veterans, Salmon explained that there were only four existing government-run hospitals capable of serving psychiatric patients: a converted juvenile home in

West Roxbury, Massachusetts; an old naval hospital in Philadelphia; a State institution for inebriates in Iowa; and a renovated hotel in Augusta, Georgia.

Salmon concluded: “No blacker reproach to the honor and humanity of this country exists today than the practical abandonment by the richest nation on earth of more than half its ex-service men who are afflicted with insanity.” Based on Salmon’s report, the American Legion made two requests of Congress:

“Coordination of the bureaus responsible for the care of the disabled” and

“Money for the building of adequate hospitals.”121

Responding to the crisis on the final day of his presidency, Woodrow Wilson signed into law an act appropriating $18.6 million for the construction of new veterans hospitals and authorizing the incoming Treasury Secretary, Andrew W.

Mellon, to convene a committee of experts to study the problem of veteran hospitalization. The committee—which would be known as the “Consultants on

120 Thomas W. Salmon, “The Insane Veteran and a Nation's Honor: The Better Way Out of the Present Deplorable Situation Involves a Lapse of Time; the Worse Way Out Is Merely Barefaced Shirking of Public Duty,” The American Legion Weekly, January 28, 1921, 5–6, 18. 121 The Weekly editor introduced Salmon as “the man who can discuss with the most unimpeachable authority the situation of the neuro-psychiatric veteran of the World War”; Salmon, “The Insane Veteran and a Nation's Honor,” 5–6, 18. 71

Hospitalization”—was assembled on March 16, less than two weeks after

Harding’s inauguration. To fill the position of chairman, Mellon selected Dr.

William Charles White, an expert on tuberculosis from the secretary’s hometown of Pittsburgh. Mellon and White had been acquainted before the war, when

White had worked with the Mellon Institute on its investigation of the health effects of smoke and soot.122 Another of the Consultants, Dr. John G. Bowman, was soon to be named chancellor of the University of Pittsburgh, where Secretary

Mellon had attended classes and where he and his brother were trustees.123

Thomas Salmon was named chairman of an eight-member advisory committee.

The consultants and their advisory committee immediately began compiling information about the problem of hospitalization for veterans. Their first order of business was to create organizational charts showing what they felt would be the ideal structure for the administration of veterans’ services.124 These charts, which showed the existing veterans’ agencies consolidated under a single, unified agency, echoed the National Budget Committee’s organizational recommendations and embodied the consultants’ feeling “that in order to get adequate and proper care for the disabled men a centralization of authority, if it

122 The activities of the consultants are discussed in Stevens, “Can the Government Govern?” For the connections between Mellon and White, see Mellon Institute of Industrial Research, Smoke Investigation, Bulletin 1 (August 1912): 7; and Theodore A. Huntley, “Mellon Sees Huge Project to Happy End,” Pittsburgh Post-Gazette, April 30, 1928. 123 Mellon attended classes at Western University of Pennsylvania (which would be renamed University of Pittsburgh in 1908) but did not earn any degree. See Cannadine, Mellon, 46–49. 124 Report of the Consultants on Hospitalization, Appointed by the Secretary of the Treasury (Washington, 1923), 8–9. 72 could be brought about, would materially assist in establishing a broad Federal hospital program.”125

The organizational charts were completed in less than three weeks, and were available for use on April 5, 1921, by another committee, which President

Harding had appointed one week after Treasury Secretary Mellon had appointed the Consultants on Hospitalization. The purpose of this second committee was to suggest legislation that would allow for enactment of the hospitalization consultants’ forthcoming recommendations. This committee became known as the Dawes Committee, after its chairman, Chicago banker Gen. Charles G. Dawes

(this was three months before he would assume his post as the director of the

U.S. Bureau of the Budget). In addition to Dawes, the committee included several businessmen, as well as a son and sister of the recently deceased former president, Theodore Roosevelt, two representatives of the American Legion, and two anti-communist labor leaders.126

The committee issued its report on April 7, only two days after its meeting.

Its recommendations largely followed the outlines of the consultants’ organizational charts, creating a new, unified veterans’ service agency. The Dawes

Committee altered the consultants’ plan slightly, however, by making the new agency an independent bureau, with a director who would report directly to the

President rather than to a cabinet secretary. This change had been recommended by Dawes, with Harding’s agreement, and it reflected the prevailing view among

125 Report of the Consultants on Hospitalization, 7–8. 126 See House Subcommittee on Interstate and Foreign Commerce, Hearings on Consolidation of Government Agencies for the Benefit of Disabled Ex-service Men, 67th Cong., 1st sess., 1921, 44. 73 administrative reformers that the Department of the Treasury already had too many non-financial functions within its domain. Seeking to obtain the endorsement of the American Legion, Dawes explained the rationale behind this decision to Chicago corporation lawyer Milton J. Foreman, who was also a general in the National Guard and state commander for the American Legion in

Illinois:

The great thing our committee contended for was the consolidation of the present uncoordinated services under a directing authority ... I think perhaps I was as much responsible as anyone else in the matter of insisting that the officer in charge report directly to the President.127

The report of the Dawes Committee makes clear that its members viewed the problem of veterans’ relief primarily as a problem of administrative organization.

“It cannot be too strongly emphasized,” Dawes intoned, “that the present deplorable failure on the part of the government to properly care for the disabled veterans is due in large part to an imperfect organization of governmental effort.

There is no one in control of the whole situation.” While Dawes acknowledged that there had been some level of cooperation between agencies, he lamented that

“in such efforts the joint action is too often modified by minor considerations, and there is always lacking that complete cooperation which is incident to a powerful superimposed authority.”128

127 Dawes to Milton J. Foreman (First National Bank Bldg, Chicago), April 25, 1921, box 277, folder 3, Dawes Papers, Northwestern University. 128 House Committee on Interstate and Foreign Commerce, Consolidation of Government Agencies for the Benefit of Disabled Ex-Service Men, 67th Cong. 1st sess., 1921, 43. The report is quoted in Weber and Schmeckebier, The Veterans’ Administration, 218. 74

Since the Consultants on Hospitalization were only in the beginning stages of their investigations and had only drafted preliminary plans (their final report would not be published until 1923), the Dawes report was silent on the details of medical care. The way in which President Harding, the Dawes Committee, and the Consultants on Hospitalization treated organizational questions as an emergency to be solved immediately, and left medical questions for an extended investigation, dramatizes the dominance of the administrative reform agenda in these years. For advocates of administrative reform such as Dawes and Harding, the hiring of medical staff and the treatment of patients were simply details to be worked out after Dawes’s “powerful superimposed authority” had been established. Even medical experts such as William Charles White and Thomas

Salmon had emphasized the general problem of poor administration, lack of coordination, and inefficiency.

A few weeks after the Dawes report, in hearings before the House Committee on Interstate and Foreign Commerce in late April, 1921, Representative Sam

Rayburn asked Ewing Laporte, Assistant Secretary of the Treasury in charge of

War Risk Insurance and Public Health, to assess the two options under consideration: a proposal to consolidate veterans activities into a single agency under the Secretary of the Treasury (as recommended by the Consultants on

Hospitalization), or a proposal to consolidate veterans activities into a single agency reporting directly to the president (as recommended by the Dawes

Committee). Laporte was a holdover from the Wilson administration, but he was also a Pittsburgh lawyer with close personal ties to Secretary Mellon. In later years Laporte was Mellon’s tax consultant. Laporte responded to Rayburn that 75 either proposal would be acceptable. “I do not think it makes very much difference,” he said. Whether the new agency reported to the Secretary of the

Treasury or directly to the President, Laporte explained, “the important thing— consolidation—is accomplished by both.”129

After the hearings, a bill embodying the Dawes Committee’s recommendations was sponsored in the House by Republican Representative

Burton E. Sweet of Iowa. The “Sweet Bill” (as it was called) was passed unanimously in the House and cleared the Senate “in record time.” Signed by

Harding on August 9, 1921, not quite two months after the Budget and

Accounting Act, the Sweet Act created the United States Veteran’s Bureau. This consolidation of three previously separate agencies created one rather large bureaucracy.130

In late September, a month and a half after Harding signed the Sweet Act, a

New York Times story—which reads like a press release from the administration—noted that this new “vast bureau” was “one of the largest organizations in the world in terms of money controlled.” The Times described the consolidation in business terms: “now, like any well organized business

129 House Committee on Interstate and Foreign Commerce, Consolidation of Government Agencies for the Benefit of Disabled Ex-Service Men, 67th Cong. 1st sess., 1921, 14. For Laporte’s association with Mellon, see, for instance, “Mellons Seen Behind M’Nair: Campaign Treasurer is Ally of Powerful Family, Opponent Says,” Pittsburgh Press, Aug. 29, 1933. 130 “Veterans’ Bureau Plan in Congress,” New York Times, May 26, 1921; “Passes Bill Merging Veteran Relief Boards,” New York Times, Jun. 11, 1921; “For Soldier Relief Unity,” New York Times, Jul. 21, 1921; Weber and Schmeckebier, The Veterans’ Administration, 218–19. 76 institution of a corresponding size, the Veterans’ Bureau has its executive power invested in one head with authority ... complete and thoroughly co-ordinated.”131

In debates about veterans’ relief, then, just as in debates about the budget system, the Harding administration and corporate elites such as Stimson and

Dawes supported an expansion of central executive power in the national government. Republican congressman Ogden L. Mills, in his 1922 update for his well-heeled constituents in New York’s 17th district, followed his celebration of the Budget and Accounting Act of 1921 with praise for the Veterans’ Bureau: “The

Sweet Bill, consolidating the different departments and bureaus having to do with the care of disabled veterans, which were expending half a billion dollars a year, was a proper reform in the interest of administrative efficiency, and one of real benefit to the disabled who now deal with but a single agency.”132

Although the Sweet Bill took an approach similar to that of the Good Bill by proposing a new executive agency directly responsible to the president, it did not provoke the same sort of opposition. Where the Good Bill had been attacked as part of an alleged corporate conspiracy, and southern Democrats and western

Republicans had worked hard to replace it with a more decentralized alternative, the Sweet Bill, in comparison, proceeded easily from introduction to enactment without significant opposition.

