The New Deal
FDR more central to USA life than anyone before
Accomplishments of New Deal (unlike others) and impact on subsequent decisions of
government role have shaped political life ever since
FDR admin. Never fully committed to any particular philosophy of government
I. Legacy of FDR and the New Deal
A. WWI ends reform, FDR admin created broad outlines of contemporary politics
1. Beginnings of modern welfare
2. Extended federal economic regulation
3. Birth of modern labor movement
4. government= force in agriculture
5. start of new liberal ideology that would govern reform efforts after WWII
B. The New Deal DID NOT end the Great Depression
1. Stabilized and kept things from getting worse--Limited, erratic recovery
2. End ‘39- basic problems were unsolved
a. 15% unemployed and GNP still relatively low
C. GD took toll on political and social life
1. FDR admin. Faced challenges from groups impatient with programs
2. New Deal ebbed and flowed--at times political upheaval seemed at hand
3. FDR managed to retain firm grip on loyalties of public majority
II. *Launching the New Deal*
A. FDR 1st task- alleviate panic in financial system
1. Quick response- construction of First New Deal
III. Restoring Confidence
A. FDR success due to personality
1. Projected optimism (only thing to fear is fear itself)
2. “fireside chats” explain programs to public=increased confidence
3. Master at press relations-respected—Many unaware of paralysis
B. priority to help existing financial institutions/revive business
1. (3/6/33)- “Bank Holiday” declared
a. Federal government stepped in to solve bank failures
2. (3/9/33)- Emergency Banking Act (Conservative bill) designed to prevent
larger banks to be pulled down from smaller ones
a. Treasury inspection before reopening--Fed. Assistance to some
b. Thorough reorganization of those in greatest difficulty
3. ¾ of FED banks reopened within days $1 billion flowed into them
C. After EBA, FDR sent Economy Act to Congress designed to convince
public/business community that government was in safe, responsible hands
1. Balance federal budget by cutting salaries and reducing pensions
2. Confirmed that FDR was a fiscal conservative like HH
3. Passed through Congress instantly despite protests from progressives
D. FDR moved to put to rest one of the divisive issues of 1920s
1. Supported 3.2% beer (prelude to 21st amendment (‘33))
IV. Agricultural Adjustment
A. Initial actions were effectively stopgaps to buy time for later readjustment
B. Agricultural Adjustment Act (5/33)--Sec of Ag. Henry A. Wallace
1. crop reductions--7 basic commodities decide on production limits
a. govt. would also pay subsidies for leaving their land idle
b. Supplement by tax on food processing to provide funds
c. Prices to be subsidized up to point of parity
C. Heartening results from AAA
1. Farm prices rose after 1933
2. farmers’ situation improves significantly for 1st time in 20 years
3. Agricultural economy was more stable and prosperous
a. Yet, AAA favored large farmers over smaller ones
i.
At times- dispossessed struggling farmers
b. Cotton belt- planters that reduced acreage evicted their tenants and
sharecroppers and fired many field hands
D. (1/36)- SC struck down crucial provisions of AAA
1. no federal authority to require farmers to limit production
2. Essence of programs survived,
a. Soil Conservation and Domestic Allotment Act
i.
farmers paid to reduce production to “conserve soil”, prevent
erosion, accomplish secondary goals
E. Also attempts to correct failure to protect sharecroppers and tenant farmers
1. Landlords required to share payments they received for cutting back
F. Other efforts to assist poor farmers
1. Resettlement Administration and Farm Security Administration: loans to
help farmers in poorer soil to relocate to better land
2. Rural Electrification Administration- power through utility cooperatives
V. Industrial Recovery
A. 1933- industry suffering from vicious deflation
1. Anti-trust laws forbade too much collusion, FDR seeks some suspension
a. govt. should enforce agreements on pricing and production
2. Provisions that would deal with other problems as well
a. concessions to labor--incomes would rise with prices
b. public works programs--pump needed funds into economy
3. National Industrial Recovery Act (6/33)
a. Business hailed it as beginning of new cooperative era in industry
b. Labor leaders- “Magna Charta” for trade unions
c. 1st- bill worked miracles
4. National Recovery Administration (NRA)--Hugh S. Johnson
a. “Blanket code”- min. wage, max. work week, no child labor
b. Blue Eagle: employers accepting provisions display in windows
i.
