ALPHABET SOUP IN A NUTSHELL
Glass-Steagall Banking Reform Act (1933) - Created FDIC
CCC - Civilian Conservation Corps (1933) - Young men hired for conservation
FERA - Federal Emergency Relief Administration (1933) - Direct money to states
AAA - Agricultural Adjustment Administration (1933) - Help for farmers
TVA - Tennessee Valley Authority (1933) - Dams, hydroelectric power plants
NIRA - National Industry Recovery Act (1933) - Created NRA and PWA
NRA - National Recovery Administration (1933) - "Fair practices," prices, wages, hours
PWA - Public Works Administration (1933) - Construction of roads, bridges, buildings
SEC - Securities and Exchange Commission (1934) - Regulating stock market
WPA - Works Progress Administration (1935) - 10 million hired: buildings, roads, bridge
Social Security Act (1935) - Unemployment insurance, pensions, disability
Wagner Act (1935) - Protected right to organize in unions and strike.
Fair Labor Standards Act (1938) - national minimum wage and 40-hour workweek.
CAUSES OF GREAT DEPRESSION
Overproduction of manufactured goods/not enough buyers
Worsened when Herbert Hoover enacted high tariffs to avoid foreign competition
Foreign countries enacted retaliatory tariffs resulting in fewer customers overseas
Overproduction of agricultural goods/caused prices to drop
Farmers produced more to make up for falling prices
Many farmers left farms to find work in cities
Name for people who fled plains - most from Oklahoma - to go West
See "Grapes of Wrath" by John Steinbeck
And photos by Dorothea Lange
Dust Bowl - result of abandoned farms in Midwest caused dust storms
Stock market crash October 1929
Low interest rates and the belief that prosperity would continue led consumers and businesses to increase borrowing and installment buying.
Over-indebtedness caused defaults on loans and bank failures.
Federal Reserve Board tightened money.
To slow speculation in 1929 the Federal Reserve decided to suddenly raise interest rates
They also stayed on the gold standard which linked America's money policy to other nations.
Little government action
Andrew Mellon (Sec. of Treasury)
Convinced that economic downturns were a normal part of capitalism
That weeded out unproductive companies and farms and encouraged people to work harder
Believed Federal aid "weakens the sturdiness of our national character"
Strongly opposed to direct federal intervention in the economy
Feared that a "dole" (giveaway program) would damage initiative.
Tax cut, 1930
Hoping to increase purchasing power of consumers.
Hawley-Smoot Tariff, 1930
Hoover raised the already high tariffs
To protect U.S. from cheap foreign goods
Inspired retaliatory tariffs from other nations.
Further reduced markets for American goods overseas
Reconstruction Finance Corporation (RFC), 1932
Between 1930 and 1932 5100 banks had failed.
RFC propped up faltering railroads, life insurance companies, banks
Hoping the aid would "trickle down" to smaller businesses.
Dropped bank failures from 70 a week to 1 every 2 weeks
But didn't help small businesses.
Emergency Relief and Construction Act
Authorized RFC to lend up to $1.5 billion for "reproductive" public works that paid for themselves
Toll bridges, slum clearance etc.
Another $300 million went to states as loans for the direct relief of the unemployed.
But too little, too late.
Bonus Army, 1932
In summer 1932 a thousand unemployed WWI veterans marched on Washington DC
Demanding immediate payment of bonuses the govt. promised to pay in 1945.
The vets, with their families, set up shacks near the Capitol.
Joined by thousands more.
Congress didn't grant them the bonuses.
General Douglas MacArthur, (the army's chief of staff) was sent to disband demonstrators
Tanks, tear gas, destruction of the shantytown - drove veterans from the city.
Two veterans were killed in the process.
Renominated Herbert Hoover.
Hoover warned that a Democratic victory would worsen economic problems.
Nominated NY Governor Franklin D. Roosevelt
Roosevelt pledged a "new deal" for the American people
Promised to repeal Prohibition and help the unemployed
Hoover was a "lame duck" president from Nov. 1932-Mar. 1933
Prompted passage of the 20th Amendment
Shortening time between presidents from 4 months to 2
Presidents elected in November would be inaugurated in January.
