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The Economy Act of 1933, officially titled the Act of March 20, 1933 (ch. 3, ; ), is an
Act of Congress An Act of Congress is a statute enacted by the United States Congress. Acts may apply only to individual entities (called Public and private bills, private laws), or to the general public (Public and private bills, public laws). For a Bill (law) ...
that cut the salaries of federal workers and reduced benefit payments to
veteran A veteran () is a person who has significant experience (and is usually adept and esteemed) and expertise in a particular occupation or field. A military veteran is a person who is no longer serving in a military. A military veteran that has ...
s, moves intended to reduce the
federal deficit The national debt of the United States is the total national debt owed by the federal government of the United States to Treasury security holders. The national debt at any point in time is the face value of the then-outstanding Treasury secu ...
in the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
.Olson, James Stuart. ''Historical Dictionary of the Great Depression, 1929-1940.'' Santa Barbara, calif.: Greenwood Publishing Group, 2001. The Economy Act of 1933 is sometimes confused with the ''
Economy Act of 1932 The Economy Act of 1932 is an Act of Congress that established the purchasing authority of the federal government. Title VI of this earlier act authorized heads of executive departments, establishments, bureaus, and offices to place orders with an ...
'', which was signed in the final days of the
Hoover administration Herbert Hoover's tenure as the 31st president of the United States began on his inauguration on March 4, 1929, and ended on March 4, 1933. Hoover, a Republican, took office after a landslide victory in the 1928 presidential election over Democr ...
in February 1933.Lee, Mordecai. ''Institutionalizing Congress and the Presidency: The U.S. Bureau of Efficiency, 1916-1933.'' College Station, Tex.: Texas A&M University Press, 2006. This Hoover-sponsored bill established the purchasing authority of the federal government. Title VI of authorized heads of executive departments, establishments, bureaus, and offices to place orders with any other such Federal agency unless the requisitioned goods or services could be acquired as conveniently or more cheaply from the private sector. Though amended several times, this provision—commonly referred to simply as the Economy Act—remains in force as of 2019 ().


