Franklin D. Roosevelt�and the New Deal

Redefined Democracy:

Political Rights  Economic�Security  Social Justice

Causes of the Great Depression

• Agricultural overproduction
• Industrial overproduction
• Unequal distribution of wealth
• Over-extension of credit
• International economic situation

How Herbert Hoover Dealt with the Crisis

• He played the game of confidence economics and just kept saying: “Prosperity is right around the corner.”

Voluntary Measures

• Hoover eventually established two privately-funded organizations:
• The National Credit Association provided $1/2 billion to businesses for emergency loans, but it was too under-funded to do much good.
• The Organization for Unemployment Relief was a clearing house for relief agencies. However, state and local governments were already in too much debt to benefit from it.

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Limited Government Intervention

• In the end, Hoover resorted to government intervention:
• The Reconstruction Finance Corp gave $1-1/2 billion in federal loans to banks, insurance companies, and industry to prevent bankruptcies, but it was too little, too late.
• The Home Loan Bank Act provided federal loans to homeowners to prevent foreclosures, but got bogged down in red tape.

Reasons for Ineffectiveness

• Hoover thought business should be self-regulating.
• He had a mania for a balanced budget.
• He lacked political finesse.

Franklin D. Roosevelt’s Appeal

• In 1932 presidential election, FDR was perceived as a man of action.
• Hoover was viewed as a “do-nothing president.”
• Norman Thomas, the Socialist candidate, was viewed as a radical.
• Results: a landslide for Democrats and a mandate to use government as an agency for human welfare.

Situation When FDR Entered Office

• In March 1933, the country was virtually leaderless and the banking system had collapsed.

FDR Restored Confidence

• In his inaugural address, he said “The only thing we have to fear is fear itself….”
• He promised vigorous leadership and bold action, called for discipline and cooperation, expressed his faith in democracy, and asked for divine protection and guidance.

FDR’s Personal Qualities

• He was a practical politician who practiced the art of the possible.
• He was a charismatic person who exhibited a warmth and understanding of people.
• He knew how to handle press by focusing attention on Washington.
• He provided dynamic leadership in a time of crisis.
• He was willing to experiment

Purposes of the New Deal

• Relief: to provide jobs for the unemployed and to protect farmers from foreclosure
• Recovery: to get the economy back into high gear, “priming the pump”
• Reform: To regulate banks, to abolish child labor, and to conserve farm lands
• Overall objective: to save capitalism

Sources of New Deal Ideas

• Brains Trust: specialists and experts, mostly college professors, idea men
• New Economists: government spending, deficit spending and public works, government should prime economic pump
• Roosevelt Cabinet: included conservatives, liberals, Democrats, Republicans, inflationists, anti-inflationists -- often conflicting, compromising, blending ideas

First New Deal (1933-1934)

• Emphasis: reform
• Political Position: conservative
• Primary aim: economic recovery
• Philosophy: economic nationalism and economic scarcity (i.e., raise prices by creating the illusion of scarcity)
• Objectives: higher prices for agriculture and business
• Beneficiaries: big business and agricultural business

National Recovery Act (NRA)

• Purpose: recovery of industry
• Created a partnership of business, labor, and government to attack the depression with such measures as price controls, high wages, and codes of fair competition

X. The “New Deal” and American Banking

• Emergency Banking Act (March 6, 1933)
• Use of the “fireside chat” to explain the bank holiday to the American public
• Initial success
• Federal Deposit Insurance Corporation (1933)
• US abandoned the gold standard

XI. The “New Deal” and the Problem of Individual Economic Relief

• Justification for the “alphabet soup” agencies of the “New Deal”
• Federal Emergency Relief Administration (FERA—spring, 1933)

--directed by Harry Hopkins

• Civil Works Administration (1933-34)

XI. Problem of Individual Economic Relief (cont.)

• Civilian Conservation Corps (CCC—spring, 1933)
• Public Works Administration (PWA—June, 1933)