Slogan- “We Do Our Part”
c. more specific set of “industrial codes” with industry’s leaders
i.
Set floors below prices and wages
ii.
Agreements on maintaining employment and production
d. Public support gave Johnson bargaining strength
e. Yet, NRA encountered difficulties and effort dissolved in failure
i.
Codes were hastily and poorly written
ii.
beyond capacities of fed. officials with no prior experience
iii.
Large producers dominated code writing
iv.
artificially raised prices to levels higher than was necessary
f. Attempts to increase consumer purchasing did not progress quickly
i.
Section 7a--right unionize/collective bargaining
ii.
Public Works Administration--administer spending
a) Interior Secretary Harold Ikes--only $3.3 bil. out
5. Failures of NRA—production actually declines
a. FDR pressured Johnson to resign
b. 1935- SC brought end to troubled experiment
i.
basis for NRA was regulation of commerce among states
ii.
“Sick Chicken” case—Schechter brothers
a) not engaged in interstate commerce
c. Agency was declared void
VI. Regional Planning
A. Role of Federal Government
1. AAA/NR--economic planning, yet private interests dominate
2. Others think govt. should be chief agency—ideas popular
B. Tennessee Valley Authority (TVA)
1. reformers call for dev. of H2O resources for cheap electric power
2. unfinished dam at Muscle Shoals, AL
a. Utility companies fought against completion of project
b. 1932- utility empire of Samuel Insull had collapsed—corruption
i.
private comp can no longer block public power movement
3. TVA to build dams, generate/sell electricity agent for redev. of region
a. Stop floods
b. Encourage industries
c. Supervise re-forestation program
d. Help farmers to improve productivity
4. ultimately a success--project revitalized the region
a. i.e. Power rates declined, fertilizers prevent soil erosion, etc.
5. No miracles- TV remained impoverished
VII. Financial Reforms
A. Country off gold standard, 4/18/1933
1. FDR realized that the gold standard was obstacle to adequate prices
2. Resort to government managed currency created important precedent
a. No immediate impact on American economy
B. increased fed. authority over previously unregulated or weak economy areas
C. Glass-Steagall Act (6/33) gave govt authority to curb irresponsible speculation
D. Federal Deposit Insurance Corporation, guaranteeing all bank deposits up to $2500
E. 1935- Congress transfers power from regional Federal Reserve to DC,
1. DC bank’s 7 members directly controlled interest rates
F. Securities Act of 1933, requiring corporations to register with…
1. Federal Trade Commission and provide full information to public
2. SEC to police the stock market
VIII. The Growth of Federal Relief
A. Most important purpose of ND was to reform and revive economy and to restore
stability and enhance productivity so prosperity would return
1. Yet, millions in desperate need of assistance--administration recognizes
B. Federal Emergency Relief Administration--grants to states rather than loans
1. intended to prop up bankrupt relief agencies
2. Harry Hopkins (NY relief) to administer
3. FDR and Hopkins favored work relief (saves skill, socially useful)
C. Civil Works Administration, temporary projects 400,000 CWA projects
D. Use of government labor to stimulate the economy (Keynesian economics) was one
of ND most important contributions to public policy
1. admin were aware of broad effects of this spending on the economy
2. Most thought of it more as way to help particular people
a. Evidence of limited view--most early relief programs had short lives
i.
Like FERA, CWA was intended to be temporary
E. Economists now agree massive and sustained spending would be the most effective
F. Civilian Conservation Corps--employment to millions of urban young men
1. Intended to advance the work of conservation and reforestation
2. With CWA, many of CCC projects were only of REAL marginal value
G. Mortgage relief was pressing need of millions of farm owners and homeowners
1. Farm Credit Administration
2. Frazier-Lemke Farm Bankruptcy Act of 1933 land even after foreclosure
3. Despite efforts, small farmers continued to lose property in many regions
4. Homeowners were troubled similarly--Home Owner’s Loan Corporation
5. Federal Housing Administration-- mortgages for construction/repairs
H. Permanent welfare system one of ND most important, lasting accomplishments.
IX. The New Deal in Transition
A. Critics of the New Deal
1. American Liberty League—opposition to “dictatorial” policies
a. conservatives and wealthy—limited to northern industrialists
2. Communists Party, Socialist Party
3. Dr. Francis Townsend—monthly pensions for older adults
4. Fr. Charles E. Coughlin achieved greater renown--radio sermons
a. Drawing on Populism and church teachings- monetary reforms
b. Re-monetization of silver, greenbacks, nat’l banking
i.
