Chapter 23 – The New Deal

I.  Roosevelt Takes Over
In his inaugural address, Franklin Roosevelt stated “the only thing we have to fear is fear itself.” 
One of Roosevelt’s greatest talents was his ability to communicate with the American people, and gain their confidence.
Roosevelt was the first president to effectively use mass media, delivering his messages to the nation through his “fireside chats” on the radio.

A.  The First Hundred Days- As F.D.R. took office he promised bold experimentation.  He would continue to try different programs to find a way to end the Depression.

• He assembled a group of advisors known as the “Brain Trust.”  These were businessmen and people from the academic world who helped develop New Deal programs.
• Congress was extraordinary cooperative with President Roosevelt, passing some of his proposed legislation in a matter of hours.
• Roosevelt initiated more legislation in his first one hundred days in office than any president in history.

B.  Bank Holiday- On his second day in office Roosevelt issued an order closing all American banks.

• During this time Congress enacted the Emergency Banking Act which provided for government assistance to some banks. 
• All banks had to pass an inspection before being allowed to reopen.
• In his first fireside chat Roosevelt encouraged Americans to put their money back into the banks.  He assured people that their deposits would be safe.
• Within a few months, over a billion dollars in deposits had been retuned to the nation’s banks.

II. Relief, Recovery, and Reform- Roosevelt’s New Deal was based on these three steps. 

• Relief - for citizens in the form of financial assistance, the creation of jobs, and mortgage assistance. 
• Recovery- the government would take steps to manage the economy and help businesses, banks, and farmers to operate profitably. 
• Reform- the government would put in place new economic regulations aimed at stopping financial abuses and preventing future depressions.

A.  Relief legislation

• Congress's first major effort to deal with the massive unemployment was to pass the Federal Emergency Relief Act.  The resulting Federal Emergency Relief Administration (FERA) was headed by Harry L. Hopkins. 
• Hopkins's agency granted about $3 billion to the states for direct relief payments or for wages on work projects. 
• The Home Owners' Loan Corporation (HOLC) assisted many households that had trouble paying their mortgages.

Public Works Programs- throughout the New Deal, Roosevelt developed numerous programs to create jobs through government spending.

• Most jobs were created through the construction of various public facilities such as roads, bridges, schools, and airports.
• The first of these programs was the Civil Works Administration (CWA). It provided about 4 million people with temporary jobs.
• The Civilian Conservation Corps (CCC)- provided employment for about 3 million men in government camps.  Their work included reforestation, fire fighting, flood control, swamp drainage, building reservoirs and irrigation systems.
• The Tennessee Valley Authority (TVA) was a regional program to bring development to the impoverished Tennessee Valley.  The main success of this program was the building of numerous dams that generated electricity and provided affordable power to the area.

 

 

B.  Recovery Programs
National Industrial Recovery Act (NIRA)

• NIRA allowed businesses to disobey anti-trust laws and cooperate with each other in order to fix prices.  This was aimed at solving the problem of deflation.
• In exchange they promised to adopt codes that regulated working conditions and labor practices which included  minimum wages, restrictions on working hours and recognition of labor unions.
• The National Recovery Administration (NRA) was created as a part of NIRA to coordinate the government’s cooperation with business including the development of specific codes for each industry.
• Workers were formally guaranteed the right to organize and bargain collectively through representatives of their choosing, not through the company's choosing. 

Help for Farmers

• Congress passed the Agricultural Adjustment Act (AAA).  This program paid farmers to reduce their amount of crops they grew.  This was aimed at eliminating surpluses in order to raise prices.
• It also set up programs for government purchases of farm goods and helped many farmers to keep their land through mortgage relief.
• The AAA did raise prices for farm goods and helped many farmers, however it also led to many farm workers and sharecroppers being put out of work due to the reduction of crops.

