The New Deal

By the Election of 1932, the country had been in the clutches of the worst economic depression in its history. Although Hoover had made gallant attempts at fixing the problem, his proposals had been too feeble to make a difference. By the time November rolled around, Americans were in desperate need of aid, and that year they placed their bets on the Democratic candidate, Franklin D. Roosevelt.

***Before we get started talking about Roosevelt and his New Deal it is very important to preface this presentation by stating that Roosevelt had TWO New Deals. The first (1933-34) was meant to provide immediate but temporary fixes. The second (1935-38) was intended to provide long-term preventive measures. The best way to think of this is by comparing the country to someone who has had a catastrophic wound and is hemorrhaging. Roosevelt’s first new deal was meant to stop the bleeding immediately. Think tourniquet. His second attempts were meant to cure the person and provide long-term care for the future. Think surgery, post-operative care, and possibly physical therapy. Also, keep in mind that many of these acts we are going to discuss were happening simultaneously. I have grouped them not chronologically but by category for easier understanding. ***

When Roosevelt entered office he had a very long to-do list which included the following:

Reassure the public
Fix Banks
Fix Market
Fix Farms
Fix Industries
Fix Regional Concerns
Fix Unemployment
Fix Mortgages

The first thing Roosevelt had to do before he could start addressing America's economic infrastructure was to reassure a very anxious public. For the first time in history, a US president used the radio to address the public every week. These radio broadcasts, or what Roosevelt called his Fire Side Chats, explained to the public at large in simple terms the plans and programs he was proposing to fix the nation. Surprisingly, his simple use of the radio, which continued throughout his presidency, was amazingly soothing. It was a start but it still did not end the depression.

After reaching out personally to the public, Roosevelt next turned to his most immediate problem- Fixing the Banks. To that end, he enacted the following:

Bank Holiday (March 6, 1933)- Two days after taking office Roosevelt closed every bank in the country for four days. Again this simple action was important. Due to the bank's reckless behavior that had resulted in bank closings and the loss of their patrons' money, many people had kept their money at home (think buried in coffee cans and hidden in the walls). This was bad because it kept money out of circulation and out of the market which is horrible for a capitalist society. The banking holiday provided a huge sense of relief because at least for four days nothing could go wrong.
Emergency Banking Relief Act (March 9, 1933)- During this period Treasury Department began inspecting all American banks. Those that were stable reopened at the end of the Banking Holiday. For those that were a little iffy, the government provided aid and for those that were very iffy, the government required complete reorganization before opening. Within three days ¾ of banks reopened. This government oversight went a long way in reassuring the public and soon $1 Billion in hoarded cash reentered the economy.
Economy Act (March 20, 1933)- This act was Roosevelt’s attempt at balancing the federal budget. It cut government employee salaries and reduced their pensions. It was meant to demonstrate that even the government was impacted by the economic crisis.
Glass-Steagall Act (June 1933) – This act authorized government oversight over the banks and allowed them to curb irresponsible binge spending by banks.
Federal Deposit Insurance Corporation (June 1933)- The FDIC guaranteed all bank deposits up to $2500. This meant even if the bank went under a patron would not lose his deposit as long as it was under $2500. (The FDIC is still around and very visibly today. Next time you are in a bank look around… you will probably see a sign saying this bank is FDIC-insured. )

And still, the economy was not fixed…

After fixing the banks, Roosevelt next turned to the Stock Market. To that end, he enacted the following:

Truth in Securities Act (May 1933)- This act required all companies issuing stocks to provide up-to-date and honest information regarding exactly what their stock was and its market worth. Before 1933 this information was not provided which made the Stock Market even riskier than it is today.
Securities and Exchange Commission – (June 1934)- This act, which is still around, provides government oversight and allows them to essentially police the stock market.

And this too did not fix the nation’s economic problems…

Next Roosevelt turned to the Farmers. He soon enacted the following:

Agricultural Adjustment Act (1933)- This act set production limits on 7 key products (Wheat, Cotton, Corn, Hogs, Rice, Tobacco, and Dairy).
Agricultural Adjustment Administration (1933) – This administration would enforce the Agricultural Adjustment Act by informing farmers of these 7 products and how much they were individually allowed to produce. However here lay a problem, if farmers could only produce a certain amount of product they were still losing money. Roosevelt came up with an ingenious idea to fix this problem. He would PAY farmers to leave their unused portions of land fallow (think not planted.) This action was soon ruled unconstitutional and replaced by the Domestic Allotment Act in the Second New Deal.

