The Great Depression and the New Deal Slides for Exam 3

Peak Unemployment Rate (Great Depression)

Reached just over 25% at its highest point, meaning that roughly 75% of the national workforce managed to remain employed during the worst of the crisis.

Bank Deposits Lost

An estimated 20% of all money held in banks was permanently wiped out before federal safety nets existed, meaning approximately 80% of total deposits survived the banking panics.

1928 Presidential Election

A landslide victory for Republican Herbert Hoover, who defeated Democrat Alfred Smith by an electoral count of 444 to 87.

Alfred Smith (1928 Controversies)

The Democratic candidate who faced intense political pushback over his Catholic faith, his open opposition to Prohibition, and his political ties to New York's Tammany Hall machine.

Historical Significance of the 1928 Election

This election marked a massive turning point in political control, standing as the very last time a Republican won the presidency until 1952.

Stock Market Crash of 1929

A catastrophic financial collapse that acted as the immediate trigger for the Great Depression in the United States, causing the market to lose 80% to 90% of its total value over several months.

GDP Decline (1929–1933)

The nation's Gross Domestic Product plummeted drastically, dropping between one-third to nearly one-half of its original value in the first four years of the depression.

Gross Domestic Product (GDP)

The total market value of all final goods and services produced within a country's borders during a specific timeframe, typically calculated annually.

Economic Recovery Timeline

Neither the national employment rates nor the U.S. GDP successfully recovered to their pre-crash 1929 levels until 1941, spurred by the onset of World War II.

Shift in Federal Spending

The economic crisis permanently altered the scale of the government

Black Thursday (October 24, 1929)

The initial panic where investors rushed to sell off stocks en masse, which was temporarily stabilized the next day when J.P. Morgan and other wealthy bankers bought up large blocks of shares.

Black Tuesday (October 29, 1929)

The definitive, devastating stock market crash where a massive wave of panic selling wiped out billions of dollars in shared value in a single day.

Comparative Standard of Living

Even with the devastating economic drop, the average U.S. citizen maintained a higher standard of living than citizens in other industrialized nations because the U.S. possessed the highest per capita income before the depression began.

Monetarist Interpretation (Friedman & Schwartz)

The economic theory arguing that the Great Depression was directly caused by the Federal Reserve, which allowed the total money supply to shrink by one-third and failed to provide emergency liquidity to collapsing banks.

Federal Reserve Policy (1928–1929)

The Fed deliberately tightened credit and reduced the money supply during a period of zero inflation for the specific purpose of halting speculative trading in the stock market.

1931 Banking Crisis & The Gold Standard

When Great Britain abandoned the gold standard, anxious Americans began hoarding gold. The Fed reacted by raising interest rates twice in one week, which backfired and forced over 500 banks to collapse in a single month.

Ben Bernanke’s Monetarist Admission

The former Federal Reserve Chairman who famously stated to Milton Friedman's estate: "Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."

Keynesian Interpretation (John Maynard Keynes)

The economic theory stating that depressions are caused by a drop in total demand

Austrian School Interpretation (Hayek & Mises)

The economic theory asserting that the crisis was caused by an artificial credit boom created by low Fed interest rates in the 1920s, and that New Deal interventions actively prevented a natural recovery.

Marxist Interpretation

The political and economic viewpoint that celebrated the Great Depression as concrete proof that the capitalist system is inherently unstable and doomed to collapse, pointing to Soviet state planning as the superior alternative.

Smoot-Hawley Tariff Act (1930)

A law that implemented some of the highest protective tariff rates in American history

Reconstruction Finance Corporation (RFC)

A federal agency established by Herbert Hoover in 1932 designed to provide emergency loans (not direct relief grants) to banks and businesses

Hooverisms

Sarcastic, pejorative nicknames used by a frustrated public to mock the president, including Hoovervilles (shantytowns), Hoover blankets (newspapers), and Hoover wagons (cars pulled by horses).

1932 Presidential Election Significance

A historic landslide victory for Franklin D. Roosevelt that allowed Democrats to capture commanding majorities in Congress (72% of the House and a 59-36 Senate split) to rapidly pass emergency laws.

The New Deal Coalition

A powerful, diverse realignment of the Democratic voting base consisting of blue-collar factory workers, farmers, urban residents, immigrants, progressive intellectuals, women, and African Americans.

Black Voters & The Democratic Party (1932)

This election marked a massive shift as African Americans voted for a Democrat in large numbers for the first time, viewing FDR as a Northern Democrat insulated from the party's Southern Jim Crow faction.

Four Tenets of the New Deal

1. Reform and preserve the capitalist system rather than replace it. 2. Boost consumer purchasing power to match industrial output. 3. Counterbalance big business with big labor and federal oversight. 4. Better redistribute concentrated wealth.

Fireside Chats

FDR’s highly effective radio broadcasts where he used clear, conversational language and warm analogies to explain complex federal operations directly to citizens in their homes.

Federal Emergency Relief Administration (FERA)

A temporary early New Deal program that distributed direct federal grants to state relief agencies to alleviate human suffering and fund local construction and arts projects.

