Chapter 25: The New Deal, 1933-1940

1. A New President, A New Deal
   1. Bank Holiday
      1. As Roosevelt’s inauguration approached, the nation faced a severe banking crisis for several reasons.
         1. Unable to collect debts owed and drained by too many investments in the sinking stock market, many banks had gone out of business since the crash, which had left depositors penniless.
         2. In 1932, 1,456 banks failed and the entire banking system seemed ready to collapse by March 1933.
         3. The public’s dwindling confidence in banks caused a growing number of runs on banks as depositors demanded their money, and since most banks did not have this money, they were forced to close their doors.
      2. On March 6, Roosevelt announced a Bank Holiday that closed all the country’s banks, and he called a special session of Congress to pass an Emergency Banking Bill.
         1. Democrats and Republicans responded almost immediately and drafted the Emergency Banking Act, which allowed the Federal Reserve to examine banks and certify those that were sound.
         2. The act also allowed the Federal Reserve and the Reconstruction Finance Corporation to support the nation’s banks by providing funds and buying stocks of preferred banks.
      3. In the first of his Fireside Chats on March 12, Roosevelt told Americans that they had nothing to fear and that the federal government was solving the banking crisis.
         1. When banks in the twelve Federal Reserve cities reopened the next day, customers appeared to deposit rather than withdraw money.
      4. The Banking Act of 1933 reorganized the banking and financial system, gave new powers and responsibilities to the Federal Reserve System, and created the Federal Deposit Insurance Corporation (FDIC).
      5. The Federal Security Act created the Securities and Exchange Commission, which regulated stock market activities, including the setting of margin rates.
      6. The Twenty-first Amendment repealed Prohibition, and the Beer and Wine Act provided a small amount of revenue but greatly boosted public morale.
   2. Seeking Agricultural Recovery
      1. The plight of farmers appeared near disaster as Roosevelt assumed office, and politically, the president was aware that a successful farm program would help tie the Farm Bloc to him and the Democratic party.
         1. The goal was to raise farm prices through national planning to a point of parity with prices received prior to World War I, and reducing rural poverty would be a by-product.
      2. The Agricultural Adjustment Act (AAA) contained the Domestic Allotment Plan, which encouraged farmers to reduce production by paying them not to plant.
         1. Although large amounts of land were removed from production, in many cases production did not drop since farmers took their least productive land out of cultivation.
         2. The Commodity Credit Corporation lent money to farmers participating in the domestic allocation program based on the price of their crop.
         3. By 1935, recovery in the agricultural sector had clearly started.
         4. Butler v. United Statesdeclared the AAA unconstitutional, since the federal government could not set production quotas and the special tax on food processing was illegal.
      3. Congress approved a second AAA that reestablished the principle of federally set commodity quotas, acreage reductions, and parity payments.
         1. The combination of drought and governmental policies took sizable amounts of land out of production, stabilized farm prices, and saved farms.
   3. Seeking Industrial Recovery
      1. The National Industrial Recovery Act (NIRA) offered something for everyone and quickly earned widespread support from business, labor, the unemployed, and community leaders.
         1. The Public Works Administration (PWA) put people to work immediately, while the National Recovery Administration (NRA) provided programs to restart the nation’s industrial engine and create permanent jobs.
         2. Business supported the NRA because it allowed price fixing, which raised prices and profits, while labor was attracted by codes that gave workers the right to organize and bargain collectively, outlawed child labor, and established minimum wages and maximum hours of work.
         3. Schechter Poultry Corporation v. United Statesdeclared the NRA unconstitutional because the government was not permitted to set national codes or set wages and hours in local plants.
   4. TVA and REA
      1. The Tennessee Valley Authority (TVA) showcased federally directed regional planning and development of a rural and impoverished region.
         1. The project brought seasonal flooding more under control and made hundreds of miles of rivers and lakes more navigable.
         2. The TVA’s electrification program became a precedent for a nationwide effort.
      2. The Rural Electrification Administration (REA) had brought electricity to 45 percent of rural homes and farms by 1945 and had increased that to 90 percent by 1951.
   5. Remembering the "Forgotten Man"
      1. The Civilian Conservation Corps (CCC) established army-style camps to house and provide a healthy, moral environment for unemployed urban males aged eighteen to twenty-five.
      2. The Federal Emergency Relief Administration (FERA), along with the PWA, provided a wider range of relief programs for the "forgotten man."
      3. The Civil Works Administration (CWA) provided nearly four million immediate jobs, especially during the winter of 1933 - 34.
      4. The Home Owner’s Loan Corporation (HOLC) permitted homeowners to refinance their mortgages at lower interest rates through the federal government, and the Federal Housing Administration (FHA) provided federally backed loans for home mortgages and repair.
2. The Second Hundred Days
   1. Populist Voices
      1. Supported by congressional Democrats and public opinion through 1934, Roosevelt continued to add to the New Deal and became less willing to cooperate with conservatives and business.
      2. Unexpected grassroots criticism that the New Deal was not doing enough to help the "forgotten man" was led by three outspoken critics.
