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Bonus Army Spectacle, U.S Capital, 1932: Root Causes
*The article below (SEMP Biot Report #634) is the first part of a two-part series. The second part is SEMP Biot Report #635: “Bonus Army Spectacle, U.S Capital, 1932: What Really Happened,” available at http://www.semp.us/publications/biot_reader.php?BiotID=635. *************************************************************************** The 1932 Bonus Army spectacle in Washington, D.C. was an undesirable outcome of at least five root causes described below. Two U.S. veterans died in the associated Bonus Army riot, and the U.S. Army, led by Chief of Staff Douglas MacArthur and his subordinates, Major Generals David Eisenhower and George Patton, routed the Bonus Army out of town, while U.S. Army troops torched their sprawling lice-infested shantytowns. The Bonus Army received ample and patient warning that this exact set of events would occur if it did not leave the capital where its members had encamped, all 15,000 or so of them, for the months of May, June and July, 1932.
Four major print resources deal with this extraordinary occurrence in American history:
Thomas B. Allen also contributed to a PBS three-part series, “March of the Bonus Army,” narrated by actor Gary Sinise and directed and also written by Robert Uth (2006). The resources listed above spend minimal time on the root causes of the riot, which is the goal here.
When the Democratic Party nominated New Jersey Governor Woodrow Wilson for President of the United States in Baltimore, Maryland, in 1912, most Democrats were hopeful that at last the Republicans’ seemingly indefinite lease of power would end. The last Democrat to hold the office of President was Grover Cleveland (1885-1889 and 1893-1897), whose father, like Wilson’s, was a Presbyterian minister. Wilson Cabinet member and staunch Democrat David F. Huston longed for the good old days of Cleveland’s reign, which he described in 1926: He [Cleveland] had…a message to young men, and it was in substance this: Democracy is a very difficult form of government. To be successful it must be based on an intelligent and thoughtful citizenship. But it is difficult for the masses to get all the necessary facts underlying public issues, and to digest and interpret them. It is of the first importance that they have frank, intelligent, patriotic, and, above, all, courageous [Democratic] leaders to aid them, men who have an eye single to the public interest and who would scorn to mislead the people or to use government for private or personal ends. (1) In 1912, former two-term President Theodore Roosevelt bolted the Republican Party when it renominated his man, William Howard Taft, for a second term. Roosevelt then organized the Progressive (Bull Moose) party, which nominated Roosevelt for a third term in office. Roosevelt’s split of the Republican Party gave Democratic Party grandees confidence that a politically unknown university president who had spent barely two years in office as New Jersey governor—put there by the New Jersey Democratic machine—could win.
Indeed, Wilson did win with only 42% of the popular vote (as opposed to 48% combined vote of Taft and Roosevelt), but with a huge majority in the Electoral College. Wilson was the second Democrat elected President between 1860 and 1932 (Grover Cleveland was the other). This was a stunning achievement, and Wilson knew it. President Wilson was a devout Pacifist, like his Secretary of State, Democratic dove and three-time Democratic Party Presidential nominee (1896, 1900, and 1908) Williams Jennings Bryan (also a Presbyterian). Between March 5, 1913 and his resignation on June 9, 1915, Bryan negotiated forty-eight bilateral peace treaties with foreign countries to prevent war through a conciliation process he developed for the two parties in dispute. Signatories submitted few disputes to the process, however, and Germany never signed one of Bryan’s treaties. War formally commenced in Europe in August 1914 when Great Britain called Germany on her pernicious overrunning of neutral Belgium to reach France. President Wilson was not impressed, announcing to the 64th U.S. Congress in December 1914 that national preparedness was not a pressing priority, as far as he was concerned. Instead, he supported developing and strengthening the National Guard in each of the states, but not enlarging the regular army. The latter was strenuously advocated by his Secretary of War Lindley M. Garrison (he resigned), vociferous Theodore Roosevelt, tenacious Major General Leonard Wood, Massachusetts Senator Henry Cabot Lodge and many other people. Rather, Wilson declared, peacefully, the following: More than this carries with it a reversal of the whole history and character of our polity. More than this, proposed at this time, permit to say, would mean merely that we had lost our self-possession, that we had been thrown off our balance by a war with which we have nothing to do, whose causes cannot touch us, whose very existence affords