Agricultural Adjustment Act (AAA)

A New Deal initiative that sought to artificially raise crop prices by paying farmers subsidies to reduce their overall agricultural production by 30%, funded through a dedicated tax on agricultural processors.

United States v. Butler (1936)

The Supreme Court ruling that struck down the Agricultural Adjustment Act, deciding that its processing tax was unconstitutional and violated the Tenth Amendment.

Federal Deposit Insurance Corporation (FDIC)

An agency funded by fees levied on member financial institutions that permanently restored trust in banking by insuring individual deposits (originally up to $2,500

National Industrial Recovery Act (NIRA / NRA)

A sweeping law that allowed industries to self-regulate and fix baseline prices in exchange for keeping a standard 35-to-40 hour workweek, a minimum wage, and eliminating child labor.

A.L.A. Schechter Poultry Corp. v. United States (1935)

A unanimous Supreme Court decision that invalidated the NIRA/NRA, ruling that the federal government had unconstitutionally exceeded its authority over interstate commerce.

Public Works Administration (PWA)

A massive infrastructure agency that built landmark projects (like the Lincoln Tunnel and naval warships) by contracting out the labor to private corporations rather than hiring individuals directly.

Civilian Conservation Corps (CCC)

A highly popular relief program that took unemployed, single young men and paid them $1 a day to live in camps and perform environmental conservation work, such as planting forests and building parks.

Tennessee Valley Authority (TVA)

A federal, regional monopoly created to modernize an impoverished area by constructing dams, generating affordable electricity, managing severe floods, and eradicating malaria.

Ashwander v. Tennessee Valley Authority (1936)

The Supreme Court ruling that defended the constitutionality of the TVA, affirming the federal government's constitutional authority to manage interstate commerce pathways.

Securities and Exchange Commission (SEC)

A regulatory commission created in 1934 tasked with enforcing federal laws on stock markets, requiring transparent financial reporting, and banning insider trading to protect investors.

Works Progress Administration (WPA)

The cornerstone program of the Second New Deal (1935–1942) that functioned as a purely federal agency, directly employing roughly 8.5 million citizens for public construction and arts projects.

Francis Townsend’s Plan vs. Social Security

Townsend gathered millions of supporters behind a radical proposal to give everyone over 60 a mandatory $200 monthly stipend

Helvering v. Davis (1937)

The landmark Supreme Court ruling that officially confirmed the constitutionality of the Social Security Act’s old-age pension and welfare systems.

Wagner Act / National Labor Relations Act (1935)

A major pro-union law that legally protected the right of workers to form unions, prohibited businesses from firing union organizers, and mandated good-faith collective bargaining.

American Liberty League

A well-funded political organization consisting of conservative Democrats and wealthy corporate executives (backed heavily by the du Pont family) that campaigned fiercely against New Deal economic regulations.

Al Smith’s Liberty League Criticisms

The former Democratic standard-bearer who publicly split from FDR, accusing the New Deal of abandoning traditional party principles, giving power to unelected bureaucrats, and drifting into creeping socialism.

Judicial Procedures Reform Bill of 1937

FDR’s highly controversial "Court-Packing Plan," which proposed adding up to six new Supreme Court justices—one for every sitting member over the age of 70—to protect his legislative programs.

Senate Judiciary Committee Response (1937)

The Democrat-led committee that rejected FDR's court-packing bill, releasing a scathing report calling it a dangerous overreach that threatened the bedrock independence of the judiciary.

End of the New Deal Phase (1938–1939)

A multi-layered political gridlock caused by public backlash to the court-packing plan, a sharp economic recession in 1937, and the rise of a conservative congressional coalition that successfully blocked new reforms.

Fair Labor Standards Act (FLSA) of 1938

A major labor law that instituted a federal minimum wage of $0.25 per hour and capped the maximum standard workweek at 44 hours, though it initially applied to only 20% to 38% of the workforce.

Dual Causes of the Dust Bowl

A severe environmental disaster generated by poor agricultural practices (over-plowing and overgrazing topsoil) combined with a brutal, decade-long natural drought and record-breaking heat waves.

Epicenter of the Dust Bowl

The Oklahoma Panhandle served as the absolute geographic heart of the ecological destruction, though it heavily devastated parts of Texas, Kansas, Colorado, and New Mexico.

Black Blizzards and Dust Pneumonia

The terrifying dust storms that completely blocked out daylight and choked communities, leading to a widespread, often fatal respiratory infection caused by breathing in heavy airborne silt.

Soil Conservation Service (1935)

A federal agency created to change agricultural techniques

The "Okie" Migration

A massive exodus of displaced families fleeing the Dust Bowl who moved to California looking for agricultural work, where they faced brutal discrimination and were treated as an unwelcome social burden.

Modern Prevention of the Dust Bowl

Since the 1960s, farmers have utilized extensive irrigation networks drawing from a massive underground aquifer, though the gradual depletion of this water supply poses a major risk for a future ecological crisis.