New Deal programs - History of Business in the U.S.
Identification: President Franklin D. Roosevelt’s liberal public programs to provide relief for the needy, promote economic recovery, and increase governmental regulation of private businesses
Date: Launched on March 4, 1933
Significance: The New Deal programs empowered the federal government to exercise greater control over the national economy, to assist poor and unemployed persons, to recognize and enforce the right of collective bargaining, and to administer the complex system of Social Security.
The term “New Deal” was first used by Franklin D. Roosevelt in his 1932 speech accepting the Democratic Party’s nomination to run for president of the United States. Although vague about specific programs, he promised to govern with “liberal thought,” “planned action,” and “bold, persistent experimentation.” He also advocated a balanced budget and the elimination of “unnecessary functions of government.” During this time, the country was in the depths of the Great Depression, with an unemployment rate of 25 percent. In the presidential election, Roosevelt won in a historic landslide (57 percent of the popular vote), and his coattails helped Democrats gain firm control of Congress. The victorious Democrats possessed a popular mandate to pursue policies different from those of the defeated Republicans.
First Phase, 1933-1934
When Roosevelt took office on March 4, 1933, more than five thousand banks had been forced to close, and the entire banking system appeared to be on the brink of collapse. In his inaugural address, Roosevelt asserted his belief that “the only thing we have to fear is fear itself,” and he pledged to “wage war against the emergency” with “direct, vigorous action.” In the next few months, called the Hundred Days, the Roosevelt administration cooperated with Congress to enact an unprecedented amount of legislation.
On March 5, Roosevelt unexpectedly declared a four-day “bank holiday.” He and his advisers hoped to stop the run on the banks and restore public confidence in the banking system. Officials quickly drafted the Emergency Banking Act, proposing that Department of Treasury inspectors examine the banks and then announce which ones were financially sound. Congress approved the legislation on March 9, and within three days almost one thousand banks were operating without fear of panic. To secure lasting confidence in the system, Congress passed the Glass-Steagall Act, which created the Federal Deposit Insurance Corporation (FDIC), giving the government’s guarantee that depositors might safely keep their money in banking accounts.
Additional laws of the Hundred Days further enlarged governmental intervention into the nation’s economy. The Civilian Conservation Corps (CCC) was a popular program employing two million young men to work in environmental projects. The Federal Emergency Relief Act created the Federal Emergency Relief Administration (FERA), which provided relief funds for the destitute. The first Agricultural Adjustment Act taxed distributors and processors of food to provide funds to farmers in exchange for limiting production of livestock and specific crops, with the goal of increasing the prices of agricultural products.
The Tennessee Valley Authority (TVA) was a massive construction project consisting of thirty dams to control flooding and thirteen power plants to provide cheap electricity for one of the nation’s depressed regions. The controversial National Industrial Recovery Act (NRA), with its symbol of the Blue Eagle, provided for the organization of business and governmental officials into industry boards empowered to set minimum wages, price guidelines, and working conditions in particular industries.
In 1934, the first phase of the New Deal came to an end with a flurry of legislation that established new regulatory structures. The Securities Exchange Act prohibited abuses such as insider trading and established the Securities and Exchange Commission (SEC), which was authorized to make rules and regulate the trade in stocks. The Corporate Bankruptcy Act permitted the reorganization of corporations if two-thirds of their creditors consented. The Federal Communications Act imposed new rules on radio broadcasting and established the Federal Communications Commission (FCC), which was authorized to regulate interstate and foreign communications by telegraph, cable, and radio. The National Housing Act founded the Federal Housing Administration (FHA) for the purpose of insuring loans made by banks, building and loan associations, and other private lending institutions.
Second Phase, 1935-1938
While continuing relief and recovery programs, the second phase of the New Deal put a new emphasis on social and economic reforms designed to help working people, the unemployed, and the elderly. Roosevelt announced this change of direction in his annual address to Congress on January 4, 1935. In large part, Roosevelt was reacting to the left-wing critics of the New Deal, particularly Huey Long, who advocated a massive redistribution of wealth, and Francis Townsend, who proposed an expensive program of benefits for older citizens.
The two most significant legislative reforms of the New Deal’s second phase were the National Labor Relations Act (NLRA) of 1935 and the Social Security Act (SSA) of 1935. The NLRA, or theWagner Act, guaranteed that workers could organize unions for collective bargaining, outlawed a large number of unfair employer practices, and established the National Labor Relations Board (NLRB) to enforce the right of workers to choose their union representatives. The Social Security Act enrolled working Americans in a pension program that guaranteed retirement income, and it also provided states with funds for disability and unemployment insurance, as well as for single mothers with dependent children. This ambitious entitlement program was financed by a tax on employer payrolls, a policy that many progressives denounced as regressive in its impact.
Other important programs were also started in 1935. The Works Progress Administration (WPA) dwarfed previous relief programs by giving employment to almost one-third of the country’s jobless. The Revenue Act of 1935 made the personal and corporate income taxes more progressive, increasing the surtax rate on incomes over $50,000 and taxing incomes in excess of $5 million at the rate of 75 percent. The Public Utility Holding Company Act broke up the oligopoly that some thirteen holding companies exercised over gas and electric operating companies, and it restricted such companies to operations within a single area.
Anumber of programs were designed to improve conditions in rural areas. The Soil Conservation and Domestic Allotment Act of 1935 established the Soil Conservation Service as a permanent unit to control and prevent soil erosion. The Rural Electrification Administration (REA), established by executive order as authorized by Congress, made extremely low-interest loans to farmers’ cooperatives and utility companies to extend electrical power to 90 percent of the population that lacked such power. The Resettlement Administration, which was absorbed by the Farm Security Administration in 1937, resettled low-income families from areas of limited potential and loaned them money to purchase farmlands and equipment.
