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For other uses of New Deal and The New Deal, see New Deal (disambiguation). The New Deal was the name President Franklin D. Roosevelt gave to the series of programs between 1933-37 with the goal of relief, recovery and reform of the United States economy during the Great Depression. Dozens of alphabet agencies were created as a result. Historians distinguish the "First New Deal" of 1933 that had something for almost every group, and the "Second New Deal" (1935-37) that introduced an element of class conflict. The opponents of the New Deal, complaining of the cost and the shift of power to Washington, stopped its expansion after 1937, and abolished many of its programs by 1943. The National Recovery Administration was ruled unconstitutional by the Supreme Court. The main programs still important today are Social Security and the Securities and Exchange Commission. * Relief, recovery, and reform The New Deal had three components: direct relief, economic recovery, and financial reform; these were also called the 'Three Rs'. Relief was the immediate effort to help the one-third of the population that was hardest hit by the depression. Roosevelt expanded Hoover's Federal Emergency Relief Administration (FERA) work relief program, and added the Civilian Conservation Corps (CCC), Public Works Administration (PWA), and (starting in 1935) the Works Progress Administration (WPA). In 1935 the social security and unemployment insurance programs were added. Separate programs were set up for relief in rural America, such as the Resettlement Administration (RA) and Farm Security Administration (FSA). These work relief programs have been praised by most economists in retrospect, including Milton Friedman, who called them "appropriate responses to the critical situation." Recovery was the effort in numerous programs to restore the economy to normal health. By most economic indicators this was achieved by 1937--except for unemployment, which remained stubbornly high until World War II began. Reform was based on the assumption that the depression was caused by the inherent instability of the market and that government intervention was necessary to rationalize and stabilize the economy, and to balance the interests of farmers, business and labor. It included the National Recovery Administration (1933), regulation of Wall Street (SEC, 1933), the Agricultural Adjustment Act farm programs (1933 and later), insurance of bank deposits (Federal Deposit Insurance Corporation 1933) and the Jack Wagner Act encouraging labor unions (1935). Despite urgings by some New Dealers, there was no major anti-trust program. Roosevelt said that he opposed socialism (in the sense of state ownership of factories), and only one major program, the Tennessee Valley Authority (1933), involved government ownership of the means of production. Milton Friedman is typical of a majority of economists who have criticized the NRA and AAA for setting prices and wages, which distorted the market. Two old words now took on new meaning. "Liberal" no longer referred to classical liberalism but now meant a supporter of the New Deal; conservative meant an opponent. Whether the New Deal was successful in achieving the three Rs is usually approached not as a historical problem but as a current debate over whether the program should be a model for government action today. Liberals continue to battle conservatives. The term "New Deal" is also used to describe the liberal New Deal Coalition that Roosevelt created to support his programs, including the Democratic party, big city machines, labor unions, Catholic and Jewish minorities, African Americans, farmers, and most Southern whites. By 1934, the Supreme Court began declaring significant parts of the New Deal unconstitutional. This led Roosevelt to propose the Court-packing Bill in 1937. Although the bill failed, the Supreme Court started upholding New Deal laws. By 1942, the Supreme Court had almost completely abandoned its "judicial activism" of striking down congressional laws, as accused by New Deal supporters. The Supreme Court ruled in Wickard v. Filburn that the Commerce Clause covered almost all such regulation allowing the necessary expansion of federal power to make the New Deal "constitutional". The Origins of the New Deal On 29 October,1929, the crash of the U.S. stock market—known as Black Tuesday—reflected a trend of a worldwide economic crisis. In 1929–1933, unemployment in the U.S. increased from the original 4% to 25%, manufacturing output collapsed by approximately a third. Prices everywhere fell, making the burden of the repayments of debts much harder. Heavy industry, mining, lumbering and agriculture felt its impact. The impact was much less severe in white collar and service sectors, but every city and state was hit hard. Upon accepting the Democratic nomination for president, Roosevelt promised "a new deal for the American people." (The phrase was borrowed from the title of Stuart Chase's book A New Deal published earlier that year.) Roosevelt entered office with no single ideology or plan for dealing with the depression. He was willing to try anything, and, indeed, in the "First New Deal" (1933-34) virtually every organized group (except the Socialists and Communists) gained much of what they demanded. This "First New Deal" thus was self-contradictory, pragmatic, and experimental. The economy eventually recovered from the deep pit of 1932, and started heading upward again until 1937, when the Recession of 1937 sent the economy back to 1934 levels of unemployment. Whether the New Deal was responsible for the recovery, or whether it even slowed the recovery, is a subject of debate. The New Deal drew