The Economics of Ambivalence: Utah's Depression Experience

The Economics of Ambivalence: Utah's Depression Experience

BY WAYNE K. HINTON

DURING THE 1976 BICENTENNIAL MILLIONS OF American and British television viewers heard Alistair Cooke proclaim that during the depression of the 1930s the Mormons were the only farmers who steadily refused all help from the federal government. That persistent and inaccurate notion not only distorts reality but also denies the complexity of the economic dilemma created by the Great Depression. Many western and southern states had a traditional resentment of federal intervention. For them the problem was how to minimize federal control and at the same time take advantage of federal dollars to achieve economic recovery from the most devastating depression in the nation's history. Utahns faced with this problem chose federally assisted recovery, provided the assistance met their perceived needs.

As the Hoover brand of voluntarism failed, appeals for state and federal aid multiplied. It was no longer widely believed that private charity and local government aid would suffice. Many came to accept the assumption that public spending should be applied "to act like a booster pump in the lagging economic flow." The New Deal was the political and economic response to those beliefs and demands.

Major trends and forces in history have often developed differently in different states and localities of the country. In a nation as large, diverse, and complex as the United States this is, of course, to be expected. The New Deal of the 1930s was one of America's most vast and far-reaching movements. Its impact upon different states and localities seemingly varied widely. Utah's economy during the 1930s can be examined for both its unique and common strands.

Although President Franklin D. Roosevelt was a believer in the virtues of state experimentation and permitted states considerable freedom in their approach to economic problems, there always lurked in Utah resistance to perceived intrusions from the federal government. Utahns were suspicious of encroachments on states' rights because of their historical perspective. Fully 65 percent of Utah's 507,847 citizens were Mormon in 1930.2 Mormons had long professed independence and self-reliance and had gone to Utah seeking to minimize outside contacts and intervention and federal government restrictions.

When the pioneers arrived in Utah in 1847, their leader, Brigham Young, immediately began a drive for economic selfsufficiency. Although Utah's 84,990 square miles of territory are not well adapted to agriculture, those pioneers nonetheless began building an economy based on agriculture. Additionally, Brigham Young preached the need to lay a manufacturing base for the economy of the kingdom. As resources permitted, Utahns commenced small manufacturing operations and the mining of industrially useful resources, particularly lead , iron ore, and coal.

Precious metals were also present in Utah, and the completion of the transcontinental railroad in May 1869 encouraged the development of this additional ingredient which was to remain important to Utah's economic fortunes.

The railroad also served to reduce the insulation the early Mormon pioneers had sought from outside interference. The resultant attempts to reform Mormonism by the influx of non-Mormons or gentiles, with able assistance from the federal government, led ultimately to a successful "Americanization" of Utah. When federal officials became sufficiently convinced of the Mormons' adherence to more traditional American political, marital, and economic patterns, Utah was admitted to statehood in 1896.

The early years of statehood witnessed the establishment of a viable two-party system in the state and the integration of Utah's economy into national patterns. For the most part, those were prosperous times in Utah. The mining of precious metals, lead, copper, and coal proved profitable.

During World War I the demand for agricultural products and metals became particularly great, and from 1914 to 1918 Utahns prospered as never before. The Armistice of November 1918 ended the war and brought a cut in defense spending along with a resumption of European agricultural production. As a result, by 1919 Utah was declining into a serious economic depression. The slide was led by a 54 percent drop in the production of gold, silver, copper, lead, and zinc. The Utah Copper Company began closing down mills in 1919 and by 1921 had entirely ceased production. Nearly 6,000 men were laid off in the Bingham mine. The mine and mill towns of Arthur, Magna, and Garfield lost over half their populations. By 1922 the mining industry was beginning to experience a gradual recovery that peaked in 1925 and then declined again until 1928 when there was a brief revival. Utah's mineral production in 1929, for the first time in the postwar period, exceeded that of 1917, but in less than a year it was cut in half by the Great Depression.

On Utah's farms the economic outlook was even bleaker than in the mining industry. The postwar depression hit the farms somewhat later—not arriving until the winter of 1920. Once it hit, the farm depression was deeper and more tenacious than the slide in the mining industries.^ Plagued by recurrent drought and low prices, farmers in many parts of Utah sold their acreages and left for the urban centers of the Wasatch Front or left the state seeking more secure employment.

