T.Roosevelt and the New Deal.

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What was the New Deal?

The idea of a New Deal caught on with the American people. It became the label attached to a programme of government action that began as soon as Roosevelt took office in 1933. In his inaugural address Roosevelt said that he would 'wage a war against the emergency’. His main aim was to provide relief for victims of the Depression and to work towards economic recovery. He also believed that, if recovery was to last, then important areas of American life had to be reformed. The speed of government action surprised many people, especially the amount that was done in the first hundred days. Roosevelt believed in 'bold, persistent experimentation'. There was no overall plan and not everything worked. But the New Deal restored hope and reassured people that the government would take responsibility for the welfare of its citizens. Politically, the New Deal was extremely successful. Roosevelt was re-elected three times and the Democratic Party dominated American politics until 1948. Roosevelt used the powers of the presidency to the full, but he kept within the rules of the American constitution. As a result, the USA avoided a dictatorship like that in Germany where Hitler came to power at around the same time as Roosevelt. The main elements of the New Deal were delivered in two phases - the first hundred days of Roosevelt’s presidency and in 1935. Legislation passed in these two phases resulted in the growth of the so-called 'alphabet agencies'.

The First Hundred Days (March-June 1933)

Roosevelt had promised action and in the first hundred days of his administration', he kept up a hectic pace of activity. During the months between his election (in November 1932) and inauguration (in March 1933), the economic crisis deepened. In particular, bank failures rocketed (4,004 banks failed in the first two months of 1933 alone). FDR's first task, therefore, was to restore confidence in the banking system. This was skilfully handled and set the pattern for what followed. The most important Acts of Congress passed in the Hundred Days were those, which tried to bring about relief for the unemployed and recovery from the Depression in both industry and agriculture. Congress, usually slow to act rushed through a series of measures, urged on by the President. Federal government agencies (known by their initials and therefore called the alphabet agencies) were set up to put the Acts into practice. The result was that the federal government played a much greater role in American life than had ever been the case before.

Phase two... the legislation of 1935

The whirlwind activity of the Hundred Days was followed by a slower pace of reform until 1935 when another series of major Acts was passed by Congress. It had become clear in 1934 that recovery from the Depression was partial and slow. The new public works programmes, for example, were still not absorbing a large enough percentage of the unemployed (see right). In addition, there were still many areas of American life that the Roosevelt government wanted to reform. Most important, Roosevelt was keen to take measures to ensure that the federal and state governments provided welfare measures (such as old age pensions, disability pay or unemployment benefit) as a matter of course. The Acts passed in 1935 shifted the focus of the New Deal. 'Whereas the main aim of the measures passed in the Hundred Days had been to provide relief and recovery, the acts of the 1935 legislation was to provide long-lasting change. The reforms of 1935 expanded the New Deal into new areas of government activity.

The Hundred Days

During Roosevelt’s first one hundred days in office, March to June 1933, he laid the foundations for his promised New Deal. It required massive state involvement in the economy and the setting up of government-controlled agencies. Roosevelt was given the authority to do this when Congress granted him /emergency powers' - the sort of powers he would have if the USA had been at war. Roosevelt set up a number of agencies that became known as the 'alphabet agencies' because the people found it easier to remember them by their initials than by their full names.

Roosevelt also realised the need to explain to the American people what he was doing. They needed to have trust and confidence in his measures and in the recovery of the economy. He used the radio to reach a large audience of millions of Americans and to talk directly to them. In his 'fireside chats', in which he sat in a chair b a fire in his office, he explained in simple terms why  the USA had fallen into depression and what he proposed to do to end it. The broadcasts were very successful - especially the first one dealing with the banking crisis. Roosevelt was able to relax the American public by telling them about his pet dog. His wife, Eleanor, had her--own national newspaper column called 'My Day'.

Helping the banks

If the banks stayed closed, the economy would cease to work. Ve quickly nobody would have money to spend. If the banks opened they might collapse. Roosevelt introduced a series of measures to deal with this problem:

Emergency Banking Act, March 1933

This was an attempt to solve the immediate crisis:

It forced banks to stay closed for four days.

Those whose finances were completely hopeless were ordered close permanently.

The rest were promised the backing of government grants so that the public could regain confidence in them.

Roosevelt broadcast to the nation, appealing for the panic to end and for people with money to take it back to the banks. it worked, and the banks were saved.

The Securities Act

Roosevelt also wanted to reform the harmful practices that had got the USA into the trouble it now faced. He was determined to bring Wall Street under control in order to prevent another crash. The Securities Act forced companies issuing new shares to provide full information about the company to the public. Directors of companies that failed to do so would be prosecuted.

The Securities and Exchange Commission

This was set up in 1934 and given wide powers to control the activities of the stock market. In future investors could have greater confidence and they would not be swindled out of their money.

Helping agriculture

Agriculture's most serious problem was overproduction. While this continued, prices would remain low, and farmers would be unable to make a decent living. Roosevelt’s solution was to pay farmers for not producing.Agricultural Adjustment Act (AAA)

 This legislation:

Gave the government the power to influence prices by destroying surplus produce.

•        Gave farmers compensation for lost produce.

•        Helped farmers who were having difficulty in meeting their mortgage payments.

•        Reached agreement with farmers on sensible amounts to be produced in future years.

 As a result of these measures farmers' income doubled in the period up to 1939. However, it failed to help farmworkers. Many of these were evicted as there was less work for them to do. The AAA had to close because of a ruling by the US Supreme Court (p. 501). Nevertheless, the government continued to find ways of helping farmers. The Resettlement Administration (RA) helped poor farmers by purchasing equipment for them and resettling some of the poorest on land purchased by the RA. It also gave grants to farmers for soil conservation schemes.

The Tennessee Valley Authority (TVA)

The TVA aimed to bring help to the Tennessee Valley which was a very depressed region. Agriculture in the area was badly hit by floods and the soil erosion it caused. Half of the population of the area was dependent on government relief for survival. In 1932 barely 2% of farms in the valley had electricity. The TVA was set up to improve the area by encouraging industry and helping agriculture. Trees were planted and forests created to improve the soil. Twenty-one dams were built to control the river and prevent flooding. Power stations were built at the dams to provide cheap electricity for homes and industry. The dams also created lakes and these were used for water transport which linked into the major river systems of the USA. The cheap source of power and good transport facilities attracted industries to the area. As a result the Tennessee Valley recovered and became a prosperous area.

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Other measures of the New Deal

The New Deal introduced a number of measures which tried to help the American people in other ways.

The Home Owners Loan Corporation (HOLC) helped people who were having difficulty with their mortgage payments. The government, through the Corporation, lent money to people at low interest rates to prevent them from losing their homes.

The Social Security Act was introduced in 1935. It set up a national system of state pensions for people over 65, for widows and for the disabled. It also provided for an unemployment insurance scheme to be ...

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