41 The New Deal

The New Deal

In early 1933 nation needed immediate relief, recovery from economic collapse, and reform to avoid future depressions, so relief, recovery and reform became Franklin D. Roosevelt`s goals when he took the helm as president. At his side stood a Democratic Congress, prepared to enact the measures carved out by a group of his closest advisors — dubbed the “Brain Trust” by reporters. One recurring theme in the recovery plan was Roosevelt’s pledge to help the “forgotten man at the bottom of the economic pyramid.”

FDR mural

Birth of the “New Deal” The concepts that became the New Deal had been discussed in earlier years but without effect. The statement by National Catholic War Council in 1919, drafted by Father John A. Ryan, contained recommendations that would later be regarded as precursors of the New Deal.

The term "New Deal" was coined during Franklin Roosevelt’s 1932 Democratic presidential nomination acceptance speech, when he said, "I pledge you, I pledge myself, to a new deal for the American people." Roosevelt summarized the New Deal as a "use of the authority of government as an organized form of self-help for all classes and groups and sections of our country."

The exact nature of Roosevelt`s intentions was not clear during the campaign, although his philosophy was set out in an address that he gave at the Commonwealth Club of San Francisco on September 23:

The government should assume the function of economic regulation only as a last resort, to be tried only when private initiative, inspired by high responsibility, with such assistance and balance as government can give, has finally failed. As yet there has been no final failure, because there has been no attempt, and I decline to assume that this nation is unable to meet the situation.

At his inauguration in March 1933, Roosevelt declared in his lilting style, "Let me assert my firm belief that the only thing we have to fear is, fear itself — needless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance." In his first 99 days, he proposed, and Congress swiftly enacted, an ambitious "New Deal" to deliver relief to the unemployed and those in danger of losing farms and homes, recovery to agriculture and business, and reform, notably through the inception of the vast Tennessee Valley Authority (TVA). The New Deal effects would take time; some 13,000,000 people were out of work by March 1933, and virtually every bank was shuttered.

The New Deal programs were born in Brain Trust meetings prior to Roosevelt’s inauguration, and also were a grateful nod to Theodore Roosevelt`s "square deal" of 30 years earlier. Members of the group included Raymond Moley, an American journalist and public figure; Rexford Tugwell, Adolf Berle of Columbia University, attorney Basil O`Connor, and later, Felix Frankfurter of Harvard Law School. Many of Roosevelt`s presidential campaign advisors continued to counsel him after he was elected, among them Berle, Moley, Tugwell, Harry Hopkins, and Samuel I. Rosenman; but they never met again as a group after his inauguration.

Herbert Hoover

Opening the way for the New Deal, President Herbert Hoover was defeated by Franklin D. Roosevelt in the Election of 1932. Hoover, who had been blamed for the stock market crash and the Depression, strongly opposed Roosevelt`s New Deal legislation, in which the federal government assumed responsibility for the welfare of the nation by maintaining a high level of economic activity. According to Hoover, Roosevelt had been slow to reveal his New Deal programs during the presidential campaign and worried that the new president would sink the nation into deficit spending to pay for the New Deal. Roosevelt never consulted Hoover, nor did he involve him in government in any way during his presidential term.

The "Hundred Days"

The president called a special session of Congress on March 9. Immediately he began to submit reform and recovery measures for congressional validation. Virtually all the important bills he proposed were enacted by Congress. The 99-day (March 9-June 16) session came to be known as the "Hundred Days."

On March 12, 1933, Roosevelt broadcast the first of 30 "fireside chats" over the radio to the American people. The opening topic was the Bank Crisis. Primarily, he spoke on a variety of topics to inform Americans and exhort them to support his domestic agenda, and later, the war effort. During Roosevelt`s first year as president, Congress passed laws to protect stock and bond investors.

