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The Great Depression and the “New Deal”

~ 1933 – 1938 ~

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A nation ready for change

In 1932, voters still had not seen any improvement, and wanted a new president.

President Herbert Hoover was nominated again without much vigor and true enthusiasm, and he campaigned saying that his policies prevented the Great Depression from being worse than it was.

The Democrats nominated Franklin Delano Roosevelt, a tall, handsome man who was the fifth cousin of famous Theodore Roosevelt and had followed in his footsteps.

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A powerful presidential team

FDR was suave and conciliatory while TR was pugnacious and confrontational.

FDR was stricken with polio in 1921, and during this time, his wife, Eleanor, became his political partner.

The First Lady• Traveled the nation observing

the social conditions • She persuaded her husband to

take a stand on issues regarding child welfare, housing reform, and equal rights for minorities and women (federal government positions: Frances Perkins Sec of Labor)

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A “New Deal” for the forgotten manRoosevelt seized the opportunity to prove that he

was not an invalid

He also attacked Hoover’s spending (ironically, he would spend even more during his term).

He used “The Brains Trust” of reform minded intellectuals to write his speeches and author legislation—experts in banking, economy, agriculture, etc

The Democrats found expression in the airy tune “Happy Days Are Here Again”

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The Humiliation of Hoover in 1932

Hoover had been swept into the presidential office in 1928, but in 1932, he was swept out with equal force, as he was defeated 472 to 59.

Many African American voters switched from the Republican to the Democratic Party.

During the lame-duck period, Hoover tried to initiate some of Roosevelt’s plans but was met by stubbornness and resistance.

Hooverites would later accuse FDR of letting the depression worsen so that he could emerge as more of a shining savior.

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

On Inauguration Day, FDR asserted, “the only thing we have to fear is fear itself.”

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The Hundred Days

March 9-June 16, 1933

The Democratic-controlled Congress was willing to do as FDR said, and the first 100 days of FDR’s administration were filled with more legislative activity than ever before.

Many of these laws expanded the power of the executive branch

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National Bank Holiday

March 6-10, 1933

All banks would close

Banks that would reopen were financially sound

This would eliminate paranoid bank withdrawals

and restore American faith in the banking industry

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Emergency Banking Relief Act of 1933

The President was able to regulate banking transactions, foreign exchange, and reopen solvent banks

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Fireside Chats•FDR addressed the American people over the radio• He spoke to Americans and

explained his plans in clear, simple terms

• He explained how withdrawing funds hurt even the strongest banks and people gradually started to reinvest their savings in the banks

http://www.youtube.com/watch?v=jt9f-MZX-58&safety_mode=true&persist_safety_mode=1&safe=active

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Glass-Steagall Banking Reform Act

Provided the Federal Deposit Insurance Corporation

Which insured individual deposits up to $5000, thereby eliminating the epidemic of bank failure and restoring faith to banks.

Now the FDIC insures deposits up to $250,000 per owner on the account

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FDR then took the nation off of the gold standard and achieved controlled inflation by ordering Congress to buy gold at increasingly higher prices.

Roosevelt: Money and Banking• 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

– The nation was taken off the gold standard

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Alphabet Soup

Roosevelt had no qualms about using federal money to assist the unemployed

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Creating Jobs for the Jobless1. Civilian Conservation Corps (CCC),

which provided employment in fresh-air government camps for about 3 million uniformed young men.

They reforested areas, became fire fighters, drained swamps, and controlled floods.

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The Federal Emergency Relief Act looked for immediate relief of unemployment rather than long-term alleviation

The Federal Emergency Relief Administration (FERA) was headed by Harry L. Hopkins.

2. The Agricultural Adjustment Act (AAA) made available many millions of dollars to help farmers meet their mortgages.

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3. The Home Owners’ Loan Corporation (HOLC) refinanced mortgages on non-farm homes (gained loyalties of middle class, Democratic homeowners.)

4. The Civil Works Administration (CWA) was established late in 1933, as part of FERA

It was designed to provide temporary jobs during the winter emergency.

Many of its tasks were rather frivolous and were designed for the sole purpose of making jobs.

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5. Congress also authorized the Works Progress Administration (WPA) in 1935

$11 million on thousands of public buildings, bridges, and hard-surfaced roads

Gave 9 million people jobs in its eight year existence—not handouts

It also found part-time jobs for needy high school and college students and for actors, musicians, and writers.

