Franklin D. Roosevelt and the New Deal

Franklin D. Roosevelt and the New Deal

Redefining Democracy

• President Franklin D. Roosevelt redefined democracy to include:
  • Political Rights
  • Economic Security
  • Social Justice

Causes of the Great Depression

• The Great Depression was caused by several factors:
  • Agricultural overproduction
  • Industrial overproduction
  • Unequal distribution of wealth
  • Over-extension of credit
  • International economic situation

Herbert Hoover's Response to the Crisis

• Herbert Hoover's approach:
  • He employed "confidence economics," repeatedly asserting that "Prosperity is right around the corner."

Voluntary Measures

• Hoover established two privately-funded organizations:
  • The National Credit Association:
    • Provided $0.5$ billion to businesses for emergency loans.
    • Was underfunded, limiting its effectiveness.
  • The Organization for Unemployment Relief:
    • Served as a clearinghouse for relief agencies.
    • State and local governments were too indebted to benefit significantly.

Limited Government Intervention

• Hoover eventually resorted to government intervention:
  • The Reconstruction Finance Corporation (RFC):
    • Provided $1.5$ billion in federal loans to banks, insurance companies, and industry.
    • Aimed to prevent bankruptcies.
    • Considered too little, too late.
  • The Home Loan Bank Act:
    • Offered federal loans to homeowners to prevent foreclosures.
    • Was hindered by red tape.

Reasons for Ineffectiveness

• Hoover's policies were ineffective because:
  • He believed business should be self-regulating.
  • He prioritized a balanced budget.
  • He lacked political finesse.

Franklin D. Roosevelt's Appeal

• In the 1932 election:
  • FDR was seen as a man of action.
  • Hoover was viewed as a "do-nothing president."
  • Norman Thomas, the Socialist candidate, was seen as a radical.
• Election Results:
  • A landslide victory for the Democrats.
  • A mandate to use government for human welfare.

Situation When FDR Entered Office

• In March 1933:
  • The country lacked leadership.
  • The banking system had collapsed.

FDR Restored Confidence

• In his inaugural address:
  • FDR stated, "The only thing we have to fear is fear itself…."
  • He promised vigorous leadership and bold action.
  • He called for discipline and cooperation.
  • He expressed faith in democracy.
  • He asked for divine protection and guidance.

FDR’s Personal Qualities

• FDR's strengths included:
  • Being a practical politician who understood the art of the possible.
  • Being charismatic and exhibiting warmth and understanding.
  • Knowing how to manage the press by focusing attention on Washington.
  • Providing dynamic leadership during a crisis.
  • Willingness to experiment with new ideas.

Purposes of the New Deal

• The New Deal had three main purposes:
  • Relief: Providing jobs for the unemployed and protecting farmers from foreclosure.
  • Recovery: Getting the economy back into high gear, "priming the pump."
  • Reform: Regulating banks, abolishing child labor, and conserving farm lands.
• Overall objective: preserving capitalism.

Sources of New Deal Ideas

• The New Deal's ideas came from various sources:
  • Brains Trust: Specialists and experts, mainly college professors.
  • New Economists: Advocated government spending, deficit spending, and public works.
  • Roosevelt Cabinet: Included diverse viewpoints (conservatives, liberals, Democrats, Republicans) leading to compromise and blended ideas.

First New Deal (1933-1934)

• Emphasis: reform
• Political Position: conservative
• Primary aim: economic recovery
• Philosophy: economic nationalism and economic scarcity (raising prices by creating the illusion of scarcity).
• Objectives: higher prices for agriculture and business.
• Beneficiaries: big business and agricultural business.

National Recovery Act (NRA)

• Purpose: recovery of industry.
• Created a partnership between business, labor, and government to address the depression through price controls, high wages, and fair competition codes.

First Agricultural Adjustment Act (AAA)

• Purpose: recovery of agriculture.
• Paid farmers to reduce production of basic crops (cotton, wheat, tobacco, hogs, and corn).
• Funding came from a tax on processors (flour millers, meat packers), who passed the cost to consumers.

Federal Emergency Relief Admin (FERA)

• Purpose: relief
• Distributed money to states and municipalities to provide money, clothing, and food to the unemployed.

Civilian Conservation Corp (CCC)

• Purpose: relief
• Provided outdoor work for unemployed men aged 17-29.
• They received $30$ per month, with $22$ sent back to their families.

Second New Deal (1934-1941)

• Emphasis: reform
• Political Position: liberal
• Primary aim: permanent reform
• Philosophy: international economic cooperation and economic abundance.
• Objectives: increased purchasing power and social security for the public.
• Beneficiaries: small farmers and labor.

Social Security Act

• Purpose: reform
• Provided money to states for aid to dependent children, established unemployment insurance (through payroll deduction), and set up old-age pensions for retirees.

National Labor Relations Act

• Purpose: reform
• Placed restraints on employers and established the National Labor Relations Board to protect the rights of organized labor to bargain collectively.

Second Agricultural Adjustment Act

• Purpose: recovery for agriculture
• Paid farmers for conservation practices if they restricted production of staple crops.

