Читать книгу Free People, Free Markets - George Melloan - Страница 10
ОглавлениеThe Dow Jones board met four days after Barron’s death. It consisted of three people: Jane Bancroft, now the principal owner; her husband, Hugh; and Casey Hogate. Hugh was elected president and Casey vice president and general manager with authority to write checks on the company’s accounts and access to its safe deposit vault. With that, the post-Barron phase of Wall Street Journal history was launched.
From the beginning, the Bancrofts would follow a principle of leaving the news and editorial policies in the hands of a talented professional journalist, perhaps because they knew that it was the abilities of a fine journalist, Clarence Barron, that had built Dow Jones to its present status. That would be the practice down through the years. Their descendents would leave the running of the newspaper, and ultimately the entire Dow Jones, up to a series of editors who had won their spurs initially as writers. It would serve Dow Jones and its employees and owners well.
Casey Hogate was the first in that series, and no doubt his talent and personality helped strengthen the Bancrofts’ decision to leave management up to the professionals. Hogate and Bancroft, who by then had proved himself as a talented executive, immediately set about to bring order to the loosely coordinated Dow Jones subsidiaries, such as the Boston and Philadelphia news bureaus. Casey also searched for talent to beef up the Journal’s editorial staff. William Peter Hamilton died in December 1929, leaving a big gap, and was replaced by 52-year-old Frederick Korsmeyer, a thoughtful Nebraskan who had been his understudy but who couldn’t match the force and bite of Hamilton’s editorials.
Hamilton had based Journal editorials on the liberal ideas of 18th-century philosophers such as Adam Smith and John Locke. The former had created the logical base for letting markets find the most efficient employment of resources and the latter the arguments upholding the principle of “natural rights” of man that had so influenced the authors of the Declaration of Independence and the Constitution. Like Barron, Hamilton was an astute market analyst. They agreed on the principle that “The market represents everything everybody knows, hopes, believes, anticipates.”
In 1926, Hogate had recruited a former United Press reporter from Ohio, William Henry Grimes, to take over the Washington bureau from the aging and alcoholic John Boyle. In 1929, Hogate hired a bright young man from his alma mater, DePauw University, named Bernard “Barney” Kilgore into the New York office. Grimes and Kilgore would prove to be inspired choices, both playing key roles in the future development of Dow Jones. Also in 1929, Hogate and Bancroft pursued the Journal’s claim of being a “national” newspaper by opening a West Coast Wall Street Journal in San Francisco. The timing wasn’t propitious. It was eight days before the stock market crash.
The Journal had warned, after a setback in the market in 1928, that stock buying with “call” money borrowed from banks at 12% interest rates (marginal borrowing) plus the huge inflow of buying orders from abroad was of concern. But it didn’t shout it from the rooftops.
In May 1929, Journal editors weighed into what proved to be a historic dispute between the New York Federal Reserve Bank, supported by its private member banks, and members of the Federal Reserve Board Washington, political appointees of the president. The New York reserve bank, presiding over the nation’s banking center, had dominated monetary policy through the 1920s with excellent results under the leadership of Benjamin Strong. But Strong had died in 1928, and that had touched off a power struggle between the New York Fed, with its focus on sound banking, and the more politically minded board in Washington.
Concerned about the speculative fervor in the New York markets fueled in part by the easy availability of margin loans, the New York Fed wanted to raise the “discount” rate it charged on loans to banks to 6% from 5%, this being the Fed’s traditional way of damping down credit excesses. But the governors in Washington were resisting.
“Why will not the board follow the advice of practical men of affairs?” demanded the Journal. Washington finally gave in and raised the discount rate to 6% in August, but not before it had established that the politically selected board in Washington, not the New York Fed, was now in charge of monetary policy. The results for the next few years would not be pretty, as the Fed failed to adequately respond to the 1929 market crash through the traditional means that had worked well after the 1920 crash, seeing to it that the banking system had sufficient liquidity. It thus bore heavy blame for bank failures and damaging deflation. Economist Milton Friedman in his 1980 book “Free to Choose” would call this one of the major causes of the Great Depression.
Herbert Hoover in his memoirs described the board of that time as “a body of startling incompetence.” Clarence Barron had been quite right in conditioning his optimism for the Fed on his hope that it would exercise “wise management.” That, unfortunately, was not to be once the system came under the domination of political appointees rather than what the Journal chose to call “men of affairs.”