131 “Veterans’ Bureau at Work: Colonel Forbes Clearing up the Tangle of Service Men’s Relief Claims,” New York Times, Sept. 25, 1921, quoted in Stevens, “The Invention, Stumbling, and Reinvention of the Modern U.S. Veterans Health Care System, 1918–1924,” 54. 132 Ogden L. Mills to “My dear Constituent,” June 27, 1922, box 6, folder 126, Leffingwell Papers, Yale. 77

The main reason for this contrast is, ironically, that the central executive power in veterans’ relief initially posed a more obvious threat to southern prerogatives. The Allied Expeditionary Forces had included more than 350,000

African American soldiers. The idea of consolidating the administration of veterans’ relief therefore raised the concern among southerners that officials in

Washington, D.C., would be placed in a position to dictate local arrangements for the treatment and rehabilitation of these African American veterans.

As the published report of the Consultants on Hospitalization describes, in a section titled “Problems of race” (which itself was a subsection of a chapter titled

“Fundamental principles”): “Very early in the work of the consultants one of the great American problems—that of race—obtruded itself more and more.”133 Faced with the dilemma of how to deal with African-American patients in veterans’ hospitals without stirring opposition that might scuttle their reform project, the committee decided early to create a single, separate hospital for black veterans in the South. This decision was made in the first week or two of the consultants’ work and was firmly in place by the time of the Dawes Committee meeting. Thus,

Southern segregation was built into the veterans’ benefit-provision system from the start, and Southern Congressmen could allow this expansion of central, national administrative power without fear of threatening the Southern way of life.134

133 Report of the Consultants on Hospitalization (Washington, 1923), p. 18. 134 For discussion of the role of race in the creation of the veterans’ hospital system, see Mark Robert Schneider, We Return Fighting: The Civil Rights Movement in the Jazz Age (Boston, Northeastern University Press, 2002); Vanessa N. Gamble, Making a Place for Ourselves: The Black Hospital Movement, 1920–1945 (New York, 1995), 70–104; and Pete Daniel, “Black Power 78

After considering several locations, the consultants chose a site in Tuskegee,

Alabama, adjacent to the well-known Tuskegee Institute. Later in 1921, a delegation of African-American veterans representing the National Committee of

Negro Veteran Relief visited the chairman of the consultants, William Charles

White, to register their opposition to placing the hospital in Tuskegee, and to lobby instead for a location in Washington, D.C., near Howard University. They also protested against the policy, which had been described in news reports, that all African-American veterans, even those who lived in the North, would be required to go to Tuskegee to receive treatment from the Veterans’ Bureau. In response, White clarified the consultants’ reasoning and explained that the

Tuskegee hospital was intended to serve only African-American veterans from the South:

Our problem is not in the negro in the north because hospitals are open to the negro soldiers all over the country the same as to the white men. The thing that is worrying us is the negro in the South. The mass of the negro draftees are in the South, and the center of that population is about where the hospital is being placed. We have had, as you will all understand, the greatest difficulty in finding some locality that will not object to such a hospital. We have tried to get it in almost every State in the Union, and there were always objections to it. Now, there are a large number of negroes in the South who are suffering from T. B. and mental and nervous diseases who could go to Tuskegee and be near their families and friends. This is an ideal location for them. There seems to be no practical way to care for the Negro in the South except to give him a separate hospital ... The place was selected that would serve the greatest number of colored men. The Northern negro need not go South at all ... You must remember that the negro of the South is a different man from the negro of the North. It is to care for the negroes of the South only that we are interested in right

in the 1920s: The Case of Tuskegee Veterans Hospital,” The Journal of Southern History 36 (Aug. 1970): 368–388. 79

now. This separate hospital was not intended to segregate negroes, but to offer better treatment to those men near their homes.135

Later events suggest that, for Harding, this early accommodation of local racial arrangements was a tactical decision made to advance his larger goal of administrative reform and not an indication that he shared the racial attitudes of their Southern counterparts. In 1921, as the consultants continued their work, and as Congress deliberated over the Sweet Bill, Treasury officials had given assurances to white leaders in Alabama, promising that the hospital would be operated under white control.136 In the spring of 1923, however, as the administration prepared to open the new hospital, President Harding agreed with leaders at the Tuskegee Institute and the NAACP that the hospital ought to be run and staffed entirely by African-Americans. Harding believed, as he explained in

April to the new director of the Veterans’ Bureau, Gen. Frank T. Hines, that such an arrangement would “afford the colored race opportunity to show its capacity for service and prove exceedingly helpful in that direction.”137 In July 1923, when members of the Ku Klux Klan marched through Tuskegee to protest the arrival of black employees at the hospital, Hines arrived two days later and informed local

135 Transcript of conference between the Consultants on Hospitalization and the National Committee of Negro Veteran Relief, November 1, 1921, box 20, Consultants on Hospitalization Records, RG 121, National Archives II. 136 Two useful accounts of this episode can be found in Vanessa N. Gamble, Making a Place for Ourselves: The Black Hospital Movement, 1920–1945 (New York, 1995), 70–104; and Pete Daniel, “Black Power in the 1920s: The Case of Tuskegee Veterans Hospital,” The Journal of Southern History 36 (Aug. 1970): 368–388. 137 Harding to Hines, April 19, 1923, box 71, Director’s File, Veterans Administration Records, National Archives, Washington, D.C. (hereafter cited as Director’s File), quoted in Daniel, “Black Power in the 1920s,” 373. 80 whites that Harding intended to follow through on his promise for an all-black staff. That promise was made good within a year.138

AFTER PASSAGE OF THE Sweet Act, Harding had appointed his friend, Col.

Charles R. Forbes, already the director of the War Risk Insurance Bureau, to be director of the new Veterans’ Bureau. Within eighteen months, however, Forbes was forced from office and the newly consolidated Veterans’ Bureau was revealed to be a center of graft and corruption. After a Senate investigation and then a grand jury revealed a sensational conspiracy in which Forbes had profited through collusion with contractors, Forbes served two years in the federal penitentiary at Leavenworth, Kansas. Despite the ignominy of the Veterans’

Bureau scandal, elite faith in the importance of administrative consolidation remained unshaken. In fact, in response to the scandal, policymakers chose to further increase the administrative authority wielded by the director of the

Veterans’ Bureau.

Soon after the first wave of the scandal hit newspapers in March 1923,

Harding had appointed retired Brigadier General Frank T. Hines to replace

Forbes. In the war, Hines had been chief of the Army Transportation Service, where he was in charge of the movement of troops between Europe and America.

Later, he was Chief of the Inland and Coastwise Waterways Service of the War

138 Daniel, “Black Power in the 1920s,” 380–388. 81

Department. After retiring from the Army in 1920, he became general manager of the Baltic Steamship Company.139

Upon taking charge of the Veterans’ Bureau, Hines immediately began cooperating with the Senate investigation, which had begun shortly before his appointment. In his public testimony, Hines outlined the abuses of Forbes’s directorship with apparent enthusiasm. Hines told the committee about

“evidence of fraud” in the dental departments of veterans’ hospitals, where “much gold bought has not been used.” He told of abuse of railroad passes. “They were issued in blank,” Hines said, “and I found plenty of people who were traveling but doing very little work.” And he complained about a man who was on the payroll for $4,800 a year but “had only done two hours’ work.”140 In his private communications with investigators, Hines conveyed an unflinching commitment to administrative efficiency. “Wherever inefficiency is found, it will be eliminated immediately,” Hines vowed to the chairman of the investigative committee,

Senator David Aiken Reed, in a personal letter. “Wherever dishonesty, either in methods or procedure, is found, those guilty will be promptly dismissed, and if their methods involved criminal intent, promptly acted upon.”141

Senator Reed, a Pennsylvania Republican, was a prominent Pittsburgh lawyer. His father, also a lawyer, had attended college with Secretary Mellon.

Both father and son were friends with Mellon and regularly engaged in legal work

139 “General Hines Resigns,” New York Times, July 29, 1920; “Personal Mention,” Marine Engineering (September 1920), 779–80; “Ask Bolling to Testify in Shipping Inquiry Today,” New York Times, November 30, 1920. 140 “Gen. Hines Charges Fraud and Waste in Veterans’ Relief,” New York Times, Oct. 23, 1923. 141 Hines to Reed, February 11, 1924, box 170, Director’s File. 82 for Mellon family concerns. An investigative reporter later called him Mellon’s

“senatorial office boy” and alleged that Reed’s “law firm protects Mr. Mellon in

Pittsburgh.” Before joining the Senate, Reed had served on the boards of the

Mellon National Bank & Trust and the University of Pittsburgh.142

Reed in turn selected Gen. John F. O’Ryan as counsel for the investigative committee. O’Ryan, a Democrat, was a prominent New York lawyer. Among his civic posts, he served on the board of the American Peace Award alongside many eminent Republicans, such as Elihu Root and Henry Stimson. He also had ties to

Mellon. The year after his work for the Senate investigation, O’Ryan would be named head of the “National Citizens’ Committee in Support of the Mellon Tax

Reduction Proposals.”143 As counsel for the investigative committee, O’Ryan authored its official report, in consultation with Reed and Mellon.

