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Chapter 34 – The Great Depression and the New Deal

1. FDR: Politician in a Wheelchair


a. At age 21, he was paralyzed and lost his previous superficiality. His wife Eleanor was a power asset of his. She
often advocated for him and became the most active First Ladies in history. She heavily influenced the policies of
the national government with her liberal views.
b. As a favorite depression governor of New York, he believed that money was expendable, not humanity. He was
regarded as a traitor to his class and a smooth talker.
c. At the democratic convention, fellow New Yorker Al Smith was pushed aside for Roosevelt. The platform was
squarely for the repeal of the Prohibition, against the Hoover depression, and he even accepted the Democratic
nomination in person, a rarity at the time.
2. Presidential Hopefuls of 1932
a. Roosevelt preached a “New Deal” for the common man, but was often contradictory with his speeches. They were
written mostly by the “Brains Trust” made up of young reform-minded intellectuals. Roosevelt promised a balanced
budget and condemned the Hoover deficits.
b. “Happy Days Are Here Again” was a pro-Roosevelt song that captured the spirit of his campaign.
c. Hoover spent hours battling depression. His supporters half-heartedly assured voters that the worst was past. With
the campaign going badly, Hoover took to talking. He predicted that if the Hawley-Smoot Tariff were repealed, the
nation would suffer worse. The dark campaign contrasted sharply with Roosevelt’s.
3. Hoover’s Humiliation in 1932
a. Hoover ended up with only 6 ardent Republican states.
b. One new feature of this election was the shift of the black voters. As the hardest hit by the Depression, they
increasingly turned to Roosevelt, rather than supporting the “party of Lincoln.” Beginning with 1932, they became a
vital element of the Democratic party.
c. The vote was overwhelmingly anti-Hoover rather than pro-Roosevelt. All the democrats had to do was wait. The
vote was more for a new deal rather than the New Deal.
d. Hoover was president for four more months, but he was helpless without the consent of Roosevelt. Roosevelt
refused to negotiate with him – Hoover was trying to tie Roosevelt to an anti-inflationary policy that would tie his
hands later.
e. Without a president, the economy ground to a halt.
4. FDR and the Three R’s: Relief, Recovery, Reform
a. FDR’s inauguration declared that the country must wage war on the Depression as it does with an armed foe.
b. Now that he had control, Roosevelt declared a national banking holiday on March 6-10 as a prelude to opening the
banks on a sounder basis. He also summoned the Hundred Days Congress that cranked out legislation.
c. The New Deal aimed at the three R’s – relief, recovery, and reform. Short-range goals included relief and immediate
recovery. Long-range goals included recovery and reform of current abuses that caused the crash. The three
objectives often overlapped and interfered with each other.
d. The Congress often passed any legislation FDR proposed – some of the laws they passed even delegated legislative
authority to the executive.
e. Roosevelt often did things by intuition, sometimes wrong. To the public, any movement seemed better than none.
f. During the Hundred Days Congress, it passed many of the three R’s, though some were passed after the Congress.
Some of these reforms were long overdue reforms sidetracked by the war in Europe and the Old Guard in the 1920s.
New Dealers embraced progressive ideas such as unemployment insurance, old-age insurance, minimum-wage laws,
conservation and development of natural resources and restriction on child labor.
5. Roosevelt Tackles Money and Banking
a. Congress pulled itself together and half the Emergency Banking Relief Act of 1933 that invested the president with
power to regulate banking transactions and foreign exchange and to reopen solvent banks.
b. Roosevelt then delivered the first of thirty “fireside chats” that assured the American public that it was safer to store
their money in reopened banks than under the mattress.
c. Congress also enacted the Glass-Steagall Banking Reform Act that provided for the Federal Deposit Insurance
Corporation which insured individual deposits up to $5,000, ending the epidemic of bank failures.
d. Roosevelt sought to protect the gold reserve by ordering all private holdings of gold to be surrendered and
exchanged for paper money, in order to take the nation off the gold standard. Congress cancelled the gold-payment
clause in all contracts and authorized repayment in paper money.
e. Roosevelt’s “managed currency” was an attempt to relieve debtors with inflation. When the Treasury bought up all
the gold at increased rates, this increased the price of gold. The policy increased the amount of dollars in circulation
yet provoked the wrath of “sound money” promoters. In Feb. 1934, FDR returned the nation to a limited gold
standard in foreign affairs. After that, the US pledged to pay foreign bills in gold at the rate of one ounce of gold for
every $35.
