The New Deal and Domestic Policy
The Great Depression, which began with the stock market crash of 1929, had not subsided during the presidency of Herbert Hoover. In the presidential election of 1932, Democratic candidate Franklin Delano Roosevelt pledged to commit himself to battling the depression through his "New Deal." He insisted upon increasing the role of the federal government to combat the woes resulting from severe unemployment and the overall low morale of Americans throughout the country. Upon being inaugurated in 1933, Roosevelt immediately began to pass sweeping reforms during the period known as "The First Hundred Days."
President Franklin Delano Roosevelt15
The First Hundred Days & Initial Legislation
The first aspect of the New Deal represents the programs initiated by Roosevelt to provide immediate aid to those in need. During the first few months of Roosevelt’s presidency in 1933, known as “the First Hundred Days,” Roosevelt kept Congress in special session and enacted an enormous amount of legislation with the help of a group of advisors, affectionately nicknamed the “the Brain Trust.” He began by declaring a bank holiday and introducing the Emergency Banking Relief Bill, whereby the government gave assistance to private bankers to reopen their banks. This bill, which could have been a complete failure for the newly inaugurated president, became FDR’s first great triumph, as millions of Americans willingly re-deposited ninety percent of the money that had been taken out of banks. 1
This one act alone greatly increased the power of both the executive within the federal government and the federal government’s role in the economy. Immediately upon arriving in the White House, Roosevelt was forced to deal with the banking crisis and through this he acquired more power than the executive had ever possessed. Additionally, unlike previous President Herbert Hoover, Roosevelt immediately set the precedent that it is the responsibility of the government to provide relief to those in need during times of crisis. 2
Additionally, during the First Hundred Days Roosevelt created the Civilian Conservation Corps (CCC) and Tennessee Valley Authority (TVA), which were both intended to aid the poor. The CCC employed 250,000 unemployed young men to work on conservation projects and established the Federal Emergency Relief Administration (FERA), which granted states money for their own relief projects. The TVA brought hydro-electric power, soil conservation, and flood control to seven southern states, addressed home mortgage foreclosures, and abandoned the gold standard to avoid inflation and the gold runs from foreign nations. 3
National Industrial Recovery Act Poster16
Other significant legislation enacted in the first few months of the New Deal included the National Industrial Recovery Act (NIRA) and the Agricultural Adjustment Act (AAA). These two acts are often seen as the most important of New Deal legislation since they significantly contributed to Roosevelt's new idea of what the government was responsible for with regard to the economy. The NIRA was in large part based on the belief that the industries' economic problems stemmed from destructive competition. Roosevelt set the precedent that it was the government's responsibility to protect industries, and, thus, oversee and intervene in even the most basic functions of the economy. 4 Therefore, the NIRA authorized businesses within the same industry to cooperate in creating industrywide codes so that competition would not drive down prices and wages. Although membership was voluntary, consumers were encouraged to support only those businesses who displayed the Blue Eagle National Recovery Administration (NRA) symbol. Unfortunately, this law allowed for domination by big businesses, and, thus, did not deliver economic recovery. Similarly, the AAA did not yield positive results. It, too, increased the role of the government by offering subsidies to farmers who agreed to limited production of specific crops, thus eliminating overproduction and raising prices. However, the cut in production rendered a third of sharecroppers homeless. By 1936, both acts had been found unconstitutional, but the AAA legislation was rewritten and has continued into the twenty-first century. 5
Also passed during the first phase of the New Deal was the Home Owners Refinancing Act, the Civil Works Administration, and the Federal Securities Act. Although Roosevelt’s efforts did not sufficiently stabilize and restore the economy, by 1936 unemployment had fallen from thirteen million to nine million, farm prices had risen, and wages and salaries had risen. Roosevelt’s policies had also helped to restore the nation’s confidence in its ability to provide relief and security to its people, as well as restore a confidence in capitalism that had been waning throughout the duration of the Depression. 6
The Second New Deal
With the termination of policies intended to end the national emergency, for the first time the New Deal faced criticism and opposition, namely from wealthy business leaders and Americans who thought that businesses were being favored too much. The legisaltion enacted during this period of skepticism and doubt was termed the "Second New Deal" and largely took place from 1935 to the end of the New Deal in 1938. Despite opposition, Roosevelt’s New Deal persevered and continued to set major precedents. The programs enacted during this period aimed at providing “greater security for the average man than he has ever known before in the history of America." 7.
