Notes: Chapter 33, The Great Depression and the New DealMain Idea Details

Title Angry voters in 1932 vengefully voted for FDR against Hoover. FDR was the perfect candidate for the time.

Hoover’s campaign praised Republican anti-depression policies, unenthusiastically promising the end of prohibition.

FDR: Politician in a Wheelchair

FDR was humble. Eleanor became conscience of the New Deal.

Eleanor joined Women’s Trade Union League and League of Women Voters.

Presidential Hopefuls of 1932

FDR was vague and contradictory in his idea of a New Deal for the forgotten man. Hoover blamed FDR on making him do badly in his last months of office. Hoover took defensive, allowing FDR to win.

Brain Trust wrote FDR’s speeches and much of the New Deal legislation. FDR promised a balanced budget and berated Hoover’s deficits. FDR was very experimental.

Hoover’s Humiliation in 1932

23 FDR-16 Hoover. Blacks became, especially in northern cities, Democratic voters. FDR was accused of making the Depression worse leading up to his presidency to make himself look better.

FDR was uncooperative with Hoover during lame-duck period. Hoover tried to bind FDR to an anti-inflationary policy making New Deal impossible, but FDR refused.

FDR and the 3 R’s: Relief, Recovery, Reform

Money changers denounced for bringing on the depression. Relief and recovery now, reform and stable recovery over time. Reform to fix the boom-or-bust policies that bred the depression. FDR was very improvisational. Unemployment insurance, old-age insurance, minimum wage, conservation, and child labor laws.

Banking holiday March 6-10, reopening when more stable. In the Hundred Days, FDR cranked out a bunch of remedial legislation. The 3 R’s were bulky but effective. FDR was given almost complete control. TVA created. Soon Europeans would come to America excited to see the rising economy of reform.

Roosevelt Manages the Money

Banking needed immediate action. 8 hours and Emergency Banking Relief Act of 1933 was passed. It gave FDR power to regulate banking transactions and foreign exchange and to reopen solvent banks. FDR protected gold reserves and prevented panicky hoarding. Private gold holdings went to Treasury to be exchanged for paper and the nation was taken off the gold standard. Payment now had to be in paper. Managed currency was on its way. Feb 1934 FDR returned US to limited gold std. for int’l purposes.

30 fireside chats. Confidence in banks returned. Hundred Days or Emergency Congress made Glass-Steagall Banking Reform Act, providing for the Federal Deposit Insurance Corporation, insuring individual deposits up to $5,000, effectively stabilizing banks to today’s standard. Managed currency purposefully caused inflation, relieving debtors’ burdens and stimulating new production. FDR made Treasury buy a lot of gold, and the price for gold almost doubled.

Creating Jobs for the Jobless

Unemployment the biggest issue: 25%. FDR used federal money to assist unemployed and pump-prime industrial recovery. Federal Emergency Relief Act gave immediate relief. FERA was given to Harry Hopkins, a NY social worker who became one of FDR’s most influential advisors. $3 billion was granted to the states for direct payments or wages on work projects. Civil Works Administration branch of FERA under Hopkins, made by FDR himself. It gave 10,000s temporary jobs in winter.

Emergency Congress made Civilian Conservation Corps (CCC), most popular of New Deal agencies. 3 million men restored the environment, fought fires, controlled floods, and drained swamps. Agricultural Adjustment Act AAA gave millions of dollars to help farmers meet mortgages. Home Owners’ Loan Corporation HOLC refinanced mortgages on nonfarm homes, assisting a million homes. Middle-class homeowners now fiercely Democratic, and also bankers were given relief.

A Day for Every Demagogue

Direct relief from DC pulled nation through worst winter, 1933-34. Emergency relief had to be continued and supplemented. Dr. Francis E. Townsend, a retired CA doctor, promised to make everyone over 60 $200 a month, and Senator Huey P. Long of LA, who publicized his “share our wealth” program, promising to give every family $5,000 at the expense of the rich. His lieutenant

Demagogues appeared giving “relief,” like Father Charles Coughlin, a MI Catholic Priest, who preached anti-New Deal-ism and prejudice. He was silenced by the church later. Fascism was seen as a link to economic crisis. Authoritarian rule was rising in Japan and Germany, and some even feared that FDR would become a dictator. Congress passed Works Progress Admin WPA

Gerald L. K. Smith was especially slick. Best-known WPA program: Federal Art project, hiring artists to create posters and murals on post office walls. 9 million were given jobs over 8 years. WPA nourished talent, preserved self-respect, and fostered creation of millions of pieces of art.

