Plenary Session Transcripts

Governors Attending:

Guests:

Discussion Subjects:

Taxation in farm states; extension of state operation of highways and roads; motor safety; state banking systems and their retention or abolishment; duty of the state in relieving unemployment; control of municipal expenditures; address by President Herbert Hoover; and reduction of public expenditures in connection with the reduction of taxes

Points of Interest:

President Hoover spoke to the Governors about local expenditures and taxes and their role in economic problems.

With respect to banking, Governor Dan Turner of Iowa argued again a revision of Federal Reserve rules that: (1) mad agricultural notes with land value as the basis of security ineligible to rediscount, and (2) put agricultural paper on a 90-day basis that should have been eligible for extension of credit for up to six months. These rules forced farmers to pay in farm products four to eight times the amount they had borrowed. The result was that banks were forced to liquidate instead of being encouraged to borrow from the Federal Reserve System, which would have kept currency in circulation and stabilized commodity prices.

Governor Floyd Olson of Minnesota addressed the issue of whether the state banking system should be abolished in favor of federal control. He argued that confining banking to federally-supervised banks would inevitably result in centralization of financial power and the control of credit in chain banking institutions. He recommended instead that a uniform banking code be developed to help solve the problems experienced by state banks.

Governor Max Gardner of North Carolina spoke of his state's assumption of all county and township road maintenance, which was being conducted by county prison chain gangs. Initially, a drawback to this system was its burden on property taxes, but legislation had been enacted in 1931 to raise gasoline taxes so as to shift the burden of paying for maintenance to the road users themselves.

Regarding welfare, Governor Louis Emmerson of Illinois said that local relief had increased 216 percent from 1929 to 1931. New York and Illinois were the first states to cooperate in the federal relief effort. But he cautioned that increasing public works projects to help relieve unemployment might backfire if higher taxes to meet the costs of those projects reduced consumption.

Memorable Quotes:

Governor Louis Emmerson of Illinois said: "There are many who do not realize that depressions are not new to the United States...panics and booms have swept over this land at various times, and...after each depression, the country has climbed to new standards of prosperity until it has become the dominant power in the world."

Governor Wilbur Cross of Connecticut said the following about lavish spending and its relationship to the Depression: "We were told that the old-fashioned virtues of thrift and saving were frauds, being in truth the archenemies of prosperity, whereas spending was extolled as the one sure means to economic well-being and recommended as the patriotic duty of all. Without doubt the widespread acceptance of this comfortable doctrine prepared the way for the lively speculative dance which preceded the crisis of 1929, and it gave authority to the theory that the road to prosperity was to be paved with spending by government when private spending faltered. It was all like the Duke of Brunswick's ball on the night before the battle of Waterloo."

Governor Dan Turner of Iowa said: "I am opposed to a general sales tax...It is not based on the sound principle that taxes should be paid in proportion to income and earnings...The sales tax is particularly unfair to the farmer. The farmer is one citizen who has nothing to say about the price he receives for his produce nor any influence in determining the price of the merchandise that he is compelled to buy."

Governor John Winant of New Hampshire said: "It is not necessary to reject the assumption that self-interest is one of the primary motivating forces in our social order to recognize that a selfish individualism has been allowed to override the collective interest of the people and that it is still a destructive force in the effort to rehabilitate the normal life of the Nation..."

Presidential Addresses: