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New Deal

NEW DEAL

NEW DEAL. The New Deal was a defining moment in American history comparable in impact to the Civil War. Never before had so much change in legislation and policy emanated from the federal government, which, in the process, became the center of American political authority. The progressive surge was also unique because it came at a time of economic collapse. Previously, in such crises government curtailed reform and reduced spending to balance the budget and so provide the stability thought necessary to help economic progress resume. The activist New Deal reversed that pattern in its effort to lift the country out of hard times and so altered American social and economic policy forever.

Origin and Design

Three factors stand out as the impetus for revolutionary change. First, the nation in the 1930s had sunk into the deepest economic depression in its history, an unprecedented catastrophe that called for measures that would necessarily break down old constraints on the use of federal powers. Second, an arsenal of progressive reform ideas that had been frustrated during the conservative years following World War I was available to resolve depression issues. Third, large numbers of racial and ethnic minorities had gained a strong enough position in American life to be ready to redress their long-standing grievances and disadvantages. By adding disaffected Republican victims of the Great Depression, reformers, and minorities, mostly in northern cities, to the traditional working-class and southern Democratic constituency, the New Deal forged an irresistible voting bloc.

The unwieldy coalition of sometimes rival interests and beliefs found the leadership it needed in Franklin Roosevelt, the most adept and inspiring president since Abraham Lincoln. Roosevelt rooted his approach in a simple set of moral precepts that he summed up in answering a question about his beliefs: "I am a Christian and a democrat, that's all." By Christian Roosevelt meant the social gospel message of shared service to those in need that he had absorbed in his youth, and by democrat, fealty to a similar progressive reform ethic. That outlook spanned both political parties. Raised a privileged only child on a large Hudson River estate at Hyde Park, New York, Franklin followed his father's lead in everything, including membership in the Democratic Party. But he was also the admiring cousin of Theodore Roosevelt, Republican president and leader of the Progressive movement in the early twentieth century. In 1910 Franklin made his successful entry into politics as a state senator devoted to reform of urban political corruption. Two years later, in support of Woodrow Wilson's campaign for the presidency, he began devising the formula that would envelop both Democratic and Republican progressive traditions.

Roosevelt's youth in the countryside and his admiration for Thomas Jefferson tied him to the decentralized ideal proclaimed in Wilson's New Freedom platform of a nation rooted in small towns and family farms. But he also accepted Theodore Roosevelt's New Nationalism argument that large concentrations of economic power were a feature of modern life that the government through expert guidance should harness to serve the general welfare. From these competing visions Franklin Roosevelt sought cooperative means to realize the ideal balance between individual liberty and democratic institutions that had eluded the nation from its beginning. In the popular term of the day, Roosevelt was an advocate of a cooperative commonwealth, and in approaching economic and political life he thought far more in terms of interdependence than of competition.

Roosevelt's political education was rounded out by his wife, Eleanor. It was she, serious, bookish, compassionate, who showed Franklin the terrible conditions she had discovered as a settlement house worker in lower Manhattan and introduced him to the remarkable women volunteers who were leading the fight to improve the lives of the poor and outcast. In drawing Franklin deeper into the lower-class world, Eleanor was able to convince him that he should learn to work with big-city machines, like Tammany Hall, as the only effective fighters for the interests of ethnic and immigrant groups. Throughout Roosevelt's presidency Eleanor would continue to stretch the inclusiveness of the New Deal by forcefully pressing for action that would serve the rights and needs of minorities, women, children, and others who usually had little influence on practical politics.

During his victorious campaign for the presidency in 1932, Roosevelt gathered a group of advisers around him who became known as the Brains Trust because they were mostly drawn from universities. Rexford Tugwell and Adolf Berle led the way in pressing for a planned approach to economic recovery and reform. Their ideas reflected a broad progressive band of thought, some of it drawn from European cooperative ventures and national systems of social insurance. Behind Tugwell's plans for a "concert of interests" lay the tutelage of Simon Patten at the University of Pennsylvania, whose advocacy of an economy of abundance early in the century opened the way for challenging orthodox conceptions of chronic scarcity and a competitive free marketplace. Berle used the devotion to facts and practical experience pressed upon him by institutional economists like John Commons and Charles Van Hise to carry out the monumental study The Modern Corporation and Private Property (1932) with his Harvard colleague Gardiner Means, which showed that control of America's large corporations had fallen into the hands of a small group of managers. Either that concentration should be broken up, concluded those who read the highly acclaimed book, or, as Berle thought, the bigness driving modern economic life should be made to benefit the public through careful control by the democratic government that alone was responsible for the general welfare. At the center of interest in planning was the memory of how the nation's productive capacity had been mobilized in World War I. The popular economist Stuart Chase captured the mood by calling for a Peace Industries Board to defeat the depression as the War Industries Board had defeated the Germans.

In his inaugural address Roosevelt promised "a New Deal for the American people" and rightly concluded that "this nation asks for action, and action now." With 13 million people, or one-quarter of the workforce, unemployed, and the local and private means relied upon to help the victims nearing collapse, the general public was ready for the torrent of legislation that flowed immediately from the White House and its congressional allies.

The New Deal in Action

Guiding the torrent during what came to be known as the Hundred Days was a remarkable group of bright, mostly young, people who wanted to be part of the promised action. It was they, as well as Roosevelt, who gave the New Deal its air of optimistic excitement. As one observer noted, "they have transformed [Washington] from a placid leisurely Southern town … into a breezy, sophisticated and metropolitan center." Within the new buzz of activity, the New Deal had first to revive and change the banking system that had almost completely stopped functioning. On 6 March a "bank holiday" was declared, and three days later Congress passed the Emergency Banking Act, empowering the secretary of the Treasury to decide which banks were stable enough to reopen and authorizing federal funds to restart banking operations. To make the revived system safe, the Federal Deposit Insurance Corporation (FDIC) was created to insure bank deposits. The stage was then set to help the millions of unemployed. On 31 March Congress enacted Roosevelt's favorite program, the Civilian Conservation Corps (CCC), to enroll idle youth in conserving natural resources, and followed up on May 12 with the Federal Emergency Relief Administration (FERA), which distributed cash payments to those unable to work.

