U.S. HISTORY (DR. CONWELL)
Great Depression: New Deal
An incumbent president during an economic recession or depression typically finds it difficult or
impossible to win reelection. The Republican Herbert Hoover, facing reelection in 1932, tried various
measures to mitigate the worst effects of the growing economic crisis, but they were only marginally
effective, and the electorate was desperate for relief and change. As a result, they elected a Democrat,
Franklin Delano Roosevelt (FDR), that year. He was only the third Democrat elected to the presidency
since the Civil War.
FDR made it clear to the American people that he intended to apply a wide variety of possible solutions
to the economic crisis, and if those failed, to try others. His pragmatic approach to the problem and
particularly his ability to communicate clearly with and show sympathy for the plight of the destitute
won their deep and abiding devotion. Republican conservatives, on the other hand, were passionately
opposed to FDR’s policies, which they branded as fiscally irresponsible and even socialistic. The new
programs and agencies created by Roosevelt to deal with the Great Depression became known as the
"New Deal." He gathered around him a group of advisors drawn from experts in various fields, who
collectively became known as his "brain trust." During his first "Hundred Days" in office, FDR ushered
through Congress no fewer than fifteen major bills, an achievement made possible by the fact that both
the Senate and the House had come solidly under Democratic control in the elections of 1932. (Before the
Depression, the Republican Party had held the presidency and both houses of Congress by a narrow
majority.) The many new federal departments created by Roosevelt's administration to deal with the
Depression, called "alphabet agencies," included the CCC, FERA, CWA, WPA, AAA, NRA, FHA, TVA,
FDIC, and SEC, just to name a few. Their broad purpose was to create work for the unemployed, support
farm prices, improve national infrastructure, stimulate spending, protect consumers' monetary assets, and
curb rampant speculation in the stock market. Roosevelt also called for a "Bank Holiday" from March 6 to
March 13, 1933—a week in which banks would remain closed. This measure was designed to stop "runs
on banks," in which depositors showed up in droves to demand the return of their money. In the
meantime, on March 12, FDR delivered the first of thirty "fireside chats" to the American people over the
radio, assuring them that it was no longer necessary for them to remove their money from the nation's
banks, and that if they had already done so, it was now safe to redeposit it. As a result, people turned up
in large numbers at their local banks on March 13 to redeposit their assets.
Among the "alphabet agencies" created by the Roosevelt administration during the "Hundred Days" was
the Tennessee Valley Authority, or TVA. It was charged with developing a series of dams along the
Tennessee River to control flooding, aid navigation, generate hydroelectric energy, and aid economic
development in the rural South. Eventually, over 50 dams would be built along the Tennessee River and
its major tributaries by TVA. Some of them include: Norris Dam (1933-1936), Chickamauga Dam (19361940), Hiwassee Dam (1936-1940), Watts Bar Dam (1939-1942), and Fontana Dam (1942-1944). Another
major federal project was Hoover Dam on the Colorado River, built between 1931 and 1936. Both of these
projects posed daunting technical challenges but in the end made major improvements to the nation's
infrastructure and transformed the regions which they served. Both continue in operation today.
Roosevelt's CCC (Civilian Conservation Corps) put thousands of young men to work improving roads,
trails, parks, and forests. The WPA (Works Progress Administration) put the unemployed to work
improving public roads, bridges, and buildings, feeding the hungry, providing shelter for the homeless,
creating public art, writing literature, and documenting the impact of the Depression on the nation. The
AAA (Agricultural Adjustment Administration) paid cash bonuses to farmers if they agreed not to plant
certain crops, to restrict the number of fields under cultivation, or to kill surplus farm animals. This
bonus, also known as a "farm subsidy," was designed to keep a lid on the supply of agricultural goods in
the marketplace. Excess commodities of any kind drive unit cost downward, often to the point where
farmers' goods bring little profit at market and threaten them with bankruptcy. Fewer goods in the
marketplace should result, according to classical economic theory, in higher and more reasonable prices
for distressed farmers. The NRA (National Recovery Administration) sought to forge an alliance between
industrialists, laborers, and the government, and to negotiate fair business and labor practices, as a way of
limiting vicious competition and labor strikes. Participating businesses often displayed the NRA emblem
in their shop windows or on their products. It featured a blue eagle and the words, "We Do Our Part." The
FHA (Federal Housing Administration) was created in 1934 to provide low interest loans to individuals
wanting to buy or build a home. It remains in operation today. The FDIC (Federal Deposit Insurance
Corporation), also still in effect today, protects bank depositors' assets up to a federally-mandated level.
In 1933, it assured the safety of deposits up to$ 2,500 in the event of a bank failure. Today, the limit is
$250,000. This measure was designed to strengthen consumer confidence in banks. The SEC (Securities
and Exchange Commission), also an active federal agency today, was put in place in 1934 to control
speculation and to enforce federal laws governing the exchange of securities (stocks, bonds, etc.) All of
these measures and many others like them aimed at putting people back to work, assisting the
downtrodden, and addressing problems thought to have contributed to the economic downturn.
In 1935, Congress approved the Social Security Act, arguably the New Deal legislation with the most
significant long-term impact. It created a social safety net for millions of Americans and continues to do
so today through a federally-mandated payroll tax. Part of every worker's wages is deducted to fund a
long-term pension plan, providing cash payments to those who are retired, disabled, or widowed.
Republicans at the time were generally hostile to the idea, viewing it as a form of socialism, and many of
them remain opposed to it today. In 1940, approximately 250,000 people were collecting Social Security
payments. A million more had been added by 1945. Today, Social Security payments are distributed
monthly to approximately 53 million individuals, and the total governmental payout per month has risen
from about 4 million dollars in 1940 to over 50 billion dollars today.
1.
What was the New Deal?
2.
What happened during Roosevelt’s first hundred days?
3.
What was the purpose of the “alphabet agencies”?
4.
What was TVA, and what did it have to do with the New Deal?
5.
What agencies created as part of the New Deal are still functioning at present?
6.
What did the Social Security Act accomplish? Nowadays, how does it raise the funds it requires?