from many different sources over the previous half-century. Some New Dealers, led by Thurman Arnold, went back to the anti-monopoly tradition in the Democratic party that stretched back a century. Monopoly was bad for America, Louis Brandeis kept insisting, because it produced waste and inefficiency. However, the anti-monopoly group never had a major impact on New Deal policy. From the Wilson administration, other New Dealers, such as Hugh Johnson of the NRA, were shaped by efforts to mobilize the economy for World War I, They brought ideas and experience from the government controls and spending of 1917-18. And from the policy experiments of the 1920s, New Dealers picked up ideas from efforts to harmonize the economy by creating cooperative relationships among its constituent elements. Roosevelt brought together a Brain Trust of academic advisers to assist in his recovery efforts. Historian, Clarence B. Carson says:
The New Deal faced some very vocal conservative opposition. The first organized opposition in 1934 came from the American Liberty League led by Democrats such as 1924 and 1928 presidential candidates John W. Davis and Al Smith. There was also a large loose grouping of opponents of the New Deal who have come to be known as the Old Right which included politicians, intellectuals, writers, and newspaper editors of various philosophical persuasions including classical liberals, conservatives, Democrats and Republicans. World Comparisons Britain, led by the hookers of America party, was unable to adopt major programs to stop its depression. That led to collapse of Labour and replacement in 1931 by a National coalition (predominantly Conservative). Partially as a result there was no equivalent "New Deal" in Britain. In Nazi Germany, economic recovery was pursued through wage controls, suppression of unions, and spending programs such as public works; large-scale rearmament came later in the 1930s. In Mussolini's Italy, the economic controls of his corporate state were tightened. In the Soviet Union, Stalin continued his massive program of economic planning and state ownership. The apparent failure of capitalism led some Americans to flirt with communist or fascist ideology. The First Hundred Days
The "Bank Holiday" and the Emergency Banking Act Roosevelt hurled the blame at businessmen and bankers with religious rhetoric: "Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men....The money changers have fled from their high seats in the temple of our civilization." By March 4 all banks in the country were virtually closed by their governors, and Roosevelt kept them all closed until he could pass new legislation. On March 9, Roosevelt sent to Congress the Emergency Banking Act, drafted in large part by Hoover's administration; the act was passed and signed into law the same day. It provided for a system of reopening sound banks under Treasury supervision, with federal loans available if needed. Three-quarters of the banks in the Federal Reserve System reopened within the next three days. Billions of dollars in "hoarded" currency and gold flowed back into them within a month, thus stabilizing the banking system. In all of 1933 4,004 small local banks were closed and were merged into larger banks. (Their depositors eventually received 85 cents on the dollar of their deposits.) Economists Milton Friedman and Anna Schwartz said, "The 'cure' came close to being worse than the disease." To avoid future "cures" the Congress created the Federal Deposit Insurance Corporation in June, which insured deposits. In practice the day of the bank run was virtually ended by the FDIC. Roosevelt issued Executive Order 6102 requiring that by next January all private gold be turned in for paper money at face value. (Legally he was following the March 9 law.) After January 1934 he then devalued the international value of the dollar by 40 percent in terms of gold and refused to honor gold obligations on any paper dollars or bonds redeemed. The Supreme Court, though with five justices condemning the repudiation of the obligation, ruled on principle that the bondholders did not suffer a loss in purchasing power when the price of gold was adjusted upward relative to paper dollars and therefore could not demand gold. However, Roosevelt had prepared a radio address beforehand to announce his refusal to enforce the decision if the Court were to rule in favor of the bondholders. The economy had hit rock bottom in March 1933 and now it started to expand. As historian Broadus Mitchell notes, "Most indexes worsened until the summer of 1932, which may be called the low point of the depression economically and psychologically." Economic indicators show the economy reached nadir in the first days of March, then began a steady, sharp upward recovery that persisted until 1937 when it was hit with the Recession of 1937, creating a depression within a depression. Thus the Federal Reserve Index of Industrial Production hit its lowest point of 52.8 in July 1932 (with 1935-39 = 100) and was practically unchanged at 54.3 in March 1933; however by July 1933, it reached 85.5, a dramatic rebound of 57% in four months The Economy Act The Economy Act, drafted by Budget Director Lewis Douglas was passed on March 20, 1933. The act proposed to balance the "regular" (non-emergency) federal budget by cutting the salaries of government employees and cutting pensions to veterans by 40%. It saved $500 million a year and reassured deficit hawks like Douglas that the new president was fiscally conservative. Roosevelt argued there were two budgets: the "regular" federal budget which he balanced, and the "emergency budget" needed to defeat the depression. It was imbalanced on a temporary basis. Roosevelt thus