Having addressed the immediate emergency, the New Deal could proceed with its comprehensive designs for planned reform. The Agricultural Administration Act (AAA), passed on 12 May, permanently altered American agriculture through its provision to pay farmers to keep land out of production and so raise prices by making commodities scarcer. Roosevelt's intent to stress conservation as a national priority received its greatest boost on 18 May from the passage of the Tennessee Valley Authority Act (TVA), which authorized dams on the Tennessee River that would provide the hydroelectric power needed to transform vast portions of Tennessee and adjoining states from abject poverty into the prosperity of model towns and reclaimed farmland. Most central to the integrative design, though, because industry and commerce had long been the focal point for planners, including those in the Brains Trust, was the National Industrial Recovery Act (NIRA), enacted on 16 June, which sought to create a system of fair practice for the nation's business firms. With parades and other promotional fanfare to drum up support, the National Recovery Administration (NRA) spread the New Deal activist spirit nationwide and persuaded most of the nation's businesses to devise codes to govern working conditions and prices.

Resistance and Realignment

Despite enthusiasm for New Deal initiatives, registered in sweeping Democratic victories in Congress in 1934, the New Deal suffered setbacks. Many businesses slanted their NRA codes to provide higher profits rather than the better wages for labor and lower prices for consumers that the cooperative design called for. In agriculture large farms garnered most of the benefits of payments for reducing crops. And within the Supreme Court a majority of justices regarded some New Deal measures as unconstitutional invasions of state authority and free enterprise. Taking the opposite view, radicals of left and right criticized the New Deal for not changing the capitalistic system more drastically.

New Dealers were willing to concede that the rise in gross national product from $56 billion in 1933 to $72 billion in 1935 was a slow pace, and they were particularly


disturbed that over 10 million people were still without jobs. To spur the economy toward full employment and a decent standard of living for the "common man," the administration in 1935 made three successful proposals to Congress. First, a $4.8 billion fund to create the Works Progress Administration (WPA) was rushed through Congress. Then to care for those unable to work, the Social Security Administration was formed on the model of an insurance company, using payroll deductions from workers for a trust fund that would provide unemployment insurance, aid for dependent mothers, children, and the blind, and a monthly income to those over sixty-five who had contributed to the system. Finally, after reluctantly giving up hope for agreement between labor and management within the NRA, Roosevelt supported the passage on 5 July 1935 of the National Labor Relations Act (NLRA), or Wagner Act after its sponsor, Senator Robert F. Wagner of New York, guaranteeing the right of labor to bargain collectively and have disputes with management decided by the National Labor Relations Board (NLRB).

The Wagner Act, labor's "Magna Carta," indicated how pressures were forcing the administration to change its approach to what some historians have described as the Second New Deal. Even as the Wagner Act conferred on labor means to contend against management rather than futilely attempting to cooperate with it, the New Deal faced a need to cope with forces determined to thwart its planning designs. In 1936 the Supreme Court invalidated the AAA and the NRA as unconstitutional delegations of power to the federal government. Business leaders echoed conservative judges with attacks on the New Deal as a threat to individual liberty, while critics on the radical left and right contradicted those charges by rejecting the New Deal as too closely tied to the prevailing capitalist system to enact necessary reforms. In response Roosevelt set aside his preference for cooperative inclusiveness. During his reelection campaign in 1936, he ignored the left as a minor threat and excoriated the "economic royalists" on the right, bent on blocking plans to share America's wealth and opportunity with those who had been left out. The shift of the New Deal focus from a fully cooperative system of all elements in society to advancement of the fortunes of members of the New Deal coalition against those in opposition caused some historians to conclude that the New Deal had become a "broker state," trading favors with special interests rather than acting in the full national interest. However, Roosevelt never lost his intent to find some way to achieve his cooperative commonwealth ideal.

Enthused by his overwhelming reelection, Roosevelt moved quickly to drag the Supreme Court out of the "horse and buggy" era by sending Congress a plan to enlarge the Court with a new justice for every old justice over seventy. The rebuff that followed indicated that Roosevelt had failed to realize the public's reverence for the Court. Congress shelved the "court packing" plan, and only the chance to replace retiring justices with more liberal judges saved the New Deal from further court disasters. The administration then compounded its problems. An ill-advised attempt by Roosevelt, urged on him by his fiscally conservative secretary of the Treasury Henry Morgenthau, to cut spending and balance the budget threw the country into a recession in 1937 that almost wiped out the economic gains made since 1933.

Roosevelt sought to reverse the downslide by establishing the Temporary National Economic Committee (TNEC) in 1938 to investigate industry practices that might be retarding recovery. In support of that move he appointed Thurman Arnold, an influential critic of what he called the symbols of government and folklore of capitalism, to carry out the most extensive campaign to break up monopolies ever undertaken. Roosevelt also attempted to strengthen his political coalition by supporting candidates running against Democratic congressmen who had opposed New Deal initiatives. But the New Deal had lost much of its focus and leverage. The TNEC could not agree on what ailed the economy, Arnold's campaign alienated business, and the attempt to purge anti–New Deal congressmen bagged only Representative John Taber of New York. Congressional conservatism also showed its rising force in the defeat of an antilynching bill and the reduction of progressive taxes on high income and capital gains, which the New Deal Revenue Act of 1938 proposed to fund recovery and distribute income more equitably.