O’Ryan’s report strikes a careful balance between supplying lurid details of

Charles Forbes’s misdeeds, on the one hand; and offering organizational and administrative recommendations on the other. The first section of the body of the report is devoted to “Organization of the bureau.”144 And, in a list of 22 reforms proposed by the chairmen of the committee, the first was a call to ensure that

“full authority is given to the director to put in force a complete administrative

142 Robert Sharon Allen and Drew Pearson, Washington Merry-Go-Round (New York, 1931), 173; and Kenneth J. Heineman, A Catholic New Deal: Religion and Reform in Depression Pittsburgh (University Park PA, 1999), 38. Mellon’s biographer, David Cannadine, reports that Reed was elected “on the clear understanding that he would take on the task of supporting and defending the secretary and his policies on the floor of the Senate. As a loyal Mellon man, he effectively did so for the remainder of the decade.” See David Cannadine, Mellon: An American Life (New York, 2006), 294. 143 Cannadine, Mellon, 316. 144 Report of the Select Committee on Investigation of the United States Veterans’ Bureau, 68th Cong., 1st sess., 1924, S. Rept. 103, 3, 6–9. 83 reorganization.”145 When discussing these reforms, O’Ryan suggests that any changes made should “be limited to structural provisions, leaving reasonable latitude to the director to modify the details of the organization as experience and necessity from time to time may indicate to be desirable.” Later, O’Ryan continues in this vein, explaining that “the existing law is liberal in vesting great authority and power in the director of the bureau. I do not believe this power should be curtailed because it has been abused in the past. The remedy is not to handicap an efficient director but to insure efficiency in the directorate.”146

Most of O’Ryan’s recommendations were enacted in the World War Veterans

Act of 1924. In press reports, and in some historical accounts, many of the specific reforms instituted by the 1924 act are framed as “decentralization,” but as

O’Ryan notes in his report, “views differ widely as to the meaning of the term.”147

It is clear, however, that by “decentralization,” O’Ryan, Hines, Reed, and Mellon meant something akin to the business reorganization then underway at firms such as DuPont and General Motors. The reforms in the Veterans’ Bureau were not intended to create a dispersal of authority, but rather they were meant to make central authority more effective by specifying which decisions could best be made at the division level and which were best left with headquarters in

Washington. “Decentralization” in this sense refers to the creation of orderly lines

145 Report of the Select Committee on Investigation of the United States Veterans’ Bureau, 68th Cong., 1st sess., 1924, S. Rept. 103, 1. 146 Report of the Select Committee on Investigation of the United States Veterans’ Bureau, 68th Cong., 1st sess., 1924, S. Rept. 103, Part 2, 7. 147 Report of the Select Committee on Investigation of the United States Veterans’ Bureau, 68th Cong., 1st sess., 1924, S. Rept. 103, 8. 84 of administrative authority and the functional delegation of discretion to allow for the better enactment of executive authority.148

As if to emphasize that the scandal had not shaken elite policymakers’ faith in the need for concentrated administrative authority in the Veterans’ Bureau, then, the policy solutions enacted in response to abuses of power by the old director

(Forbes) granted increased administrative power to the new director (Hines). The problem of corrupt administrators abusing power and authority for personal gain was redefined as a problem of “efficiency in the directorate,” making it so that the solution of choice would be to grant administrators increased power and authority.149

That this redefinition of the problem was an expression of a preexisting reform agenda, and not purely the result of the Senate investigation into the scandal, is especially clear in light of evidence that some of the activity attributed to Forbes was ongoing in the bureau even as the new Director Hines and the

Senate investigators boasted of how they were cleaning up the bureau. For instance, a file from April 1923 details the investigation of a man who was caught forging signatures to obtain copies of blueprints at the direction of Gen. Charles

Sawyer, who was President Harding’s personal physician and the head of the

Federal Hospitalization Board. This suggests that there was likely some truth to

148 The changes at DuPont and GM are described in Alfred Chandler, Strategy and Structure Chapters in the History of the Industrial Enterprise (Cambridge, Mass: M.I.T. Press, 1962). 149 This is a clear example of a phenomenon noted by the political scientist John Kingdon, where policymakers and policy analysts define a policy problem to fit a preexisting policy solution. In this case, the preexisting solution was administrative consolidation. See John W. Kingdon, Agendas, Alternatives, and Public Policies (Boston: Little, Brown, 1984). 85

Forbes’s protestations that any conspiracy in the Bureau was actually directed by

Sawyer. An investigator from the Veterans’ Bureau counsel’s office suggested that

Hines press charges against this man—who refused to make a statement unless it was delivered in Sawyer’s office. Hines dismissed the investigator’s suggestion without explanation. The Senate investigators were apparently unaware, or chose to disregard, such evidence when they formulated their recommendations.150

The point here is not that O’Ryan, Reed, Hines, and their allies were corrupt, but that they were so committed to the idea of business efficiency in government and to the importance of organization that most policy problems to them seemed obviously to be the result of faulty organization and a lack of efficiency. Logically, to them at least, the solution to such problems was to further concentrate administrative authority through organizational measures in order to increase administrative efficiency.

III

LESS THAN A MONTH before Calvin Coolidge signed the World War Veterans

Act of 1924, Congress passed the World War Adjusted Compensation Act of

1924—also known as the Bonus Act—overriding the president’s veto. Many policy elites at the time viewed the passage of the Bonus as a disaster that would lead to a reprise of the scandal of Union Army pensions after the Civil War.151 The editors

150 McInerny to Hines, April 18, 1923, box 220, Director’s File; McInerny to Hines, April 20, 1923, box 220, Director’s File; Smith to Hines, May 26, 1923, box 220, Director’s File. 151 See Theda Skocpol, Protecting Soldiers and Mothers (Cambridge, Mass., 1992), which details the scandal-ridden Civil War pension system, but which does not follow the development of federal veterans’ policy beyond 1920. 86 of the Nation, for instance, described the bonus as “the merest raid upon the

Treasury, a sordid demand for a cash payment which will bear no relation to any financial losses any given soldier may have sustained by his service and in many cases will be of no genuine benefit, an entering wedge toward repetition of the shameful history of the Grand Army’s pension-grabbing.”152

The bonus fight provides a useful angle for analyzing the conflict between administrative reformers and their opponents. For reformers such as Henry L.

Stimson and Charles Dawes, for instance, a commitment to organizational efficiency and opposition to the bonus seemed to go hand in hand. They viewed the clamor for a bonus as evidence of the need for central executive control. At the same time that they opposed a “raid on the treasury,” they also favored creating a powerful bureaucracy to serve the needs of disabled veterans. Budget director Dawes made connection explicit in a 1922 memo to President Harding:

“The plea constantly made for uncoordinated expenditures for veteran relief is indicative of that pressure which exists for the ruinous decentralization in government business which resulted in such general waste and inefficiency in the past.”153

Agitation for “adjusted compensation” for veterans had begun soon after the

Armistice. Advocates for a bonus payment argued that the wartime salaries of servicemen had been diminished by inflation, and they pointed to the profits made by those who had stayed home during the war. President Wilson, as part of his turn to postwar fiscal retrenchment, opposed calls for a bonus, and the

152 “The Bonus Swindle,” The Nation 114 (March 1, 1922): 238. 153 Charles G. Dawes to Warren G. Harding, July 26, 1922, box 277, folder 3, Dawes Papers, Northwestern University. 87 leadership of the American Legion initially declined to support the bonus. As the election season of 1920 began, however, the bonus movement intensified. In

March of that year, in response to this mounting pressure, the leadership of the

American Legion announced that it would pursue enactment of a cash bonus for all veterans of the World War.154

Henry Stimson protested this decision in a series of letters to the Legion’s national commander, Franklin D’Olier. “The announcement,” Stimson told

D’Olier, “came to me as a great surprise and shock.” He pointed out that the

Legion’s announcement contradicted the resolution passed by the Legion at the previous year’s meeting that “the American Legion feels that it cannot ask for legislation in its selfish interest, and leaves with confidence to the Congress the discharge of this obligation.” Stimson’s arguments against a bonus were similar to those used by other business-minded policy elites. He noted, first, the problems that were emerging in the care of wounded and disabled veterans.

Stimson worried that “to press for a flat service bonus to unwounded service men” before the needs of the wounded had been addressed “would seriously jeopardize the work to be done in favor of the wounded, which we all recognize as paramount.” Stimson also related his own discussions with veterans. He was commander of his local post on the East Side of Manhattan. “My experience here,” Stimson wrote, “has led me to a very strong conviction that the main

154 A detailed play-by-play of the bonus battles is beyond the scope of this chapter, and would stand little chance of improving upon several excellent treatments of this episode. The best recent analysis of this early phase of the bonus issue can be found in Ortiz, Beyond the Bonus March and GI Bill, 22–28. Any account of the bonus must rely heavily on William Pencak, For God and Country: The American Legion, 1919–1941 (Boston, 1989) and William Pyrle Dillingham, Federal Aid to Veterans, 1917–1941 (Gainesville, Fla., 1952). 88 agitation for the bonus does not come from the men themselves but from politicians and agitators who, for one reason or another, are seeking to ingratiate themselves with what they think will be the soldier vote.”155

Stimson made many of these same points publicly in May 1920 when he announced the formation of the Committee for Aid to Disabled Veterans—which was originally called the “Committee for Aid to Disabled Veterans and

Referendum on the Bonus,” and which would eventually be renamed the “Ex-

Service Men’s Anti-Bonus League.” Stimson asserted that “the chief concern of every sound ex-service man is to see that the wounded and disabled and the dependents of those who were killed in the war get a square deal. The last thing he wants to do is to stand in the way of their getting it.” Stimson warned that, if the bonus were enacted, it would be “with the inevitable result that the wounded and disabled and dependent of the war will be made to suffer for the benefit of those who came through unscratched.” In addition to these points, Stimson added a call for “a referendum vote among the ex-service men and women,” insisting that this would prove that the agitation for the bonus had come, not from the ranks of the Legion, but from politically connected leaders.156

After the first bonus bill passed the House, Harding chose the occasion to make an unexpected personal appearance in the Senate chamber on July 12,

1921—about a month after the passage of the budget bill and a month before passage of the Sweet Act. In what most observers, depending on their point of view, either hailed or criticized as a bold assertion of executive prerogative,

155 Henry L. Stimson to Franklin D’Olier, March 2, 1920, reel 54, pp. 734–36, Stimson Papers, Yale University Library. 156 “Fight Against Bonus Planned by Veterans,” New York Times, May 17, 1920. 89

Harding urged Senators to postpone further action. Noting that the economy was in the midst of an “industrial depression,” Harding argued that the bill would mean “disaster to the nation’s finances.” The Senate deferred to Harding and let the bonus bill die.157

The bill was resurrected in 1922, however, passing both houses, but was vetoed by Harding. In his veto message, Harding complained that “when the bill was under consideration in the House I expressed the conviction that any grant of bonus ought to provide the means of paying it, and I was unable to suggest any plan other than that of a general sales tax. Such a plan was unacceptable to the

Congress, and the bill has been enacted without even a suggested means of meeting the cost.” He concluded: “I confess a regret that I must sound a note of disappointment to the many ex-service men who have the impression that it is as simple a matter for the Government to bestow billions in peace as it was to expend billions in war.” The House voted to override Harding’s veto, but the

Senate vote fell short of the required two-thirds majority.158

After Harding’s death in August 1923, both sides of the bonus battle began to prepare for a new round of conflict. A November 1923 article in the American