Roosevelt began with the Emergency Relief Appropriation Act, which provided $4 billion in deficit spending to establish public works programs for the unemployed, including the Resettlement Administration, the Rural Electrification Administration, the National Youth Administration, and the Works Progress Administration (WPA). The WPA alone employed more than eight million people, contributed to cultural programs, and built hundreds of thousands of miles of highways and roads, along with public buildings, bridges, reservoirs, irrigation systems and parks throughout the nation.
Social Security Act Poster17
The second prominent reform of the Second New Deal was the initiation of a welfare state in 1935, made possible by the Democratic sweep in the elections of 1934. Nothing of the kind had ever been enacted in the United States, thus setting a precedent that it is the responsibility of the government to provide security for the unemployed and the elderly. 8 The Social Security Act created a national system of insurance in which most employees and employers were compelled to participate. At age sixty-five, workers would receive retirement annuities financed by taxes on their wages and their employers’ payroll. These benefits would vary in proportion to how much they had earned. Additionally, the government agreed to share the responsibility of caring for those who were already older than sixty-five and could not take part in the insurance program. Finally, the act established a federal-state system of unemployment insurance and provided national aid to the states for the care of dependent mothers and children, the crippled, the blind, and for public health services. 9 This law, in addition to providing security to those receiving benefits during times of stability, was intended to provide protection during any future recessions. It ensured that the federal government would not have to go deeply into debt to provide relief if another depression hit. 10 Although the act may seem very radical given the departure from the traditional role of the government in the American economy, it actually is much more conservative than similar systems of social security that had already been established throughout Europe by this time. 11
Between 1937 and 1938 the United States economy witnessed another recession after almost three years of recovery. This recession was a direct result of Roosevelt’s commitment to a balanced budget, which he fervently pursued when recovery seemed promising. Despite his use of deficit spending, Roosevelt was unable to balance the budget, yielding little more than the recession as a result of his efforts. By 1939 the New Deal was essentially over and the emphasis placed on domestic policy by the administration was replaced by a focus on foreign policy as political turmoil in Europe brewed conflict and the eventual outbreak of World War II. 12
The precedents set forth by the New Deal did not only last throughout Roosevelt’s presidency, but set examples for future presidencies and administrations to follow. In addition to adding stabilizers into the economy and establishing the first aspect of the welfare state that remains in existence today, the New Deal gave power to both the executive branch of the government and the federal government as a whole that still rings true today.
President Roosevelt speaking in Chicago18
The New Deal created a trend toward big government, whereby an interventionist government has the power and responsibility to interfere not only in the economy but in all aspects of society. Previous to the Roosevelt presidency, the economy remained much more independent of the federal government. However, with the passage of many New Deal acts, such as the NIRA, AAA, and Social Securities Act, the government began to play the role of director, monitoring the economy and intervening when it saw fit. It became the duty of the fedeal government to ensure the security and well being of society, as evident in Roosevelt's immediate desire to alleviate the hardships of the Great Depression through direct aid to the unemployed. The emphasis that the New Deal placed on increasing the role of the federal government resulted in a decrease in power for state and city governments. It was, after all, the federal government that provided the largest source of relief to the people. Some money and clothing was given to local governments to be doled out as they saw fit, but these resources were often inadequate in relieving the woes of the Depression.13
As New Deal reforms came to a close in 1939 and attention shifted to foreign policy, Roosevelt continued to reign supreme and he, followed by the federal government, dictated actions with the support of Americans. As evidenced in Roosevelt's First Hundred Days, the power of the executive skyrocketed during his presidency. Though some of his acts were eventually declared unconstitutional and he endured much criticism, Roosevelt's power was not checked very often or very harshly throughout the time of the New Deal. He successfully expanded the role of the federal government without much resistance or difficulty, which was his initial goal despite any opposition, thus setting the precedent of the superiority of the executive branch over the legislative and judicial branches that continued for years to come 14.