Congress did agree to several important measures. In 1937 the Resettlement Administration (established in 1935) was transformed into the Farm Security Administration (FSA) with broadened powers to move poor farmers to better land; a new AAA was drafted that passed muster with a liberalized Supreme Court; a weak National Housing Act was passed in 1937 to provide low-income housing; and the Fair Labor Standards Act of 1938 established a minimum wage and a forty-hour week for many workers and at last prohibited child labor.

The Final Phase

Especially significant for the way it signaled an important shift in New Deal economic thinking was the $3 billion Emergency Relief Appropriation Act of 1938, designed to combat the recession with increased relief work for the unemployed. Preceding the passage of the act was a contentious discussion of how to regain momentum toward full recovery. Against Morgenthau's orthodox argument that a balanced budget and increased credit for business investment would place the economy on a firm footing, a growing number of advisers pressed for spending on public projects, even if it meant deficits, and using antitrust action to break up big businesses that refused to contribute to the general recovery. There was some awareness within their midst of the publication in 1936 of the most important economic work of the century, John Maynard Keynes's A General Theory of Employment, Interest, and Money, but the strongest impetus came from Keynes's American counterparts, who decried the resistance of business leaders to planning. In their manifesto, An Economic Program for American Democracy (1938), a team of Harvard and Tufts economists proclaimed that "Here in America we can save our free democratic institutions only by using them to expand our national income." Government action was essential, for "private enterprise, left to its own devices, is no longer capable of achieving anything." Especially to be checked were businessmen who seemed "obsessed with a devil theory of government" that might tempt them to try replacing democracy with a plutocratic dictatorship. Roosevelt had long looked at businessmen that way but was only finally persuaded to the Keynesian case when the chairman of the New York Federal Reserve, Beardsley Ruml, reminded him that governmental stimulation of business was an old story, stretching back to nineteenth-century grants to railroads, the distribution of public lands, and the setting of tariffs.

In another important departure from past practice in the direction of greater executive authority, Congress acceded to Roosevelt's urging in 1939 to pass the Administration Reorganization Act, which, in the name of streamlined efficiency, placed many government agencies under the president's control. By also transferring the Bureau of the Budget to the executive office and creating a National Resources Planning Board, Roosevelt further expanded the scope of the executive branch to a degree that has prompted some historians to call that development the Third New Deal, bent on using expanded executive power to revive the original New Deal ardor for cooperative planning.

Significant reform initiatives did not follow, however, partly because of conservative resistance, partly because the approach of World War II diverted attention to foreign dangers. Industrial recovery continued to lag and unemployment remained high. Only the entry of America into the war ended the impasse. Mobilization of resources and manpower eliminated the most central and persistent curse of the Great Depression by absorbing the jobless so thoroughly that the WPA could be phased out in 1943. Wartime pressures did not, however, lay the groundwork for completion of New Deal plans to end hardship and injustice by assuring full employment at good wages, extend the Social Security system to include those originally denied coverage, enact a national health system, and revise the law to grant civil rights and fair opportunity to women and minorities.

Despite these shortfalls, the New Deal changed America from a nation whose political focus was in regional localities and offered little in the way of welfare or national planning. In the wake of New Deal activism, Americans came to assume that the government would take significant responsibility for their material and spiritual needs. That expectation has remained intact even though the New Deal coalition has weakened as the prosperity it promoted moved many of its members from inner-city New Deal strongholds to the conservative suburbs, where reformist zeal and ethnic and labor union solidarity ebbed. Civil rights reform had a similarly ironic outcome. As the desegregation movement advanced in the 1960s, bearing the New Deal social justice spirit with it, many southerners rejected their traditional loyalty to the Democratic Party and joined in the Republican Party's continuing efforts to check New Deal reform in the name of states' rights and free enterprise.

An overall assessment of the New Deal's effectiveness indicates that most of its problems stemmed from not carrying its policies far enough to achieve a planned economy of abundance for all Americans, partly because of traditional individualism and to a lesser extent because the New Dealers themselves wished to revitalize the system, not displace it. Thus New Deal initiatives tended to stall. The NRA did not get enough money in the hands of consumers for them to support a fully productive economy. Commitment to deficit spending toward the end of the 1930s was not sufficient to end unemployment. New taxes on the wealthy did not go far enough to redistribute income to the desperate have-nots. Relief spending never reached more than 40 percent of those in need. And Social Security excluded several categories of needy people. In some cases, New Deal policies had unwanted results. The agricultural price support system did not eliminate the surplus and funneled payments mainly to large-scale farms. Nor were hopes for urban revitalization realized. Housing policies did not achieve the New Deal goal of eliminating city slums but instead encouraged flight to the suburbs, away from the meager low-cost housing that underfunded New Deal programs were able to build.

Yet the New Deal had lasting success in establishing the principle Lincoln enunciated that the federal government should do for people what they cannot do for themselves. Thus the NRA enacted a minimum wage standard and the right of workers to join unions of their own choosing. Regulation stabilized banking and finance. Civil rights became a significant part of the Democratic and then national agenda. And to extend recovery to mind and spirit, the WPA devised an arts program that inspired the later creation of the National Endowments for the Arts and Humanities. From the socially conscious art, regional guides, and documentary film and photography sponsored by the program has come a significant share of what Americans have learned about their history and culture.

Roosevelt stated at the outset that his New Deal would be a war on depression miseries comparable to previous military wars. But in the end it was the actuality of World War II, which the nation avoided as long as it could, that ended the depression by generating the economic stimulus the New Deal had not gone far enough to provide. In the years since the depression ended, admiration for the New Deal has remained high; but debate has also persisted as to whether the New Deal devotion to planned cooperation is a necessary part of maintaining a stable and prosperous American democracy.

