Modern history

The New Deal

The nation was ready for a change, and on election day 1932, with hard times showing no sign of abating, Democratic presidential candidate Franklin Delano Roosevelt defeated Hoover easily. Roosevelt’s sizable victory provided him with a mandate to take the country in a bold, new direction. However, few Americans, including Roosevelt himself, knew exactly what the new president meant to do or what his pledge of a New Deal would mean for the country.

Roosevelt Restores Confidence

As a presidential candidate, Roosevelt presented no clear, coherent policy. He did not spell out how his plans for the country would differ from Hoover’s, but he did refer broadly to providing a “new deal” and bringing to the White House “persistent experimentation.” He pledged to put more faith “in the forgotten man at the bottom of the economic pyramid.” These flights of rhetoric, however, were balanced by the Democratic candidate’s harsh denunciation of Hoover for excessive governmental spending and failure to balance the budget. Roosevelt’s appeal derived more from the genuine compassion he was able to convey than from the specificity of his promises. In this context, Eleanor Roosevelt’s evident concern for people’s suffering and her history of activism made Franklin Roosevelt even more attractive.

Franklin Delano Roosevelt Campaigning in Georgia New York governor Franklin Roosevelt greets farmers in Georgia as he campaigns for president in 1932 as the Democratic candidate. Photographers were careful not to show that Roosevelt was unable to use his legs, which were paralyzed after he contracted polio in 1921. Roosevelt forged a coalition of farmers and urban workers and easily defeated the incumbent Hoover. AP Photo

Instead of any fixed ideology, Roosevelt followed what one historian has called “pragmatic humanism.” A seasoned politician who understood the need for flexibility, Roosevelt blended principle and practicality. “It is common sense,” Roosevelt explained, “to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.” More than any president before him, FDR, as he became affectionately known, created an expectation among Americans that the federal government would take concrete action to improve their lives. A Colorado woman expressed her appreciation to Eleanor Roosevelt: “Your husband is great. He seems lovable even tho’ he is a ‘politician.’” A textile worker echoed this sentiment: “The president isn’t going to forget us.” The New Deal would take its twists and turns, but Roosevelt never lost the support of the majority of Americans.

Starting with his inaugural address, in which he declared that “the only thing we have to fear is fear itself,” Roosevelt took on the task of rallying the American people and restoring their confidence in the future. Using the power of radio to communicate directly with the American people, Roosevelt delivered regular fireside chats in which he boosted morale and informed his audience of the steps the government was taking to help solve their problems. Not limited to rhetoric, Roosevelt’s New Deal would provide relief, put millions of people to work, raise prices for farmers, extend conservation projects, revitalize America’s financial system, and rescue capitalism.

Steps toward Recovery

In March 1933, President Roosevelt issued an executive order shutting down banks for several days to calm the panic that gripped many Americans in the wake of bank failures and the loss of their life’s savings. Shortly after, Congress passed the administration’s Emergency Banking Act, which subjected banks to Treasury Department inspection before they reopened, reorganized the banking system, and provided federal funds to bail out banks on the brink of closing. This assertion of federal power allowed solvent banks to reopen. Boosting confidence further, Congress passed the Glass-Steagall Act in June 1933. The measure created the Federal Deposit Insurance Corporation (FDIC), insuring personal savings accounts up to $5,000, and detached commercial banks from investment banks to avoid risky speculation. The president also sought tighter supervision of the stock market, whose collapse many blamed for sparking the Great Depression. By June 1934, Roosevelt had signed into law measures setting up the Securities and Exchange Commission (SEC) to regulate the stock market and ensure that corporations gave investors accurate information about their portfolios.

The regulation of banks and the stock exchange did not mean that Roosevelt was antibusiness. He affirmed his belief in a balanced budget and sought to avoid a $1 billion deficit by cutting government workers’ salaries and lowering veterans’ pensions. Roosevelt also tried to keep the budget under control by ending prohibition, which would allow the government to tax alcohol sales and eliminate the cost of enforcement. The Twenty-first Amendment, ratified in 1933, ended the more than decade-long experiment with temperance.

