7.10 - The New Deal

Franklin D. Roosevelt as President

• Background and Influence: FDR, related to former President Theodore Roosevelt, significantly expanded the role and size of the federal government and was a dominant figure in American politics for over a decade.

• Policy Approach and Impact: His presidency marked a substantial shift in government operations and presidential power, making him a pivotal figure in 20th-century global politics.

The New Deal Philosophy

• Foundations: Franklin D. Roosevelt did not have a detailed plan to end the Depression in his 1932 campaign but was committed to action, aiming to experiment with solutions to economic issues.

• Three R's: Roosevelt's New Deal focused on three main objectives: relief for the unemployed, recovery for the economy, and reform of economic institutions, targeting the "forgotten man" at the bottom of the economic pyramid.

Advisory and Administrative Support

• Brain Trust: Roosevelt relied on a group of university professors and former advisors from his tenure as Governor of New York to shape the New Deal.

• Diverse Appointments: His administration was noted for its diversity, with significant appointments of African Americans, Catholics, Jews, and women, including Frances Perkins, the first female cabinet member.

Bank Holiday

• Bank Failures and Response: In early 1933, due to massive withdrawals and failing banks, President Roosevelt declared a "bank holiday" on March 6, closing banks temporarily to stabilize them. Over 5,000 banks had failed by this point, matching the total failures of the previous years combined.

• Emergency Banking Act: Roosevelt explained the situation in a radio broadcast and reassured the public. Congress passed the Emergency Banking Act on March 9, allowing banks to reopen on March 13 after reorganization.

Repeal of Prohibition

• Legislative Actions: Roosevelt fulfilled his campaign promise by first passing the Beer-Wine Revenue Act, legalizing the sale of beer and wine to raise taxes.

• End of Prohibition: Later in 1933, the 21st Amendment was ratified, repealing the 18th Amendment and officially ending Prohibition.

Fireside Chats

• First Fireside Chat: On March 12, 1933, Roosevelt conducted the first of many fireside chats (speaking to Americans on the radio), assuring Americans that the reopened banks were secure.

• Public Response: The public responded positively, depositing more money into the banks than was withdrawn, restoring some confidence in the financial system.

The New Deal

Relief for the Unemployed

• Federal Emergency Relief Administration (FERA): Directed by Harry Hopkins, FERA provided federal funds to local governments for direct relief efforts, like soup kitchens, benefiting the jobless and homeless.

• Public Works Administration (PWA): Led by Harold Ickes, the PWA funded infrastructure projects like roads and bridges, generating thousands of jobs.

• Civilian Conservation Corps (CCC): The CCC provided employment to young men on conservation projects on federal land, offering financial aid to their families.

• Tennessee Valley Authority (TVA): A vast regional development project, the TVA employed many in the Tennessee Valley to build infrastructure like dams and power plants, significantly lowering electricity costs for the area.

Financial Recovery and Reform Programs

• Emergency Banking Relief Act: Allowed the government to inspect and reopen financially stable banks.

• Glass-Steagall Act: Increased banking regulations and restricted how banks could use customer deposits.

• Federal Deposit Insurance Corporation (FDIC): Provided government insurance for bank deposits to ensure security for depositors.

• Farm Credit Administration: Extended low-interest loans and mortgages to farmers to prevent their land from being foreclosed.

National Recovery Program

• National Recovery Administration (NRA): Aimed to stabilize industry by setting fair practices and labor standards, although it was later ruled unconstitutional.

Farm Production Control Program

• Agricultural Adjustment Administration (AAA): Encouraged farmers to reduce crop production by to raise market prices, supported by government subsidies (paying them to not produce), but was also declared unconstitutional.

Additional New Deal Programs

• Civil Works Administration (CWA): Created jobs through temporary construction projects funded by the federal government.

• Securities and Exchange Commission (SEC): Established to regulate the stock market, requiring corporate transparency to protect investors.

