How Unemployment Insurance Started

January 15, 1933

A scheduled Sheriff's Sale to satisfy a $4,237 judgment against the farm of Ernest Ganshorn in Logan, Iowa was halted today when 400 angry farmers surged into the courtroom, loudly protesting the foreclosure.

 

The farmers sent a committee to speak with the Sheriff, Chuck Cross, who agreed to halt the sale.  The decision was to send the sale back to the court marked "unsatisfied".

A farmer in 1929 taking out a mortgage could pay it back if wheat was $1 a bushel.  So if he borrowed $10,000 and raised 10,000 bushels - he could meet the loan.  By 1933 wheat had dropped to 50 cents a bushel and that farmer simply could not pay.  So unless the price of the loan reduced or wheat came back up - it was impossible to pay.

The Government tried to both get wheat prices up and also give the farmer debt relief.  It simply was never successful.  A newer idea was to give farmers debt relief in the courts, which would simply make the debtor and creditor sit down and talk.  If successful, the court would supervise payment of reduced debt.   That mediation court was very hard to get to and be heard - and few were helped.

Some thought inflation was the answer.  If inflation could raise wheat prices - farmers would be made whole again.  But this was a time of Depression, not inflation.

In Lincoln, Nebraska the threat of "farmers marches" on the Nebraska legislature demanding tax reduction and mortgage moratorium laws were gathering large crowds.

Earlier in the week 1,000 farmers had flooded the courthouse at Bedford, Iowa seeking postponement of a deficiency judgement against the farm of JO Walters.  That sale was delayed.

Closer to home, 4 farms were sold in the Palouse.   The 1,124 acres at Plaza and Waverly were the best land in the whole area and the sales fetched $55,000.   In normal times the land would have brought $250 an acre or $281,000. 

This very fertile land produces 59 bushels of wheat per acre or 66,316 bushels on the 1,124 acres each year.  At $1 a bushel the crop would yield $66,326.    In reality these four desperate farmers had their very rich land stolen at a very cheap price.

Stories appeared in the newspaper everywhere of farm foreclosure sales and the community resistance.  Common tactics known as  "buyers boycotts" allowed angry farmer mobs to block sales .  Crowds of protestors stopped all bidding.   In some cases groups colluded to drive the price down so low that these neighbors could collectively buy back the farm.  That prevented insurance companies, banks, and large lenders from fully recovering their loans.

 

 The Federal Land Bank

The Spokane Federal Land bank said nobody was being foreclosed who was worthy of loan help - but that was a lie.  They called in many hundreds of loans on farmers who simply farmed. 

All over Eastern Washington farmers did not look like they would survive.  They could not satisfy the farm bank loan and prove that they were not doing their "level best".

The Taxpayers League

Taxpayer League members assembled in large meetings to get the various governments all over the middle of the United State to reduce tax levies.

It was in the depths of the Great Depression and 8 weeks before Franklin Roosevelt was to take office, elected in a landslide vote.

The government in Washington DC was trying to pass a Farm Relief Bill, but it was locked up in endless debate.  It was sponsored by Senator McNary of Oregon and Senator Thomas of Idaho.  Both states were having similar debt foreclosure problems. 

Their plan was to form many national mediator tribunals.  These tribunals would be allowed to make adjustments between the creditors and debtors - reducing each mortgage on a case by case basis.

The Farmers Federation said that "it is impossible for the farmer to pay his taxes out of crop income with current crop prices at these extremely low levels."

Unemployed

In Spokane a large crowd of unemployed men shouted "on to the courthouse".

 The Spokane County Unemployed League had offices at 327 W Trent.  The crowd began marching to the county courthouse for relief and was at least 300 strong. 

Among their wishes they demanded the County Commissioners restore necessary items on the Spokane County Relief List - bread, butter, eggs, milk, peanut butter, and macaroni and more.  The county was giving limited money to the most seriously unemployed - but only for necessities.

Three days later a new march started.  The crowd swelled to 700 angry residents.  Their earlier march to the courthouse had been unsuccessful, but this larger crowd was extremely riled up.

On the courthouse steps, the leader of the march called out:

"Commissioner Thomas knows what we want."  "He is just too afraid to come out and face this mob."

Unemployment meant insecurity, a breakdown of the family, heavier consumption of alcohol, an alarming increase in apathy, irritability, and much more mental illness.

Rampant unemployment was nationwide, not just in Spokane.

Similar marches were being held in Sacramento, Los Angeles, and Denver - each government using Relief Lists to feed the unemployed poor.

Some governments had no money but just issued 'script' instead of cash. 

Spokane had a script plan and protest leaders wanted these lists enlarged to cover all the unemployed in Washington state with essentials. 

Not everyone liked script.Script issued by the county was not liked by the poor and most merchants in the city would not accept it.

"Script is a sucker's game."   "If you get any of it be sure to quickly pass it on." 

was the recommendation by businessmen.

A woman had taken script in payment for the rent.  She could not dispose of it.

The American Legion also was very vocal. 

It was made up of ex-servicemen who were also having a hard time.  Among their complaints was not being able to get milk for their children.

A New Currency Wanted

It was generally known that the existing currency was worthless and dead.   People had lost faith in it and inflation had ruined it.   Government needed to issue new currency.

Here was the rationale.

"The emergency is caused by the inability to match what an individual has with what he needs."  "There needs to be an emergency currency."  "Larger stores simply cannot accept script in order to pay their bills."  "The government needs to step in and guarantee the script, convertible into cash upon demand."

And Congress was debating a new  currency bill adding $3 billion to ease the money supply. Government planned to sell new bonds to raise the new money.

Adding additional silver to the currency that was circulating might ease the farmers' mortgages, people's loans, and the unemployment issues.  But all these ideas were speculative.

In Olympia the state was trying to pass a $10 million relief package.  That law stopped 36,000 houses in Seattle in deep foreclosure.  Lenders were preparing to sell a lot of properties at auction, and it had to be stopped.  The new law would give people two years of freedom from loan payments  It was assumed in 2 years they would again pay their mortgages. 

A committee representing 1,000 very hungry, desperate unemployed men marched on Olympia.  The "hunger marchers" were asking for free money - $10 a week for a single man, $10 for a husband and wife family, and $3 for each dependent.  Every employer would be taxed 3% of their payroll to pay for this. 

The danger that these marches could get out of hand was a great concern.  There were at least 100,000 people in Washington needing relief.

Newspaper Ads

As a contribution to the relief of the unemployed, the Spokesman Review said they would  run a free want ad service for those having commodities or services to exchange.  It will appear under "Employment Relief" column - and is intended to be a labor exchange.   But the exchange was limited to only food, fuel, clothing, or shelter in exchange for work.

Unemployment Insurance

The State of Washington passed the first ever unemployment bill on January 26, 1933. 

The new law said that a person at 65 years old who had  lived in the county for 5 years and the state for 15 years - could draw on the newly created state fund.    In order to get the $30 a month allowed; the pensioner had to state they had not received a $360 income the previous year.

At the same session the state tried to pass their first sales tax.  It failed miserably.

All through the spring of 1933 there were marches, protests, and unrest all over the nation. 

Everyone was waiting for the installation of the new Democratic President - Franklin Delano Roosevelt.  It took 5 months from the Election in November to the installation in March to change the government.

FDR promised  lot, and now it was time to perform.  His first 100 days were a whirlwind of new laws, policies, and outright experiments to make normalcy return.