First supported FDR, but then disheartened
a) established National Union for Social Justice
5. Most powerful was Sen. Huey P. Long of LA
a. Rise: attacks on banks, oil, and utilities and on conservatism
i.
as LA gov., Long dominated-many claimed he was a dictator
ii.
Like Coughlin, Long critical of HH-supported FDR in 1932
b. Later, advocated wealth redistribution (Share-Our-Wealth)
i.
confiscating through taxation the surplus riches of wealthy
a) Share Our Wealth society -- (4 million members)
6. dissident movements represented two competing popular sentiments: desire
for government assistance and desire to protect their ability to control own
lives from encroachments of large and powerful organizations
a. dissidents a genuine threat to established political parties?
i.
advisers warn FDR needs to counter
X. The Second New Deal
A. Response- FDR laid out Second New Deal (3/35)
1. Some ways- attempt to stall thunder of admin critics
2. Also represented a new direction and change in ND policy
B. striking change was attitude toward big business
1. FDR now openly attacking great corporate interests
2. 3/35- combat concentration of power in utility holding companies
3. Holding Company Act of 1936, but contained amendments—limited
C. New Tax reforms- “soak the rich” scheme
1. to undercut Share-Our-Wealth—highest, most progressive taxes in peace
a. Actual results were less radical than FDR liked to claim
D. SC 1935 decision to invalidate National Industrial Recovery Act
1. Section 7a illegal—in response, Sen. Robert F. Wagner of NY
a. introduced the National Labor Relations Act (Wagner Act)
i.
More federal protection
ii.
Outlawed unfair practices by employers
iii.
Created National Labor Relations Board to police employers
XI. Labor Militancy
A. Emergence of powerful American trade union movement—most significant
1. Occurred in response to government efforts to enhance power of unions
a. Primarily because of increased militancy of workers and their leaders
2. 1920s- little militancy in challenging employers or demanding recognition
a. Faced powerful and popular business establishment
b. Co-opted by Welfare Capitalism
c. conservative labor organizations, unwilling to risk modest gains won
3. 1930s- inhibiting factors vanished
a. Business leaders lost public standing of New Era-lost federal support
4. Section 7a of NIRA and Wagner Act were passed over strong objections
a. Welfare capitalism vanished
b. Economy in decline- employers rescinded most of gains
c. Workers agreed to reduced wages and fewer benefits
5. 1930s- new labor organizations emerge-challenge conservative unions
6. Militancy obvious in 1934--strikes to demand recognition of unions
7. With Wagner- more effective forms of organization gained strength
B. AFL and William Green, increased activities in response to GD, it proved inadequate
1. Committed to idea of craft union (workers organized on skills)
a. Result- AFL offered little hope to unskilled (bulk of work force)
2. 1930s-craft unions challenged by industrial unionism
3. AFL leaders opposed--industrial unionism was supported
a. John L. Lewis, leader of United Mine Workers
4. 1st worked within AFL, but friction between grew rapidly
a. Created Committee on Industrial Organization (within AFL)
b. renamed (1936) to rival AFL and became first president
5. Weakened labor, but gave impetus to powerful new organizations
a. CIO expanded constituency of labor movement
C. Organizing Battles
1. Major battles for organization in auto and steel industries
a. United Auto Workers was becoming preeminent
b. (2/36), Auto workers employed the sit down strike
i.
Tactic spread to other locations
ii.
ignored court orders to vacate-resisted efforts by police
iii.
Gov. wouldn’t intervene, GM had to relent
a) 2/37 GM recognizes UAW, other comp. follow
c. Sit down strike effective but survived only briefly
d. Steel industry- unionization less easily won
i.
Steel Workers’ Organizing Committee—SWOC
a) March, 1937- US Steel relented
ii.