The Second New Deal

• Works Progress Administration (WPA): This expansive agency provided jobs to millions from 1935 to 1940, funding large-scale public works projects and supporting unemployed artists and writers, significantly exceeding the scope of earlier relief programs.

Other Key Programs and Reforms

• Resettlement Administration (RA): Led by Rexford Tugwell, a member of the Brain Trust, this program offered loans to small farmers and better living conditions for migrant workers.

• National Labor Relations (Wagner) Act: Replaced earlier labor laws with stronger protections, guaranteeing union rights and collective bargaining, overseen by the newly formed National Labor Relations Board (NLRB).

Financial and Social Legislation

• Federal Taxes: The 1935 revenue act increased taxes on high incomes, large gifts, and capital gains, targeting the wealthy to fund New Deal programs.

• Social Security Act: Introduced in 1935, this act established a comprehensive social insurance system for retirees over 65, as well as unemployment and disability benefits, marking a profound change in the social safety net for Americans.

The Election of 1936

• Roosevelt's Popularity: President Roosevelt, buoyed by the success of his New Deal programs, which significantly appealed to workers and small farmers, was renominated by the Democrats. His regulatory and pro-union measures, however, made him less popular with the business community.

• Political Realignment: The election solidified a new coalition for the Democratic Party, which included the Solid South, urban ethnic groups, Midwestern farmers, labor unions, and liberals. Notably, many African Americans in northern cities shifted their support from the Republican Party to the Democrats, largely because of the New Deal’s impact.

New Deal Coalition

• Legislative Success: Roosevelt’s ability to pass New Deal legislation rapidly was significantly supported by the "New Deal coalition" in Congress, which was composed of diverse groups that supported his agenda, ensuring cooperative and effective legislative action throughout his terms.

Challenges with the Supreme Court

• Initial Opposition: Early in his first term, Roosevelt faced significant challenges from the U.S. Supreme Court, which ruled key New Deal programs like the NRA and AAA unconstitutional.

• Court Reorganization Plan: After his reelection in 1936, Roosevelt proposed a plan to appoint additional justices to the Supreme Court, aiming to overcome conservative opposition. This plan was widely criticized and ultimately defeated in Congress.

• Subsequent Developments: Ironically, the Supreme Court began upholding New Deal legislation such as the Wagner Act and Social Security Act, and Roosevelt later appointed more sympathetic justices following retirements.

Fair Labor Standards Act of 1938

• Labor Protections: Established minimum wage, a standard workweek with overtime pay, and restrictions on child labor, marking a significant victory for labor rights.

• Supreme Court Reversal: In 1941, the Supreme Court upheld the child labor provisions of the act, reversing earlier decisions.

Social Conditions During the Depression

• Economic and Psychological Impact: Many Americans developed a lasting "depression mentality" due to the continued hardships of the 1930s.

• Dust Bowl: Severe droughts created the Dust Bowl in the Great Plains, leading to significant migration and economic hardship, famously depicted in John Steinbeck's The Grapes of Wrath.

• Role of Women: Women faced increased pressures and opportunities in the workforce, though they often received lower wages than men despite advocacy from figures like Eleanor Roosevelt.

• African Americans: Racial discrimination intensified economic disparities for African Americans, who faced higher unemployment and were often excluded from relief programs.

• Note: New Deal is often criticized for not being an equal opportunity for all. 

Limitations of the New Deal in Ending the Depression

• Economic Shortcomings: While the New Deal introduced significant reforms and relief measures, it did not fully pull the United States out of the Great Depression. The economy showed signs of improvement but remained unstable and weak, lacking the robustness needed for a full recovery.

• Political Resistance: By 1937, the New Deal faced increased opposition from a coalition of Republicans and conservative Democrats, who blocked further reform legislation. This resistance, combined with a reduced Democratic majority after the 1938 elections, significantly weakened the New Deal's momentum.

• Shift of Focus: As threats from abroad, particularly the aggressive actions of Nazi Germany, began to dominate national concerns, domestic economic issues were overshadowed, diverting attention and resources away from the New Deal's initiatives.