BIBLIOGRAPHY

Allswang, John M. The New Deal and American Politics: A Study in Political Change. New York: Wiley, 1978. A convincing explanation of the formation of the New Deal coalition, buttressed by detailed case studies.

Badger, Anthony J. The New Deal. The Depression Years, 1933–40. New York: Hill and Wang, 1989. Provides a thorough account of the history and historiography of the New Deal.

Bernstein, Irving. A Caring Society: The New Deal, the Worker, and the Great Depression. Boston: Houghton Mifflin, 1985.

Brinkley, Alan. The End of Reform: New Deal Liberalism in Recession and War. New York: Knopf, 1995.

Brock, William R. Welfare, Democracy, and the New Deal. Cambridge, U.K.: Cambridge University Press, 1988.

Fite, Gilbert C. American Farmers: The New Majority. Bloomington: Indiana University Press, 1981. The most incisive overview of New Deal agricultural policy and its effects.

Harris, Jonathan. Federal Art and National Culture: The Politics of Identity in New Deal America. Cambridge, U.K.: Cambridge University Press, 1995. The most tightly drawn account of the links between the social populism of the New Deal and the Federal Arts Projects.

Hawley, Ellis W. The New Deal and the Problem of Monopoly. Princeton, N.J.: Princeton University Press, 1966. The cornerstone for understanding the New Deal's relations with business.

Leuchtenburg, William E. Franklin D. Roosevelt and the New Deal, 1932–1940. New York: Harper and Row, 1963. Still the best one-volume account. Detailed but highly readable.

Patterson, James T. The Welfare State in America, 1930–1980. Durham, U.K.: British Association for American Studies, 1981.The best, brief discussion of the creation and evolution of Social Security.

Reagan, Patrick D. Designing a New America: The Origins of New Deal Planning, 1890–1943. Amherst: University of Massachusetts Press, 1999. Engaging portraits of the architects of national planning in modern America.

Rodgers, Daniel T. "New Deal." In Atlantic Crossings: Social Politics in a Progressive Age. Cambridge, Mass.: Harvard University Press, 1998. An erudite and sweeping discussion of the European influences on American progressive reform thought.

Rosenof, Theodore. Economics in the Long Run: New Deal Theorists and Their Legacies, 1933–1993. Chapel Hill: University of North Carolina Press, 1997. A uniquely valuable account of how New Deal economic policy drew upon the changing economic thought of the time.

Schlesinger, Arthur S., Jr. The Age of Roosevelt. 3 vols. Boston: Houghton Mifflin, 1956–1960. An epic account of the New Deal era by a master of panoramic synthesis.

Sitkoff, Harvard. A New Deal for Blacks: The Emergence of Civil Rights as a National Issue. New York: Oxford University Press, 1978.

Tugwell, R. G. The Brains Trust. New York: Viking, 1968. A shrewd appraisal that has special value because it is by an insider.

Ware, Susan. Beyond Suffrage: Women in the New Deal. Cambridge, Mass.: Harvard University Press, 1981.

AlanLawson

See alsoGreat Depression .

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New Deal

NEW DEAL

"I pledge you, I pledge myself, to a new deal for the American people." In July 1932, franklin delano roosevelt said these words to the delegates at the Democratic National Convention, who had just elected him the party's candidate for president of the United States.

Roosevelt's New Deal was a response to the tumultuous events of the years leading to his nomination. After world war i, the people of the United States experienced unprecedented prosperity. Consumers of all income levels were buying goods "on time" by putting a few dollars down and paying a few dollars a month. Record numbers of people were also using the installment-buying concept to purchase stocks. The number of stockbrokers grew from fewer than 30,000 in 1920 to more than 70,000 in 1929. Stockbrokers allowed their clients to "buy on margin," meaning that a customer only had to pay 10–15 percent down on a stock, with the broker lending the client the rest and being repaid when the stock went up in value. By 1929, the skyrocketing prices in the stock market indicated continued prosperity to some economists, but to others it signaled impending doom. So much investment had been done on margin that stockbrokers had borrowed money from banks that by then were also heavily in debt. Stock prices began rapidly dropping in September 1929, and on "Black Thursday," October 24, 1929, they plummeted beyond all belief, devastating thousands of brokerage houses. By the following Tuesday, October 29, virtually all stocks were worthless. Millionaires became paupers overnight. People who had invested their savings woke up to find themselves penniless. This was the start of the Great Depression.

herbert hoover was the president at the time of the great stock market crash. He initially refused to believe that there was a problem, and even in April 1930, when more than three million people had lost their jobs, he continued in vain to reassure people that everything was fine. Because people were afraid of losing their jobs and running out of money, they refused to engage in the free-spending ways of the past and chose to save rather than to spend their money. This behavior, in turn, created a new cycle of problems. Because many banks had failed during the crash, people no longer trusted them, and kept their money at home, which depleted the supply of capital that banks needed. People also refused to buy new products and instead repaired old ones. Because few people were buying new products, companies were forced to close and to lay off employees. Many people were evicted from their homes for failing to make payments, and often several members of extended families lived together. The number of homeless persons soared, as did cases of malnutrition. President Hoover still remained firm in his stance that government aid was not an option. He believed that private charity could take care of those individuals who could not take care of themselves and that the ingenuity of private business would cure the ills of the country, not government intrusion. The American people resented President Hoover's attitude. The camps of makeshift shacks in which many people lived after being evicted were called Hoovervilles, and slogans such as Hard Times Are Hoovering over Us were heard everywhere. By December 1931, the unemployment rate was more than 13.6 million, a third of the labor force. When President Hoover sent military troops with bayonets and tear gas to disband the Bonus Army—a group of World War I veterans who had come to Washington, D.C., to seek early payment of a promised bonus for fighting in the war—his approval among U.S. voters plunged irrevocably.

