In 1937, Roosevelt began to scale back deficit spending, because he believed that the worst of the Great Depression had passed and because he was receiving pressure from conservatives in Congress (and even from ardent New Dealers in his own cabinet). The size of the Works Progress Administration, for example, was severely reduced, as were agricultural subsidies.
This decision to cut back spending turned out to be premature, however, as the economy buckled again, resulting in what became known as the Roosevelt Recession. The stock market crashed for a second time in 1937, and the price of consumer goods dropped significantly. Contrary to conservative beliefs, the economy simply had not pulled far enough out of the depression to survive on its own. The embattled Roosevelt only made himself look worse by trying to place the blame on spendthrift business leaders. The American people were not convinced, and as a result, Democrats lost a significant number of seats in the House and Senate in the 1938 congressional elections. This return of Republican power effectively killed the New Deal.
Republicans in Congress further weakened Roosevelt’s executive powers with the Hatch Act of 1939. The act forbade most civil servants from participating in political campaigns and public office holders (i.e., Roosevelt and New Dealers) from using federal dollars to fund their reelection campaigns. The bill also made it illegal for Americans who received federal assistance to donate money to politicians. Conservatives hoped that these measures would divorce the functions of government from the campaign frenzy and ultimately dislodge entrenched New Dealers who preyed on a desperate public for votes.
Despite the numerous positive effects that the New Deal had, it failed to end the Great Depression. Millions of Americans were still hungry, homeless, and without jobs as late as December 1941, when the United States entered World War II. Many historians and economists have suggested that the New Deal would have been more successful if Roosevelt had put a greater amount of money into the economy, but this conclusion is debatable. Only after the surge in demand for war-related goods such as munitions, ships, tanks, and airplanes did the economy finally right itself and begin to grow.
The New Deal was a crucial turning point in the history of the U.S. government. Politics had never before been so involved in—or exerted more control over—the daily lives of regular Americans as it was during Roosevelt’s terms in office in the 1930s. Critics lamented that the United States had transformed itself into a welfare state. Indeed, the budget deficit increased dramatically every year, and the national debt more than doubled in just ten years.
However, the New Deal did in fact help millions of Americans survive the Great Depression. Unlike his predecessor, Herbert Hoover, Roosevelt tried to directly help as many people as the conservatives in Congress and the Supreme Court would allow him to. His New Deal legislation helped create new jobs, build houses and shelters for the homeless, and distribute food to the hungry. New Deal policy also raised agricultural commodity prices, put banks back on solid footing, and greatly improved the national infrastructure. Moreover, the New Deal created a number of long-standing government institutions, such as Social Security, that we still have today.