The Year Of The Old Folks’ Revolt

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The transaction tax, they decided, would almost certainly fail to produce the requisite income, for while the Townsendites based their estimates of income on the gross national product of the last of the pre-Depression years, 1929, their taxing program would operate in a far less prosperous America. Moreover, the argument concerning the velocity of money, the economists said, was mythical—a dollar would not “turn over” ten times within a month, for even in the boom years of the igao’s the average turnover amounted to less than three times monthly. And although Townsend looked for economic wonders through money distribution, the promised goods and services simply could not be produced because of the limitations of existing plant capacity. But the transaction tax had still another defect. It was essentially a sales tax, and as such, it was ungraduated. The burden would have fallen on those least able to afford it. Paul Douglas, professor of economics at the University of Chicago (now U.S. Senator from Illinois), estimated that if this tax had become law, the real income of most workers would have been reduced by about one-half.

Economists of the day asked another question: How would the government make sure the elderly spent their monthly payments promptly? Frugal oldsters, unaccustomed to such a sizable income, might well have attempted to save part of their monthly checks in case the golden faucet should ever be turned off.

When all of its deficiencies had been uncovered, the plan became the butt of economists’ jokes. Dr. Louis Haney of New York University wryly suggested that Townsend had not gone far enough, that $200 should be given to everyone every week. If the government can afford $24 billion, Haney said, it can afford $2,400 billion. In Battle Creek, Michigan, a “rival” to the O.A.R.P. was announced. The “Retire at Birth Plan” proposed that every newborn child receive $20,000, payable with interest at age twenty.

Townsend’s supporters tried to counterattack. “The politicians should stop listening to these academics,” one urged, “for they are but husk-dry pedants, who rely upon books, formal rules, and abstract theories.” And a leading publicist for the plan even asserted that “the physician, understanding physiology, may be especially qualified to feel, by the process of intuitive analogy, the most fundamental economic principles.”

Convinced of the absurdity of the Townsend Plan, F. D. R. moved to meet the political threat it represented by encouraging, in early 1936, a new series of attacks on it by Democratic congressmen.

Senator Kenneth McKellar of Tennessee opened the assault by stating that the plan was nothing more than a “fantastic … devastating … wild-eyed scheme for looting the treasury of the United States.” Representative Phillip Ferguson of Oklahoma termed it “a racket,” and Representative Maury Maverick of Texas argued that it was “a way of avoiding discussion of the real issues.”

Dr. Townsend, now certain that “the politicians” were his enemies, was ready to fight back. He accused the New Deal of being “a misdeal … where political appointees experiment in human misery.” He termed certain actions of the administration “nothing more than Mussolini Fascism.” And he even hinted at the formation of a new political party.

Townsend had declared war on Congress and on the White House; retaliation was inevitable. The weapon was a new congressional subcommittee, headed by Missouri Democrat C. Jasper Bell.

The Bell committee’s formally stated purpose was to investigate old-age pension plans in order to propose legislation to prevent frauds, but its unstated purpose was to undermine the Townsend organization’s effectiveness as a political force in the 1936 elections. The thrust of the attack came in the committee’s careful scrutiny of the financial aspects of the Townsend operation. It was revealed that Townsend and Clements took profits far greater than the small salaries they listed on the O.A.R.P. books. Clements’ income in 1935 was shown to be $5,200, plus $7,385 from Prosperity Publishing (the Townsend Weekly ), for a total of $12,585. O.A.R.P. also paid for his Washington, D.C., apartment, and for his transportation, tips, and meals. Clements testified that Townsend made $68,000 in two years with O.A.R.P.; while Townsend did not deny this, he claimed he had “given many dollars to the O.A.R.P. to every one that I received from it.”

Midway in its weeks of hearings, the committee called Townsend himself to the witness stand. The Doctor, sensitive to the harsh questions, began to crack under the pressure. His economic naïveté was revealed time and time again. As E. B. White put it, “When forced to deal with the fundamental problems, he quietly came apart, like an inexpensive toy.”

For Townsend, the Bell committee hearings represented a disaster. Not only was he publicly humiliated, but key members of his movement began to desert. In April the Doctor had a sudden and bitter quarrel with Representative McGroarty, and the Congressman dissociated himself from the O.A.R.P. organization. But more serious was the defection of Robert Earl Clements. Relations between Clements and Townsend had cooled perceptibly in the weeks before the investigation. The younger man objected particularly to Townsend’s occasional threats to start a third political party.

Clements resigned from the movement the day after he was called to appear at the Bell hearings. And once he faced the congressional investigators, he proved willing to give damaging anti-Townsend testimony.