Having endorsed Herbert Hoover, the Journal’s editorials were rather muted in offering criticisms of his performance, a timidity that vindicated Charles Dow’s warning that a good newspaper should never tie itself to a politician of either party. The Journal went out of its way to praise some of the measures of the president, such as the creation of the Reconstruction Finance Corp., essentially a government bank.
But the editors couldn’t help noticing that the hyperactive Hoover was making some colossal mistakes. For one thing, he and the Republican Congress raised income taxes to “balance the budget,” not a particularly wise measure during a time when the relatively well-to-do Americans, the only people who at that time paid income taxes, had just been shocked by the crash and were uncertain about economic recovery and thus wary of new investments.
The Journal’s free-market principles were violated when Hoover bowed to heavy lobbying by farmers and industry and signed the notorious Hawley-Smoot Tariff Act, one of the greatest protective tariff increases in American history. When the nation’s trading partners retaliated in kind, Hawley-Smoot brought about a virtual shutdown in world trade, hitting American farmers, who accounted for a large share of American exports, hardest of all. That, along with the hapless Fed’s inability to arrest deflation, worsened the Depression. A petition signed by 1,028 leading economists urged Hoover to veto the measure, to no avail. Under heavy political pressure from protectionists, he ignored their advice.
Republicans were excessively committed to their efforts to “help” the farmer. An editorial on April 15, 1930, probably written by Korsmeyer and titled “A Tariff Banquo,” attacked a proposed export subsidy for farmers that William Edgar Borah (Rep., Idaho) wanted included in the Hawley-Smoot bill. The editorial likened the provision to Banquo’s ghost in that it popped up repeatedly in Congress and was hard to banish. The editorial calculated that for cotton alone, the provision would cost the Treasury $80 million a year, and the subsidy would also defeat efforts by the government to curb crop acreage to support prices of farm products. Farmers would respond by increasing their production with the “certainty of a future collapse making their condition worse than ever.”
As for the tariff bill generally, the Journal said on April 1, 1930, that the “pending tariff bill has been constructed on the good old theory that this country can make its own living standards and let the rest of the world roll by.” The editorial challenged the popular idea (still existent today but more dangerous then) that an export surplus, enforced by high tariffs, is a good thing for the economy. It cited a book titled “America Looks Abroad” by banker-economist Paul Mazur about the fundamental inconsistency of that view.
Said the editorial: “America looks abroad, wrote Mazur, because she can’t help herself. She seeks an answer to the not altogether new question how she may continue to collect $1,000,000,000 of annual interest on foreign loans and still preserve a merchandise export balance of nearly as much. With due conditions and qualifications, Mr. Mazur’s conclusion is that it cannot be done.”
This editorial was not the first and would not be the last time that the Journal would have to point out that the flip side of an export surplus is a foreign investment deficit. Americans in the 1930s frequently grumbled over the failure of our European Allies to pay their World War I debts. Mazur and the Journal were pointing out that high tariffs made it difficult for the Europeans to earn the dollars to make those payments, even with the best of intentions.
The damage from Hawley-Smoot wasn’t long in coming. A Journal editorial on December 30, 1930, noted that exports of autos and parts for the 10 months ending in October had dropped to $249 million from the $488 million in the like period a year earlier. “This is not an isolated instance but is only one of many of our export trade. When there is a great falling off of foreign demand for the products of labor, whether cotton or machinery, there must be a falling off in employment that reacts upon all industry and trade,” said the Journal.
On January 28, 1930, the Journal examined a proposal by Irving T. Bush, founder of the Bush Terminal Co. in Brooklyn, that, to prevent future financial crises, bankers should be licensed. Mr. Bush had written that the public accepts as a matter of course that doctors and lawyers be licensed, but when it comes to financial well-being, “we place our affairs without reservation in the hands of any person who chooses to open an office and call himself a banker.”
Replied the Journal: “‘We do nothing of the sort. Some of us do, to our sorrow. The majority of us do not even trust the storage or forwarding of goods or their passage through the customs to any person who chooses to open an office and call himself a forwarding agent. We turn, rather, to expert and reliable organizations like the Bush Terminal Co. . . .”
The Journal pointed out that banking is a business and that each party to a banking transaction asserts the right to act on his own judgment; “if what Mr. Bush calls ‘the guiding hand of greed’ too often controls the seller, the same motive actuates the buyer even more frequently.”
A Journal editorial on December 31, 1930, marked the “End of a Trying Year.” Trying to put the best face on things, the writer struck a hopeful note by offering that “there are good reasons to believe that such impedimenta as 1930 leaves behind can be disposed of more easily and quickly than could that which remained at the close of 1929. The country is now in a realistic frame of mind. It has rid itself of the last of its illusions and is both willing and able to reckon with the facts. Quite possibly it has swung too far away from the light-minded credulity of early 1929 and is now disposed to exaggerate its fears, just as it was inflating its hopes beyond all reason less than two years ago. At any rate, men everywhere recognize the necessity of sober calculation, of cold scrutiny of all business projects in relation to the inherent soundness and usefulness.”
But a short while later, the Journal was notably cool toward Hoover’s 1931 State of the Union address, criticizing him for a lack of leadership in signing Hawley-Smoot. An editorial said the message was “in fact disappointing,” betraying Mr. Hoover as “a man whose mental vision is apt to become focused on what he wishes to see.”
As the Depression deepened the Journal’s support for Hoover waned further and although it still leaned toward Hoover over FDR in the 1932 presidential race, there were no more enthusiastic endorsements. The Journal’s editorial position was equivocal, deeming both parties to be, in effect, antibusiness. Indeed, an editorial on July 1, 1932, favored the Democrat platform plank as being the “most honest” on the repeal of Prohibition, which even in the depths of a Depression, it described as the “most important issue facing the nation.”
But as the election neared, the Journal was furious at FDR for lending his own support to high tariffs and other political capitulations to the farm lobby. An editorial on November 3 stated: “Governor Roosevelt has unreservedly pledged himself to continue and extend the same impossible effort to afford tariff protection to export surplus producers which gave birth to the Hawley-Smoot and worse to the Agricultural Marketing Act and its $500,000,000 farm board folly.”
The latter was a reference to the 1929 law passed by the Republican Congress and signed by Hoover that lavishly refunded the 12 federal farm loan banks created by the Federal Farm Loan Act of 1916. The federally preferential loan terms offered by these banks probably had a lot to do with the overproduction that had held down farm prices, giving rise to farmer demands for import protection. Farmers paid a very high price during the Depression for the federal measures they had lobbied so hard for, and the Journal’s editors recognized the damage caused to the economy by these federal interferences with the normal workings of markets.
But after Roosevelt and the Democrats won a landslide victory, the Journal granted them a honeymoon, no doubt partly because the editors were themselves anxious about the state of the U.S. economy. An editorial praised the rapid-fire New Deal creation of legislation during FDR’s first 100 days by opining that the new administration had “superbly” risen to the occasion.
“It and the country still have incredible tasks to perform before they can afford so much as a pause for breath. But together they have a good beginning and there are times when a beginning is nearly everything.”
FDR and Hogate were in fact neighbors, with adjoining farms in Dutchess County, New York. They knew and liked each other, despite the differences in their political views, and often had long talks at their country places and in New York. Hogate had prevailed on Governor Roosevelt, apparently with some success, to give the New York Stock Exchange some slack, letting it have a try at self-reform.
Roosevelt, after his inauguration as president on March 4, 1933, immediately responded to the banking crisis, caused in part by Fed incompetence, by temporarily shutting down the nation’s banks, thereby freezing depositors’ funds. The Journal was only mildly critical. It even advised against the use of bank clearing house scrip, normally narrowly employed in the settling of interbank accounts, as a kind of substitute money, fearing it would lay the groundwork for inflation.
The Journal may have been wrong about that. Given the state of the banking system and a Fed that was little more than a bystander, a substitute money might have been useful in providing liquidity. Yet fears of inflation were a powerful force in that era, a time when the world had recently seen a German economy collapse under the weight of hyperinflation and when the British had in 1931 abandoned the international gold standard in their desire for more flexibility in the manipulation of money.
Although the Journal seemed to accept that some sort of emergency action was needed, it did point out that shutting down the banks was a further blow to an already weak economy and urged the government to end the “bank holiday” quickly. The government was less than responsive to that demand, as some bank inspections and depositor freezes dragged on until the end of the year. When the bank holiday ended, only 12,000 banks were permitted to open. In mid-1929, the nation had had 25,000 banks.
