xt7wwp9t2q46_82 https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/mets.xml https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/59m61.dao.xml American Liberty League 37 linear feet archival material English University of Kentucky This digital resource may be freely searched and displayed.  Permission must be received for subsequent distribution in print or electronically.  Physical rights are retained by the owning repository.  Copyright is retained in accordance with U. S. copyright laws.  For information about permissions to reproduce or publish, contact the Special Collections Research Center. Jouett Shouse Collection (American Liberty League Pamphlets), No. 85 "The Fallacies And Dangers Of The Townsend Plan" Speech of Dr. Walter E. Spahr, Chairman, Department of Economics, School of Commerce, New York University, Broadcast by the National Broadcasting Company on January 3, 1936. (Note: An audio copy of this speech can be found by searching the SONIC catalog at the Library of Congress.) text No. 85 "The Fallacies And Dangers Of The Townsend Plan" Speech of Dr. Walter E. Spahr, Chairman, Department of Economics, School of Commerce, New York University, Broadcast by the National Broadcasting Company on January 3, 1936. (Note: An audio copy of this speech can be found by searching the SONIC catalog at the Library of Congress.) 2013 https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/59m61/59m61_85/Am_Lib_Leag_85_001/Am_Lib_Leag_85_001.pdf section false xt7wwp9t2q46_82 xt7wwp9t2q46 V . ¤ I
V >
We extend to every American citizen who believes in Q   F   
the fundamental principles which gave birth to the §
` Constitution of the United States an invitation to be- § D     
come a member of the American Liberty League. Q
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b . E
‘“°“‘ °'°   DR. WALTER E. smua
` ENROLLMENT BLANK g * Chairman, Department of Economics,
D Q School of Commerce, New York Uni-
atc·—T···—·—····— Q versity, and Member of the National
I favor the principles and purposes of the American g AdvIS°Iy C°un°iI °fIh° American
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g January 3, 1936
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E National Headquarters
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Q Document No. 85

 The F allacies and Dangers of the
Townsend Plan
* e
’ Every Business Depression Brings Out Its
, Contemporary "Reformers” and
i Their Panaceas
V   One of the very worst features of a business
V depression is found in the wild and dangerous
p “remedies” and “correctives” and “reforms”
p   which are proposed by misguided, though per- A
hapswell-intentioned, people. It is a matter of
r fact that every depression brings out its con-
  temporary reformers and their inspired solu-
' tions and panaceas, just as gophers are brought
l from their holes by a flood.
, Since this depression has been the most severe
’ one in our history, this country has been sub-
  HEN you have finished with this p jected to an unprecedented number and variety
_ p of these economic salesmen with their “cures,” E
Pamphlet please pass It an to Some   patent economic medicines, and home remedies.
friend or acquaintance who might be r Anyone who has studied our economic and
interested, calling his attention to the A financial history W111 recall the great variety of
g cure-alls, advocated in the past, that have since
membership blank on page 24‘ * been regarded with amusement and wonder. It
also will be remembered that all sorts of ingen-
ious devices have been used to appeal to people.
Finally, it will be noticed that, in all these
} instances, the exercise of a little common sense,
_ p and the coming of a business recovery, have
’ _ B killed off these wild and fantastic movements,
t and have relegated their leaders to the limbo
y of forgotten and disillusioned prophets.
l Today this country is being agitated morning,
noon, and night, and from one corner to the
other, by “leaders,” visionaries, and prophets.
_ The suffering of the people is the stock in trade
common to them all. Each “reformer” has
’ v developed his own peculiar method of appeal.
Some of the devices used are so painfully crude
‘ and repelling that the reformer and his program
are soon abandoned, while attention is shifted
p to some newer and more interesting or more
i intriguing prophet who has more to,oHe1· and

 who has devised more subtle methods of appeal. which promised the most and secured the great-
All around us, and ell through the depression, est I1l1II1l)61' of 3dl'1C1'CI1tS, it is VB1‘y (l0l1l)ttl1.l
one has been able to see this constant shifting whether any could be found that would com-
of the followers from one patent economic pare with the “solution” of Dr. Townsend. It
medicine vendor to another. has all the ingredients which will, they say, give
It Seems Easy for These ‘tRcf0rmcrS,, to I the aged peace, comfort, plenty, tfreedom from
_ _ _ l work, and freedom from worry; lt w1ll put the
Shp up on the Blind Sldc of the unemployed to work· it will bring general
Average Amcricall prosperity to all classee; it will raise the stand-
Apparently, the Amerieen People have e ard of living of all people. What more could
great weakness for letting some spellbinder or anyone ask? Who is there S0 mmm that hc
some "honest-appearing," or “obviously-sincere,” P would Challenge Such a proposal?