Among the measures enacted during the first Hundred Days were the following:

  • Emergency Banking Act (March 9), provided the president with the means to reopen viable banks and regulate banking;
  • Economy Act (March 20), cut federal costs through reorganization of and cuts in salaries and veterans` pensions;
  • Beer-Wine Revenue Act (March 22), legalized and taxed wine and beer;
  • Civilian Conservation Corps Act (March 31). Three million young men, between the ages of 18 to 25, found work in road building, forestry labor and flood control through the establishment of the Civilian Conservation Corps (CCC);
  • Federal Emergency Relief Act (May 12), established the Federal Emergency Relief Administration to distribute $500 million to states and localities for relief. Administered by Harry Hopkins for relief or for wages on public works, that federal agency would eventually pay out about $3 billion;
  • Agricultural Adjustment Act (May 12), established the Agricultural Adjustment Administration to decrease crop surpluses by subsidizing farmers who voluntarily cut back on production;
  • Thomas Amendment to the Agricultural Adjustment Act, permitted the president to inflate the currency in various ways;
  • Tennessee Valley Authority Act (May 18), allowed the federal government to build dams and power plants in the Tennessee Valley, coupled with agricultural and industrial planning, to generate and sell the power, and to engage in area development. The TVA was given an assignment to improve the economic and social circumstances of the people living in the river basin; and the
  • Federal Securities Act (May 27), to stiffen regulation of the securities business.
  • The “Second Hundred Days"

    Congress also enacted several important relief and reform measures in the summer of 1935 — sometimes called the Second Hundred Days.

    During the Second Hundred Days, those measures enacted included:

  • Joint resolution to abandon the gold standard (June 5);
  • National Employment System Act (June 6), to create the U.S. Employment Service;
  • Home Owners Refinancing Act (June 13), to establish the Home Owners Loan Corporation (HOLC) to refinance non-farm home mortgages;
  • Glass-Steagall Banking Act (June 16), to institute various banking reforms, including establishing the Federal Bank Deposit Insurance Corporation, that insured deposits up to $5,000, and later, $10,000;
  • Farm Credit Act (June 16), to provide for the refinancing of farm mortgages;
  • Emergency Railroad Transportation Act (June 16), to increase federal regulation of railroads; and the
  • National Industrial Recovery Act (June 16), to establish the National Recovery Administration and the Public Works Administration.
  • Following Roosevelt`s lead, the government launched a relief program, the Civil Works Administration (CWA), in winter 1933-1934. The CWA provided funds to such authorities as mayors and governors for public projects including road, bridge, and school construction, park restoration, and others. Critics castigated the CWA as make-work, much of it useless.

    WPA project

    After a few months, Roosevelt terminated the CWA, but other programs enjoyed longer lives. The Civilian Conservation Corps (CCC) lasted from 1933 until 1942. Its members produced notable and lasting results with flood control, soil conservation and forestry programs. The Works Progress Administration (WPA) was established in 1935 to provide work for the unemployed. Between that year and 1941, the WPA employed an average of two million people a year. The WPA went on to spend billions on reforestation, flood control, rural electrification, water works, sewage plants, school buildings, slum clearance, student scholarships, and other projects. Their crowning achievement came in the completion of the Bonneville Dam on the Columbia in 1937.

    The New Deal also greatly influenced the American Labor Movement, especially through the following legislation:

  • Through the National Industrial Recovery Act of 1933 the National Recovery Administration (NRA) came into being. The NRA attempted to revive industry by raising wages, reducing work hours and reining in unbridled competition. Portions of the NRA were ruled unconstitutional by the Supreme Court in 1935; however, the Works Progress Administration (WPA), which was the second part of the NRA, was allowed to stand. The majority of its collective bargaining stipulations survived in two subsequent bills. The NRA — a product of meetings among such “Brain Trust” advisors as Raymond Moley, big business leaders, and labor unionists — illustrated Roosevelt`s willingness to work with, rather than against, business interests.