The Journal, however, supported two New Deal measures. It backed the Federal Deposit Insurance Act, which had an important influence on stabilizing the banking industry in the 1930s and thereafter by giving depositors more confidence in banks and reducing bank runs. And in a front-page editorial on April 4, 1934, it gave strong backing to the Securities Exchange Act, which created the Securities and Exchange Commission. The editorial said that “not only owners and users of investment capital but the investment bankers whose fortune it is to bring these two interests face to face, should welcome the legislation.”
For one thing, the Journal’s editors liked the idea of legal requirements that would bring about greater transparency in corporate reporting. They had historical memories of the Dow and Jones days when some companies, including the economically dominant railroads, didn’t even deign to issue public annual reports. Reporters like Jones and Bergstresser had to fight for information about the true financial condition of the companies that were the subject of large bets being made by Wall Street investors. Hogate and others likely felt that the securities act would go a long way in restoring public trust in Wall Street, and quite likely they were right.
The Journal even offered some initial support for what, along with the revolutionary Agricultural Adjustment Act (AAA), was an equally revolutionary New Deal experiment, the National Industrial Recovery Act. The act set up the National Recovery Administration (NRA), whose job it was to organize the entire American business community into industry cartels, with separate “codes” for each industry.
The Journal even joined other newspapers in displaying the NRA’s eagle symbol on its front page to show that it was a subscriber to the publishing code. But that sharp and uncharacteristic deviation from the newspaper’s traditional free-market policies would be short-lived, thanks in part to the rising influence of Hogate’s young protégé, Barney Kilgore.
The initial embrace of the NRA could be attributed to the fact that Dow Jones, along with the rest of the country in 1933, was facing hard times. Circulation and advertising had dropped sharply. Hugh Bancroft died in October of that year after a long illness at age 53. His widow, Jane, owned or controlled roughly 90% of the shares of Financial Press Companies of America, the family holding company that owned Dow Jones. She in essence turned the company over to Hogate, whom she much admired, telling him to do what was best for the company and “Don’t you and the boys worry about dividends.” Jane and her late sister Martha had loved their stepfather C.W. Barron, and Jane shared his trust in the abilities of the young man from Indiana.
Hogate worked tirelessly to keep Dow Jones afloat and focused much of his attention on rebuilding readership, in part by broadening the Journal’s scope, not only as a national financial newspaper but a national business newspaper as well. To this end, he endeavored to liven up the Journal and make it more readable. He and Bancroft in 1930 had brought back Thomas Woodlock, the Journal’s editor of a quarter century before, to write a front-page column. The Review & Outlook column originated by Charles Dow was moved from the front page to page 8 and became the official purveyor of the Journal’s institutional opinions, which it remains to this day.
As mentioned previously, after leaving the Journal, Woodlock had become a railroad analyst, and in 1924 Coolidge had appointed him a commissioner of the ICC. In 1930, Hogate correctly surmised that a talented wordsmith like Woodlock in his waning years might want to do something more interesting than reviewing railroad petitions for rate increases. He proved to be right. Woodlock accepted the offer and was soon back in the role of offering Journal readers front-page commentary on everything from the performance of Herbert Hoover to the philosophy of Spanish essayist and poet George Santayana. His philosophical pieces gave the Journal class but were hardly the trenchant observations on current events that had gained Barron fame. In short, he was not the voice of the newspaper.
Whereas the return of the 63-year-old Woodlock was an evocation of the Journal’s past, young Barney Kilgore was the embodiment of its future. He was moving up quickly as a protégé of Hogate, just as Hogate had been a protégé of Barron. Like Barron, he was a prodigious producer of intelligent, engaging copy. He wrote, as Barron had advised in his essay on good writing, with the reader foremost in mind and would later, as Dow Jones CEO, establish that principle as a Journal hallmark, which likely contributed to its remarkable ability to attract readers throughout the last half of the 20th century.
Kilgore started on a mundane job in New York in late 1929, just before the crash, checking the performance of the Dow Jones news service, delivered by broad tape “tickers,” designed in house, to customers around the country. His role was to keep tabs on how often important stories ran on the ticker before competing wire services offered them and how often the competitors won the race, and by how many minutes or seconds. In the wire service business, a few seconds is a win; 20 seconds is a major victory. Though a routine job, it taught Barney a lot about business news coverage.
Hogate pushed him ahead quickly, shipping him to San Francisco to be news editor of the West Coast edition. It was there in March 1932 that Kilgore started writing what he called his “Dear George” column in the form of a letter to a fictitious correspondent about issues of the day. Hogate soon picked it up for the New York edition, putting it on the editorial page and explaining in an italic precede: “This series of letters in so far as persons mentioned therein are concerned, is fiction, of course. But the problems discussed are real.”
