Chapter 33: The Great Depression and the New Deal

FDR: Politician in a Wheelchair

• Born to a wealthy New York family

• Served as the governor of New York

• FDR's wife, Eleanor Roosevelt - very active in his political career

  • Loved by liberals and hated by conservatives

  • First First Lady to take an active stance in the President’s career

• FDR was a very good public speaker

  • Polarized the country with his politics

• In the election of 1932, the Democrats called for a balanced budget and social and economic reforms.

  • Got both electoral and popular vote

Presidential Hopefuls of 1932

• During election, FDR attacked the Republican Old Deal and supported a New Deal for the "forgotten man."

  • Shot at Teddy Roosevelt’s Square Deal

• Many Americans distrusted the Republican party because of the Great Depression

• Herbert Hoover believed that the worst of the Depression was over

• Reaffirmed his faith in American free enterprise and individualism

Hoover’s Humiliation in 1932

• FDR won election of 1932 by a sweeping majority, in both the popular vote and the Electoral College

• Beginning in the election of 1932, Black people became a vital part of the Democratic Party, especially in the urban centers of the North

FDR and the Three Rs: Relief / Recovery / Reform

• On March 6-10, FDR declares Bank Holiday - prelude to opening the banks on a sounder basis

• The Hundred Days Congress/Emergency Congress (March 9-June 16, 1933) passed a series laws to help improve the state of the country

  • FDR was the first to state what his plans were for his first 100 days in office

• Congress also passed some of FDR's New Deal programs

  • Focused on: relief, recovery, reform

    • Short-range goals = relief and immediate recovery

    • Long-range goals = permanent recovery and reform

  • Some of the New Deal programs gave the President unprecedented powers, which included the ability of the President to create legislation.

  • Many of the programs that gave the President this authority were declared unconstitutional by the Supreme Court.

• Congress gave President Roosevelt extraordinary blank-check powers: some of the laws gave legislative authority to the President.

• The New Deal legislation embraced progressive ideas like

  • unemployment insurance, old-age insurance, minimum-wage regulations, conservation and development of natural resources, and restrictions on child labor

Roosevelt Manages the Money

• Emergency Banking Relief Act of 1933 - gave President power to regulate banking transactions and foreign exchange and to reopen solvent banks

  • First thing he did during the Hundred Day Congress

• FDR gave "fireside chats" over the radio -soothed public's confidence in banks

• Congress created the Federal Deposit Insurance Corporation (FDIC) with the Glass-Steagall Banking Reform Act

  • Insured individual bank deposits up to $5,000  ended nation's epidemic of bank failures

• FDR took the nation off of the gold standard by having the Treasury buy gold from citizens  his point on, only transactions in paper money were accepted

• FDR's goal was to create modest inflation

  • Relieve debtors' burdens and stimulate new production

  • Inflation was achieved by buying gold at increasing prices over time - increased the amount of dollars in circulation

Creating Jobs for the Jobless

• FDR created jobs with federal money to jumpstart the economy.

• Civilian Conservation Corps (CCC) employed about 3 million men in government camps - included reforestation, fire fighting, flood control, and swamp drainage

• Federal Emergency Relief Act - Congress's first major effort to deal with the massive unemployment

  • Created the Federal Emergency Relief Administration (FERA) which gave states direct relief payments or money for wages on work projects

• Civil Works Administration (CWA), branch of FERA - designed to provide temporary jobs during the winter emergency

  • Thousands of unemployed were employed at leaf raking and other manual-labor jobs.

• Relief was given to farmers - Agricultural Adjustment Act (AAA) made available millions of dollars to help farmers meet their mortgages

  • Helps farmers control their growth as well as providing assistance for a payment

• Home Owners' Loan Corporation (HOLC) assisted many households that had trouble paying their mortgages

A Day for Every Demagogue

• Despite New Deal efforts, unemployment continued to plague the nation.

• Opponents to FDR's policies:

  • Father Charles Coughlin's, who preached anti-New Deal speeches over the radio

  • Senator Huey P. Long publicized his "Share Our Wealth" program in which every family in the United States would receive $5,000

  • Dr. Francis E. Townsend attracted millions of senior citizens with his plan that each citizen over the age of 60 would receive $200 a month

• Congress passed Works Progress Administration (WPA) in 1935, with the objective of providing employment for useful projects (i.e. the construction of buildings, roads, etc.)

