• A series of droughts, in the Great Plains, in the early 1930s dried up crops and topsoil, turning the soil to dust
• Lasting for a decade, heavy winds carried topsoil across hundred of miles, burying homes and destroying harvests
• Farmers were forced to abandon their farms
• Many moved west to California (over 1M were forced from their land)

• Overproduction – manufacturers were producing more goods than they could sell (cars, radios, appliances, etc.)
• Speculation – more and more people were speculating in the stock market in hopes of “getting rich quick”
– Many began buying on margin (getting loans from a bank or stock broker)
– People also speculated in Real Estate

• Remained true to laissez-faire capitalism, despite the spiraling economic problems
• Rejected demands for the government to provide unemployment to the needy
• Believed this would reduce the incentive to work and that private organizations should provide emergency relief, not the government
• The Federal reserve made matters worse by reducing the money supply, not increasing it and for allowing banks to fail

• THE STOCK MARKET CRASH – October 29, 1929
– On October 24, stock prices began moving sharply downward
– Top bankers bought stocks above current market prices to try to stop the rapid decline
– By October 29, stock prices kept falling faster and faster, prices were at an all-time low, and the market crashed

• Restricted International Trade – American tariffs were enacted to protect American markets
– Tariffs made it hard for producers to sell overseas, since other countries retaliated by setting high tariffs of their own
– In 1930, President Hoover signed the highest tariff in U.S. history
– The shrinking of world trade contributed to the
Great Depression

• With less demand for labor during the
Depression, white Americans sought jobs filled by Mexican-American immigrants
• Hostility grew toward Mexican immigrants
• It was more difficult to enter the U.S.
• Hoover authorized the Mexican Repatriation Act to send Mexican-Americans back to Mexico (over half a million were forcibly returned, rather legal or not)

• These policies were seen as too little, too late, and his lack of leadership frustrated most
Americans
• Shanty towns of homeless families and the unemployed became known as “Hoovervilles” and sprang up on the outskirts of many cities
• By the end of Hoover’s term, about 100,000 businesses failed and unemployment reached 13 million (25%)
• Many Americans began losing faith in democracy

IMPACT OF STATE & FEDERAL GOVERNMENTS
• Power of federal government increased
• Government had a positive responsibility to make sure the national economy ran smoothly and efficiently and made it possible to control citizens’ private actions
• Taxes rose dramatically to fund new gov’t programs
• States implemented their own versions of New Deal policies
• Established a legacy of gov’t. agencies, regulations, and procedures that remain with us today

THE SUPREME COURT AND THE NEW DEAL
• Posed the greatest threat to the New Deal
• Ruled that both the NIRA and AAA were unconstitutional
• In Schechter Poultry v. U.S. (1937), the Supreme
Court ruled that even during a national crisis,
Congress can not give the President more powers than those granted in the Constitution
• Fearing the court might declare other New Deal legislation unconstitutional, FDR proposed a plan to allow the President to add a new appointment to the Supreme Court for each justice over 70 ½ years old.

• The plan, if adopted, would have given FDR the right to appoint 6 Justices, giving him control over the court.
• It was viewed by many as an attempt to upset the traditional separation of powers
• Despite his popularity, the public condemned this move and Congress rejected it
• After this challenge to the court, the justices generally stopped overruling New Deal legislation