Roosevelt’s New Deal
On July 2, 1932, at the Democratic National Convention, the crowd listened intently to the phrase,” I pledge you, I pledge myself to a new deal for the American people.” The New Deal name was soon applied to the program of reform and recovery instituted by Franklin Delano Roosevelt. During the early part of the Great Depression, the economy had ground to a halt as a result of the stock market crashing and the unemployment rates skyrocketed as businesses shut down. Only a very small portion of the population actually held stock. The cause of the Great Depression was really a result of shallow economical prosperity. Most of the farmers and other industries struggled in the 1920’s. Low prices, suppressed wages and production material prices, and lopsided distribution of income all influenced the spiraling effect of the Great Depression. The relative greed of businesses in terms of profit margins and little interest in the increase of wages and positive working environments also played a role. By not making allowances for increasing wages, businesses essentially reduced the spending power of the workforce. This made the products these workers helped to produce unavailable to them. The banking industries were also involved by reacting inappropriately to economical trends right before the crash. An increase in credit flexibility might have helped reduce some of the dramatic effects of the stock market crash. The relative reduction in disposable income as well as an inflexible credit system created a dramatic reduction in spending and effectively promoted a drastic reduction in the value of the dollar. When the market crashed, all of these factors that were hidden by a general belief in permanent wealth and prosperous trends sent the economy into a tale spin. Many believed that the United States would decline into dissolution and little faith was placed with the current policies of Herbert Hoover’s administration. The American public desperately needed someone to guide them through the most economically debilitating period in history. They were looking for someone with a plan that would help kick start the economy and bring prosperity back to the masses.
The gravity of the Great depression called for governmental reforms and programs to protect and maintain the general welfare of its citizens. Franklin Roosevelt utilized a committee of people from differing points of view to aid in his legislative ideas. This committee, called the Brain Trust, disagreed and argued over many of the policies implemented during the New Deal era. This conflict was probably as helpful as it was harmful to the decision-making processes needed for instituting the programs and organizations introduced in the following years. The New Deal would bring about a new beginning in public welfare by setting up the framework for a welfare state, which is still in existence today. The New Deal program is usually divided into three periods. The first phase (1933-34) attempted to provide recovery and relief from the Great Depression through programs of agricultural and business regulation, inflation, price stabilization, and public works (New Deal 1993). Fortunately for Roosevelt, the Democratic Party held the majority in Congress. This allowed Franklin Roosevelt to churn out legislation with almost no resistance. On his second day in office, FDR called for a special session of Congress which would ultimately establish numerous emergency organizations, notably the National Recovery Administration (NRA), which attempted to stabilize prices and wages through cooperation between the government, business, and labor, the Federal Deposit Insurance Corporation (FDIC), which used various means to rebuild trust in banking, the Agricultural Adjustment Administration (AAA), which aided farmers through compensation, the Civilian Conservation Corps, and the Public Works Administration; both of which employed many people to work on public building projects. Congress also instituted farm relief, tightened banking and finance regulations, and founded the Tennessee Valley Authority (New Deal 1993). These various organizations were all designed to improve the social and economic situations Americans faced during this period in United States history. The banking industry was the first focus of Roosevelt’s administration.
Banks had been closing all over the country due to frightened citizens withdrawing all of their money. In order to increase trust in the banking system, Congress passed the Emergency Banking Relief Act of 1933. The bill gave the president broad powers over financial transactions, prohibited the hoarding of gold, and allowed for the reopening of sound banks, sometimes with loans from the Reconstruction Finance Corporation (Nash and Jefferey et al 777). It also passed the Banking Act of 1933, which strengthened the Federal Reserve System, established the Federal Deposit Insurance Corporation (FDIC), and insured individual deposits up to $5,000 (777). These legislative acts encouraged the public to once again trust their banks, and to deposit their money back in them instead of hiding it at home in or under the proverbial mattress. The allowance for insurance limits was increased greatly, later on, as a direct result of this regained trust and the consequentially larger sums of money being reintroduced into the banking system.
With this new trust in banks being established, the focus was turned to the common household and farmers. The Agricultural Adjustment Act and the Home Owners’ Loan Corporation were both formed to help farmers and other households with paying their burdensome mortgages. This form of aid would also be instrumental in helping the mortgage-holding banks to stay in business. The Frazier-Lemke Farm Bankruptcy Act was aimed at helping to save farms from going under due to bank foreclosure. Along with postponing final foreclosure for three years, allowing for potential recovery from foreclosure, this legislative act also made provisions for moving farmers from land with poor soil and poor production potential to good farming areas. Some of these reforms were not all widely praised and or completely successful. As in the case of the AAA, speculation grew to outrage as farmers were given compensation for growing less acreage. The subsequent intentional destruction of crops and the use of slaughtered pigs as fertilizer increased the inspection into a plan that wasted food while so many went hungry. This particular plan failed, but a revision of the original idea, during the second phase of the New Deal, succeeded with the Soil Conservation and Domestic Allotment Act. This act planned to remove acreage from production while conserving the soil from erosion that had taken so much of the topsoil during drought and high winds. In order to accomplish this, farmers were paid to plant soil conserving crops or to leave the land undisturbed. This legislation was much more successful than its predecessor. The vacated areas would still be planted with trees in order to prevent the loss of soil through erosion and to eventually help restore these areas to fertile and stable conditions.
