The New Deal

In the 1932 election, voters blamed President Herbert Hoover for the hard times. His Democratic opponent, New York governor Franklin D. Roosevelt, had few detailed plans, but he promised a “new deal for the American people” and called for “bold, persistent experimentation.” Roosevelt won 42 of the 48 states.

In those years a new president did not take office until March. During the four months of waiting, banks failed faster, and by inauguration day many states had closed or limited their banks. On March 4, 1933, Roosevelt told the nation that “the only thing we have to fear is fear itself” and asked for “action, and action now.”

On March 6 Roosevelt ordered a national bank holiday, closing every bank in the country. Congress met in a special session and on March 9 passed the Emergency Banking Act within hours. It let the Treasury inspect banks and reopen the sound ones with federal support.

On Sunday, March 12, Roosevelt gave the first of his radio talks, later called fireside chats. In plain words he explained how banks worked and why the reopened ones were safe. Banks began reopening the next day, and many depositors put money back in.

The special session lasted until June 16. In these Hundred Days, Congress passed about fifteen major laws on banking, farming, relief, industry and electric power, more than in any earlier stretch of American history.

Historians often sort New Deal goals into three Rs. Relief meant helping hungry and jobless people right away. Recovery meant restarting farms, factories and spending. Reform meant changing the rules so that a crash like 1929 would be less likely to happen again. This is a framework historians use, not a plan Roosevelt announced, and many programs fit more than one category.

• Civilian Conservation Corps (CCC), 1933: hired young, unmarried men to plant trees, fight fires and build parks for $30 a month, most of it sent home to their families. Historians estimate about 3 million men served before it closed in 1942.
• Tennessee Valley Authority (TVA), 1933: a federal agency that built dams in one of the poorest regions, for flood control and cheap electric power.
• Agricultural Adjustment Act (AAA), 1933: paid farmers to grow less, to push prices up. Payments went to landowners, and many tenant farmers and sharecroppers lost their places.
• National Industrial Recovery Act (NIRA), 1933: created the National Recovery Administration (NRA), which let each industry write codes on prices, wages and hours, and the Public Works Administration (PWA), which paid contractors to build bridges, dams and schools.
• Federal Deposit Insurance Corporation (FDIC), 1933: insured bank deposits, starting in 1934. Bank failures dropped from thousands in 1933 to a few dozen in 1934.
• Securities and Exchange Commission (SEC), 1934: set rules for the stock market and required companies to give investors honest information.

In 1935, with unemployment still high and critics growing louder, Roosevelt pushed a second wave of laws that historians often call the Second New Deal.

• Works Progress Administration (WPA), 1935: hired jobless people to build roads, schools, airports and parks. Its arts projects paid writers, painters, actors and musicians. Estimates put the total it employed over its life at about 8.5 million people.
• Social Security Act, 1935: created old-age pensions paid for by taxes on workers and employers, unemployment insurance, and aid for needy children. The first monthly pension checks went out in 1940.
• Wagner Act (National Labor Relations Act), 1935: protected workers’ right to join unions and bargain with employers, and created the National Labor Relations Board (NLRB) to enforce it. Union membership grew quickly in the late 1930s.
• Fair Labor Standards Act (FLSA), 1938: set the first national minimum wage, 25 cents an hour, limited the workweek and restricted child labor. It was the last major New Deal law.

The New Deal was popular with many voters, but it drew attacks from two directions.

Critics on the right said it went too far. In 1934 business leaders and some conservative Democrats formed the American Liberty League, which argued that the New Deal threatened property, free enterprise and the Constitution. The 1936 Republican platform warned that “America is in peril.”

Other critics said it did not go far enough. Senator Huey Long of Louisiana promoted a Share Our Wealth plan to tax great fortunes and give every family a home and a basic income. He was assassinated in September 1935. Dr. Francis Townsend, a retired California doctor, proposed a $200 monthly pension for every American over 60, to be spent within the month; Townsend clubs gathered millions of members, by their own estimates. Father Charles Coughlin, a Catholic priest in Michigan, reached a huge radio audience. He first backed Roosevelt, then turned against him, and by the late 1930s his broadcasts spread antisemitism.

