THE NEW DEAL

The New Deal, the name given to the peacetime domestic program of President Franklin D. Roosevelt, and especially to the innovative measures taken between 1933 and 1938 to counteract the effects of the Great Depression.

Both Roosevelt and the U.S. Congress, in trying to reduce unemployment and restore prosperity, endorsed a wide spectrum of new federal programs and agencies, most popularly identified by alphabetical titles. Roosevelt, a skillful political leader, helped win support for an unprecedented array of new services, regulations, and subsidies. Yet no single political philosophy or set of coherent goals ever unified the disparate programs.

Early Legislation

Roosevelt's overwhelming victory in the 1932 election, coupled with the urgency of the worst economic collapse in U.S. history, opened the way for a flood of legislation in 1933. The Emergency Banking Act provided for federal bank inspections, thus helping restore popular confidence in the wake of widespread bank failures. A second act set much more stringent rules for banks and provided insurance for depositors (the Federal Deposit Insurance Corporation, or FDIC). Two acts, one in 1933 and one in 1934, mandated detailed regulations for the securities market, enforced by a new Securities and Exchange Commission, or SEC. Several bills provided mortgage relief for farmers and homeowners and offered loan guarantees for home purchasers through the Federal Housing Administration, or FHA. A Federal Emergency Relief Administration expanded existing relief grants to the states, and a Civilian Conservation Corps, or CCC, provided work relief for young men under a type of military discipline. Congress established a Tennessee Valley Authority, or TVA, to develop the Tennessee River in the interest of navigation and flood control and to provide electric power to a wide area of the southeastern U.S.

The most important legislation of 1933 involved the major economic sectors. As a climax to a decade of wrangling, Congress in 1933 enacted a complex new farm bill, the Agricultural Adjustment Act. It provided several mechanisms to help raise agricultural prices, but the one most extensively used involved contractual reductions of surplus crops in return for government payments. The National Industrial Recovery Act, or NIRA, was the most innovative early New Deal measure. It provided for two major recovery programs—a vastly expanded public works effort (carried out by a Public Works Administration) and a complex program to regulate American business and ensure fair competition. A National Recovery Administration (NRA) approved and enforced a set of competitive codes for each industry.

 The Second New Deal

The hopes of 1933 for early recovery proved illusory. Many of the hastily drafted early bills were declared unconstitutional by the U.S. Supreme Court. These reverses, plus increasingly political opposition to Roosevelt, triggered a second flood of legislation, beginning in 1935, which some observers called the Second New Deal. Roosevelt now exploited developing class divisions, formed closer alliances with organized labor, and increasingly castigated the big-business groups that opposed his New Deal programs. Among the new measures were higher taxes for the rich, strict regulations for private utilities, subsidies for rural electrification and what amounted to a bill of rights for organized labor. The National Labor Relations Act of 1935 gave federal protection to the bargaining process and established a set of fair employment standards. The federal Fair Labor Standards Act of 1938 mandated maximum hours and minimum wages for most categories of workers.

By 1935, several Roosevelt advisers welcomed massive new federal expenditures to induce more private demand, even at the price of budget deficits. A huge relief appropriation of almost $5 billion reinvigorated several programs and funded a new federalized work relief program administered by the Works Progress Administration (WPA; see Work Projects Administration). Perhaps of greatest enduring significance, Congress in 1935 enacted the Social Security Act (see Social Security), which contained three major programs—a retirement fund, unemployment insurance, and welfare grants for local distribution (including aid for dependent children). These programs, coupled with a new subsidized public housing program, began what some now refer to as a welfare state.

The pressures for new legislation abated after 1937, and by 1939 national attention focused increasingly on foreign policy and national defense. The New Deal was over, but it had permanently expanded the role of the federal government, particularly in economic regulation, resource development, and income maintenance. Although in itself it failed to stimulate full economic recovery, it gave the federal government increased controls over monetary supplies and Federal Reserve policies and increased understanding of the economic consequences of its own taxing, borrowing, and spending—thus enabling it to limit the severity of later recessions.

  

 Public Policy Measures of the New Deal

 

Year

Program

Explanation

1932

Emergency Banking Relief Act

Reopened banks under government supervision

1933

Civilian Conservation Corps (CCC)

First federal effort to deal with youth unemployment using direct public works

1933

Federal Emergency Relief Act

Required Washington to fund state-run-welfare programs

1932

Reconstruction Finance Corporation (RFC)

First use of government credit to aid troubled private companies

1933

Agricultural Adjustment Act

First system of agricultural price and production supports

1933

Tennessee Valley Authority (TVA)

First direct government involvement in energy production and marketing

1933

Glass-Steagall Banking Act

Created bank deposit insurance. Divorced commercial and investment banking. Prohibited interest on checking accounts.

1933

National Industrial Recovery Act (NIRA)

First major attempt to plan and regulated the economy through the use of industry and trade associations and codes of competition. First act to allow collective bargaining and wages and hour regulation. Portions were declared unconstitutional.

1934

National Housing Act

Provided for federal mortgage insurance and for regulation of housing standards.

1935

Wagner Act

Promoted collective bargaining and prohibited unfair labor practice by employers.

1935

Social Security Act

Created a system of social insurance and a national retirement system.

1938

Agricultural Adjustment Act

Extended price supports, instituted payments, and launched wide federal management of agriculture.

1938

Fair Labor Standards Act

Provided for minimum wage, 40-hour work-week, overtime, and control of child labor.

 

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