us opportunities of friendship and disinterested service which should make us ashamed of any thought of hostility or fearful preparations for trouble. But I turn from the subject. It is not new. There is no need to discuss it. We shall not alter our attitude toward it because some amongst us are nervous and excited. We shall easily and sensibly agree upon a policy of defense. The question has not changed its aspects because the times are not normal….Let there be no misconception. The country has been misinformed. We have not been negligent of national defense.” (2-4) Meanwhile, the War Department was busily trumpeting the need to enlarge the regular army, because of the threat of the Central Powers. When the war began in Europe, the regular army in the U.S. consisted of 4,701 officers and 87,781 men. An additional 8,323 officers and 119,087 men were National Guardsmen who were required to attend twenty-four drills a year and spend five days in the field. The regular army reserve consisted of 26 men. (5) The U.S. Congress did pass legislation that permitted a small increase in size of the regular army. Fourteen months after President Wilson’s declaration that the European was none of America’s business, he reconsidered his pacifism, as noted in a speech he presented to the public (Manhattan Club of New York City) on January 27, 1916. The War Department, he told the rapt audience, had made plans for additional preparedness and he agreed with those plans. German submarines were becoming a real problem for neutral countries, like the United States. Indeed, the RMS Lusitania was torpedoed on May 7, 1915, killing nearly 1,200 men, women, and children, including 128 Americans. The sinking of the Lusitania, according to Arthur S. Link, had a “more jolting effect upon American opinion than any other single event of the World War.” The sinking convinced many Americans that Imperial Germany had “run amuck and was now an outlaw among civilized nations.” (6-7)
Secretary Garrison, following the guidance of the regular army staff, came forth in November 1915 with a plan to increase “the regular army from 5,023 officers and 102,985 men to 7,136 officers and 134,700 men, a total of 141,836; the creation of a continental army of 400,000 men, raised in three equal increments, who would serve for three years with the colors and then three years with the reserve; and a strengthening of the National Guard. The raising of the continental army would depend upon the patriotic feeling of the young men and upon their willingness to volunteer.” (8) Thus, the continental army would be a volunteer army. This approach was not to last (more below). President Wilson accepted the War Department’s program, which was a marked his change of mind. He made a trip through the United States, west as far as Kansas, to try to arouse Americans and persuade them to back his proposals in the mostly pacifist Congress. On January 27, 1916, Wilson referred to his change of mind in this way: Perhaps when you learned, as I dare say you did learn beforehand, that I was expecting to address you on the subject of preparedness, you recalled the address which I made to Congress something more than a year ago, in which I said that this question of military preparedness was not a pressing question. But more than a year has gone by since then, and would be ashamed if I had not learned something in fourteen months. [Emphasis added] The minute I stop changing my mind with the change of all the circumstances of the world, I will be a back number.” (9) Garrison had convinced Wilson that the “National Guard could not be a direct resource as a national reserve under national authority.” Wilson pushed hard for “a body of at least a half a million trained men who will be immediately available.” (9) The 64th Congress passed the National Defense Act of 1916, which provided for “a larger regular army (186,000 in placed of 142,000), to be increased in time of war, a federalized National Guard of 425,000, the members of which were to take an oath both to the United States and to the state, a reserve corps of men discharged from the army and an officers’ training corps at colleges and universities. (10-11) The National Guard was to be uniformed, equipped, and disciplined like the regulars, and its training period to be increased.” (9) On February 1, 1917, Germany announced her intention to recommence unrestricted submarine warfare against all vessels in her blockaded areas around the British Isles, after discontinuing the practice in 1916 to quiet fierce objections issued by the Wilson administration. Houston said, “I could not believe she [Germany] would be so stupid…It meant war and meant the beginning of the end for Germany.” (12) President Wilson severed diplomatic relations with Germany, as he promised he would. He finally understood that Germany was now declaring war on the United States. Indeed, Germany had been making war on the United States for some time, sinking her ships. America had been at war with Germany, but had not realized it.