Roosevelt then turned his attention toward businesses and inflation manipulation. Roosevelt called for all privately owned stores of gold to be turned in and repaid in paper money. He took the nation off of the gold standard and cancelled any use of a gold payment clause in contracts. He reduced the amount of gold behind the dollar as a means for a further reduction in dependence on the gold standard. After experimenting with pushing the price of gold up by buying it in the open market, Roosevelt and his advisors fixed the price at $35 an ounce in January 1934 (against the old price of $20.63). This inflated the dollar by about 40 percent (777). The inflation of the dollar allowed businesses to be more aggressive and to stabilize in the midst of the financial landslide.
Gradually stabilizing businesses would consequently help to slowly turn the tide of unemployment. The unemployed men and many unemployed women would also be given opportunities through other newly instituted government organizations. Roosevelt was interested in providing relief for everyone, those who had plenty as well as those who had very little. Roosevelt once remarked, ” The test of our progress is not whether we add to the abundance of those who have much. It is whether we provide enough for those who have too little” (Tindall and Shi 1241). Congress’ first step in accomplishing this goal was the creation of the Civilian Conservation Corps (CCC). It put young unemployed men between the ages of 18 and 25 to work on reforestation, road and park construction, flood control, and other projects (Nash and Jefferey et al 779). Congress also allowed for more immediate relief with the Federal Emergency Relief Administration (FERA). This organization gave money to states in the form of grants. The money was then handed out to relief clients in the form of direct cash payments, wages, and work projects. The NRA was formed in order to further help with the improvement of industry, labor, and unemployment inadequacies. Workers were guaranteed the right to organize and bargain together with their own representative and also forbade businesses from forcing workers to sign an anti-union contract before they were hired. All of these reforms were useful in helping to solve some of the unemployment problems. However, the problem would not be addressed seriously until the second part of the New Deal.
These regulations and reforms were instrumental in providing new hope, if little else, to the American public. The economic reforms were not conducive to a free market society due to the aim for strict control of the many factors involved in recovery. Fortunately for Roosevelt’s administration, little progress could have been made with any ongoing use of a laissez- faire approach to economic regulation by the government. The first phase of the New Deal was temporary and used for an immediate restoration of the economy and any trust in it held by the public. These reforms were somewhat successful in abating a failure in the money system and gaining enthusiastic support for the Roosevelt administration. They did not, however, significantly reduce the immense pressure felt by the public as a result of the Great Depression. Along with this reality, several crucial New Deal programs were found to have violated conservative constitutional theory; the National Recovery Administration, the Agricultural Adjustment Administration, and others were invalidated by the Supreme Court, which was dominated by conservatives with a narrow view of the interstate commerce clause of the Constitution, the basis of much New Deal legislation. Other skeptics of the administration feared that the country was being lead down a path to socialism.
During the period from 1935 to the middle of 1936, while FDR prepared for re-election, a new group of reforms were set in motion. This new group of reforms is referred to as the second New Deal. Emphasis was removed from cooperation with businesses to reforming social issues. Roosevelt called the legislation passed during the second New Deal “must” legislation (Tindall and Shi 1254). The Wagner Act also known as the National Labor Relations Act prohibited employers from interfering with union activities and gave workers the right to bargain through unions of their own choice. The Social Security Act of 1935 was the New Deal’s “supreme achievement”, according to Roosevelt (1255). These acts obviously reinforced the labor forces’ right to assert their own goals and positions as well as to organize activities and negotiations independently from the control of outside interest groups. The Works Progress Administration (WPA), authorized by Congress in April 1935, was the first massive attempt to deal with unemployment and its demoralizing effect on millions of Americans (Nash and Jefferey et al 781). By employing several million people per year, the WPA was able to complete many socially important projects including bridges, libraries, and golf courses. The Works Progress Administration had many critics, as the workers were often pictured as loafers and lackadaisical in production. The WPA did account for many thousands of useful projects. The National Youth Administration (NYA) complemented the Works Progress Administration by supporting 16 to 25 year old people for work on similar public assignments.
The longest lasting social reform came in the form of a tax on personal income to fund some of the social based programs introduced by the government during this time. The Social Security Act is sometimes considered the greatest accomplishment of the entire New Deal era. This tax would be used to establish a system of old-age pensions, unemployment insurance, and welfare benefits for such protected groups as dependent children and the handicapped. These reforms established a framework that shaped the American welfare system through the remainder of the century. The high volumes of social legislation during this period also included some important programs aimed at aiding the farmers and rural communities. The Resettlement Administration (RA) was used to allow for relocating many farmers to government held land. Lack of funds and fears that the Roosevelt administration was trying to establish Soviet-style collective farms limited the effectiveness of the RA program (783). A different program would prove to be immensely more important to rural America than the Resettlement Administration. The Rural Electrification Administration (REA) was given authority to furbish the right to distribute electricity to areas not being serviced by the major private power companies. Only 10 percent of the nation’s farms had electricity in 1936. When the REA’s lines were finally attached, they dramatically changed the lives of millions of farm families who had been able only to dream about radios, washing machines, and farm equipment advertised in magazines (783). The hardships endured by these families without electricity would, for the most part, now become an inconvenience of the past.