reflected the classical Democratic party position, dating back to Andrew Jackson and the Jacksonian Democrat days. Roosevelt was initially in favor of balancing the budget but he would soon find himself using deficit spending in order to fund the numerous programs he created. Douglas, however, rejecting the distinction between a regular and emergency budget, resigned in 1934, and became an outspoken critic of the New Deal. Roosevelt strenuously opposed the Bonus Bill that would give World War I veterans a cash bonus. Finally, Congress passed it over his veto in 1936, and the Treasury distributed $1.5 billion in cash to 4 million veterans just before the 1936 election. At least until John Kennedy in 1960 New Dealers never fully recognized the Keynesian argument for government spending as a vehicle for recovery. Most economists of the era, along with Henry Morgenthau at the Treasury, rejected Keynesian solutions and favored balanced budgets. The Farm Programs Roosevelt was keenly interested in farm issues, and emphasized that true prosperity would not return until farming was prosperous. Many different programs were directed at farmers. The first hundred days produced a federal program to protect commercial farmers from the uncertainties of the depression through subsidies and production controls. This program began with the Agricultural Adjustment Act, creating the Agricultural Adjustment Administration (AAA), which Congress passed in May 1933. The Act reflected the demands of leaders of major farm organizations, especially the Farm Bureau, and reflected debates among Roosevelt's farm advisers such as Henry A. Wallace, Rexford Tugwell, and George Peek. The AAA implemented a provision for crop reductions known as the "domestic allotment" system of the act. Under this system producers of corn, cotton, dairy products, hogs, rice, tobacco, and wheat would decide on production limits for their crops. The AAA would then pay land owners subsidies for leaving some of their land idle with funds provided by a new tax on food processing. Farm prices were to be subsidized up to the point of parity. Some crops were ordered to be destroyed and some livestock slaughtered to maintain prices. The idea was that the less produced, the higher the price, and the farmer would benefit. Farm incomes increased significantly in the first three years of the New Deal. However, this was at the expense of consumers who had to pay more. The AAA established an important and long-lasting federal role in the planning on the entire agricultural sector of the economy. The AAA did not provide for any sharecroppers or tenants or farm laborers who might become unemployed, but there were other New Deal programs especially for them. Roosevelt, Eleanor Roosevelt, and many New Dealers were highly sympathetic to the marginal farmers who lived on the land in severe poverty, especially in the South. Major programs addressed to their needs included the Resettlement Administration (RA), the Farm Security Administration (FSA), the Rural Electrification Administration (REA), the Tennessee Valley Authority (TVA) and rural welfare projects sponsored by the WPA, NYA, Forest Service and CCC, including school lunches, building new schools, opening roads in remote areas, reforestation, and purchase of marginal lands to enlarge national forests. The AAA was the first program on such a scale on behalf of the troubled agricultural economy, and it established an important and long-lasting federal role in the planning on the entire agricultural sector of the economy. In 1936, the Supreme Court declared the AAA to be unconstitutional, stating that "a statutory plan to regulate and control agricultural production, is a matter beyond the powers delegated to the federal government..." The AAA was replaced by a similar program that did win Court approval. Federal regulation of agricultural production has been modified many times since then, but together with large subsidies it is still in effect in 2006. Relief
Repeal of prohibition In a measure that garnered substantial popular support, Roosevelt, in his first days of office, moved to put to rest one of the most divisive cultural issues of the 1920s. He supported and signed a bill to legalize the manufacture and sale of beer, an interim measure pending the repeal of Prohibition, for which a constitutional amendment (the Twenty-first) was already in process. The amendment was ratified later in 1933. Prohibition had been a rather unpopular amendment and was also the cause of bootlegging, or the illegal manufacture and sale of liquor within the United States. Communists in New Deal Right wing critics complained that the New Deal was infiltrated with Communists. The most important group (in the Department of Agriculture) was fired in 1934. Outside government, the far left was exerting considerable influence in the labor movement (it dominated the new CIO), and was building a network of membership organizations. Thus the American League Against War and Fascism was formed in 1933 and, in 1937 became American League for Peace and Democracy. There followed the America Youth Congress, 1934; League of American Writers, 1935; National Negro Congress, 1936; and the American Congress for Democracy and Intellectual Freedom, 1939. All had significant Communist connections, but little popular or political influence or support. Puerto Rico A separate set of programs operated in Puerto Rico, headed by the Puerto Rico Reconstruction Administration. It promoted land reform and helped small farms; it set up farm cooperatives, promoted crop diversification, and helped local industry. It was directed by Ernest Gruening. Business, labor, and government cooperation Besides programs for immediate 