The New Deal

Causes of the Great Depression

• High tariffs and war debts
• Stock market crash and financial panic
• Overproduction
    * Industry
    * Agriculture
• Unequal distribution of wealth
• Monetary policy

The Three R’s

• Relief
    * Halt the effects of the Depression
    * Provide immediate relief to unemployed
    * Prime the pump and reduce unemployment
• Recovery
    * Restore the economy to full employment
    * Restart consumer demand investment
• Reform
    * Target the causes of the Depression
    * Prevent any future economic catastrophes

First New Deal (1933-34)

Emergency Banking Act

• Banking Holiday
    * March 5th to 13th, 1933
    * Closed all banks nationwide to prevent further banking withdrawals
• Emergency Banking Act
    * March 9, 1933
    * Empowered Treasury Department to monitor solvency of banks
    * First category: banks fit to fully reopen
    * Second category: certain percentage of deposits withdrawn
    * Third category: banks on brink of collapse and only accept deposits
    * Fourth category: unfit banks and closed down

Banking Reform

• Glass-Steagall Banking Reform Act
    * June 16th, 1933
    * Federal Deposit Insurance Corporation (FDIC)
    * Prohibited use of commercial banking for investment banking
    * Creation of the Federal Open Market Committee (FDMC) of the Federal Reserve
• Gold Reserve Act (January 1934)
    * Devalued the dollar to gold
    * Outlawed private ownership of gold and gold certificates
    * Increased the money supply, lowering interest rates for investment

Civilian Conservation Corps (CCC)

• April 5th, 1933
• Work relief for two million unemployed, unmarried men 17-25 yrs old
• Sent to rural areas and lived in barracks, subject to military-type discipline
• Built reservoirs and bridges, planted trees, road construction, reforestation, and cleared lands
• Earned $30 ($588) a month
    * Up to $25 of it sent to their families back home
    * The rest kept by workers: housing and food covered by CCC
• Inspired by the Bonus Army March

Agricultural Adjustment Administration (AAA)

• May 12th, 1933
• Purpose and provisions
    * Restored farmer purchasing power to pre-WWI levels
    * Federal government provided a domestic allotment for farmers to produce less, by 30%
      * Funded by a tax on farm processors
    * Controlled the supply of basic crops (corn, wheat, cotton, rice, peanuts, tobacco, milk)
• Effects
    * Higher prices benefited large landowners and burdened American consumers
    * Led to eviction of sharecroppers and tenant farmers due to less average production
• United States v. Butler (1936)
    * Declared that a federal processing tax on agricultural commodities violated the Tenth Amendment because it attempted to regulate and control agricultural production
      * Power should be reserved to the states

National Industrial Recovery Act (NIRA)

• June 16th, 1933
• Purpose
    * Regulate industry for fair wages and prices to stimulate the economy
• Established the National Recovery Administration (NRA) to enforce provisions
    * Companies developed codes of fair competition
    * Effectively fixed wages and prices
    * Established production quotas
    * Allowed employees the right to join unions
• Tended to favor corporations over small business
• Established the Public Works Administration (PWA)
    * La Guardia Airport
    * Overseas Highway
    * Great Smokey Mountains National Park
    * Hoover Dam
• Schecter Poultry Corp v. United States (1935)
    * Delegation of legislative powers to executive
    * Codes beyond the scope of Congress’ commerce power

Tennessee Valley Authority (TVA)

• Tennessee Valley was underdeveloped and hard-hit by the Depression
• TVA intended to modernize the region
    * Build dams for electricity and power utilities
    * Introduced new farming techniques
    * Replenished river systems and lakes
    * Established flood control systems
• Criticisms
    * Eminent domain displaced 15,000 families
    * Federal gov. in direct competition with private business

Federal Emergency Relief Administration (FERA)

• $500 million of outright direct relief to state and local public work projects
• Established Civil Works Administration (CWA) for temporary public works construction jobs
    * 44,000 miles of road
    * 4,000 new or improved schools
    * 1,000 new or improved airports

Alphabet Soup

• Called by their initials
• Securities and Exchange Commission (SEC) (1934)
    * Regulatory agency for stock market
• Farm Credit Administration (FCA)
    * Refinanced farm loans
• Home Owners Loan Corporation (HOLC)
    * Refinance mortgages for home improvements
• Federal Housing Administration (FHA)
    * Regulate mortgage interest rates and underwrite mortgages
• United States Housing Authority (USHA)
    * Government-owned low-income housing
• Reciprocal Trade Agreements Act (RTAA)
    * Authorized president to negotiate trade agreements

Revenue Acts

• Revenue Act of 1932 (Hoover)
    * Increased corporate tax rates and income tax rates
    * Estate tax
• Revenue Act of 1934
    * Increased rates on higher incomes
• Revenue Act of 1935
    * Wealth Tax (“Soak the Rich” Tax)
    * Corporate tax rate up to 15%
    * Revenue Act of 1937 closed any tax loopholes and prevented tax evasion by revising the law
• Revenue Act of 1936
    * Raised top income rate to 79%
    * Levied tax on corporate undistributed profits
• Purpose
    * Generate revenue for spending programs
    * Alleviate tax burden on middle class
• Criticism
    * Wealthy and corporations overburdened
    * Limited incentives for work, investment, and entrepreneurship