6. Creating Jobs for the Jobless
a. 1 out of 4 workers were unemployed in FDR’s time and he had no problem using federal money to assist the
unemployed and “prime the pump” of industrial recovery.
b. Congress responded with the Civilian Conservation Corps (CCC) – the most popular of the New Deal agencies –
that provided employment for young men doing useful work like reforestation, fire fighting, flood control and
swamp damage. They were required to send home a portion of their pay to their parents. Human and natural
resources were conserved, though critics complained about the militarizing of the nation’s youth.
c. Congress established the Federal Emergency Relief Act (FERA) headed by Harry L. Hopkins. He granted $3 billion
to the states for direct dole or payment on work projects.
d. Congress also passed the Agricultural Adjustment Act (AAA) that made millions of dollars available to help farmers
make their mortgages. The Home Owners’ Loan Corporation (HOLC) refinanced mortgages on nonfarm homes.
The agency bailed out mortgage-holding banks and achieved the political loyalties of the middle class.
e. FDR himself established the Civil Works Administration (CWA) in 1933 as a branch of FERA. It provided menial
jobs during the winter emergency.
7. A Day for Every Demagogue
a. The public works pulled the nation through the winter of 1933-34 but the programs had to be continued and
supplemented. The rise of demagogues such as Father Charles Coughlin from Michigan – whose anti-New Deal
preaching eventually caused church elders to silence him in 1942 – illustrated this point.
b. The most notorious was Senator Huey P. (“Kingfish”) Long from Louisiana. He used his rabble-rousing talents to
publicize his “Share Our Wealth” programs that promised $5000 for every family. He was assassinated in 1935.
c. Dr. Francis E. Townsend of California attracted the support of 5 million senior citizens who believed they would be
given $200 a month if they spent it that month.
d. Congress authorized the Works Progress Administration (WPA) to undercut the demagogue’s power. Launched
under Hopkins, the agency spent $11 billion on improving the infrastructure of the US. 9 million people were given
jobs, not handouts.
8. A Helping Hand for Industry and Labor
a. Congress authorized the National Recovery Administration (NRA) that was designed to assist industry, labor, and
the unemployed. It combined efforts at short-term relief and long-range recovery and reform.
b. Individual industries were to work out codes of “fair competition” under which hours of labor were reduced in order
to spread jobs out among the people. There was a ceiling placed on the maximum hours and a floor placed on wages.
c. Labor was now guaranteed benefits like the right to organized under agents of their own choosing, yellow-dog
contracts forbidden, and restrictions placed on child labor.
d. The industrial codes under NRA would be painful – they called for self-denial in both management and labor.
Patriotism was aroused by parades and baseball teams. The eagle logo was developed to show that the employer was
part of the NRA. There was a small upswing in business activity.
e. Too much self-sacrifice was required of all participants – the “age of chiselry” dawned as “chiselers” (or
unscrupulous businessmen displayed the eagle in their window while violating the edicts. In 1935, the Supreme
Court ruled in the famous Schechter “sick chicken” decision that Congress couldn’t delegate legislative powers to
the executive. They also declared that Congress’s control of interstate commerce couldn’t apply to local businesses
like the Schechter brothers in Brooklyn, New York.
f. The same Congressional act that authorized the WPA also authorized the Public Works Administration (PWA)
headed by Harold L. Ickes, Sec. of the Interior. $4 billion was spent on public works projects such as the Grand
Coulee Dam on the Columbia River – the largest structure since the Great Wall of China. The Dam seemed the
height of folly since it made possible the irrigation of new farmland when the government was trying to reduce farm
surpluses and created electrical power at a time when there was little market.
g. With the end of the Prohibition imminent, Congress legalized light wine and beer with an alcoholic content not
exceeding 3.2 percent and levied a tax of $5 on every barrel manufactured. Drys condemned Roosevelt, but the 21st
amendment repealed the Prohibition.
9. Paying Farmers Not to Farm
a. Ever since 1918, farmers had suffered from low prices and overproduction. During the depression, conditions were
worse as farms were foreclosed on, corn was burned for fuel and farmers tried to prevent the shipment of crops.
b. Congress established the Agricultural adjustment Administration (AAA) that would pay growers to reduce their crop
acreage. Through artificial scarcity, it would establish “parity prices for basic commodities. The money needed to
pay the farmers would be raised by taxing farm product processors like flour millers that would shift the burden to
consumers.
c. The AAA was established at a time when much of the cotton crop for 1933 was already planted. Farmers were
forced to plow under their crops. Several million pigs were bought and slaughtered, many used for food for people
on relief, but some used for fertilizer. The waste of food when so many were hungry seemed “sinful.”
d. The subsidized scarcity did raise farm income, but it also increased unemployment by paying farmers not to farm.