Because Utah's industrial economy was still young, without set patterns or great resilience, the state did not participate fully in the postwar recovery. The economy remained in the doldrums, and there was little prosperity in the 1920s in Utah. Meanwhile, eagerly optimistic Americans elsewhere who were participants in the Coolidge prosperity invested feverishly in upwardly spiraling stocks. When the stock market crash of October 1929 signaled the onset of the Great Depression, Americans everywhere came to realize what many Utahns, particularly miners and farmers, had endured throughout the twenties. Even though misery may love company, the new condition brought Utahns little or no comfort, for they suffered severely—worse than did most Americans.

Utah was firmly tied to international economic conditions through its emphasis on mining and agriculture. In both sectors demand was low through the twenties and even lower in the thirties. Also, severe drought struck the state in 1931 and again in 1934. Income per capita fell from $537 in 1929 to$237 in 1933. In 1932 unemployment in the state reached 36 percent." The pall of discouragement spread. The state had not developed a manufacturing economy sufficient to attract an influx of population. Rather, population growth had been sustained largely by a high birthrate and low death rate that placed Utah first in the nation in excess of births over deaths. The unusually high birthrate made it necessary for those who could find jobs to feed and educate proportionately higher numbers of youth than in most states. This burden also contributed to Utah's general poverty.

By the eve of the November general election in 1932 faith in local self-sufficiency had generally evaporated. The campaign promises of Franklin D. Roosevelt for a New Deal may have been vague, but to the majority of Americans and Utahns they offered some promise of a solution to the nation's economic problems.

Utah lacked a tradition of strong, positive government, and officials were unprepared to assume new responsibilities. Limited state revenues made officials think twice before shouldering new burdens. Furthermore, the depression did not seem an opportune time for expensive experimentation. Henry H. Blood, Utah's governorelect, had campaigned for thrift in the operation of state government. His attitude reflected a persistent conservative inclination embodied until 1932 in Sen. Reed Smoot, Utah's enduring symbol of the stand-pat, business-oriented conservatism of the Harding, Coolidge, and Hoover years of national Republican ascendency. This inclination emphasized reducing taxes and appropriations. Utahns sought the mutually exclusive aims of self-determination, economy, and recovery. Something of these aims would have to be sacrificed. Governor Blood in his inaugural address stressed that he would look to Washington for federal assistance. •'^ Some degree of local autonomy would therefore be sacrificed to keep state expenditures low by seeking recovery through federal programs, whatever they might be.

This approach proved very frustrating to some of the unemployed who began to demand state relief from the legislature which was meeting in its regular session during the lame-duck interlude before the national inaugural on March 4, 1933. The Utah legislature was obsessed with budget balancing, and little relief legislation emerged. The state was unwilling and unable to finance an unemployment compensation plan that did not include federal help.

As Utah's legislative session concluded, Congress convened on March 9, 1933, to consider emergency legislation. During the hundred days from March 9 to June 16 Congress enacted fifteen significant pieces of legislation ranging from the Emergency Banking Act of 1933 to authorization for the Tennessee Valley Authority. Most of the relief and recovery measures known as the first New Deal were put in place in this remarkable session. Neither the Agricultural Adiustment Act (AAA) nor the National Industrial Recovery Act (NIRA), the two key recovery measures of the early New Deal, produced initial controversy in Utah. That was in one sense remarkable, for the AAA by-passed state officials and established federal authority at the grass-roots level. However, its economic potential seemingly outweighed this political reality. The AAA objectives vitally concerned one of Utah's two major economic sectors, and the programs of controlled production and crop subsidies were to play a large role in Utah's economic recovery. Farmers were "near jubilant" over the efforts of the administration to give them tangible assistance.12 By October 1934 Utah farmers were receiving prices under the federal government's hay program that were 100 percent above the prices of twelve months earlier. From the AAA's passage on May 12, 1933, until January 1, 1936, Utah farmers received over $10,000,000 in direct payments from AAA, and returns for farm produce in the state rose more than $10,000,000 above the level of 1934.1 Utah's farmers maintained that the AAA provided for "economic as well as political democracy."

