The New Deal & Its Legacy
I can describe the government's response to the Great Depression, & I can evaluate its effects on the nation.
Electing Franklin Roosevelt
The 1932 presidential election showed that Americans were clearly ready for a change. Because of the depression, people were suffering from a lack of work, food, and hope. Although the Republicans renominated President Hoover as their candidate, they recognized he had little chance of winning. Too many Americans blamed Hoover for doing too little about the depression and wanted a new president. The Democrats pinned their hopes on Franklin Delano Roosevelt, known popularly as FDR, the two-term governor of New York and a distant cousin of former president Theodore Roosevelt. As governor, FDR had proved to be an effective, reform-minded leader, working to combat the problems of unemployment and poverty. Unlike Hoover, Roosevelt possessed a “can-do” attitude and projected an air of friendliness and confidence that attracted voters.
Indeed, Roosevelt won an overwhelming victory, capturing nearly 23 million votes to Hoover’s nearly 16 million. In the Senate, Democrats claimed a nearly two-thirds majority. In the House, they won almost three-fourths of the seats, their greatest victory since before the Civil War.
Waiting for Roosevelt to Take Over
Four months would elapse between Roosevelt’s victory in the November election and his inauguration as president in March 1933. The 20th Amendment, which moved presidential inaugurations to January, was not ratified until February 1933 and did not apply to the 1932 election. the 1932 election. FDR was not idle during this waiting period, however. He worked with his team of carefully picked advisers—a select group of professors, lawyers, and journalists that came to be known as the “Brain Trust.” Roosevelt began to formulate a set of policies for his new administration. This program, designed to alleviate the problems of the Great Depression, became known as the New Deal, a phrase taken from a campaign speech in which Roosevelt had promised “a new deal for the American people.” New Deal policies focused on three general goals: relief for the needy, economic recovery, and financial reform.
The Hundred Days
On taking office, the Roosevelt administration launched a period of intense activity known as the Hundred Days, lasting from March 9 to June 16, 1933. During this period, Congress passed more than 15 major pieces of New Deal legislation. These laws, and others that followed, significantly expanded the federal government’s role in the nation’s economy. Roosevelt’s first step as president was to carry out reforms in banking and finance. By 1933, widespread bank failures had caused most Americans to lose faith in the banking system. On March 5, one day after taking office, Roosevelt declared a bank holiday and closed all banks to prevent further withdrawals. He persuaded Congress to pass the Emergency Banking Relief Act, which authorized the Treasury Department to inspect the country’s banks. Those that were sound could reopen at once; those that were insolvent—unable to pay their debts— would remain closed. Those that needed help could receive loans. This measure revived public confidence in banks, since customers now had greater faith that the open banks were in good financial shape.
An Important Fireside Chat
On March 12, the day before the first banks were to reopen, President Roosevelt gave the first of his many fireside chats— radio talks about issues of public concern, explaining in clear, simple language his New Deal measures. These informal talks made Americans feel as if the president were talking directly to them. In his first chat, President Roosevelt explained why the nation’s welfare depended on public support of the government and the banking system. “We have provided the machinery to restore our financial system,” he said, “and it is up to you to support and make it work.” He explained the banking system to listeners. The president then explained that when too many people demanded their savings in cash, banks would fail. This was not because banks were weak but because even strong banks could not meet such heavy demands. Over the next few weeks, many Americans returned their savings to banks.
Regulating Banking and Finance
Congress took another step to reorganize the banking system by passing the Glass-Steagall Act of 1933, which established the Federal Deposit Insurance Corporation (FDIC). The FDIC provided federal insurance for individual bank accounts of up to $5,000, reassuring millions of bank customers that their money was safe. It also required banks to act cautiously with their customers’ money. |
Congress and the president also worked to regulate the stock market, in which people had lost faith because of the crash of 1929. The Federal Securities Act, passed in May 1933, required corporations to provide complete information on all stock offerings and made them liable for any misrepresentations. In June of 1934, Congress created the Securities and Exchange Commission (SEC) to regulate the stock market. One goal of this commission was to prevent people with inside information about companies from “rigging” the stock market for their own profit.