Second New Deal (1935-36)

• More liberal and more controversial

Works Progress Administration (WPA)

• Congress appropriated $5 billion
• Purpose to employ unemployed people until the economy has recovered
• Established a national work relief program through large-scale public works projects
• National Youth Administration (NYA)
    * Provide work-relief and education for Americans 16-25 yrs old

WPA - Federal One

• $27 million allocated for employment of artists, musicians, actors, and writers
• Divisions
    * Federal Art Project
      * Jackson Pollock
    * Federal Music Project
    * Federal Theater Prokect
      * Living newspaper
    * Federal Writers’ Project
      * Ralph Ellison, Zora Neale Hurston, Claude McKay, Studs Terkel
    * Historical Records Survey
• House Un-American Activities Committee (HUAC)
    * Believed agencies infiltrated by communists and promoting socialist agendas

Social Security Act

• Created a fund to provide for old-age pensions, disabilities, and unemployment compensation
• Funded by a payroll tax on workers and employers
• Social Security Administration
    * Worked through state-federal cooperation

Rural Electrification Administration (REA)

• By 1935, only 10% of rural America had electricity
• Federal loans for installation of electrical distribution systems in isolated rural areas
    * Operated through privately-run business cooperatives
    * Offered electricity at affordable rates
• By 1940, 40% of rural America had electricity
• By 1950, 90% of rural America had electricity

Resettlement Administration (RA)

• Relocated urban and rural families from unproductive lands to planned communities
    * Federal government implemented soil conservation and reforestation programs on unproductive lands
• Provided low-interest loans to farmers for subsistence measures
• Replaced by Farm Security Administration (FSA)
    * Purpose to provide opportunity for tenant farmers
    * Build migrant farmer camps

Dorothea Lange

• Worked as a photographer with the RA
• Documented rural poverty and exploitation of sharecroppers

Soil Conservation Service (SCS)

• Purpose to combat soil erosion and preserving natural resources in response to the Dust Bowl
• Provided farmers subsidies and technical advice to plant native grasses and trees and raise vegetables instead of commercial crops

Labor Relations

• National Labor Relations Act (aka Wagner Act)
    * Guaranteed the right to join and form an independent labor union and collective bargaining
    * National Labor Relations Board (NLRB)
    * “Magna Carta for labor”
• Fair Labor Standards Act
    * Established child labor laws
    * Established right to a minimum wage
    * Guaranteed overtime pay for time and a half for over 40 hours a week

New Deal Opposition: “Not Enough”

• Father Charles E. Coughlin
    * Initially supported FDR
    * National Union for Social Justice
      * Monetary reform through free silver
      * Nationalization of major industries
    * Dr. Francis Townsend
      * Old-Age Revolving Pension - Townsend Plan
        * $200 monthly stipend to retired 60 years older; must spend it within the month
    * Huey Long
      * Share Our Wealth
        * Progressive tax code including 100% tax on personal income over $100 million
        * $5,000 estate with an annual minimum income $2,500
        * Free college education and vocational training old-age pensions; veterans’ benefits; a month’s vacation for each worker

New Deal Opposition: “Too Much”

• GOP Platform (1936)
    * Powers of Congress has been usurped by the President
    * New Deal seeks to usurp the rights of the states
    * It has created fear and hesitation in commerce and industry
    * Discourages new enterprise
    * Prevents employment and prolongs the depression
• American Liberty League
    * Group of conservative businessmen
• Roberts Taft (R-OH)
    * Criticized the New Deal as socialism
• William Randolph Hearst
    * Against the high tax rates on upper class and inheritance tax rates
• Al Smith (D)
    * Criticized FDR as engaging in class warfare
• Harry Byrd (D-VA)
    * Southern Democrat critical of FDR’s abandonment of conservative principles
    * Joined Conservative Coalition with Taft

Election of 1936

• Democrat
    * Franklin D. Roosevelt
    * New Deal Coalition
• Republican
    * Alfred Landon
      * Campaigned on ability to manage New Deal programs more efficiently

FDR and Court Packing

• Supreme Court reverse several New Deal programs
    * Schechter Poultry Corp v. United States (1935)
    * United States v. Butler (1936)
• Justice Reorganization Bill
    * Appoint new justices for every justice over 70
      * 6 additional justices
• “The Switch in Time That Saved Nine”
    * Justice Owen Roberts
    * Four horsemen (conservative wing) and three musketeers (liberal wing)
    * West Coast Hotel Co. v. Parrish
      * Upheld minimum wage law
    * Helvering v. Davis
      * Upheld Social Security Act