Once the new federal legislation was passed, state governments had to decide whether and to what extent they wished to cooperate with the newly enacted New Deal programs. During a special session of the Utah State Legislature convened July 10, 1933, the New Deal won state legislative approval. Public approval had seemingly preceded the legislative action, as most people recognized the existence of a genuine emergency more devastating than any they had ever experienced.

Utahns shared in the general national enthusiasm to sign up industry and commerce under the National Recovery Administration's codes of fair competition and to secure "consumers' pledges" to buy only from firms exhibiting the NRA's blue eagle insignia. By August 1, 1933, about 700 Utah firms had accepted the NRA codes, and by August 5 the state's supply of the NRA blue eagle emblems was exhausted.16 Section 7a of the NIRA with its labor provisions almost immediately affected Utah's primitive union organizations. Union activity increased from twenty-seven union affiliates with a membership of 965 in 1933 to seventy-one affiliates with membership of 5,926 in February of 1935. The state approved a 2 percent sales tax to help fund Utah's participation in the federal NIRA programs.

On March 21, 1933, President Roosevelt requested a massive infusion of federal relief of three kinds: a job corps called the Civilian Conservation Corps (CCC), direct cash grants to the states to provide relief payments for needy citizens, and public works projects. On March 31 Congress approved the CCC, which ultimately put 2.5 million young men between the ages of eighteen and twenty-five to work planting trees, clearing camping areas, and building bridges, dams, reservoirs, fish ponds, and fire towers. On May 12 Congress passed the Federal Emergency Relief Act (FERA), which authorized $500 million in aid to state and local governments. The proposed plan for public works became Title II of the National Industrial Recovery Act (NIRA). It established the Public Works Administration (PWA) with a fund of $3.3 billion to build roads, sewage and water systems, public buildings, and a host of other projects. The purpose of PWA was to prime the economic pump—to stimulate consumer buying power, business enterprise, and employment.

During the consideration of these relief bills. Governor Blood made two trips to Washington, D.C, and spent a total of three weeks lobbying to secure public works projects and federal funds for Utah. His lobbying effort was consistent with public opinion in the state. A majority of Utahns approved the purposes and the content of the CCC, PWA, AAA, NIRA, Federal Deposit Insurance Corporation, Home Owners Loan Corporation, federal—with emphasis on the federal—welfare aid, and other New Deal programs.

For example, the Civilian Conservation Corps, which involved large expenditures of federal money, was relatively popular in Utah, perhaps partly because no state matching money was required for participation. Additionally, CCC seemed to provide an opportunity for creative experimentation. Within Utah where so much land is part of the public domain and where so many acres are uninhabited there were numerous possibilities to develop and perfect projects in conservation and reclamation. In 1937 when President Roosevelt began budget cuts with the thought that the private sector was healthy enough to continue the recovery, Utahns were concerned that two CCC camps in the state were in danger of elimination. A lobbying effort led by the Salt Lake Chamber of Commerce succeeded in retaining these camps. The resultant addition of $50 million to the CCC for the fiscal year won wide praise and ready acceptance among Utahns.

On March 3, 1933, all banks in Utah were closed on Governor Blood's order. Upon passage of the emergency banking act, solvent banks were reopened. The Federal Deposit Insurance Corporation was then set up to insure banks that desired and qualified for coverage. By December 30, 1933, every bank in Utah had qualified for FDIC benefits, and the act setting up the corporation was being widely praised. By December 1934 the total resources of Utah banks showed an increase of $11 million over December 1933.

The Public Works Administration established by the NIRA aroused local enthusiasm with its promise of jobs and public works. The Blood administration demonstrated energy and resourcefulness in going after PWA funds. In October 1933 Blood made another trip to Washington to secure as much aid as possible for his state. Some felt his "untiring efforts brought home the bacon." Blood had gone to Washington because several interests in the state were advocating a faster payment of relief funds by Secretary of Interior Harold Ickes. Despite concern about their administration, Utahns were calling PWA recovery programs, "the closet thing to Christianity ever promulgated. " In its first year of operation the PWA approved projects for Utah amounting to $27,500,000. The biggest disappointment continued to be the slow pace of cautious PWA administrator Harold Ickes to issue contracts and money.

