Introduction

The Adjusted Compensation Payment Act (27 January 1936, Pub.L. 74–425, 49 Stat. 1099) was a piece of United States legislation that provided for the issuance of US Treasury Bonds to veterans who had served in World War I as a form of economic stimulus and relief.

The act is sometimes considered to be part of the “New Deal” though it was not supported by then President Franklin D. Roosevelt, and the law was one of several pieces of United States legislation popularly known together as the “Bonus Act,” which was enacted after Congress overrode President Franklin D. Roosevelt’s veto on 27 January 1936.

Background

Congress had sustained Roosevelt’s previous veto of an earlier version of the bill in 1935, called the Patman Greenback Bonus Bill. The President addressed a joint session of Congress to deliver his veto message. As he concluded his speech, he handed the unsigned bill to the Speaker of the House. Within an hour the House overrode the veto by a vote of 322 to 98. Even before the Senate sustained the veto, proponents were planning another attempt at passage. Roosevelt argued that the program would invite demands for similar treatment by other groups and that it was not a relief bill since it was not based on the demonstrated needs of the recipients. With respect to the veterans, aside from the wounded, he said: “I hold that that able-bodied citizen because he wore a uniform and for no other reason should be accorded no treatment different from that accorded to other citizens.”

Enactment

Congress sent another version of the bill to the President on 22 January 1936. As a symbolic response to the President’s personal veto message in 1935, a Congressman personally delivered the bill to the White House by taxi. The bill became law when the Senate overrode the President’s veto on 27 January 1936. The heads of veterans associations met with Roosevelt and promised that they would recommend their members to hold their bonds until they matured in 1945.

Content

The Act replaced the service certificates awarded to veterans under the World War Adjusted Compensation Act of 1924 with bonds issued by the Treasury Department in denominations of $50. The bonds paid interest at an annual rate of 3% from 15 June 1936 to 15 June 1945, higher than rates available to savings accounts. Amounts less than $50 were paid immediately. The bonds could not be sold, but the Treasury would redeem them for cash at any time after 15 June 1936. Most veterans redeemed their bonds promptly. The Treasury issued bonds worth $1.745 billion initially. Between June 1935 and June 1936, 80% of the bonds issued had been redeemed. The Treasury paid more than $800 million in cash in the last two weeks of 1936 and almost $700 million more in the next year. The cash payments constituted an efficient economic stimulus since the programme required little government administration, the monies were likely to be spent without delay, and the entire process did not require the long lead time of a public works programme.