  • Employees were guaranteed the right to negotiate with employers through unions of their choosing by the Wagner Act of 1935, and it established a Labor Relations Board as a forum for dispute resolution. The act bolstered the American Federation of Labor, and pointed to the inception of the Congress of Industrial Organizations (C.I.O.), another labor movement.
  • Workers were given the right to bargain collectively through the National Labor Relations Act of 1935.
  • The Fair Labor Standards Act of 1938 promulgated a 44-hour workweek with time-and-a-half for overtime and pegged a minimum wage of 25 cents an hour. The act also provided that the hours worked would drop to 40 and the wage would incrementally rise to 40 cents. In addition, the bill made child labor under the age of 16 illegal.
  • The U.S. government could reach out in the widest way to alleviate human misery — such was an assumption that underlay the New Deal. Beginning in 1935, Congress enacted the Social Security Act of 1935 (and later amendments) that provided pensions to the aged, benefit payments to dependent mothers, crippled children and blind people, and unemployment insurance. Small businesses, homeowners and the oil and railroad industries were given help by other legislation.

    Who paid for the New Deal?

    The foregoing projects, and others, were expensive, and the government was not taking in enough revenue to avoid deficit spending. To fund all the new legislation, government spending rose. Spending in 1916 was $697 million; in 1936 it was $9 billion. The government modified taxes to tap wealthy people the most, who could take it in stride most easily. The deficit was made up in part by raising taxes and borrowing money through the sale of government bonds. Meanwhile, the national debt climbed to unprecedented heights.

    TVA construction site

    Response in the U.S. Supreme Court

    Supreme Court Chief Justice Charles Evans Hughes provided a swing vote during the critical Depression and New Deal eras, although liberal senators had assumed that he would hold conservative positions when he was nominated by Hoover in 1930. Critics have suggested that some of Hughes’ pro-New Deal stances were prompted by a desire to weaken FDR`s court-packing scheme, not by conviction. He supported Franklin Roosevelt’s decision not to pay government obligations in gold, provided a critical vote upholding collective bargaining rights under the Wagner Act and upheld the controversial Social Security Act.

    On other occasions, however, Hughes dealt severe blows to the New Deal, most notably in Schechter Poultry Corporation v. United States (1935), in which he voted with the majority to strike down the National Industrial Recovery Act. In 1937, Hughes publicly opposed Roosevelt’s plan to pack the Supreme Court with sympathetic justices and offered his opinion in writing to the Senate Judiciary Committee.

    Opponents of the New Deal

    By 1934, the New Deal was encountering opposition from both ends of the political spectrum. All around the country, brazen unions — some Marxist-influenced — sparked job actions, including a city-wide strike in San Francisco. Nevertheless, the most prominent left-wing threat to Roosevelt was a Louisiana senator, Huey P. Long, who railed at the New Deal for not doing enough. Conservatives argued that Roosevelt had done too much. Some of them organized the American Liberty League in August 1934 to galvanize the right. However, in the mid-term elections, the Democrats gained enough seats in both houses of Congress to enjoy veto-proof majorities.

    The nation saw measurable progress by 1935, but businessmen and bankers increasingly opposed the New Deal. The president`s experiments alarmed them. The rich, conservatives, numerous businessmen — and those who were all three — vigorously opposed the New Deal. They were dismayed by his toleration of budget deficits and his removal of the nation from the gold standard, and were disgusted by legislation favorable to labor.

    Social Security poster

    Election of 1936

    The U.S. Supreme Court had been nullifying crucial New Deal legislation, but the president was re-elected by a wide margin in 1936. That nationwide endorsement of FDR, who carried every state except Vermont and Maine, convinced him that he had popular backing. To capitalize on it, Roosevelt introduced legislation to expand the federal courts, ostensibly as a straightforward organizational reform, but actually to "pack" the courts with justices sympathetic to his proposals. He was unsuccessful, but constitutional law would eventually change to allow the government to regulate the national economy.

    Conclusion

    As the free world geared up to fight the Axis powers, Roosevelt began to turn his attention away from domestic policies and toward helping the Allies, while maintaining an isolationist position towards entering the fighting of World War II. With America’s eventual entry into the war, that nation’s economy continued to improve. Large-scale production of military equipment and the draft turned America’s eyes toward a larger enemy than the beast of poverty that it had once known during The Great Depression, thus closing the chapter on the New Deal.

    ---- Selected Quotes ----

    Quotes regarding The New Deal.

    By Franklin D. Roosevelt
    I pledge you, I pledge myself, to a new deal for the American people.
    Speech accepting the 1932 Democratic Party nomination.

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