Many historians think pressure from these movements helped push Roosevelt toward Social Security and the other laws of 1935.

The Supreme Court struck down two major New Deal programs. In Schechter Poultry Corp. v. United States (May 1935), sometimes called the “sick chicken” case, the justices ruled 9 to 0 that the NRA codes were unconstitutional. In United States v. Butler (January 1936), the Court voted 6 to 3 to strike down the AAA’s tax on food processors, which paid for the farm program.

After his landslide reelection in 1936, Roosevelt proposed in February 1937 to add one justice for each justice over 70 who did not retire, up to six. Critics called it court packing, and many Democrats in Congress joined Republicans against it. The Senate rejected the plan in July 1937.

That spring, though, the Court began upholding New Deal laws, including a state minimum wage law and the Wagner Act. Retirements soon let Roosevelt name new justices. He lost the plan but won the legal fight, at a cost to his support in Congress.

By 1937 the economy had grown for four years, though unemployment was still high. Roosevelt cut federal spending to balance the budget, new Social Security taxes took money out of paychecks, and the Federal Reserve tightened credit. In late 1937 the economy fell sharply. Industrial output dropped by roughly a third, and unemployment, by common estimates, rose from about 14 percent to about 19 percent. In 1938 Roosevelt asked Congress for new spending, and the economy began to recover. Critics called it the “Roosevelt recession.”

The New Deal reached millions of people, but not equally. Many historians argue that, to win votes from Southern Democrats in Congress, Social Security, the Wagner Act and the Fair Labor Standards Act left out farmworkers and domestic workers. These were the jobs held by a large share of Black workers, and of Mexican American workers in the Southwest, so many of them got no pension, no union protection and no minimum wage at first. Many programs were run by local officials who paid Black workers less, and CCC camps were segregated. Federal housing agencies rated many Black neighborhoods as poor risks for loans.

Still, New Deal relief helped many Black families, and Black officials gained a voice in government. Mary McLeod Bethune, an educator who led the National Youth Administration’s Division of Negro Affairs, organized Black officials into the Federal Council on Negro Affairs, often called the Black Cabinet. In 1936 most Black voters who could vote chose Roosevelt, a shift away from the Republican Party that has lasted.

Eleanor Roosevelt traveled the country, wrote a newspaper column and pushed her husband on civil rights. In 1939, when the singer Marian Anderson was barred from a Washington concert hall because she was Black, the First Lady resigned from the group that owned it, and Anderson sang at the Lincoln Memorial to a crowd estimated at 75,000. Frances Perkins, the first woman in a president’s Cabinet, led the committee that drafted Social Security and backed the minimum wage law.

The economy grew fast from 1933 to 1937, but unemployment stayed high all decade. By common estimates it was still above 14 percent in 1940. Full employment came only with the huge government spending for World War II. Historians and economists read this record in different ways.

• Some argue that the New Deal ended the worst of the crisis, stopped the bank panics and gave millions of people jobs and hope, and that the recovery stalled mainly when spending was cut in 1937.
• Some argue that spending was too small to end the Depression, and that war spending later showed what large government spending could do.
• Others argue that some New Deal policies, such as the NRA’s price codes, slowed recovery, and that monetary changes, such as leaving the gold standard in 1933, mattered more.

Whatever their view on recovery, most historians agree that the New Deal’s reforms lasted. The FDIC, the SEC, Social Security, the NLRB, the minimum wage and the TVA still exist today. The New Deal also built a political coalition of city workers, union members, farmers, Black voters and the white South that kept Democrats in power for much of the next generation, and it made the federal government a much larger part of Americans’ lives. Whether that change was good for the country is still debated.

This is the last unit in the course. Unit 1 asked what caused the boom of the 1920s; this one asks what government should do when the economy fails. Use evidence from all four units when you answer.