'relief' the New Deal embarked quickly on an agenda of long-term 'reform' aimed at avoiding another depression. Falling prices hurt the economy; the New Dealers responded to demands to inflate the currency by a variety of means. Another group of reformers sought to build consumer and farmer co-ops as a counterweight to big business. The consumer co-ops did not take off, but the Rural Electrification Administration used co-ops to bring electricity to rural areas. (As of 2005, many still operate.) Roosevelt realized that these initial actions were nothing but short term solutions, and that more comprehensive government programs would be necessary. In the roughly three years between the Great Crash and Roosevelt's First Hundred Days, the industrial economy had been suffering from a vicious cycle of deflation. Since 1931, the U.S. Chamber of Commerce, then and now the voice of the nation's organized business, had been urging the Hoover administration to adopt an anti-deflationary scheme that would permit trade associations to cooperate in stabilizing prices within their industries. While existing antitrust laws clearly forbade such practices, organized business found a receptive ear in the Roosevelt administration. The Roosevelt administration, packed with reformers aspiring to forge all elements of society into a cooperative unit (a reaction to the worldwide specter of business-labor "class struggle"), was fairly amenable to the idea of cooperation among producers. The Roosevelt administration, insisted that business would have to ensure that the incomes of workers would rise along with their prices. The product of all these impulses and pressures was the National Industrial Recovery Act (NIRA), the most important undertaking of the First Hundred Days, that was passed by Congress in June 1933. The NIRA guaranteed to workers the right of collective bargaining and helped spur some union organizing activity, but much faster growth of union membership came after the 1935 Wagner Act. The NIRA established the National Recovery Administration (NRA), which attempted to stabilize prices and wages through cooperative "code authorities" involving government, business, and labor. The NRA included a multitude of regulations imposing the pricing and production standards for all sorts of goods and services. Some ridiculed it as the "National Run Around." Most economists were dubious because it was based on fixing prices to reduce competition. Historian Jim Power, in FDR's Folly says that the above-market wages rates dictated by the NRA made it more expensive for employers to hire people, and therefore unnecessarily maintained high unemployment and prolonged the Depression. To prime the pump and cut unemployment, the NIRA created the Public Works Administration (PWA), a major program of public works. From 1933 to 1939 PWA spent $6 billion with private companies to build 34,500 projects, many of them were quite large. The NRA "Blue Eagle" campaign
Legislative successes and failures In the spring of 1935, responding to the setbacks in the Court, a new skepticism in Congress, and the growing popular clamor for more dramatic action, the administration proposed or endorsed several important new initiatives. Historians refer to them as the "Second New Deal" and note that it was more radical, more pro-labor and anti-business, than the "First New Deal" of 1933-34. The National Labor Relations Act (July 5), also known as the Wagner Act, revived and strengthened the protections of collective bargaining contained in the original (and now unconstitutional) NIRA. The result was a tremendous growth of membership in the labor unions comprising the American Federation of Labor. Labor thus became a major component of the New Deal political coalition. Roosevelt nationalized unemployment relief through the Works Progress Administration (WPA), headed by close friend Harry Hopkins. It created hundreds of thousands of low-skilled blue collar jobs for unemployed men (and some for unemployed women and white collar workers). Applicants for WPA jobs did not have to be Democrats, but their foremen quickly explained that Roosevelt created their paychecks and that conservative Republicans wanted to abolish the program. The National Youth Administration was the semi-autonomous WPA program for youth. Its Texas director, Lyndon Baines Johnson, later used the NYA as a model for some of his Great Society programs in the 1960s. In the very long run, the most important program of 1935, and perhaps the New Deal as a whole, was the Social Security Act (August 14), which established a system of insurance against old age. It also set up unemployment insurance and welfare benefits for such protected groups as dependent children and the handicapped. It established the modern framework for U.S. welfare system. Roosevelt insisted that it should be funded by payroll taxes rather than from the general fund; he said, "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program." One of the last New Deal agencies was the United States Housing Authority, created in 1937 with some Republican support to abolish slums. Defeat: Court Packing and Executive Reorganization Roosevelt, however, emboldened by the triumphs of his first term, set out in 1937 to consolidate authority within the government in ways that provoked powerful opposition. Early in the year, he asked Congress to expand the number of justices on the Supreme Court so as to allow him to appoint members sympathetic to his ideas and hence tip the ideological balance of the Court. This proposal provoked a storm of protest. In one sense, however, it succeeded; Justice Owen Roberts, almost certainly in response to the threat, switched positions and began voting to uphold New