The New Deal

*In 1932, Herbert Hoover had almost no chance of being re-elected, but he ran nonetheless, and lost by the largest margin a president facing re-election has ever suffered (winning only 6 states and 39.7% of the popular vote).  His opponent was Franklin Delano Roosevelt, distant cousin of Theodore.


*Franklin Roosevelt was also a distant cousin of his own wife, Eleanor (FDR's niece).  FRD had also suffered from polio when he was younger and lost the use of his legs.  He went to great lengths to hide this, though, wearing leg braces and often being propped up by two friends when in public, and the media of the time worked with him to do this.


*FDR promised a New Deal for America, although he was deliberately vague on just what that meant.  If Americans wanted to find out, they would have to elect him. 

*FDR was sworn in on 4 March, 1933.  This was the last time a president was inaugurated in March, as the XX Amendment (ratified in 1933) moved the presidential inauguration date to 20 January, because waiting almost five months between the election and inauguration made it too hard for the new president to respond to crises (partly because FDR refused to work with Hoover on anything substantial, to make sure he got all the credit for any programmes that worked well).


*In his inaugural address, Franklin D. Roosevelt assured Americans that he and the government would take care of them.  He told America ‘the only thing we have to fear is fear itself.’

*His first vice-president (1932-1940) was John ('Cactus Jack') Nance Garner IV.  His cabinet included a wide range of people:

-State:  Cordell Hull, born in a log cabin in Tennessee, Spanish-American War veteran and future Nobel Peace Prize winner

-Treasury:  Henry Morgenthau, junior, FDR's neighbour, and a Jewish businessman who (among other things) grew Christmas trees.  Later he would play a large role in trying to rescue Jews from Europe during WWII and would push for the execution of Nazi war criminals

-Interior:  Harold Ickes, a Progressive Republican

-Agriculture:  Henry Wallace, an agricultural scientist, new-age seeker of religious enlightenment, Freemason, socialist, and later Vice-President (1940-1944)

-Post-Master General:  James Farley, FDR's campaign manager, a businessman, a Knight of Malta, and one of the first nationally prominent Roman Catholics

-Labour:  Frances Perkins, the first woman to serve in the US cabinet


*Roosevelt also employed a group of professional and academic experts known as the Brain[s] Trust to help him create his New Deal.  

*When FDR came into office, there was great enthusiasm for his New Deal, and in the First Hundred Days (a standard against which all subsequent administrations have been measured), Congress passed many of his ideas into law.  Furthermore, he communicated his ideas to the people by radio, in a series of fireside chats that helped keep Americans calm during crises.

*A new banking panic was gripping the country as people began withdrawing funds again.  To prevent any more banks failing (as over 4,000 already had), Roosevelt declared a 4-day Bank Holiday, closing all banks so they could get their affairs in order.  When banks reopened, people did not run on them.

*Banking reform was a major part of the New Deal, and a major part of that was the Glass-Steagal Act, which, among other things, forced banks to separate their investment branches from their commercial branches and from insurance companies, a rule that broke even the House of Morgan into two banks (which have since gone on to be two of the largest banks on Earth) and which stood until 1999 (and whose repeal is sometimes blamed for the recent financial crisis).

*The Glass-Steagal Act also created the Federal Deposit Insurance Corporation (FDIC), which insured deposits up to $2,500 per person (soon raised to $5,000; now up to $250,000).  Runs on banks largely ended as people felt their money was secure.

*The Securities Exchange Commission (SEC) began to regulate trading on the stock market.

*The Federal Housing Administration (FHA) regulated interest rates and other rules about home loans and insured mortgages so that banks would not be afraid to lend money to homebuyers.


*On 5 April, 1933, FDR made it illegal for private citizens (including foreigners with gold held in the United States) to own significant amounts of gold (aside from jewellery, collectible coins, and gold for industrial uses), requiring them to turn it over to the Federal Reserve by 1 May, 1933 in exchange for paper money.  Some who refused had their assets seized by force.