Taxpayers criticized the agency for paying people to do "useless" jobs

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More than 1 million pieces of art were created and displayed

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The National Recovery Administration (NRA)

Designed to assist industry, labor, and the unemployed.

There were maximum hours of labor, minimum wages, and more rights for labor union members, including the right to choose their own representatives in bargaining.

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Public Works Administration

Intended both for industrial recovery and for unemployment relief.

Headed by Secretary of the Interior Harold L. Ickes, it aimed at long-range recovery by spending over $4 billion on some 34,000 projects that included public buildings, highways, and parkways

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One of the Hundred Days Congress’s earliest acts was to legalize light wine and beer with an alcoholic content of 3.2% or less and also levied a $5 tax on every barrel manufactured.

Prohibition was officially repealed with the 21st Amendment.

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Paying Farmers Not to Farm

Congress established the Agricultural Adjustment Administration to help struggling farmers

The federal government would pay farmers to reduce their crop acreage which would eliminate price-depressing surpluses.

The money would come from taxing companies that processed farm crops

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However, it got off to a rocky start when it killed lots of pigs for no good reason and when farmers had to plow under their crops

Paying farmers not to farm actually increased unemployment.

The Supreme Court ended the Act in 1936 (its regulatory tax provisions were unconstitutional)

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The New Deal Congress then passed the Soil Conservation and Domestic Allotment Act of 1936

It paid farmers to plant soil-conserving plants like soybeans or to let their land lie fallow.

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The Second Agricultural Adjustment Act (1938)

If farmers observed planting restrictions on things like cotton and wheat, they could get set prices for their crops

Farmers received a larger share of the federal income

And land conservation was encouraged

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Opponents of the New Deal

1. Father Charles Coughlin, a Catholic priest in Michigan who disliked the New Deal and voiced his opinions on radio.

2. Senator Huey P. Long of Louisiana was popular for his “Share the Wealth” program

Every family was to receive $5000, allegedly from the rich.

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Opponents of the New Deal

3. Dr. Francis E. Townsend of California attracted the trusting support of perhaps 5 million “senior citizens”

His plan would give each senior $200 month, provided that all of it would be spent within the month.

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Dust Bowls and Black BlizzardsAfter the drought of 1933, furious winds

whipped up dust into the air, turning parts of Missouri, Texas, Kansas, Arkansas, and Oklahoma

The Dust Bowl forced many farmers to migrate west to California (Okies)

John Steinbeck’s The Grapes of Wrath.

The dust was very hazardous to the health and to living, creating further misery.

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Congress feels for the farmer

1. The Fazier-Lemke Farm Bankruptcy Act--(1934) made possible a suspension of mortgage foreclosure for five years (Supreme Court voided it)It was later replaced by a law reducing

the grace period to 3 years2. In 1935, FDR set up the Resettlement

Administration to moving near-farmless farmers to better land.

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Indian Reorganization Act of 1934Commissioner of Indian Affairs John Collier

sought to reverse the forced-assimilation policies (Dawes Severalty Act of 1887.)

He promoted the Indian “New Deal”, which encouraged tribes to preserve their culture, traditions, and create local self-governments.

77 tribes refused to organize under its provisions (200 did).

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No More Black TuesdaysRegulating Wall Street

The Federal Securities Act (“Truth in Securities Act”)--promoters had to provide investors with information regarding the soundness of their stocks and bonds.

The Securities and Exchange Commission—a watchdog administrative agency regulating the stock market (trading marts not casinos).

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The TVA Harnesses the Tennessee River

Existing utility companies were accused of gouging the public with excessive rates.

Thus, the Tennessee Valley Authority (1933) sought to discover exactly how much money it took to produce electricity and then keep rates reasonable.

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•It constructed dams on the Tennessee River and helped the 2.5 million extremely poor citizens of the area improve their lives and their conditions. (Cheap hydroelectricity)

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Housing Reform

To speed recovery and better homes, FDR set up the Federal Housing Administration (FHA) in 1934 to stimulate the building industry through small loans to householders.

Congress bolstered the program in 1937 by authorizing the U.S. Housing Authority (USHA), designed to lend money to states or communities for low-cost construction.

The Second New Deal

1935-1936

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Social Security Act 1935Greatest victory for New Dealers,

since it created pension and insurance for the old-aged, the blind, the physically handicapped, delinquent children, and other dependents by taxing employees and employers.