These initial measures restored confidence in the presidency and in the federal government’s willingness and ability to redress some of the problems responsible for the economic crisis. Yet the Roosevelt administration had much more to accomplish before those hardest hit by the depression felt some relief. Roosevelt viewed the Great Depression as a crisis analogous to war and adapted many of the bureaus and commissions used during World War I to ensure productivity and mobilize popular support to fit the current economic emergency. Many former progressives lined up behind Roosevelt, including women reformers and social workers who had worked in government and private agencies during the 1920s to develop programs for mothers, children, and the poor. At his wife Eleanor’s urging, Roosevelt appointed one of them, Frances Perkins, as the first woman to head a cabinet agency—the Department of Labor.

Rehabilitating agriculture and industry stood at the top of the New Deal’s priority list. Farmers came first. In May 1933, Congress passed the Agricultural Adjustment Act, aimed at raising prices by reducing production. The Agricultural Adjustment Administration (AAA) paid farmers subsidies to produce less in the future, and for farmers who had already planted their crops (including corn, cotton, rice, tobacco, and wheat) and raised livestock, the agency paid them to plow under a portion of their harvest, slaughter hogs, and destroy dairy products. By 1935 the program succeeded in raising farm income by 50 percent. Large farmers remained the chief beneficiaries of the AAA because they could afford to cut back production. In doing so, especially in the South, they forced off the land sharecroppers who no longer had plots to farm. Even when sharecroppers managed to retain a parcel of their acreage, AAA subsidies went to the landowners, who did not always distribute the designated funds owed to the sharecroppers. Though poor white farmers felt the sting of this injustice, the system of white supremacy existing in the South guaranteed that blacks suffered most.

After the Supreme Court voided the AAA in 1936 for imposing an unlawful tax on food processors in order to fund the subsidies, Congress enacted several pieces of legislation designed to limit production and provide aid to small farmers. The second AAA, passed in 1938, offered agricultural subsidies to reduce cultivation on the basis of conservation and soil erosion prevention, which overcame judicial objections. To deal with continuing rural poverty among sharecroppers and tenant farmers, Congress provided loans for displaced farmers.

The Roosevelt administration exhibited its boldest initiative in creating the Tennessee Valley Authority (TVA) in 1933 to bring low-cost electric power to rural areas and help redevelop the entire Tennessee River valley region through flood-control projects. In contrast to the AAA and other farm programs in which control stayed in private hands, the TVA owned and supervised the building and operation of public power plants, starting with the Muscle Shoals Dam in Alabama, which progressives had lobbied for since the 1920s. For farmers outside the Tennessee River valley, the Rural Electrification Administration helped them obtain cheap electric power starting in 1935, and for the first time tens of thousands of farmers experienced the modern conveniences that electricity brought (though most farmers would not get electric power until after World War II).

Roosevelt and Congress also acted to deal with the soil erosion problem behind the dust storms. In 1933, the Department of Interior established a Soil Erosion Service, and two years later Congress created a permanent Soil Conservation Service in the Department of Agriculture. Although these measures would prove beneficial in the long run, they did nothing to prevent even more severe storms from rolling through the Dust Bowl, as it was now known, in 1935 and 1936.

At the same time, Roosevelt concentrated on industrial recovery. He kept Hoover’s RFC intact, but he went far beyond his predecessor in sanctioning government participation in the economy. In 1933 Congress passed the National Industrial Recovery Act, which established the National Recovery Administration (NRA). This agency allowed business, labor, and the public (represented by government officials) to create codes to regulate production, prices, wages, hours, and collective bargaining. Designers of the NRA expected that if wages rose and prices remained stable, consumer purchasing power would climb, demand would grow, and businesses would put people back to work. For this plan to work, business people needed to keep prices steady by absorbing some of the costs of higher wages. The head of the NRA, Hugh S. Johnson, a veteran of the War Industries Board during World War I, engaged in a highly visible public relations campaign. Johnson argued that regulatory codes were good for everyone. Like rules for a fair fight, they would “eliminate eye-gouging and knee-groining and ear- chewing in business,” Johnson proclaimed. Businesses and industries that joined the NRA displayed the symbol of a blue eagle to signal their participation, and officials whipped up patriotic fervor on its behalf.