The first column was about deflation, perhaps the foremost problem of 1932, the year the U.S. economy sank to its lowest point in the Depression. Wrote the 23-year-old columnist: “Did you ever stop to think what deflation is? It isn’t a thing more than a bull market in money . . . Right now prices are low and dollars are high. And what that does to a lot of people is plenty.”
He would add in a later column that the “problem with inflation or deflation is not one of condition but of a change of condition . . . it is a change in the value of the dollar that wreaks havoc with the economic order.” The Kilgore column generated a spate of approving letters from readers, particularly after Barney invited his fictitious correspondent to write him with his own thoughts, thus provoking letters from readers.
The Journal had found a new voice in this talented writer from Indiana, one who spoke to the reader in a plain, conversational tone and explained complex issues in simple terms. Kilgore biographer Richard Tofel wrote that the column was “an extraordinary breath of fresh air in the musty precincts of financial journalism, and newspaper journalism generally.” Tofel went on to write that “Kilgore’s new column assumed that its readers were interested but not expert, eager to understand but currently confused, particularly as the economic order seemed to collapse around them.”
C.W. Barron would have been pleased with the emergence of this young man who consciously or unconsciously adhered to the maxim Barron had laid down years before: Put the reader first. Indeed, Barney in one of his columns, would repeat an observation about the stock market that both Barron and William Hamilton had made in various ways during the Journal’s earlier years, instructing “George” that the market “is a place where all knowledge about everything that has the slightest thing to do with business and trade is brought to bear eventually upon the price of securities representing equities in that business and trade.” It was another way of saying that Charles Dow’s creation of indexes that would measure market sentiment had been a marvelous invention.
Kilgore was brought back to New York and started a new editorial page column, Reading the News of the Day, which was more explicitly journalistic in that “news of the day” meant exactly that. Along with a wide range of subjects, he addressed the issue of barriers to trade, warning cotton farmers in the South that, because of their dependence on foreign markets, they had better “think twice before taking up the cry, ‘Buy American.’” In another column, he wrote that the history of helping the farmer in the last few years “has been a process of trial and error, with some pretty good-sized errors.”
As Kilgore’s fame spread, it was not long before he, as with Barron, was being interviewed by other journalists. He made guest appearances on NBC’s nationwide Red Network, something that thrilled his parents, Tecumseh and Lavina, in South Bend when they picked it up on Chicago’s WMAQ.
Kilgore, although from a Republican family, was initially friendly toward the New Deal. He was particularly impressed with the quiet conversational tone of Franklin D. Roosevelt’s fireside chats, which also were broadcast on network radio. He initially was hopeful about the National Industrial Recovery Act, which attempted to form businesses into cartels that could raise prices and, so it was hoped, put business on a sounder footing. The NRA was set up to implement codes governing prices and wages for individual industries.
But Kilgore decided to make a tour of cities to question people about how the NRA was working, an innovation that would give rise later to the popular Journal technique called the news “round-up,” which anticipated the modern craze for opinion polling by sending reporters out on the streets to buttonhole citizens and get their views on a particular topic. As he surveyed the impact of NRA rules on individual business, he became more and more skeptical and said so in his writings. The New Deal’s efforts to regiment business was not lifting them out of depression but instead sowing chaos, particularly with its efforts to raise wages while at the same time, in contradiction, trying to control prices.
The NRA, headed by a thin-skinned army general named Hugh Johnson, was not pleased with Kilgore’s reports. In a speech to the American Federation of Labor in Washington, General Johnson left little doubt that he was attacking The Wall Street Journal when he declared that “the idea of a Wall Street journal going out to demonstrate through the little fellow the failure of a great social regeneration is one of the grimmest, ghastliest pieces of humor of all the queer flotsam of our daily work.”
The general’s fit of temper was probably a reflection of his own realization that the NRA was something of a mess. The Journal was the least of his problems. The NRA, which some later historians would call an experiment in proto-fascism, was short-lived. In 1935, the Supreme Court issued a ruling striking down the NRA as an unconstitutional exercise of government power. By that time, there was little enthusiasm in Congress for trying to salvage any parts that might have passed court muster. It died a timely death as a two-year-old.
