Home
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Chapter 18
Chapter 19
Chapter 20
Chapter 21
Chapter 22
Chapter 23
Chapter 24
Chapter 25
Chapter 26
Chapter 27
Chapter 28
Chapter 29
Chapter 30
Chapter 31
Chapter 32
Chapter 33
Chapter 34
Chapter 35
Chapter 36
Chapter 37
Chapter 38
Chapter 39
Chapter 40
Chapter 41
Chapter 42

Chapter 34

The Great Depression and the New Deal

1933-1939

 

As the election of 1932 neared, unemployment and poverty brought dissent of President Hoover and a demand for a change in policy.  The Republicans nominated Herbert Hoover to run for president in the election of 1932.  The Democrats chose Franklin Delano Roosevelt.  He had been born to a wealthy New York family and served as the governor of New York.

 

FDR:  Politician in a Wheelchair

Franklin D. Roosevelt's wife, Eleanor Roosevelt, was to become the most active First Lady in history.  She powerfully influenced the policies of the national government, battling for the impoverished and oppressed.

Roosevelt's commanding presence and golden speaking voice made him the premier American orator of his generation.

 

Presidential Hopefuls of 1932

In the Democratic campaign of 1932, Roosevelt attacked the Republican Old Deal and concentrated on preaching a New Deal for the "forgotten man."  He promised to balance the nation's budget and decrease the heavy Hooverian deficits.

Although Americans' distrust in the Republican party was high because of the dire economic state of the country (Great Depression), Herbert Hoover and the Republican party had hopes that the worst of the Depression was over. Hoover reaffirmed his faith in American free enterprise and individualism.

 

Hoover's Humiliation in 1932

Franklin Roosevelt won the election of 1932 by a sweeping majority, in both the popular vote and the Electoral College.

Beginning in the election of 1932, blacks became, notably in the urban centers of the North, a vital element of the Democratic Party.

 

FDR and the Three R's:  Relief, Recovery, Reform

Franklin Roosevelt was inaugurated on March 4, 1933.

On March 6-10, President Roosevelt declared a national banking holiday as a prelude to opening the banks on a sounder basis.  The Hundred Days Congress/Emergency Congress (March 9-June 16, 1933) passed a series laws in order to cope with the national emergency (The Great Depression).

Roosevelt's New Deal programs aimed at 3 R's:  relief, recovery, reform.  Short-range goals were relief and immediate recovery, and long-range goals were permanent recovery and reform of current abuses.

Congress gave President Roosevelt extraordinary blank-check powers:  some of the laws it passed expressly delegated legislative authority to the president.

The New Dealers embraced such progressive ideas as unemployment insurance, old-age insurance, minimum-wage regulations, conservation and development of natural resources, and restrictions on child labor.

 

Roosevelt Tackles Money and Banking

The impending banking crisis caused Congress to pass the Emergency Banking Relief Act of 1933.  It gave the president power to regulate banking transactions and foreign exchange and to reopen solvent banks.  President Roosevelt began to give "fireside chats" over the radio in order to restore public confidence of banks.

Congress then passed the Glass-Steagall Banking Reform Act, creating the Federal Deposit Insurance Corporation (FDIC).  A reform program, the FDIC insured individual bank deposits up to $5,000, ending the epidemic of bank failures.

In order to protect the shrinking gold reserve, President Roosevelt ordered all private holdings of gold to be given to the Treasury in exchange for paper currency and then the nation to be taken off the gold standard-Congress passed laws providing for these measures.

The goal of Roosevelt's "managed currency" was inflation, which he believed would relieve debtors' burdens and stimulate new production.  Inflation was achieved through gold buying; the Treasury purchased gold at increasing prices, increasing the dollar price of gold.  This policy increased the amount of dollars in circulation.