Legion Weekly denounced Stimson’s Anti-Bonus League as a corrupt effort by big business to cheat veterans out of their deserved compensation. The author of the piece, the journalist-historian Marquis James—who would later win a Pulitzer

157 “Defer Bonus Action, Speed Tax Revision, the President Urges,” New York Times, July 13, 1921. 158 “Soldiers’ Adjusted Compensation: Message of the President of the United States,” Congressional Serial Set, 67 Cong. H. doc. 396, pp. 2–3, 5. The vote counts and other details of the events in this paragraph are outlined in Weber and Schmeckebier, The Veterans’ Administration, 185–193; also see Ortiz, Beyond the Bonus March and GI Bill, 25–27. 90

Prize for an admiring two-volume biography of Andrew Jackson—presented the story in populist terms, emphasizing the prominent role played by men such as

Stimson and the group’s ties to Wall Street. The league’s advisory board, James pointed out, was “all wealthy and all identified with big business.” And the league, in concert with other business groups such as the U.S. Chamber of

Commerce, was engaged in a “big game,” using “trickery” and a “slush fund” “to fog up the issue.”159

Despite the efforts of administrative reformers and the Coolidge administration, a Bonus Bill again passed both houses during the 1924 elections season, and was again vetoed. This time, however, both houses were able to override the veto. The 1924 bill differed from previous versions. Where earlier bonus bills called for an immediate cash payment, the 1924 bill was altered so that the bonus would be paid as a deferred, interest-bearing certificate that would mature in 1945. This change, which spread the costs of the bill over time, was made as part of a three-way compromise between American Legion leaders, congressional leaders, and Coolidge administration officials. Although Coolidge and Mellon still publicly opposed the bill, they agreed to abstain from the behind- the-scenes arm-twisting that had helped to sustain the veto in 1922. This, combined with the news of unexpected federal budget surpluses of $313 million in 1922 and $310 million in 1923, allowed Congress members to defy the

159 Marquis James, “Big Business Trains Its Guns on Adjusted Compensations,” American Legion Weekly, November 16, 1923, 9–10, 24–26. He won the 1938 Pulitzer Prize for Biography or Autobiography for his books, Andrew Jackson, the Border Captain (Indianapolis, 1933), and Andrew Jackson, Portrait of a President (Indianapolis, 1937). See: http://www.pulitzer.org/bycat/Biography- or-Autobiography 91 president during the election season without seeming to abandon the principles of good government.160

The landscape of veteran politics was altered, however, by the enactment of the deferred bonus in 1924. The American Legion held to the terms of their compromise with Coolidge and Mellon and subsequently opposed calls for the immediate payment of the bonus, which were taken up continually by the more militant Veterans of Foreign Wars, and by populist firebrands such as Father

Coughlin and Huey Long.161 Thenceforth, Legion leadership would remain reliably conservative. Legionnaires such as Henry Stimson would rarely have occasion to criticize the organization’s policies, and never again would an

American Legion publication engage in the sorts of populist attacks against “big business” that had appeared in Marquis James’s defense of the bonus.162

Under the terms of the Bonus Act, World War veterans could expect to receive up to $625, depending upon the length of their service, when their bonus certificates matured in 1945.163 In 1924, this amounted to about half of the

160 The deferred bonus as a compromise that enabled the bill’s enactment is covered in Ortiz, Beyond the Bonus March and GI Bill, 27, and Donald J. Lisio, The President and Protest: Hoover, MacArthur, and the Bonus Riot, 2nd ed. (New York, 1994), 8; the surpluses are noted by Pencak, For God and Country, 199; vote totals are reported in Weber and Schmeckebier, The Veterans’ Administration, 233. 161 See Ortiz, Beyond the Bonus March and GI Bill, 28–31. 162 This shift is noted by Ortiz, and it marks the beginning of his account of the VFW’s growing political power and influence during the New Deal. See Ortiz, Beyond the Bonus March and GI Bill, 27–28. 163 Veterans who served more than 60 days were entitled to a payment of $1 per day for domestic service, and $1.25 per day for overseas service. Payments to veterans who saw no service overseas were limited to $500. For a full explanation of the rules, see Weber and Schmeckebier, The Veterans’ Administration, 186. 92 average production worker’s annual wages.164 In the meantime, however, starting on January 1, 1927, veterans could take out loans using their expected bonus as collateral. Many veterans took this opportunity, but serious problems emerged within the first few days. Initially, many banks would not accept bonus certificates. Some of those that did charged usurious rates, rendering the bonus certificates essentially worthless, and generating profits for agents. Some veterans who were in desperate need of cash were of course willing to take whatever terms they could get.

During a January 4, 1927, press conference, in response to a suggestion that the Veterans’ Bureau make the loans directly, Mellon replied “off hand” that he

“was apprehensive about putting the Government into the banking business.”

Mellon and Veterans’ Bureau director Hines agreed to study the suggestion, however.165 They overcame their apprehensions quite quickly. Just two weeks later, Hines submitted a plan to President Coolidge, who immediately approved it.166

164 In 1924, a 40-hour-per-week production worker could expect to earn that sum in about seven and a half months. This was computed assuming a 40-hour week and using Lawrence H. Officer and Samuel H. Williamson, “Annual Wages in the United States, 1774-Present,” MeasuringWorth, 2015. URL: http://www.measuringworth.com/USwages/. Thanks to inflation, the real value of the $625 certificates would have been halved by 1945. When the bonus was actually paid, in 1936, after Congress overrode Franklin D. Roosevelt’s veto, the average payment of $581 was equivalent to about six and a half months of production labor. On the enactment of the immediate bonus payment in 1936, see Ortiz, Beyond the Bonus March and GI Bill, 165–176. 165 Associated Press, “Many Banks Refuse War Bonus Loans,” New York Times, January 4, 1927. 166 “Bureau to Make Loans Direct to Veterans; Hines Gets Coolidge’s Approval for Plan,” New York Times, January 20, 1927. 93

A law authorizing the Veterans’ Bureau to makes loans on the bonus certificates was enacted less than two months later, on March 3, without controversy and almost unnoticed in the popular press. The new law allowed loans to be made from the U. S. Government life-insurance fund, with authorization for the Treasury Department to lend $25 million to that fund to cover the new loans.167 By mid-April, the bureau had loaned more than $7 million to veterans.168 Within five months, the amount loaned by the bureau had grown to $71 million, dwarfing the $3 million that had been loaned by banks.169 In 1930, while detailing the work of the bureau for a Congressional committee, Hines would boast that the bureau was “in the banking business on a rather large scale

[with] over 1,300,000 loans in the central office [and] more active bookkeeping accounts than in any corporation in the United States.”170

This expansion of the Veterans’ Bureau’s mandate is another example showing the strength of elite policymakers’ preference for executive power. To solve a problem caused by the granting of the deferred bonus, which they felt was an unwise governmental intrusion into the economy, Republican officials agreed to an even greater governmental intrusion into the economy: the granting of new

167 Annual Report of the Director, United States Veterans’ Bureau, for the Fiscal Year Ended June 30, 1927. 70th Cong., 1st sess., 1927. H. Doc. 20, 7. 168 “Loans to Veterans Grow,” New York Times, April 14, 1927. 169 “Soldier Bureau Needs Put at $500,000,000,” New York Times, July 31, 1927. This amount, in turn, was almost insignificant in comparison to the total of $8.63 billion on loan by banks in the U.S. Federal Reserve system. See National Bureau of Economic Research, All Other Loans, Reporting Member Banks, Federal Reserve System for United States [M1475DUSM027NNBR], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/M1475DUSM027NNBR/. 170 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 197. 94 banking powers to the U.S. Veterans’ Bureau. This was done quickly, and not in response to any concerted campaign from progressive pressure groups. Although this particular policy solution might seem surprising to modern readers who view

Mellon as the prototypical anti-government conservative, it nicely illustrates his commitment to a strong, effective national administrative state.

AT THE BEGINNING of Herbert Hoover’s presidency, one organizational shortcoming of the federal veteran policy system remained unreformed: veterans of previous wars were still being served by the separate prewar system. The government was thus running parallel veterans’ pension and hospital programs.

Veterans of the World War were served by the U.S. Veterans’ Bureau while veterans of the Civil War and Spanish-American War were served by the Pension

Bureau of the Department of the Interior and the independent National Home for

Disabled Volunteer Soldiers. This particular example of what Charles Dawes viewed as “ruinous decentralization” would not be addressed until 1930, when

Congress and President Hoover would agree on a plan to combine the Veterans’

Bureau with the two older veterans’ agencies to create a single new agency: the

U.S. Veterans’ Administration.

Hoover often presented this consolidation as a means to rein in the expanding federal budget during the first years of the Great Depression, since the veterans’ agencies were the largest and fastest-growing source of federal expenditures, but the idea to merge the Veterans’ Bureau with the two Civil War-era veterans’ service agencies was in circulation even before the formation of the Veterans’ 95

Bureau. In 1920, for instance, the National Budget Committee had advocated merging the Bureau of War Risk Insurance and the Federal Board with the

Bureau of Pensions.171 In February 1927, a joint conference of the heads of the independent veterans’ organizations released a statement calling for “placing under one head the veterans’ bureau, the pension bureau and soldiers’ homes.”172

Veterans’ Bureau director Hines outlined his own support for such a plan in his

1928 annual report:

The director of the bureau has given considerable study to the subject of veterans’ relief, and has publicly proposed that there be established a separate department to handle all matters affecting the extension of direct benefits to veterans and to the dependents of veterans; and will vigorously support any legislation that has for its object this unified plan of control. In the opinion of the director, the main advantage of such a consolidation would be in bringing together in one definite agency under the President matters which are so closely related at this time as to make it essential for those charged with the administrative duties to be familiar with all phases of the problem.173

The consolidation plan was favored by majorities in congress, administration officials, American Legion leadership, and independent good-government reform groups such as the National Civil Service Reform League—by everyone except the heads of the agencies that would be subsumed by the VA, who stood to lose administrative power, and by the American Medical Association, whose members