Lesser companies not willing to surrender
a) 5/1937--“Memorial Day Massacre”
b) One of last gasps of brutal strikebreaking
D. Social Security
1. Early ND impulse
a. Popularity of Townsend added strength to cause,
b. 1935, FDR gave public support to Social Security Act
c. Variety of programs--2 types of assistance for elderly
i.
Presently destitute- up to $15/ month in federal assistance
ii.
presently working were incorporated into pension system to
which they and employers would contribute by paying
payroll tax to provide them with income on retirement
d. Limits on program
i.
Pensions would not begin until 1942, only $10-15/ month
ii.
Broad categories of workers were excluded
a) (domestic, agr.- blacks and women)
iii.
Yet, Crucial 1st step to create social security
2. Social Security Act expanded gov. activities on behalf of unemployed
a. unemployment insurance--employers alone contribute
b. federal aid to disabled people and dependent children
3. ND did not think of SS as welfare system, but rather that SS was insurance
a. Pensions based not on need, but on contributions to the system
b. Wealthy USA entitled to SS Payments
c. Unemployment ins. not to based on economic need
i.
anyone, but typically elderly, disabled, dependent children
4. SS most important single piece of social welfare legislation in USA history
XII. New Directions in Relief
A. SS was designed to fulfill long-range goals
1. More concern- unemployed that did not find relief through programs
B. 1935 Works Progress Administration
1. Like CWA, which established a system of work relief for unemployed
2. far-reaching--Harry Hopkins (Minister of Relief),
a. WPA employed average of 2.1 million between 1935-41
b. buildings, airports, roads, and bridges
c. stimulated the economy by increasing money flow
3. WPA- flexibility--did not fit into any traditional category of relief
a. ie work for unemployed musicians, actors, directors, etc.
b. Federal Writers Project, Art Project, Theater Project, Music Project
4. National Youth Administration--between ages of 16-25 (scholarships)
5. Emergency Housing Division of PWA (established 1933 along NRA)
a. began federal sponsorship of public housing
C. Hiring practices of WPA, NYA, and others revealed feature of ND welfare system
1. Men and women in distress, but system dealt with them in different ways
2. aid to women was not work relief, but often cash assistance
3. Tensions between welfare system and realities of employment profound
XIII. The 1936 “Referendum”
A. Election of 1936 was referendum on ND
1. Conservative opposition intense, but not large enough to win control of R
2. Ignored HH et al--nominated Alf M. Landon (KS), supporter of TR 1912
a. platform to continue ND, but constitutionally and without deficit
3. Dissident strength evaporated as quickly as it emerged
a. Assassination of Huey Long
b. Ill-fated alliance among remaining dissident leaders -- Union Party
c. Most important was failure ever to turn supporters fully against FDR
4. Lopsided contest--Greatest landslide in history to that point
a. election displayed fundamental party re-alignment that ND produced
b. D- W and S farmers, urban-working class, poor, unemployed, N
Black communities, traditional progressives, and liberals (majority)
XIV. The New Deal in Disarray
A. FDR emerged in 1936 with great popularity
1. new difficulties- result of opposition, FDR errors, and economic setbacks
2. ND stumbles unable to regain initiative it had once had
B. The Court fight and the Purge
1. 1936 a mandate for FDR to so something about Supreme Court?
2. No program could survive obstructionists --struck down NRA and AAA
a. Foes of NLRA, SSA, HCA openly flouting laws, confident in SC
3. Narrow interpretation of federal power
4. 1937- FDR proposed expansion of SC through addition of new justices
a. Bold measure, but not radical
i.