However, the NRA did not function as planned, nor did it bring the desired recovery. Businesses did not exercise the necessary restraint to keep prices steady. Large manufacturers dominated the code-making committees, and because Roosevelt had suspended enforcement of the antitrust law, they could not resist taking collective action to force smaller firms out of business. The NRA legislation guaranteed labor the right to unionize, but the agency did not vigorously enforce collective bargaining. The government failed to intervene to redress the imbalance of power between labor and management because Roosevelt depended primarily on big business to generate economic improvement. Moreover, the NRA had created codes for too many businesses, and government officials could not properly oversee them all. In 1935 the Supreme Court delivered the final blow to the NRA by declaring it an unconstitutional delegation of legislative power to the president.

Direct Assistance and Relief

Economic recovery programs were important, but they took time to take effect, and many Americans needed immediate help. Thus relief efforts and direct job creation were critical parts of the New Deal. Created in the early months of Roosevelt’s term, the Federal Emergency Relief Administration (FERA) provided cash grants to states to revive their bankrupt relief efforts. Unlike Hoover’s RFC, the FERA did not expect states to repay the loans, but it left administration of the programs to state and local agencies. Roosevelt chose Harry Hopkins, the chief of New York’s relief agency, to head the FERA and distribute its initial $500 million appropriation. On the job for two hours, Hopkins had already spent $5 million. He did not calculate whether a particular plan “would work out in the long run,” because, as he remarked, “people don’t eat in the long run— they eat every day.”

Harold Ickes, secretary of the interior and director of the Public Works Administration (PWA), oversaw efforts to rebuild the nation’s infrastructure. Funding architects, engineers, and skilled workers, the PWA built the Grand Coulee, Boulder, and Bonneville dams in the West; the Triborough Bridge in New York City; 70 percent of all new schools constructed between 1933 and 1939; and a variety of municipal buildings, sewage plants, port facilities, and hospitals.

Yet neither the FERA nor the PWA provided enough emergency relief to the millions who faced the winter of1933—1934 without jobs or the money to heat their homes. In response, Hopkins persuaded Roosevelt to launch a temporary program to help needy Americans get through this difficult period. Both men favored “work relief”—giving people jobs rather than direct welfare payments whenever practical. The Civil Works Administration (CWA) lasted four months, but in that brief time it employed more than 4 million people on about 400,000 projects that built 500,000 miles of roads, 40,000 schools, 3,500 playgrounds, and 1,000 airports. Montana got its state capitol building renovated, Pittsburgh erected its Cathedral of Learning, Boston’s unemployed teachers went back to their classes, writers and artists remained at their desks and canvases, singers toured the nation, and ninety-four Indians restocked the Kodiak Islands off the coast of Alaska with rabbits.

One of Roosevelts most successful relief programs was the Civilian Conservation Corps (CCC), created shortly after he entered the White House. The CCC recruited unmarried men between the ages of eighteen and twenty-five for a two-year stint.

It removed them from relief rolls and the glut of the job market and put them to work planting forests; cleaning up beaches, rivers, and parks; and building bridges and dams. To build discipline, the U.S. army ran the CCC, furnished uniforms, and set up military-style camps. Participants received $1 per day, and the government sent $25 of the $30 in monthly wages directly to their families, helping make this the most popular of all New Deal programs. The CCC employed around 2.5 million men and lasted until 1942.

New Deal Critics

Despite the unprecedented efforts of the Roosevelt administration to spark recovery, provide relief, and encourage reform between 1933 and 1935, the country remained in depression, and unemployment still hovered around 20 percent. A liberal but not a radical, Roosevelt found himself under attack from both the left and the right. On the right, conservatives questioned New Deal spending and the growth of big government. On the left, the president’s critics argued that he had not done enough to topple wealthy corporate leaders from power and relieve the plight of the downtrodden.

The Great Depression and Hoover’s inability to ameliorate its most damaging effects dealt a serious blow to the Republican Party and to the conservative opposition to federal government intervention with which it was identified. In 1934 officials of the Du Pont Corporation and General Motors formed the American Liberty League. The group, according to one of its founders, set out to educate the nation about “the value of encouraging people to work; encouraging people to get rich.” From the point of view of the league’s founders, the New Deal was little more than a vehicle for the spread of socialism and communism. The organization spent $1 million attacking what it considered to be Roosevelt’s “dictatorial” policies and his assaults on free enterprise. The league, however, failed to attract support beyond a small group of northern industrialists, Wall Street bankers, and a few disaffected Democrats.