1935 to spend $11 billion on thousands of public buildings, bridges, and hard-surfaced roads. Some were useless, like cricket control and monkey pens.

New Visibility for Women US women become more important. Eleanor

Roosevelt, SOL Frances Perkins first woman cabinet member, Mary McLeod Bethune director of Office of Minority Affairs in national Youth Administration. Pearl S. Buck, novelist, was raised in China by Presbyterian missionary parents and introduced American readers to Chinese peasant society. The Good Earth earned her the Nobel Prize for literature in 1938, making her the 3rd American to receive the honor. She was a humanitarian.

Anthropology owned by women. Ruth Benedict carried on work of her mentor, Franz Boas, by developing culture and personality movement of ‘30s and ‘40s. Her landmark work, Patters of Culture, made study of cultures as collective personality patterns. Her student Margaret Mead drew from her study of adolescence among Pacific islanders advancing new ideas of sexuality, gender roles, and relationships. She popularized anthropology.

Helping Industry and Labor

Attempt to stimulate a nationwide comeback started with National Recovery Admin (NRA). Most complicated combination of immediate relief and long-range recovery and reform. It assisted industry, labor, and unemployed. Too much self-sacrifice was expected of labor, industry, and the public for the NRA to work. 1935 Supreme Court shut down blue eagle NRA in Schechter decision. Congress was not allowed to delegate legislative powers to the president. More electrical power was made than by the TVA in a place where there was little need for power. With outbreak of WWII, the dam would soon prove to be useful. Repeal of prohibition—21 amendment 1933—gave opportunity to raise federal revenue and provide jobs.

200+ industries were to work out fair competition codes, where employment hours were reduced to accommodate more workers. Max hours restricted, wages regulated. Workers could now organize as they pleased. Child labor restricted. Recovery through fair competition painful. Patriotic meetings and parades. Brief business prosperity reigned. Public Works Admin (PWA) intended for industrial recovery and unemployment relief, headed by SOI Harold Ickes. It was about long-range recovery, and over time $4 billion was spent on 34,000 projects like buildings, highways, and parkways. Grand Coulee Dam on Columbia River. It irrigated millions of new acres of farmland but at the time the government was trying to reduce farm surpluses.

Paying Farmers Not to Farm

Farmers suffered since end of war-boom in 1918 of low prices and surpluses in grain. In IA bad counties were under martial law. Agricultural Adjustment Admin (AAA) to the rescue. Parity prices were established for basic commodities. AAA started off bad. Cotton was already planted for 1933, and pig meat was used as fertilizer instead of for feeding the hungry. Farm income was raised by artificial scarcity, but the act was criticized. All were unhappy still. Paying farmers not to farm increased unemployment. Second Agricultural Adjustment Act of 1938 said if growers observed acreage restriction on specific commodities, they would be paid. New AAA gave farmers a fairer price with a less Socialistic taste.

During depression, mortgages foreclosed, corn was burned for fuel, and farmers tried to prevent shipment of crops to saturated markets. AAA eliminated surpluses by paying growers to reduce crop acreage. $millions needed for these payments raised by taxing processors of farm products, like flour millers, who gave the burden to consumers. Supreme Court killed AAA 1936 by declaring its regulatory taxation unconstitutional. Soil Conservation and Domestic Allotment Act of 1936 made. Acreage withdrawal now achieved by paying farmers to plant soil-conserving crops like soybeans, or to let land lie fallow. More substantial share of US income given to farmers.

Dust Bowls and Black Blizzards

Late 1933 drought struck trans-MS Great Plains, along with wind, causing the Dust Bowl, topsoil torn from farms from CO to MO. New Dealers made efforts to help Dust Bowl, like Frazier-Lemke Farm Bankruptcy Act, which made a suspension of

High grain prices made farmers cultivate marginal land, and dry farming and mechanization left powdery topsoil. 10,000s refugees fled to south CA to San Joaquin Valley, which was similar to the southern plains of OK and AK. The transition was

foreclosed mortgage possible for 5 years. This was killed by Supreme Court a year later. A revised law limited the period to 3 years and was upheld. FDR made Resettlement Admin, removing farmers to better land. 200+ million trees were planted on the prairies as windbreaks by CCC. Not all Indians liked Indian Reorganization Act, denouncing it as a way to make museum pieces out of Indians. 77 tribes refused to organize, but 200 others did.

cruel. The Grapes of Wrath about it. Indians were reformed by New Deal. Commissioner of Indian Affairs John Collier reversed forced assimilation of Dawes Act 1887. He was inspired by a sojourn of Pueblos in NM and promoted Indian Reorganization Act 1934, encouraging tribes to make self-government and preserve culture. It stopped loss of Indian land and revived interest in identity and culture.