Farmers, food processors, consumers, and tax payers all paid for the system. The Supreme Court finally killed the
AAA in 1936 by declaring its regulatory taxation provisions unconstitutional.
e. Congress hastened to pass the Soil Conservation and Domestic Allotment Act of 1936. Under this act, famers were
paid to plant soil-conserving crops, like soybeans, or to let their land lie fallow. With the emphasis on conservation,
the Supreme Court approved this scheme.
f. The Second Agricultural Adjustment Act of 1938 was a comprehensive substitute that continued conservation
payments, but also added that if growers observed acreage restrictions on specified commodities like cotton and
wheat, they would be eligible for parity payments.
10. Dust Bowls and Black Blizzards
a. In late 1933, a drought in the states of the trans-Mississippi Great Plains caused the topsoil from homesteads to be
torn from the ground.
b. Drought and wind triggered the dust storms, but the high grain prices during WWI enticed farmers to bring marginal
land under cultivation. The dry farming techniques and mechanization tore up more topsoil than oxen could and the
powdery topsoil could be torn away easily.
c. Refugees fled their land and headed to southern California, portrayed in John Steinbeck’s The Grapes of Wrath.
d. Sympathetic New Dealers urged Congress to pass the Frazier-Lemke Farm Bankruptcy Act in 1934, which made
possible the suspension of foreclosures up to five years. It was voided by the Supreme Court. Later, the grace period
was changed to three years, which the court upheld. In 1935, the Resettlement Administration was established by the
president to remove near-farmless farmers to better land. Trees were planted in the prairies by men of the Civilian
Conservation Corps.
e. The commissioner of Indian Affairs John Collier promoted the Indian Reorganization Act of 1934 that encouraged
local self-government and the preservation of native crafts and traditions. The act helped revive interest in their
identity and culture, but some denounced it as meaning to turn the Indians into a museum. Yet some established
tribal governments.
11. Battling Bankers and Big Business
a. Congress passed the “Truth in Securities Act” (Federal Securities Act) that required promoters to transmit the
investor sworn information regarding the soundness of their stocks and bonds.
b. In1934 Congress authorized the Securities and Exchange Commission (SEC) that was designed as a watchdog for
the stock market.
c. In 1932, Samuel Insull’s multibillion-dollar empire of public utilities crashed. The Public Utility Holding Company
Act of 1935 forbid the holding of multiple levels of big business.
12. The TVA Harnesses the Tennessee River
a. The New Dealers accused the electric-power industry of gouging its customers for a vital service, especially since it
secured many of its water-power sites from the public domain.
b. The Tennessee River provided the New Dealers with an opportunity. The area drained an area about the size of New
England and the government already owned some area at Muscle Shoals because they had erected plants during
WWI for nitrates. Washington could reform the power monopoly and put thousands of people to work.
c. Congress passed the Tennessee Valley Authority (TVA) in1933 lead by Senator George W. Norris of Nebraska.
This was the most revolutionary of the “planned economy.”
d. This agency was meant to determine how much the production and distribution of energy cost. Utility companies
said that the reason TVA power was cheaper was that there was dishonest bookkeeping and no taxes. Critics
protested that the venture was creeping towards communism.
e. New Dealers were delighted with the achievements of TVA: full employment, cheap electric power, low-cost
housing, cheap nitrates, restoration of soil, reforestation, improved navigation, and flood control. Foreigners were
impressed with the achievements and New Dealers wanted to expand into the Columbia, Colorado, and Missouri
Rivers, but conservative backlash was heavy.
13. Housing Reform and Social Security
a. Roosevelt set up the Federal Housing Administration (FHA) in 1934 that gave small loans to homeowners for
improving their residence and completing new ones. The FHA was one of the few agencies to outlast Roosevelt.
b. Congress authorized the United States Housing Authority (USHA) in 1937 to bolster the agency. It lent money to
states or communities for low-cost construction. New building, however, fell tragically short of need and when
Congress tried to expand, it met a brick wall of real estate promoters, builders, landlords and anti-New Dealers.
Regardless, for the first time, slums began to shrink rather than grow.
c. The Social Security Act of 1935 gave federal-state unemployment to cushion future depressions, regular payments
for retired workers to provide security for old age, and included provisions for the blind, physically handicapped,
delinquent children and other dependants. The payments were to be financed by a payroll tax on employers and
employees.
d. Republicans opposed the bill vehemently, fearing it would breed laziness.
e. Social Security was based on the highly industrialized nations of Europe. In an agricultural time, there was farm
work for all ages and families took care of their own. In an industrial economy, the government had a responsibility.
Many people qualified for Social Security and it was eventually expanded to include more. Unlike Europe, you have
to be employed to qualify.
