Launching the New Deal

• Much of Roosevelt’s success was a result of his ebullient personality. In his inaugural address, he assured the American people that “the only thing we have to fear is fear itself,” and promised to take drastic, even warlike, action against the emergency

• On March 6, 1933, two days after taking office, he issued a proclamation closing all American banks for four days until Congress could meet in a special session to consider banking-reform legislation.

• So great was the panic about bank failures that the “bank holiday,” as the president euphemistically described it, created a general sense of relief.

• Three days later, Roosevelt sent to Congress the Emergency Banking Act, a generally conservative bill (much of it drafted by Hoover administration holdovers) designed primarily to protect the larger banks from being dragged down by the weakness of smaller ones.

• The bill provided for Treasury Department inspection of all banks before they would be allowed to reopen, for federal assistance to some troubled institutions, and for a thorough reorganization of those in the greatest difficulty

• On the morning after passage of the Emergency Banking Act, Roosevelt sent to Congress another measure—the Economy Act—designed to convince fiscally conservative Americans (especially the business community) that the federal government was in safe, responsible hands

• Roosevelt also moved in his first days in office to put to rest one of the divisive issues of the 1920s.

• He supported and then signed a bill to legalize the manufacture and sale of beer with a 3.2 percent alcohol content—an interim measure pending the repeal of prohibition, for which a constitutional amendment (the Twenty-First) was already in process.

• The amendment was ratified later in 1933.

Agricultural Adjustment

• The first of them was the Agricultural Adjustment Act, which Congress passed in May 1933.

• Its most important feature was its provision for reducing crop production to end agricultural surpluses and halt the downward spiral of farm prices.

• Under the provisions of the act, producers of seven basic commodities (wheat, cotton, corn, hogs, rice, tobacco, and dairy products) would decide on production limits for their crop

• The government, through the Agricultural Adjustment Administration (AAA), would then tell individual farmers how much they should produce and would pay them subsidies for leaving some of their lands idle.

• A tax on food processing (for example, the milling of wheat) would provide the funds for the new payments.

• Farm prices would be subsidized up to the point of parity.

Industrial Recovery

• Ever since 1931, leaders of the U.S. Chamber of Commerce and many others had been urging the government to adopt an anti-deflation scheme that would permit trade associations to cooperate in stabilizing prices within their industries.

• The Roosevelt administration was more receptive.

• In exchange for relaxing antitrust provisions, however, New Dealers insisted on other provisions

• At first, the new industrial recovery program appeared to work well.

• At its center was a new federal agency, the National Recovery Administration (NRA), under the direction of the flamboyant and energetic Hugh S. Johnson. Johnson called on every business establishment in the nation to accept a temporary “blanket code”: a minimum wage of between 30 and 40 cents an hour, a maximum workweek of thirty-five to forty hours, and the abolition of child labor

• NRA itself gave the New Deal a convenient excuse for ending a failed experiment.

Regional Planning

• The AAA and the NRA largely reflected the beliefs of New Dealers who favored economic planning but wanted private interests (farmers or business leaders) to dominate the planning process.

• Other reformers believed that the government itself should be the chief planning agent in the economy.

• The TVA revitalized the region in numerous ways.

• It improved water transportation, virtually eliminated flooding in the region, and provided electricity to thousands who had never before had it.

• Throughout much of the country, largely because of the “yardstick” provided by the TVA’s cheap production of electricity, private power rates declined

Currency, Banks, and the Stock Market

• Roosevelt soon came to consider the gold standard a major obstacle to the restoration of adequate prices.

• On April 18, 1933, he made the shift off the gold standard official with an executive order.

• It did not, however, have any immediate impact on the depressed American economy.

• Through other legislation, the early New Deal increased federal authority over previously unregulated or weakly regulated areas of the economy

• To protect investors in the stock market, Congress passed the so-called Truth in Securities Act of 1933, requiring corporations issuing new securities to provide full and accurate information about them to the public

The Growth of Federal Relief

• Among Roosevelt’s first acts in office was the establishment of the Federal Emergency Relief Administration (FERA), which provided cash grants to states to prop up bankrupt relief agencies.

• To administer the program, he chose the director of the New York State relief agency, Harry Hopkins, who disbursed the FERA grants widely and rapidly

• Roosevelt’s favorite relief project was the Civilian Conservation Corps (CCC).

• Established in the first weeks of the new administration, the CCC was designed to provide employment to the millions of young men who could find no jobs in the cities.

• The CCC created camps in national parks and forests and in other rural and wilderness settings

• Mortgage relief was a pressing need for millions of farm owners and homeowners.

• The Farm Credit Administration, which within two years refinanced one-fifth of all farm mortgages in the United States, was one response to that problem.

• The Frazier-Lemke Farm Bankruptcy Act of 1933 was another.

• It enabled some farmers to regain their land even after foreclosure on their mortgages.

• Despite such efforts, however, 25 percent of all American farm owners had lost their land by 1934.