*On 30 January, 1934, the US was removed from the gold standard.  US dollars were no longer backed by a specific amount of gold, although US dollars were still convertible to gold.


*The XXI Amendment (December, 1933) ended Prohibition.

*The Indian Reorganization Act (or Indian New Deal) reversed the Dawes Act, preserving tribal lands and encouraging independent tribal government (with mixed success).

*FDR believed that America could not truly proper again until American farmers were prosperous, so he often tried to help rural Americans. 


*The Agricultural Adjustment Act (AAA) helped farmers with subsidies, paying farmers to limit their production (and even destroy excess produce they had on hand, which many starving Americans saw as immoral).  This led to a rise in farm prices, but farmers have depended on the government for other subsidies ever since.  Although the AAA was declared unconstitutional in 1937, but was soon replaced by other farm aid programmes.


In the South, the AAA made tobacco profitable and stable for the first time in years, and eventually helped cotton prices improve, too.  However, the drive for efficiency and central planning meant that many tenant farmers were no longer profitable, either for themselves or their landowners, and many lost their livelihoods and left the state, or at least the countryside.

*Some tenant farmers tried to fight this—some, both white and black, even joined the Southern Tenant Farmers’ Union (headquartered first in Arkansas, then in Memphis), and organized sit-down strikes in the cotton fields in 1935, but this did not work, and Roosevelt largely ignored the tenant farmers.  The New Deal made agriculture profitable again, but mostly for big business farmers, not for small farmers.

*In 1933 George Norris, a senator from Kansas and FDR visited Muscle Shoals in 1933, and later that year Congress created TVA.  Its headquarters is in Knoxville.

*The Tennessee Valley Authority (TVA) built dams in the Tennessee River Valley, creating jobs building dams, providing cheap electricity, dispensing water for irrigation, and controlling floods.  It also replanted forests, built lakes which benefited the national park system, taught farmers better farming techniques, and began to bring the South into the modern world, as cheap electricity attracted industry and allowed many people to enjoy the comforts of modern life, and thus encourage them to buy the modern electric luxuries that America's faltering businesses hoped to sell. 

*There were people who opposed TVA, particularly the utility companies of Nashville and Memphis, but the Supreme Court upheld TVA’s right to produce and sell power, and in the end, many private companies sold their dams and power plants to TVA.  However, there was enough opposition both locally and in Congress that no other part of the nation got a similar programme, although George Norris had always hoped that TVA would be a test for a nation-wide programme, with an Authority for every Valley in the nation.


*The Rural Electrification Administration (REA) helped bring power to other rural areas.

*The National Recovery Act (NRA) set minimum wages and minimum prices, so both workers and businesses could make money, or at least that was the idea.  In fact, it created so many regulations that both business owners and their employees hated it, and most parts of it were declared unconstitutional in 1935 in Schechter Poultry Corp. v. United States (known as the Sick Chicken Case because the government accused the Schechters of selling sick chickens; the Supreme Court determined while judging the case that Schechters did not do enough interstate commerce to be regulated).  Overall, it was viewed as a failure, although the Public Works Administration (PWA) which it created hired private contractors to build dams, bridges, tunnels, and other public works throughout the 1930s.


*After all, if the economy could not create enough employment on its own, the government could create make-work programmes to do so instead.

*The Civilian Conservation Corps (CCC) employed young men in a military style organisation that built parks (including the Appalachian Trail), fought fires, and undertook other outdoor projects.  They had plenty to do, as Roosevelt set aside about 12 million acres of land as National Parks.


*The Federal Emergency Relief Administration (FERA) lent money to states to fund make-work programs and even programs of direct relief through handouts of cash, food, and clothing, although FDR and Harry Hopkins who was in charge of FERA and later other make-work programs and even became Secretary of Commerce in 1938 preferred to help Americans work rather than offer direct relief.

