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New Deal


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

  • "Okies"

  • 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

Excessive Credit

  • 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.

HERBERT HOOVER

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

  • Hoover

  • 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.


ELECTION 1932

Republicans

  • Renominated Herbert Hoover.

  • Hoover warned that a Democratic victory would worsen economic problems.

Democrats

  • Nominated NY Governor Franklin D. Roosevelt

  • Roosevelt pledged a "new deal" for the American people

  • Promised to repeal Prohibition and help the unemployed

20th Amendment

  • 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


BANKING RELIEF

  • 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

  • Fireside chat

  • 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.

GOLD STANDARD

  • 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

  • Assassinated 1935

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

  • Retired physician

  • He and Father Coughlin created the National Union for Social Justice

  • Ran for presidency in 1936

  • Townsend Plan

  • 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

  • 75,000 bridges

  • 8000 parks

  • 800 airports

  • 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

Labor Reform

  • 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

  • Lasting effect

  • 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

ELECTION 1936

Democrats

  • 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

Republicans

  • ​Didn't stand a chance against FDR and Democrats

  • Nominated moderate Kansas governor Alfred M. Landon on anti-New Deal platform.

Roosevelt landslide

  • 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.

COURT-PACKING SCHEME

  • 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

  • Backfired

  • Instead of winning over Democrats and New Dealers, had opposite effect

  • Shock over president’s disregard for cherished tradition of separation of powers.

  • Compromise

  • Making minor reforms in lower courts

  • Keeping Supreme Court untouched and intact.

  • Judges became more accommodating anyway

ROOSEVELT RECESSION

  • Roosevelt began scaling back deficit spending in 1937

  • Pressured by conservatives in Congress.

  • Believed worst of depression had passed.

  • Reduction

  • 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

  • Reason

  • 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

  • Result

  • Democrats lost number of seats in House in Senate in 1938 congressional elections

HATCH ACT

  • 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

  • Conservatives

  • 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


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