CHAPTER 15

FRANKLIN D. ROOSEVELTAND THE NEW DEAL

Election of 1932

• Herbert Hoover: Rep. Candidate• Franklin D. Roosevelt: Demo.

Candidate• Major Issue: the depression• Minor Issue: prohibition

Herbert Hoover• Born in Iowa• Quaker• Orphaned• Attended Stanford• Self-made millionaire

(mining engineer)• Food Administrator

during WW1• Elected Pres. in 1928

Franklin D. Roosevelt

• Wealthy N.Y family• Asst. Sect. Navy• N.Y. State Legislator• Gov. New York: 1928• V.P. Candidate in 1920

election (Cox)• Paralyzed with polio at

age 39 (1921)

FDR’s famous quotes

• “I pledge to you, I pledge to myself, to anew deal for the American people.”

• FDR promised to help the “forgottenman at the bottom of the economicpyramid.”

• “the only thing we have to fear is fearitself.”

Economic Crisis in 1933

• 25% unemployment• 50% unemployment for A.A.• Farmers forced to sell crops at a loss• 400,000 farms lost through foreclosure• 50% population earned below poverty level• 85,000 businesses went bankrupt• Over 4,000 banks closed• Elderly and disabled had no income

Ideological Responses to theEconomic Crisis

• Conservative Response: Gov’t.should do nothing. Natural businesscycle; actually healthy for the economy.

• Liberal Response: Gov’t. must providehelp to get the economy moving.(public works, social welfare, regulation)

• Radical Response: Replacecapitalism with socialism or communism

The Three R’s

• Relief: for people out of work• Recovery: for agriculture and industry• Reform: for American economic

institutions (banks, stock market, etc)

The New Deal

• Greatly expanded the size of the federalgovernment

• Greatly expanded the scope of thefederal government’s operations andfunctions

• Greatly expanded the powers of thepresidency

“Relief” to the unemployed

• In order to provide jobs for the millionsof unemployed Americans, the NewDeal established many public worksprojects:– Civilian Conservation Corp (CCC):

• Provided work for men 18-25. 3 million jobs.$30.00 month. Planting trees, building roads,developing parks, dams, soil erosion, etc.

Civilian Conservation Corp

• 113 sites in Pa. (2110across the nation)

• Penn Roosevelt StatePark

• Whipple Dam• Black Moshannon State

Park• Colyer Lake• Poe Valley

CCC Camp Relief Projects

• Federal Emergency ReliefAdministration (FERA): offered federalmoney to states and local governmentsto provide direct relief to the poor.Distributed 3 billion to the states.Primary recipients were widows anddependant children. (we call thiswelfare today)

Relief Projects

• Works Progress Administration(WPA): employed 3.4 million peopleconstructing bridges, roads, airports,libraries, etc.– Also employed artists, writers, actors to

paint murals, write histories, perform inplays

– recorded slave narratives (2,000 interviewsin 17 states)

WPA Slave Narratives

• http://memory.loc.gov/learn/collections/born_slavery/history.html

• http://memory.loc.gov/ammen/snhtml/snintro00.html

Recovery Measures

• Agricultural Adjustment Act (AAA): paidfarmers to remove land from production. Forsurpluses already grown--plow it under.

• Govt. subsidies paid to farmers.• Wheat, cotton, corn, hogs, rice, tobacco, dairy• Purpose of AAA--create shortages/raise

prices• Declared unconstitutional by Supreme Court.

WHY?

Recovery Measures

• National Recovery Administration (NRA):attempt to guarantee reasonable profits forbusinesses and fair wages/hours for laborers.

• Helped industries set wages, hours, level ofproduction and prices for goods.

• Allowed workers the guaranteed right toorganize and bargain collectively

• Found unconstitutional by Supreme Court

Reform Measures

• Federal Deposit Insurance Corporation(FDIC): guaranteed savings of bankdeposits up to $2500

• Securities and Exchange Commission(SEC): govt. agency designed toregulate the stock market

Reform Measures

• Social Security Act: 1935• Three Goals:

a) Provide unemployment insurance forthose who lost job due to illness

b) Provide old age pension fund for people65 and older

c) Provide help for the handicapped (blind,deaf, crippled, dependent children)

Social Security

• Pension Plan for retirement establishedby the government

• Funds paid by younger generation tosupport costs of those currently retired

• Payroll tax (FICA). Employee pays6.2% of wages and employer pays6.2% to match contribution

• Self-employed must pay 12.4%

Social Security

• Must pay the 6.2% tax on earned income upto $90,000.

• Must work a total of 10 years to be eligible tocollect benefits upon retirement

• Retirement age 65. If born after 1960,retirement age 67.

• Can retire at 62 with 30% benefit reduction

Social Security

• Checks range from $8800 to $21,900 a year,depending on earned income

• Ratio of 18 wage earners to one retiree whenSS first began

• Today ratio is three wage earners to oneretiree

• Estimated by 2041, more people collectingthan paying in due to baby boomers retiring

Changes to the currentsystem?