*The Civil Works Administration (CWA) and later, the much larger Works Progress Administration (WPA) (both also led by Harry Hopkins) created many kinds of public works jobs for the unemployed, building dams, bridges, highways, power plants, and government buildings.  The Stone Castle in Bristol was built by the WPA.  The WPA even gave jobs to artists and academics (they painted murals in the WPA buildings and collected the stories of former slaves in their old age).


*The Wagner Act of 1935 recognised the right of workers in all industries to join unions and created the National Labor Relations Board to help work out disputes between business and labour, in part to try to solve the problems that the National Recovery Administration had failed to address.

*The Social Security Act of 1935 taxed workers, but paid pensions to retired workers who had contributed to it.  This was based in part on ideas put forth by a retired California doctor named Francis Townsend, who proposed a national sales tax that would allow the government to pay every American aged 60 or older $200 a month on the condition that they stop working and spend their entire check.  Instead of a sales tax, FDR chose pay check withholdings, and at first only paid $20 a month.

*To pay for all these programmes, the government went deeply into debt as the deficit increased nearly 10 times between 1932 and 1936.  This was based on the ideas of the economist John Maynard Keynes, who said governments needed to do this during depressions in order to prime the pump, as getting money into the hands of the people through government spending would allow people to begin consuming again, thus allowing factories to begin producing again, thus creating jobs, all of which could be taxed to repay the government’s debts eventually--and if not, by the time it mattered, the politicians who had run up the debts and the economists who had advised them to do so would be dead by then.


*Roosevelt said such drastic action was necessary because the problems facing America were so numerous and so immediate: 

Here is one-third of a nation ill-nourished, ill-clad, ill-housed--NOW!
Here are thousands upon thousands of farmers wondering whether next year's prices will meet their mortgage interest--NOW!
Here are thousands upon thousands of men and women laboring for long hours in factories for inadequate pay--NOW!
Here are thousands upon thousands of children who should be at school, working in mines and mills--NOW!
I "Here are strikes more far-reaching than we have ever known, costing millions of dollars--NOW!
Here are spring floods threatening to roll again down our river valleys--NOW!
Here is the Dust Bowl beginning to blow again--NOW!
If we would keep faith with those who had faith in us, if we would make democracy succeed, I say we must act--NOW!"

*Conservatives said that Roosevelt was turning American into a socialist country and that creating a Welfare State in which people depended on the government sapped initiative and removed the need for personal responsibility.  Many also criticised how deeply the government went into debt.  Eventually Congress stopped passing Roosevelt’s ideas so quickly (although a Second New Deal, mostly in 1935, also created important programmes, such as the WPA and Social Security).


*In 1934, Democrats like John Davis (one of Wilson's advisors and the 1924 presidential candidate) and Al Smith (1928 presidential candidate) joined up with conservatives--mostly Democratic, but some Republicans--to form the American Liberty League to oppose Roosevelt for ending Prohibition and for attacking private property through his attempts to control industry and redistribute wealth through taxes that paid for welfare and make-work schemes.


*Many liberals (particularly socialists) also accused Roosevelt of passing up a chance to truly reform or even replace the capitalist system.  Indeed, Roosevelt insisted that he was undertaking these relatively moderate reforms so that Americans would turn to communism out of desperation.

*On the other hand, some people criticised Roosevelt for not going far enough.  The normally conservative Father Charles Coughlin criticised Roosevelt in a popular radio programme for not nationalising industry (but he also was fervently anti-Communist and anti-Semitic), although eventually Roosevelt (with the support of the Catholic Church) forced him to stop his broadcasts when he began to openly support Hitler and Mussolini. 

*Among Roosevelt's critics on the left was Huey Long, governor and senator from Louisiana wanted to Share the Wealth by placing very high taxes on the rich and giving the money to the poor through a guaranteed minimum annual income and through building public works such as schools and roads and free public education.  He promised to make Every Man a King.