Roosevelt also faced criticism from the left. Communist Party membership reached its peak of around 75,000 in 1938, and though the party remained relatively small in numbers, it attracted intellectuals and artists whose voices could reach the larger public. The party’s efforts to save the Scottsboro Nine boosted its appeal among African Americans. Party members also led unionizing drives in both the North and the South and displayed great talent and energy in organizing workers where resistance to unions was greatest. In the mid-1930s, the party followed the Soviet Union’s antifascist foreign policy and joined with left-leaning, non-Communist groups, such as unions and civil rights organizations, to oppose the growing menace of fascism in Europe, particularly in Germany and Italy. By the end of the decade, however, the party had lost many members, as revelations about the tyrannical behavior of the Soviet dictator Joseph Stalin emerged and after the Soviet Union reversed its anti-Nazi foreign policy.

The greatest challenge to Roosevelt came from a trio of talented men who reflected diverse beliefs. Through charisma, organizational skills, or a combination of both, each of them created his own national campaign criticizing the New Deal. Francis Townsend, a retired California physician, proposed a “Cure for Depressions.” In 1934 he formed the Old-Age Revolving Pensions Corporation, whose title summed up the doctor’s idea. Townsend would have the government give all Americans over the age of sixty a monthly pension of $200 if they retired and spent the entire stipend each month. He promoted this scheme as a simple panacea for the ailing economy. Retirements would open up jobs for younger workers, and the income these workers received, along with the pension for the elderly, would pump ample funds into the economy to promote recovery. The government would fund the Townsend plan with a 2 percent “transaction” or sales tax. By 1936 Townsend Clubs had attracted about 3.5 million members throughout the country, and one-fifth of all adults in the United States signed a petition endorsing the Townsend plan.

While Townsend appealed mainly to the elderly, Charles E. Coughlin attracted Catholics and a lower-middle-class following. An outspoken priest from the Detroit suburb of Royal Oak, Michigan, Father Coughlin used his popular national radio broadcasts to talk about economic and political issues. Originally a Roosevelt supporter, by 1934 Coughlin had begun criticizing the New Deal for catering to greedy bankers. He spoke to millions of radio listeners about the evils of the Roosevelt administration, the godless Communists who had allegedly infested it, and international bankers—coded language referring to Jews—who supposedly manipulated it. In 1935 Coughlin’s popularity reached its peak as he organized the National Union for Social Justice, which supported monetary inflation to help debt-ridden farmers and the nationalization of banks to control lending practices. As the decade wore on, his strident anti-Semitism and his growing fondness for fascist dictatorships abroad overshadowed his economic justice message, and Catholic officials ordered him to stop broadcasting.

Huey Pierce Long of Louisiana, known as “the Kingfish,” posed the greatest political threat to Roosevelt. Unlike Townsend and Coughlin, Long had built and operated a successful political machine, first as governor and then as U.S. senator, taking on the special interests of oil and railroad corporations in his home state. Early on he had backed Roosevelt, but Long found the New Deal wanting. “Not a single thin dime of concentrated, bloated, pompous wealth, massed in the hands of a few people,” Long claimed, “has been raked down to relieve the masses.” In 1934 Long established the Share Our Wealth society, promising to make “every man a king” by presenting families with a $5,000 homestead and a guaranteed annual income of $2,000. To accomplish this, Long proposed levying heavy income and inheritance taxes on the wealthy. Although the financial calculations behind his bold plan did not add up, Share Our Wealth clubs counted some seven million members. The swaggering senator departed from most of his segregationist southern colleagues by appealing to a coalition of disgruntled farmers, industrial workers, and African Americans (as governor of Louisiana, he supported repeal of the poll tax). Before Long could help lead a third-party campaign for president, he was shot and killed in 1935.


• What steps did Roosevelt take to stimulate economic recovery and provide relief to impoverished Americans during his first term in office?

• What criticisms did Roosevelt's opponents level against the New Deal?

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