Hoover’s long term key to economic recovery was that government intervention should be kept to an absolute minimum and to restore the confidence of the business community in the economy of the United States. Only if businessmen reinvested their capital in the economy would the country be able to recover. Hoover fought desperately to maintain a balanced federal budget. This was extremely difficult given the demands placed on the government to launch various relief programs and a shrinking revenue base because of the huge deflation rate. Hoover states: "The course of unbalanced budgets is the road to ruin". Therefore, he pursued for over three years a conservative business-oriented approach to Americas’ recovery.
In the name of restoring business confidence, President Hoover also rejected demands by Americans that the currency system be inflated. Many Americans reasoned that since the economic disaster, the country suffered from immense deflation as hundreds of millions of dollars were withdrawn from circulation. Then the appropriate prescription was inflation. They urged the government to abandon the gold standard and flood the economy with printed currency. Hoover rejected such demands arguing that a stable or "hard" currency system had always been a requirement for business investment. If the currency system was inflated by the government, businessmen would refuse to reinvest their funds in the economy. This would simply delay the day when economic recovery could begin therefore convincing Hoover to refuse the demands for inflation.
By 1932 unemployment had reached 24.9% nationwide. This was such an enormous problem that only the federal government, with its borrowing power and its ability to print currency, could cope with it. Nonetheless, Hoover refused to budge. President Hoover did increase federal spending on public works as a way of trying to lessen unemployment. $700 million on such projects in 1931 was extraordinarily high. However, he grew more hostile with the passage of time believing "a huge work relief program might be as demoralizing as a dole". When Congress passed the Emergency Relief and Construction Act in 1932, Hoover's administrators did everything in their power to limit its impact through the implemented process.
Hoover finally gave in to his stubborn attitude and called for and obtained the Reconstruction Finance Corporation which was a government lending agency that made long-term low interest loans to banks and big businesses in hopes of prompting economic recovery. While the RFC loans did prevent the peak of the banking crisis until 1933, they failed to promote economic recovery. Expansion would obviously be the last thing on the minds of most businessmen in 1932. Causing businesses not to get loans to expand, workers weren't rehired, and there was no increase in consumption by rehired laborers. While the RFC was a good start, it was according to Hoover's attitude and his conservative business-oriented philosophy and approach. The loans benefited the banks and big businesses and the unemployed, homeless, and needy were left to go hungry and feel like failures. President Roosevelt was then elected in 1933 and quickly created a program to create jobs and recover America.
Roosevelt's general policy was to make work for anyone and everyone who was redundant; it didn't matter if the work was pointless, and didn't really need to be done. He managed to create the “New Deal” in the hundred days with help of his ‘brain trust’. In order to buy time to solve the banking crisis caused by "bank runs" since 1929, FDR declared a "Bank Holiday" temporarily shutting down every bank in the country by executive order. Congress then instantly passed the Emergency Banking Act of 1933, lending government money to unstable banks and thereby restoring confidence. Shortly thereafter FDR and Congress created a more permanent solution - the Federal Deposit Insurance Corporation. FDIC was and still is a government-sponsored insurance program guaranteeing the security of deposits in member banks. If the bank fails, the FDIC compensates depositors, bringing back faith to America.
Many of FDR’s famous alphabet agencies were quickly established to control the economic depression by pumping national funds into the economy. This made a great impact on the economy and things began looking up for America. The Federal Emergency Relief Administration (FERA) provided funds outright to the needy, whereas the Civilian Conservation Corps (CCC), the Public Works Administration (PWA), and the Tennessee Valley Authority (TVA) put millions of unemployed to work on public projects. The Federal Deposit Insurance Corporation (FDIC) protected depositors in the event of bank failures; the National Recovery Administration (NRA) regulated prices and wages and promoted fair business competition; and the Agricultural Adjustment Administration (AAA) tried to help farmers by reducing excess production and increasing farm prices this alphabet policy created relief for many and America looked as though it was on the road to recovery.
By the end of Roosevelt’s second term, for the first time, the federal government assumed responsibility for the welfare of American citizens. For individuals, there was relief for the jobless and the needy, insurance programs for the aged and the unemployed, and subsidies for farmers. The PWA (public works administration) spent $6 billion enabling building contractors to employ 650,000 workers who might otherwise have been jobless. The PWA built everything from schools and libraries to roads and highways. The agency also financed the construction of cruisers, aircraft carriers, and destroyers for the navy. On a broader level, FDR's domestic policies allowed for the manipulation of credit and interest rates to promote economic expansion, and a vast range of economic planning policies aimed at "priming the pump" with tax adjustments, government spending, and active intervention in the private sector. However, despite these efforts of the New Deal relief and recovery programs, the economy recovered only slightly between 1933 and 1935. While laissez-faire capitalism died, democracy and capitalism survived the tremendous ordeal of the Great Depression. If the New Deal failed to end the Great Depression, its successes still transformed America permanently.
Hoover and Roosevelt had a variety of different ideas from a political view, Hoover once said; "No president must ever admit he has been wrong." Hoover acted boldly during his presidency, it became more and more apparent that the Depression was worsening and his program of confidence, voluntarism, and business support wasn't working, He refused to recognize that his philosophy and programs weren't working. Rather than try something different, he clung rigidly to his program, became more defensive and convinced himself and Americans that things were getting better, but instead lost the support of the nation. Roosevelt on the other hand