Although the Republicans knew that the Democratic presidential candidate would more than likely win, they nominated Hoover again in 1932. The Democratic nominee, Franklin D. Roosevelt, won all but six states and received 22 million votes, as compared to Hoover's 15 million Roosevelt came from a wealthy family, had served as assistant secretary of the navy and as governor of New York, and had battled polio courageously. His promised "new deal" was anxiously awaited.

The day after he was inaugurated, Roosevelt requested a special session of Congress to convene and declared a week-long bank holiday. He guaranteed that at the end of one week's time, banks that the government found to be sound and secure would reopen. Roosevelt also announced a moratorium on the export of gold. Because foreign investors required trading to be done in gold (paper money was believed to be too risky) the combination of the moratorium and the bank holiday effectively put the economy of the United States on hold. After the week had passed, Roosevelt held the first of his famous "fireside chats" via the radio to reassure the American people. As promised, the majority of the banks reopened. Many people followed Roosevelt's advice and again placed their money in the banks. During those same first weeks, Roosevelt and Congress worked together to repeal prohibition, allowing the sale and consumption of alcohol to resume.

These moves were only the beginning of what is referred to as the Hundred Days. More legislation was passed during the first hundred days of Roosevelt's presidency than had been passed in any similar period of any previous presidency. Roosevelt worked with young lawyers, professors, and social workers to create legislation that was meant to get people working and spending once again. To relieve the immediate need for food and shelter, Roosevelt ushered through Congress the Federal Emergency Relief Administration, which granted $500 million in aid to the states for distribution to people in need.

Next came congressional approval of Roosevelt's Civilian Conservation Corps Act (ch. 383, 50 Stat. 319). The government paid young men between the ages of 18 and 25 for six months to one year to do construction or conservation work. The men built bridges, dams, and roads and planted more than 17 million acres of new forests. They were paid $30 per month and were required to send most of their money home to their families.

The Agricultural Adjustment Act of 1933 (AAA), 7 U.S.C.A. §§ 601 et seq., also was passed during these first hundred days. Farmers were growing large surpluses of crops such as wheat and corn, and these surpluses drove prices down

even though the farmers' expenses were rising. The AAA sought to reduce the surplus of crops by paying farmers not to grow them. Although some Americans questioned this practice because so many people were starving, the theory of the plan bore out, and by 1936 farmers were receiving $1.02 per bushel of wheat, as compared to the 38 cents per bushel that they had received in 1932.

Toward the end of the hundred days, Congress enacted the national industrial recovery act of 1933 (NIRA), (ch. 90, 48 Stat. 195) and created the National Industrial Recovery Administration to implement the act's goals. The legislation's main goal was to stimulate dormant factories and industries and to get people back to work. The National Industrial Recovery Administration believed that the best way to do this was to create a series of codes (746 in all) that companies had to follow in the marketplace. These codes regulated everything from a minimum hourly wage to the maximum number of hours per week that an employee could work. They controlled advertising and business production and output. Fearing a return of the high unemployment rate, one code forbade industry from developing technological advances that would lead to employee layoffs.

NIRA represents the first direct government involvement in business operations. It allowed industries and business to engage in previously prohibited monopolistic price-fixing so that one manufacturer could not under price its goods to drive a competitor out of business. The legislation allowed workers to unionize and to bargain

collectively for better pay and working conditions. This was all done with the goal of increasing business profits, which, in turn, would create more jobs and more spending. However, NIRA posed difficulties for many business owners, who were forced to restructure their business operations.

One of the most popular programs of the New Deal was the Works Progress Administration (WPA), which created more than 250,000 projects, putting millions of people to work. Most of the money and effort went to public construction of bridges, roads, and government buildings such as post offices. Writers were employed to interview town residents and to compile local histories. Actors and musicians were hired to bring theater and live music to residents of rural towns, who otherwise had little opportunity to see live performances.

After the first 18 months of the New Deal, five million previously unemployed people had found work. However, Roosevelt and his New Deal were not without their critics. When wealthy people realized that Roosevelt was intending not to return the country to the pre-crash status quo but rather to reform the entire national economic structure, they soon turned on him, calling him a traitor to his class. They disliked Roosevelt for the new taxes imposed on them, and some believed rumors that Roosevelt wanted to make the United States a socialist state under his dictatorship. The leaders of big business, once beholden to Roosevelt for getting their businesses back on track, were now among his most forceful critics.

Wealthy people were not Roosevelt's only critics. People to the political left of Roosevelt thought that he had let the common man down. Socialists such as upton sinclair and some Democrats such as Huey Long, the senator from Louisiana, complained that Roosevelt and his New Deal did not do enough for the lower and middle classes of society. Despite criticism from many angles, the majority of U.S. citizens loved Roosevelt, re-electing him by a landslide in 1936 over the Republican nominee, Alfred M. Landon.

One significant reason for Roosevelt's considerable popularity was the passage of the social security act of 1935 (42 U.S.C.A. § 301 et seq.)—the first piece of legislation in the history of the United States to address social welfare. The legislation provided people over the age of 65 with a monthly pension from the federal government. It also contained provisions for unemployment insurance and for aid to children. Although this form of government charity also had its critics, Roosevelt was pleased with it because it was proof that he had not forgotten the common man.