U.S. Housing Authority

• Purpose: recovery and reform
• Used federal funds to tear down slums and construct better housing.

The New Deal on Trial

• By 1935, political disunity was evident, with critics on both the right and the left.

Criticisms of Conservative Opponents

• Conservative opponents argued the New Deal went too far:
  • It was socialism (killed individualism).
  • It increased the national debt ($35$ billion).
  • It wasted money on relief and encouraged idleness.
  • It violated the Constitution and states' rights.
  • It increased the power of the Presidency (FDR was seen as reaching toward dictatorship).

Anti-New Deal Organization

• The American Liberty League:
  • Conservative opponents to the New Deal formed this organization.
  • They had money but limited numbers, so FDR wasn't worried.

Criticisms of Radical Opponents

• Radical opponents argued the New Deal did not go far enough.
  • They included demagogues and had popular followings, causing FDR concern.

Senator Huey Long (LA)

• Senator Huey Long advocated a "Share the Wealth" plan:
  • Guaranteed annual income of at least $5,000$ for every American.
  • Financed by confiscating wealth from people making over $5$ million per year.

Father Charles E. Coughlin

• Father Charles Coughlin, a radio priest from Detroit, claimed:
  • There was an international bankers conspiracy and Jews were responsible.
  • Advocated nationalization of banking, currency, and natural resources.
  • Demanded a "living wage."

Dr. Francis E. Townsend

• Dr. Francis E. Townsend proposed:
  • The federal government should pay $200$ per month to unemployed people over 60.
  • The program would be financed by a $2\%$ national sales tax.
  • Pensioners would be required to spend the money in 30 days to stimulate the economy.

Moderate Legislation

• FDR sponsored moderate legislation to silence radical opposition:
  • Revenue Act of 1935: Increased taxes on large incomes and corporations (response to Huey Long).
  • Banking Act of 1935: Extended federal control over private banking practices (response to Coughlin).
  • Social Security Act of 1935: Included provisions for unemployables (dependent children, the disabled, blind), unemployment insurance, and old-age pensions (response to Townsend).

The Election of 1936

• The election:
  • Made the Democratic party the majority party.
  • Created a new Democratic coalition.
  • Showed the American people rejected radical solutions to the depression.

The Roosevelt Coalition

• Democrats broadened their constituency by appealing to:
  • Small farmers in the Midwest
  • Urban political bosses
  • Ethnic blue-collar workers
  • Jews
  • Intellectuals
  • African Americans

Protection of New Deal Accomplishments

• FDR's steps to protect New Deal accomplishments (both failed):
  • Court-Packing Plan: Proposed increasing the Supreme Court from 9 to 15 members, causing a revolt in the Democratic Party.
  • Purge of the Democratic Party in the Election of 1938: He came out strongly in favor of liberal Democratic candidates, evidence that he interfered in a state campaign, and Republicans gained strength in both houses of Congress.

Decline of New Deal Reform After 1937

• Reasons for the decline:
  • The court-packing plan made Congress irritable.
  • The recession of 1937-38 weakened confidence in New Deal measures.
  • The attempted purge of the Democratic party failed.
  • Conservative Democrats were elected, joining with Republicans to block New Deal legislation.
  • Increasing focus on foreign affairs.

The Significance of the New Deal

Physical Rehabilitation of Country

• The New Deal:
  • Addressed soil erosion.
  • Built dams and planted trees to prevent floods.
  • Reclaimed grasslands of the Great Plains.
  • Developed water power resources.
  • Encouraged regional reconstruction projects like the TVA and Columbia River project.

Human Rehabilitation

• The New Deal:
  • Established the principle that government is responsible for the health, welfare, and security of its citizens.
  • Embraced social security, public health, and housing.
  • Entered the domains of agriculture and labor.

Revitalization of Politics

• The New Deal:
  • Strengthened the executive branch.
  • Reasserted presidential leadership.
  • Revitalized the political party as a vehicle for the popular will and effective action.

Extension of Democracy

• The New Deal:
  • Redefined democracy to include not only political rights but economic security and social justice as well.

Maintenance of a Democratic System

• The New Deal:
  • Maintained a democratic system in a world threatened by totalitarianism.
  • Increased the size and scope of government to meet the needs of the depression.
  • Provided leadership for Congress to pass relief, recovery, and reform measures.
  • Sponsored moderate legislation to neutralize radical opponents.

Government Expenditures

• The total cost of the current bailout exceeds $4.6$ trillion dollars.
• Historical costs (adjusted for inflation):
  • Marshall Plan: $12.7$ billion ($115.3$ billion)
  • Louisiana Purchase: $15$ million ($217$ billion)
  • Race to the Moon: $36.4$ billion ($237$ billion)
  • S&L Crisis: $153$ billion ($256$ billion)
  • Korean War: $54$ billion ($454$ billion)
  • The New Deal: $32$ billion (est. $500$ billion est.)
  • Invasion of Iraq: $551$billion ($597$ billion)
  • Vietnam War: $111$ billion ($698$ billion)
  • NASA: $416.7$ billion ($851.2$ billion)
  • TOTAL: $3.92$ trillion