         1. Father Charles Coughlin formed the National Union for Social Justice, which advocated a guaranteed annual income, the redistribution of national wealth, tougher antimonopoly laws, and the nationalization of banking.
         2. Senator Huey Long of Louisiana advocated a Share the Wealth plan, which called for the federal government to provide every American family with an annual check for $2,000, a home, a car, a radio, and a college education for each child.
         3. Dr. Francis Townsend, a public health doctor, advocated a federal old-age pension plan.
      3. The growing popularity of Coughlin, Long, and Townsend reflected the frustration of a large segment of the American population who believed that the government was still doing too little to help them.
   2. A Shift in Focus
      1. Responding to the growing pressures to modify the New Deal and showing his irritation with business leaders, Roosevelt focused more on people than on business beginning in 1935 and targeted underconsumption rather than low production.
         1. Congress allocated nearly $5 billion for relief to be divided among the CCC, PWA, FERA, and newly created Works Progress Administration (WPA).
         2. Most WPA workers did manual labor, but it also employed professional and white-collar workers.
         3. The WPA also made special efforts to help women, minorities, students, and young adults.
      2. The National Youth Administration (NYA) provided aid for college and high school students and programs for young people not in school.
      3. The Social Security Act established a federal old-age and survivor insurance program that was to be a permanent modification of the government’s role in society.
      4. The National Labor Relations Act, or Wagner Act, strengthened the union movement by putting the power of government behind the workers’ right to organize and to bargain with employers for wages and benefits.
      5. The Resettlement Administration (RA) and the Farm Mortgage Moratorium Act helped small farmers, sharecroppers, and tenant farmers.
3. The New Deal and Society
   1. The New Deal and Urban America
      1. In most cities, relief programs were among those targeted for elimination or reduction.
      2. Public works projects improved the existing infrastructure by constructing roads, bridges, hospitals, schools, and other public buildings.
   2. Popular Culture
      1. Movies and radio, the most popular form of entertainment throughout the thirties, provided a break from the worries of Depression life.
         1. Radio was even more popular than the silver screen, with nearly 90 percent of American households having at least one radio.
      2. While movies and radio rarely criticized American politics and society, many novelists intended their works as social criticism.
      3. Although many feared that the Depression would add to the ranks of those who rejected American social, economic, and political values, the main thrust of the popular culture was to affirm traditional American values.
   3. A New Deal for Minorities and Women
      1. Perhaps even more than the president, Eleanor Roosevelt was sensitive to the needs of average Americans, especially minorities and women.
         1. Rarely able to provide any direct assistance, her message emphasized hope and explained changes being made by the New Deal.
         2. She publicly and privately worked to reduce discrimination in the government and throughout the country.
      2. Most black leaders perceived that the existing patterns of prejudice, discrimination, and segregation remained untouched by the New Deal.
         1. Nonetheless, the New Deal and the Roosevelts brought about some positive changes in favor of racial equality, including the appointment of African-Americans to government positions and an unofficial Black Cabinet.
         2. By 1938, New Deal programs were providing nearly 30 percent of the African American population with some federal relief, often over the opposition of local authorities.
      3. Mexican Americans benefited from the New Deal in much the same way as African Americans - indirectly.
      4. American Indians, however, benefited from the Indian Reorganization Act.
4. The New Deal Winds Down
   1. Roosevelt and the Supreme Court
      1. To alter the political philosophy of the Court and to protect programs that had already been passed, Roosevelt wanted to appoint enough new justices to ensure a pro-New Deal majority.
         1. Roosevelt made a major political miscalculation with his Court-packing plan, and he lost the loyalty of many Democrats who now sided with the Republicans.
         2. Roosevelt eventually admitted defeat and dropped the issue, but not until he had squandered a great deal of his political assets.
   2. Resurgence of Labor
      1. Labor strife also dampened enthusiasm for the New Deal, especially as the CIO continued to organize workers and call for political support.
      2. The first major sit-down strikes in the U.S. called for recognition of the union in the rubber industry and higher wages.
         1. The United Auto Workers (UAW) conducted a sit-down strike against General Motors and helped labor make gains against employers.
      3. As strikes spread and violent incidents multiplied, unions did not fare well in public opinion.
   3. The End of New Deal Legislation
      1. By 1937, Roosevelt and New Deal legislation faced an increasingly hostile political environment as a growing number of moderates joined conservatives in viewing Roosevelt as too radical and antibusiness.
      2. The Fair Labor Standards Act, which established an initial maximum workweek of forty-four hours, set a minimum wage of twenty-five cents an hour, and outlawed child labor under age sixteen, was the last piece of New Deal legislation.
   4. The New Deal’s Impact
      1. New Deal programs had in fact failed to achieve recovery, largely because Roosevelt never spent enough money to generate rapid economic growth, and it was World War II spending that propelled the economy toward recovery.
      2. Evaluations of the New Deal are numerous and generally reflect attitudes about the proper role of government in society.
      3. Whether viewed as good or bad, during the New Deal the federal government became almost a literal Uncle Sam by assuming new and expanded responsibilities and practices.