 

Creating Jobs for the Jobless

President Roosevelt had no qualms about using federal money to assist the unemployed in order to jumpstart the economy.  Congress created the Civilian Conservation Corps (CCC), which provided employment for about 3 million men in government camps.  Their work included reforestation, fire fighting, flood control, and swamp drainage.

Congress's first major effort to deal with the massive unemployment was to pass the Federal Emergency Relief Act.  The resulting Federal Emergency Relief Administration (FERA) was headed by Harry L. Hopkins.  Hopkins's agency granted about $3 billion to the states for direct relief payments or for wages on work projects.  Created in 1933, the Civil Works Administration (CWA), a branch of the FERA, was designed to provide temporary jobs during the winter emergency.  Thousands of unemployed were employed at leaf raking and other manual-labor jobs.

Relief was given to the farmers with the Agricultural Adjustment Act (AAA), making available millions of dollars to help farmers meet their mortgages.

The Home Owners' Loan Corporation (HOLC) assisted many households that had trouble paying their mortgages.

 

A Day for Every Demagogue

As unemployment and suffering continued, radical opponents to Roosevelt's New Deal began to arise.  Father Charles Coughlin's anti-New Deal radio broadcasts eventually became so anti-Semitic and fascistic that he was forced off the air.  Senator Huey P. Long publicized his "Share Our Wealth" program in which every family in the United States would receive $5,000.  His fascist plans ended when he was assassinated in 1935.  Dr. Francis E. Townsend attracted millions of senior citizens with his plan that each citizen over the age of 60 would receive $200 a month.

Congress passed the Works Progress Administration (WPA) in 1935, with the objective of employment on useful projects (i.e. the construction of buildings, roads, etc.).  Taxpayers criticized the agency for paying people to do "useless" jobs such as painting murals.

 

A Helping Hand for Industry and Labor

The National Recovery Administration (NRA) was designed to assist industry, labor, and the unemployed.  Individual industries, through "fair competition" codes, were forced to lower their work hours so that more people could be hired; a minimum wage was also established.  Workers were formally guaranteed the right to organize and bargain collectively through representatives of their choosing, not through the company's choosing. 

Although initially supported by the public, collapse of the NRA came in 1935 with the Supreme Court's Schechter decision in which it was ruled that Congress could not "delegate legislative powers" to the president and that congressional control of interstate commerce could apply to local fowl business.

The Public Works Administration (PWA) was intended for both industrial recovery and for unemployment relief.  Headed by Harold L. Ickes, the agency spent over $4 billion on thousands of projects, including public buildings and highways.

In order to raise federal revenue and provide a level of employment, Congress repealed prohibition with the 21st Amendment in late 1933.

 

Paying Farmers Not to Farm

Congress created the Agricultural Adjustment Administration (AAA).  It established "parity prices" for basic commodities.  "Parity" was the price set for a product that gave it the same real value, in purchasing power, that it had from 1909-1914.  The agency also paid farmers to reduce their crop acreage, eliminating surpluses, while at the same time increasing unemployment.

The Supreme Court struck down the AAA in 1936, declaring its regulatory taxation provisions unconstitutional.

The New Deal Congress passed the Soil Conservation and Domestic Allotment Act of 1936.  The reduction of crop acreage was now achieved by paying farmers to plant soil-conserving crops.

The Second Agricultural Adjustment Act of 1938 continued conservation payments; if farmers obeyed acreage restrictions on specific commodities, they would be eligible for parity payments.

 

Dust Bowls and Black Blizzards

Late in 1933, a prolonged drought struck the states of the trans-Mississippi Great Plains.  The Dust Bowl was partially caused by the cultivation of countless acres, dry-farming techniques, and mechanization.

Sympathy towards the affected farmers came with the Frazier-Lemke Farm Bankruptcy Act, passed in 1934.  It made possible a suspension of mortgage foreclosures for 5 years.  It was struck down in 1935 by the Supreme Court.

In 1935, President Roosevelt set up the Resettlement Administration, given the task of moving near-farmless farmers to better lands.