New Deal and Labor

• Wagner Act provisions contributed to growth of unions to 9 million members
• Congress of Industrial Organizations (1935)
    * John L. Lewis
    * Organize unskilled laborers in major industries
    * Industrial unionism
• United Automobile Workers
    * Used sit-down strikes to earn recognition from General Motors

New Deal and African-Americans

• New Deal Programs
    * AAA provisions led to evictions of sharecroppers
    * CCC segregated camps
    * NRA displaced 500,000 African-American workers
• Black Cabinet
    * Mary McLead Bethune - personal friend to Eleanor Roosevelt
• New Deal Coalition and Democratic Party allegiances
    * Ends in mid-1960s

New Deal and Women

• Federal and state laws prohibit married women from working
• New Deal programs
    * First New Deal relief programs only for male breadwinners
    * WPA first to directly hire single women and widows
      * Hired as seamstresses, clerks, Federal One
    * Would not address equal pay
• Frances Perkins
    * First woman to serve in presidential cabinet
    * Secretary of Labor (1933-1945)
      * Longest serving
    * Drafted Social Security Act

Escapism Literature

• Dominated by theme of dealing with disaster and hardship through faith and determination
• John Steinbeck
    * Grapes of Wrath (1939)
    * Of Mice and Men (1936)
• Margaret Mitchell
    * Gone with the Wind (1938)
• James Rorty
    * Where Life is Better (1936)

Escapism Music

• Characteristics
    * Jazz became mainstream with swing music
    * Development of big bands
    * Songs more popular than the artists
• Artists
    * Duke Ellington
    * Woody Guthrie
    * Benny Goodman
• Great Depression
    * Brother, Can You Spare a Dime? - Bing Crosby
    * Give a Man a Job - Jimmy Durante

Escapism Film

• Films inspiring hope
    * Gone with the Wind
    * The Wizard of Oz
    * Frank Capra
      * It’s a Wonderful Life
      * Mr. Deeds Goes to Town
      * Mr. Smith Goes to Washington
• Comedy
    * Marx Brothers
• Universal monsters
    * Fantasy and horror provided escape from reality of Depression
    * Frankenstein
    * Dracula

Great Depression in Sports and Recreation

• Sports
    * WPA
      * Athletic facilities
      * Athletic educational programs
    * Innovation, consolidation, and sacrifice of professional and college sports
      * College bowl games
      * NFL playoffs
• Recreation
    * Games and Monopoly
    * Gambling
    * Rodeos
      * Dance halls and jazz

Roosevelt Recession (1937-1938)

• Factors
    * Roosevelt pursued balanced budgets, curbing deficit spending - decrease in aggregate demand
    * Federal Reserve contracted money supply
      * Building reserves
      * No money to lend by banks
• Effects
    * Industrial production declined by almost 30%
    * Unemployment increased from 14.3% to 19%
    * Launched $5 billion spending program
• Democratic Purge of 1938
    * FDR’s campaign for liberal Democrats over conservative incumbents
    * Court-packing scheme and Roosevelt Recession
    * Net loss of 72 in House
• Hatch Act (1938)
    * Allegations of WPA bribing for votes
    * Prohibited federal government employees from using position for campaigns lobbying for votes

End of the New Deal

• Conservative Coalition
    * Southern Democrats and Republicans
    * After 1938 midterms, Democrats held slimmer majorities in Congress
• International Concerns
    * Totalitarian governments spawned defensive preparations
      * Japanese invasion of Manchuria in 1931
      * Italian invasion of Ethiopia, 1935
      * Hitler’s invasions:
        * Rhineland, 1936
        * Austria and Sudetenland, 1938
        * Czechoslovakia, March 1939
        * Poland, Sept 1939
    * Cash and carry (1939)
      * Prompted military production and federal spending through defense contracts

FDR’s Second Bill of Rights: State of the Union (1944)

• The right to a useful job in the industries of the nation
• The right to earn enough to provide needs
• The right of farmers to sell products at a return which will give them a decent living
• The right of every businessman to trade free of unfair competition and domination by monopolies
• The right of every family to a decent home
• The right to adequate medical care and good health
• The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment
• The right to a good education

The New Deal and the Depression

• Did help
    * Capitalist system remained
    * No nationalization of industries or financial systems
    * Enacted banking and stock market safeguards
      * FDIC
      * SEC
    * Established economic security
      * Social Security
      * Wagner Act
    * Provided new opportunities to minorities
    * Build the foundation for the modern labor movement
• Did not help much
    * Overburdened business with high costs such as wages
    * FDR demonized upper class and corporate class
    * Expanded federal bureaucracy and red tape
    * More than doubled the national debt
    * Federal government permanently given an active/direct role in economy
    * Expanded role of federal government in average American life
    * Catered to racist Southern Democrats
    * Discriminatory rates for women and minorities

New Deal Today

• Federal Deposit Insurance Corporation (FDIC)
• Securities and Exchange Commission (SEC)
• National Labor Relations Board (NLRB)
• Social Security Administration
• Tennessee Valley Authority (TVA)
• Federal Housing Authority (FHA)

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