• Shift the responsibility to individuals, requiringthem to set up own retirement accounts

• Keep the current system and raise the payrolltax to help cover costs

• Rewrite the contract (raise retirement age,reduce benefits for upper income, let peopledecide to participate or not)

Currency Crisis

• Major Economic Problem During theGreat Depression--DEFLATION

• Demand low, wages low, prices low• Money was hard to earn “tight money”• Need more money in circulation• Partially removed US currency from

gold standard (1.00=59.06 cents ingold)

Modified Gold Standard

• Purpose:– Put more money in circulation– Raise prices (create inflation)

• Bankers said “legalized robbery”– Lent money out backed by 100% gold– Payments back at 59.06% gold

Deficit Spending

• New solution offered to FDR to help endthe depression--deficit spending

• Suggested by economist John M.Keynes (Keynesian economics)

• Would create jobs and get money intocirculation

• AKA “priming the pump”

Dangers of Deficit Spending

• Gov.t borrows from banks, othercountries, etc.

• High interest on borrowed $. At least15% of gov’t spending goes for interest

• Leaves future generations with a bill forservices they didn’t get

• Less $ available for education,infrastructure, new technology, etc.

Many Critics of the New Deal

• Left wing liberals: gov’t not doingenough (Huey Long, Dr. Townsend,Father Coughlin)

• Right wing conservatives: gov’t doingtoo much. Bordering on socialism. (Am.Liberty League, wealthy businessleaders, bankers)

Critics of New Deal

FDR still very popular

• Election of 1936:– FDR renominated by Democrat Party– Alfred Landon (Gov. Kansas nominated by

Republican Party)– New Deal brought income up and

unemployment down– Popular vote 22 million for FDR, 16 million

for Landon– Electoral vote 523 FDR, 8 Landon

Second Inaugural Address

• “I see one-third of a nation ill-housed, ill-clad, and ill-nourished. The test of ourprogress is not whether we add more tothe abundance of those who havemuch. It is whether we provide enoughfor those who have too little”.

Court Packing Proposal

• 7 out of 9 New Deal measures found tobe unconstitutional by Supreme Court

• FDR proposes to appoint new Justicesfor each member over the age of 70 (6out 9)

• Lost the proposal but eventuallyJustices began to retire and by 1941,FDR made 4 appointments (7 total)

New Deal: A friend to Labor

• Many New Deal measures werebeneficial to industrial laborers:– Wagner Act: right to join unions, engage in

collective bargaining. Employers can nolonger interfere with unions, fire unionmembers without cause. Set up NLRB tohear testimony about unfair practices

Friend to Labor

• Fair Labor Standards Act (1938):

– Minimum hourly wage (25 cents)– Maximum work week of 40 hours– New child labor laws banning children

under 16 from factory labor

Unions Grow

• 1933-1941 union membership rose from3 million to 8 million.

• AFL was only for skilled workers• Created CIO for unskilled and

semiskilled• New bargaining tactic: sit-down strike.

Prevented use of scabs.

Motion Pictures of 1930’s

• Golden age of motion pictures (65% ofpopulation attended movies once a week)

• “talking” pictures launched a new era ofglamour in Hollywood– Gone With The Wind (1939)– Wizard of Oz (1939)

• Clark Gable, James Cagney, Greta Garbo

Radio Programs Entertain

• 90% of homes owned a radio in 1930’s• Variety of programs: news, comedies,

dramas, soap operas, children shows.• Orson Wells’ drama “War of the Worlds” based on H.G. Wells’ novel. 1938

special announcement “ martians hadinvaded Earth”.

American Artists

• Most famous portrayals of America’srural life during the Great Depression byGrant Woods.

• American Gothic (1930)• Two stern faced farmers, father and

daughter, standing stiffly in front of theirfarmhouse

What did you see?

• A tribute to hard-working farm families

• The narrow-minded, puritanicalintolerance of many rural and smalltown Americans

Impact of the New Deal

• Deficit Spending: by 1943--54 billion• A balance of two extremes:

unregulated capitalism (laissez-faire)and overregulated socialism

• Expansion of the federal government’spower (creating jobs, regulating supplyand demand, settling labor disputes)

Legacies of New Deal

• Wagner Act• Fair Labor Standards Act• National Labor Relations Board (NLRB)• Farm subsidies• Securities and Exchange Commission• FDIC• Social Security

Legacies of New Deal

• Impact on the environment:– Planting trees– Hiking trails– Soil conservation and erosion prevention– Electric power plants– New national parks– Air, water, land pollution, strip mining

Entitlement Programs

• What are “entitlement programs”?

• Government programs that requirepayment to anyone who meets specificqualifications

• Guarantee access to benefits becauseof rights or an agreement by law

Entitlement Programs

• Social security (old age pension 67+)• Medicare (health insurance 65 +)• Medicaid (health insurance poor)• Food stamps• Welfare• Farm subsidies• Low income housing

Entitlement Programs

• These programs take up to half of thefederal budget

• 20% Social Security• 20% Medicare & Medicaid• 8% Social Aid Programs• Right or personal responsibility for poor