  • Taxpayers criticized the agency for paying people to do "useless" jobs such as painting murals

  • Woody Guthrie was paid to write songs about the new deal

New Visibility for Women

• Women began to break gender barriers by holding positions in the Federal government, including the President's cabinet

• Ruth Benedict: made strides in the field of anthropology

• Pearl Buck: wrote about Chinese peasant society; won a Nobel Prize in literature in 1938

Helping Industry and Labor

• Cornerstone New Deal agency was the National Recovery Administration (NRA)

  • Designed to bring industries together to create a set of "fair" business practices (fair to business and workers)

  • Working hours were reduced so that more people could be hired; a minimum wage was established; workers were given the right to organize.

  • Made in an attempt to detract overtime work

• NRA was declared unconstitutional by the Supreme Court in 1935 (Schechter vs. United States) - gave legislative powers to the President, and allowed Congress to control individual business, not just interstate commerce

• Public Works Administration (PWA) was intended to provide long- term recovery

  • Headed by Harold L. Ickes, the agency spent over $4 billion on thousands of projects, including public buildings, highways, and dams.

• Congress repealed prohibition with the 21st Amendment in late 1933 to raise federal revenue and provide employment

Paying Farmers Not to Farm

• Agricultural Adjustment Administration (AAA) attempted to reduce crop surpluses, which led to lower crop prices

  • Established standard "parity prices" for basic commodities

  • Also paid farmers to not farm

• Supreme Court ruled the AAA unconstitutional in 1936, stating that its taxation programs were illegal.

• Second attempt to make farmers farm less, Congress passed the Soil Conservation and Domestic Allotment Act of 1936

  • Under the guise of conservation, it reduced crop acreage by paying farmers to plant soil-conserving crops

• Second Agricultural Adjustment Act of 1938 continued conservation payments; if farmers obeyed acreage restrictions on specific commodities, they would be eligible for payments

  • Allowed manufacturers to reopen breweries and stimulate economy

Dust Bowls and Black Blizzards

• Lots of art came out of the Dust Bowl

• Late in 1933, the Dust Bowl struck many states in the trans- Mississippi Great Plains

  • No rain for a solid 4 years

  • California sets up roadblocks to block people escaping the Dust Bowl from entering the state unless they paid a $20 fee

• Caused by drought, wind, and over-farming of the land

• Frazier-Lemke Farm Bankruptcy Act, passed in 1934, suspended mortgage foreclosures on farms for 5 years - struck down in 1935 by Supreme Court.

• Resettlement Administration, moved near-farmless farmers to better lands

• Indian Reorganization Act of 1934 encouraged Native American tribes to establish self-government and to preserve their native crafts and traditions

  • 77 tribes refused to organize under the law, while hundreds did organize

Battling Bankers and Big Business

• To protect the public against investment fraud, Congress passed the "Truth in Securities Act" (Federal Securities Act)

• Required people selling investments to inform their investors of the risks of the investment

• Securities and Exchange Commission (SEC) was created in 1934 - provided oversight of the stock market.

TVA Harnesses the Tennessee

• New Dealers accused the electric-power industry of charging the public too much money for electricity

• 1933 - Hundred Days Congress created the Tennessee Valley Authority (TVA)

  • Repackaged version of the Muscle Shoals project

    • Designed to construct dams on the Tennessee River

    • Provided employment and long-term recovery - projects gave gov’t information on exactly how much money was required to produce and distribute electricity

    • Would be a metric that gov’t could use to assess the rates charged by private companies

• TVA turned a poverty-stricken area (lower Appalachia) into one of the most flourishing regions in the United States

• Conservatives viewed the New Deal programs as "socialistic“ - ultimately helped limit the TVA-style of management to the Tennessee Valley

Housing and Social Security

• Federal Housing Administration (FHA), 1934, attempted to improve the home-building industry

  • Gave small loans to homeowners for the purpose of improving their homes and buying new ones

• United States Housing Authority (USHA) was passed in 1937

  • Designed to lend money to states/communities for low-cost housing developments

• Social Security Act of 1935

  • Provided federal-state unemployment insurance. To provide security for old age, specified categories of retired workers were to receive regular payments from Washington

  • Purpose of Social Security was to provide support for urbanized Americans who could not support themselves with a farm

  • In the past, Americans could support themselves by growing food on their farm. Now, relied solely on money from job. If they lost their job, they could not eat.