On Wednesday, March 21, 1917, President Wilson called Congress to meet on Monday evening at 8:30 p.m., April 2, 1917. In his now famous speech asking Congress to declare war on Germany, he said, “The present German submarine warfare against commerce is a warfare against mankind. It is a war against all nations…The challenge is to all mankind.” (13) He approved the “principle of universal liability to service, and also the authorization of subsequent additional increments of equal force so soon as they may be needed and can be handled in training.” (13) At 3:12 a.m., on April 6, 1917, the 65th Congress declared the existence of a state of war with Germany. (14) Of all the questions facing Congress for a quick decision, the foremost involved the raising of an army. (15) As early as March 24, 1917, “it was stated that the President’s thought seemed to be [that] if volunteering failed, we should resort to conscription.” (16) Good war jobs supplying the Allies were plentiful and wages were high and rising, thus undermining the volunteer army principle. On April 5, 1917, even before Congress had officially declared war on Germany, Wilson forwarded to it the War Department’s plan to draft two million men with no provision for volunteers. Many members of Congress grasped their chests. “Recollection of the Civil War draft riots made a great many congressmen reluctant to hazard their political prospects by rashly condoning the coercion of free Americans,” wrote Livermore in 1966. (15) Congress got over its jitters and passed on May 17, 1917, the historic Selective Draft Act of 1917 (Public Law 65-12, 40 Stat. 76). On May 28, 1917, President Wilson issued his proclamation establishing conscription. (17) It said, in part, that all male persons between the ages of 21 and 30, both inclusive, were subject to registration. It also made clear that each man so registered will be assigned “the part for which he is best fitted. To this end, Congress…provided that the nation shall be organized for war by selection; that each man shall be classified for service in the place to which it shall best serve the general good to call him.” (17) The constitutionality of the draft was tested. The Pennsylvania Supreme Court found it unconstitutional; but the United States Supreme Court reversed the decision. (18) On June 5, 1917, all eligible men were required to register for the draft at the place where they normally voted. “On the night of June 5 the results were known through the same channels as are those of a national election,” wrote Palmer. On file at the nation’s command were the names and records of 9,660,000 men of service age. The population of the U.S at the time was about 103 million people. (19)
On July 20, 1917, Secretary of War Newton Baker (successor to Lindley Garrison, who resigned his post when President Wilson dragged his feet on enlarging the regular army) and other federal authorities drew numbers from a glass jar in a “great national lottery,” which decided which men went first for their draft physical examinations. (19) By September 1917, 516,212 men were enlisted into military service. By November 1918, 2,294,084 more men were enlisted into military service. (20) Among these approximately 3,000,000 total enlisted soldiers and sailors were the 15,000 to 20,000 members of the Bonus Army that marched on Washington, D.C., in 1932. A month before the declaration of war by Congress, Samuel Gompers, founder and president of the American Federation of Labor, stepped up to speak for labor as a whole. He early sensed that the polyglot nature of the United States was a potential hazard in a war involving such large world areas. At the time of the Great War, there were 854 various unions with over 4,000,000 members. All the Federal unions, except the four great railroad brotherhoods, were allied in the American Federation of Labor. (21)
Gompers called an emergency conference of national labor executives who adopted a declaration of support for the United States. President Wilson and his administration breathed a sigh of relief. Gompers then began mobilizing American labor to support the United States. The many committees he organized, comprised of executives of all national and international unions and the railway brotherhoods, among other groups, provided a final chart for war labor administration that later was followed by the Department of Labor when its Secretary became the war labor administration. Gompers also advocated benefits for sailors and soldiers (more below.) (22) Gompers had a seat on Advisory Commission to the Council of National Defense, which President Wilson established on August 24, 1916. (23) “After war was declared against Germany and her allies, action had to come quickly on war provisions with high priority such as mobilization of fighting personnel and the building of cantonments, ships, the manufacture of uniforms and conversion of factories for war products. Coordination of planning and polices was through the Council of National Defense.” (22) Gompers opined, We should bear in mind this…fact, that all of the fighting men who could answer to the call to arms, whether two millions or five millions or more, would have been of no avail whatsoever if it had not been for the civilian fighting man in factory, workshop and shipyard. It is the heroism of industry, it is the heroism of a consciousness that very people outside the ranks of labor can understand or appreciate. (22) Union industrial workers of eligible age for the draft thus generally remained in the United States during the war where their skills were needed to produce arms and clothing. The U.S. Government chose not to draft them, even as government industrial workers. By contrast, physically and mentally fit non-union and non-industrial men, such as farmers (until this was corrected) and clerical workers, were drafted as soldiers and sailors to fight overseas.
#1. The U.S. Government’s decision to draft into the military certain categories of workers (e.g., farmers, clerical workers) and not draft other classes of workers (i.e., workers belonging to the nation’s 854 unions) is the first root cause of the Bonus Army spectacle in Washington, D.C., in 1932. Union workers could have been drafted while remaining in their usual jobs, but the U.S. Government decided against this.
