Frank Knox: Prescient and Principled

This year marks the 70th anniversary of Franklin D. Roosevelt’s defeat of Alf Landon in the 1936 presidential election. Although almost everyone knows of Roosevelt’s landslide victory, it is Frank Knox, Landon’s vice-presidential nominee, who should not be forgotten.

William Franklin Knox was born in Boston in 1874, to a family of very limited means. When Knox was 7, his family relocated to Grand Rapids, Mich., and by the age of 11, he was delivering two newspapers a day to keep himself clothed and fed. After losing his paperboy shifts in the Panic of 1893, Knox tackled multiple jobs to pay his tuition at Alma College. During the Spanish-American War, Knox left school to enlist with Teddy Roosevelt’s Rough Riders, and the letters that he sent home to calm his anxious mother landed him a minor job at the Grand Rapids Herald. By the early 1920s, Knox had worked his way up in the newspaper business and was managing all of William Randolph Hearst’s 27 papers.

Knox the journalist morphed into Knox the crusading politician with the introduction of President Franklin Roosevelt’s New Deal, a series of government programs designed to allay the economic hardships of the Great Depression.

Knox had initially favored Roosevelt: He admired the president’s campaign pledges to balance the federal budget and relieve both individuals and businesses of the "excessive burdens of taxation." But not long after Roosevelt’s inauguration, Knox realized that the new president’s course of action not only contradicted his campaign promises, but posed a danger to the American economy by taxing away capital, encouraging waste and throttling America’s entrepreneurial spirit.

Through editorials in the Chicago Daily News, Knox began to criticize the president’s actions. This was a dangerous move: Knox’s papers were published in Chicago, an area deeply sympathetic to Roosevelt, and such condemnations were likely to cost him subscribers and jeopardize everything he had worked so hard to achieve. Also, Knox understood that Roosevelt’s responses to vocal critics often included public chastisement, inquiries from a legislative committee or even a thorough investigation by the Internal Revenue Service. But Knox simply could not remain idle. Fortunately, he was never subject to an investigation, and his business remained sound.

President Roosevelt repeatedly blamed business for the Depression. However, Knox had belonged to the wage-earning class for the majority of his life, and he understood that employment opportunities and standards of living depended greatly on the prosperity of business. High taxes siphoned the money that businesses needed to pay salaries.

Unfortunately, Roosevelt did not share Knox’s understanding of the economy. During the 1936 election, the top marginal income tax rate was 79 percent. After the election, Roosevelt eventually raised it to 90 percent.

Knox had attacked Roosevelt’s undistributed profits tax, a measure that greatly penalized a company for retained earnings, an important internal source of business capital. Roosevelt was able to popularize this tax because it was ostensibly levied on the entity "business," rather than individual people.

But Knox argued that the tax made it cheaper for businesses to pay out all of their earnings, rather than investing in research and innovation. The resulting inefficiencies and backwards products meant less business revenue, which in turn meant that employers would no longer be able to afford to provide jobs for all of their employees.

Knox correctly excoriated the tax as "one of the worst pieces of tax legislation ever imposed upon the tax-paying people of this nation." He was right: Six years into Roosevelt’s presidency, national unemployment was 19.8 percent. Knox firmly contended, "Until it is released from the straight-jacket Mr. Roosevelt has strapped about it business will not be able to do its natural part in restoring prosperity."

Knox believed that much of Roosevelt’s success resulted from successful propaganda at a time when people’s anxieties left them desperate for leadership. Although Knox served as Roosevelt’s Secretary of the Navy during World War II, he relentlessly opposed high taxes until his death in 1944.

Knox may have viewed himself as a lone activist, but he was in fact a trailblazer, paving the way for others to speak out against the New Deal. Although Roosevelt continued to serve as president, he experienced a diminishing margin of victory after each subsequent election.

Knox predicted that one day the American people would realize that the New Deal, "starting out to appeal to the best in us, now uses us to support the worst that is in politics." Desperation prevented Depression-era voters from grasping the validity of Knox’s words, but a growing body of research and literature is proving that Knox espoused a sound response to Roosevelt’s flawed economic policy. This emerging vindication is a reminder that even in the midst of social upheaval and overwhelming political defeat, courage and persistence like Knox’s do more than ennoble the soul; they generate rewards that echo through the ages.

Christina M. Kohn is a senior economics and history major at Hillsdale College and a summer 2006 intern at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.