Republican attacked this bitterly.

Helping the worker

• Wagner Act (National Labor Relations Act)

• Protected the right of the workers to join unions and use collective bargaining with employers

• It also prohibited unfair labor practices (threats, termination, interference with unions)

•Between 1933 and 1941, union membership went from 3 million to 10 million•Workers saw FDR as a friend of labor

The sit-down strike became an effective bargaining tool

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Unskilled Laborers Organize

• John L. Lewis succeeded in forming the Committee for Industrial Organization (CIO) as a subgroup within the larger American Federation of Labor

• Unskilled workers in the CIO used sit down tactics to gain recognition in General Motors plants

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The CIO also won a victory against the United States Steel Company (the CIO employees gained the right to unionize)

But smaller steel companies struck back against attempts to unionize

The Memorial Day Massacre of 1937 (Republic Steel Company of South Chicago)--police fired upon striking workers, leaving many killed or injured.

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Fair Labor Standards Act

1938 (Wages and Hours Bill) was passed, setting up minimum wage (40 cents an hour)and maximum hours standards and forbidding children under the age of sixteen from working.

Roosevelt enjoyed immense support from the labor unions.

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In 1938, the CIO broke completely with the AF of L and renamed itself the Congress of Industrial Organizations (the new CIO).

By 1940, the new CIO had over 4 million members, 200,000 African American

Still tensions existed between the AFL and the CIO

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Landon Challenges “the Champ” in 1936

The Republicans nominated Alfred M. Landon to run against FDR.

Landon was weak on the radio and weaker in personal campaigning

While he criticized FDR’s spending, he also favored enough of FDR’s New Deal to be ridiculed by the Democrats as an unsure idiot.

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In 1934, the American Liberty League had been formed by conservative Democrats and wealthy Republicans to fight “socialistic” New Deal schemes.

But FDR won primarily because he appealed to the “forgotten man,” whom he never forgot.

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Nine Old Men on the Supreme Bench

The 20th Amendment had cut the lame-duck period down to six weeks, so FDR began his second term on January 20, 1937, instead of on March 4.

He controlled Congress, but the Supreme Court kept on blocking his programs, so he proposed a shocking plan that would add a member to the Supreme Court for every existing member over the age of 70, for a maximum possible total of 15 total members.

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The Court Changes CourseFDR’s “court-packing scheme” failed, but

he did get some of the justices to start to vote his way, including Owen J. Roberts, formerly regarded as a conservative.

However, his failure of the court-packing scheme also showed how Americans still did not wish to tamper with the sacred justice system.

As time went on, deaths and resignations allowed FDR to make 9 appointments

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The Twilight of the New Deal

During Roosevelt’s first term, the depression did not disappear, and unemployment, down from 25%, was still at 15%.

In 1937, the economy took another (brief) downturn when the “Roosevelt recession,” caused by government policies, occurred (a depression within a depression)

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FDR makes use of deficit spendingFinally, FDR embraced the policies of

British economist John Maynard Keynes.In 1937, he announced a bold program to

stimulate the economy by planned deficit spending.

You have to spend money to make money--even if it puts the national budget in the red

A turning point in the government’s relationship with the economy

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FDR wanted Congress to give him power to reorganize the national administration so that it would be more efficient

In 1939, Reorganization Act was passed , which gave FDR limited powers for administrative reforms, including the key new Executive Office in the White House.

To promote more economically equal elections, the Hatch Act of 1939 barred federal administrative officials, except the highest policy-making officers, from active political campaigning and soliciting.

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New Deal or Raw Deal?Opponents of the New Deal condemned its

waste, citing that nothing had been accomplished.

Critics were shocked by the “try anything” attitude of FDR, who had increased the federal debt from $19.487 million in 1932 to $40.440 million in 1939.

The New Deal did not cure the Depression or unemployment.

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It took World War II, though, to really lower unemployment, but the war also created a heavier debt than before.

FDR provided bold reform without revolution.

The New Deal had embraced the philosophy of “balancing the human budget” and accepted the principle that the federal government was morally bound to prevent mass hunger and starvation by “managing” the economy

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FDR demonstrated the value of powerful presidential leadership to relieve the hardships of the American people

He helped to preserve democracy in America although democracy was being threatened in other parts of the world