Furthermore, Gompers and Secretary Baker signed a business contract between government and labor on June 19, 1917, which read: For the adjustment and control of wages, hours and conditions of labor in the construction of cantonments, there shall be created an adjustment commission of three persons, appointed by the Secretary of War: one to represent the Army, one the public, and one labor; the last to be nominated by Samuel Gompers, member of the Advisory Commission of the Council of National Defense, and President of the American Federation of Labor. As basic standards with reference to each cantonment, such commission shall use the union scales of wages, hours and conditions in force on June 1, 1917, in the locality where such cantonment is situated. Consideration shall be give to special circumstances, if any, arising after said date which may require particular advances in wages or changes in other standards. Adjustment of wages, hours, or conditions made by such board are to be treated as binding by all parties. (22) “The contract covering cantonments was later extended to all war construction for the War and Navy Departments and for the Emergency Fleet Corporation,” noted Thorne. She continued, Similarly agreements were later developed for war munitions by the responsible agencies and trade unions of workers employed in such production, with a national War Labor Board to deal with controversies…Unions supplies the necessary workers and helped train and adjust workers for war work, and were strengthened by opportunities for more varied services. Unions and industries supplied existing disciplined agencies through which the government could channel orders without dislocating the controls and economic order of private organizations. There was the minimum of danger to responsible self-government inherent in temporary administrative agencies. (22) In other words, the U.S. Government guaranteed unionized industrial workers the high wages they were making as of June 1, 1917. By contrast, privates in the American Expeditionary Force (the name for the U.S. Army in France in the Great War) received a base pay of one dollar per day, or thirty dollars per month. The dollar per day did not represent the soldier’s full compensation, however, because he had other compensation in the way of board, clothing, and lodging. “Their compensation really amounted to the equivalent of $90 a month,” noted Republican Senator Howard Sutherland in 1921. (24) Who came up with the dollar per day compensation for the soldiers and sailors drafted to serve in the war? The answer is the Advisory Commission section on compensation for soldiers (committee on labor) chaired by Judge Julian W. Mack, an American jurist, social reformer, and lifelong Democrat, according to one source. (25) Though low by comparison to what industrial workers were making in the United States, the dollar a day level of American soldier and sailor compensation was the envy of soldiers and sailors in other countries. However, some soldiers, upon returning home to the United States at the end of the Great War, felt economically disadvantaged compared with men who had stayed at home or at their jobs, whose wages doubled or tripled producing the goods and performing the services necessary to support the U.S. Army and U.S. Navy. The dollar per day also did not compensate soldiers for the military risks they faced, which dwarfed risks faced by men who remained in the U.S. #2. The marked discrepancy in compensation and hazard risk between union workers working at home, and soldiers and sailors serving overseas was a second root cause of the Bonus Army spectacle in Washington, D.C., in 1932.
What if Gompers had chosen not to support the United States in its decision to enter the war on the side of the Allies? He could have adversely influenced, from the perspective of the United States, the two great divisive forces in the country—the Socialist Party and the foreign language press. The Socialists emphasized international principles and action, and thus were a vulnerable element in national unity. The foreign press was often sympathetic to the Kaiser in Imperial Germany. Instead, Gompers worked hard to persuade American labor unions that “the best interests of free nations lay in alliance of the United States with Great Britain and France.” (26-27) Samuel Gompers was interested in advancing the interests of soldiers and sailors, too. He advocated allowances for the families of the men who served in the Army and the Navy for a dollar a day, and in caring for their dependents if they were killed or disabled. (25) “On July 15, 1917, he had written to [Secretary of War] Baker saying that the committee of the Advisory Commission including himself, V. Everit Macy, August Belmont, P. Tecumseh Sherman, Professor Spencer F. Baldwin, Judge Julian W. Mack, and others had a conference on the subject, and they were assisting Mack in drafting a bill. Gompers suggested that Baker bring the bill before the Council of National Defense for its approval before it was introduced in the Congress.” (25) The Council of National Defense consisted of the Secretary of the Army, the Secretary of the Navy, the Secretary of the Interior, the Secretary of Agriculture, the Secretary of Commerce, and the Secretary of Labor. Instead, Secretary of Treasury William Gibbs McAdoo called a conference of the presidents of the life insurance companies to discuss the Gompers’ plan, which he said he also had in mind, however for different reasons, i.e., preventing the necessity of future pensions or funds for the care of disabled veterans. (25) William Gibbs McAdoo was the husband of Wilson’s youngest daughter.