The early successes of the New Deal created a boldness that eventually led to its demise. By the mid 1930s, the U.S. Supreme Court began to strike down New Deal legislation as unconstitutional exercises of congressional power. In Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S. Ct. 837, 79 L. Ed. 1570 (1935), for example, the Court struck down the heart of Roosevelt's New Deal legislation, the NIRA. The Schechter brothers were wholesale kosher poultry distributors who did business within the state of New York. They were convicted of violating the Live Poultry Code, including wage-and-hour violations. The Court unanimously held that the federal government could only control trade between states, not trade within one state. Even liberal justices on the Court who had supported previous New Deal legislation found the challenged provisions unconstitutional. The following year, the Court struck down the Bituminous Coal Conservation Act of 1935, ch. 824, 49 Stat. 991, because its enactment was not based upon a power that Congress possessed under the Constitution. Carter v. Carter Coal Co., 298 U.S. 238, 56 S. Ct. 855, 80 L. Ed. 1160 (1936).

Many legal actions against other New Deal legislation were piling up, and in a fast and furious move in 1937, Roosevelt proposed a restructuring of the high court through the addition of a new justice to the Court for each justice over the age of 70. At the time of this proposal, six of the nine justices were over the age of 70, including Chief Justice charles evans hughes and associate justices willis van devanter, james mcreynolds, louis brandeis, george sutherland, and pierce butler. Roosevelt tried to place a nonpolitical spin on his proposal, citing instances where changes to the composition of the Court had been made before, as well as the heavy workload for nine justices, but he could not disguise his blatant attempt to pack the Court with liberal justices who saw things his way. Roosevelt refused to concede, which resulted in months of Senate debates that cost him many supporters.

Rather than exploding, the controversy retreated as the Court began supporting many pieces of New Deal legislation. In nlrb v. jones & laughlin steel corp., 301 U.S. 1, 57 S. Ct. 615, 81 L. Ed. 893 (1937), the Court upheld the constitutionality of the National Labor Relations Act, which was purportedly based upon the commerce clause of the Constitution. Prior to Jones & Laughlin Steel Corp., Van Devanter resigned from the Court and was replaced by hugo black. The Court's structure changed dramatically over the eight years following the decision, as the majority of justices retired or resigned from the court, including the following: Sutherland (1938); benjamin cardozo (1938); Brandeis (1939); Butler (1939); Hughes (1941); McReynolds (1941); harlan stone (1941); and Roberts (1945).

Although, in the end, the makeup of the Court was just as Roosevelt wanted, he suffered losses in support and confidence that he never regained. Many people felt that the New Deal legislation had granted labor too much power, and they were resentful of the unionization efforts, which led to strikes that were often violent. Finally, the unemployment rate in late 1937 to mid 1938 soared from five million to eleven million. Roosevelt and his vision for a New Deal lost congressional support. No further reform legislation was passed during Roosevelt's time in the White House. Although the country was much better off than it had been when he took office in 1932, the Great Depression continued. It ended not by legislation, but by the coming of world war ii.

The political machine of the New Deal and its dominant social policy continued for decades after the last piece of its legislation was passed. Although its demise can not be traced to one single event, by the time ronald reagan was elected president in 1980, the era of the New Deal was effectively over.

further readings

Fraser, Steve, and Gary Gerstle. 1989. The Rise and Fall of the New Deal Order. Princeton, N.J.: Princeton Univ. Press.

Freedman, Russell. 1990. Franklin Delano Roosevelt. New York: Clarion Books.

Schraff, Anne E. 1990. The Great Depression and the New Deal. New York: Watts.

Stewart, Gail B. 1993. The New Deal. New York: New Discovery Books.

cross-references

Banks and Banking; Labor Law; Labor Union; National Recovery Administration; Schechter Poultry Corp. v. United States; Social Security; Welfare.

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"New Deal." West's Encyclopedia of American Law. 2005. Encyclopedia.com. 31 Jul. 2016 <http://www.encyclopedia.com>.

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New Deal

New Deal, in U.S. history, term for the domestic reform program of the administration of Franklin Delano Roosevelt; it was first used by Roosevelt in his speech accepting the Democratic party nomination for President in 1932. The New Deal is generally considered to have consisted of two phases.

The first phase (1933–34) attempted to provide recovery and relief from the Great Depression through programs of agricultural and business regulation, inflation, price stabilization, and public works. Meeting (1933) in special session, Congress established numerous emergency organizations, notably the National Recovery Administration (NRA), the Federal Deposit Insurance Corporation (FDIC), the Agricultural Adjustment Administration (AAA), the Civilian Conservation Corps, and the Public Works Administration. Congress also instituted farm relief, tightened banking and finance regulations, and founded the Tennessee Valley Authority. Later Democratic Congresses devoted themselves to expanding and modifying these laws. In 1934, Congress founded the Securities and Exchange Commission and the Federal Communications Commission and passed the Trade Agreements Act, the National Housing Act, and various currency acts.

The second phase of the New Deal (1935–41), while continuing with relief and recovery measures, provided for social and economic legislation to benefit the mass of working people. The social security system was established in 1935, the year the National Youth Administration and Work Projects Administration were set up. The Fair Labor Standards Act was passed in 1938. The Revenue Acts of 1935, 1936, and 1937 provided measures to democratize the federal tax structure. A number of New Deal measures were invalidated by the Supreme Court, however; in 1935 the NRA was struck down and the following year the AAA was invalidated. The President unsuccessfully sought to reorganize the Supreme Court. Meanwhile, other laws were substituted for legislation that had been declared unconstitutional.

The New Deal, which had received the endorsement of agrarian, liberal, and labor groups, met with increasing criticism. The speed of reform slackened after 1937, and there was growing Republican opposition to the huge public spending, high taxes, and centralization of power in the executive branch of government; within the Democratic party itself there was strong disapproval from the "old guard" and from disgruntled members of the Brain Trust. As the prospect of war in Europe increased, the emphasis of government shifted to foreign affairs. There was little retreat from reform, however; at the end of World War II, most of the New Deal legislation was still intact, and it remains the foundation for American social policy.