The period of grace granted by the Journal to the New Deal withered away quickly. Even as early as April 1933, only a month into FDR’s administration, Journal editors were beginning to have doubts. They opposed FDR’s decision to take the United States off the gold standard, call in monetary gold at the traditional price of $20.67 and then raise the exchange price for gold in central bank transactions to $35 an ounce. FDR’s controversial Executive Order 6102 exacted a $10,000 fine and a potential prison term for any American citizen caught “hoarding” gold.
FDR’s move was intended to devalue the dollar in international exchange markets to reverse the deflation that had begun with the 1929 crash and to create inflation instead. A dollar was now worth only one thirty-fifth of an ounce of gold in international exchange, whereas it would buy over one-twentieth of an ounce before FDR’s unilateral devaluation.
This disturbed the Journal’s inflation hawks. An editorial observed that “Just as the United States was the first nation to abandon gold voluntarily it is now the first to deliberate publicly on the expediency of debasing its currency in the absence of the traditional compelling reason thereto. For certainly the national budget could be balanced within a reasonable time without it. We are a nation calmly discussing inflation ‘as an instrument of national policy’ whereas heretofore it has always been begun stealthily by finance ministers desperate to conceal national bankruptcy from the people or from an armed enemy at the gates.”
The Journal was, of course, referring to the age-old practice of governments deliberately cheapening their currencies, thereby exacting a tax from savers and consumers in the form of a lowered value of their money and savings. What Barney Kilgore would have called a “bear” market in money effectively lowered the cost of paying off government debt, thereby easing the path to greater indebtedness. Whether FDR could have ended deflation by less drastic measures would be much debated. It would have helped to have had a central bank better attuned to the nation’s monetary needs.
The Journal had also become skeptical of the ideas of the British wunderkind, John Maynard Keynes, and would remain so thereafter. Keynes was not a member of FDR’s “brain trust,” but he influenced policy. He wrote an open letter to FDR in late 1933 suggesting that the government could cure the Depression by borrowing more and spending more. The Journal attacked this theory with the same argument it would continue to use thereafter against Keynesianism: How is it economically “stimulative” when the government takes money from one person, the taxpayer, and gives it to another?
The Journal also challenged Nicholas Murray Butler, the president of New York’s Columbia University, an institution that had contributed two of its faculty members, Raymond Moley and Rexford Tugwell, to FDR’s original three-member brain trust.
After Butler had deplored the “the profit motive,” a Journal editorial asked: “What is this profit motive that is suddenly become fashionable to decry. The profit motive is simply the common aspiration of all men to better their material status through individual exertion . . . How many members of the Columbia University faculty have exerted themselves beyond the requirements of their inadequately salaried duties to make contributions to literature and the technological arts for which the world is glad to pay them?”
The New Deal’s Banking Act of 1933 gave the Fed board in Washington more clearly defined monetary policy power by creating an FOMC to conduct the Fed’s money-creation activities. Putting to bed the days when those powers were often exercised at the discretion of the New York Fed, the act made political control over monetary policy more explicit by dictating that the FOMC would be made up of the seven politically appointed Fed governors and only five regional presidents, whose membership would rotate from year to year. It is doubtful that greater political control improved the Fed’s performance.
First with Hoover and then with the New Deal, the center of the nation’s economic decision making was shifting from New York to Washington. The Federal Reserve Board in Washington had won its power struggle with the New York Federal Reserve Bank. Board members even got titles, able to call themselves “governors” in the manner of the governor of the Bank of England, whereas the heads of the regional banks would remain bank “presidents,” implying that their responsibilities were mainly regional.
With this power shift going on, Hogate saw the need to beef up the Journal’s Washington bureau. The man he chose to do it was the 25-year-old Barney Kilgore, whom he appointed manager of the bureau in early 1935. The able William Henry Grimes had been promoted from bureau chief to managing editor of the Journal in September 1934 and had moved to New York.
Hogate was responding to the massive change the New Deal had wrought on the origins of news as it spread its influence over economic transactions far and wide. Washington was now in charge of the economy, or was at least boldly and recklessly attempting to be. For better and for worse, the Journal had to cover that capital city’s outpouring of ukases.
Barron had thought so little of the Journal’s Washington bureau that he seldom visited it, preferring to deal directly with presidents. His good friend Coolidge had once invited him to spend a night at the White House. When he did consult with the Journal’s Washington reporters, there was something of a communications problem. According to the Wendt history, Barron’s corpulence precluded his climbing the steep stairs to the Washington bureau. So he would get out of his chauffeured limousine below the bureau’s window and shout up to the longtime bureau manager, John Boyle, “Boyle, Boyle! Come down here!”