FRANKLIN D. ROOSEVELT
Elected in 1932
Assumption that a Democrat would spur Washington to dole out more federal assistance.
New Deal goals
Provide relief, recovery and reform
Inspiration from John Maynard Keynes (Br. Economist)
Deficit spending to prime the pump and jump-start economy
“Alphabet Agencies” on First New Deal within First Hundred Days
FIRST 100 DAYS
March 6, 1933, (2 days after becoming president)
FDR declared a 5-day national bank holiday.
Temporarily closed all the banks
(9,000 had closed during each year of Depression under Hoover)
Passed Emergency Banking Relief Act
Gave Roosevelt power to regulate banking transactions and foreign exchange.
Glass-Steagall banking Reform Act 1933
Forbade banks from investing in the stock market
Separation of commercial and investment banking
Glass-Steagall was repealed in 1999 - possibly leading to 2008 crash.
FDIC (Federal Deposit Insurance Corporation)
Federal government would protect people's bank deposits
Insured savings up to $2,500 (today $250,000)
Regulated lending policies
First of 30 evening radio addresses reassuring American people
Convinced them to put money back in banks when holiday ended (worked)
CIVILIAN CONSERVATION CORPS (Mar. 1933)
Hired unemployed young men to work on environmental conservation projects
$30 a month, worked on flood control, reforestation, national parks, public roads
3 million men in 9-year existence
FEDERAL EMERGENCY RELIEF ADMINISTRATION (May 1933)
Doled out $500 million to the states
Assigned ½ of this money to bail out bankrupt state and local governments.
States matched other half (3 state dollars for ever 1 federal dollar) and distributed it directly to the people.
Over the years, FERA gave more than $3 billion to the states
FERA also created Civil Works Administration to create temporary labor jobs to those most in need
AGRICULTURAL ADJUSTMENT ACT (AAA) (1933)
To assist farmers
Government temporarily set production quotas for farm commodities
Including corn, wheat, rice, milk, cotton and livestock
Gave money to farmers to reduce production so that prices would eventually rise again
And paid farmers to destroy some of their crops and animals.
Farm Credit Act provided loans to farmers in danger of bankruptcy
Disproportionately benefited large landowners
Who received money to reduce crop yields
And kicked sharecroppers and tenant farmers off their land.
Dust Bowl, 1930s
Farmers in grasslands of Oklahoma and neighboring states
Because of Homestead Act 1862
Hit with a drought
Dust on abandoned farms were swept up in dust storms
350,000 farmers left for the west - especially California
Plight of the "Okies" and "Arkies" was chronicled
By John Steinbeck (Grapes of Wrath)
And photographer Dorothea Lange
AAA was declared unconstitutional in 1936 in the U.S. v. Butler Case
Government was not allowed to interfere in state commerce.
TENNESSEE VALLEY AUTHORITY (May 1933)
To modernize and reduce unemployment in the Tennessee River Valley (one of poorest regions in country even before Depression)
TVA hired local workers to construct series of dams and hydroelectric power plants
That brought cheap electricity to 1000s of people
Also created affordable employee housing, manufactured cheap fertilizer, drained 1000s of acres for farming
NATIONAL INDUSTRY RECOVERY ACT (1933)
Headed by Hugh Johnson
Created two administration
National Recovery Administration (NRA)
To eliminate destructive competition
Labor, government and industry came together to create codes of "fair practices"
Set prices, minimum wage, maximum hours
Voluntary for businesses
Businesses that observed practices were allowed to display Blue Eagle in their shop windows (see image)
Shops that didn't follow were often boycotted
Supreme Court declared NRA unconstitutional in 1935
Schechter Poultry Corp. v. U.S.
But many provisions stayed in 1935 Wagner Act
Public works Administration (PWA), June 16, 1933
Headed by Sec. of Interior Harold Ickes.
Several billion dollars used.
Spent on construction of public roads, bridges, buildings.
"Big bucks on big projects" to "prime the pump"
By 1939, the PWA funded 34,000 projects
Airports, dams, aircraft carriers, schools, hospitals etc.
