Roosevelt’s New Deal
Roosevelt’s New Deal
FDR came to office convinced of the economic theories of John Maynard Keynes, who argued that government spending could revive a faltering economy. FDR’s New Deal embodied this strategy.
The First Hundred Days and the First New Deal
In his inauguration speech of 1933, FDR pledged to devote his presidency to helping the poor and promoting recovery, claiming, “the only thing we have to fear is fear itself.” During the first hundred days of his presidency, FDR set forth his plan for national recovery, known as the New Deal. The New Deal ushered in an unprecedented era of government intervention in the economy.
The first problem FDR faced during the early months of 1933 was a rash of bank closures in thirty-eight states. In response, he called for a bank holiday, during which he met with the heads of many suffering banks and developed the Emergency Banking Relief Act, passed March 9. This act provided a framework under which banks could reopen with federal support. Other important reforms of the “first hundred days” include:
  • On March 31, Congress passed the Unemployment Relief Act, which created the Civilian Conservation Corps (CCC), a program to employ the destitute in conservation and other productive work.
  • May 12 saw the passage of the Agricultural Adjustment Act, creating the Agricultural Adjustment Administration (AAA) to manage federal aid to farmers and control production. The AAA controlled the production of crops, and thus prices, by offering subsidies to farmers who produced under set quotas. The same day, the Federal Emergency Relief Act (FERA) was passed, appropriating $500 million to support state and local treasuries that had run dry.
  • On May 18 a bill was passed creating the Tennessee Valley Authority (TVA), a plan to develop energy production sites and conserve resources in the Tennessee Valley.
  • On May 27, the Federal Securities Act was passed in efforts to improve corporate honesty about stocks and other securities, prefacing the creation of the Securities Exchange Commission (SEC) in 1934.
  • On June 16, the National Industrial Recovery Act was passed, creating the National Recovery Administration (NRA) to manage the recovery of industry and finance. The NRA established regulations for fair competition that bound industry during the entire New Deal. The National Industrial Recovery Act also created the Public Works Administration (PWA), which spent over $4 million on projects designed to employ the jobless and infuse the economy with money.
  • June 16 also saw the passage of the Banking Act of 1933, creating the Federal Deposit Insurance Corporation (FDIC) to back individuals’ bank deposits with federal funds.
After June 16, Congress recessed, officially ending the “first hundred days” of reform which created the framework for heavy government involvement to help bring the U.S. out of the Depression.
FDR’s first hundred days in office saw unprecedented government intervention in the economy, industry, and agriculture. Democrats in Congress, at FDR’s behest, passed measures creating a massive structure of agencies under executive control.
Legislation and Agencies of the First New Deal
Emergency Banking Relief Act ended the bank panic, provided banks with federal support
Civilian Conservation Corps (CCC) employed more than two million young men from 1933 to 1941
Agricultural Adjustment Administration (AAA) regulated farm production, helped raise farm income
Federal Emergency Relief Act (FERA) funded state and local treasuries
Tennessee Valley Authority (TVA) helped develop and preserve the resources of the Tennessee Valley
Federal Securities Act regulated the stock market
Federal Deposit Insurance Corporation (FDIC) backed individuals’ bank deposits with federal funds
National Recovery Administration (NRA) regulated business by establishing fair codes of competition
Public Works Administration (PWA) employed jobless men and women from all fields (industrial workers, artists, teachers)
Civil Works Administration (CWA) provided short-term projects for the unemployed
Challenges to the New Deal
After the first hundred days, continued economic distress and mounting opposition to FDR’s programs cast doubt upon the New Deal. The first sign that the New Deal was in danger was trouble with the NRA. Opposition to the NRA came to a head in 1935, when the conservative Supreme Court declared the agency unconstitutional, claiming the NRA gave the executive branch regulatory powers that belonged exclusively to Congress. This decision began a series of court decisions that overturned key elements of the New Deal.
The efforts of the AAA, combined with a severe drought in the American heartland, effected a drop in farm production, prompting a rise in farm prices. However, while the AAA did much to help large landowners and commercial farmers, it did little for landless laborers and tenant farmers who populated the rural Midwest. This large group of dispossessed farmers made up the majority of those who participated in the western migration from the dust bowl to California in search of land and employment. As the plight of the dust bowl poor became more widely recognized, questions arose about the effectiveness of the AAA. In 1936, the Supreme Court ruled the AAA unconstitutional, claiming it enforced illegal taxation.
Another source of criticism was the conservative American Liberty League, composed of elites who claimed that the New Deal restricted democratically guaranteed freedoms to earn and save money and acquire property. Other challenges to the New Deal arose from those appealing to the discontented lower and middle classes, including Father Charles Coughlin and Huey Long, who argued that the New Deal was not going far enough in alleviating poverty. The most famous political opposition movement of the Great Depression years, Long’s Share Our Wealth program pressed for far greater income redistribution and benefits for the poor.
These challenges passed, at least in part, with the midterm elections of 1934. Despite a vocal minority of dissenters, FDR remained a popular president because of his efforts at relief, his charismatic leadership, and his connection with the citizens symbolized by his frequent fireside chats—radio broadcasts that he used to rally the support of the people and to offer assurances of economic recovery. FDR’s popularity and public confidence in the New Deal resulted in a resounding approval of the Democratic program in the elections of 1934. Democrats gained seats in both the House and Senate.
