I | INTRODUCTION |
New
Deal, name given to the peacetime domestic program of United States
president Franklin D. Roosevelt, and especially to the innovative measures taken
between 1933 and 1938 to counteract the effects of the Great Depression.
Both Roosevelt and the Congress of the United
States, in trying to reduce unemployment and restore prosperity, endorsed a wide
spectrum of new federal programs and agencies, most popularly identified by
acronym titles. Roosevelt, a skillful political leader, helped win support for
an unprecedented array of new services, regulations, and subsidies. Yet no
single political philosophy or set of coherent goals ever unified these
disparate programs, most of which he developed with the aid of an informal group
of advisers known as the Brain Trust. These individuals from outside government
included professors, lawyers, and others who came to Washington to advise
Roosevelt, in particular on economic affairs. The central legacy of the New Deal
was increased government involvement in the lives of the people.
II | BACKGROUND |
The stock market crash in October 1929 marked
the beginning of the Great Depression, a difficult economic period for the
United States and other countries. Unemployment increased and the economic
security of many people was threatened. Farmers lost their land, homeowners
their homes, and workers their jobs. In the years following the stock market
crash, thousands of banks closed and many Americans lost their savings. The
incumbent president, Herbert Hoover, lost the election of 1932 to Democrat
Franklin D. Roosevelt. Roosevelt campaigned on promises of a new deal for the
American people. In his first inaugural address he declared:
...in the event that
Congress shall fail to take these courses and in the event that the national emergency
is still critical I shall not evade the clear course or duty that will then confront
me. I shall ask the Congress for the one remaining instrument to meet the crisis—broad
executive power to wage a war against the emergency, as great as the power that
would be given to me if we were in fact to be invaded by a foreign foe.
Roosevelt's course of action became known as the New Deal.
...in the event that
Congress shall fail to take these courses and in the event that the national emergency
is still critical I shall not evade the clear course or duty that will then confront
me. I shall ask the Congress for the one remaining instrument to meet the crisis—broad
executive power to wage a war against the emergency, as great as the power that
would be given to me if we were in fact to be invaded by a foreign foe.
Roosevelt's course of action became known as the New Deal.
III | EARLY LEGISLATION |
Roosevelt's overwhelming victory in the 1932
election, coupled with the urgency of the worst economic collapse in U.S.
history, opened the way for a flood of legislation in 1933. Almost immediately
after taking office, Roosevelt called on Congress to convene and began what
would be known as the Hundred Days, which lasted until June 16, 1933. On March 6
Roosevelt called a nationwide bank holiday, and on March 9 Congress passed the
Emergency Banking Act, which provided for federal bank inspections. In the
summer of 1933, the Glass-Steagall Act set much more stringent rules for banks
and provided insurance for depositors through the newly formed Federal Deposit
Insurance Corporation (FDIC). These acts helped to restore popular confidence in
the wake of widespread bank failures. Two acts, one in 1933 and one in 1934,
mandated detailed regulations for the securities market, enforced by the new
Securities and Exchange Commission (SEC). Several bills provided mortgage relief
for farmers and homeowners and offered loan guarantees for home purchasers
through the Federal Housing Administration, or FHA (see Housing). The
Federal Emergency Relief Administration which was headed by Harry Hopkins, a
social worker appointed by Roosevelt, expanded existing relief grants to the
states and resulted in assistance for more than 20 million people. The Civilian
Conservation Corps (CCC) provided work relief for thousands of young men under a
type of military discipline. The CCC emphasized reforestation, among other
projects. Congress established the Tennessee Valley Authority (TVA) to develop
the Tennessee River in the interest of navigation and flood control and to
provide electric power to a wide area of the southeastern United States.
The most important legislation of 1933
involved the major economic sectors. As a climax to a decade of wrangling,
Congress in 1933 enacted a complex new farm bill, the Agricultural Adjustment
Act. It provided several mechanisms to help raise agricultural prices, but the
one most extensively used provided for government payments to farmers who
destroyed or did not grow surplus crops. At a time when economic hardship was
leaving people in other areas in need of food, the act invited criticism. The
Agricultural Adjustment Act was declared unconstitutional by the Supreme Court
of the United States in 1936. The National Industrial Recovery Act (NIRA) was
the most innovative early New Deal measure. It provided for two major recovery
programs—a vastly expanded public works effort, carried out by the Public Works
Administration, and a complex program to regulate American business and ensure
fair competition. The National Recovery Administration (NRA) approved and
enforced a set of competitive codes for each industry to help ensure fair
competition in each.
IV | THE SECOND NEW DEAL |
The hopes of 1933 for early recovery proved
illusory. Many of the hastily drafted early bills were declared unconstitutional
by the Supreme Court. Roosevelt now exploited developing class divisions, formed
closer alliances with organized labor, and increasingly castigated the
big-business groups that opposed his New Deal programs.
These reverses, plus increasingly political
opposition to Roosevelt, triggered a second flood of legislation, beginning in
1935, which some observers called the Second New Deal. Among the new measures
were higher taxes for the rich, strict regulations for private utilities,
subsidies for rural electrification (see Rural Electrification
Administration), and what amounted to a bill of rights for organized labor.
Under the guidance of Secretary of Labor Frances Perkins, the National Labor
Relations Act of 1935 gave federal protection to the bargaining process for
workers and established a set of fair employment standards. The National Labor
Relations Act, also known as the Wagner Act for its sponsor, Robert Wagner,
guaranteed workers the right to organize and bargain through unions. The federal
Fair Labor Standards Act of 1938, the last major domestic program launched by
the Roosevelt administration, mandated maximum hours and minimum wages for most
categories of workers.
By 1935, several Roosevelt advisers welcomed
massive new federal expenditures to induce more private demand, even at the
price of budget deficits. A huge relief appropriation of almost $5 billion
reinvigorated several programs and funded a new federalized work relief program
administered by the Works Progress Administration (WPA; see Work Projects
Administration). Perhaps of greatest enduring significance, Congress in 1935
enacted the Social Security Act (see Social Security), which contained
three major programs—a retirement fund, unemployment insurance, and welfare
grants for local distribution (including aid for dependent children). These
programs, coupled with a new subsidized public housing program, began what some
now refer to as a welfare state. Social security was developed in the United
States later than in many European countries, which had developed social
security programs before World War I (1914-1918).
In 1937, after a resounding victory in the
1936 election, Roosevelt sought to increase support for his ideas on the Supreme
Court. He proposed legislation that would add more judges to the Supreme Court,
but Congress rejected this “court-packing” attempt. The pressures for new
legislation abated after 1937, and opposition to extending the New Deal mounted
rapidly, especially in the South. By 1939 public attention focused increasingly
on foreign policy and national defense. The New Deal was over, but it had
permanently expanded the role of the federal government, particularly in
economic regulation, resource development, and income maintenance. Although in
itself the New Deal failed to stimulate full economic recovery, it provided the
federal government not only with increased controls over money supply and
Federal Reserve policies but also with increased understanding of the economic
consequences of its own taxing, borrowing, and spending—thus helping the
government to limit the impact of later recessions. In addition, the New Deal
coalition dominated the electorate and the nation for years thereafter. The New
Deal changed the relationship between the government and the people of the
United States. In addition to increasing the involvement of the government in
people's lives, the New Deal created a number of agencies that still exist, and
it stimulated the growth of the Democratic Party.
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