The Great Depression and the New Deal

Chapter 33

Hoover blamed for

Depression

• Did not believe government should

get involved

• Private organizations should help

people out

• If people worked hard enough,

they would succeed

FDR and election of 1932

• Background

– Governor of NY, former Assistant Secretary of Navy

– Wealthy

– related to Teddy Roosevelt

– married Eleanor Roosevelt

• Was a major advisor, campaigner and worker for

FDR. Advocate for poor, women and blacks

– had polio and was in a wheelchair

– Excellent speaker, and conveyed empathy for

“forgotten man” – the hard working poor

• Hoover insisted depression would have been worse

without his policies and FDR’s would lengthen depression

• Election of 1932

– FDR wins in dramatic landslide

– FDRs reform policies begin to encourage blacks to

shift from Republican to Democrat party

– Between November election and March inauguration

very little happened to change the political or

economic situation

First Inaugural Address

• I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our people impel. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days

FDR and the Three R’s: Relief, Recovery,

Reform

• People take money out of banks causing the banks to go

out of business

– FDR declares 4 day bank holiday (March 6-10) to stop

the withdrawals

• First Hundred Days

– Beginning of FDR’s administration where many

programs were implemented

– Relief, Recovery and Reform (see page 774, 777)

• “Alphabet soup” of programs – CCC, AAA, TVA,

NWA, PWA, FDIC, NRA, Glass Stegall Act, etc.))

– Relief (Meet needs of hungry and jobless); Recovery

(Help agriculture and industry); Reforms (Change the

American Economy)

• Congress rubber stamped many FDR initiatives

– Nation supported ANY change, as long as it appeared

government was doing something

– Many programs had foundations in Progressivism

Roosevelt Manages the Money

• Emergency Banking Relief Act (1933)

– Gave president power to regulate banking and foreign

exchange

– Fireside Chats

• FDR used radio broadcasts to build support for his

policies, reassure the public and pressure Congress

into action

• Glass-Stegall Banking Reform Act

– Created the FDIC (Federal Deposit Insurance

Corporation) which insured individual deposits in banks

– Tighter regulation and prohibit banks from selling

securities (stocks/bonds)

• Created separation between commercial and

investment banks

• Gramm-Leach-Bilely Act of 1999 repealed bans on

commercial/investment firm affiliations – eliminated

most Glass-Stegall barriers between types of

banking

• Managed Currency

– FDR ordered all gold to be surrendered to Treasury

– Wanted to stimulate inflation by buying gold at high

prices

Roosevelt Manages the Money

• Civilian Conservation Corps (CCC)

– Provided 3 million jobs working in national forests,

flood control, swamp drainage

– Required to send majority of wages to their families

• Federal Emergency Relief Act (FERA)

– Aim was immediate relief

– Harry Hopkins ran FERA, gave $3 billion in direct

payments

• Agricultural Adjustment Act (AAA)

– Made money available for farmers to pay mortgages

• Home Owners Loan Corporation (HOLC)

– Helped Americans refinance home mortgages so that

they would keep their house

• Civil Works Administration (CWA)

– Part of FERA

– Gave temporary jobs such as raking leaves

Opponents to FDR

• Father Charles Coughlin

– “Social Justice” – argued in favor of radical monetary

reforms;

– advocated for poor and against businesses;

– over 30 million people listened to him on radios;

– eventually accused of being anti-Semitic and was forced to

stop giving speeches by the Catholic Church

• Huey “Kingfish” Long

– Governor of Louisiana

• Opposed FDR and New Deal

– Share Our Wealth

• Guaranteed Family Income; Money to buy a home; Free

Education; Cheap food; Paid with tax on wealthy

– 4.5 million people joined Long; but was assassinated in

1935

• Dr. Francis Townsend

– Argued for guaranteed income for senior citizens to be

funded by sales tax

– Social Security Act was proposed partially to stop support

for Townsend

• WPA created to quiet critics

– Provided jobs for unemployed

Liberty League

• Opposed New Deal

– Did not want large government created by New

Deal

– Believed New Deal threatened free enterprise

– Did not want to have to pay for New Deal

programs

– Feared Huey Long’s proposals

– Only wealthy supported league

New Visibility for Women

• Eleanor Roosevelt

– Took a lead in advocating for women’s and minority

rights

• Frances Perkins

– First female member of cabinet as Secretary of Labor

– Helped write Social Security Act and Fair Labor

Standards Act

• Mary McLeod Bethune

– Director of Office of Minority Affairs – highest ranked

African American

• Advances in science and literature

– Ruth Benedict, Margaret Mead and Pearl BuckFrances Perkins

Industry, Labor and Farmers

• National Recovery Administration (NRA)

– 200 industries worked out “fair competition” guidelines

– Hours reduced to increase number of jobs available

– “Yellow Dog” contracts prohibited

– Both management and labor had to give up

independence to benefit from program

• Schechter v US (1935)