24.1: The New Deal in Transition

Critics of the New Deal

• Some of the most strident attacks on the New Deal came from critics on the right.

• Roosevelt had tried for a time to conciliate conservatives and business leaders.

• By the end of 1934, however, it was clear that the American right in general, and much of the corporate world in particular, had become irreconcilably hostile to the New Deal.

• Roosevelt’s critics on the far left also managed to produce alarm among some supporters of the administration, but like the conservatives, they proved to have only limited strength.

• The Communist Party, the Socialist Party, and other radical and semi-radical organizations were at times harshly critical of the New Deal.

• But they, too, failed to attract genuine mass support.

• According to the Townsend Plan, all Americans over the age of sixty would receive monthly government pensions of $200, provided they retired (thus freeing jobs for younger, unemployed Americans) and spent the money in full each month (which would pump needed funds into the economy).

• By 1935, the Townsend Plan had attracted the support of many older men and women.

• And while the plan itself was defeated in Congress in 1935, the public sentiment behind it helped build support for the Social Security system, which Congress did approve in 1935.

• The government, he claimed, could end the Depression easily by using the tax system to confiscate the surplus riches of the wealthiest men and women in America and distribute these surpluses to the rest of the population.

• That would, he claimed, allow the government to guarantee every family a minimum “homestead” of $5,000 and an annual wage of $2,500

The Second New Deal

• Roosevelt launched the so-called Second New Deal in the spring of 1935 in response both to the growing political pressures and to the continuing economic crisis.

• The new proposals represented, if not a new direction, at least a shift in the emphasis of New Deal policy.

• Perhaps the most conspicuous change was in the administration’s attitude toward big business.

• Symbolically at least, the president was now willing to attack corporate interests openly

Labor Militancy

• The growing labor militancy first became obvious in 1934, when recently organized workers (many of them inspired by the collective bargaining provisions of the National Industrial Recovery Act) demonstrated a new assertiveness.

• It was soon clear, however, that without stronger legal protection, most organizing drives would end in frustration.

• The American Federation of Labor (AFL) remained committed to the idea of the craft union: organizing workers on the basis of their skills.

• But that concept had little to offer unskilled laborers, who now constituted the bulk of the industrial workforce.

• During the 1930s, therefore, a newer concept of labor organization challenged the craft union ideal: industrial unionism.

Organizing Battles

• Out of several competing auto unions, the United Auto Workers (UAW) was gradually emerging preeminent in the early and mid1930s

• In the steel industry, the battle for unionization was less easily won.

• In 1936, the Steel Workers Organizing Committee (SWOC; later the United Steelworkers of America) began a major organizing drive involving thousands of workers and frequent, at times bitter, strikes.

• In March 1937, U.S. Steel, the giant of the industry, recognized the union rather than risk a costly strike at a time when it sensed itself on the verge of recovery from the Depression

Social Security

• In 1935, Roosevelt gave public support to what became the Social Security Act, which Congress passed the same year.

• It established several distinct programs.

• For the elderly, there were two types of assistance.

• Those who were presently destitute could receive up to $15 a month in federal assistance.

• More important for the future, many Americans presently working were incorporated into a pension system, to which they and their employers would contribute by paying a payroll tax; it would provide them with an income on retirement.

• Pension payments would not begin until 1942 and even then would provide only $10 to $85 a month to recipients.

• And broad categories of workers (including domestic servants and agricultural laborers, occupations with disproportionate numbers of blacks and women) were excluded from the program.

• In addition, the Social Security Act created a system of unemployment insurance, which employers alone would finance and which made it possible for workers laid off from their jobs to receive temporary government assistance

New Direction is Relief

• Social Security was designed primarily to fulfill long-range goals.

• But millions of unemployed Americans had immediate needs.

• To help them, the Roosevelt administration established the Works Progress Administration (WPA) in 1935.

• Like the Civil Works Administration and earlier efforts, the WPA established a system of work relief for the unemployed.

• But it was much bigger than the earlier agencies, both in the size of its budget ($5 billion in its first two years) and in the energy and imagination of its operations.

• Under the direction of Harry Hopkins, the WPA was responsible for building or renovating 110,000 public buildings (schools, post offices, government office buildings) and for constructing almost 600 airports, more than 500,000 miles of roads, and over 100,000 bridges.

• In the process, the WPA kept an average of 2.1 million workers employed and pumped needed money into the economy

The 1936 Referendum

• For a time in 1935, there had seemed reasonable to question the president’s prospects for reelection

• The election results demonstrated the party realignment that the New Deal had produced.

24.3: The New Deal in Disarray

The Court Fight

• The 1936 mandate, Franklin Roosevelt believed, made it possible for him to do something about the problem of the Supreme Court

• Conservatives were outraged at the “Court-packing plan,” and even many Roosevelt supporters were disturbed by what they considered evidence of the president’s hunger for power.

