New Deal

I INTRODUCTION

New Deal, name given to the peacetime domestic programme of United States president Franklin D. Roosevelt, and especially to the innovative measures taken between 1933 and 1938 to counteract the effects of the Great Depression.

Both Roosevelt and the US Congress, in trying to reduce unemployment and restore prosperity, endorsed a wide spectrum of new federal programmes and agencies, most popularly identified by alphabetical titles. Roosevelt, a skilful political leader, helped win support for an unprecedented array of new services, regulations, and subsidies. Yet no single political philosophy or set of coherent goals ever unified these disparate programmes, most of which he developed with the aid of the so-called Brain Trust. This informal group from outside government included professors, lawyers, and others who came to Washington to advise Roosevelt, in particular on economic affairs.

II EARLY LEGISLATION

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

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

III THE SECOND NEW DEAL

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

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

The pressures for new legislation abated after 1937, and opposition to extending the New Deal mounted rapidly, especially in the South. By 1939 public attention focused increasingly on foreign policy and national defence. The New Deal was over, but it had permanently expanded the role of the federal government, particularly in economic regulation, resource development, and income maintenance. Although in itself it failed to stimulate full economic recovery, it provided the federal government not only with increased controls over money supply and Federal Reserve policies but also with increased understanding of the economic consequences of its own taxing, borrowing, and spending—thus helping it to limit the impact of later recessions. In addition, the New Deal coalition, centred in the Democratic party, dominated the electorate and the nation for years thereafter.