The new deal
In 1933 the new president, Franklin Roosevelt, brought an air of confidence and optimism that quickly rallied the people to the banner of his program, known as the New Deal. "The only thing we have to fear is fear itself," the president declared in his inaugural address to the nation. In a certain sense, it is fair to say that the New Deal merely introduced types of social and economic reform familiar to many Europeans for more than a generation. Moreover, the New Deal represented the culmination of a long-range trend toward abandonment of "laissez-faire" capitalism, going back to the regulation of the railroads in the 1880s, and the flood of state and national reform legislation introduced in the Progressive era of Theodore Roosevelt and Woodrow Wilson.
What was truly novel about the New Deal, however, was the speed with which it accomplished what previously had taken generations. In fact, many of the reforms were hastily drawn and weakly administered; some actually contradicted others. And during the entire New Deal era, public criticism and debate were never interrupted or suspended; in fact, the New Deal brought to the individual citizen a sharp revival of interest in government.
When Roosevelt took the presidential oath, the banking and credit system of the nation was in a state of paralysis. With astonishing rapidity the nation's banks were first closed -- and then reopened only if they were solvent. The administration adopted a policy of moderate currency inflation to start an upward movement in commodity prices and to afford some relief to debtors. New governmental agencies brought generous credit facilities to industry and agriculture. The Federal Deposit Insurance Corporation (FDIC) insured savings-bank deposits up to $5,000, and severe regulations were imposed upon the sale of securities on the stock exchange.
UNEMPLOYMENT
By 1933 millions of Americans were out of work. Bread lines were a common sight in most cities. Hundreds of thousands roamed the country in search of food, work and shelter. "Brother, can you spare a dime?" went the refrain of a popular song.
An early step for the unemployed came in the form of the Civilian Conservation Corps (CCC), a program enacted by Congress to bring relief to young men between 18 and 25 years of age. Run in semi-military style, the CCC enrolled jobless young men in work camps across the country for about $30 per month. About 2 million young men took part during the decade. They participated in a variety of conservation projects:planting trees to combat soil erosion and maintain national forests; eliminating stream pollution; creating fish, game and bird sanctuaries; and conserving coal, petroleum, shale, gas, sodium and helium deposits.
Work relief came in the form of the Civil Works Administration. Although criticized as "make work," the jobs funded ranged from ditch digging to highway repairs to teaching. Created in November 1933, it was abandoned in the spring of 1934. Roosevelt and his key officials, however, continued to favor unemployment programs based on work relief rather than welfare.
AGRICULTURE
The New Deal years were characterized by a belief that greater regulation would solve many of the country's problems. In 1933, for example, Congress passed the Agricultural Adjustment Act (AAA) to provide economic relief to farmers. The ...
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Work relief came in the form of the Civil Works Administration. Although criticized as "make work," the jobs funded ranged from ditch digging to highway repairs to teaching. Created in November 1933, it was abandoned in the spring of 1934. Roosevelt and his key officials, however, continued to favor unemployment programs based on work relief rather than welfare.
AGRICULTURE
The New Deal years were characterized by a belief that greater regulation would solve many of the country's problems. In 1933, for example, Congress passed the Agricultural Adjustment Act (AAA) to provide economic relief to farmers. The AAA had at its core a plan to raise crop prices by paying farmers a subsidy to compensate for voluntary cutbacks in production. Funds for the payments would be generated by a tax levied on industries that processed crops. By the time the act had become law, however, the growing season was well underway, and the AAA encouraged farmers to plow under their abundant crops. Secretary of Agriculture Henry A. Wallace called this activity a "shocking commentary on our civilization." Nevertheless, through the AAA and the Commodity Credit Corporation, a program which extended loans for crops kept in storage and off the market, output dropped.
Between 1932 and 1935, farm income increased by more than 50 percent, but only partly because of federal programs. During the same years that farmers were being encouraged to take land out of production -- displacing tenants and sharecroppers -- a severe drought hit the Great Plains states, significantly reducing farm production. Violent wind and dust storms ravaged the southern Great Plains in what became known as the "Dust Bowl," throughout the 1930s, but particularly from 1935 to 1938. Crops were destroyed, cars and machinery were ruined, people and animals were harmed. Approximately 800,000 people, often called "Okies," left Arkansas, Texas, Missouri and Oklahoma during the 1930s and 1940s. Most headed farther west to the land of myth and promise, California. The migrants were not only farmers, but also professionals, retailers and others whose livelihoods were connected to the health of the farm communities. California was not the place of their dreams, at least initially. Most migrants ended up competing for seasonal jobs picking crops at extremely low wages.
The government provided aid in the form of the Soil Conservation Service, established in 1935. Farm practices that had damaged the soil had intensified the severity of the storms, and the Service taught farmers measures to reduce erosion. In addition, almost 30,000 kilometers of trees were planted to break the force of winds.
Although the AAA had been mostly successful, it was abandoned in 1936, when the tax on food processors was ruled unconstitutional. Six weeks later Congress passed a more effective farm-relief act, which authorized the government to make payments to farmers who reduced plantings of soil-depleting crops -- thereby achieving crop reduction through soil conservation practices.
By 1940 nearly 6 million farmers were receiving federal subsidies under this program. The new act likewise provided loans on surplus crops, insurance for wheat and a system of planned storage to ensure a stable food supply. Soon, prices of agricultural commodities rose, and economic stability for the farmer began to seem possible.