--Directed by Harold Ickes

• Works Progress Administration (WPA—1935)

XII. The “New Deal” and the American Farmer

• Agricultural Adjustment Act (AAA—spring, 1933)
• Commodity Credit Corporation (1933)
• “Dust Bowl” migrations

-- “Okies”

• Tennessee Valley Authority (TVA—spring, 1933)
• Farm Security Administration (FSA—1937)

First Agricultural Adjustment Act (AAA)

• Purpose: the recovery of agriculture
• Paid farmers who agreed to reduce production of basic crops such as cotton, wheat, tobacco, hogs, and corn
• Money came from a tax on processors such as flour millers and meat packers who passed the cost on to the consumer

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Federal Emergency Relief Admin (FERA)

• Purpose: relief
• Gave money to states and municipalities so they could distribute money, clothing, and food to the unemployed

Civilian Conservation Corp (CCC)

• Purpose: relief
• Gave outdoor work to unemployed men between the ages of 17 and 29
• They received $30 per month, but $22 went back to the family

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Shoring Up the Financial State

• Emergency Banking Relief Act (March 9) allowed Treasury to reopen solvent banks & reorganize insolvent ones
• Federal Securities Act (May 27) mandated full disclosure on all new securities
• Home Owners’ Loan Corp. (June 13) created to refinance home mortgages
• Glass-Steagall Act (June 16):
• Separated commercial & investment banking
• Federal Deposit Insurance Corp. created to insure bank deposits up to $5,000.00
• Securities Exchange Commission created in 1934 to monitor Wall Street

Creating Jobs for the Unemployed

• Civilian Conservation Corps (March 31, 1933) put young, unmarried men to work planting trees & creating parks
• Almost 3 million men, aged 18-25, participated
• 2,650 segregated, military-style camps
• Paid nominal $30 a month, but point was to keep them out of the labor force
• Federal Emergency Relief Administration (May 12, 1933) gave grants to states to fund relief efforts
• Run by Harry Hopkins
• Set up some works programs
• Public Works Administration (June 12, 1933) hired private contractors for large infrastructure projects
• Run by Secretary of the Interior Harold Ickes
• Spent $3.3 billion on projects like Triborough Bridge
• Used private contractors who hired union members & did not discriminate

Helping the Farmers

• Agricultural Adjustment Administration (May 12, 1933)
• Run by George Peek
• Set crop quotas & prices based on 1909-14
• Worked through state & local officials, so benefits went to middle & upper class
• Declared unconstitutional by Supreme Court in U.S. v. Butler (1936)
• Emergency Farm Mortgage Act (May 12, 1933) allowed refinancing of farm mortgages

The Tennessee Valley Authority�May 18, 1933

• Cheap electricity used as yardstick to measure private companies’ rates
• Government bought nitrates for military use
• Caused vast pollution
• Rural Electrification Administration created in 1935 to bring electricity to rural areas

Copyright 2000, Bedford/St. Martin’s

National Recovery Administration�June 16, 1933

• N.R.A. meant to be centerpiece of New Deal – based on T.R.’s New Nationalism
• Run by Gen. Hugh Johnson
• Joint committees of labor, management & government created fair practice codes
• Section 7(a) guaranteed union recognition
• Declared unconstitutional by Supreme Court in Schecter Poultry Co. v. U.S. (1935)

Critics on the Right

• Conservative Democrats formed the American Liberty League – opposed New Deal as corrupt patronage politics
• Hoover & Republicans labeled the New Deal “socialist” & warned of loss of personal liberty
• Supreme Court invalidated legislation:
• Schecter Poultry Co. v. U.S. - declared NRA restricted intrastate commerce & delegated legislative power to executive branch
• U.S. v. Butler - invalidated AAA as attempt to use taxing power to unconstitutionally regulate agriculture

