Emergency Relief and Construction Act of 1932

views updated

EMERGENCY RELIEF AND CONSTRUCTION ACT OF 1932

The Emergency Relief and Construction Act (ERCA) of 1932, signed by President Hoover on July 27, 1932, appropriated funds for federal relief loans to the states and new public works construction. While the public works provisions of the law proved to be a disappointment, the $300 million relief appropriation financed the first large-scale federal public welfare program in American history.

Two forces combined to produce the congressional majorities that approved the law: mounting political pressure for new public works construction and the collapse of state and local relief programs then assisting the unemployed. Numerous congressional proposals for expanded public works spending had surfaced in 1930 and 1931. Even Hoover's own relief officials had initially supported a large public employment program. At the same time, supporters of direct federal relief to the unemployed through local welfare agencies garnered considerable support for a measure that would have provided $375 million in relief grants to the states (the so-called LaFollette-Costigan Bill introduced in Congress in December 1931). Hoover and moderates in Congress had opposed both these measures, instead advocating voluntarist alternatives such as the private fund drive organized by the President's Organization for Unemployment Relief.

By the spring of 1932, however, it was clear that the large emergency relief organizations in cities such as Chicago and Philadelphia would collapse without federal aid. On May 12, Hoover announced that he would enlarge the coffers of the newly created Reconstruction Finance Corporation (RFC) to provide funds for public works and relief loans to the states. There followed a politically charged debate over the scope of the public works program and the policies of the RFC, but there now existed a consensus about the need for direct relief aid. In late July, with relief having been discontinued in Philadelphia and on the verge of collapse in Chicago, Hoover signed the ERCA.

The ERCA allocated $322 million for federal public works and authorized the RFC to provide funds for "self-liquidating" state, local, and private public works. The law also allocated $300 million in direct relief loans to local welfare agencies through states. These loans were to be repaid through deductions from future federal highway funds. The implementation of the public works provisions of the law proved to be a disappointment to the public works lobby. States and municipalities hesitated to apply for the funds, which would place them further in debt, and the administration was also slow to allocate the $322 million for federal public works.

The impact of the provisions for direct relief, however, was significant. Federal aid financed the bulk of relief during the winter of 1932–1933. RFC aid not only bailed out large urban relief organizations on the verge of collapse, it also financed a significant expansion of relief in smaller industrial communities and rural regions that had supplied relatively little relief prior to 1932. The RFC was forced to play a more active role in policymaking and administration than had been intended when the law was passed. Federal funds helped finance new state-level relief organizations and federal officials played key roles in lobbying for new state welfare appropriations.

By the time Franklin D. Roosevelt was inaugurated, the federal government was financing over 60 percent of all relief nationally. In the end, the $300 million in relief loans to the states was never repaid, and the federal government had permanently entered the field of public assistance.