The Supreme Court’s decision in Schechter Poultry Corp. v. United States (1935), which struck down the National Industrial Recovery Act as unconstitutional, marked the beginning of a bitter conflict between the Roosevelt administration and the Court. Even though Roosevelt had become dissatisfied with the controversial NRA, he feared that the Court might strike down his more successful programs. In 1936, these fears were reinforced by United States v. Butler, which invalidated the way that the Agricultural Adjustment Administration was financed. Democratic landslide victories in the elections of that year provided evidence of public support for the New Deal. Convinced of his popular mandate, Roosevelt in early 1937 proposed a “court-packing” bill that would have added an additional justice for each justice over the age of seventy. Although Congress refused to pass the bill, one moderately conservative justice began to vote with the four liberal justices, a change often called the “judicial revolution of 1937.” Soon thereafter, Roosevelt was able to appoint justices with liberal perspectives on constitutional jurisprudence, thereby ending the conflict.
In 1937, Roosevelt signed into law the National Housing Act, which appropriated $500 billion for a program of slum clearance and public housing, establishing a foundation for the expanded programs of the postwar years. By this time, Roosevelt, concerned about large deficits and believing that the economy was rebounding, decided to cut back on relief programs. Unfortunately, the stock market reacted negatively, and the unemployment rate grew to an alarming extent. In 1938, Congress enacted the second Agricultural Adjustment Act, which satisfied the Supreme Court’s objection to the way that the first act had been financed. Later that year, Congress enacted the last major piece of New Deal legislation, the Fair Labor Standards Act, which outlawed child labor and set a minimum wage of 40 cents per hour and a maximum workweek of forty hours. In addition to helping exploited workers, the act was motivated by the desire of northern manufacturers to minimize the competitive advantage that the low wages paid in the South gave to southern firms.
Legacy of New Deal Programs
By 1938, New Deal liberals, increasingly under attack, were forced into a defensive position. A powerful coalition of Republicans and conservative southern Democrats was able to slash appropriations and reduce corporate taxes. Conservatives on the House Committee on Un-American Activities launched a well-publicized investigation of communist influences within New Deal agencies. In the mid-term Democratic primaries, voters reacted negatively to Roosevelt’s attempts to “purge” anti-New DealDemocratic senators, and in the November elections, Republicans made major gains in both the Senate and the House, as well as in state contests. In his state of the union address of January, 1939, Roosevelt expressed the need to “preserve our reforms,” while he proposed no new domestic policies.
With the outbreak of World War II, the growing demand for labor eliminated the need for relief programs such as the Civil Conservation Corps and the Works Progress Administration. In a press conference of 1943, Roosevelt observed that New Deal programs had been enacted during a period in which the United States was “an awfully sick patient,” and he declared that it was now time for “Dr. New Deal” to be replaced by “Dr. Win-the-War.” Although conservatives continued to denounce the New Deal, they made almost no attempts to abrogate its core programs: Social Security, subsidies for farmers, minimum-wage legislation, the banning of child labor, defense of collective bargaining, and banking and securities regulations. These programs had become firmly entrenched as foundations within the new economic and social order produced by the New Deal.
In subsequent years, moreover, many of these programs would be expanded on a piecemeal basis. When the United States entered World War II in December, 1941, Roosevelt would be able further to institutionalize the New Deal’s most important legacy, governmental regulation of the economy. Following the war, the number of New Deal-inspired programs would continue to proliferate in Harry S. Truman’s Fair Deal and even more in Lyndon B. Johnson’s Great Society.
Alter, Jonathan. The Defining Moment: FDR’s Hundred Days and the Triumph of Hope. New York: Simon & Schuster, 2007. Compelling narrative account of how President Roosevelt and his advisers dealt with the banking crisis and cooperated with Congress to enact the many significant laws of early 1933.
Kennedy, David M. Freedom from Fear: The American People in Depression andWar, 1929-1945. New York: Oxford University Press, 1999. The first half of this Pulitzer Prize-winning book presents an informed account of the New Deal within its historical context.
Leuchtenburg, William. Franklin D. Roosevelt and the New Deal, 1932-1940. New York: Harper & Row, 1963. Written by a Roosevelt admirer who lived during the period, this popular book has long been recognized as one of the best syntheses ever written about the New Deal.
Rosen, Elliott A. Roosevelt, the Great Depression, and the Economics of Recovery. Charlottesville: University Press of Virginia, 2007. Discussing corporate regulations, social welfare, and monetary and fiscal policies, Rosen takes a critical view of the government’s efforts to regulate the economy.
Sitkiff, Harvard. New Deal for Blacks: The Emergence of Civil Rights as a National Issue. New York: Oxford University Press, 1981. Discusses the extent to which the New Deal benefited African Americans, emphasizing the roles of persons like Mary McLeod Bethune and Robert Weaver.
Smith, Jason Scott. Building New Deal Liberalism: The Political Economy of Public Works, 1933-1956. New York: Cambridge University Press, 2005. In this historical account of public works programs, Smith argues that the New Deal produced a revolution in economic development and laid the foundations for postwar development.
Smith, Jean Edward. FDR. New York: Random House, 2007. Probably the most interesting and well-written biography ever written about Roosevelt, with a good balance between his personal life and public policies.
See also: Farm Credit Administration; Federal Trade Commission; Food Stamp Plan; U.S. Presidency.