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    • Second category: certain percentage of deposits withdrawn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)