Enactment

As
Governor of New York The governor of New York is the head of government of the U.S. state of New York. The governor is the head of the executive branch of New York's state government and the commander-in-chief of the state's military forces. The governor has ...
,
Franklin D. Roosevelt Franklin Delano Roosevelt (; ; January 30, 1882April 12, 1945), often referred to by his initials FDR, was an American politician and attorney who served as the 32nd president of the United States from 1933 until his death in 1945. As the ...
had campaigned for the
Presidency A presidency is an administration or the executive, the collective administrative and governmental entity that exists around an office of president of a state or nation. Although often the executive branch of government, and often personified by a ...
, in part, on a pledge to balance the federal budget.Schlesinger, Arthur M. ''The Age of Roosevelt: The Crisis of the Old Order, 1919-1933.'' Paperback ed. Boston: Houghton Mifflin Co., 1957. On March 10, 1933, six days after his inauguration, Roosevelt submitted legislation to Congress which would cut $500 million ($8.181 billion in 2009 dollars) from the $3.6 billion federal budget by eliminating government agencies, reducing the pay of civilian and military federal workers (including members of Congress), and slashing veterans' benefits by 50 percent.Kennedy, David M. ''Freedom From Fear: The American People in Depression and War, 1929-1945.'' New York: Oxford University Press, 2007. Veterans benefits constituted a quarter of the federal budget at the time. The Act was written primarily by
Lewis Douglas Lewis Williams Douglas (July 2, 1894March 7, 1974) was an American politician, diplomat, businessman and academic. Early life and education Douglas was the son of James Douglas, Jr., a mining executive employed by the Phelps Dodge Company, and hi ...
, Roosevelt's Director of the Budget, and
Grenville Clark Grenville Clark (November 5, 1882 – January 13, 1967) was a 20th-century American Wall Street lawyer, co-founder of Root Clark & Bird (later Dewey Ballantine, then Dewey & LeBoeuf), member of the Harvard Corporation, co-author of the book '' Wo ...
, a private attorney.Northrup, Cynthia Clark. ''The American Economy: A Historical Encyclopedia.'' Santa Barbara, Calif.: ABC-CLIO, 2003. The Act faced stiff opposition in the Congress. On June 17, 1932, the
Bonus Army The Bonus Army was a group of 43,000 demonstrators – 17,000 veterans of U.S. involvement in World War I, their families, and affiliated groups – who gathered in Washington, D.C., in mid-1932 to demand early cash redemption of their servic ...
(about 17,000
World War I World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fightin ...
veterans and 26,000 of their family members and affiliated groups) had established a
Hooverville A "Hooverville" was a shanty town built during the Great Depression by the homeless in the United States. They were named after Herbert Hoover, who was President of the United States during the onset of the Depression and was widely blamed for it. ...
shanty town on the Anacostia Flats area of
Washington, D.C. ) , image_skyline = , image_caption = Clockwise from top left: the Washington Monument and Lincoln Memorial on the National Mall, United States Capitol, Logan Circle, Jefferson Memorial, White House, Adams Morgan, ...
Dickson, Paul and Allen, Thomas B. ''The Bonus Army: An American Epic.'' New York: Walker and Company, 2004. On July 28, the U.S. 12th Infantry Regiment commanded by General
Douglas MacArthur Douglas MacArthur (26 January 18805 April 1964) was an American military leader who served as General of the Army for the United States, as well as a field marshal to the Philippine Army. He had served with distinction in World War I, was C ...
and the 3rd Cavalry Regiment (supported by six
tank A tank is an armoured fighting vehicle intended as a primary offensive weapon in front-line ground combat. Tank designs are a balance of heavy firepower, strong armour, and good battlefield mobility provided by tracks and a powerful engin ...
s) commanded by Major
George S. Patton George Smith Patton Jr. (November 11, 1885 – December 21, 1945) was a general in the United States Army who commanded the Seventh United States Army in the Mediterranean Theater of World War II, and the Third United States Army in France ...
attacked and set afire the Bonus Army's encampment, injuring hundreds and killing several veterans and civilians. Congress was forced to flee the city for several days after outraged veterans ringed the
United States Capitol The United States Capitol, often called The Capitol or the Capitol Building, is the seat of the legislative branch of the United States federal government, which is formally known as the United States Congress. It is located on Capitol Hill ...
. The political backlash caused by the attack on the Bonus Army led to the defeat of several members of Congress that fall. Many in Congress, remembering the incident, did not want to support the Economy Act. The
House Democratic Caucus The House Democratic Caucus is a congressional caucus composed of all Democratic Representatives in the United States House of Representatives and is responsible for nominating and electing the Democratic Party leadership in the chamber. In its ...
even refused to support the bill. Heavily opposed by liberal Democrats (92 of whom voted against it), the bill passed the
House of Representatives House of Representatives is the name of legislative bodies in many countries and sub-national entitles. In many countries, the House of Representatives is the lower house of a bicameral legislature, with the corresponding upper house often c ...
only with heavy support of Republicans and conservative Democrats. The bill easily passed the
Senate A senate is a deliberative assembly, often the upper house or chamber of a bicameral legislature. The name comes from the ancient Roman Senate (Latin: ''Senatus''), so-called as an assembly of the senior (Latin: ''senex'' meaning "the el ...
only because the
Senate Democratic Caucus The Democratic Caucus of the United States Senate, sometimes referred to as the Democratic Conference, is the formal organization of all senators who are part of the Democratic Party in the United States Senate. For the makeup of the 117th Cong ...
had scheduled a vote on the popular Cullen-Harrison Act (to amend the
Volstead Act The National Prohibition Act, known informally as the Volstead Act, was an act of the 66th United States Congress, designed to carry out the intent of the 18th Amendment (ratified January 1919), which established the prohibition of alcoholic d ...
to allow the manufacture and sale of beer and light wines) immediately after the vote on the Economy Act—allowing Senators to cast vote for one very unpopular bill and one very popular bill in quick succession. The President signed the Economy Act into law on March 20, 1933.