The life insurance companies were “deeply interested in the plan, and concerned about its effects after the War, since it brought the government into the life insurance business,” noted Palmer, and the insurance company presidents “were very active on the subject in Congress.” (25) Thus Judge Mack had to tread warily when creating the bill. The Act as eventually passed by Congress “far from represented” Gompers’ original ideas of providing allowances for the families of the men who served in the Army and the Navy for a dollar a day, and in caring for their dependents if they were killed or disabled. Palmer opines, It turned out that no piece of war propaganda at the time was more unfair to our soldiers than the trumpeting of the War Risk Insurance Act as a new and wonderful system of compensation which would prevent the necessity of future pensions or funds for the care of the disabled. The civil world even seemed to think that it meant free insurance. With the difference of the added risk for war, the Act, as finally passed, gave the soldiers insurance for the same average premium as company insurance in peace-time, or perhaps a shade more. This premium the soldiers had to meet out of their pay. The only advantage was that if a soldier died in war, serving for a dollar a day, his legatees would get the same, or about the same, amount as would those of a munition worker at $10 a day, who had paid an average peace-time premium to a life insurance company. All danger of government interference with private enterprise had been averted in the course of the “greatest advertisement.” After the War some of the younger veterans dropped their government insurance when agents persuaded them that private companies could take them over as a peace risk at lower rates. [Emphasis added] Palmer continues, “After McAdoo had had his conference with the life insurance leaders, which was subsequent to the work of the Gompers committee on the subject, he requested the President to turn over war risk insurance to the Treasury, since it was a financial matter. Baker, who had responsibilities enough already without asking for any that McAdoo was willing to take on (McAdoo had not yet taken charge of all the railroads), only reminded the President in a letter that all the names and address and records of the soldiers were necessarily kept in the War Department. McAdoo had his way. It was not long before he asked Baker to send over officers and soldiers to assist in the administration of war risk insurance.” (25) In this way, war risk insurance for soldiers and sailors who chose to participate was administered by the Treasury Department. The War Insurance Law gave “officers and enlisted men the right to secure from the government…protection in the form of insurance against death or total permanent disability in any multiple of $500, and not less than $1,000 or more than $10,000…This protection [was] to be in the form of term insurance renewable from year to year and convertible after war, without medical examination, into various standard forms of insurance…The United States [bore] the expenses of administration and the excess mortality and disability cost resulting from the hazards of war…Premiums [were] deducted from the pay or deposit of the insured, unless the insured [made] payment otherwise.” (28) The term of the federal government insurance offered to World War I soldiers and sailors extended from the beginning of the war until five years after the declaration of peace. “By this system a man taking out the maximum insurance of $10,000 would pay approximately $6.50 per month for it, the rate increasing slightly each year. In the case of his death from any cause his beneficiary (who had to be a relative) receive[d] $57.50 per month until 240 [equal monthly] payments [had] been made,” explained Conyngton. (29) “When the insured [was] the beneficiary in the case of total permanent disability, the monthly installments [were] continued throughout the duration of the disability. This insurance feature of the new law [was] novel and far reaching,” Conyngton declared. (29)
#3. The Wilson administration’s effort to replace pensions and payments for the future care of veterans disabled in the war with a form of life insurance paid for by the soldiers vanquished Gompers’ intent to more justly compensate soldiers and sailors for their service. The Wilson administration decision was a third root cause of the Bonus Army spectacle of 1932.
America’s involvement in the Great War stopped as suddenly as it had begun. Following the outbreak of the German Revolution, a republic was proclaimed on November 9, 1918. The Kaiser fled to the Netherlands. Two days later, on November 11, 1918, representatives of the German Republic signed an Armistice with the Allies, which signaled a ceasefire. A formal state of war persisted, however, until June 28, 1919, when the Allies signed the Treaty of Versailles with Germany. The United States then began an amazingly rapid industrial and military demobilization between 1918 and 1920, as described elsewhere. (30)
The conflict of America with Germany between April 6, 1917, and June 28, 1919 saw 5,000,000 Americans under arms. (31) The Great War gave birth to the American Legion, which grew out of an inclusive society of veterans among members of the American Expeditionary Force (AEF) in France. The American Legion was thus born in Paris, France, in March 1919, as follows: After the Armistice was signed, there had been a serious decline in the morale of the AEF. The war was over and two million men had done the job for which they came to France. They were tired of discipline, tired of regulations, tired of being away from home, and full of animal spirits and curiosity. Numbers went Absent without Leave. The AWOLs and some not on the loose got into a considerable amount of mischief. High authority, from General Pershing down to company commander, was worried. Every soldier, every unit, could not be sent home at once. Twenty officers, national guardsmen and reserve, were ordered to Paris to meet with some regulars, some military intelligence officers and others, and consider steps to be taken for improving the contentment of the Army, bettering its conditions and promoting its morale. This meeting had something to do with various programs adopted by the AEF, athletic