INDUSTRY AND LABOR
The National Recovery Administration (NRA), established in 1933 with the National Industrial Recovery Act (NIRA), attempted to end cut-throat competition by setting codes of fair competitive practice to generate more jobs and thus more buying. Although the NRA was welcomed initially, business complained bitterly of over-regulation as recovery began to take hold. The NRA was declared unconstitutional in 1935. By this time other policies were fostering recovery, and the government soon took the position that administered prices in certain lines of business were a severe drain on the national economy and a barrier to recovery.
It was also during the New Deal that organized labor made greater gains than at any previous time in American history. NIRA had guaranteed to labor the right of collective bargaining (bargaining as a unit representing individual workers with industry). Then in 1935 Congress passed the National Labor Relations Act, which defined unfair labor practices, gave workers the right to bargain through unions of their own choice and prohibited employers from interfering with union activities. It also created the National Labor Relations Board to supervise collective bargaining, administer elections and ensure workers the right to choose the organization that should represent them in dealing with employers.
The great progress made in labor organization brought working people a growing sense of common interests, and labor's power increased not only in industry but also in politics. This power was exercised largely within the framework of the two major parties, however, and the Democratic Party generally received more union support than the Republicans.
THE SECOND NEW DEAL
In its early years, the New Deal sponsored a remarkable series of legislative initiatives and achieved significant increases in production and prices -- but it did not bring an end to the Depression. And as the sense of immediate crisis eased, new demands emerged. Businessmen mourned the end of "laissez-faire" and chafed under the regulations of the NIRA. Vocal attacks also mounted from the political left and right as dreamers, schemers and politicians alike emerged with economic panaceas that drew wide audiences of those dissatisfied with the pace of recovery. They included Francis E. Townsend's plan for generous old-age pensions; the inflationary suggestions of Father Coughlin, the radio priest who blamed international bankers in speeches increasingly peppered with anti-Semitic imagery; and most formidably, the "Every Man a King" plan of Huey P. Long, senator and former governor of Louisiana, the powerful and ruthless spokesman of the displaced who ran the state like a personal fiefdom. (If he had not been assassinated, Long very likely would have launched a presidential challenge to Franklin Roosevelt in 1936.)
In the face of these pressures from left and right, President Roosevelt backed a new set of economic and social measures. Prominent among these were measures to fight poverty, to counter unemployment with work and to provide a social safety net.
The Works Progress Administration (WPA), the principal relief agency of the so-called second New Deal, was an attempt to provide work rather than welfare. Under the WPA, buildings, roads, airports and schools were constructed. Actors, painters, musicians and writers were employed through the Federal Theater Project, the Federal Art Project and the Federal Writers Project. In addition, the National Youth Administration gave part-time employment to students, established training programs and provided aid to unemployed youth. The WPA only included about three million jobless at a time; when it was abandoned in 1943 it had helped a total of 9 million people.
But the New Deal's cornerstone, according to Roosevelt, was the Social Security Act of 1935. Social Security created a system of insurance for the aged, unemployed and disabled based on employer and employee contributions. Many other industrialized nations had already enacted such programs, but calls for such an initiative in the United States by the Progressives in the early 1900s had gone unheeded. Although conservatives complained that the Social Security system went against American traditions, it was actually relatively conservative. Social Security was funded in large part by taxes on the earnings of current workers, with a single fixed rate for all regardless of income. To Roosevelt, these limitations on the programs were compromises to ensure passage. Although its origins were initially quite modest, Social Security today is one of the largest domestic programs administered by the U.S. government.
A NEW COALITION
In 1936, the Republican Party nominated Alfred M. Landon, the relatively liberal governor of Kansas, to oppose Roosevelt. Despite all the complaints leveled at the New Deal, Roosevelt won an even more decisive victory than in 1932. He took 60 percent of the population and carried all states except Maine and Vermont. In this election, a broad new coalition aligned with the Democratic Party emerged, consisting of labor, most farmers, immigrants and urban ethnic groups from East and Southern Europe, African Americans and the South. The Republican Party received the support of business as well as middle-class members of small towns and suburbs. This political alliance, with some variation and shifting, remained intact for several decades.
From 1932 to 1938 there was widespread public debate on the meaning of New Deal policies to the nation's political and economic life. It became obvious that Americans wanted the government to take greater responsibility for the welfare of the nation. Indeed, historians generally credit the New Deal with establishing the foundations of the modern welfare state in the United States. Some New Deal critics argued that the indefinite extension of government functions would eventually undermine the liberties of the people. But President Roosevelt insisted that measures fostering economic well-being would strengthen liberty and democracy.
In a radio address in 1938, Roosevelt reminded the American people that:
Democracy has disappeared in several other great nations, not because the people of those nationsdisliked democracy, but because they had grown tired of unemployment and insecurity, of seeing their children hungry while they sat helpless in the face of government confusion and government weakness through lack of leadership....Finally, in desperation, they chose to sacrifice liberty in the hope of getting something to eat. We in America know that our democratic institutions can be preserved and made to work. But in order to preserve them we need...to prove that the practical operation of democratic government is equal to the task of protecting the security of the people....The people of America are in agreement in defending their liberties at any cost, and the first line of the defense lies in the protection of economic security.
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