This period of reform attempted to address other issues with more radical ideas. The government passed legislation to limit the power of utility corporations and even planned to tax the very wealthy in order to level the financial playing field. This control of corporations and their respective power would meet plenty of opposition and would not be very effective since any attempt they made to pass this type of legislation seemed to project an appearance of communist influences. The power companies were not as successful in shedding the government’s control. The Public Utility Holding Company Act was introduced in an attempt to limit the control over public utilities held by a few private companies. The company could be eliminated if efficiency levels were not maintained within a given period of time.
The successes greatly outweighed these later failures and more radical tendencies. For this reason, the public put their faith in Roosevelt’s administration. This upswing toward an increase of social interest in massive waves of legislation led to a landslide victory for Franklin Delano Roosevelt in the 1936 election.
After the election, Roosevelt entered into the third and final phase of his New Deal. This late portion of the New Deal administration was initially focused on decreasing the prevalence of impoverished people across America. Unfortunately, much of this later period would be focused on reforms within the government. These internal reforms were aimed at a problematic and very conservative Supreme Court as well as the lesser courts in the judicial system. Roosevelt was bitter about the many programs that had been overturned by the Supreme Court. He tried to add more youthful justices to the Court and thereby reduce the strong conservative trends held there. This aggressive action and attempt to load the bench with sympathetic justices was quickly met with resistance in the Republican Party as well as with many members of the Democratic Party. The public also lost enthusiasm in Roosevelt for these almost dictatorial tactics. Roosevelt eventually conceded and backed down in the face of public criticism over the attempt to manipulate the time- honored institution. The Court would eventually change its position and even support some controversial reform programs. His attempt to reorganize the Court dissipated energy and slowed the momentum of his legislative program (791). The third period of the New Deal included some more legislation on issues addressed in the previous periods. Organizations like the Farm Security Administration (FSA), the Home Owner’s Loan Corporation (HOLC), and the Federal Housing Administration (FHA) were introduced to provide more relief, along with existing organizations, for the farming industry, migratory workers, and homeowners. The Federal Housing Administration provided long term, low interest loans for households in order to save many from foreclosure. New Deal housing policies helped make the suburban home with the long FHA mortgage part of the American way of life, but the policies also contributed to the decline of many urban neighborhoods (792).
Of all the legislation introduced in this period, none were more important than the Fair Labor Standards Act. This established the minimum wage concept and provided for subsequent increases in the minimum wage over a period of time. The policy also improved the standards of labor for most groups. The workweek was reduced to the now standard 40 hours per week with the exception for agricultural workers and household servants. When this program was implemented many workers enjoyed an immediate increase in pay and now had much more disposable income in the home. This program also set age limits and did not place any emphasis on gender. This made anyone under the age of 16 unavailable for work in most industries. By doing this, the government effectively eliminated the shocking abuses endured by children as they were sent off to work in order to contribute to their household’s income. And without emphasizing the matter, the law made no distinction between men and women, thus diminishing, if not completely ending, the need for special legislation for women (793).
Overall, the New Deal increased the government’s sense of social responsibility for its citizens. All of these bills were part of Roosevelt’s complicated, experimental, and radical plan, supported by his interest in providing relief from economic disparity, economic and social recovery, and social reform. Roosevelt’s ideas of a big government were opposed by conservatives and businesses, which had enjoyed years of laissez-faire practices. However, most Americans gladly embraced the New Deal as saving the country despite its relatively small accomplishments. Roosevelt was criticized for spending as much as he did on his programs, but some economists believe that he should have spent much more. Roosevelt’s New Deal was a brand new approach to government that greatly limited states rights, strongly favored workers and unions, and formed programs that for many critics were borderline socialist. The charisma and enthusiasm he held for his New Deal made it a key ingredient for holding the country together through one of its most tumultuous periods. The limited success of the administration was no longer a concern for anyone after the beginning of World War II in 1939. This worldwide event would boost the economy tremendously and jolt the United States back into prosperity. After all is said and done, the New Deal administration under Franklin Roosevelt laid down the framework and guidelines for America social policy still in effect today.
1.Nash, Gary B., Jeffrey, Julie Roy, Howe, John R., Frederick, Peter J., Davis, Allen F., Winkler, Allan M., general eds. , The American People: Creating a Nation and a Society. Vol. 2., 5th ed. Addison Wesley Educational Publishers Inc., 2001
2.”New Deal.” The Columbia Encyclopedia. 1993 ed., p. 26532
3.Tindall, George, and Shi, David. America: A Narrative History. W. W. Norton, New York, 1999