• Republicans opposed Social Security

A New Deal Labor

• Congress passed National Labor Relations Act of 1935 (Wagner Act) to help labor unions

  • Created powerful National Labor Relations Board for administrative purposes and it reasserted the rights of labor to engage in self-organization and to bargain collectively through representatives of its own choice

• Unskilled workers began to organize under leadership from John L. Lewis - formed the Committee for Industrial Organization (CIO) in 1935

  • CIO led a series of strikes, including the sit-down strike at the General Motors automobile factory in 1936

• Congress passed Fair Labor Standards Act (Wages and Hours Bill) in 1938

  • Industries involved in interstate commerce were to set up minimum-wage and maximum-hour levels

  • Labor by children under the age of 16 was forbidden.

• CIO joined with the AF of L and the name "Committee for Industrial Organization" was changed to "Congress of Industrial Organizations.“

  • By 1940, the CIO claimed about 4 million members

    Landon Challenges “The Champ”

    • Republicans chose Alfred M. Landon to run against President Roosevelt in the election of 1936

    • Republicans condemned the New Deal for its radicalism, experimentation, confusion, and "frightful waste."

    • Democrats had significant support from the millions of people that had benefited from the New Deal programs

    • President Roosevelt was reelected as president in a lopsided victory

    • FDR won primarily because he had appealed to the "forgotten man" (the South, blacks, urbanites, the poor)

Nine Old Men On the Bench

• Ratified in 1933, the 20th Amendment shortened the period from election to inauguration by 6 weeks

• Roosevelt saw his reelection as a mandate to continue the New Deal reforms

• Supreme Court was dominated by older ultraconservatives who attempted to stop many of the "socialistic" New Deal programs

• With continuous Democrat wins in Congress and the presidency, Roosevelt felt that the American people wanted the New Deal - argued that the Supreme Court needed to get in line with public opinion

• 1937, Roosevelt proposed legislation that would allow him to add liberal justices to the Court (court-packing plan): a new justice would be added for every member over the age of 70 who would not retire

• Plan received much negative feedback

The Court Changes Course

• Public criticized Roosevelt for attempting to tamper with the Supreme Court – went against system of checks and balances

• Possibly due public pressure, the Supreme Court began to support New Deal legislation - included Justice Owen J. Roberts - formerly regarded as a conservative.\

• Series of deaths and resignations of justices allowed Roosevelt to appoint 9 justices

• Supreme Court controversy in 1937 cost FDR a lot of political capital - few New Deal reforms passed after 1937

Twilight of the New Deal

• Roosevelt's first term, from 1933-1937, unemployment still ran high and recovery had been slow

• 1937, the economy took another downturn

  • Caused by reduced spending - Consumer spending was reduced because Social Security taxes cut into payrolls.

  • Roosevelt administration also cut back on spending in an attempt to keep a balanced budget. (The New Deal had run deficits for several years, but all of them had been somewhat small and none was intended.)

• Downturn led FDR to embrace recommendations of British economist John Keynes

• Keynesianism Economics: government money is used to "prime the pump" ofthe economy and encourage consumer spending > policy intentionally creates a budget deficit

• Congress passed the Hatch Act of 1937

  • Prevented federal administrative officials from active political campaigning and soliciting

    • Forbade use of government funds for political purposes as well as collection of campaign contributions from people receiving relief payments

New Deal or Raw Deal?

• Opponents of New Deal charged President of spending too much money on his programs

  • Significantly increased national debt > 1932 to 1939, the national debt increased from $19 trillion to $40 trillion

• Federal gov’t became much more powerful under FDR

• New Deal did not end the depression; it just gave temporary relief to citizens.

• Many economists eventually argued that not enough deficit spending was used. Despite the New Deal programs' efforts, production still outpaced spending.

• Not until World War II was the unemployment problem solved

FDR’s Balance Sheet

• New Deal supporters had argued that relief, not the economy, was the primary objective of their war on the Depression

  • Roosevelt believed that the government was morally bound to prevent mass hunger and starvation by "managing" the economy

• FDR potentially saved capitalism by eliminating some of its worst faults (ex: poor labor conditions)

  • If FDR had not helped the middle class, the poor would have gotten poorer, and the rich would have just gotten richer, bringing us to a fascist like state

    • Had his programs not been implemented, Socialism could've taken a bigger hold in the nation.

• FDR was a Hamiltonian in that he supported big government, but he was a Jeffersonian in that he supported the "forgotten man."