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12/09/2005

The GI Bill

I was reading a story in American Heritage magazine by the
great financial historian John Steele Gordon on the GI Bill and
realized I had some other sources in my vast library to draw upon
for a little tale on the legislation’s importance in shaping today’s
America.

But first, veteran benefits go back to the Plymouth Colony,
according to Gordon, who noted as early as 1636 a law was
passed stating that “if any person shall be sent forth as a soldier
and shall return maimed he shall be maintained competently by
the Colony during his life.” Revolutionary War soldiers who
were wounded were granted pensions, as were the widows and
dependents of those killed. Later soldiers often received land
grants, while after World War I, disabled veterans qualified for
monthly education assistance.

When U.S. participation in World War II came about, planning
began almost immediately after Pearl Harbor. Eventually, the
nation would have 16 million men and women in uniform and at
the time there were widespread fears their return would send
America spiraling into a new depression.

By January 1944, the American Legion had lobbied for and
drafted legislation to address this issue and President Franklin D.
Roosevelt signed it into law in June of that year, having been
passed by both houses unanimously. Officially labeled the
“Serviceman’s Readjustment Act,” the American Legion called it
“a bill of rights for GI Joe and GI Jane.” The GI Bill of Rights,
or GI Bill, authorized payments for tuition, books, and living
expenses for up to four years of college or vocational school, as
well as low-interest mortgages for homeowners, loans for buying
farms and starting businesses, and a “readjustment allowance” of
$20 per week while veterans sought employment.

Author Harold Evans described the GI Bill as the most satisfying
expression of Federal will during the FDR years. But not all
were happy about it.

“Elitists ridiculed the notion of millions of ordinary men and
women being fit for scholarship, but those veterans, having won
the war, won the peace. They helped America soar in the fifties
and sixties. And every time one of them stepped up to receive
his diploma, a light bulb lit up in everyone’s mind: What a waste
of this country’s talent we had endured by limiting higher
education to the well-off, what an undemocratic denial of a
citizen’s potential we had tolerated!”

Demobilization of forces following the war occurred swiftly; far
too quickly to some, and within a year the armed services had
been reduced from 12 million to 3 million, and by 1950 to well
below one million. [Which is why we were so unprepared for
Korea, incidentally.]

It is estimated by 1956, about 10 million veterans obtained more
education in both secondary and technical schools than would
have otherwise. In 1946, alone, over one million veterans
enrolled in colleges – half of that year’s total enrollment.

Schools often made places for male veterans by turning away
qualified women, however, and some in academia were
“appalled” at the thought of federal subsidies for those they
deemed unworthy.

“Education is not a device for coping with mass unemployment,”
said Robert Maynard Hutchins, president of the University of
Chicago. “Colleges and universities will find themselves
converted into educational hobo jungles.” [John Steele Gordon]

Well, everyone is entitled to their opinion, I suppose, but the fact
is by 1950 some 496,000 college degrees were awarded, twice
the number of a decade earlier. And while the federal
government spent $14 billion on GI educational benefits between
1945 and 1952, its impact on the nation’s economy far exceeded
this sum as the demand for goods and services soared.

“Many industrial products – automobiles, appliances, tires, even
nylon stockings – had been nearly unobtainable during the war,
while workers had banked over $137 billion in savings in those
years. The demand for renewed industrial production, fueled by
those billions in savings, kept the American economy humming.”
[John Steele Gordon]

The GI Bill also opened up high-level jobs to segments of the
population that had little firsthand experience with such
employment. The country’s economic elite expanded beyond the
dominant British and northern Europeans.

And as stated earlier, the GI Bill, in providing low-interest
mortgages for those not traditionally qualified, had a huge impact
on the housing market and the growth of suburbs. The Veterans
Administration guaranteed up to $25,000 or 60 percent of the
loan, whichever was less. With little fear of default, banks had
no problem in lending money to veterans, often with zero down.
Of course what was needed was the housing itself, and this is
where entrepreneurs like William Levitt stepped in. Levitt
would later say, “The market was there and the government was
providing the financing. How could we lose?”