Provisions and impact

The Economy Act cut federal spending by $243 million, not the $500 million requested by the President. This aspect of the Act proved
deflation In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation ...
ary as the government purchased fewer goods and services, and some argue that this led to a worsening of the Great Depression.Schlesinger, Jr., Arthur M. ''The Age of Roosevelt, Vol. 2: The Coming of the New Deal''. Paperback ed. New York: Mariner Books, 2003. (Originally published 1958.) The act also halved Supreme Court pensions and two of the four anti-New Deal Supreme Court justices,
Willis Van Devanter Willis Van Devanter (April 17, 1859 – February 8, 1941) was an American lawyer who served as an Associate Justice of the Supreme Court of the United States from 1911 to 1937. He was a staunch conservative and was regarded as a part of the Four ...
and
George Sutherland George Alexander Sutherland (March 25, 1862July 18, 1942) was an English-born American jurist and politician. He served as an associate justice of the U.S. Supreme Court between 1922 and 1938. As a member of the Republican Party, he also repre ...
, refused to retire, remained on the bench, and struck down some of Roosevelt's recovery acts;McKenna, Marian Cecilia. ''Franklin Roosevelt and the Great Constitutional War: The Court-Packing Crisis of 1937''. New York: Fordham University, 2002, p. 35–36, 335–336. Supreme Court pensions were originally halved in 1932 but had been temporarily restored by Congress to full pay in February 1933.''Oliver Wendell Holmes: Law and the Inner Self'', G. Edward White pg. 469 These two justices would likely have retired from the Supreme Court early into Roosevelt's first term if their pensions had not been halved. The Economy Act also gave the President limited authority to reorganize executive branch agencies to achieve efficiency, but this power was not utilized much before the Act expired in 1935. By March 3, 1935, Roosevelt had issued 27 reorganization orders, most of them minor in nature. Roosevelt did not engage in extensive reorganization efforts until the passage of the
Reorganization Act of 1939 The Reorganization Act of 1939, , codified at , is an American Act of Congress which gave the President of the United States the authority to hire additional confidential staff and reorganize the executive branch (within certain limits) for two y ...
gave him that authority. Its most important provisions, however, repealed all federal laws regarding veterans' benefits.Keene, Jennifer D. ''Doughboys, the Great War, and the Remaking of America''. Baltimore: Johns Hopkins University Press, 2003. Section 17 of the Act declared: "All public laws granting medical or hospital treatment, domiciliary care, compensation, and other allowances, pension, disability allowance, or retirement pay to veterans and the dependents of veterans of ... the World War ... are hereby repealed, and all laws granting or pertaining to yearly renewable term insurance are hereby repealed." However, the Act allowed the president to re-establish these benefits for two years via
executive order In the United States, an executive order is a directive by the president of the United States that manages operations of the federal government. The legal or constitutional basis for executive orders has multiple sources. Article Two of th ...
at levels the President deemed appropriate. Benefits for non-disabled veterans fell more than 40%, creating deep resentment among former soldiers and officers and leading to the establishment of the
Veterans of Foreign Wars The Veterans of Foreign Wars (VFW), formally the Veterans of Foreign Wars of the United States, is an organization of US war veterans, who, as military service members fought in wars, campaigns, and expeditions on foreign land, waters, or a ...
as a major force in American politics. The Economy Act caused a second Bonus Army to form, but Roosevelt handled this protest much more carefully than Hoover had: His administration set up an encampment for the protesters (albeit too far from the Capitol to make their protest effective), prohibited loitering in the District of Columbia (forcing the marchers to stay outside the city), sent
Eleanor Roosevelt Anna Eleanor Roosevelt () (October 11, 1884November 7, 1962) was an American political figure, diplomat, and activist. She was the first lady of the United States from 1933 to 1945, during her husband President Franklin D. Roosevelt's four ...
to deliver food and medicine to the marchers and hear their grievances, and encouraged the ex-servicemen to seek work with the
Civilian Conservation Corps The Civilian Conservation Corps (CCC) was a voluntary government work relief program that ran from 1933 to 1942 in the United States for unemployed, unmarried men ages 18–25 and eventually expanded to ages 17–28. The CCC was a major part of ...
(which many did). Veterans nonetheless sued to have their benefits restored. In ''Lynch v. United States,'' 292 U.S. 571 (1934) and ''United States v. Jackson,'' 302 U.S. 628 (1938), the
Supreme Court of the United States The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
ruled that Congress had violated federal law in eliminating certain insurance guarantees formerly offered to veterans by the
War Risk Insurance Act The War Risk Insurance Act was a piece of legislation passed by the United States Congress in 1914 to ensure the availability of war risk insurance for shipping vessels and individuals during World War I. It established a Bureau of War Risk Insur ...
(as amended December 24, 1919; Chapter 16, Section 12, 41 Stat. 371), and those benefits were restored.''Lynch v. United States'', 292 U.S. 571 (1934); ''United States v. Jackson'', 302 U.S. 628 (1938); McKenna, Marian Cecilia. ''Franklin Roosevelt and the Great Constitutional War: The Court-Packing Crisis of 1937''. New York: Fordham University Press, 2002. The Economy Act had little effect on either the federal deficit or the economy. Spending in other areas rose so substantially that it dwarfed the cuts imposed by the Economy Act. The benefit cuts also did not last. In June 1933, Roosevelt restored $50 million in pension payments, and Congress added another $46 million."Economy's End." ''Time.'' August 26, 1935.
/ref> In January 1934, Roosevelt added another $21 million for veterans whose disabilities were service-connected but not service-caused. In March 1934, Congress overrode Roosevelt's
veto A veto is a legal power to unilaterally stop an official action. In the most typical case, a president or monarch vetoes a bill to stop it from becoming law. In many countries, veto powers are established in the country's constitution. Veto ...
and added another $90 million in veterans benefits and $120 million to federal workers' salaries. In October 1934, Roosevelt restored $60 million in federal salary cuts, and restored cuts to veterans who had served in the
Spanish–American War , partof = the Philippine Revolution, the decolonization of the Americas, and the Cuban War of Independence , image = Collage infobox for Spanish-American War.jpg , image_size = 300px , caption = (clock ...
,
Philippine–American War The Philippine–American War or Filipino–American War ( es, Guerra filipina-estadounidense, tl, Digmaang Pilipino–Amerikano), previously referred to as the Philippine Insurrection or the Tagalog Insurgency by the United States, was an arm ...
, and
Boxer Rebellion The Boxer Rebellion, also known as the Boxer Uprising, the Boxer Insurrection, or the Yihetuan Movement, was an anti-foreign, anti-colonial, and anti-Christian uprising in China between 1899 and 1901, towards the end of the Qing dynasty, by ...
.


Notes

{{New Deal 73rd United States Congress 1933 in law New Deal legislation United States federal defense and national security legislation 1933 in economics