reformer slip up on their blind side and take ‘
advantage of them. In the past we took gmt X How the T<>w¤S<=>¤dit<=¤ Slip up an the B1i¤a
pride in our general intelligence. The hard-   Side af Pearls
headedness and canny shrewdness of the Yankee ’ One of the striking (end subtle) features of
were traits we were glad te adVe1‘tiBe· We { the Townsend Plan is seen in one of the prin-
liked to think that the average American was   cipal devices used to appeal to people. It is
Pt`ettY keeh- ` reported that a common device used at each
Today, as one leeka Out 0V61‘ thé land and l gathering is to open the meeting with prayer.
sees great masses of people following blindly In this manner the hslfqleiined thought is
and eagerly after this economic Simple Simon vaguely planted in the minds of these hopeful
and that quack reformer. one maY well W0¤d¢1‘ listeners that God has approved the Townsend
what has haPPehed te the vaunted common . Plan, that He is on Townsend’s side, that the
eehee et the average Amet'teah· It is easy to whole movement is a crusade for righteousness
eehehtde that the blind Side of the tYPieal and justice. This procedure, combined with
Ametieah has ePt'ead eehatdeI`ahtY· But this the expression of other finely-attuned senti-
explanation is hardly adequate. The real answer ments, such as "Honor thy father and thy
to HIC PIICHOHICHOH 8pP€8I`B to   ill thC tElCt [[l_Otl']_C]_’,” SGIVBS to p€1‘Sl1&(l6 people that tl1lS is
that it is 8 1‘&tl1C1‘ natural 1‘C8Cti011 of people, y really 3 great and good movement led by good
who have suffered severely during the depres- v people who would do no wrong. In an atmos-
sion, and whe are Wea1'Y and W01°¤ with tlwif phere of noble sentiments, carefully cultivated,
struggles and worries, to hope that perhaps after the Plan is made exceedingly attractive by esk-
all one of these vendors of a patent economic ing such questions ss; "Would you, who are 60
medicine mev have teuhd the magie formula ¢ years of age or older, not like to quit work and
which will give them rest and peace and security be given $200 per month to spend`?” “Would
and P1ehtY·` HePe Seems vte aP1'i¤g ¢t61'¤81” y you not like a new car?” “Would you not like W
in the human breast, and it is this that provides to take that trip to California or to New York y
such a fertile field for the magic remedies of l for which you have been waiting so long?” Ex- t
the dePt`eeeteh deetet'a• ’ v planation as to how this is to be accomplished
Probably No D6p1_cSSi0u‘;Rcmcdy,, Has Ever is a minor part of the proceedings. t Thus _
Exccedcd the Townsend Plan unpleasant thoughts and harsh real1t1es are  
in Attractivcncss banished. Only the sp1r1t and atmosphere of
fine sentiments, of gifts to bestow, dominate the ‘
Were one to search the records of all our .
depressions for the patent economic remedy mcetmg 5 P

 IS this not a Subtle Way to site up on the e more deeply than the discovery that their sacred
blind Side of People-? You, the reader, who are rel1g1on has been violeted and has been used
an honest person, may feel repelled by the use aa the means at lcadmg them aSu;aY‘ Such
of such ia device. You may say, "What a travesty P°°P1° usually heeeme csnemally bitter when
A on rciigiontss Géwhat an imposition upon these they realize that, 1n addition, they have paid
honest souls who are led to believe that there eat their g°°d mcmcy fm thc Privilege °f heme
is some connection between their faith in God thas imimscd up°n’
and the soundness of the Townsend Plan!" And _ The g°°d DI" T°Wm€nd‘* his aids aaa ergam
you are of course, quite correct in your feeling izers, and those Congressmen who subscribe to
about the matieh But the Point is that this the Plan, are carving out for themselves e most
particular method of procedure works, and it aaeavlahie sad un°°mf°rmb1° place m the
works nicely. Probably no movement succeeds _ history at this °°unu`Y‘
quite so well as one linked with religion. For i What IS This Plan of DL Townsend? ·
thousands of years this has been true. The _ _ _
Crusades of the Middle Ages, with their wars, I Ii PYOPOSGS t° gwc t° every citizen °f the i
pillaging, robbery, assaults, slaughter of inno- United Staten 60 years at aa? and area a pcm l
cent little children, and every other crime listed Sum °f $200_P°r meath fer his _ i
on the human calendar, provide fine examples Each Pcnslouclnmust give up an gainful pm"
of what a movement linked with a religious Suits aaa Spend his $200 each m°nth' i
zeal can be like- To pay these pensions it is proposed that a  
tax of 2 per cent be laid on the gross dollar i
The Townsend Pian Has Noi Deaerved an value of each business, commercial, and finan-
Answer hy Eoonornists cial transaction carried on in the United States.