Critics on the Left

• Father Charles Coughlin created the National Union for Social Justice
• Claimed New Deal really benefited wealthy, not poor
• charged that an international conspiracy of Jewish financiers was behind Roosevelt
• Dr. Francis Townshend suggested a revolving pension scheme for the elderly
• Sen. Huey Long (the Kingfish) wrote Every Man a King & created Share Our Wealth Clubs
• Called for seizing incomes above $1 million & redistributing to all families
• Planned to run for president in 1936

Second New Deal (1934-1941)

• Emphasis: reform
• Political Position: liberal
• Primary aim: permanent reform
• Philosophy: international economic cooperation and economic abundance
• Objectives: increased purchasing power and social security for public
• Beneficiaries: small farmers and labor

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Social Security Act

• Purpose: reform
• Gave money to states for aid to dependent children, established unemployment insurance through payroll deduction, set up old-age pensions for retirees.

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National Labor Relations Act

• Purpose: reform
• Put restraints on employers and set up a National Labor Relations Board to protect the rights of organized labor to bargain collectively with employers.

XIII. The “New Deal” and Organized Labor

• FDR’s sympathy with union concerns grows
• Growth in union membership
• Wagner Act (1935)

--Creation of NLRB

• Congress of Industrial Organizations (CIO) created in 1935

XIII. The “New Deal” and Organized Labor (cont.)

• The Leadership of John L. Lewis and others
• Use of the “sit down strike”
• Fair Labor Standards Act (1938)

--minimum wage: 40 cents

--prohibition of child labor

--maximum work week of 40 hours

Second Agricultural Adjustment Act

• Purpose: recovery for agriculture
• Paid farmers for conservation practices, but only if they restricted production of staple crops.

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U.S. Housing Authority

• Purpose: recovery and reform
• Used federal funds to tear down slums and construct better housing.

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The New Deal on Trial

• By 1935, political disunity was evident. There were critics on the right and the left.

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NEW DEAL

Criticisms of Conservative Opponents

• Conservative opponents said the New Deal went too far:
• It was socialism (killed individualism)
• It added to the national debt ($35 billion)
• It wasted money on relief and encouraged idleness
• It violated the constitution & states rights
• It increased the power of the �Presidency (FDR was reaching �toward dictatorship, Congress a�rubber stamp, independence�of judiciary threatened, �separation of powers shattered)

Anti-New Deal Organization

• Conservative opponents to the New Deal had an organization called the American Liberty League. They had money but were small in numbers, so FDR was not worried.

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Criticisms of Radical Opponents

• Radical opponents said the New Deal did not go far enough. They were demagogues (rabble-rousers) and had popular followings, so FDR was concerned.

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Senator Huey Long (LA)

• Senator Huey Long said New Deal relief measures were mere crumbs and advocated a share the wealth plan (i.e., a guaranteed annual income of at least $5,000 for every American, financed by confiscating wealth of people who made over $5 million per year).

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Father Charles E. Coughlin

• Father Charles Coughlin was�a rabble-rousing radio priest from Detroit. His broadcasts were called the “Golden Hour of the Little Flower.” He claimed there was an international bankers conspiracy and Jews were responsible. He advocated nationalization of banking and currency and national resources and demanded a “living wage.”

Dr. Francis E. Townsend

• Dr. Francis E. Townsend was an elderly physician from CA. He had a plan for the federal government to pay $200 per month to unemployed people over 60. The program would be financed by a 2% national sales tax and each pensioner would be required to spend the money in 30 days. This would stimulate the economy.

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Moderate Legislation

• FDR sponsored moderate legislation to silence radical opposition:
• Revenue Act of 1935 – Response to Huey Long. Increased taxes on large incomes and corporations.
• Banking Act of 1935 – Response to Coughlin. Extended federal control �over private banking practices.
• Social Security Act of 1935 �Response to Townsend. �Included provisions for �unemployables (dependent children, the disabled, blind), unemployment insurance, and old-age pensions.