See B. Rauch, History of the New Deal 1933–1938 (1944); A. Schlesinger, Jr., The Coming of the New Deal (1959) and The Politics of Upheaval (1960); M. Keller, ed., The New Deal: What Was It? (1963); R. Eden, ed., The New Deal and Its Legacy (1989); W. E. Leuchtenburg, The Supreme Court Reborn (1995); G. E. White, The Constitution and the New Deal (2001); A. L. Hamby, For the Survival of Democracy: Franklin Roosevelt and the World Crisis of the 1930s (2004); A. Cohen, Nothing to Fear: FDR's Inner Circle and the Hundred Days That Created Modern America (2009); I. Katznelson, Fear Itself: The New Deal and the Origins of Our Time (2013).

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New Deal

New Deal (1933–39) Programme for social and economic reconstruction in the USA following the Great Depression, launched by President Franklin D. Roosevelt. It was based on massive and unprecedented federal intervention in the economy. Early measures, including extensive public works, mainly dealt with relief. The New Deal encountered bitter resistance from conservatives and did not avert further recession in 1937–38. Industrial expansion, full employment, and agricultural prosperity were achieved less by the New Deal than by the advent of World War II.

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New Deal

NEW DEAL


The New Deal (19331939) was a series of programs intended to alleviate the suffering caused by the Great Depression (19291939), an abrupt economic collapse that began in 1929 and resulted in massive unemployment throughout the 1930s. The New Deal began with the inauguration of Franklin Roosevelt (19331945) as President of the United States in 1933.

To restore confidence in the American financial system Roosevelt declared a "bank holiday," closing all banks for four days until Congress met to pass bank reform legislation. The immediate banking crisis ended soon after when Congress passed the Emergency

franklin d. roosevelt's "new deal" programs attempted to alleviate the financial hardships brought on by the depression in the 1930s.
NEIIW DEAL PROGRAMS
year instituted program description
1933 agricultural adjustment administration (aaa) farmers were paid to stop growing specific crops. consequently, the demand for and the value of the crops rose.
1933 civilian conservation corps (ccc) provided jobs for urban youth in work such as planting trees, maintaining fire lines, and improving hiking trails.
1933 federal deposit insurance corporation (fdic) insured individual savings held in banks and other institutions across the comuntry. monitored and defined standards for the banking industry.
1933 federal emergency relief administration (fera) provided foodl and shelter to those most affected by the great depression. distributed cash grants to the states for disbursements to individuals and families on the "dole."
1933 national recovery administration (nra) set standards for wages, prices and production to encourage business recovery and investment.
1933 public works administration (pwa) to stimulate demand in the construction industry, the pwa initiated large building projects such as dams, aircraft carriers, schools, and government buildings.
1933 tennessee valley authority (tva) constructed a series of dams on the tennessee river to provide electricity and flood control for seven southern states. the program also established health centers and schools.
1935 rural electrification administration (rea) encouraged the growth of rural electrification cooperatives, spreading electricity throughout the country's rural areas.
1935 social security act (ssa) a government-run pension program, designed to provide financial assistance to the elderly, the disabled, and the unemployed.
1935 works progress administration (wpa) created urban work projects, such as repairing streetcar tracks and cleaning streets.
1937 farm security administration (fsa) loaned money to struggling sharecroppers. helped relocate farmers to more productive land and provided shelter for migrant workers.
1938 fair labor standards act (flsa) established a minimum wage and set a maximum of work hours for unskilled laborers employed by business associated with interstate commerce.

Banking Act, which required the Treasury Department to inspect all banks before they could reopen. Three-fourths of the Federal Reserve system banks reopened within three days.

Even though these measures stemmed the immediate crisis, more comprehensive measures were needed. Congress passed the first program, the Agricultural Adjustment Act, in May 1933. The most important aspect of the act was its establishment of the Agricultural Adjustment Administration, which provided subsidies to farmers who were told to reduce crop production by leaving part of their land idle. In 1936 the Supreme Court ruled that it was unconstitutional for the government to require farmers to limit production and the act became inoperable. However, within weeks Congress passed the Soil Conservation and Domestic Allotment Act, which allowed the government to pay farmers to reduce production. In addition, the Roosevelt administration helped poor farmers by setting up the Resettlement Administration in 1935, succeeded by the Farm Security Administration in 1937, which helped farmers on marginal lands relocate to better land by providing loans.

Saving the industrial economy was the most significant challenge facing the Roosevelt administration. On the one hand, businesspeople wanted to stop rapid deflation by relaxing antitrust laws to allow the cooperation of trade associations and stabilize prices. On the other hand, New Dealers wanted business to recognize the rights of workers to organize and bargain collectively in unions, which would allow workers' wages to rise with prices. The resulting compromise was the National Industrial Recovery Act (NIRA), passed in June 1933, which established a new federal agency, the National Recovery Administration (NRA). The NRA called for every business to abide by a temporary "blanket code," with a minimum wage of between 30 and 40 cents an hour, a maximum work-week of 35 to 40 hours a week, and the abolition of child labor. Those employers who followed the code displayed the NRA symbol of the Blue Eagle in their windows.

The NRA also set up codes for most of the country's major industries to establish price and wage floors, below which the specific industry could not go. However, the hastily devised codes would fail. Most importantly, federal officials, inexperienced in running such a large program, did not have the capacity to administer it. In addition, Section 7(a) of the NIRA gave workers the right to form unions, but had no mechanism for enforcement. Thus, the program failed to raise workers' wages and increase consumer purchasing power. In 1935 the Supreme Court nullified NRA legislation when it ruled in the Schechter case that in giving the president the power to shape the NRA codes, the Congress had acted unconstitutionally. Consequently, the failing program was abolished.