171 National Budget Committee, A Proposal for Government Reorganization, Published in the Interest of National Economy (New York, 1921), 47–48. 172 “Heads of 5 Great Veterans’ Groups Ask Preparedness,” Washington Post, Feb. 19, 1927; for more about the Pension Bureau, see Gustavus A. Weber, The Bureau of Pensions: its History, Activities and Organization (Washington, D.C., 1924); for a useful account of the National Soldiers’ Home, see Judith G. Cetina, “A History of Veterans’ Homes in the United States, 1811-1930,” PhD dissertation (Case Western Reserve University, 1977). 173 Frank T. Hines, Annual Report of the Director, United States Veterans’ Bureau, for the Fiscal Year Ended June 30, 1928 (Washington, 1928), 2. 96 were, theoretically, threatened economically by a strong government-run veterans’ hospital system. In May 1929, at Hines’s request, Hoover formed a

Committee to Coordinate Veterans’ Activities. The committee included Hines, as well as Secretary of the Interior, Ray Lyman Wilbur, the head of the National

Home for Disabled Soldiers, George H. Wood, and the president’s secretary,

Walter H. Newton. The executive secretary of the committee was Hoover’s military aide, Col. Campbell Blackshear Hodges.174

The committee members were unable to agree on a plan, however, so, in early

1930, Hines and his bureaucratic rivals appeared at hearings before the House

Committee on Expenditures in the Executive Departments to consider a bill proposed by the committee’s chairman, William Williamson, Republican of South

Dakota. Williamson’s bill embodied Hines’s plan and called for consolidation of the Pension Bureau and Soldiers’ Homes under the Veterans’ Bureau. Hines was the first witness to testify, on January 8.175 Three days later, Secretary of the

Interior Wilbur, argued in his testimony for “coordination” of the three agencies rather than “consolidation.”176 Wilbur insisted that the bill was “bound to invite some very severe opposition” and that consolidation would be “going too far—

174 See Hodges to Hoover, Memorandum on “Coordination of Veterans’ Activities,” May 17, 1929, box 195, Presidential Papers, Subject File, Hoover Library; Hoover to Hines, May 23, 1929, box 195, Presidential Papers, Subject File, Hoover Library; Memo, May 23, 1929, box 195, Presidential Papers, Subject File, Hoover Library. For more on the AMA’s opposition to the Veterans’ Administration, see Rosemary Stevens, “Can the Government Govern?” 175 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 1. 176 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 42–62. 97 going too fast.”177 The next week, Col. Earl D. Church, Commissioner of Pensions in the Department of the Interior, protested to the committee that the consolidation bill was “an intensified form of bureaucracy and not in accord with the fundamental principles of the Government which have obtained from its very inception.”178 He complained that consolidation would “simply mean absorption in the Veterans’ Bureau.”179 Church proposed an alternative bill that would

“coordinate” the three agencies under the Department of the Interior.180 On

January 23, George H. Wood, president of the board of managers of the National

Home for Disabled Volunteer Soldiers, also argued in favor of coordination rather than consolidation, saying he preferred “placing the three eggs under one hen” rather than “scrambling them.”181 Wood argued that transferring the soldiers’ homes to the Veterans’ Bureau would result in inefficiency, pointing out that the cost per day, per patient in the Veterans’ Bureau was $4, while the cost in the soldiers’ homes was only $2.39. Transfer of soldiers’ home patient to the

177 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 46. 178 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 75. 179 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 77. 180 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 81. 181 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 114. 98

Veterans’ Bureau would, Wood argued, cost the government more than $3 million per year.182

In response to these arguments, committee chairman Williamson reiterated that consolidation made “good common sense,” and invited Hines to testify a second time to rebut his rivals’ testimony.183 Hines was the only witness given this opportunity. Recapping his earlier testimony, Hines told the committee:

I come before you simply as a manager of one of your subsidiary companies would come before a board of directors, and I look upon the Members of Congress as the board of directors of this great business of the United States Government. I gave to you solely my own views. I did not quote the President, although I had discussed the problem with him.184

Rebutting Wood’s claims about the Veterans’ Bureau’s inefficiency, Hines told the committee: “It is exceedingly difficult to compare, for there is a considerable difference in the type of service rendered in the bureau hospitals and in the soldiers’ homes hospitals.” He compared the cost of care in Veterans’ Bureau hospitals with care provided in Army, Navy, and private hospitals, before dismissing the soldiers’ homes as “old institutions that were established many years ago and have been in operation for a considerable length of time. The administration of these institutions has therefore been stabilized. This, to an extent, tends to more economical administration.” Finally, he pointed out that

182 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 117. 183 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 123. 184 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 178. 99

“the administration of the national soldiers’ homes is not under United States civil service regulations, nor is it under the supervision of the classification law.”185

Despite opposition from Wilbur, a cabinet official and a lifelong friend of

President Hoover, Hines’s arguments prevailed, and Congress passed the

Williamson Bill, which embodied the vision that had been outlined by the

National Budget Committee 10 years earlier, on July 3, 1930. 186 When President

Hoover signed the executive order creating the United States Veterans’

Administration on July 8, 1930, he noted: “The consolidated budget of these services for the present fiscal year amounts to approximately $800,000,000, so that the new establishment becomes one of the most important functions in the government.” Hoover’s assessment was echoed at the time by scholars of public administration such as Charles and William Beard, who, in their 1930 survey of

185 House Committee on Expenditures in the Executive Departments, Consolidation of Veterans’ Activities: Hearings on H.R. 6141, 71st Cong., 1st sess., 1930, 190. 186 The historian Donald J. Lisio notes that Interior secretary Wilbur, “as a trusted cabinet member and old friend of the President ... apparently felt confident of convincing Hoover to reorganize veterans’ affairs within the Interior Department. To his surprise, however, Hines had expertly usurped his favored position.” Lisio gives a well-sourced account of this episode as a prelude to the bonus march, noting that some veterans’ groups interpreted the contest between Hines and Wilbur as evidence of Hoover’s ambivalence about veterans’ issues. Lisio describes Hines as “a master bureaucrat” who “enjoyed overwhelming his listeners with his vast knowledge of the intricate laws governing veterans’ benefits”; see Donald J. Lisio, The President and Protest: Hoover, MacArthur, and the Bonus Riot, 2nd ed. (New York, 1994), 9-13. 100 the federal government, expressed their hope that this reform would “contribute materially to the efficiency of administration.”187

* * *

THE ADMINISTRATIVE REFORMERS continued pursuing their agenda after the formation of the VA. Herbert Hoover maintained his opposition to an immediate soldiers’ bonus, at great personal political cost. Ironically, Franklin D.

Roosevelt, the beneficiary of Hoover’s mishandling of the Bonus March, shared

Hoover’s views on the bonus issue. When Congress finally passed a bill paying an immediate bonus, in 1936, it was over President Roosevelt’s veto.188 The administrative reform agenda is also evident in the Economy Act, drafted in the waning days of the Hoover administration, and passed as the second act of FDR’s first hundred days. Under the authorization of the act, FDR cut federal benefits paid to veterans in half, but left the administrative consolidation intact. So, even after drastic budget cuts, which groups such as the Veterans of Foreign Wars interpreted as an attack on veterans by FDR, the net result was increased administrative power and central authority within the executive branch.189

Although contemporary observers and subsequent scholars tended to focus on the sensational episodes of the Veterans’ Bureau scandal and the Bonus

187 “Veterans’ Bureaus United by Hoover,” New York Times, July 9, 1930. Charles A. and William Beard, The American Leviathan: The Republic in the Machine Age (New York, 1930), 779. 188 The starting point for any study of the Bonus March should be the 1994 Fordham University Press edition of Donald J. Lisio’s still-definitive account, first published in 1974: Donald J. Lisio, The President and Protest: Hoover, MacArthur, and the Bonus Riot (New York, 1974). On the final passage of the immediate bonus, see Ortiz, Beyond the Bonus March and GI Bill, 165–176. 189 See Ortiz, Beyond the Bonus March and GI Bill, 66–98. 101

March, this focus has obscured more far-reaching developments in the evolution of the American national state. In response to the policy emergency presented by post-war veteran relief, the scandal in the Veterans’ Bureau, and the agitation for a soldier’s bonus, reformers with ties to Wall Street and to Republican presidential administrations successfully promoted the concentration of executive power in the administration of veterans’ relief. This resulted, ultimately, in the creation of the VA, one of the emblematic bureaucracies of the modern American state.190

190 For an exception to this focus the scandal and the Bonus March, see administrative historian Paul P. van Riper’s 1983 survey of the origins of the academic field of public administration, where he notes that the Veterans Administration was “the first important permanent agency to be so named.” See Paul P. van Riper, “The American Administrative State: Wilson and the Founders—An Unorthodox View,” Public Administration Review 43 (Nov.-Dec., 1983), 481 102

CHAPTER 3

LAW ENFORCEMENT: Prohibition

Good Government and the Expansion of National Authority

THE DISORGANIZED STRUCTURE created by the 18th Amendment and the

Volstead Act to enforce national alcohol prohibition was designed to preserve local control against national authority. Warren Harding called it a “nation-wide scandal” and “the most demoralizing factor in our public life.”191 This system quickly emerged as a target for the administrative reform coalition. Although many administrative reformers personally opposed constitutional prohibition, key members of the good-government coalition such as William Howard Taft and

Herbert Hoover responded to the scandal of prohibition enforcement by insisting on an earnest effort to effectively and efficiently enforce the law. As with the budget debate, and as with the provision of veterans’ benefits, their first priority when attempting to solve the problem of prohibition enforcement was to reform the administrative structure of the federal agencies involved. The result, by the end of the New Era, was increased central power in the national government.

The American experiment with prohibition has had no shortage of scholars, but this aspect of the story has been largely ignored in favor of tales of bootleggers, gangsters, and “untouchables.” Scholars have tended to focus on the battle between “wets” and “drys” and on how the coercion inherent in prohibition

191 Address of the President of the United States to the Congress, December 8, 1922 (Washington: Government Printing Office, 1922), 9. 103 seems to embody the supposed conservatism of the 1920s and seems to have laid the foundations for the later development of the modern “penal state.”192

This chapter takes a different approach, however, by focusing on the organizational and administrative aspects of enforcement. As with the budget and veterans’ relief, nationalist Republicans and business leaders viewed the problem of prohibition enforcement through an organizational lens. It was not prohibition itself that spurred the growth of central power, I argue, but the efforts of reformers to rationalize the organization of federal enforcement through administrative consolidation and through the extension of civil service requirements. The need to implement national policy led the administrative reformers to favor an expansion of national authority.