Deal measures, effectively creating a liberal majority in West Coast Hotel Co. v. Parrish and National Labor Relations Board v. Jones & Laughlin Steel Corporation thus departing from the Lochner v. New York era and giving the government more power in questions of economic policies. Journalists called this change "the switch in time that saved nine." But the "court packing plan," as it was known, did lasting political damage to Roosevelt and was finally rejected by Congress in July. At about the same time, the administration proposed a plan to reorganize the executive branch in ways that would significantly increase the president's control over the bureaucracy. Like the Court-packing plan, executive reorganization garnered opposition from those who feared a "Roosevelt dictatorship" and it failed in Congress; a watered-down version of the bill finally won passage in 1939. Attacks Right and Left
The New Deal and the "broker state"
Government Role: balance labor, business and farming Despite the dismal record in aiding marginal farmers and African Americans, among others-- contrasted with its often frequent generosity toward certain business interests--the New Deal was to elevate and strengthen new interest groups so as to allow them to compete more effectively for the interests by having the federal government evolve into an arbitrator in competition among all elements and classes of society, acting as a force that could mediate when necessary to help some groups and limit the power of others. By the end of the 1930s, business found itself competing for influence with an increasingly powerful labor movement, one that was engaged in mass mobilization and sometimes militant action; with an organized agricultural economy, and occasionally with aroused consumers. The New Deal accomplished this by creating a series of state institutions that greatly, and permanently, expanded the role of the federal government in American life. The government was now committed to providing at least minimal assistance to the poor and unemployed; to protecting the rights of labor unions; to stabilizing the banking system; to building low-income housing; to regulating financial markets; to subsidizing agricultural production; and to doing many other things that had not previously been federal responsibilities. Thus, perhaps the strongest legacy of the New Deal, in other words, was to make the federal government a protector of interest groups and a supervisor of competition among them. As a result of the New Deal, political and economic life became politically more competitive than before, with workers, farmers, consumers, and others now able to press their demands upon the government in ways that in the past had been available only to the corporate world. Hence the frequent description of the government the New Deal created as the "broker state," a state brokering the competing claims of numerous groups. If there was more political competition, there was less market competition. Farmers were not allowed to sell for less than the official price. The transportation industry (especially airlines, trucking and railroads) was tightly regulated so that every firm had a guaranteed market and management and labor had high profits and high wages, all at the cost of high prices and much inefficiency. Quotas in the oil industry were fixed by the Railroad Commission of Texas with the federal Connally Hot Oil Act of 1935 guaranteeing that illegal "hot oil" would not be sold. To the New Dealers, the free market meant "cut-throat competition" and they considered that evil. Not until the 1970s and 1980s would most of the New Deal regulations be relaxed. Thus, it did not transform American capitalism in any genuinely radical way. Except in the field of labor relations, corporate power remained nearly as free from government regulation in 1939 as it had been in 1933, but that changed dramatically during the war, as Washington took control over wage rates, prices, and allocation of raw materials, and sent military officers into munitions plants. All the relief programs were closed down during the war, but one major program survived--Social Security--to become the liberal hallmark of the New Deal into the 21st century. African Americans
The recession of 1937 and recovery
World War II and the end of the Great Depression The Depression, however, continued until the U.S. entered the Second World War; Roosevelt, once committed to war in Europe and Asia, then had little choice. Under the special circumstances of war mobilization, massive war spending doubled the GNP. Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output as an expression of patriotism. Patriotism drove most people to voluntarily work overtime and give up leisure activities to make money after so many hard years. Patriotism meant that people accepted rationing and price controls for the first time. Cost-plus pricing in munitions contracts guaranteed that businesses would make a profit no matter how many mediocre workers they employed, no matter how inefficient the techniques they used. The demand was for a vast quantity of war supplies as soon as possible, regardless of cost. Business hired every person in sight, even driving sound trucks up and down city streets begging people to apply for jobs. New workers were needed to replace the 12 million working-age men serving in the military. These events magnified the role of the federal government in the national economy. In 1929, federal expenditures accounted for only 3% of GNP. Between 1933 and 1939, federal expenditure tripled, and Roosevelt's critics charged that he was turning America into a socialist state. However, spending on the New Deal was far smaller than on the war effort. In the