Battling Bankers and Big Business

Reformist New Dealers wanted to curb money-changers who had caused the Depression. Truth in Securities Act (Federal Securities Act) forced promoters to give investors sworn info regarding soundness of stocks and bonds. Let the seller beware.

1934 Congress protected public against fraud, deception, and manipulation by authorizing Securities and Exchange Commission (SEC) which was a watchdog admin agency. Stock markets were more like trading marts and less like casinos. Spring 1932 Sam Insull’s financial empire crashed. Big business pyramids were killed by Public Utility Holding Company Act of 1935.

The TVA Harnesses the Tennessee

New $13 billion electric power industry caught attention of New Deal. TN River gave New Dealers opportunity. Its tributaries drained a badly eroded area the size of England, containing the poorest people in the nation. DC used hydroelectric plant at Muscle Shoals, putting thousands to work and reforming the power monopoly. TVA brought jobs and cheap electricity, along with cheap housing, nitrates, and flood control. Rivers were cleaner and the region quickly started to dig itself out of debt. Foreigners copied the TVA idea, and similar ideas were made in Columbia, CO, and MO Rivers. Federally built dams eventually spanned all these waterways, trapping 30% runoff from Rockies.

New Dealers accused electric industry of charging too high, especially because its success as a business was owed to waterpower sites bought from the public. Tennessee Valley Authority (TVA) passed in 1933, inspired by George W. Norris of NE. TVA helped discover how much production and distribution of electricity cost, so fairness of rates could be tested across nation. Utility corporations lashed back, claiming unfairness of TVA and absence of taxes. Critics complained it was creeping socialism. Hydroelectric power drove growth of urban West and diverted waters nurtured agriculture in deserts. Reactionaries kept TVA in TN.

Housing and Social Security

New Deal framed policies for housing construction. FDR set up Federal Housing Admin (FHA) to speed recovery and better homes. Building industry was to be stimulated by small loans to householders for improving houses and completing new ones. More important was success of unemployment insurance and old-age pensions through Social Security Act 1935. It was made to cushion future depressions and made federal-state unemployment insurance. To provide security for old age, retired workers received regular payments from $10 to $85 a month and were financed by a payroll tax on employers and employees. Disabled were given provisions. Millions of poor men and women were excluded from Social Security benefits for decades thereafter. US workers, unlike in Europe, had to be employed and in certain jobs to get coverage.

1937 Congress authorized US Housing Agency USHA, designed to lend money to states or communities for cheap construction. Units for 650,000 poor people were started but new building fell short of needs. Efforts to expand project met opposition from real estate promoters, builders, and landlords, on top of Republicans. However, for the first time in a century, slums shrank. Bitter GOP opposition to Social Security. It was inspired by example of advanced European countries. In agricultural America, there were always farm chores for everyone, but now, government needed to take responsibility for citizens’ welfare. 1939 over 45 million eligible for Social Security benefits. Later, further categories of workers were included, like farmers.

A New Deal for Labor NRA good for labor. As employment went up, so

did labor security and assertiveness. Walkouts occurred in summer 1934, including a paralyzing one in San Fran, which was broken when citizens

National Labor Relations Act replaced NRA, more commonly known as Wagner Act after its sponsor Robert Wagner. It made a powerful new National Labor Relations Board and reassured right of labor

became vigilantes. Wagner Act was magna carta of US labor. Encouraged by National Labor Relations Board, unskilled workers started organizing effective unions. John L. Lewis led them. He made Committee for Industrial Organization CIO in ranks of skilled-craft AF of L. Skilled workers had been lukewarm about unionizing the unskilled since K of L, especially blacks. 1938 Fair Labor Standards Act set wage and hours for interstate commerce companies. Industrialists whined, especially southern textile manufacturers.

to engage in self-organization and to bargain collectively through self-chosen representatives. Rebellious CIO moved to car industry. 1936 GM sit-down strike. CIO won as GM recognized it as the only union for employees. US Steel Company voluntarily granted union rights to CIO employees. Little steel companies fought back in 1937 Memorial Day Massacre. CIO broke with AF of L 1938. CIO Committee was remade to Congress, under John L. Lewis. 1940 CIO had 4 million members with .2mil blacks. Fights with AF of L.