And still, the Depression continued…

Next Roosevelt turned to Industry. His plan to fix this area of the economy included:

National Industrial Recovery Act (1933)- This act allowed the president to regulate the industry and raise product prices.
National Recovery Administration (1933) – This Administration was tasked with regulating the industry; to that end it first sought to stabilize the economy by creating blanket codes that set wages and prices. The hope was that this would create jobs, define working standards, and raise wages. The problem was that these codes were set by big businesses and were often nonexistent for small companies.
National Industrial Recovery Act Section 7(a)- This section of the NIRA guaranteed workers the right to organize into Unions. This act was ruled unconstitutional and was replaced by the Wagener Act during the Second New Deal.

And still, the economy continued to spiral...

While many of Roosevelt's reform efforts had been restricted to government administrations impacting the nation at large with the creation of the Tennessee Valley Authority he branched out into regional oversight. The idea for TVA began before WWI with the building of a dam at Muscle Shoals, AL. Due to opposition, the idea stalled but in 1932 the opposition collapsed. TVA soon evolved into a multipurpose public operation serving 7 different states. Through a series of dams, it was able to control the waterways running through the Tennessee Valley resulting in not only creating cheap electricity for the area but also controlling damaging flooding. It also created numerous jobs for a region plagued by unemployment. TVA still exists today. Still, the economic problem continued…

Next Roosevelt turned to unemployment. But here he faced a problem. He didn’t just want to hand out federal aid because he felt like that would make the nation soft. To that end, he tried the following:

Federal Emergency Relief Administration (1933)- Following in Hoover’s footsteps Roosevelt first tried providing government grants to states to support failing relief efforts. The Administration was soon accused of favoritism and the funding was too limited to be effective.
Civil Works Administration (1933)- Next Roosevelt turned to direct aid. He created government-funded work programs that created projects of lasting value such as building roads, schools, parks, and bridges. The Administration soon created 4 Million temporary jobs.
Civilian Conservation Corps (1933)- The CWA soon created the CCC which was a work project that specifically targeted young men living in urban environments. This program created camps in national parks that were charged with building reservoirs, developing park infrastructure, and planting trees.

Still, the Depression continued…

Next Roosevelt turned to help people keep their homes. He enacted the following:

Farm Credit Administration (1933)- This Administration created the Farm Credit System, which was a group of cooperative lending organizations that helped farmers refinance their mortgages.
Frazier- Lemke Farm Bankruptcy Act (1934) -This act restricted the bank's ability to repossess farms and delayed foreclosures by 5 years, turning the property in question into a rental property. At the end of the 5 years, farmers could then choose to buy back the property at market value at 1% interest.
Home Owners Loan Corporation (1933)- This corporation helped refinance mortgages that were at risk of foreclosure.
National Housing Act (1934) -The NHA created the Federal Housing Administration that set standards for construction, underwriting, and insurance loans and mortgages on new construction.

And still, the problem continued…

Despite Roosevelt’s best efforts the Depression continued and by the end of the First New Deal many critics had emerged including:

American Liberty League- This league was comprised of America's wealthiest individuals (read business owners) who encouraged public opposition to what they felt was the government's overbearing policies that they claimed attacked free enterprise.
Dr. Francis E Townsend- Townsend was an elderly physician from CA who felt that the government could create more jobs by creating a federal pension plan for the elderly. According to Townsend's plan once an individual reached 65 they could retire and receive a monthly government pension payment of $200 which they had to spend that month. Townsend's idea was based on the idea that older workers who did not retire were taking up valuable jobs that could be going to younger more productive workers.
Senator Huey P. Long- Long was a very flamboyant and lively senator from LA who came up with an alternative plan he called “Share The Wealth.” This plan would create a tax system that would place high enough taxes on the wealthy to create a government surplus that would guarantee government funds for each family to have a minimum homestead of 5000 acres and a yearly wage of $2500! Unfortunately, for long his style was not popular amongst everyone and he was assassinated before his plan could go too far.

The First New Deal lasted from 1933-34. As you have probably noted, while Roosevelt was able to “stop the bleeding” in some areas of the economy, his numerous acts and administrations did not solve the nation’s problems. Likewise, many were struck down by a very conservative Supreme Court. As 1935 rolled around Roosevelt moved on to his Second New Deal which would last until 1938. As you will note, the acts and administrations produced during this period were intended as long-term fixes and as preventative measures in the form of public safety nets. Some of them have even lasted until today!