In addition, Roosevelt persuaded Congress to approve a bill allowing the manufacture and sale of some alcoholic beverages. The bill’s main purpose was to raise government revenues by taxing alcohol. By the end of 1933, the passage of the 21st Amendment had repealed prohibition altogether.
Rural Assistance
While working on banking and financial matters, the Roosevelt administration also implemented programs to provide relief to farmers, perhaps the hardest hit by the depression. It also aided other workers and attempted to stimulate economic recovery. The Agricultural Adjustment Act (AAA) sought to raise crop prices by lowering production, which the government achieved by paying farmers to leave a certain amount of every acre of land unseeded. The theory was that reduced supply would boost prices. In some cases, crops were too far advanced for the acreage reduction to take effect. As a result, the government paid cotton growers $200 million to plow under 10 million acres of their crop. It also paid hog farmers to slaughter 6 million pigs. This policy upset many Americans, who protested the destruction of food when many people were going hungry. It did, however, help raise farm prices and put more money in farmers’ pockets. An especially ambitious program of regional development was the Tennessee Valley Authority (TVA), established on May 18, 1933. (See Geography Spotlight on page 520.) Focusing on the badly depressed Tennessee River Valley, the TVA renovated five existing dams and constructed 20 new ones, created thousands of jobs, and provided flood control, hydroelectric power, and other benefits to an impoverished region.
Providing Work Projects
The administration also established programs to provide relief through work projects and cash payments. One important program, the Civilian Conservation Corps (CCC), put young men aged 18 to 25 to work building roads, developing parks, planting trees, and helping in soil-erosion and flood-control projects. By the time the program ended in 1942, almost 3 million young men had passed through the CCC. The CCC paid a small wage, $30 a month, of which $25 was automatically sent home to the worker’s family. It also supplied free food and uniforms and lodging in work camps. Many of the camps were located on the Great Plains, where, within a period of eight years, the men of the CCC planted more than 200 million trees. This tremendous reforestation program was aimed at preventing another Dust Bowl. The Public Works Administration (PWA), created in June 1933 as part of the National Industrial Recovery Act (NIRA), provided money to states to create jobs chiefly in the construction of schools and other community buildings. When these programs failed to make a sufficient dent in unemployment, President Roosevelt established the Civil Works Administration in November 1933. It provided 4 million immediate jobs during the winter of 1933–1934. Although some critics of the CWA claimed that the programs were “make-work” projects and a waste of money, the CWA built 40,000 schools and paid the salaries of more than 50,000 schoolteachers in America’s rural areas. It also built more than half a million miles of roads.
Promoting Fair Practices
The NIRA also sought to promote industrial growth by establishing codes of fair practice for individual industries. It created the National Recovery Administration (NRA), which set prices of many products and established standards. The aim of the NRA was to promote recovery by interrupting the trend of wage cuts, falling prices, and layoffs. The economist Gardiner C. Means attempted to justify the NRA by stating the goal of industrial planning. The codes of fair practice had been drafted in joint meetings of businesses and representatives of workers and consumers. These codes both limited production and established prices. Because businesses were given new concessions, workers made demands. Congress met their demands by passing a section of the NIRA guaranteeing workers’ right to unionize and to bargain collectively.
Many businesses and politicians were critical of the NRA. Charges arose that the codes served large business interests. There were also charges of increasing code violations.
Food, Clothing, and Shelter
A number of New Deal programs concerned housing and home mortgage problems. The Home Owners Loan Corporation (HOLC) provided government loans to homeowners who faced foreclosure because they couldn’t meet their loan payments. In addition, the 1934 National Housing Act created the Federal Housing Administration (FHA). This agency continues to furnish loans for home mortgages and repairs today. |