Roosevelt took country off gold standard
Had previously allowed citizens and foreign countries to exchange paper money for gold anytime they wanted
Roosevelt ordered Americans to hand over their stockpiles of gold to US treasury in exchange for paper dollars
Also allowed U.S. to print money to "prime the pump"
SECURITIES EXCHANGE COMMISSION (SEC) (1934)
To regulate trading on Wall Street and curb wild speculation that had led to the Crash of 1929
INDIAN NEW DEAL
Ended forced assimilation
and allowed Indians unprecedented cultural autonomy,
Indian Reorganization Act (1934)
Native Americans got federal assistance.
Indian Reorganization Act to promote tribal reorganization
And give federal recognition to tribal governments.
Nearly 100,000 young Native American men participated in relief programs (such as CCC, PWA and WPA)
Indian Reorganization act changed relations between various tribes and federal government
Reversed the 1887 Dawes Severalty Act (which had weakened tribal affiliations by stipulating that only individual Native Americans – not tribal councils – could own land)
Didn’t accomplish much
Some tribes had difficulty understanding terms of the new treaty
Some simply rejected it.
CRITICS OF NEW DEAL
NEW DEAL WENT TOO FAR
Said it was “Creeping Socialism” threatened to subvert capitalism.
1934 American Liberty League
led by former Democratic presidential hopeful Al Smith
funded by Du Pont family
Claimed FDR wanted to destroy free-enterprise capitalism and pave way for communism, fascism or both.
Big business opposed New Deal
Fears that federal government would support organized labor
NEW DEAL DIDN'T GO FAR ENOUGH
Ultra liberals said too much to wealthy and failed to resolve problems in financial sector
Huey P. “Kingfish” Long
From Louisiana, believed income inequality had caused the Depression
Promoted “Share Our Wealth” or “Every man a King”
To levy enormous taxes on rich so that every American family could earn at least $5000 a year
Enormous popularity during first few years of Roosevelt’s first term
Father Charles Coughlin
Catholic priest, broadcast criticisms on weekly radio program
Amassed following of 40 million
Blamed Depression on crooked Wall Street financiers and Jews
Campaign for the nationalization of the entire American banking system
Francis E. Townsend
He and Father Coughlin created the National Union for Social Justice
Ran for presidency in 1936
Every person over 60 paid $200/month
Had to be retired
Free from “habitual criminality”
Had to spend the money within 30 days (in order to put the money back into the economy. )
Supported by 2% national sales tax
SECOND NEW DEAL
FDR responded to critiques – new legislation 1935-1938
Differed from New Deal
Relied more heavily on Keynesian-style deficit spending
Acceptance in part due to complaints from critics such as Huey Long
Also because clear by 1935 that more Americans still needed federal relief assistance
Projects were part of FDRs Emergency Relief Appropriations Act (Apr. 8, 1935)
REVENUE ACT OF 1935
In response to Huey Long's "Share Our Wealth"
Government raised federal income tax on wealthiest Americans
Called the "Wealth Tax" or "Soak the Rich" tax
Up to 75% tax on the highest income
WORKS PROGRESS ADMINISTRATION (WPA) 1935
To appease people like Huey Long who wanted more direct assistance from the federal govt.
Similar to Public Works Administration of First New Deal
Hired nearly 10 million Americans to construct new public buildings, roads, bridges.
650,000 miles of roads
125,000 public buildings
Congress dumped more than $10 billion into these projects in just under a decade
Also employed 1000s of artists, writers and actors.
Federal Art Project
Sponsored murals, graphic arts, posters, community art centers and galleries
Artists wages $23.50/week
Produced 2,566 murals, 100,000 paintings, 17,700 sculptures
Federal Writers' Project (Jul. 27, 1935)
Produced city guides, local histories, oral histories, children's books etc.
Over 10,000 people employed through FWP
American Guide series included guides to 48 states (histories, photos, maps)
Slave Narrative Collection - interviews with over 2,300 former slaves.
American Life Histories
Federal Theater Project (Aug. 27, 1935)
Aid to artists, musicians, actors
Many actors, stagehands etc. were out of work because of motion pictures
Employed 15,000 at $23.86/week
Started careers of people like Orson Welles, Elia Kazan, Arthur Miller.
"Living Newspaper" plays, African-American theater, dance, foreign-language, radio
SOCIAL SECURITY ACT (1935)
Created a federal retirement pension system for many workers
Funded by tax on every working Americans’ paycheck
Created an unemployment insurance plan to assist those temporarily out of work
And made funds available to the blind and the physically disabled.