• On one level, the affair was a significant victory for Franklin Roosevelt.

• The Court was no longer an obstacle to New Deal reforms, particularly after the older justices began to retire, to be replaced by Roosevelt appointees.

• But the Court-packing episode did lasting political damage to the administration

Retrenchment and Recession

• The recession of 1937, known to the president’s critics as the “Roosevelt recession,” as a result of many factors

• Later in 1938, the administration successfully supported one of its most ambitious pieces of labor legislation, the Fair Labor Standards Act, which for the first time established a national minimum wage and a forty-hour workweek, and which also placed strict limits on child labor.

• Like Social Security, the act at first excluded from its provisions the great majority of women and minority workers

24.4: Limits and Legacies of the New Deal

The Idea of the Broker State

• In 1933, many New Dealers dreamed of using their new popularity and authority to remake American capitalism—to produce new forms of cooperation and control that would create a genuinely harmonious, ordered economic world.

• What they had created was something that in later years would become known as the “broker state.”

• In later years, the “broker state” idea would expand to embrace other groups as well

African Americans and the New Deal

• One group the New Deal did relatively little to assist was African Americans.

• The administration was not hostile to black aspirations.

• On the contrary, the New Deal was probably more sympathetic to them than any previous government

• Eleanor Roosevelt spoke throughout the 1930s on behalf of racial justice and put continuing pressure on her husband and others in the federal government to ease discrimination against blacks.

• She was also partially responsible for what was, symbolically at least, one of the most important events of the decade for African Americans

• African Americans supported Franklin Roosevelt because they knew he was not their enemy

• New Deal relief agencies did not challenge, and indeed reinforced, existing patterns of discrimination.

• The Civilian Conservation Corps established separate black camps.

• The NRA codes tolerated paying blacks less than whites doing the same jobs

• The New Deal was not hostile to African Americans, and it did much to help them advance.

• But it refused to make the issue of the race a significant part of its agenda

The New Deal and the “Indian Problem”

• In many respects, government policies toward the Indian tribes in the 1930s were simply a continuation of the long-established effort to encourage Native Americans to assimilate into the larger society and culture.

• Even with the redistribution of lands under the 1934 act, however, Indians continued to possess, for the most part, only territory whites did not want—much of it arid, some of it desert

• The efforts of the 1930s did not solve what some white people called the “Indian problem.”

• They did, however, provide Indians with some tools for rebuilding the viability of the tribes.

Women and the New Deal

• As with African Americans, the New Deal was not hostile to feminist aspirations, but neither did it do a great deal to advance them

• There were, to be sure, important symbolic gestures on behalf of women.

• Roosevelt appointed the first female cabinet member in the nation’s history, Secretary of Labor Frances Perkins.

• He also named more than 100 other women to positions at lower levels of the federal bureaucracy

• But New Deal support for women operated within limits, partly because New Deal women themselves had limited views of what their aims should be

• The New Deal generally supported the prevailing belief that in hard times women should withdraw from the workplace to open up more jobs for men.

• New Deal relief agencies offered relatively little employment for women.

• The NRA sanctioned wage practices that discriminated against women.

• The Social Security program at first excluded domestic servants, waitresses, and other predominantly female occupations

The New Deal in the West and the South

• In the South, locally administered New Deal relief programs did not challenge prevailing racial norms.

• In the West, too, New Deal programs accepted existing racial and ethnic prejudices.

• But the main reason for the New Deal’s impact on the West was that conditions in the region made the government’s programs especially important

• The New Deal located fewer great infrastructure projects in the South than it did in the West—although the largest of them, the TVA, was an entirely southern venture.

• But many of the economic development efforts the Roosevelt administration undertook were of disproportionate benefit to the South, largely because the South was the least economically developed region of the nation in the 1930s.

• The New Deal also directed national attention toward the economic condition of the South in a way that no previous administration had done.

• Many Americans outside the South had long believed the South to be “backward,” but they tended to attribute that backwardness to racism, segregation, and prejudice

The New Deal and the National Economy

• The most frequent criticisms of the New Deal involve its failure genuinely to revive or reform the American economy.

• New Dealers never fully embraced government spending as a vehicle for recovery, and their efforts along other lines never succeeded in ending the Depression.

• The economic boom sparked by World War II, not the New Deal, finally ended the crisis.

• Nevertheless, the New Deal did have important and lasting effects on both the behavior and the structure of the American economy

• The New Deal also created the basis of the federal welfare state, through its many relief programs and above all through the Social Security system

The New Deal and American Politics

• Perhaps the most dramatic effect of the New Deal was on the structure and behavior of the American government and on the character of American politics.

• Franklin Roosevelt helped enhance the power of the federal government

• Finally, the New Deal had a profound impact on how the American people defined themselves politically.

• It took a weak, divided Democratic Party, which had been a minority force in American politics for many decades, and turned it into a mighty coalition that would dominate national party competition for more than thirty years.