But back to education, as hot a topic today as it was in the
postwar era, the following passage from the classic book
“Growth of the American Republic” lays out the challenges of
the 40s and 50s. [Note: The first edition of this tome was
published in 1930 and there were many subsequent editions up to
1980; thus some of the language used is ‘dated’ by today’s
vernacular.]

“America was the first country in modern history where each
generation had more education than its forebears – an elementary
consideration which goes far to explain that child-centered
society which puzzled foreign observers. The familiar process of
enlarging both the base and the height of the educational pyramid
was greatly accelerated in the years after the Second World War.
Prosperity, the GI Bill of Rights, leisure, the achievement of
equality for women and the beginnings of equality for Negroes,
the urgent demands for expertise and professional skills – all of
these combined to give a powerful impetus to education,
particularly at the secondary and higher levels. In the twenty
years after 1940 the educational level of the country rose by two
or three years. By 1960 the college occupied about the same
position in the educational enterprise as the high school in 1920
and the junior college in 1940. Between 1920 and 1960, when
the population grew about 75 percent, the high school population
increased 500 percent. The total number of students at
institutions of higher education in 1920 was less than 600,000,
and that year universities granted some 53,000 degrees. By 1960
the university population was 3.6 million, and of these, 479,000
earned degrees – a six-fold increase in enrollment and a nine-fold
increase in earned degrees. Substantial numbers of college
graduates – in some colleges as high as 85 or 90 percent – moved
on to graduate professional schools.

“The new demands on schools and universities raised many
perplexing problems, of which the most urgent was money. How
were the American people to finance twice as much education
for twice the number of students as they had for an earlier
generation? Total public school expenditures in 1950 ran around
$6 billion – not an impressive sum when compared with the $7
billion spent for liquor, to be sure, but heavy enough to cause
widespread complaint. In the next decade the population
explosion threatened to overwhelm the nation’s schools; the
number of children aged 5 to 14 increased 49 percent. By 1960
public school expenditures had soared to over $15 billion. The
average varied greatly from state to state. In 1958 New York
spent more than $500 per pupil, Oregon and Delaware over
$400, but Mississippi, South Carolina, and Arkansas less than
$200; nevertheless Southern states were actually spending a
larger proportion of their tax income on schools than were their
rich Northern and Western neighbors. Inability, assumed or real,
of the poorer states to support public schools adequately led to a
widespread demand for federal aid to education, but this was not
achieved until the Johnson administration.

“These material problems of education reflected deeper and more
important intellectual ones. Education had been controversial
ever since Plato’s day, and it was not to be expected that society
would cease to debate its character, content, or purposes when it
became ‘universal.’ What troubled many Americans at mid-
century was that somehow education had failed to educate: that a
generation of which almost everyone went to high school and
unprecedented numbers to the university, was still content with
largely pictorial journalism, television programs fit for imbeciles,
politics conducted with the technique of the circus, and race
relations that reflected the tribal enmities of primitive peoples.”

Sounds like the same debate some of us have today, doesn’t it?

But wrapping up on the GI Bill, Wall Street investor Bernard
Baruch told Congress that regardless of the gloom of the
economists regarding the future, with proper planning postwar
America could be what he called “an adventure in prosperity.”
As John Steele Gordon concludes, “Not even Baruch knew just
how true his words would prove to be, thanks in no small
measure to the GI Bill.”

Sources:

Paul S. Boyer, editor, “The Oxford Companion to United States
History”
Harold Evans, “The American Century”
John Steele Gordon, “An Empire of Wealth: The Epic History of
American Economic Power”
John Steele Gordon, American Heritage / October 2005
Samuel Eliot Morison, Henry Steele Commager, and William E.
Leuchtenburg, “Growth of the American Republic”

Wall Street History returns next week.