Another New Deal relief measure to gain wide approval in Utah was the emergency cattle and sheep purchase program necessitated by the drought of 1934. Overall, this program was executed remarkably well by the FERA. The animals purchased were mostly culls, many of them diseased. This livestock could not have been sold at regular markets for enough to meet even transportation costs. Likely, many would have died during the winter, and retention would have reduced the already scarce feed needed by more healthy livestock. This program not only benefited livestock producers and their creditors, but it also provided work and some commodities for persons on relief.

By mid-April 1934 the drought had reached critical proportions. Water storage levels were one-fourth the previous year's amounts. Governor Blood wired Washington urging special federal action to help Utah. By early May $600,000 in special grants from federal relief funds were made available to the state. Cutting through red tape, the award was made just thirty-six hours after all the request forms and reports were filed. Relief work was underway in Utah just four days later.

As the drought intensified, Governor Blood banned all hay and mill feed shipments from the state. By June plans for the slaughter program were being implemented. Initially, the program was for cattle only, but it was enlarged to include sheep and goats. A total of 155,000 cattle and 250,000 sheep were slaughtered in Utah at a cost to the federal government of $2,000,000. Some felt another 75,000 head of livestock should have been slaughtered and wondered why "a program well started and generally approved" should not be carried to a successful conclusion.

The FERA, which carried out the slaughter program, had been established by Congress in May 1933 and given $500 million to be dispensed through state relief agencies. Harry L. Hopkins, the director, insisted that the unemployed needed jobs, not handouts. In November 1933 Hopkins persuaded President Roosevelt to create a Civil Works Administration (CWA), and within a month it put over four million Americans to work. The cost of the CWA—$1 billion in less than five months—frightened Roosevelt; the agency was abolished, but an expensive public works program was continued throughout 1934 under FERA.

As CWA cut back its public works in preparation for being phased out, its work was praised in Utah. There was a feeling that the "spirit of CWA should never end—the government should stand ready to spend money for the employment of idle labor." By April 1934, the FERA had taken over the unfinished CWA projects. The Utah administrator of the FERA, Robert H. Hinckley, became director of the western states FERA, appointed to the post because he was considered one of the few western officials aware of the responsibility of state governments in the realm of welfare.

Initially, the FERA was praised as "one of the government agencies set up by the present administration that is beyond criticism. . . ." However, following the November 1934 Democratic election victories Roosevelt committed himself to the Hopkins approach which would return "unemployables" to the care of state and local agencies, while the federal government continued the task of public works projects for many of the rest of the unemployed.

Utahns who had generally applauded the federally run and financed Civil Works Administration resented its abrupt termination. As the FERA proceeded, a feeling grew that FERA agents meddled in state affairs. The demand for state funds was also resented. If states did not contribute a fair share, the FERA could cut off funds or even assume direct control of relief administration. Utahns were reluctant to shoulder the welfare responsibility. By November 1, 1935, all relief of unemployables was to become a local responsibility as Roosevelt ordered the federal government to "quit the business of relief." When Utah assumed relief payments monthly assistance was cut by 50 percent, causing riots at the FERA headquarters in Salt Lake City that necessitated police intervention and the arrest of eight of the two hundred or so demonstrators.37 Welfare appropriations by the state remained modest and were made grudgingly. Only with great reluctance did Utah face up to the need for long-term state spending for relief and welfare. Such programs seemed far more acceptable when funded by federal dollars.

Much of the first New Deal appeared to provide disproportionate assistance to southern and western states. The programs seemed to offer an imaginative and acceptable attack on the problems of Utah's two major economic interests—farming and natural resources, including mining. Under the programs of the first New Deal, Utah ranked high among the forty-eight states in per capita federal expenditures and in receipt of federal loans. The Reconstruction Finance Corporation (RFC), FERA, CWA, PWA, and CCC funds expended were very beneficial and appreciated.

