New Deal Governors

Written By Douglas Carl Abrams

O. Max Gardner

served as governor of North Carolina from 1929 to 1933, but more importantly, his political organization dominated state politics from the 1920s to the 1940s. In 1916, at the age of thirty three, he was elected lieutenant governor, but after losing the gubernatorial race in 1920 to Cameron Morrison, a candidate from U. S. Senator Furnifold M. Simmons’s “machine,” Gardner built his own “dynasty.” After his gubernatorial victory in 1928, with no opposition in the Democratic Party, Gardner chose his successor, John C. B. Ehringhaus, who won the governor’s race in 1932; Gardner’s brother-in-law and fellow citizen of Shelby, Clyde R. Hoey, also won in 1936.  As a result, Gardner and his allies controlled the Democratic Party when it dominated the state and the South.

Gardner was a moderate and pragmatic politician. As a mill owner and friend of Piedmont textile, tobacco, and banking interests, Gardner promoted a pro-business agenda and fought unions, child labor legislation, and economic regulations. Often he opposed the eastern, agrarian, more liberal wing of the party, championed by Josephus Daniels, editor of the influential Raleigh News and Observer.

On the other hand, Gardner supported some progressive measures. He had backed women’s suffrage and, in 1928, campaigned for Al Smith, the controversial Democratic nominee for president; many old-guard Democrats did not, for they questioned Smith’s Catholicism and opposition to Prohibition.  Gardner also exemplified the “business progressivism” of the 1920s, a forward-looking approach to Southern economic development that called for the expansion of public services, especially roads and public schools, but not welfare. That southern progressivism also valued efficiency in state government.  Gardner symbolized the post-World War II generation that transcended old political issues dating from Reconstruction.

Expansion of public services had proved expensive: state debt rose dramatically from $13 million in 1920 to over $178 million in 1929, when Gardner took office. Except for Florida, North Carolina probably had the greatest expansion in the decade, and by 1931, its per capita debt reached second highest in the country. In his first year, before the Great Depression set in, Gardner called for spending cuts, and by June 1929, he had cut the state budget by almost $1.5 million.

After the Stock Market Crash, Gardner commissioned a Brookings Institution study for a reorganization of state government to cut costs and increase efficiency. The 1931 General Assembly, with Gardner’s urging, acted on the report’s recommendation and revamped the highway, agriculture, and health departments and the state university system. These changes brought greater centralization to state government as well as savings. The 1931 General Assembly had reduced spending by $6 to $7 million a year.

Even before the onset of the Great Depression, Gardner also pushed for tax relief.  Between 1920 and 1929, state and local taxes in North Carolina had risen 195-percent to pay for expanding public services. Cries for greater tax relief increased after the Wall Street collapse. By 1932, thirty-four of the state’s one hundred counties and seventy seven of its towns had defaulted, in part because of nonpayment of taxes.

Landowners demanded property tax relief, although property taxes had declined modestly as a percentage of all taxes in the 1920s. In 1929, before the Crash, Gardner recommended to the state legislature that North Carolina assume greater financial responsibility for roads and schools and lessen the burden of local governments. The Great Depression made that proposal even more popular, and the 1931 legislature enacted the proposals and reduced the property tax burden by more than $12 million, the largest dollar reduction in property taxes in Tar Heel history.  Although many politicians pushed for a state sales tax as a new source of revenue, Gardner balked. The result was a compromise: a fifteen-percent ad valorem tax on property, increased corporate income and franchise taxes, and a gasoline tax.

Gardner’s fiscal discipline minimized the implementation of large-scale relief efforts. He did work with the Hoover administration, however; with loans to the state from the Reconstruction Finance Corporation (RFC), created by Congress in July 1932, Gardner helped provide federal help for the unemployed.  To administer the relief funds, Gardner established the Governor’s Office of Relief.  By late 1932, the RFC had over 56,000 people on work or direct relief. The RFC loaned $4.6 million to approximately 40,000 Tar Heel farmers.

Gardner’s conservative approach to the Great Depression served as a model for his successors in the Governor’s Mansion. In 1932, John C. B. Ehringhaus defeated Richard T. Fountain for the Democratic gubernatorial nomination, with critical support from Gardner, who wanted his ally to continue pro-business policies. Ehringhaus and the legislature emphasized fiscal restraint. Severe cuts in government spending and the implementation of a three-percent sales tax, for property tax relief, preserved a balanced budget–far more important to most politicians in Raleigh than social programs to deal with the Great Depression. Even educational institutions in 1933 faced a forty two-percent cutback. The 1933 legislature did create a statewide eight-month school term and assumed greater financial responsibility for public education, although the move was connected to passing the sales tax. Ehringhaus, though personally “dry,” took no official position on repeal of Prohibition, but state voters overwhelmingly supported Prohibition by rejecting in a referendum the call for a state constitutional convention to address the issue. The 1935 General Assembly followed Ehringhaus’s recommendation, renewed the sales tax, and expanded it to include necessities. Also, the General Assembly appropriated $6 million more than the governor sought for additional funding of schools and roads.  Legislators also permitted eighteen counties to hold referenda on the sale of liquor, and soon after, Wilson County opened the first county-operated liquor store in 1935.

Ehringhaus supported President Roosevelt publicly but showed little enthusiasm for participation in New Deal relief and recovery programs, especially those that required huge state expenditures. Modest help from Washington, D.C. did allow North Carolina to create the first public-sponsored rural electrification program in the nation. Ehringhaus delayed for about two years before calling a special session of the legislature to deal with Social Security compliance.

In 1936, conservative Clyde R. Hoey, political ally and brother-in-law of Gardner, won the Democratic nomination for governor after a stiff challenge from the New Dealer and anti-sales tax candidate, Ralph W. McDonald.  Hoey’s opposition stalled much of the New Deal in the state. With the economy improving and revenues up, the 1937 legislature approved the largest budget in state history, in part to defend the continuance of the sales tax, not to expand any social programs. One popular action was providing free textbooks for the state’s elementary school students. With Hoey’s support the legislators complied with the Social Security program and crop control legislation. In 1939, the state legislature continued expanding the budget, adding funds for public schools; by that year, the state had restored state services to 1930 levels, except for public schools and colleges.

Hoey served later as a United States Senator from 1945 until his death in 1954.  After leaving the governor’s office, Gardner worked as a lawyer-lobbyist in Washington, D.C.  In 1947, President Truman appointed him ambassador to Great Britain, but Gardner died before reaching London.