C. Reform Measures- gave the government greater authority over the economy, especially banking and the stock market.

• In 1933 Roosevelt ended the gold standard, and Congress passed legislation giving the government more control over the value of currency.
• In the Glass-Steagall Banking Reform Act, Congress gave the federal government the power to oversee the operation of all banks in the Federal Reserve System and to regulate loan practices.
• It also created the Federal Deposit Insurance Corporation (FDIC) which insured individual bank deposits up to $5,000, ending the epidemic of bank failures.
• The Truth in Securities Act required all companies that offered stocks to provide accurate information about their financial health to the public.
• The Securities and Exchange Commission (SEC) was established to monitor the operation of the stock market.

III Setbacks for the New Deal- Roosevelt’s programs helped, but by no means did they end the Depression.  By 1935 some were concerned that nothing the government could do would end the Depression.

A. Criticism of the New Deal

• Conservatives criticized the New Deal for granting too much control to the government especially to Roosevelt himself.  They felt that the government was too involved in the economy, and that the New Deal was stifling free enterprise and self reliance.
• They also criticized the enormous deficit spending that was creating a huge national debt. 
• Liberals, including socialists, argued that the New Deal was not comprehensive enough in battling the Depression.  They pointed out that there were still millions of Americans suffering.  Many liberals argued that the government had not gone far enough to redistribute wealth in America. 
• As unemployment and suffering continued, radical opponents to Roosevelt's New Deal began to arise.  Father Charles Coughlin's used radio broadcasts to call for greater action against banks and other business and demand greater “economic justice.” Coughlin was eventually was forced off the air because he became increasingly anti-Semitic and pro-fascist. 
• Senator Huey P. Long publicized his "Share Our Wealth" program in which every family in the United States would receive $5,000.  His fascist plans ended when he was assassinated in 1935. 
• Dr. Francis E. Townsend attracted millions of senior citizens with his plan that each citizen over the age of 60 would receive $200 a month.  This helped inspire the Social Security Act

 

 

B. The Supreme Court Strikes Down New Deal Legislation

• The conservative justices on the Supreme Court ruled against New Deal programs 7 times.
• In the Schechter Case, 1935, the Supreme Court declared certain parts of NIRA to be unconstitutional.  The court ruled that Congress had gone beyond regulating interstate commerce, and that NIRA had given the President legislative powers.
• In 1936, The Supreme Court also overturned key aspects of the Agricultural Adjustment Act. 

IV.  The “Second New Deal”

• In 1935, with the depression still enduring, Roosevelt launched the Second New Deal.  This was another sweeping round of legislation to set up programs aimed at ending the depression, and helping those in need.
• Works Progress Administration (WPA)- initiated more public works projects, creating millions of jobs including many for artists, writers, photographers and performers. Some taxpayers criticized the agency for paying people to due "useless" jobs such as painting murals and taking photographs.
• Wagner Act (National Labor Relations Act)- provided protection for unions, guaranteed collective bargaining, set up National Labor Relations Board.  This greatly increased the power and size of unions in the United States.
• Social Security Act- set up the Social Security System which provided payments for elderly, unemployed disabled and families in need.  This was a permanent social welfare system that has been expanded over time.

V. The Election of 1936

• As the election of 1936 neared, the New Dealers had achieved significant progress, and millions of people who had received relief from the government were grateful to Roosevelt.  However, the depression still continued and many people wondered if the government would ever be able to end it.
• The election of 1936 was set to be a referendum on the New Deal.  The Republicans condemned the New Deal for its radicalism, experimentation, confusion, and "frightful waste."
• President Roosevelt was reelected as president in a lopsided victory.  He had forged a powerful and enduring voting coalition of the South, Blacks, urban populations, and the poor.
• Ratified in 1933, the 20th Amendment shortened the period from election to inauguration by 6 weeks.  FDR took the presidential oath on January 20, 1937, instead of the traditional March 4.