Prior to 1933 Utah had experienced a major decline in economic prosperity and personal income and had demonstrated a great need for federal assistance due to the inability of the state to raise revenue on its own. Through the benevolence of the New Deal, Utah experienced a rather remarkable recovery from 1933 to 1935. Christmas retail sales in Utah for 1933 were the best in five years. The Salt Lake Chamber of Commerce joined other Utahns in sending telegrams of appreciation to President Roosevelt and Utah's congressional delegation.^o In his New Year's Day message Governor Blood predicted a happy coming year under the New Deal. Salt Lake City and County Commissioners pointed to the success of the New Deal and to the bright prospects for thriving economic times. The New Deal was hailed as "a preserver of American principles" by a convention of 150 of Utah's business and industrial leaders.

Undeniably, the surge behind the New Deal had sprung from economic crisis and was centered in Washington, D.C. At a relatively minimal financial cost to Utah, the New Deal had succeeded in improving economic conditions within the state. Employment had increased 10 percent, state and local tax collections had gained significantly, and business was reported up between 50 and 100 percent. Per capita income in Utah had made significant gains toward attainment of the national average. Although under ordinary circumstances historical events might have predisposed many Utahns to resent outside interference, the programs of the first New Deal had been rather well accepted.

It should be noted, however, that because most of the first New Deal programs had been federally funded and administered, the state's social services remained rudimentary as of January 1935. More revolutionary changes were soon to come with the second New Deal which would require greater state effort, commitment, and compliance. Up until this point only bolder critics had surfaced to denounce the New Deal. The geiieral feeling in LUah was that the early New Deal programs were beneficial and had come with minimal local and state funding.

In the spring and summer of 1935 Utahns, along with other Americans, found themselves almost totally preoccupied with keeping abreast of the sweeping reforms of the second New Deal. Major reforms of this new wave of legislation included public works under the Works Progress Administration (WPA), Social Security, and labor reform legislation. The WPA, authorized in May 1935 and placed under the direction of Harry Hopkins, was the keystone of the new legislation for a majority of Utahns. It offered a multitude of projects to the state from public buildings to the writers and artists projects. There were opportunities provided for respectable, federally financed jobs to all who were classified as employable. This agency found a warm reception in Utah, both for the jobs it provided and for the considerable number of buildings and other structures it erected.

Hopkins gave orders to employ 15,000 heads of families in Utah by November 25, 1935. By the end of November the state's monthly WPA payroll exceeded $ 1,000,000. In the first year of its existence, WPA workers in Utah built, repaired, or improved over 700 miles of roads. They erected or repaired 150 public buildings, installed sanitary systems and flood and erosion control projects, constructed 98 miles of sidewalks and paths, built 9 miles of curbs and gutters, placed 11 miles of guardrails on mountainous roads, built and expanded many recreational facilities, worked on insect, plant, and disease eradication, and distributed more than 4,000 garments and 590 tons of foodstuffs to needy persons." Without the Works Progress Administration Utah would have continued to suffer severe unemployment.

Despite the popularity of WPA, other programs of the second New Deal seemed to represent a shift away from a perceived southern and western perspective of the first New Deal toward an eastern and midwestern bias. The new programs appealed more to low-income and ethnic minority groups in cities. Utahns could identify with and appreciate the AAA and the CCC and welcome federal money for irrigation, highway, and conservation projects, but they were less favorably disposed toward collective bargaining, minimum wage laws, and heavy urban relief spending. Those who had enthusiastically accepted much of the first New Deal were more suspicious and grudging in their acceptance of these new reforms.

The Social Security Act of August 1935 contained a national old-age insurance program and a retirement benefits system, both of which were mainly a federal operation. However, the act did involve the state administration in providing matching-fund programs to care for the blind, the disabled, and dependent children. The unemployable poor were also to be cared for by the states. In a special session of the legislature in the summer of 1936, Utah became the seventh state to pass an unemployment insurance bill meeting all the requirements of the Social Security Act. Heber R. Harper, regional director for the Social Security Board, later labeled the Utah bill as the "model law to date." By this action Utah had qualified for all portions of the Social Security program, and it became the first state to receive all the benefits of the Social Security Act. It might, therefore, be concluded that Utah continued in its enthusiasm for the New Deal. That, however, would be a false assumption, for the enthusiasm was now more reserved. Utah's cooperation came begrudgingly and at the expense of whatever party unity existed among Utah Democrats. The legislative battles in the August 1936 special session widened the growing gap between New Deal Democrats and conservative Democrats and gave a degree of renewed strength to Utah's dispirited Republican party. Democrats continued to dominate state politics for several more years, but the party was torn by factionalism. As time went on, and as comparatively good economic times returned, greater political reactionism set in.