first peacetime year of 1946, federal spending still amounted to $62 billion, or 30% of GNP. Wartime spending and other measures were able to provide an enormous output. Between 1939 and 1944 (the peak of wartime production), the nation's total output almost doubled. This, along with the conscription and removal of soldiers, meant that civilian unemployment plummeted—from 14% in 1940 to less than 2% in 1943 as the labor force grew by ten million. Millions of farmers left marginal operations, students quit school, and housewives returned to the labor force. The war economy was not run on the basis of free enterprise, but was the result of government/business cooperation, with government bankrolling business. A major result of the full employment at high wages was a sharp, permanent decrease in the level of income inequality. The gap between rich and poor narrowed dramatically in the area of nutrition, because food rationing and price controls guaranteed a reasonably priced diet to everyone. Large families that had been poverty-stricken in the 1930s had four or five or more workers, and shot to the top one-third income bracket. Overtime made for huge paychecks in the munitions factories; white collar workers were fully employed too, but they did not receive overtime and their salary scale was no longer much higher than the blue collar wage scale. Economist Robert Higgs (1987), argues that the War did not end the Great Depression but a return to normality after the war, as the government relaxed wage controls, price controls, capital controls, reduced tariffs and other trade barriers, and eliminated the rationing of goods and the relaxing of Federal control over American industries ended it. Conflicting interpretation of the New Deal economic policies
Depression Statistics "Most indexes worsened until the summer of 1932, which may be called the low point of the depression economically and psychologically." Economic indicators show the American economy reached nadir in summer 1932 to February 1933, then began recovering until the Roosevelt recession of 1937-1938. Thus the Federal Reserve Industrial Production Index hit its low of 52.8 on 1932-07-01 and was practically unchanged at 54.3 on 1933-03-01; however by 1933-07-01, it reached 85.5 (with 1935-39 = 100, and for comparison 2005 = 1,342). In Roosevelt's twelve years in office the economy had an 8.5% compound annual growth of GDP, the highest growth rate in the history of any industrial country, however, recovery was slow --by 1939 GDP per adult was still 27% below trend. And, throughout the New Deal the median joblessness rate was 17.2 percent and never went below 14 percent. (1) in 1929 dollars (2) 1935-39 = 100
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Relief Cases 1936-1941 | ||||||
monthly average in 1,000 | ||||||
1936 | 1937 | 1938 | 1939 | 1940 | 1941 | |
Workers employed: | ||||||
WPA | NUMFORMAT:="96,-1,1995">
1,995 | NUMFORMAT:="96,-1,2227">
2,227 | NUMFORMAT:="96,-1,1932">
1,932 | NUMFORMAT:="96,-1,2911">
2,911 | NUMFORMAT:="96,-1,1971">
1,971 | NUMFORMAT:="96,-1,1638">
1,638 |
CCC and NYA | 712 | 801 | 643 | 793 | 877 | 919 |
Other federal work projects | 554 | 663 | 452 | 488 | 468 | 681 |
Public assistance cases: | ||||||
Social security programs | 602 | NUMFORMAT:="96,-1,1306">
1,306 | NUMFORMAT:="96,-1,1852">
1,852 | NUMFORMAT:="96,-1,2132">
2,132 | NUMFORMAT:="96,-1,2308">
2,308 | NUMFORMAT:="96,-1,2517">
2,517 |
General relief | NUMFORMAT:="96,-1,2946">
2,946 | NUMFORMAT:="96,-1,1484">
1,484 | NUMFORMAT:="96,-1,1611">
1,611 | NUMFORMAT:="96,-1,1647">
1,647 | NUMFORMAT:="96,-1,1570">
1,570 | NUMFORMAT:="96,-1,1206">
1,206 |
| NUMFORMAT:="96,-1,5886">
5,886 | NUMFORMAT:="96,-1,5660">
5,660 | NUMFORMAT:="96,-1,5474">
5,474 | NUMFORMAT:="96,-1,6751">
6,751 | NUMFORMAT:="96,-1,5860">
5,860 | NUMFORMAT:="96,-1,5167">
5,167 | |
Total families helped | ||||||
Unemployed workers (Bur Lab Stat) | NUMFORMAT:="96,-1,@ROUND(+B14,-2)">
9,030 | NUMFORMAT:="96,-1,@ROUND(+C14,-2)">
7,700 | NUMFORMAT:="96,-1,@ROUND(+D14,-2)">
10,390 | NUMFORMAT:="96,-1,@ROUND(+E14,-2)">
9,480 | NUMFORMAT:="96,-1,@ROUND(+F14,-2)">
8,120 | NUMFORMAT:="96,-1,@ROUND(+G14,-2)">
5,560 |
coverage (cases/unemployed) | NUMFORMAT:="288,-1,+B11/B15">
65% | NUMFORMAT:="288,-1,+C11/C15">
74% | NUMFORMAT:="288,-1,+D11/D15">
53% | NUMFORMAT:="288,-1,+E11/E15">
71% | NUMFORMAT:="288,-1,+F11/F15">
72% | NUMFORMAT:="288,-1,+G11/G15">
93% |
Prolonged/Worsened the Depression
A 1995 survey of economic historians and economists asked "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." Of the economists 27% agreed and 51% disagreed. Of the economic historians, only 6% agreed and 74% disagreed. (the rest were in the partly agree/disagree group). See *
The minority view is represented by Harold L. Cole and Lee E. Ohanian who conclude that the "New Deal labor and industrial policies did not lift the economy out of the Depression as President Roosevelt and his economic planners had hoped," but that the "New Deal policies are an important contributing factor to the persistence of the Great Depression." They conclude that the New Deal "cartelization policies are a key factor behind the weak recovery." They say that the "abandonment of these policies coincided with the strong economic recovery of the 1940s." Lowell E. Gallaway and Richard K. Vedder conclude that the "Great Depression was very significantly prolonged in both its duration and its magnitude by the impact of New Deal programs." They argue that without Social Security, work relief, unemployment insurance, and especially without the labor unions, business would have hired more workers and the unemployment rate during the New Deal years would have been 6.7% instead of 17.2 percent.