programs, educational programs, amusement programs. It also started a program which was to carry long and far, the formation of what was to be the American Legion. (32) Meanwhile, Americans at home were in a jubilant mood. Indeed, members of Congress erupted with election year ideas (election November 1920) that would appeal to the huge new veteran voting bloc, represented by the fledgling American Legion and other veterans’ organizations. One popular idea proposed by Republican and Democratic Congressmen in 1919 was “generous financial aid for the ‘doughboys,’ regardless of whether they had returned from Europe disabled, slightly wounded, or unscathed.” (34) The “veterans’ adjusted compensation, or “bonus,” was “motivated in partly by a genuine desire to express the nation’s gratitude to its defenders and partly by the realization that the votes of ex-soldiers would be heavily influenced by the American Legion in the 1920 presidential campaign,” avers Palmer. (34) American Legion historian Jones writes, Adjusted compensation began as a matter of simple equity and justice. The private soldier of the first great war had been paid on a basic rate of $30 per month, form which stipend was deducted the family allowances and allotments, the cost of war-risk insurance, and of such Liberty Bonds as a patriotic soldiery subscribed for. Very little money was saved from soldiers’ pay. When the war was won the winners were given each an honorable discharge, a ticket home and $60 cash. The money was their new start in life. It would not buy a decent outfit of civilian clothing. Such being the facts, a prompt demand arose for an adjustment of the compensation. It arose in Congress and among the discharged veterans and among the people everywhere who saw them come home, practically dead broke. More often than not its form was a suggestion for an added one dollar per day of military or naval service. (35) Jones further notes, Correlative arguments supported this proposal. The government had taken over the railroads in wartime, and adjusted the pay of railroad labor. Several Allied governments had granted their returned soldiers adjustments of pay, or bonuses. The large profits of industry in wartime, the high wages of labor, afforded arguments. The silk shirt had become the symbol of labor’s prosperity. At the formative caucus of the Legion at St. Louis in May 1919 there was much talk about adjusted compensation. (35) At first, the American Legion looked to Congress to quickly dispose of adjusting the compensation of veterans of the war. The American Legion was not founded for the purpose of promoting legislation in its selfish interest, it said, yet, when the federal government stalled in coming forth with legislation to provide the funds for adjusted compensation, the battle for the bonus became a cause célèbre in the history of the American Legion through force of circumstances. For almost two decades, the Legion “fought the battles of the bonus and won them. It won against four Presidents of the United States [Harding, Coolidge, Hoover and Franklin Roosevelt vetoed the bonus bills presented to them], against Secretary of the Treasury Andrew W. Mellon and the banking industry in general, against the United States Chamber of Commerce and the National Association of Manufacturers, against many lesser organizations, and against various artificial veterans’ societies organized for the purpose of opposing the legislation and discrediting the Legion.” (36) The American Legion disliked the term “bonus bill,” as illustrated in the following exchange between American Legionnaire executive Mr. Taylor and members of the U.S. Senate Finance Committee, including Senator Porter McCumber, in December 1920: Mr. Taylor: Mr. Chairman [who was Mr. Porter McCumber, Republican senator from North Dakota, 1853-1933], we appreciate this early opportunity to appear before your committee on the adjusted compensation bill, and there are just two observations I should like to make before calling on the national commander and the chairman of the national legislative committee. One of them is in reference to the misnomer of the bill being called the “bonus bill.” It is through that misnomer that the wrong impression has gotten, first, to Congress and, second, to the public generally. “Bonus” really means an increased compensation for some service already performed. Senator McCumber: More than that, it means a gift. Senator Thomas Walsh [D-Montana]: The Latin word “bonus” means good — bonus for a good man. “Bonus” really means, in American slang, “something to the good.” Mr. Taylor. Yes; it does; and that has never been and is not now in the minds of the members of the American Legion or any of the other veteran organizations. What they believe they are entitled to is an adjustment of their compensation due to the change in their economic condition as a result of the war and as a result of their participation in the war. This was, of course, all gone over very carefully before the Ways and Means Committee of the House and the Senate Committee on Finance, and yet I feel that it can not be reiterated too frequently. The average soldier at the time of the war, who left his then-existing circumstances, went away for what was conceded to be reasonable wages ; he performed his duty to the best of his ability; he returned to this country and to his former occupation and found that those men who had remained home at their work had increased their advantages and increased their savings to a tremendous extent; and also — and most important — that the living conditions and costs had gone up so that he was discriminated against financially in his position. This adjusted compensation bill— Senator McCumber (interposing). I think that you might also add there, “and had increased the public debt by reason of mass excessive earnings to such an extent that he would be called upon, without the benefit of those earnings, to go so much deeper into his pocket.” Mr. Taylor. To bear his part of that burden? Senator McCumber. Yes, sir. Mr. Taylor. And this adjusted compensation bill is only to remedy that in part — because it could not be expected that it could be remedied in whole — and not only in the way of a cash payment, but more in the way of an opportunity, and that opportunity is really the thing in which the American Legion is most