The Election of 1936

• The Election of 1936:
• Made the Democratic party the majority party
• Created a new Democratic coalition composed of both traditional elements and new elements
• Showed that the American people rejected radical solutions to depression

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The Election of 1936

Candidate

Party

% Popular�Vote

Electoral Votes

FDR

Democratic

60.3%

523

Alfred E. Landon

Republican

36.56%

8

William Lemke

Radical

1.93%

Norman Thomas

Socialist

0.41% �(2.21 in 1932)

Earl Browder

Communist

0.17 (0.25 in 1932)

The Roosevelt Coalition

• While Republicans were still relying on their traditional base of political support (big business, big farmers, and conservatives), Democrats broadened their constituency by appealing to small farmers in the Midwest, urban political bosses, ethnic blue collar workers, Jews, intellectuals, and African Americans.

Protection of New Deal Accomplishments

• Steps FDR took to protect New Deal accomplishments (both failed):
• Court-Packing Plan (proposed increasing Supreme Court from 9 to 15 members, caused in revolt in Dem. Party)
• Purge of the Democratic Party in the Election of 1938 (came out strongly in favor of liberal Dem. Candidates, evidence that he interfered in a state campaign, Republicans gained strength in both houses of Congress)

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Decline of New Deal Reform after 1937

• Reasons for decline of New Deal reform after 1937:
• Court-packing plan made Congress irritable.
• Recession of 1937-38 weakened confidence in New Deal measures. Republicans gained strength in both houses.
• Attempted purge of Democratic party failed.
• Conservative Democrats were elected to office. Resentful of attempted party purge, they joined ranks with Republicans to block New Deal legislation.
• Increasing focus on foreign affairs.

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The Significance of �the New Deal

Physical Rehabilitation of Country

• Attacked soil erosion
• Built dams and planted trees to prevent floods
• Reclaimed the grasslands of the Great Plains
• Developed water power resources
• Encouraged regional reconstruction projects like the TVA and Columbia River project

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Human Rehabilitation

• Established the principle that government has responsibility for the health, welfare, and security, as well as the protection and education of its citizens
• Embraced social security, public health, housing
• Entered the domain of agriculture and labor

Revitalization of Politics

• Strengthened executive branch
• Reasserted presidential leadership
• Revitalized political party as a vehicle for the popular will and as an instrument for effective action.

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Extension of Democracy

• Redefined the concept of democracy so that it included not only political rights but economic security and social justice as well.

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Maintenance of a Democratic System

• The New Deal maintained a democratic system of government and society in a world threatened by totalitarianism.
• Increased size and scope of government to meet needs of the depression
• Provided the leadership that enabled Congress to put through the necessary relief, recovery, and reform measures.
• Sponsored moderate legislation to neutralize the popularity of radical opponents 

XVIII. Summary of the Results of the “New Deal”

• Did not end the Depression
• Many agricultural problems unsolved, especially for southern Blacks and tenant farmers
• Did restore national hope
• Controls were built into the economy to avert future crises

--Federal Securities Act of 1933 and SEC (1934)

• The Government as “broker state”
• Restoration of confidence in U.S. government and economy—but both different than before 1932

Government Expenditures

• The total cost of the current bailout now exceeds $4.6 trillion dollars. It has cost more than all of these government expenditures combined. Figures in parentheses have been adjusted for inflation:
• Marshall Plan: Cost: $12.7 billion ($115.3 billion)
• Louisiana Purchase: Cost: $15 million ($217 billion)
• Race to the Moon: Cost: $36.4 billion ($237 billion)
• S&L Crisis: Cost: $153 billion ($256 billion)
• Korean War: Cost: $54 billion ($454 billion)
• The New Deal: Cost: $32 billion est.($500 billion est.)
• Invasion of Iraq: Cost: $551billion ($597 billion)
• Vietnam War: Cost: $111 billion ($698 billion)
• NASA: Cost: $416.7 billion ($851.2 billion)
• TOTAL: $3.92 trillion