Boyle, who somehow despite Prohibition, managed to supply his large thirst for alcohol, also was averse to climbing, either up or down, those steep stairs. So he would stagger to the window and yell, “You come up.” The standoff was resolved by Barron shouting his instructions from his position on the sidewalk to Boyle in the window. He was willing to tolerate Boyle because he didn’t assign much importance to the bureau.
But that was certainly not true after FDR’s first 100 days of legislation to totally reorder the American economy, from acts (Glass-Steagal) that separated commercial and investment banking, to farm legislation that authorized the government to try to raise farm prices by paying farmers to burn part of the cotton crop and slaughter baby pigs. The Journal found it difficult to even record what was happening, let alone offer sufficient commentary on the wisdom of the acts. Hogate was a friend of FDR but not a confidante. One thing they had in common, though, was a mutual admiration for the young Barney Kilgore.
Early in his administration, FDR had publicly recommended to reporters that they read a Kilgore column to get a better understanding of the monetary and budgetary issues involved in paying World War I veterans a cash bonus. He said, “I don’t agree with the story all the way through but it’s a good story. It is an analytical story on an exceedingly difficult subject, the question of issuing currency to meet the government’s obligations. I think that Kilgore could have gone just a bit further than he did.”
FDR, like Hoover, was a believer in a balanced budget, and though some of his programs were radical, they weren’t extravagant. For example, his farm act proposed to pay for farm subsidies with a tax on food processors, a provision among others that prompted the Supreme Court in January 1936 to scuttle it and necessitate a rewrite. The court ruled that the AAA included unconstitutional infringements by the federal government on powers reserved for the states.
As to the nettlesome bonus issue, a 1924 act had granted veterans bonus certificates, but they were not redeemable until 1945. A large “bonus army” consisting in large part of unemployed veterans descended on Washington in the summer of election year 1932 demanding immediate cash payments. Hoover paid a high political price when he refused on budgetary grounds and ultimately ordered the army to disperse the protesters.
Roosevelt also refused to pay but partly defused a similar protest in 1933 by offering the veterans jobs in the newly created Civilian Conservation Corps, which employed young men primarily to maintain national parks and forests. Congress finally passed a bill in 1936 to grant the bonuses nine years early and overrode FDR’s veto. So naturally the president was grateful for Barney’s dispassionate analysis in 1933.
A Journal editorial deplored the 1936 Bonus Act, arguing that it and farm subsidies would further expand the federal budget deficit in fiscal 1937. It said this had raised the question, in acute form, “whether there is to be any control over spending and borrowing?”
The Roosevelt administration had been running large deficits throughout the depressed 1930s, with the gap between revenues and outlays rising to a high of 5.4% of Gross Domestic Product (GDP) in fiscal 1936, which happened to be an election year. One might argue, as did Keynes, that deficit spending had a bearing on the limited economic recovery from 1933 through 1936. But that theory would be subject to some doubt when, in 1937, the U.S. stock market and economy suffered another crash, ushering in what has been called the second Depression.
In 1934, Kilgore was becoming increasingly skeptical of the New Deal’s programs and voiced his doubts on the Journal’s front page. He wrote that, since the New Dealers came to power in March 1933, they had had “a definite political philosophy . . . They have had, too, a vague social philosophy . . . But they have lacked and continued to lack any economic philosophy whatever.”
Of the NRA, he wrote that after six months of reporting on its efforts, he had concluded that “because of its haste in pursuing the objective of a code for everyone and everyone under a code, and to the degree with which it succeeded in attaining that objective, it now finds itself with an enforcement problem on its hands that staggers the imagination.”
Some New Dealers may have breathed a sigh of relief after the Supreme Court put the NRA out of its misery in 1935. Democrats in Congress were sensing that the public was becoming a bit weary of great social and political experiments. To be sure, FDR sought to retaliate against the court with his euphemistically titled Judicial Procedures Reform Bill of 1937, which would have given him the power to expand the 9-member court to as many as 15 members with his own appointees, a move that quickly became identified as an effort to “pack” the court.
One would have expected the Journal to rain hellfire on this proposal, but instead it came up with a short and rather badly written editorial equating the president’s scheme to an effort to install umpires who would favor the home team. Maybe the mildness of the Journal’s response reflected some knowledge that the effort had little chance of becoming law, Roosevelt’s landslide reelection in the preceding year notwithstanding. Indeed, the bill died in the Judiciary Committee of the Senate when even the Democratic majority had little stomach for an all-out assault on the third branch of government, separate and equal to the presidency and Congress.