deeply interested. In other words, we are deeply interested in the productive features of this bill. (37) The term “bonus bill” gained popularity, however, and mostly replaced the more accurate phrase “adjusted service compensation.” The American Legion leadership wrote a proposal that made its way into the 66th Congress as H.R. 14157. It called for provision of $2 billion by the U.S. Treasury to be paid at the rates of $1.25 to each serviceman for each day served overseas after the first sixty-day period. It also advocated changes to the tax system to ensure that bonus payments could be properly funded. On March 11, 1920, Representative Joseph W. Fordney (D-Michigan), chairman of the U.S. House of Representatives Ways and Means Committee, asked the opinion of David F. Houston, President Wilson’s Secretary of the Treasury on the $2 billion provision. Houston responded, “To float bonds in the amount of $2 billion or to meet such an additional expenditure out of taxes would present grave problems and might result in disaster.” (38) Despite admonitions and party platforms, the House passed H.R. 14157 (the World War Veterans Adjusted Compensation bill) by a vote of 289 to 92, on May 29, 1920. The bill went to the Senate where Chairman McCumber and the Senate Finance Committee, because of the price tag and the challenged state of the U.S. Treasury “quietly conducted [it] to the legislative graveyard of [the] season…The prevailing opinion in the Senate,” according to a Washington Post article dated June 1, 1920, was that any legislation of this kind is unwise at this time. The same is true of the House, but in the lower body there is no doubt, observers say, that nearly 200 members voted against their honest convictions. The Senate has been increasingly opposed to passing any bonus measure, but as the Senate’s opposition gained strength, the disposition of the House to pass the measure and throw all the responsibility on the Senate for its rejection, increased perceptibly. The majority by which the House passed the measure gave the Senate a distinct shock, for it increases the difficulty, in the upper body, of sidetracking or defeating it. Nevertheless, while there is much resentment in the Senate against what many members characterize as the weakness of the House, the determination to prevent the legislation has not apparently lost any of its force. (39) It is beyond the scope of this article to describe the four following years of intense dueling over the bonus bill before it was finally passed, over the veto of President Calvin Coolidge, on May 19, 1924, by a House margin of 331-87 and Senate margin of 61-27. (40-44) Passage of the soldiers’ bonus law meant “each veteran of the first World War, below the rank of major and equivalent Navy rank, received an ‘adjusted service credit’ certificate calculated on $1 per day for service at home and $1.25 per day for service overseas. It would accumulate interest for twenty years, could be borrowed on after two years, or would be paid in full upon the death of the veteran. The insurable age of the veteran modified the face value, the total being based on mortality tables and representing the amount of paid-up endowment insurance which the ‘adjusted service credit’ would buy. That was the veteran’s settlement for the economic loss sustained by reason of his war service.” (40)
The U.S. Government issued the adjusted service certificates on January 1, 1925. (45-46) “When the loan clause became operative in 1927, it soon was evident that banks did not welcome the business. The long term of the loans did not fit into banking practice. An amendment by Congress allowed the government, through the Veterans Administration, to make the loans. In 1928 another amendment extended the time within which applications for adjusted service certificates could be filed. Some 3,240,000 veterans had received certificates. During the great depression another half million would apply. Ultimately the number would be 3,792,574, and the face [of their certificates] amount $3,710,036,627.” (47) There were 83,354 eligible veterans who never asked for their bonus. “With many this was a matter of principle; with some, ignorance of their rights. Year by year the death claims were paid, 4,595 the first year, more as time went on. In that respect adjusted compensation operated well. It was an insurance policy, a certain, sure nest egg for the widow or the orphans when a veteran died. A total of 243,902 death claims were paid during the life of the certificates, amounting to $240,074,921. In many a bereaved home that was the financial stopgap, the money which tided the widow over a few hard months, which took the children to the homes of grandparents or aunts or uncles, which completed the education of a boy or girl. As a humanitarian enterprise adjusted compensation was a success,” averred Jones. (47)
#4. Great Depression unemployment was the fourth root cause of the Bonus Army spectacle of 1932.
The American Legion leadership already knew by experience in 1930 that the great financial depression and resulting unemployment was resulting in veterans’ agitation for immediate payment of adjusted service certificates, which otherwise matured in 1945. Jones wrote, “The bonus certificates offered a possible medium of quick relief to more than three million veterans.” (47) The Legislative Committee of the American Legion considered a number of resolutions, including seeking legislation for full payment, retirement of the certificates at eighty percent of face value, and increasing loan provisions and reduction of interest on loans. (47) After discussing the matter with President Herbert Hoover, who was a guest of the American Legion National Convention in Boston in September 1930 and who disparaged an early payout, the Legion decided to ask only for a modification of the interest rate on bonus loans. “By midwinter [1930-1931] the business depression had grown steadily worse. Demands for prepayment of the bonus grew correspondingly louder and more numerous. Representative Wright Patman, of Texas, himself a veteran [although he did not serve overseas], became the leading spokesman for prepayment. His plan was to use unsecured paper currency to redeem the certificates, a complete departure from the gold standard which had been the basis of American money and the financial system. He argued that an additional two billions of currency in circulation would help solve the financial difficulties of the country. It became evident that Congress would be obliged to consider the Patman bill carefully, and other bills proposing payment of the bonus.” (47) Meanwhile, Treasury Secretary Mellon and his assistant and successor Ogden Mills (Mellon resigned after pressure from Patman who pointed out certain conflicts of interest in Mellon’s business portfolio), explained that to pay the veterans’ certificates [in 1931] would cost from two billions to three and a half billions [dollars], depending on the plan adopted,” and that “the financial ship of state was leaking and battered already. Another blow from the bonus might sink her.” (47)
