From 1929 to 1933, manufacturing output decreased by 1/3. Prices fell by 20% causing deflation which...

The New Deal

A. Economic Collapse From 1929 to 1933,

manufacturing output decreased by 1/3. Prices fell by 20% causing deflation which made the repayments of debt much harder. Unemployment in the U.S. increased from 4% to 25% . About 1/3 of all employed persons were downgraded to working part-time. Almost 50% of the nation’s human work power was going unused.

Before the New Deal, there was no insurance on deposits at banks; when thousands of banks faced bankruptcy, many people lost everything! No public unemployment, no social security. Relief for the poor had been the responsibility of families, private charities, and local governments. However, as conditions worsened year by year, their combined resources fell far short of demand.

B. Running For Office Upon accepting

the 1932 Democratic nomination for president, Franklin Roosevelt promised “a new deal for the American people”

“Throughout the nation men and women, forgotten in the political philosophy of the government, look to us here for guidance and for more equitable opportunity to share in the distribution of national wealth . . . I pledge myself to a new deal for the American people. This is more than a political campaign. It is a call to arms.”

With a nation desperate for relief, reform, relief, and recovery were Franklin D. Roosevelt’s goals when he took over as president. At his side was a Democratic Congress, the majority of whom were prepared to enact measures carved out by a group of Roosevelt’s closest advisors (the “Brain Trust”). Recurring theme –help the “forgotten man at the bottom of the economic pyramid”

Hoover’s Disadvantages

not supported by many of the prominent Republicans and violently opposed by others;

some Republicans went so far as to endorse Roosevelt;

blamed for the Great Depression (for more than two years, Hoover had been restricting trade and increasing taxes);

outrage of the deaths of veterans in the Bonus Army

His attempts to campaign were disastrous; he often had objects (rotten fruits and vegetables) thrown at him or his vehicle. He viciously attacked Roosevelt’s plan, saying that it would make the depression worse. This only decreased his own popularity.

Two Deals? The “First New Deal” (1933-1934)

and the “Second New Deal” (1935-1938) are distinguished from one another. The first dealt with diverse groups, from banking and railroads to industry and farming. The Second New Deal was more liberal and controversial.

E. The “Hundred Days” called a special session of

Congress on March 9th; immediately, he began to submit reform and recovery measures for Congressional validation. Almost all of these bills were enacted by Congress; the 99-day (March 9th -June 16th ) session has come to be known as the Hundred Days.

On March 12th 1933, Roosevelt broadcast his first “fireside chat” to the American people; there would be 29 subsequent chats. The opening topic was the Bank Crisis. He spoke on a variety of topics to inform Americans and convince them to support his domestic agenda, and later, the war effort. During Roosevelt’s first year as president, Congress passed laws to protect the stock market and bond investors.

F. Some Measures› Emergency Banking Act – provided

the president with the means to reopen viable banks and regulate banking

› Economy Act – cut federal costs through reorganization of and cuts in salaries and pensions

› Beer-Wine Revenue Act – legalized and taxed beer and wine

› Civilian Conservation Corps Act – established the Civilian Conservation Corps; three million young men, 18-25, found work – building roads, forestry labor, flood control

› Federal Emergency Relief Act – established the Federal Emergency Relief Administration; distributed $500 million to states and localities for relief – pay out eventually became about 3 billion

› Agricultural Adjustment Act – established the Agricultural Adjustment Administration; decreased crop surpluses by subsidizing farmers who voluntarily cut production

› Thomas Amendment – permitted the president to inflate the currency

› Tennessee Valley Authority Act – allowed the federal government to build dams and power plants in the Tennessee Valley, along with agricultural and industrial planning, to generate and sell the power, and to engage in area developments

› Federal Securities Act –stiffening regulation of the securities business

G. A Second New Deal 35-38

In the spring of 1935, responding to setbacks in the Court, growing skepticism in Congress and popular call for more drastic action, the Administration proposed several new initiatives

Social Security – Before 1935, only a few states had old age insurance laws and most programs were seriously underfunded. The US was the only modern industrialized country where people faced the Depression without any national system of social security. The Social Security Act, drafted by Francis Perkins, is often viewed as the most important part of the New Deal. It established a permanent system of universal retirement pensions, unemployment insurance, and welfare benefits for the handicapped and needy children.

› Gold standard abandoned› National Employment Systems Act

› Home Owners Refinancing Act – established the Home Owners Loan Corporation

› Glass-Steagall Banking Act – banking reforms, established the Federal Bank Deposit Insurance Corporation

› Farm Credit Act – refinancing for farms

› Emergency Railroad Transportation Act – increase federal regulation of railroads

› National Industrial Recovery Act – established the National Recovery Administration and the Public Works Administration

H. Who Paid? Spending in 1916 was about 690

million; in 1936, it was 9 billion. The government modified taxes to tap wealthy people the most; the deficit was made up in part by raising taxes and borrowing money through the sale of government bonds. Meanwhile, national debt climbed to unprecedented heights.

I. Attempt at Court Packing?

When Roosevelt took office, the 5 justices (of 9) of the Supreme Court were appointed by the Republican Party. 4 were very conservative and convinced a 5th to vote down progressive legislation. Roosevelt tried to get Congress to pass the Judiciary Reorganization Bill; this would allow the president to appoint a new justice after an existing justice reached 70 and failed to retire within 6 months.

While the proposal failed, the justice, many believe due to Roosevelt’s court-packing attempt, began to vote more liberally. He upheld the collective bargaining rights under the Wagner Act and the Social Security Act.

J. Opponents By 1934, the New Deal was

encountering opposition from both ends of the spectrum. All around the country, brazen unions (many Marxist-influenced) sparked job actions, including city-wide strikes. Liberals argued that Roosevelt had not done enough; conservatives argued that he had done too much! Many were dismayed by the national budget deficits.

K. Election of 1936

The US Supreme Court had been nullifying crucial New Deal legislation but the President was reelected in 1936. He carried every state except Maine; wanting to capitalize on this, he introduced legislation to expand the federal courts. (another attempt at “packing”)

L. Attention Turns to Europe

As the free world began to fight the Axis Powers, Roosevelt began to turn his attention away from domestic policy to helping the Allies while still maintaining a somewhat isolationist position towards actually entering the war. America’s eventual entry into the war would continue to improve the economy. Large-scale production of military equipment and the draft turned Americans toward a beast in Europe and away from the poverty of the Great Depression.