– Ruled Congress could not delegate legislative power to

executive. Ruled against the NRA

• Public Works Administration (PWA)

– Led by Harold Ickes – made large public works projects

like the Grand Coulee Dam

• Prohibition repealed by 21st

Amendment (1933)

• Agricultural Adjustment Administration (AAA)

– Paid farmers not to farm to induce scarcity thereby

driving up prices

– Created unemployment, was ruled unconstitutional in

1936

• Soil Conservation and Domestic Allotment Act (1936)

– Paid farmers to leave land fallow to conserve land

– Since it was conservation; Supreme Court allowed it

Dust Bowl

• Dust Bowl originated from droughts through mid 1930s that

destroyed 50 million acres of land

• Created by combination of over farming and lack of

rainwater

– Dry farming and mechanized farming weakened topsoil

and sped the process

• Okies and Arkies

– Bankrupt farmers fled midwest in hopes of better life in

California

– Shown in Grapes of Wrath by John Steinbeck

• Frazier Lemke Farm Bankruptcy Act

– Early attempt to stop farm bankruptcies but it was ruled

unconstitutional

• Resettlement Administration

– Attempted to relocate farmers to better land

• Indian Reorganization Act

– Led by John Collier; allowed for reversal of Dawes Act

– Ended forced assimilation of Indians and allowed for

traditional (i.e. non farming) ways of life

– Established new tribal governments

TVA, Social Security and Housing

Tennessee Valley Authority (TVA)

• Electricity developed into a big business

• Federal government owned land in Tennessee Valley and

around Muscle Shoals in Alabama

• Also was one of the poorest areas of US – it provided

work, electricity, housing and clean water

• Intent was to establish a “fair price” for private

companies to charge

• Plan was copied in rivers throughout Rocky Mountains

• Social Security and Housing

• FHA (Federal Housing Administration) (1934)

• Provided loans to build and improve people’s homes

• USHA (United States Housing Authority) (1937)

• Designed to promote low income housing; met with

mixed results

• Social Security Act (1935)

• Provided old age insurance and unemployment

insurance to mitigate influence of future depressions

• Paid for with payroll tax on employers and employees

• Not as generous as European pension schemes

Second New Deal

• Wagner Act – (National Labor Relations Act) (1935)

– Passed in response to the unconstitutionality of NRA

– Protected unions and establish a board to mediate disputes between

labor and management; created principle of collective bargaining

– Encouraged the creation of unions like United Mine Workers led by John

L. Lewis

• CIO (Committee of Industrial Organization)

– Sub group of American Federation of Labor (AFL) to protect unskilled

workers

– Eventually splits with AFL in 1938, led by John Lewis – becomes changes

“C” to Congress

• Fair Labor and Standards Act (Wages and Hours Bill)

– Passed in response to bloody suppression of CIO strikes steel industries

– Established minimum wage, maximum hours limits and ended child labor

under 16

• WPA – Works Progress Administration

– Large scale national works program to create jobs

– Built schools, bridges, public buildings etc

Election of 1936 and Court

Packing Scandal

Election of 1936

• Republicans argued FDR’s growing government threatened

freedom

– Picked Al Landon to run against FDR

• FDR argued that too many people are “ill housed, ill clad, ill

nourished”

• FDR won in landslide

– Established loyalty between Democratic Party and

unions, city voters, Catholic, Jewish and black voters

Court Challenges New Deal

• Supreme Court rejects FDR’s New Deal programs

– Said would give federal government too much power

– FDR’s programs violated the policies of checks and

balances

Court Packing Scandal

• FDR tries to increase size of Supreme Court from 9 to 15

unless Justices over 70 retired

– Would allow FDR to pick 6 justices

• Plan rejected because it gave President too much power

• Justice Roberts began voting liberal, which protected

some New Deal programs

Twilight of New Deal

• FDR’s attack on Court ended Congress’ unquestioned support of New Deal

programs

• Economic recovery slow despite “pump priming”

• “Roosevelt Recession” 1937 resulted from increased taxes and spending

• Kenynesianism

– Based on philosophies of John Maynard Keynes

– When demand for goods is too low, high unemployment results; therefore

active government needed to stabilize economy with expansionary

monetary policies by reducing interest rates and public works projects

• Hatch Act (1939) passed to ban administrative officials from soliciting

campaign money or using government funds for campaigning

• Critics of New Deal

– Argued it led to waste, corruption, bloated government, communistic

ideas and policies that were implemented before thought through.

National debt doubled in 7 years. Philosophy of handouts undermined

virtues of thrift and initiative.

– Business and conservatives accused FDR of class warfare and socialism

– New Deal did not end depression, economists believed greater deficit

spending was needed

– WWII ended depression but also created modern debt (from $40 to $258

billlion)