National Debt
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Fiscal Conservatism
Fiscal conservatism was a key component of the New Deal, as Zelizer (2000) demonstrates. It was supported by Wall Street and local investors and most of the business community; mainstream academic economists believed in it, as apparently did the majority of the public. Conservative southern Democrats, who favored balanced budgets and opposed new taxes, controlled Congress and its major committees. Even liberal Democrats at the time regarded balanced budgets as essential to economic stability in the long run, although they were more willing to accept short-term deficits. Public opinion polls consistently showed public opposition to deficits and debt. Throughout his terms, Roosevelt recruited fiscal conservatives to serve in his administration, most notably Lewis Douglas the Director of Budget from 1933 to 1934, and Henry Morgenthau Jr., Secretary of the Treasury from 1934 to 1945. They defined policy in terms of budgetary cost and tax burdens rather than needs, rights, obligations, or political benefits. Personally the president embraced their fiscal conservatism. Politically, he realized that fiscal conservatism enjoyed a strong wide base of support among voters, leading Democrats, and businessmen. On the other hand there was enormous pressure to act–and spending money on high visibility programs attracted Roosevelt, especially if it tied millions of voters to him, as did the WPA.
Douglas proved too inflexible, and quit in 1934. Morgenthau made it his highest priority to stay close to Roosevelt, no matter what. Douglas' position, like many of the Old Right was grounded in a basic distrust of politicians and the deeply ingrained fear that government spending always involved a degree of patronage and corruption that offended his Progressive sense of efficiency. The Economy Act of 1933, passed early in the Hundred Days, was Douglas' great achievement. It reduced federal expenditures by $500 million, to be achieved by reducing veterans’ payments and federal salaries. Douglas cut government spending through executive orders that cut the military budget by $125 million, $75 million from the Post Office, $12 million from Commerce, $75 million from government salaries, and $100 million from staff layoffs. As Freidel concludes, "The economy program was not a minor aberration of the spring of 1933, or a hypocritical concession to delighted conservatives. Rather it was an integral part of Roosevelt's overall New Deal." Revenues were so low that borrowing was necessary (only the richest 3% paid any income tax before 1942.) Douglas therefore hated the relief programs, which he said reduced business confidence, threatened the government’s future credit, and had the "destructive psychological effects of making mendicants of self-respecting American citizens." Roosevelt was pulled toward greater spending by Hopkins and Ickes, and as the 1936 election approached he decided to gain votes by attacking big business.
Morgenthau shifted with FDR, but at all times tried to inject fiscal responsibility; he deeply believed in balanced budgets, stable currency, reduction of the national debt, and the need for more private investment . The Wagner Act met Morgenthau’s requirement because it strengthened the party’s political base and involved no new spending. In contrast to Douglas, Morgenthau accepted Roosevelt’s double budget as legitimate–that is a balanced regular budget, and an “emergency” budget for agencies, like the WPA, PWA and CCC, that would be temporary until full recovery was at hand. He fought against the veterans’ bonus until Congress finally overrode Roosevelt’s veto and gave out $2.2 billion in 1936. His biggest success was the new Social Security program; he managed to reverse the proposals to fund it from general revenue and insisted it be funded by new taxes on employees. It was Morgenthau who insisted on excluding farm workers and domestic servants from Social Security because workers outside industry would not be paying their way.
Claims the New Deal adopted fascist models
"Fascism" in the 21st century has very strong connotations of mass murder and death camps, making it a highly loaded term. However, in the 1930s it was treated as a technical term regarding how much control in a capitalist system the government should have over business. From the time the New Deal was introduced, some commentators tried to relate its control over business to the fascist model. These commentators ranged from contemporary Communists, to Republican Herbert Hoover, and libertarian economist Murray Rothbard.
Ronald Reagan, a strong supporter of the New Deal at the time reversed positions and said in 1976, "Fascism was really the basis for the New Deal." Journalist John T. Flynn, a former socialist, in his 1944 book As We Go Marching, said that "the New Dealers...began to flirt with the alluring pastime of reconstructing the capitalist system...and in the process of this new career they began to fashion doctrines that turned out to be the principles of fascism." See a further discussion of these claims linking the New Deal to statism, corporatism, and fascism at Fascism and ideology
Former President Herbert Hoover argued that some (but not all) New Deal programs were "fascist," carrying a combination of rule by big business corporations and presidential dictatorship. ''Memoirs'' 3:420
"Among the early Roosevelt fascist measures was the National Industry Recovery Act (NRA) of June 16, 1933 .... These ideas were first suggested by Gerald Swope (of the General Electric Company)....and the United States Chamber of Commerce. During the campaign of 1932, Henry I. Harriman, president of that body, urged that I agree to support these proposals, informing me that Mr. Roosevelt had agreed to do so. I tried to show him that this stuff was pure fascism; that it was a remaking of Mussolini's "corporate state" and refused to agree to any of it. He informed me that in view of my attitude, the business world would support Roosevelt with money and influence. That for the most part proved true."
Whatever Hoover was told, Swope and Hariman, however, had not contacted Roosevelt and he had not agreed to any such plan.