One of the most successful New Deal programs was legislation enacted in 1933 to create the Tennessee Valley Authority (TVA), a project for building a dam at Muscle Shoals and for the comprehensive redevelopment of the region. By building dams and waterways in the region, the TVA nearly eliminated flooding in the area and provided electricity to thousands of people. But the Roosevelt administration also initiated major financial reforms. On April 18, 1933, Roosevelt made an inflationary move by signing an executive order, which took U.S. currency off the gold standard. Enabling the government to manipulate the value of the dollar, government management of currency set a significant precedent in federal policy and changed the relationship between the government and business. The New Deal also gave the government authority in areas of the economy that previously were weakly regulated. The Glass-Steagall Act of June 1933 allowed the government to regulate irresponsible speculation by banks. The act also established the Federal Deposit Insurance Corporation (FDIC), which guaranteed all bank deposits up to $2,500. In 1935 Congress passed a banking act which transferred the authority of the regional Federal Reserve to the Federal Reserve Board in Washington, D.C. Congress sought to protect stock market investors by passing the Truth in Securities Act of 1933, which required corporations to provide accurate and complete information to the public. In addition, in June 1934, the Securities and Exchange Commission (SEC) was established as a stock market watchdog.

The expansion of federal relief provided to millions of unemployed Americans was an enormous undertaking. One of President Roosevelt's first programs was the Federal Emergency Relief Administration (FERA), which gave grants to states in which relief agencies had run out of money. However, the FERA relief would not be enough. The second program, the Civil Works Administration (CWA), provided work relief to more than four million people between November and April during the president's first year in office. But both FERA and CWA were intended as only relief measures, not as long-term programs meant to save the country's economy. By 1934, Roosevelt began to dismantle the CWA. His administration also established the Civilian Conservation Corps (CCC), which employed millions of young men, mostly urban, to work in camps at national parks and forests on conservation and reforestation projects. Though the programs devised for the early years of the New Deal were intended to be temporary, they provided a basis for later social measures that became part of a permanent welfare state.

In 1935 Roosevelt began a new set of programs called the "Second New Deal." Noted for its shift to a decidedly anti-corporate stance, the president proposed one of the most progressive tax systems in American history. Called a "soak the rich" plan by conservatives, the system had taxes reach as high as 75 percent on income for the richest of Americans.

Another significant development during the New Deal was the growth of labor militancy. When the Supreme Court nullified the NIRA in 1935, Senator Robert F. Wagner of New York introduced the National Labor Relations Act (also called the Wagner Act) in Congress. The new law gave workers more federal protection than Section 7(a) provided by including an enforcement mechanism in the National Labor Relations Board (NLRB), which was given the power to require employers to recognize unions. While showing few signs of challenging employers in the 1920s, union leaders and workers, encouraged by the Wagner Act in 1935, stepped up organizing efforts. John L. Lewis of the United Mine Workers helped start the Committee on Industrial Organization to begin organizing unskilled factory workers, a group that the more conservative American Federation of Labor ignored because of their commitment to organizing only skilled workers. The number of workers in recognized unions jumped from three million in 1932 to eight million in 1937, and to 10 million in 1941.

In 1935 Congress passed the Social Security Act (SSA), one of the most important pieces of social welfare legislation in American history. The act established several programs. First, it provided for federal assistance to the elderly in poverty, who could receive $15 a month. The act started a pension system, in which workers and their employers would pay a payroll tax, beginning in 1940, to provide an old age pension of $10 to $85 a month for many workers, though it excluded domestic servants and agricultural workers. The SSA also set up an unemployment insurance system, and provided aid to handicapped people and dependent children.

In addition, the Roosevelt administration set up the Works Progress Administration (WPA) in 1935, a much larger work relief program than the CWA. Between 1935 and 1941, the WPA employed about 2.1 million workers. WPA workers built 110,000 public buildings, 600 airports, and over 500,000 miles of roads, and over 100,000 bridges.

Though President Roosevelt won a landslide victory in 1936, he faced a conservative backlash during the following years. Although the economy had improved by the summer of 1937, a recession struck the economy that year. In 1938, the president asked for emergency funds for public works and relief programs, and as the government's spending saturated the economy, a recovery seemed possible. The American economy, however, would not recover from the Great Depression until World War II. Only the massive federal spending needed to produce the men and material to fight the war brought the depression to an end and laid the ground work for the postwar economic boom. Even though New Dealers failed to meet their goal of rejuvenating the American economy, they had remade the federal government and its relationship to the corporate world.

See also: Glass-Steagall Act, Hoovervilles, National Industrial Recovery Act, Securities and Exchange Commission, Tennessee Valley Authority, Works Progress Administration


FURTHER READING


Badger, Anthony J. The New Deal: The Depression Years, 19331940. New York: The Noonday Press, 1989.

Brinkley, Alan. The End of Reform: New Deal Liberalism in Recession and War. New York: Vintage Books, 1995.

Burns, James MacGregor. Roosevelt: The Lion and the Fox. New York: Harcourt, Brace and World, Inc., 1956.

Fraser, Steven, and Gary Gerstle. The Rise and Fall of the New Deal Order, 19301980. Princeton: Princeton University Press, 1989.

Leuchtenburg, William E. Franklin D. Roosevelt and the New Deal. New York: Harper and Row, 1963.

though the programs devised for the early years of the new deal were intended to be temporary, they provided a basis for later social measures that became part of a permanent welfare state.

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