Landon Challenges the Champ

KS gov Alfred M. Landon against FDR 1936. Landon was a moderate who accepted some New Deal legislation, but not the Social Security Act. FDR denounced economic royalists who sought to hide behind the flag and Constitution. Landon only got Maine and Vermont. Blacks, urbanites, and the poor were now signed-on Democratic voters.

Republicans accused FDR’s New Deal of being frivolous spending. American Liberty League backed by Hoover was a group of wealthy conservatives. Landon got only 16 to FDR’s 27. Congress was a hearty Democratic majority. Blacks were now officially for the Democrats. Democrats now had New Immigrants (Jews, Catholics, south and east Europe).

Nine Old Men on the Bench

20th Amendment had made inauguration in January instead of March. FDR thought if the people chose who was in office, then liberals should be in a Supreme Court in a liberal time. FDR said the oldies were behind in their work, which was wrong, and FDR’s reputation took a hit.

In 9 New Deal cases in front of the ultra-conservative Supreme Court, 7 had been ruled against FDR. FDR’s worst misjudgment: asking Congress to permit him to add a new justice to Supreme Court for every one over 70, bringing new total to 15.

The Court Changes Course

Congress and nation convulsed over Court-packing plan. FDR was vilified for trying to mess with checks and balances. 5-4 decision upheld state minimum wage for women, reversing its stand on a similar case a year earlier thanks to Roberts’s change of heart. Court reform bill applied to lower courts. FDR lost his case but won it in a better way. Deaths and resignations allowed him to make 9 appointments to the tribunal, more than any since Washington.

FDR accused of being a dictator trying to browbeat the judiciary. Basic liberties seemed to be in jeopardy. Conservative Justice Owen J. Roberts went for FDR. The Court was now more sympathetic to the New Deal, upholding Wagner Act and Social Security Act. Congress voted full pay for justices over 70 who retired. After one retired, he was replaced by a New Dealer. FDR lost court battle and war as many New Deal reforms after ‘37 were rejected in Congress.

Twilight of the New Deal FDR’s first term made a great leap from

unemployment at the beginning at 30% to 15% at the end. FDR finally followed advice of British economist John Keynes. FDR in 1937 announced a bold program to stimulate economy by planned deficit spending. Keynesianism, use of gov’t spending to pump-prime, was new orthodoxy for decades. New Dealers accused of having richest campaign chest. Hatch Act 1939 barred all but highest political officials from campaigning and soliciting. 1938 Republicans regained many seats, but were still minority.

Recovery was dishearteningly modest, and in 1937, the Roosevelt Recession started. Government policies had caused it. Social security taxes bit into payrolls and the admin cut spending to make a balanced budget. 1937 FDR urged a growingly conservative Congress to authorize a reorganization of national admin in interest of efficiency. It was confused with his supreme court mishap to be dictatorial and denied. 1939 Congress gave him Reorganization Act, giving him limited power to reform admins, like the cabinet. WWII took focus away from domestic issues.

New Deal or Raw Deal? New Deal criticized for waste, incompetence,

confusion, contradictions, and cross-purposes. Budget was not balanced. $19 bil 1932 $40 bil 1939. US became handout state. Workers became lazy. New Deal did not do enough.

FDR accused of being too experimental. Bureaucracy blossomed. Federal government grew larger and larger as states grew smaller and smaller. Increasing Federalism was detested by Republicans.

FDR’s Balance Sheet

New Dealers defended themselves. They knew there was waste, but relief—not economy—was the ultimate goal. FDR saved free-enterprise by saving business’s image. FDR saved capitalism from itself. National debt caused by WWII, not New Deal. FDR provided bold reform without revolution like Jefferson, and avoided fascism and communism in America.

New Deal relieved worst of crisis in 1933. It promoted good philosophy and accepted need of federal economy to manage economy. DC was to be used, not feared. Collapse was averted, fair distribution of wealth was achieved, and citizens were able to retain self-respect. Left-wing said he did not go far enough, right wing said he went too far. He was very Hamiltonian.