VI. Roosevelt attempts to “pack” the Supreme Court

• With his reelection, Roosevelt felt that the American people had approved the New Deal.  If the American way of life was to be preserved, he argued, and then the Supreme Court had to get in line with public opinion. 
• President Roosevelt asked Congress to pass legislation allowing him to appoint one new justice to the Supreme Court for every member over the age of 70 who would not retire; the maximum number of justices would now be 15. 
• Disturbing both Congress and the public, the plan received much negative feedback.  President Roosevelt was criticized for attempting to break down the system of checks and balances among the 3 branches of government.
• Eventually the Court became more sympathetic towards the New Deal, upholding the National Labor Relations Act (Wagner Act) and the Social Security Act.
• A succession of deaths and resignations of justices enabled Roosevelt to appoint 9 justices to the Court through traditional procedures.
• In Response to the Supreme Court’s ruling on the AAA, Roosevelt persuaded Congress to pass the Soil Conservation and Domestic Allotment Act of 1936.  This sought to reduce production of more common crops by paying farmers to plant soil-conserving crops.
• The Second Agricultural Adjustment Act of 1938 continued conservation payments; if farmers obeyed acreage restrictions on specific commodities, they would be eligible for payments.

VII. Roosevelt attempts to adjust the New Deal

• After Roosevelt's first term, from 1933-1937 significant recovery had taken place.
• In 1937, the Roosevelt administration cut back on funding for New Deal programs out of concerns about the growing national debt. 
• It was hoped that as New Deal Programs were scaled back, that private businesses would begin hiring more workers.  However with the additional burden of Social Security taxes, many companies were reluctant to increase their payrolls.
• The economy took another downturn as new and the Federal government once again increased its spending to try to stimulate a recovery.

 Summary

• Foes of the New Deal charged the president with spending too much money on his programs, significantly increasing the national debt.  They also claimed that financial aid and relief were undermining the old virtue of initiative.
• Private enterprise was being suppressed and states' rights were being ignored. 
• The most damning indictment of the New Deal was that it did not end the depression; it merely administered “Band-Aids." 
• Not until World War II did the U.S. economy fully recover. 

• New Deal supporters had pointed out that relief, not economy, had been the primary objective of their war on the depression.  Roosevelt believed that the government was morally bound to prevent mass hunger and starvation by "managing" the economy.

The New Deal greatly increased the size of the federal government and increased its power and responsibilities.  It also fundamentally changed the role of the government in terms of its involvement in the economy and in providing for the social welfare of the population.

• Many of the New Deal programs would disappear after the 1930’s, but some remained in place.  Most notable among them is the Social Security System, which has been expanded in the ensuing decades.
• The New Deal also greatly increased the infrastructure of the nation.

 

New Deal Programs Quick Reference

1933

• Emergency Banking Act- provided relief and regulation for banks.
• Federal Deposit Insurance Corporation (FDIC)- insured bank deposits.
• Agricultural Adjustment Act- provided relief for farmers, tried to raise prices of farm products by limiting production.
• National Industrial Recovery Act (NIRA)- regulated industries, tried to provide recovery for businesses, helped businesses to raise prices, but also set minimum wage standards.  Created the National Recovery Administration (NRA) which set codes for how businesses should operate.
• Civilian Conservation Corps (CCC)- created jobs in conservation (parks).
• Tennessee Valley Authority (TVA)- regional relief organization, carried out public works projects.  Built hydroelectric dams to provide power to the region.
• Home Owners' Loan Corporation (HOLC) assisted many households that had trouble paying their mortgages.

1935 (Second New Deal)

• Works Progress Administration (WPA)- initiated more public works projects, creating millions of jobs including many for artists, writers, photographers and performers.
• Wagner Act (National Labor Relations Act)- provided protection for unions, guaranteed collective bargaining, set up National Labor Relations Board.  Greatly increased the power of unions.
• Social Security Act- set up the Social Security System which provided payments for elderly, unemployed and disabled.  Was a permanent social welfare system that has been expanded over time.