Brian Trumbore



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-12/09/2005-      
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Wall Street History

12/09/2005

The GI Bill

I was reading a story in American Heritage magazine by the
great financial historian John Steele Gordon on the GI Bill and
realized I had some other sources in my vast library to draw upon
for a little tale on the legislation’s importance in shaping today’s
America.

But first, veteran benefits go back to the Plymouth Colony,
according to Gordon, who noted as early as 1636 a law was
passed stating that “if any person shall be sent forth as a soldier
and shall return maimed he shall be maintained competently by
the Colony during his life.” Revolutionary War soldiers who
were wounded were granted pensions, as were the widows and
dependents of those killed. Later soldiers often received land
grants, while after World War I, disabled veterans qualified for
monthly education assistance.

When U.S. participation in World War II came about, planning
began almost immediately after Pearl Harbor. Eventually, the
nation would have 16 million men and women in uniform and at
the time there were widespread fears their return would send
America spiraling into a new depression.

By January 1944, the American Legion had lobbied for and
drafted legislation to address this issue and President Franklin D.
Roosevelt signed it into law in June of that year, having been
passed by both houses unanimously. Officially labeled the
“Serviceman’s Readjustment Act,” the American Legion called it
“a bill of rights for GI Joe and GI Jane.” The GI Bill of Rights,
or GI Bill, authorized payments for tuition, books, and living
expenses for up to four years of college or vocational school, as
well as low-interest mortgages for homeowners, loans for buying
farms and starting businesses, and a “readjustment allowance” of
$20 per week while veterans sought employment.

Author Harold Evans described the GI Bill as the most satisfying
expression of Federal will during the FDR years. But not all
were happy about it.

“Elitists ridiculed the notion of millions of ordinary men and
women being fit for scholarship, but those veterans, having won
the war, won the peace. They helped America soar in the fifties
and sixties. And every time one of them stepped up to receive
his diploma, a light bulb lit up in everyone’s mind: What a waste
of this country’s talent we had endured by limiting higher
education to the well-off, what an undemocratic denial of a
citizen’s potential we had tolerated!”

Demobilization of forces following the war occurred swiftly; far
too quickly to some, and within a year the armed services had
been reduced from 12 million to 3 million, and by 1950 to well
below one million. [Which is why we were so unprepared for
Korea, incidentally.]

It is estimated by 1956, about 10 million veterans obtained more
education in both secondary and technical schools than would
have otherwise. In 1946, alone, over one million veterans
enrolled in colleges – half of that year’s total enrollment.

Schools often made places for male veterans by turning away
qualified women, however, and some in academia were
“appalled” at the thought of federal subsidies for those they
deemed unworthy.

“Education is not a device for coping with mass unemployment,”
said Robert Maynard Hutchins, president of the University of
Chicago. “Colleges and universities will find themselves
converted into educational hobo jungles.” [John Steele Gordon]

Well, everyone is entitled to their opinion, I suppose, but the fact
is by 1950 some 496,000 college degrees were awarded, twice
the number of a decade earlier. And while the federal
government spent $14 billion on GI educational benefits between
1945 and 1952, its impact on the nation’s economy far exceeded
this sum as the demand for goods and services soared.

“Many industrial products – automobiles, appliances, tires, even
nylon stockings – had been nearly unobtainable during the war,
while workers had banked over $137 billion in savings in those
years. The demand for renewed industrial production, fueled by
those billions in savings, kept the American economy humming.”
[John Steele Gordon]

The GI Bill also opened up high-level jobs to segments of the
population that had little firsthand experience with such
employment. The country’s economic elite expanded beyond the
dominant British and northern Europeans.

And as stated earlier, the GI Bill, in providing low-interest
mortgages for those not traditionally qualified, had a huge impact
on the housing market and the growth of suburbs. The Veterans
Administration guaranteed up to $25,000 or 60 percent of the
loan, whichever was less. With little fear of default, banks had
no problem in lending money to veterans, often with zero down.
Of course what was needed was the housing itself, and this is
where entrepreneurs like William Levitt stepped in. Levitt
would later say, “The market was there and the government was
providing the financing. How could we lose?”