Barney Kilgore’s tenure as Washington bureau chief brought more of his thoughtful analysis. With regard to the New Deal’s efforts to jack up farm prices by destruction of crops and farm animals, Barney attacked the New Deal’s price-fixing efforts, writing that such efforts “invariably fix prices at uneconomic levels.”
He also applied his logical mind to Keynesian theory: “No government ever really creates purchasing power. It merely has the power to redistribute it. Hence, despite all claims that the New Deal has no intention of robbing Peter to pay Paul, the fact is slowly emerging that it must either tax Peter to pay Paul (which amounts to about the same thing) or it must tax Paul to pay Paul (which is even more patently a ring-around-the-rosey game).”
On one of Kilgore’s periodic trips to sample grassroots opinion about the New Deal in September 1934, he quoted a “shrewd observer” in Cleveland as saying, “If the administration really wants to plan a recovery all it has to do is quit planning.” But nonetheless, he reported that FDR still enjoyed widespread popularity, as would be evident in his 1936 victory.
As 1936 passed into history and the 1930s wore on and Kilgore made vigorous use of his post as Washington bureau manager, things began to turn sour for FDR. His effort to pack the court fell flat. The crash of 1937 dashed any claims he might have of economic policy success. And in the 1938 midterm elections, the Republicans made a strong comeback in Congress. On top of all this, the global outlook was beginning to look increasingly dangerous. The Spanish Civil War broke out in 1936 and soon became a proxy contest between Hitler on the side of the rebellious Francisco Franco and Stalin on the side of the Loyalists, thus providing a foretaste of the massive struggle between the two that would come later. In 1937, Japan invaded Manchuria, starting a war with China. And in 1938, Hitler annexed Austria and, after getting a pass from Britain’s Neville Chamberlain, also took over a German-speaking part of Czechoslovakia called the Sudetenland.
Americans were averse to any involvement, and Congress passed a series of Neutrality Acts beginning in 1935 mainly forbidding arms shipments to warring powers. The Journal was well disposed toward these laws, but they were gradually being eroded as Roosevelt sought ways to aid China, a victim of Japanese aggression, and Britain and France, who were threatened by Germany. In October 1937, Roosevelt proposed to “quarantine” countries that violated treaties, which would have the effect of allowing the United States to embargo aggressor nations, an act of war.
The Journal opposed that idea in an editorial titled “We Could Muddle Into War.” While it recognized that Americans opposed aggression, it argued that the president’s proposal was “strongly suggestive of forcible measures against nations that wage aggressive warfare, declared or undeclared. Does anyone believe that public opinion in this country can be marshaled to support the United States in measures of international force?”
During the 1940 presidential election, Kilgore was impressed by the enthusiastic public reception a fellow Hoosier, Wendell Willkie, was getting as he campaigned for the presidency on the Republican ticket against Roosevelt. Kilgore thought the election would be close. But he hadn’t accounted for the effective political machine the Democrats had created. FDR won 55% of the popular vote. Kilgore wrote a column apologizing to readers for being carried away by the noise and excitement of the Willkie campaign.
But Kilgore would soon cease to be the most prominent Journal byline writer. In early 1941, he and Grimes had a long discussion in New York during which Grimes offered to step aside and let Barney become managing editor. Grimes would become the new voice of the Journal, although an anonymous one most of the time, by taking over editorial opinion responsibilities with the title of editor. Hogate approved of the change.
It was a felicitous change. Barney could apply his creative talents to the continuing efforts to make the Journal more interesting and readable. And Grimes, while retaining some responsibility for the overall quality of the paper, would apply his sharp intellect to the task of making Journal editorials more assertive and exacting. Working as a team, they both succeeded in that endeavor, judging from the increased prominence of the Journal as a source of news and opinion.
Grimes’ editorials would continue the Journal’s long-standing opposition to involvement in foreign wars in 1941 even as Europe was being set ablaze by Hitler’s tanks and bombers. At one point, a rather defensive editorial expressed resentment over having its position described as “isolationist,” saying that “it does not help clear thinking to invent words with a sinister meaning and then proceed to hurl them at people.” But the Journal had a long antiwar tradition and, right or wrong, was adhering to that tradition.