The November 15, 1919, edition of the National Budget Committee’s newsletter lampooned the myriad functions performed by the U. S. Treasury in an article titled: “The Secretary of the Treasury: He is a Financier, Banker, Tax Collector,

Expert Accountant, Doctor, Architect, Builder, Lighthouse-keeper, and Master

Detective—All in One.”193 This was at the height of the debate over the location of the proposed national budget system, when Carter Glass and Woodrow Wilson

192 Journalist Daniel Okrent provides an entertaining and illuminating survey in Last Call: The Rise and Fall of Prohibition (New York: Scribner, 2010). Historian Lisa McGirr makes a forceful argument for prohibition as a key source of the modern American penal state in The War on Alcohol: Prohibition and the Rise of the American State .New York: Norton, 2015 193 “The Secretary of the Treasury: He is a Financier, Banker, Tax Collector, Expert Accountant, Doctor, Architect, Builder, Lighthouse-keeper, and Master Detective—All in One,” The National Budget, November 15, 1919. 104 were trying to persuade the National Budget Committee that a budget bureau and auditing agency should both be housed within the Treasury. Just two weeks earlier, however, Congress had expanded the Secretary’s duties as “Master

Detective” by passing the National Prohibition Act—popularly known as the

Volstead Act.

The federal government had briefly collected taxes on whiskey during the presidential administrations of George Washington and John Adams. Permanent national taxes on liquor had been in place since the Civil War. During World War

One, acting under the authority of the Food and Fuel Control Act of 1917,

President Wilson issued a series of executive orders placing the Bureau of

Internal Revenue in control of the wartime production of “distilled spirits for beverage purposes.” The terms of the Food and Fuel Control Act were limited to the duration of the war, but ten days after the Armistice, under pressure from the powerful Anti-Saloon League, Congress passed the incongruously named

Wartime Prohibition Act. The new law forbade the sale of alcoholic beverages during the period beginning June 30, 1919, and lasting “until the termination of demobilization”—an end date that was open to interpretation. Questions on this point became moot, however, less than two months after the passage of this new act, and six months before its provisions were scheduled to take effect, when, on

January 16, 1919, 18th Amendment was ratified. Opponents and proponents alike were caught off guard. Even the most optimistic activists within the Anti-Saloon

League had expected ratification to take several years.194

194 On the wartime regulations, see Laurence F. Schmeckebier, The Bureau of Prohibition: Its History, Activities and Organization. Institute for Government 105

The 18th Amendment was scheduled to take effect one year after ratification.

In the early months of 1919, Wayne B. Wheeler—leader of the Anti-Saloon

League—drafted a bill that would enact the provisions of the amendment. His draft was then revised, over the course of several more months by Andrew

Volstead, Republican Representative of Minnesota. Once introduced in the

House by Volstead, the bill passed easily. It also passed easily in the Senate, although with slight amendments. After the final bill emerged from conference committee, it was sent to President Wilson on October 10, 1919. The Volstead Bill had been framed as a continuation of the wartime prohibition laws, and this commingling of temporary, wartime functions with constitutional questions offended Woodrow Wilson’s strict-constructionist scruples, prompting his veto on October 27. The House overrode the veto, 210 to 73, on the same day. One day later, the Senate overrode the veto 69 to 20. The act was set to take effect at the first moment allowed by the 18th Amendment: midnight, January 17, 1920.195

The Volstead Act retained the wartime prohibition structure by making the

Commissioner of Internal Revenue responsible for enforcing prohibition, but the permanent, constitutional character of the new law—and the need to enforce it in peacetime, which deprived prohibition of the cloak of wartime patriotism—meant a significant increase in responsibility for the commissioner. The law, however, did not specify the enforcement organization to be put in place within the Bureau

Research, Service Monographs of the United States Government, No. 57 (Washington, D.C., The Brookings Institution, 1929), 4–5; Daniel Okrent, Last Call: The Rise and Fall of Prohibition (New York: Scribner, 2010), 99–100; Thomas R. Pegram, Battling Demon Rum: The Struggle for a Dry America, 1800–1933 (Chicago: Ivan R. Dee, 1998), 146–147. 195 On the authorship of the Volstead Act, see Okrent, Last Call, 110. 106 of Internal Revenue. To carry out enforcement, then, Treasury Secretary Glass created an ad hoc “Prohibition Unit,” led by a “Prohibition Commissioner” under the Commissioner of Internal Revenue.196 The law did specify that each state have a federal “Prohibition Director,” and that these officers, as well as their subordinates, would not be subject to civil service rules.197

The advent of alcohol prohibition in 1920 was the culmination of a century-long reform effort. In the early 19th century, an increase in drinking rates coincided with the flowering of the Second Great Awakening. These two developments combined to produce the Temperance movement.198 In the mid-19th century, temperance reformers tended to identify first with the Whig Party and then with the Republican Party, and temperance speakers became a common feature alongside abolitionists on the Northern lecture circuit. During Reconstruction, temperance reformers launched a third party—the Prohibition Party—and nominated presidential and vice-presidential candidates beginning in 1872. The

196 On this lack of formal organization, see Schmeckebier, who notes that the Unit “was never established by law, all the powers exercised by it being vested in the Commissioner of Internal Revenue. Not even the appropriation acts recognized the Unit, all the appropriations being for the purpose of enforcing the law,” The Bureau of Prohibition, 7. 197 See Schmeckebier, The Bureau of Prohibition, 7–8. 198 Research on 19th century temperance and its connection to 20th century prohibition is voluminous. See particularly, Lisa McGirr, The War on Alcohol: Prohibition and the Rise of the American State (New York: Norton, 2015); Daniel Okrent, Last Call: The Rise and Fall of Prohibition (New York: Scribner, 2010), 99–100; Thomas R. Pegram, Battling Demon Rum: The Struggle for a Dry America, 1800–1933 (Chicago: Ivan R. Dee, 1998). Also useful on the intertwining of 19th century religious movements and the early temperance cause is Daniel Walker Howe, What Hath God Wrought: The Transformation of America, 1815–1848 (New York: Oxford, 2007), especially 166–168. 107 next year, a group of Protestant women in Hillsboro, Ohio, founded the Women’s

Christian Temperance Union. While these two organizations provided institutional support for temperance activism, it was not until after the 1890s, and the emergence of a new advocacy organization, that the cause of prohibition reached the height of its power in American politics.

The Anti-Saloon League (ASL), founded in 1893 in Oberlin, Ohio, pioneered issue-advocacy politics in the United States. Using its innovative methods, the

ASL dramatically expanded the impact of the temperance movement, and broadened its traditional base of support. With its leadership drawn from a younger generation than that of the Prohibition Party or the Women’s Christian

Temperance Union, the ASL’s strategy reflected the new age. While the earlier temperance crusade was largely the work of Northern Methodists and

Congregationalists, the ASL’s membership was drawn from Protestant churchgoers of various denominations and geographically diverse, with Southern

Baptists and Presbyterians particularly well represented. The ASL used its broad membership base—dominated neither by Democrats nor Republicans—to put pressure on vulnerable politicians. Its efforts to ensure that office holders voted in line with ASL direction were made even more effective by the ASL’s use of bureaucratic techniques pioneered in big business. The ASL’s administrative capacity allowed it to mobilize quickly at the local, state, and national levels. In contrast to earlier temperance activists, the ASL was self-consciously pragmatic rather than idealistic or moralistic. It would support any politician—regardless of 108 part affiliation, whether personally “wet” or “dry”—as long as they toed the ASL line.199

After 1915, the ASL made further inroads into the South through cooperation with the resurgent Ku Klux Klan. The Klan’s commitment to local law enforcement, racial purity, and Protestantism made the reborn Invisible Empire a natural ally for the ASL. Klan fears of organized Jews and Catholics meant that it shared enemies in common with the ASL. The role that alcohol and unregulated saloons seemed to play in encouraging racial mixing and miscegenation led the Klan to view freely available alcohol as a prime threat to its mission. Like the ASL, the 20th century Klan used modern organizational methods to great effect, and for a time surpassed even the ASL as the exemplar of modern political advocacy. One contemporary observer, writing at the end of

1923 for the liberal Protestant magazine The Outlook, noted with alarm that “the

Ku Klux Klan has become the most vigorous, active, and effective organization in

American life outside business” and that “the Klan can no longer be dismissed as an unimportant though distressing outbreak of a few morons.” After the enactment of prohibition in 1920, ASL leaders in some locales even went so far as to enlist Klan vigilantes to help enforce the laws.200

199 The first and still, in some ways, best account is Peter Odegard, Pressure Politics: The Story of the Anti-Saloon League (New York, 1928). The theme of business organizational methods in the ASL is explored in K. Austin Kerr, Organized for Prohibition: A New History of the Anti-Saloon League (New Haven, 1985). Another useful account of the ASL’s rise to power is Pegram, Battling Demon Rum, 109–135. 200 Stanley Frost, “When the Klan Rules: The Giant in the White Hood,” The Outlook, December 19, 1923, 674. This article was first in a series that Frost published in book form as The Challenge of the Klan (Indianapolis: Bobbs- Merrill Co., 1924). For a careful examination of the symbiotic relationship 109

The advent of prohibition also gave the ASL an opportunity to build an alliance of convenience with many “political bosses” and “machine politicians.”

The Volstead Act stipulated that state-level Prohibition Directors and their subordinates would not be subject to civil service requirements and could thus be appointed directly by party leaders, without passing a civil service examination.

The ASL’s official rationale for this provision was that civil service exams did not distinguish between “wet” and “dry” applicants. In practice, as civil service reformers routinely complained, this provision opened up a whole new field of opportunity to the “spoilsmen.” Party leaders at all levels of government were now able to dispense positions in prohibition enforcement offices in addition to traditional plums such as postmasterships. One result of this was that some opportunistic leaders tolerated the new law even if it conflicted with the preferences of their “wet” constituencies.

By the early 20th century, the brewing, distillation, and distribution of alcoholic beverages had become profitable business. The early “wet” opposition to prohibition was naturally led by organized brewers, distillers, and distributors who were threatened economically by the 18th amendment and the Volstead Act.