Stipulated that Congress would match with federal dollars every state dollar allocated to workers’ compensation funds
Help for farmers
After Supreme Court declared Agricultural Adjustment Administration unconstitutional in 1936, Democrats responded with passage of Soil Conservation and Domestic Allotment Act the same year
Continued to subsidize farmers to curb overproduction
Also paid them to plant soil-enriching crops (instead of wheat) or not grow anything at all so nutrients would return to the soil
1938 Congress created Second Agricultural Adjustment Administration
To reduce total crop acreage.
RURAL ELECTRIFICATION ADMINISTRATION (REA) (May 20, 1936)
U.S. lagged behind Europe in providing electricity to rural areas
Less than 11% of farms had electricity (France and German = 90%)
REA helped bring electrification to rural areas
National Labor Relations Act or Wagner Act (1935)
Protected workers’ right to organize and strike
Fair Labor Standards Act (1938)
Established national minimum wage and 40-hour week in some sectors of economy
Outlawed child labor
1935 Wagner Act paved way for collective bargaining and striking.
Within a year, labor unions made headway fighting for better hours and higher wages
Example, assembly-line works in GM
Used Wagner Act to initiate series of sit-down strikes (preventing hiring of “scab” workers)
By 1937 the company had recognized their right to organize
Also helped concepts of minimum wages and child-labor laws
Provided relief, recovery and reform
Had won support of blacks (who voted Democrat first time in large numbers)
Had support from unskilled laborers
Had support from those in West and South
Didn't stand a chance against FDR and Democrats
Nominated moderate Kansas governor Alfred M. Landon on anti-New Deal platform.
523 electoral votes to Landon’s 8
Proved Americans widely supported New Deal
LEGAL CHALLENGES TO NEW DEAL
Conservative, Republican-dominated Supreme Court
Court put brakes on federal control of economy and Keynesian deficit spending
Began to strike down key pieces of New Deal legislation
Schechter Poultry Company v. US, 1935
Declared National Industrial Recovery Act violated Constitution because gave too many powers to the president
And attempted to control intrastate (within states) commerce rather than interstate (between states)
Constitution only allows Congress to regulate "interstate" commerce
("commerce clause" Article 1, Section 8, Clause 3)
Butler v. US, 1936
Declared Agricultural Adjustment Administration violated Constitution
Because it unconstitutionally tried to exert federal control over agricultural production.
Roosevelt believed NIRA and AAA were crucial to reviving American economy
Feared any more conservative rulings would cripple or kill New Deal
Petitioned Congress 1937 to change makeup of the Court
Believed justices old age affected their ability to concentrate on their work
Asked for the power to appoint as many as six additional justices (bringing total to fifteen)
And for authority to replace justices over age of 70
Instead of winning over Democrats and New Dealers, had opposite effect
Shock over president’s disregard for cherished tradition of separation of powers.
Making minor reforms in lower courts
Keeping Supreme Court untouched and intact.
Judges became more accommodating anyway
Roosevelt began scaling back deficit spending in 1937
Pressured by conservatives in Congress.
Believed worst of depression had passed.
Drastically reduced size of WPA
Halted paying farmers’ federal subsidies.
Early retreat came too soon
Economy buckled again
Caused “Roosevelt Recession”
Stock market crashed again in 1937
Price of consumer goods dropped significantly
Economy had not pulled far enough out of Depression to survive on own.
Roosevelt tried to blame spendthrift business leaders
But Americans didn’t believe him
Democrats lost number of seats in House in Senate in 1938 congressional elections
Republicans in Congress further weakened Roosevelt’s power with Hatch Act 1939
Forbade most civil servants from participating in political campaigns
Also forbade public office holders (i.e. Roosevelt and New Dealers) from using federal dollars to fund their reelection campaigns
Made it illegal for Americans who received federal assistance to donate money to politicians
Hoped measures would divorce functions of government from campaign frenzy
And ultimately dislodge entrenched New Dealers who preyed on a desperate public for votes.
Blamed for Recession and plan to dominate federal courts – and with political base pulled out from under them
Democrats and New Deal ended in 1938