When the Townsend Plan {net appeared, its The President is authorized to raise the tax
complete and utter ridiculousness was so obvious te 3 Per eeni er te iower ii te i Per ee¤t When'
that no eoonotnjst fe]t it necessary to psy the ever he deems it advisable in order to finance
slightest attention to it. The scheme wss looked the pehaiea roll adequately- This tax ia te he a
upon as just another part of the froth which Paid rnoniiiiY ands ef eearaes ia ih addition te
the seething of a depression brings to the sur- aii ether iaXes¤ Same ef which are te he in'
face. No economist wished to wssts time point- ereaaed· Aoeording te a new hills the traaa-
ing out the economic fallacies of the thing. aeiions tax ia te he supplemented i)Y a 2 Per h
No eeonomist wished to dignity the movement cent tax on all inheritances and gifts in excess  
with so much as an answer. It was supposed of $500, and 8 1/ 10 Per cent increase in Present ·
that in due time the followers would come to ineoine tax rates- f
their ssosos sod that the movsmoot would die t T e insure that all taaea Shan he saith all 3
as have others of the some type. sellers of commodities and “commercial things i
Bnt the movement has spread and is sti]_] of value” are to be licensed, and the fee for
Spreading, and it is clear that egorts must he _ the license is to be fixed by the Secretary of the t
made to wake people up and to expose the eco- Treasury- g
nomic fallacies and the great dangers involved Ne Pensioner may give mere than is Por eeht i
in the p]en_ of his $200 to charity, church, or fraternal
When the followers of this fantastic delusion organizations-  
tinsuv wake up, as they must in time, there t No person convicted of a felony, is eligible  
doubtless will bc some ehittei. People in this for the pension for a period of 10 years follow-  
country, because few things sting human beings ies the completion at his sentence- i
6 7

 The law is to be administered by pension national income is $50 billion. Thus to pay
boards, Cach composed of three pensioners who the annual cost of the Townsend pension scheme
are to be appointed by the Secretary of the would ¤·=<1hh·= 40 per Cem Pf the hhhhhhl
Treasury. There is to be a board in each m°°m°° _ _ '
county in the United States, and Bach board Stated 1n another way the Townsendites pro-
may appoint deputies. Members of these boards POSC t° gwc 6 per iicm Oi the P°P“1aP°“ 40
81`C to receive HO other COII1P€IlS£llZ10l'1. than lZl’1€11‘ Per cent of thc natlonéfl 1nc0mB’ léavlflg thc `
_ Pensions. Thus the law is to be administered other 60 per cent of the 1ncome for distribution ·
by its beneficiaries. among the 94 per cent of the population.
A major notion underlying the Plan is that .1f .the nat1ona1 1ncome of $50 billion were
the enforced spending will create purchasing dlslnbuted evenly among the L?7 mlllmn P?Pu` ?
7 Power and Provide jobs. The aged are Picked l3t1OI1 each pC1`SOl'1 would 1`6CC1V€   SIIICC g
as e class to receive the peheieh, because h is * *h°_T°“’“S"“d Plan P"°P°S°S *0 wha 40 Par hhht
felt that there is eeheeei agreement that they af lh ahhh hahah *79¤h'· have hh $236- Thus e 
am deserving. 94 per cent of the c1t1zens of th1s country would j
h have their incomes cut to an average of $236  
What AP6 thi? Economic Fallacies of This per year so that 6 per cent of the citizens may  
S€I’i€S of PTOPOSEJS? enjoy net incomes of $1,440 per year ($2,400 less F
(1) The American people could not pay the the 40 per cent tax) or more than six times as  
bill; there would be revolution. much-  
A eeee ding he the census ee ieee, there   For may individual hahahah h would    
10,479,028 peeeehe ih the United States 60 years gy? dw °°mP1°t“ "“““a1.‘“°°"}‘“’ °f mm than :
f a e or over. Thus the cost if all were en- 2 aborcrs to pay the b1u’ usmg $900 as the 1
0, gd ld b $2 096 ,11, ° tl? r income per average laborer in the United States A
?)1)€;.c }(;;11li0ncp€r,ycarT111T;;);;   eigjat —3I'l0lZl1€1` COI1S€I`V3li1VC CSlZ1II13lZ€, 3CC01’(11I]g to  
times he present (ieee) normal revenue ofthe the mh? *hg%h*hhda*h· h 8 mL‘h¤h.h·=mhS h
Federal Government received from taxation and are Bcnslinc m, t C manual pmpOScd° It would  
miscellaneous receipts. The Townsendites claim, rciigilrg t C emlfcb annual mmm; of Over 22 E
however, that only about 8 miuieh peheehe m‘T;°“ “"‘”’“‘g° “ °f"°” “’1*”"'; ° "°S;;i I 3
would qualify for the pension and that the total B graft TTS T) PGOP C’ W 0 wml Miva  
cost per year would be about $20 billion. To to pay thm bl] ° Sllnply could not Exlst Wlth  
be   we shall eeee pt this lower Such a.h·hd hh that hacks Thea rhhh he  
estimate. . I‘€V01l1t10I1, and 0`|.11` BCOIIODJIC 3Ild SOC131 SYSTBHI  
Thus, their estimated yearly cost would place would couapsfb  
a burden on the people equal to about seven · (2) Townsendites confuse the burden of tax-  
times. the taxes and miscellaneous revenues re- ation on transactions with the efect of ·
ceived by the Federal Government in 1934. taxation on wealth and income.  