The Second New Deal
Reassured by the overwhelming Democratic victory in the midterm elections of 1934, FDR laid out his plans for the Second New Deal in the January 1935 State of The Union Address. He outlined six ways in which the administration would renew and intensify the efforts begun under the first New Deal. These plans included an enlarged unemployment relief program, assistance to the rural poor, support for organized labor, social welfare benefits for the elderly and disadvantaged, strict regulation of business and finance, and heavier taxes on the wealthy.
In April 1935, Congress passed the Emergency Relief Appropriation Act. This act granted FDR $5 billion to use on whatever programs he chose. The majority of that funding went to the Works Progress Administration (WPA). Over eight years, the WPA pumped $11 billion into the economy and supported the unemployed of all backgrounds, from industrial engineers to authors and artists. The unemployment rate fell over 5 percent from 1935 to 1937, partially due to the WPA’s efforts.
To regulate the economy, FDR empowered the Federal Reserve Board to exert tighter control over the money supply, and called for strict enforcement of the Securities Exchange Act of 1934, which required that a detailed and truthful prospectus be publicized for each company issuing stock on the U.S. market.
One of the most lasting achievements of the Second New Deal was the creation of Social Security benefits for the elderly through the Social Security Act of 1935. This act, passed largely in response to the elderly rights movement, exemplified the New Deal focus on social services.
The best known achievement of the Second New Deal is the passage of the Social Security Act of 1935, which created the modern Social Security program.
Support for organized labor was another major feature of the Second New Deal. The government supported unionization and collective bargaining with the 1935 National Labor Relations Act, popularly known as the Wagner Act, which provided a framework for collective bargaining. The Wagner Act granted workers the right to join unions and engage in bargaining, and forbid employers from interfering with, or discriminating against, union rights.
Under the government’s favorable treatment of labor, unions gained membership, power, and political influence, often lending their support to the Democratic Party—an alliance that remains in place today. Strikes were a common occurrence throughout the 1930s, and workers increasingly won concessions. In 1935, the Committee for Industrial Organization formed within the American Federation of Labor (AFL), eventually becoming the independent Congress of Industrial Organizations (CIO) in 1938. In less than two years, the CIO claimed more than four million members. The AFL and CIO were the nation’s most dominant and successful unions throughout the late 1930s and 1940s, and in 1955 merged to form the AFL-CIO.
The New Deal Changes Party Alignments
FDR’s landslide victory in the 1936 election confirmed his and his party’s success in becoming the representatives of the downtrodden and disadvantaged. Farmers appreciated FDR’s consistent efforts to forge an effective agricultural plan. Urban voters and organized labor, great sources of funding for FDR’s 1936 campaign, valued his support of union rights and his efforts to cope with rampant unemployment. Many women recognized that FDR’s programs attacked the concept of inequality and appreciated that he had appointed the first female cabinet member, Frances Perkins, as Secretary of Labor. Black Americans, as the group most devastated by unemployment, had benefited extensively from New Deal measures. Black support gradually shifted toward FDR and the Democratic Party away from Republican Party, which had consistently won the black vote since the late 1800s (remember that Lincoln and those in Congress favoring emancipation had been Republican).
The election of 1936 saw the rise of a new Democratic coalition, including farmers, urban workers, women, and blacks. This coalition helped FDR win the 1936 election by a landslide.
FDR’s presidency and the New Deal thus brought about a realignment of the Democratic and Republican parties. As Democrats won the support of blacks, urban workers, and farmers, they lost the support of the white South, a traditional Democratic stronghold. The Republican Party, meanwhile, lost its long-held black vote.
Legislation and Agencies of the Second New Deal
Resettlement Administration relocated and otherwise assisted the rural poor
Works Progress Administration (WPA) employed workers of all fields, from industry to art (the PWA became a subdivision of the WPA)
National Labor Relations Act (Wagner Act) guaranteed labor’s right to organize in unions and collectively bargain
Social Security Act created social security, or benefits for the elderly and the disabled
Revenue Act raised personal income taxes for those in the highest tax bracket
New Deal Fades
The stage seemed set for FDR’s continued success in pushing through the New Deal, but he faced a host of political challenges that hindered his efforts. The first element in the downturn was his involvement in the Court Packing scheme. Early in 1937, Roosevelt proposed a court-reform bill allowing the president to appoint an additional Supreme Court justice for each current justice over the age of seventy. FDR claimed that the bill addressed concerns about the justices’ workload, but it was clear that the proposal was meant to dilute the power of the conservative justices of the Supreme Court who had been hostile to New Deal legislation (they had ruled that the AAA and NRA were unconstitutional, among other decisions). The Senate vetoed the scheme in July 1937. Several justices retired shortly after or announced their intention to do so, and the Supreme Court resisted less during the final years of the Second New Deal than it had during earlier years, but the Court Packing scheme was a blemish on Roosevelt’s record.
A more direct factor in the decline of the Second New Deal was the inability of FDR’s programs to revive the economy. In August of 1937, the nation plunged into the 1937 recession, also known as the “Roosevelt Depression.” By early 1938 unemployment had again risen above 20 percent.
The final obstacle to the extension of the Second New Deal came from within Congress, where critics of FDR were growing in power. A conservative coalition legislated cuts in relief programs and blocked further legislation proposed by New Deal supporters. As a result, FDR proposed few new reform measures during his second term in office. That he proposed no new domestic programs in his January 1939 State of the Union address signaled the end of the New Deal.
The New Deal had effectively ended by 1939, owing, in part, to the embarrassing Court Packing scheme, the 1937 recession, and growing congressional opposition.
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