Much like with his first New Deal, Roosevelt had a long to-do list including:

Fix long-term union concerns
Fix continued unemployment problems
Fix continued agricultural problems
Protect previous reforms

Facing continued setbacks provided by the Supreme Court, Roosevelt continued to work to protect unions and their members. To that end, he replaced the NIRA (a)7 with the National Labor Relations Act (aka Wagner Act) (1935) that prohibited employers from interfering in unions. To enforce this NLRA the National Labor Relations Board was created. It was a 5 member board that oversaw labor activities. Thanks to the protections provided by the NLRA Industrial Unions became more viable and their membership grew along with their bargaining power. The two biggest included the United Auto Workers (UAW) and the United Mine Workers (UMW). Unions also began to employ less violent more productive forms of protest. When General Motors refused to recognize the UAW, members sat- down on the job (otherwise known as a sit-down strike) in one of GM's plants. This was an incredibly powerful form of striking because if workers stayed at their station then scabs could not come in and work in their place. Also because of their strategic choice in location, a plant that created dye–casts which were at the center of the assembly process, the strike’s repercussions soon rippled out, forcing work to stop at other companies. As a result, GM was finally forced to recognize the UAW.

During the Second New Deal Roosevelt, went about not only creating jobs but also providing safety nets for workers. This not only helped the workers but also made sure that they would still be earning money which was crucial to making sure the economy kept going. His actions included:

Social Security Act (1935)- Taking a move out of Townsend's playbook, Roosevelt moved to help elderly workers by essentially creating a federal retirement fund. For those destitute in 1935, the government provided a monthly paycheck of $15. For workers, the SSA created an enforced pension system where both employer and employee paid into a retirement fund. The first Social Security checks would be sent out in 1942 with individuals earning anywhere from $10-$85 depending on how much they had put in. Unfortunately, the first SSA did not include domestic servants or farmers.
Unemployment Insurance (1935)- This was an employer-financed safety net that provided funds for those who became unemployed and met the federal criteria.
Federal Aid for Disabilities- This government aid would provide those unable to work due to physical or mental disability a small monthly paycheck to ensure they at least had some money coming in. This was not meant to be a welfare check but instead a form of insurance.

In addition to providing safety nets for those most vulnerable citizens, Roosevelt continued to provide programs to create jobs. He replaced the CWA with the Works Progress Administration (1935) which provided jobs on temporary projects including renovating 100.000 public buildings, constructing 600 airports, building 500,000 miles of roads, and building 100,000 bridges. In the end, it employed close to 2.1 million workers. Not only that but the WPA created specialized jobs for those who had unique skills including:

Federal Art Project- Hired artists to create art for non-federal municipal buildings and public spaces.
Federal Writers Project- Hired writers, editors, historians, researchers, art critics, archaeologists, geologists, and cartographers to create works of lasting use including the Slave Narrative collection and other socially conscious works.
Federal Music Project- Hired professional musicians to provide live performances and introduce music into the classroom.
Federal Theatre Project- Hired actors to create a nationwide theater network. By the termination of the project, these actors had played 30 million people in more than 200 theaters!

To address continued agricultural problems, the Second New Deal did the following:

Domestic Allotment Act (1936) – To overcome the knockdown of the AAA, Roosevelt created this act to pay farmers to conserve soil to prevent erosion thus paying them for leaving their land fallow.
Resettlement Administration (1935) –This act provided loans to farmers for cultivating marginal land that wasn’t as productive. It was deemed unconstitutional and was replaced by the Farm Security Administration.
Rural Electrification Administration (1936)- This act provided electricity to rural areas of the country and by doing so created jobs.

As you have probably noticed many of Roosevelt’s reforms were struck down by the Supreme Court. Needless to say, Roosevelt feared that the very conservative Supreme Court would all but destroy his New Deal. In 1937 he proposed the Judicial Procedures Reform Bill (sometimes called the court-packing plan) that would allow Roosevelt to appoint additional justices, up to 6, for every judge over 70 years and six months. Roosevelt claimed he created this bill to alleviate the Supreme Court's workload that he suggested was too rigorous for its older members, however, everyone saw his true goal- adding additional liberal judges who would uphold his new deal. The Court Packing Scandal was an epic failure. Roosevelt was soon called out on his disingenuous bill BUT the Supreme Court Judges were faced with a reality they did not like and began on their own to reverse previous judgments regarding some of the President's New Deal initiatives.

In 1937 the anemic economy appeared to be getting better. Roosevelt decided to cut back on federal-funded initiatives. Immediately the economy crashed again. Roosevelt was forced to call for $5 Million in emergency appropriations that went directly to his Public Works projects. This became known as the Roosevelt Recession. The sudden economic downturn proved that despite all of Roosevelt's efforts the Great Depression continued with no solution in sight… or so Roosevelt thought. However, soon the fix that the President and nation so desperately sought would come expectedly…