But back to education, as hot a topic today as it was in the
postwar era, the following passage from the classic book
“Growth of the American Republic” lays out the challenges of
the 40s and 50s. [Note: The first edition of this tome was
published in 1930 and there were many subsequent editions up to
1980; thus some of the language used is ‘dated’ by today’s
vernacular.]

“America was the first country in modern history where each
generation had more education than its forebears – an elementary
consideration which goes far to explain that child-centered
society which puzzled foreign observers. The familiar process of
enlarging both the base and the height of the educational pyramid
was greatly accelerated in the years after the Second World War.
Prosperity, the GI Bill of Rights, leisure, the achievement of
equality for women and the beginnings of equality for Negroes,
the urgent demands for expertise and professional skills – all of
these combined to give a powerful impetus to education,
particularly at the secondary and higher levels. In the twenty
years after 1940 the educational level of the country rose by two
or three years. By 1960 the college occupied about the same
position in the educational enterprise as the high school in 1920
and the junior college in 1940. Between 1920 and 1960, when
the population grew about 75 percent, the high school population
increased 500 percent. The total number of students at
institutions of higher education in 1920 was less than 600,000,
and that year universities granted some 53,000 degrees. By 1960
the university population was 3.6 million, and of these, 479,000
earned degrees – a six-fold increase in enrollment and a nine-fold
increase in earned degrees. Substantial numbers of college
graduates – in some colleges as high as 85 or 90 percent – moved
on to graduate professional schools.

“The new demands on schools and universities raised many
perplexing problems, of which the most urgent was money. How
were the American people to finance twice as much education
for twice the number of students as they had for an earlier
generation? Total public school expenditures in 1950 ran around
$6 billion – not an impressive sum when compared with the $7
billion spent for liquor, to be sure, but heavy enough to cause
widespread complaint. In the next decade the population
explosion threatened to overwhelm the nation’s schools; the
number of children aged 5 to 14 increased 49 percent. By 1960
public school expenditures had soared to over $15 billion. The
average varied greatly from state to state. In 1958 New York
spent more than $500 per pupil, Oregon and Delaware over
$400, but Mississippi, South Carolina, and Arkansas less than
$200; nevertheless Southern states were actually spending a
larger proportion of their tax income on schools than were their
rich Northern and Western neighbors. Inability, assumed or real,
of the poorer states to support public schools adequately led to a
widespread demand for federal aid to education, but this was not
achieved until the Johnson administration.

“These material problems of education reflected deeper and more
important intellectual ones. Education had been controversial
ever since Plato’s day, and it was not to be expected that society
would cease to debate its character, content, or purposes when it
became ‘universal.’ What troubled many Americans at mid-
century was that somehow education had failed to educate: that a
generation of which almost everyone went to high school and
unprecedented numbers to the university, was still content with
largely pictorial journalism, television programs fit for imbeciles,
politics conducted with the technique of the circus, and race
relations that reflected the tribal enmities of primitive peoples.”

Sounds like the same debate some of us have today, doesn’t it?

But wrapping up on the GI Bill, Wall Street investor Bernard
Baruch told Congress that regardless of the gloom of the
economists regarding the future, with proper planning postwar
America could be what he called “an adventure in prosperity.”
As John Steele Gordon concludes, “Not even Baruch knew just
how true his words would prove to be, thanks in no small
measure to the GI Bill.”

Sources:

Paul S. Boyer, editor, “The Oxford Companion to United States
History”
Harold Evans, “The American Century”
John Steele Gordon, “An Empire of Wealth: The Epic History of
American Economic Power”
John Steele Gordon, American Heritage / October 2005
Samuel Eliot Morison, Henry Steele Commager, and William E.
Leuchtenburg, “Growth of the American Republic”

Wall Street History returns next week.

Brian Trumbore