Federal Credit Aid for Consumers

Report Outline
Consumers' Purchasing Power and the Potential Market
Plans and Peoposals for Credit Aid to Consumers
Consumer Credit in Prosperity and Depression
The Consumers' Board and the Cost of Credit
Special Focus

Consumers' Purchasing Power and the Potential Market

Creation of the Electric Home and Farm Authority, Inc., by executive order of President Roosevelt on December 19, 1933, marked a new departure in the extension of governmental credit in the United States. Heretofore credit has been provided to financial institutions, to railroads, to producers, and to political subdivisions, with the ultimate consumer receiving direct, credit assistance only upon real estate. The Electric Home and Farm Authority, in contrast, has as its objective the financing of the consumer, to enable him to purchase electrical equipment.

Establishment of this new federal agency was preceded and has been followed by the proposal of a number of schemes for artificial enlargement of consumer purchasing power in the interests of economic recovery. Notable among these schemes is that originally advanced by Donald R. Richberg, now chief counsel of the National Recovery Administration, which called for the extension of federal credit to the unemployed in amounts up to $500 per family. Legislation to this end may be offered by Senator Costigan (D., Colo.) as an amendment to administration measures affecting the Reconstruction Finance Corporation at the present session of Congress. Another plan for expanding purchasing power through the payment of supplemental compensation to employed workers, formulated by Albert L. Deane, president of the General Motors Holding Corporation, was the subject of a two-hour conference at the White House on December 27, 1933. A more comprehensive scheme for the equalization of production and consumption through the payment of dividends to consumers by the state, which has been advocated in Great Britain for fifteen years by C. H. Douglas, has many supporters in this country.

The importance of the consumer and his purchasing power in the functioning of the economic system has recently been emphasized by Rexford G. Tugwell, Assistant Secretary of Agriculture, and a leading economic advisor to President Roosevelt. “A business always faces, when it is organized on the typical modern scale, the necessity of creating and maintaining a market which will absorb a large number of its goods steadily,” Tugwell said. Goods must first be produced and expenses incurred, with the approval of the consumer not being registered until after the article has been completed; if the consumer then refuses or is unable to purchase, the whole structure collapses.