FDR, The New Deal, and the Second Deal

FDR

• Born in 1882, 5th cousin of Theodore Roosevelt

• In 1921 he contracted polio and lost the use of his legs. (Paralytic Illness)

• Promised Americans a “New Deal” in 1932 but was vague on the details

• He received 57% of the American people’s votes and was easily swept into office.

New Deal• Roosevelt conceived of the New Deal as an

alternative to Nazism and unregulated capitalism.

• Hoped to reconcile democracy, individual liberty, ad economic planning.

• The view of FDR’s cabinet: Large firms needed to be managed and directed by the government

• “This nation asks for action and action now.”

The Banking Crisis• Taking office in 1933 the banking system is on

the verge of collapse.

1. Bank funds lost stock market value 2. Panicked depositors withdrew their savings3. Banks had to close their doors from all the

withdrawals.

Banking Crisis Continued• March 1933, Roosevelt declares a “bank holiday”– Temporarily closed banks, halted operations

• March 9, 1933 – Creates the Emergency Banking Act, providing funds to shore up banks

• The Glass-Steagall Act: – kept commercial banks from getting involved in the stock market. – Established the FDIC (insurance for individual depositors)

• Outcome: These acts help rescue the financial system and increased government control over the banks.

The National Recovery Administration (NRA)

• Part of the first “hundred days” of the Roosevelt administration.

• Work with groups of business leaders to establish industry codes that set standards for: 1. output, 2. prices 3. working conditions

• Outcome: NRA is another step toward government intervention in the economy. A step away from an unrestrained economy.

Government Jobs• March 1933 (Part of the “hundred days”)• Civilian Conservation Corps (CCC)– Gave unemployed young men work projects– Forest Preservation, wildlife preserves– Program ends in 1942, helped 3 million young men

• May 1933 (Part of the “hundred days”)• Federal Emergency Relief Administration (FERA)– Made grants to local agencies to help the

impoverished– Created temporary jobs• Roads, bridges, infrastructure

Public Works Projects• Public Works Administration (PWA)• Used 3.3 billion to build:– Roads– Schools– Hospitals

• Civil Works Administration (CWA)– Employed more than 4 million people by 1934– Built, highways, tunnels, courthouses, and airports

• Roosevelt dissolved the CWA after high costs and public complaints about creating a class of people dependent on government jobs.

New Deal and Agriculture

• Agricultural Adjustment Act– “Hundred Days” policy initiative– Attempted to increase farm prices, paid farmers

not to plant more crops• 6 million pigs were ordered to be slaughtered

– Succeeded in raising farm prices– Benefits flowed to land owners• NOT TENANTS

New Deal and Housing• 250,000 homes in 1932 were foreclosed• Millions of Americans lived in slums• Roosevelt has the government enter the housing

market.– Security of a home is a fundamental right

• Federal Housing Administration (FHA)– Insured millions of long-term loans for private banks

New Deal Success?

• The New Deal transforms the role of government.– Provide economic relief and security– Constructed numerous public facilities– Relief for millions– A set of experiments, some worked, some did not

• The New Deal did not end the Great Depression– 20% of the workforce (10,000,000 Americans) was

unemployed in 1934

New Deal Success?• The Court and the New Deal– Controlled by conservative Republican judges– Roosevelt is a Democrat– The NRA is unanimously voted unconstitutional– The First New Deal starts to ground to a halt

– More pressures outside of Washington D.C. propel the administration to newer and more radical policies. • To be Continued………

– Link pick up at 10:00, stop at 17:00

The Second New Deal

The Second New Deal• Democrats gain seats in the midterm elections in

1934

• Gives Roosevelt the confidence to launch the Second New Deal in 1935

• New Dealers believed that the government should focus less on business recovery now and more on redistribution of national income.

Features of the Second New Deal

• New taxes on the large fortunes and corporate profits.– Response to Huey Long’s “Share our Wealth

Campaign”

• Created the Rural Electrification Agency (REA)

• Helped small farmers reduce soil loss

The Works Progress Administration

• Established in 1935• Hired 3 million Americans until it ended in 1943.• Accomplishments of the WPA:– Constructed thousands of public buildings and bridges– Added murals to their construction– Built more than 500,000 miles of road– Built 600 airports– Stadiums, sewage plants, and swimming pools were

also built– Employed many out of work white collar workers and

professionals

WPA and Wagner Act• Promoting the arts was the most famous WPA

project.– Hundreds of artists created murals on buildings– Writers produced local histories and guidebooks– Also recorded the histories of hundreds of former slaves– First glimpse of live music and theatre for many

Americans• Wagner Act: empowered the National Labor

Relations Board to supervise elections of union reps– Outlawed “unfair labor practices” I.E. firing/blacklisting

union organizers

Social Security• Social Security is the centerpiece of the

Second New Deal in 1935.• Concept: the national government has a

responsibility to ensure the material well-being of ordinary Americans.

• System of: – unemployment insurance, – old age pensions– Aid to the disabled– Elderly poor– Families with dependent children

Social Security Continued

• The U.S. would now supervise a permanent system of social insurance.– Rather than just temporary relief

• Launches the American version of the Welfare State– Income assistance– Health coverage– Social service

Social Security Continued• Represented a radical transformation of federal

government• The question changes:– Pre 1930s: Whether government should get involved– After the New Deal: How should government intervene in

the economy• Government assumes responsibility for – A living for Americans– Protection against economic and personal misfortune

• Limitations: Domestic Agricultural workers are not covered– I.E. unmarried women and non-whites

The Election of 1936• Working-class voters provided the majority of the

Democratic Party• A fight for the possession of “the ideal of freedom• FDR insists there is a threat posed to freedom by

large corporations– Argues this is the main issue of the election

• FDR’s opponent is Alfred Landon– Denounces the New Deal programs and Social Security– Landon loses in a landslide– FDR wins with a voting coalition of union workers,

southern whites, and northern blacks

The Court Fight• Roosevelt proposes the President be allowed to

appoint a new justice for each one on the court over the age 70– Six of the nine justices were over the age 70– FDR’s aim is to change the balance of power

• Congress rejects the plan• FDR’s aim ultimately succeeds– Justices fear future “court packing”– The conservative court starts supporting economic

regulations by federal and state governments

End of the Second New Deal• United States Housing Act, 1937– Build houses for the poorest Americans

• Fair Labor Standards Bill– Banned goods produced by child labor from interstate

commerce– Sets a 40 cent minimum wage– Required overtime pay for 40+ hour workweeks– Sets federal regulations for wages/working conditions

End of Second New Deal Continued

• 1936: economic conditions are improving– FDR reduces the federal funding for farm subsidies– WPA work relief is cut

• 1937: The results of the federal cuts is disastrous– Unemployment was 14% at the end of 1936– Unemployment rose to 20% at the end of 1937

• Keynesian economics takes hold– John Maynard Keynes– Challenges the need for balanced government budgets

John Maynard Keynes• Large scale spending by the government is

necessary during downturns.– Sustains purchasing power and stimulates the economy

• It is necessary to maintain large scale spending during economic downturns– Even if it requires deficit spending

• Deficit Spending: Spending more than the government takes in.

Government Planning for the Great Depression

• New Deal, 1933-1934: Economic Recovery • Second New Deal, 1935-1936: Economic

redistribution• Now, 1937-1938: Public Spending to combat

unemployment and stimulating economic growth

• 1937-1938 ends the Second New Deal