When Utah regained comparative prosperity, it was largely due to New Deal generosity. Governor Blood had emphasized from the beginning that Utah would look to Washington for aid and direction. The federal government had heeded the call and played a major role in the state's recovery. least one Utahn felt that "the voice of God was heard in Roosevelt's. . . " byt other Utahns were beginning to demand more loudly a reduction in public spending and public debt. Several factors provided support to a widening belief that final recovery was at hand. Roosevelt shared that belief and the desire for a balanced budget. To aid in the effort, calls went out for Utah to take the initiative in halting federal spending.

As efforts to balance the budget proceeded, some Utahns expressed opposition to reductions in federal programs in Utah. Governor Blood believed cuts in federal programs would place a greater burden on the states. He maintained that employment statistics in Utah indicated that the private sector was not yet strong enough to replace federal public works projects. State taxes had been kept low, state appropriations were low, and $8,345,000 of state indebtedness had been retired between 1933 and the end of 1940. He nevertheless argued that Utah was using all available state funds and could not hope to support a jobs program of the magnitude of some of the federal programs. From March 1933 until January 1937 the federal government had expended a total of $158,216,132 in Utah.^o Through 1939 the federal expenditures in Utah amounted to $342 per capita, ranking Utah twelfth among all states in per capita spending of federal money.

Utahns who sought a balanced federal budget decided that it should come at someone else's expense, certainly not at the expense of reductions in Utah's favorite programs. For example, Gus P. Backman, secretary of the Salt Lake Chamber of Commerce, a group advocating a balanced budget, journeyed to Washington to lobby for federal approval of a number of Utah projects. Industrialists, state officials, and civic organizations strove desperately to maintain federal programs in Utah. The Chamber of Commerce directed communications to all the western state Chambers of Commerce requesting support in a campaign to prevent a reduction in federal aid to highways. Governor Blood requested additional federal assistance for public works, and city and county officials continued to submit requests for new WPA projects. The Deseret News, one of the first adamant voices within the state to demand reductions in federal expenditures, also had a favorite program that it did not want cut: budgets were not to be balanced by reductions in the National Youth Administration (NYA) funds, for "nothing better can be done for ambitious young people " Ironically, Utahns who professed independence, self-reliance, and dedication to free enterprise, and who wanted minimum federal restrictions and a balanced federal budget, admitted through their lobbying efforts the need for extraordinary relief measures.

The New Deal has been seen as ushering in the welfare state and exalting the accumulation of national power at the expense of the states. Hard times forced Utah, and other states as well, to economize drastically, to inaugurate welfare policies, and to search frantically for revenue to pay costs. The New Deal prompted Utah to approve unemployment compensation and to cooperate with many new federal agencies. The state responded as quickly to New Deal federal programs as other states, being the first to have in place all parts of the Social Security system. Even though Utah was not regarded as a labor state, it became one of five states to approve a statewide labor relations bill modeled on the Wagner Act.

State and local officials in Utah remained cost-conscious in the expenditure of state and local revenues and usually followed conservative fiscal policies. Whenever federal money was available, however, Utah was ready to go after its share. The Great Depression had struck Utah with paralyzing power and caused Utahns to look to Washington. Despite some objections to federal power and public spending, the state continued to look to Washington until prosperity had returned.

Utahns who professed to want limited government embraced more readily programs run by the federal government than those with shared responsibility. They were most critical of programs requiring matching funds because the state claimed to be hardpressed to raise the matching amounts. So, the crisis of the depression produced the economics of ambivalence wherein some aspects of the New Deal were attractive, while other actions and policies were repugnant. Utahns could rake in the federal largess with one hand and, when they felt irritated by agencies such as the FERA, strike at the federal bureaucracy with the other. They could also advocate reduced federal spending, but their actions belied their protestations.

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