The Indian Reorganization Act of 1934 encouraged Native American tribes to establish self-government and to preserve their native crafts and traditions.  77 tribes refused to organize under the law, while hundreds did organize.

 

Battling Bankers and Big Business

In order to protect the public against fraud, Congress passed the "Truth in Securities Act" (Federal Securities Act), requiring promoters to transmit to the investor sworn information regarding the soundness of their stocks and bonds.

In 1934, Congress took further steps to protect the public with the Securities and Exchange Commission (SEC).  It was designed as a watchdog administrative agency.

 

The TVA Harnesses the Tennessee River

Zealous New Dealers accused the electric-power industry of gouging the public with excessive rates.

2.5 million of America's most poverty-stricken people inhabited Muscle Shoals.  If the government constructed a dam on the Tennessee River in Muscle Shoals, it could combine the immediate advantage of putting thousands of people to work with a long-term project for reforming the power monopoly. 

In 1933, the Hundred Days Congress created the Tennessee Valley Authority (TVA).  It was assigned the task of predicting how much the production and distribution of electricity would cost so that a "yardstick" could be set up to test the fairness of rates charged by private companies.

The large project of constructing dams on the Tennessee River brought to the area full employment, the blessings of cheap electric power, low-cost housing, abundant cheap nitrates, the restoration of eroded soil, reforestation, improved navigation, and flood control.  The once-poverty-stricken area was being turned into one of the most flourishing regions in the United States.

The conservative reaction against the "socialistic" New Deal would confine the TVA's brand of federally guided resource management and comprehensive regional development to the Tennessee Valley.

 

Housing Reform and Social Security

To speed recovery and better homes, President Roosevelt set up the Federal Housing Administration (FHA) in 1934.

To strengthen the FHA, Congress created the United States Housing Authority (USHA) in 1937.  It was designed to lend money to states or communities for low-cost construction.

The more important success of New Dealers was in the field of unemployment insurance and old-age pensions.  The Social Security Act of 1935 provided for federal-state unemployment insurance.  To provide security for old age, specified categories of retired workers were to receive regular payments from Washington.

Republicans were strongly opposed to Social Security.  Social Security was inspired by the example of some of the more highly industrialized nations of Europe.

 In an urbanized economy, the government was now recognizing its responsibility for the welfare of its citizens.

 

A New Deal for Unskilled Labor

When the Supreme Court struck down the National Recovery Administration (NRA), Congress, sympathetic towards labor unions, passed the National Labor Relations Act of 1935 (Wagner Act).  This law created a powerful National Labor Relations Board for administrative purposes and reasserted the rights of labor to engage in self-organization and to bargain collectively through representatives of its own choice.

The stride for unskilled workers to organize was lead by John L. Lewis, boss of the United Mine Workers.  He formed the Committee for Industrial Organization (CIO) in 1935.  The CIO led a series of strikes including the sit-down strike at the General Motors automobile factory in 1936.

Congress passed the Fair Labor Standards Act (Wages and Hours Bill) in 1938.  Industries involved in interstate commerce were to set up minimum-wage and maximum-hour levels.  Labor by children under the age of 16 was forbidden.

In 1938, the CIO joined with the AF of L and the name "Committee for Industrial Organization" was changed to "Congress of Industrial Organizations."-led by John Lewis.  By 1940, the CIO claimed about 4 million members.

 

Landon Challenges "the Champ" in 1936

As the election of 1936 neared, the New Dealers had achieved considerable progress, and millions of "reliefers" were grateful to their government.

The Republicans chose Alfred M. Landon to run against President Roosevelt.  The Republicans condemned the New Deal for its radicalism, experimentation, confusion, and "frightful waste."

President Roosevelt was reelected as president in a lopsided victory.  FDR won primarily because he had appealed to the "forgotten man."  He had forged a powerful and enduring coalition of the South, blacks, urbanites, and the poor.