In 1934, Roosevelt himself warned his "fireside chat" radio audiences against linguistic confusion. Some people, he said,:
will try to give you new and strange names for what we are doing. Sometimes they will call it 'Fascism,' sometimes 'Communism,' sometimes 'Regimentation,' sometimes 'Socialism.' But, in so doing, they are trying to make very complex and theoretical something that is really very simple and very practical. . . . Plausible self-seekers and theoretical die-hards will tell you of the loss of individual liberty. Answer this question out of the facts of your own life. Have you lost any of your rights or liberty or constitutional freedom of action and choice?
In September 1934 Roosevelt defended a more powerful national government as he believed was necessary to control the economy, by quoting conservative Republicans Elihu Root:
The tremendous power of organization Root had said has combined great aggregations of capital in enormous industrial establishments . . . so great in the mass that each individual concerned in them is quite helpless by himself. . . . The old reliance upon the free action of individual wills appears quite inadequate. . . . The intervention of that organized control we call government seems necessary. . . . Men may differ as to the particular form of governmental activity with respect to industry or business, but nearly all are agreed that private enterprise in times such as these cannot be left without assistance and without reasonable safeguards lest it destroy not only itself but also our process of civilization.
Other scholars reject linking the New Deal to Fascism as overly simplistic. As a leading historian of fascism explains, "What Fascist corporatism and the New Deal had in common was a certain amount of state intervention in the economy. Beyond that, the only figure who seemed to look on Fascist corporatism as a kind of model was Hugh Johnson, head of the National Recovery Administration." Johnson strenuously denied any association with Mussolini, saying the NRA "is being organized almost as you would organize a business. I want to avoid any Mussolini appearance -- the President calls this Act industrial self-government." Donald Richberg eventually replaced General Hugh Johnson as head of NRA and speaking before a Senate committee said "A nationally planned economy is the only salvation of our present situation and the only hope for the future." Historians such as Hawley (1966) have examined the origins of the NRA in detail, showing the main inspiration came from Senators Hugo Black and Robert Wagner and from American business leaders such as the Chamber of Commerce. The main model was Woodrow Wilson's War Industries Board, in which Johnson had been involved. No historian reports that any New Deal agency was copied from Italy, Germany or any other country.
rogress Administration]] subsidized artists, musicians, painters and writers on relief. The US Treasury had a separate program which hired commercial artists at usual commissions to add murals and sculptures to federal buildings. The Resettlement Administration (RA) and Farm Security Administration (FSA) had major photography programs. The New Deal arts programs emphasized regionalism, socialist realism, class conflict, proletarian interpretations, and audience participation. The unstoppable collective powers of common man, contrasted to the failure of individualism, was a favorite theme.
The FSA photography project is most responsible for creating the image of the Depression in the USA. Many of the images appeared in popular magazines. The photographers were under instruction from Washington as to what overall impression the New Deal wanted to give out. Director Roy Stryker's agenda focused on his faith in social engineering, the poor conditions among cotton tenant farmers, and the very poor conditions among migrant farm workers; above all he was committed to social reform through New Deal intervention in people's lives. Stryker demanded photographs that "related people to the land and vice versa" because these photographs reinforced the RA's position that poverty could be controlled by "changing land practices." Though Stryker did not dictate to his photographers how they should compose the shots, he did send them lists of desirable themes, e.g., "church", "court day", "barns". New Deal era films such as Citizen Kane ridiculed so-called "great men", while class warfare appeared in numerous movies, such as Meet John Doe and The Grapes of Wrath.
By contrast there was also a smaller but influential stream of anti-New Deal art. Thus Gutzon Borglum's sculptures on Mount Rushmore emphasized great men in history (his designs had the approval of Calvin Coolidge). Gertrude Stein and Ernest Hemingway disliked the New Deal and celebrated the organic autonomy of perfected written work in opposition to the New Deal trope of writing as performative labor. The Southern Agrarians celebrated a premodern regionalism and opposed the TVA as a modernizing, disruptive force. Under Chief Justice Charles Evans Hughes, the Supreme Court built one of the most architecturally striking buildings; its classical lines and small size contrasted sharply with the gargantuan modernistic federal buildings in Washington. Hollywood managed to synthesize both streams, as in Busby Berkeley's Gold Digger musicals, where the storylines exalt individual autonomy while the spectacular musical numbers show abstract populations of interchangeable dancers securely contained within patterns beyond their control.
The legacies of the New Deal
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"New Deal" as Political Metaphor
Since 1933 politicians and pundits have often called for a "new deal" regarding this or that political object. That is, they demand a completely new, large-scale approach to a project. As Arthur A. Ekirch Jr. (1971) has shown, the New Deal stimulated utopianism in American political and social thought on a wide range of issues.
In accordance with the rise of the use of U.S. political phraseology in the United Kingdom, the Labour Government of Tony Blair has termed some of its employment programs 'New Deal', in contrast to the Conservative Party's promise of the 'British Dream'.
Notable New Deal programs
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See also
Secondary sources
Primary sources
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Notes
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