Constitution set no specific number, changed # in past
5. Aroused public fervor--FDR ineptitude in proposing and promoting it
6. said Courts overworked and needed additional men and younger blood
a. some outraged at Court-packing plan, warning that constitutional
short cuts were routes by which dictators seized power
7. might have forced Congress to approve at least compromise measure
a. but SC itself not intervened
8. 5-4 Liberal upholding a state min. wage law, Wagner Act, validated SSA
a. Necessity for FDR judicial reform bill vanished
b. SC moderated position in order to avert disastrous precedent
9. Affair was significant victory for FDR
10. Drawbacks
a. Generated public suspicion and re-invigorated C opposition
b. Helped destroy congressional coalition
XV. Retrenchment and Recession
A. Severe recession beginning in fall, 1937- worst suffering since ‘32
1. Summer 1937- no longer belief that prosperity was about to return
B. Economic indices showed improvements
1. To FDR- time was ripe for retrenchment in government spending
2. Also good time to balance federal budget
3. Economists- real danger was no longer depression, but inflation
4. Result- admin moved on several fronts to cut back recovery programs
a. Recession of 1937 results
C. April, 1938- FDR asked Congress for emergency appropriation
1. public works and relief, funds poured into economy once again
2. Tentative recovery underway, proof of validity of their approach
3. Many advocated for restoration of competition
a. Temporary National Economic Committee
i.
New and sophisticated use of Sherman and Clayton acts,
ii.
TNEC crusades did not have lasting impact
D. End of 1938- goals faced uncertain future--ND came to end
1. Congress opposition made it difficult for FDR to create new programs
2. More important- threat of world crisis hung in atmosphere
XVI. The New Deal: Limits and Legacies
A. Conservative contemporaries, the ND was dangerous, radical break with past
B. To left- ND was little more than timid defense of capitalism
XVII. Black America and the New Deal
A. Blacks’ economic problems accompanied by political disenfranchisement and
subjugation throughout the nation- prevented them from making significant advances
1. ND- little to improve them, yet sympathetic--Eleanor Roosevelt
2. FDR- important gestures to Blacks
a. Worked to repeal certain glaring racial restrictions w/in government
XVIII.
XIX.
XX.
XXI.
b. Appointed # Blacks to second-level positions (Black Cabinet)
c. efforts to ensure that ND programs did not exclude Blacks
i.
1936- 90%+ Blacks voted D (many decades following)
3. Never willing to risk losing S D support by being identified with Blacks
4. FDR refused to use relief agencies to challenge local discrimination
5. ND not actively hostile--did much to help them advance
The New Deal and The Indian Problem
A. Elements of policy in ND advanced a different goal
1. John Collier- commissioner of I affairs
a. Committed to I cause after exposure to tribal cultures in NM
b. Influenced by 20th century anthropology - cultural relativism
2. Collier promoted legislation that would reverse pressures on I to assimilate
3. Indian Reorganization Act of 1934 to advance goals--Substantial impact
a. Significant political authority to tribes (tribal gov./constitutions)
b. government funds for education, health care, culture activities
c. Right to own land collectively
B. Not rid of “problem” but helped work of rebuilding viability of tribes
Women and the New Deal
A. Women failed to emerge to challenge the obstacles to female advancement
1. ND not hostile--but aspirations did not yet attract widespread support
B. Important symbolic gestures on behalf of women
1. FDR appointed 1st female cabinet member- Sec of Labor Frances Perkins
2. 100+ women to lower levels of bureaucracy
3. Active network within the govt committed to advancing women causes
The New Deal and the Economy
A. Frequent criticism of ND- failure to revive economy
1. ND never fully recognizes value of gov spending
2. Unemployment high; consumption, investment and econ growth low
3. Boom sparked by WWII truly ended crisis
4. did not substantially alter distribution of power within USA capitalism
5. Large organizations dominated economy--power was greater than before
B. ND had number of important and lasting effects--behavior and structure of economy
1. protections for various groups of citizens suffering from crisis
2. helped prevent economy from decaying further
3. Not alter capitalism, but elevated new groups (farmers, workers)
4. Inc. regulatory functions of govt in stock market, banking system
5. Established the basis for new forms of federal fiscal policy
6. created rudiments of welfare (SSA)
C. New system marked historic break with reluctance to public assistance
The New Deal and American Politics
A. Dramatic ND effect was structure an behavior of USA Politics
1. FDR enhanced power of government as whole
a. presidency as preeminent center of authority within government
b. Congress never able to wield independent power as before ND
2. impact on how people politically defined themselves
3. Weak, divided D party turned into a mighty coalition for 40+ years
4. Attention of many voters away from cultural issues of 20s and awakened in
them an interest in economic matters of direct importance to their lives
5. Created among American people at large greatly increased expectations of
government that ND did not always fulfill but that survived to become the
basis of new liberal crusades in post-war era