Temporary National Economic Committee (TNEC)

On the recommendation of President Franklin D. Roosevelt, Congress established the Temporary National Economic Committee (TNEC) in June 1938 to analyze the poor performance of the American economy during the Great Depression. Arising from a concern about the impact of monopoly business power on the economy, the TNEC held hearings from December 1938 to March 1941 and eventually published dozens of volumes of testimony and studies of the economy. The TNEC hearings unexpectedly provided a more important forum for Keynesianism and compensatory fiscal policy than for antimonopoly policy.

The impetus for the TNEC had both long-term and short-term roots. To some degree it reflected the antimonopoly component of liberalism going back to the Progressive Era and advocated by a number of New Dealers. It stemmed also from the long depression of the 1930s and related concern about big business and concentrated economic power. But the proximate reason for the creation of the TNEC was the severe recession of 1937-1938 and the policy debates within the administration about what had caused it and what to do to restore the economy to full production and full employment.

As the debates proceeded in the winter and spring of 1938, several viewpoints existed. Some in the administration, led by Leon Henderson and others, believed that monopoly power kept prices high, restricted production, produced unemployment, and sharply restricted consumer spending. They believed that the administration must turn to antitrust policy to stimulate the economy.

Another group, led by Marriner Eccles and Harry L. Hopkins, argued that compensatory fiscal policy based on Keynesianism could provide the stimulus required to move the economy toward full production and full employment. (These two approaches were not mutually exclusive; Henderson, for example, advocated both antimonopoly and compensatory fiscal policy.) Some in the administration, led by Secretary of the Treasury Henry Morgenthau, Jr., advocated fiscal prudence and the balanced budget as the way to right the economy, and others argued for more thorough regulation of business. But the main contest was between antimonopoly and spending as the focus of government economic policy.

In April 1938, Roosevelt seemed to avoid making a final decision by taking both approaches. In the middle of the month, he announced a renewed spending program. Then, at the end of the month, he recommended to Congress a “thorough study of the concentration of economic power in American industry.” In June, Congress passed legislation, signed by Roosevelt, establishing the TNEC. FDR had anticipated an administration committee to conduct the investigation, but Congress wanted half the committee to come from Congress, half from federal agencies. Chaired by Wyoming Democratic senator Joseph C. O’Mahoney, the committee included a variety of viewpoints, and was charged to study economic policy broadly, not just economic concentration and its consequences. Leon Henderson served as executive secretary and managed the committee’s operations.

The TNEC began its hearings in late 1938, and ultimately heard from some 552 witnesses. Some argued for vigorous antitrust policy, some for compensatory spending, some for accepting concentrations of economic power but imposing more stringent regulation. The committee also developed a wealth of detail about the economy. But as the committee labored on, it became increasingly peripheral, as attention in Washington and the nation focused on global events and foreign policy. Perhaps the most significant testimony came from a number of Keynesians who argued in the spring of 1939 for the importance of compensatory fiscal policy to achieve economic recovery. They reflected the direction of the Roosevelt administration in the so-called Third New Deal of the second and third terms, and their view-point was corroborated when massive deficits during World War II produced full-production, full-employment prosperity.

Although the TNEC’s testimony and studies were full of useful information, its final report and recommendations in 1941 were anticlimactic, unfocused, and largely ignored, partly because they came in the much different context of war in Europe, economic mobilization, and returning prosperity. Seemingly of great potential importance as it began its work, the TNEC together with its reports and recommendations quickly became little more than a footnote to history. The economic recovery of the war years brought the ascendancy among liberals of the Keynesian approach to economic policy over both antimonopoly and increased regulation and control.

Further reading: David Lynch, The Concentration of Economic Power (New York: Columbia University Press, 1946).