A business witness named Owen D. Young, Chairman of General Electric, who was called to testify before Congress about the bonus bill on February 4, 1931, “suggested that perhaps there was a way out of the apparent predicament, that it might really be possible to relieve the financial distress of a million unemployed veterans without bankrupting the Federal treasury.” How? “He calmly proposed That the loan value of the adjusted service certificates be immediately increased to fifty percent of their face amount. Assuming that one-third of the ex-servicemen were in real need, or about a million person, this loan procedure would cost $500,000,000, and that was a sum which could be raised by the treasury without undue strain. Mr. Young not only suggested that this be done, but that it be done quickly. Prompt action, he pointed out, would mean a genuine service to the veterans and a quick relief to the strained nerves of bankers and brokers, who had worried themselves into the belief that bonus prepayment alone was holding back financial recovery. (47) Young’s idea won the day. A bill incorporating his idea was introduced on February 12, 1931, which passed the House on February 16, 1931, and passed the Senate on February 19, 1931, by overwhelming majorities. President Hoover vetoed it, and the house and Senate passed it over his veto by huge margins (328-19 and 76-17, respectively). (47) Only one problem arose in the aftermath of passage of the bill. Instead of the predicted thirty percent of veterans asking for loans, the number was closer to ninety percent. “The business depression grew steadily worse. The demand for complete payment of the adjusted service certificates had merely received a brief recess,” concluded Jones. (47)
#5. Congress’s refusal in 1931 to cash out the adjusted compensation certificates, instead requiring veterans to take out loans of up to 50 percent the face value of the certificates, was a fourth root cause of the Bonus Army spectacle in 1932.
Congressmen Wright Patman, Billy Connery, and John Rankin, among others, began to annoy American Legion notables, who felt these Congressmen were demagogues who were undermining the morale of the Legion. The American Legion notables advocated prevention of endorsing any further plans for prepayment of the adjusted service certificates. President Herbert Hoover even made an appearance on September 21, 1931, at the National Convention of the Legionnaires in Detroit, asking “able-bodied men of America, rich and poor, veteran, civilian and statesmen, to refrain from placing unnecessary financial burdens upon the nation” to “victoriously conclude” the depression. (48) The roll call for notables of the American Legion were 902 to 507 against prepayment. Nevertheless, when the 72nd Congress assembled in December 1931, it was promptly flooded with bonus payment bills. The issue would not go away! “The Ways and Means Committee of the House reported none of them,” says Jones. “Wright Patman set up a petition to get his bill out of the Committee. By May 10 [1932], he had the necessary 145 signatures.” He had been aided in obtaining the signatures by a new group ostensibly led by veteran W.W. Waters, which called itself the Bonus Expeditionary Force (a play on American Expeditionary Force), or, for short, the Bonus Army. To learn about the Bonus Army spectacle in Washington, D.C., in 1932, which ended up in a riot with two veterans killed, please see SEMP Biot Report #635, available at http://www.semp.us/publications/biot_reader.php?BiotID=635. A long history preceded the Bonus Army, which was made up of hungry, unemployed, World War I veterans who hoboed their way from all points distant on the mainland of the United States to Washington, D.C., to exert pressure on Congress to pass legislation that would pay out in cash their adjusted service certificates. The root causes of the ensuing Bonus Army spectacle in 1932 are, as described above, The “masses” in Houston’s quotation at the beginning of this article apparently did not agree with Grover Cleveland’s opinion that “Democracy is a very difficult form of government. To be successful it must be based on an intelligent and thoughtful citizenship. But it is difficult for the masses to get all the necessary facts underlying public issues, and to digest and interpret them. It is of the first importance that they have frank, intelligent, patriotic, and, above, all, courageous [Democratic] leaders to aid them, men who have an eye single to the public interest and who would scorn to mislead the people or to use government for private or personal ends.” The veterans were deceived by a series of Presidential administrations leadership team, but most of all by the Wilson Administration and the 65th Congress, which enacted the de novo selective service draft system and applied it unequally to Americans of various categories, i.e., Union and non-Union. The Bonus Army veterans were not going to stop their pressure on the U.S. Government until they obtained their adjusted service compensation. Their quest became a matter of deep principle, as the money they received would never make up for the time, risk, and domestic life opportunity (compared with the Union workers who remained safe at home earning high wages and learning new skills) they lost while serving overseas to defend the United States. To learn about the Bonus Army experience in Washington, D.C., in 1932, please see SEMP Biot Report #635, available at http://www.semp.us/publications/biot_reader.php?BiotID=635. Notes:
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