Alcohol producers and sellers were soon joined by consumers—particularly urban workers, Catholics, and immigrants. Most urban saloon-goers resented the

Puritanical paternalism of prohibition. Catholics and immigrants resented what they rightly viewed as a nativistic attack on their cultural traditions.

between the ASL and KKK, see Thomas R. Pegram, “Hoodwinked: The Anti- Saloon League and the Ku Klux Klan in 1920s Prohibition Enforcement,” Journal of the Gilded Age and Progressive Era 7 (Jan., 2008): 89–119. 110

The administrative reform coalition included an influential group of actors who could be perhaps best classified as “semi-dry.” They were sympathetic to the temperance cause (that is, encouraging self-discipline for all, and curbing excessive drinking by workers and the poor), but they disapproved of the tactics of the ASL and KKK as an affront to good government, and they felt that moral causes were best addressed through moral movements, not constitutional amendments and coercive laws. This point of view is spelled out by the eminent corporation lawyer-turned-statesman Elihu Root, in a letter written December

20, 1919, less than a month before prohibition was scheduled to take effect:

I have always been of the opinion that external compulsion is the poorest way to reform character, and that if you wish a temperate people the best way is to bring such influences to bear that people will themselves prefer to be temperate. It has seemed that the steady decrease of intemperance among the American people for more than fifty years past has indicated that our people have been acquiring satisfactory standards of conduct in this respect, and have been in the course of establishing real temperance upon the permanent basis of their own free will, and it has seemed to me a great mistake upon purely temperance grounds to interrupt that process by compulsion of law.201

Many of Root’s peers expressed similar opinions in the period before prohibition took effect. Ex-President William Howard Taft, for instance, and wartime U.S. Food Administrator Herbert Hoover both personally favored temperance, but opposed ratification of the constitutional amendment. After enactment, however, and once prohibition became a settled piece of law, Taft and

201 Root to Lewis L. Clarke, December 20, 1919, box 137, folder “1919 C-F,” Elihu Root Papers, Library of Congress. The recipient was president of the American Exchange National Bank. 111

Hoover shifted their position and argued that the law ought to be enforced effectively and efficiently.202

Root’s protégé Henry L. Stimson expressed this viewpoint in his advice to the

1924 Republic candidate for governor in New York, Theodore Roosevelt, Jr. The ex-president’s son had been flirting with a wet agenda, and two of his brothers

(Archibald and Kermit) were prominent members of the Association Against the

Prohibition Amendment.203 “In the present situation in New York State,” Stimson asserted to Roosevelt, “the real issue is not ‘Wet’ versus ‘Dry’ but Law enforcement versus disobedience of the law.” Stimson attempted to sway the young candidate by reminding him of a stand taken by Roosevelt’s father early in his career:

Whatever our views as to the unwisdom of personal reform by constitutional amendment, the situation which confronts us today in New York is a fact and not a theory, and must be met in the way in which your father met the “Sunday-closing” question in 1895. I remember very well how unwise some of us then thought the Sunday closing law was, and the clamor that was raised about the political unwisdom of interfering with the beer which good Germans regarded as necessary as bread. Many people here then thought that your father’s attitude was the cause of Tammany’s victory that year, and that it had ruined his own political future. They did not realize that by his insistence upon law enforcement he not only had performed an incalculable service to the republic but had so clinched his own reputation in the minds of his country-men for courage and honesty, that he had laid a foundation for their confidence in him which was never thereafter shaken.204

202 On Taft, see Okrent, Last Call, 108. On Hoover’s pre-1920 view, see Okrent, Last Call, 99. For most members of the administrative reform coalition, this shift seems to have come after Root’s failed argument against prohibition before the Supreme Court in March 1920. On Root’s Supreme Court appearance, see Okrent, Last Call, 121. 203 The Roosevelt brothers’ names appear on AAPA letterhead throughout this period. See, for instance, AAPA Circular, October 25, 1922, box 14, file “A, 1922,” William DuPont Papers, Hagley Library. 204 Henry L. Stimson to Theodore Roosevelt, Jr., October 1, 1924, reel 64, pp. 113–116, Henry L. Stimson Papers, Yale University. 112

Stimson was following a line of reasoning similar to that laid out by his own former assistant, Harvard Law professor Felix Frankfurter, a year earlier, in the

Annals of the American Academy of Political Science. Frankfurter had argued that repeal and nullification were not viable options. Noting the effective nullification of the Reconstruction Amendments in the South, Frankfurter asked:

“How many provisions of the Constitution can be flouted with impunity, without undue stress and strain on popular confidence in the Constitution, upon which the present social structure finally rests?” “The only way out, then,” Frankfurter concluded, “is honest and effective enforcement.”205

III

The loose-knit federal enforcement organization created by the Volstead Act had been crafted to satisfy the dry coalition assembled by the ASL. The KKK, for instance, would not have supported a bill creating a centralized national police force. When administrative reformers looked at the federal enforcement effort, the system—with its informal structure, dispersed authority, evasion of civil service rules, and location within the already overburdened Treasury—seemed designed for inefficiency and an invitation to scandal. Effective prohibition enforcement seemed impossible without serious organizational and administrative reforms.

For administrative reformers, the most obvious solution was to transfer the

Prohibition Unit from the Treasury to the Department of Justice. The National

205 Felix Frankfurter, “A National Policy for Enforcement of Prohibition,” Annals of the American Academy of Political Science 109 (September 1923): 193–195. 113

Budget Committee made this recommendation in 1921. “The enforcement of the

Prohibition Act is a matter which is in no sense germane to the proper functions of the Treasury,” the Committee insisted.206 In 1923, William F. Willoughby, the director of the Institute for Government Research, made the same recommendation. “Both from [the] standpoint of relieving the overburdened

Bureau of Internal Revenue of a task not properly belonging to it and from that of vesting responsibility where it belongs,” Willoughby wrote, “this service should be transferred to the Department of Justice.”207 Even though administrative reformers had the support of Treasury Secretary Andrew Mellon and other leaders in the Harding and Coolidge administrations, the Prohibition Unit remained firmly embedded within the Bureau of Internal Revenue.208

Unable to make headway in their attempt to transfer prohibition enforcement from the Treasury to Justice, reformers set their sights on what seemed a more achievable goal. Starting in 1923, several attempts were made to pass bills creating a formal Bureau of Prohibition within the Treasury. One version, which also included a provision for bringing employees under civil service rules, passed the House in 1924, but it never came to a vote in the Senate.

In 1925, with these proposals stalled in Congress, Secretary Mellon took matters into his own hands. On April 1, he issued an order placing the Customs

Service, the Coast Guard, and the Prohibition Unit under a new Assistant

Secretary in charge of Customs, Coast Guard, and Prohibition. Other functions in

206 National Budget Committee, A Proposal for Government Reorganization, Published in the Interest of National Economy (New York, 1921), 60. 207 William F. Willoughby, The Reorganization of the Administrative Branch of the National Government (Baltimore: Johns Hopkins Press, 1923), 253. 208 For Mellon’s opinion, see Cannadine, Mellon, 294, 317. 114 the Bureau of Internal Revenue were placed under the Assistant Secretary in charge of Internal Revenue and Miscellaneous.209 In June, Mellon announced that this new Assistant Secretary in charge of prohibition enforcement, Brigadier

General Lincoln C. Andrews, would reorganize the Prohibition Unit. Over the course of several months, Andrews revamped the field service, replacing the 48 field directors—one for each state—with 24 “prohibition administrators.” In the new system, each administrator’s district shared boundaries with at least one federal judicial district. Andrews also refined the division of labor between his staff in Washington and the administrators in their districts. District administrators were given authority to issue permits and perform other functions related to the physical control of alcohol. At the same time, as the Commissioner of Internal Revenue explained in his 1925 annual report, Andrews and his headquarters staff in Washington would focus on “supervision to secure uniformity of procedure, standardization, coördination, etc.”

In a manner similar to the reforms made in the U.S. Veterans’ Bureau the year before, Mellon framed this shuffling of functions and responsibilities as

“decentralization.” In his own annual report in 1926, Mellon put an anti-statist gloss on these changes, asserting that “the Treasury felt with respect to local law enforcement that too much responsibility had been placed upon the Federal

Government.” But as a seasoned corporate executive (and a shrewd government administrator) Mellon surely recognized that, by refining the assignment of functions and responsibilities within the organization, and providing the means for headquarters staff to set a strategy that the district administrators would

209 Schmeckebier, The Bureau of Prohibition, 9. 115 implement, the new “decentralized” structure of the Prohibition Unit in fact served to strengthen the power of central administration in national prohibition enforcement.210

Although Mellon’s reorganization brought more business efficiency to national prohibition enforcement, in some ways it actually exacerbated the

Prohibition Unit’s formal organizational problems. One of the Unit’s most offensive attributes—for organizationally minded observers at least—was that it did not actually exist under the law. The Prohibition Unit was merely an unofficial group formed to carry out the functions formally entrusted to the

Commissioner of Internal Revenue by the Volstead Act. By dividing the functions of the Bureau of Internal Revenue and creating two new assistant secretaries without congressional authorization, Mellon had created a situation where legal authority and actual authority were vested in different officers.211

This legal tangle put new pressure on Congress to act, and on March 3, 1927,

President Coolidge signed an act creating a Bureau of Prohibition in the Treasury.

The act officially created the office of Commissioner of Prohibition, as well as several other headquarters staff positions, all of which were to be appointed by the Secretary of the Treasury. Employees in the administrative districts were to be appointed by the Commissioner of Prohibition. The act gave the Treasury

210 Cannadine, Mellon, 317. Schmeckebier, The Bureau of Prohibition, 9–13. Annual Report of the Commissioner of Internal Revenue (Washington: Government Printing Office, 1925), 26. Annual Report of the Secretary of the Treasury (Washington: Government Printing Office, 1926), 139. For an account of the contemporary decentralization at firms such as DuPont and General Motors, see Alfred Chandler, Jr., Strategy and Structure. 211 This is noted in Schmeckebier, The Bureau of Prohibition, 10. 116

Secretary discretion to define the specific duties of the Prohibition

Commissioner.212

For good-government reformers, however, the most exciting aspect of the new law was that it placed all federal prohibition officers and employees—the commissioner excepted—under civil services rules.213 Reformers hoped that federal prohibition would no longer be, as the former New York district prohibition administrator Chester P. Gibbs had described it, “a party spoils system” and “a reservoir of jobs for henchmen and of favors for friends,” staffed by “ward heelers and sycophants.”214

Although the majority of its members had ties to the old temperance cause, the leadership of the National Civil Service Reform League (the leading American good-government group) had opposed the ASL’s vision for prohibition enforcement from the start. The league had formed in 1881 with the mission of overturning the system of party patronage in federal employment—commonly called the “spoils system.” Ever since the election of Andrew Jackson in 1828, the selection of federal employees had been in the hands of the “spoilsmen.”

