The GI Bill
Brian Trumbore
President/Editor, StocksandNews.com

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