*Long had grown up poor and was very popular with many poor people in Louisiana.  He was known as the Kingfish after a character on the radio programme 'Amos 'n' Andy.'  As a senator, he initially supported FDR's New Deal, but later opposed it, partly because he felt it did not go far enough and partly because he wanted to control how New Deal money and jobs were handed out in Louisiana, and, FDR would not allow that.  Long considered running for the presidency in 1936 (if he could get the Democratic nomination away from FDR) or in 1940. 


*Huey Long also shared the wealth by skimming some off for himself and his friends, as every government employee had to pay into Long's 'deduct box.'  Even once he was in the Senate, he still tried to control Louisiana politics, and he was assassinated in 1935.

*Despite opposition from both the left and right wings of American culture and politics, Roosevelt was easily re-elected in 1936, winning every state but Maine and Vermont.

*As soon as Roosevelt was sworn into his second term, he confronted the most conservative part of the government, the Supreme Court.  The Court had already overturned some parts of the New Deal, particularly the NRA.  To prevent this happening again, Roosevelt asked Congress to add up to six more justices to the Supreme Court, supposedly to help out the elderly members of the Court.  Opponents said this was a court packing scheme, and it failed.  Nonetheless, the Court did uphold many of his New Deal programmes (often by a 5-4 margin).

*During his second term, Roosevelt did more to allow working class people to help themselves.  The Fair Labor Standards Act of 1938 outlawed child labour, set a 25-cent per hour minimum wage, and created a 44-hour maximum work week, partly because reducing the work load of an individual worker would force companies to hire more workers to perform the same tasks.

*Workers in many unskilled or low-skill jobs (who could not join the skilled craft unions of the AFL) created a new group of unions, the Congress of Industrial Organizations (CIO), which organised a successful strike of the United Auto Workers against General Motors in Flint, Michigan.  Between 1930 and 1940, the number of union members doubled.


*One of Roosevelt’s most important political assets in the creation of the Welfare State was his wife.  Eleanor traveled the country (much more easily than her crippled husband) and visited the homes and workplaces of the working class and the poor, even African-Americans and American Indians.  She was strongly opposed to sexism and racism, and tried to win greater equality for women and for blacks.

*The New Deal did help African-Americans in many ways.  Roosevelt had many black advisors—so many that they were known as the Black Cabinet.  However, he did not support anti-lynching laws or a number of other laws against racism because he did not want to turn Southern Democrats against him.  Furthermore, as the AAA and other government subsidies encouraged farmers to grow fewer crops, many black sharecroppers and tenant farmers were evicted by landowners who wanted to produce less. 

*Despite this, FDR began to bring African-Americans into the Democratic Party while strengthening its traditional base among farmers and industrial workers.  This New Deal Coalition was so powerful that, after 40 years as a minority party, the Democrats were able to hold the majority in the House of Representatives for all but four years between 1933 and 1995 and hold the presidency for all but eight years between 1933 and 1969.  This is also described as America’s Fifth Two-Party system, and would last until at least 1968 and perhaps as late as 1994.

*Furthermore, FDR became the most powerful president up to his time, and set standards that all subsequent presidents have tried to follow, from measuring the beginning of their terms by how much they could accomplish in the first Hundred Days to having to not only be leaders of the Free World but media stars on radio and later on television.


*Still, after the Court Packing scheme failed, Roosevelt found less support for continuing the New Deal, partly because the Depression continued to drag on.  Although the New Deal had (probably--there are some historians and economists who disagree) kept the Great Depression from getting worse, the economy still had violent ups and downs (including a surge in unemployment to 20% in 1937-1938 sometimes known as the Roosevelt Recession).  Furthermore, the New Deal had achieved its successes through a vast enlargement of the government and its powers, involving it in far more people’s lives and making many people dependent on the Welfare State.

This page last updated 7 November, 2018.
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