Whenever the opposing party captured the presidency, it summarily fired many incumbent federal employees, regardless of the skill or expertise of those employees. A new crop of postmasters, tax collectors, port inspectors, land office managers, and a host of other federal officers were then selected by the incoming administration from among the party faithful. The most lucrative positions—

212 See Schmeckebier, The Bureau of Prohibition, 20. 213 Schmeckebier, The Bureau of Prohibition, 214 Chester P. Mills, “Dry Rot,” Collier’s Weekly 80 (September 17, 1927), 5–6, 46–48. 117 those that provided officers with the most opportunity for graft—were the most sought-after. In the 1870s, the civil service reform movement arose and sought to replace the spoils system with the “merit system.” Under the merit system, prospective federal employees would have to prove their eligibility by passing a civil service examination. This, civil service reformers believed, would weaken the grip of the spoilsmen and allow the American civil service to rise from the dismal state to which it had sunk in the 19th Century. President James A. Garfield had been a consistent supporter of civil service reform, and his assassination at the hands of a disgruntled office-seeker made him a martyr for the cause. Formed shortly after Garfield’s death, the National Civil Service Reform League (NCSRL) leveraged outrage over the president’s assassination into popular support for a civil service law proposed by Senator George Pendleton, Democrat of Kentucky.

The 1883 Pendleton Act introduced the merit system to the American public service. At first, however, the new law only covered a limited number of positions.

The NCSRL spent the next half century fighting to bring more federal positions under the law’s provisions.215

Each year during the 1920s, the league listed reform of the Prohibition Unit as one of its top goals. With each year that their proposals were ignored, their distrust of the ASL increased. Even when ASL leader Wayne Wheeler claimed to be in favor of bringing the Prohibition Unit under civil service rules, civil service reformers were disinclined to believe him. In 1924, for instance, Wheeler wrote:

“I believe in civil service for prohibition agents—any reports to the contrary

215 For an assessment of the NCSRL’s role in late-19th Century American political development, see Skowronek, Building a New American State, 64–68. 118 notwithstanding—because it will take the appointment of prohibition agents out of politics, so far as it can be done.” His bland statement was the sort of thing the reformers had heard from spoilsmen before, however, and it was contradicted by his jeering criticism—in the same article—of civil service reformers who

“appeared to be more interested in criticizing the Prohibition act and the Anti-

Saloon League than in the success of any civil service provision the law might hold.”216

Civil service reformers had long since dismissed Wheeler as a false friend to the civil service cause. At the 1922 meeting of the NCSRL, Wheeler had explained that “it was impossible to secure civil service except for the clerical force in the original bill,” and he noted, apparently earnestly, that “one of the objections raised was that the qualifications of the successful prohibition agent, integrity, courage and common sense, are not brought out by a civil service examination.”

This sort of statement—showing himself willing to compromise with “the politicians” and questioning the efficacy of the merit system—revealed him to be entirely at odds with the civil service movement.217

The 1927 act was a resounding victory for the civil service reform cause. It brought the dry forces under the civil service system, not simply by “covering them in” but by requiring employees to pass civil service examinations before reinstatement. Terms of existing employees who had not met civil service requirements were set to expire October 1, 1927—six months after the act was

216 Wayne B. Wheeler, “Prohibition Enforcement Under Civil Service,” The Current History Magazine (Feb. 1924): 847–849. 217 ”Statement of Mr. Wayne B. Wheeler at Annual Meeting of the Nation Civil Service Reform League,” December 8, 1922, box 44, folder Wa-10: 4120, NCSRL Papers, Cornell University. 119 made effective. Reformers felt vindicated when it was revealed that 59 percent of the existing prohibition enforcement employees failed civil service examinations.218

Brookings Institution researcher Lawrence Schmeckebier, in his 1929 study of the Prohibition Bureau, noted that the proposals to create a separate bureau subject to civil service laws had “encountered vigorous opposition from an unexpected quarter, namely, the legitimate users of industrial alcohol and the manufacturers of pharmaceuticals, extracts, and toilet preparations in which alcohol is used as a necessary solvent.”219 Among the leaders of this opposition effort were executives at the DuPont Company. Charles Lee Reese, chemical director at DuPont, explained the problem with the bills in a November 1924 letter. Under the original structure created by the Volstead Act, Reese pointed out, when the Prohibition Commissioner had made “rulings which are extremely deleterious to the handling of the legitimate alcohol business,” industrial users could appeal to the Commissioner of Internal Revenue, “whose force,” Reese explained, “is thoroughly familiar with the details of this work.” Reese and his peers feared that an enforcement structure that bypassed the Bureau of Internal

Revenue would put their fate in the hands of the ASL. “If these duties are put into the hands of the Prohibition Unit,” Reese warned, “a lot of inexperienced fanatics

218 National Commission on Law Observance and Enforcement, Report on the Enforcement of the Prohibition Laws of the United States, January 7, 1931, 27. 219 Schmeckebier, The Bureau of Prohibition, 19–20. 120 will be put in charge of this industry which will undoubtedly cause a great deal of trouble.”220

Despite Reese’s fears that it would empower dry activists, the reorganization act of 1927 seems to have actually helped to alter the political ecosystem in the opposite direction. By placing prohibition employment under civil service rules, the act eliminated the ASL’s ability to broker federal prohibition appointments.

At the same time, however, the passage of the reorganization act and the resulting increase in central administrative power in the national government helped to spur a new, intensified effort to repeal the 18th Amendment, led by industrial users and their allies.221

The Association Against the Prohibition Amendment had been, since 1919, the most prominent organization in opposition to prohibition. The association’s bylaws forbid that any leadership role be filled by—or that any funding be accepted from—anyone involved in the liquor business. At the end of 1927, however, the leadership of the AAPA was taken over by a group of men with ties to the DuPont Company—the same group that had earlier opposed the bills establishing an independent Prohibition Bureau. The new head of the association was Pierre S. DuPont, chairman of General Motors and the DuPont Company.

Also involved in the new leadership group were Pierre’s brothers, Irénée and

220 Charles Lee Reese to John J. Raskob, November 26, 1924, file 1936, Raskob Papers, Hagley Library. 221 Existing accounts are vague on the reasons for the diminished influence of the ASL after 1927—most attribute the organization’s decline to a series of contretemps involving Wayne B. Wheeler and which led to his retirement and, apparently, his sudden death on September 5—and of the emergence of the business campaign for repeal. With the exception of Schmeckebier’s 1929 study, none of these accounts have noted the coincidence of these developments with the 1927 prohibition reorganization act. 121

Lamont, as well as John Raskob, who was an executive at GM and DuPont, and who was soon to be appointed chairman of the Democratic National

Committee.222

With this change of leadership, the AAPA adopted a new, more aggressive stance against prohibition and for repeal of the 18th amendment. This change in strategy was made possible, of course, by the financial resources of the new leadership group. Emulating the strategies pursued in their business affairs, the new, post-1927 AAPA invested in innovation by creating a research department, headed by John C. Gebhart, who had been an investigator for the Social Science

Research Council’s preliminary study of prohibition in 1926.223

This enabled the AAPA to out-pamphlet the ASL, alerting the public to the various evils wrought by prohibition—not least of which, in the opinion of leaders such as the DuPonts and Raskob, was an alarming expansion of central authority in the federal government.224 Through Raskob, the AAPA began to develop close ties with the Democratic Party. With the 1928 presidential candidacy of Alfred E.

Smith, they hoped to turn the election of 1928 into a national referendum on prohibition.

222 Existing accounts highlight the role of DuPont associates, but do not note that this same group was behind opposition to the 1927 reorganization act. See Okrent, Last Call, 294–299; and McGirr, The War on Alcohol. 223 See “Statement Presented Before the House Judiciary Committee, February 27th, 1930, box 4, National Commission on Law Observance and Enforcement, Record Group 10, National Archives II. 224 On the APAA’s fears of centralized power, see McGirr, The War on Alcohol, 237. 122

While the wet forces became better organized after 1927, dry forces moved in the opposite direction. The influence of the ASL declined after 1927. This decline was brought on by a combination of factors, including the elimination of patronage in federal prohibition offices as well as a series of contretemps involving Wayne B. Wheeler, which led to his retirement and, apparently, his sudden death on September 5, 1927. With the ASL’s disciplined publicity machine out of the picture, the campaign to defend prohibition became more disorganized, with individual advocates and informal groups waging battle where they found it.225

One of the most visible and respected of these advocates was the Yale economist, Irving Fisher. The son of a Hudson Valley Congregationalist minister,

Fisher graduated from Yale in 1888, the same year as his lifelong friend, Henry

Stimson, and the year before his fellow prohibitionist, Gifford Pinchot. Fisher had become involved with the dry cause during the war, when he produced analyses of the ways that liquor production undermined the fighting strength of the nation. Fisher was perhaps the most respected American economist in the

Interwar Era, and was a pioneering theorist of money and debt. He was regularly called on as an expert witness in favor of prohibition. A prolific writer on many subjects, in the 20s he supplemented his economic texts with a series of popular books and articles offering a statistical and intellectual defense of prohibition.226

One of his best-known books, Prohibition at its Worst, based on

Congressional testimony in 1926, included a series of charts showing dramatic

225 Okrent attributes the final decline of the ASL to factionalism within the organization after Wheeler’s death. See Last Call, 300–302. 226 See Okrent, Last Call, 98–99, 247–249. 123 declines in the following measurements after the advent of prohibition in 1920:

“Arrests for Drunkenness”; “Estimates of Actual Drunkenness”; “Juvenile

Delinquency in New York City”; “Divorces Granted on Account of Dru