 

Nine Old Men on the Supreme Bench

Ratified in 1933, the 20th Amendment shortened the period from election to inauguration by 6 weeks.  FDR took the presidential oath on January 20, 1937, instead of the traditional March 4.

Roosevelt saw his reelection as a mandate to continue the New Deal reforms.  The ultraconservative justices on the Supreme Court proved to be a threat to the New Deal as the Roosevelt administration had been thwarted 7 times in cases against the New Deal.

With his reelection, Roosevelt felt that the American people had wanted the New Deal.  If the American way of life was to be preserved, he argued, and then the Supreme Court had to get in line with public opinion.  President Roosevelt released his plan to ask Congress to pass legislation allowing him to appoint one new justice to the Supreme Court for every member over the age of 70 who would not retire; the maximum number of justices would now be 15.  Shocking both Congress and the public, the plan received much negative feedback.

 

The Court Changes Course

President Roosevelt was belittled for attempting to break down the checks and balances system among the 3 branches of government.

Justice Owen J. Roberts, formerly regarded as a conservative, began to vote liberal.  In March 1937, the Supreme Court upheld the principle of state minimum wage for women, reversing its stand on a different case a year earlier.  The Court, now sympathetic towards the New Deal, upheld the National Labor Relations Act (Wagner Act) and the Social Security Act.

A succession of deaths and resignations of justices enabled Roosevelt to appoint 9 justices to the Court.

FDR aroused conservatives of both parties in Congress so that few New Deal reforms were passed after 1937.  He lost much of the political goodwill that had helped him to win the election of 1936.

 

The Twilight of the New Deal

In Roosevelt's first term, from 1933-1937, unemployment still ran high and recovery had been relatively slow.  In 1937, the economy took another downturn as new Social Security taxes began to cut into payrolls and as the Roosevelt administration cut back on spending out of the continuing reverence for the orthodox economic doctrine of the balanced budget.

The New Deal had run deficits for several years, but all of them had been somewhat small and none was intended.  Roosevelt embraced the recommendations of the British economist John Maynard Keynes.  The newly-accepted "Keynesianism" economic program was to stimulate the economy by planned deficit spending.

In 1939, Congress passed the Reorganization Act, giving President Roosevelt limited powers for administrative reforms, including the new Executive Office in the White House.

Congress passed the Hatch Act of 1939, barring federal administrative officials from active political campaigning and soliciting.  It also forbade the use of government funds for political purposes as well as the collection of campaign contributions from people receiving relief payments.

 

New Deal or Raw Deal?

Foes of the New Deal charged the president of spending too much money on his programs, significantly increasing the national debt; by 1939, the national debt was at $40,440,000,000.  Lavish financial aid and relief were undermining the old virtue of initiative.

Private enterprise was being suppressed and states' rights were being ignored.  The most damning indictment of the New Deal was that it did not end the depression; it merely administered "aspirin, sedatives, and Band-Aids."  Not until World War II was the unemployment problem solved.

 

FDR's Balance Sheet

New Deal supporters had pointed out that relief, not economy, had been the primary objective of their war on the depression.  Roosevelt believed that the government was morally bound to prevent mass hunger and starvation by "managing" the economy.

FDR was a Hamiltonian in his idea of big government, but a Jeffersonian in his concern for the "forgotten man."

New Deal Acronyms

Acronym

Definition

AAA

Agricultural Adjustment Administration

CCC

Civilian Conservation Corps

CWA

Civil Works Administration

FERA

Federal Emergency Relief Administration

FHA

Federal Housing Administration

FSA

Farm Security Administration

HOLC

Home Owners Loan Corporation

NRA

National Recovery Administration

NYA

National Youth Administration

PWA

Public Works Administration

REA

Rural Electrification Administration

SSA

Social Security Administration

TVA

Tennessee Valley Authority

WPA

Work Projects (Progress) Administration

 


Home

Next Chapter >>