According to the estimates of the Department ” The T HS d.t th t th d 11 1  
of Commerce, published in August, 1935, the na- f H OW el] 1 cl Say a .6 0 ar va uc  
tional income paid out (not earned) amounted O. il tramacuom m one year IS about $1’000 A
to $49,440 million. The produced national b1ll1on, and that a 2 per cent tax on these trans- I  
income was estimated ee be about $47 billion.   WM he hah thc ”°6d€d $?° hlhhh $
A To be conservative again, and to concede the   31232 dB;:€taXCS have to bg gud out sf  
Townsendites everything which we reasonably (it 1,   h ygnay mgm Teac 0Yn.t0 t C  
can, we shall assume the present produced capl a W lc Pm uccs t C Income. t IS here E
8 9 *

 that the Townsendites have made their fatal porhsns additional light may ho thrown upon t
mistake in their caiculatisns and- es e eonse' the picture if it is realized that it would require
quence, the followers of the Townsend Plan ele the entire annual income of 14,900,000 wage and
being e0Inp1ete1Y misled- salary earners to pay the yearly cost of these
Just h0W wrong are lne Townsend eeleuld pensions, or two-thirds of the entire income of W
tions? LA Sinlpls exiimrjle snonlid makst ilu; 22,300,000 such persons; or half the entire in-
c ear. et 11S ta e Pi uslnoss Wlt e oeln s o come of nearly 30 million such persons.
$1 million which nol`lnollY has e nel i¤<=¤m¤ ol If we assume that 67 per cent of the national V l
10 Pol` oonla ol` $loo¤ooo· To earn lnls $l00=000 income of $50 billion goes to wage and salary
the enterprise {loose let us seYv $10 lnllllon wor? earners, that there are 37 million such people o
of hl1SlneSS» ol`, in the Words of the Townsen ' at work earning an average annual income of X
ites, $10 million of transactions pass through $900, and that osoh snohc poison nays his 40 t
its halide during lne Yoon The 2 Per eenl lex ` per cent in taxes, then each such person has I
on the transactions would amount to $200,000,   left only $540 per year on which to support  
and the business Would have e dendl; lol i himself and family. This compares with the 1
$100,000. Of ooufso tho business wou e $1,440 net income per pensioner, or with $2,880
wrecked. Practically every business in the coun- noi. ivomily whon hoth noronts sto liVing_ t
i1‘Y would be in this Posltlon· And so would Thus Dr. Townsend would give to a husband j
many individuals- and wife who are 60 years of age or over a sum L
It is Po1‘loollY oleel` that tne Townsendlles do five times as great as he would leave in the hands i
not understand what their tax program means of tho svoisgo wsso and salon.}, earner who may it
or what they are talking about when they dis- hsvo s family to Support. T
CUSS the tax h\11`*lon· But the taxation proposed is of such a nature  
(3) The wage and Salary earners would have that the wage and salary earner would pay even t
to carry most of the load, and they could 1 more than h1s proporuonate amount. Th1s is 3
t . because the poor are compelled to spend most i
not do tt. _ _ _ _
or all the11· 1ncome for the necessaries of life.
The Vo1`Y host esllnsetes indicate lnul sléoul Every time these commodities would pass from j
67 per Cent of our nellonsl lnoonle is Pol lo one producer to another the tax would be added t
laborers in the form of wages and salaries. This to the ni.ioo_ And this would not ho sll_ Thoro  
means that if these taxes fell evenly on tall would ho o nytsniiding of tho tax_ Evory time t
g1‘ouPs vf PooPle seoordlng lo lne Plollolllilin the tax would result in a fraction, the full even
of natienal lnoonio oooh gl`ouP l`eoelVes¤ l e amount would be added to the price. By the t
1ab01‘e1`S who 1`ooolVo wages ;n€l$s;lei;`l§s would time many of these commodities would reach
P¤Y about 67 Pol` eent ol l e 2 l lon Per . the consumer, they would have been taxed
year, of $13,400 mllllon· lf we slssulne gn;5 several times, the taxes would have been pyra-
the annual lnoomo Pol` average Wol` er is 9 mided several times, and the consumer would
Po? Yoo? (ll Wes estllneted to be $814 ln l9o3)i ~ pay his 2 per cent tax on what would be very i
it W0\1l