14. A New Deal for Unskilled Labor
a. With the New Deal lowering unemployment, workers began to feel more secure. A rash of walkouts in the summer
of 1934 occurred, including a general strike in San Francisco (following a “Bloody Thursday”), which was only
broken when citizens resorted to vigilante tactics.
b. When the Supreme Court nixed the NRA, Congress pass the Wagner, or National Labor Relations, Act of 1935 that
created a new National Labor Relations Board for administrative purposes and reasserted the rights of labor to
engage in self-organization and bargaining collectively.
c. Under this encouragement, unskilled labor began to organize themselves under the direction of John L. Lewis, boss
of the United Mine Workers. In 1935, Lewis managed to create the Committee for Industrial Organization (CIO) in
the AFL. Ever since the Knights of Labor in the 1880s, skilled labor has been wary of unskilled. In1936, the older
federation suspended the members associated with CIO.
d. In 1936, CIO turned to the automobile industry and initiated a new kind of strike – the sit down. This prevented
strike breakers from being imported. CIO was eventually recognized as the sole bargaining agency for GM.
e. United States Steel Corporation averted a strike by granting rights of unionization to its CIO employees. The “little
steel” companies fought back. On Memorial Day 1937, police fired upon picketers at the Republic Steel Company.
f. Congress passed the Fair Labor and Standards Act (Wages and Hours Bill) in 1938. It set up minimum-wage and
maximum-hour levels and banned labor by children under sixteen (under 18 if it was dangerous). Industrialists,
especially the textile manufacturers in the south, opposed the bill. However, the bill excluded the agricultural,
service and domestic workers where blacks, Mexican-Americans, and women were highly concentrated.
g. In the later Roosevelt days labor thrived, showing its support in the ballot box.
h. CIO broke off completely from the AFL in 1938 the “committee” was officially renamed the “congress.” CIO
became very popular, but often was caught in wars with the AFL.
15. Landon Challenges “the Champ” in 1936
a. Exultant Democrats renominated Roosevelt on a platform of the New Deal.
b. Republicans were hard-pressed but finally nominated Alfred M. Landon. He accepted some of the New Deal
reforms, but not the Social Security Act. The Republican platform condemned the New Deal and Roosevelt for his
radicalism, experimentation, confusion and waste. Hoover backed Landon as a “holy crusade for liberty” like the
American Liberty League formed in 1934 by wealthy conservatives to oppose the New Deal.
c. Roosevelt took to the stump and condemned them as “economic royalists.”
d. A landslide overwhelmed Landon, with Republicans only taken Vermont and Maine. The electoral count for FDR
was the most lopsided in history. Democrats could now boast of 2/3rds of the House and Senate.
e. The battle was largely one of class warfare. Needy economic groups lined up against the greedy economic groups.
CIO contributed generously to Roosevelt. The left-wing turned to Roosevelt and the 3rd party protest declined. Even
blacks had shaken off their alliance to Republicans as Lincoln was “truly dead.”
f. FDR primarily won because he appealed to the “forgotten man.” Some of his support was only pocket-book deep –
they wanted to keep the money coming. However, FDR was also good at marshalling the South, blacks, urbanites,
the poor, and the “New Immigrants.”
16. Nine Old Men on the Supreme Bench
a. The 20th amendment shortened the lame duck period by six weeks and got rid of the postelection lame duck session
of Congress.
b. Roosevelt saw his victory as a mandate for further New Deal reforms. However, he saw the Supreme Court as an
obstacle. The Court was ultraconservative and most were old. None were appointed by Roosevelt.
c. Some of the Old Guard was simply hanging on to curb “that socialist” in the White House. Roosevelt viewed the 3
successive victories by Democrats a mandate for the New Deal.
d. In 1937, Roosevelt approached Congress and asked for a new Justice for every Justice over 70 that wouldn’t retire.
The maximum membership would then be 15. Roosevelt charged that the Supreme Court was behind in its work and
needed to have fresh blood. He didn’t realize that the public regarded the Court as a sacred cow.
17. The Court Changes Course
a. Roosevelt was accused of trying to “pack” the Court and break down the delicate checks-and-balances.
b. The Court now had an ax over its head. Justice Owen J. Roberts, formerly conservative, began voting liberal. In
March 1937, the Court upheld the state minimum wage for women, reversing a decision a year earlier. In later
decisions, the Court upheld the National Labor Relations Act, and the Social Security Act. When Congress approved
full pay for justices who retired over 70, one of the oldest conservative judges retired, to be replaced with Justice
Hugo Black, a New Dealer.
c. Congress finally passed a court reform bill, but it only applied to lower courts. Roosevelt suffered his first major
Congressional defeat. Americans have never appreciated tampering with the Supreme Court by the executive.
Roosevelt ironically won his campaign. The Court became friendlier to the New Deal reforms and a succession of
deaths and resignations led him to appoint all nine Justices – the first since Washington.
d. FDR also lost. He aroused such conservatives in both parties that few New Deal reforms after the fight in 1937.
18. The Twilight of the New Deal
a. Roosevelt’s first term didn’t banish the depression, though it did lower unemployment from 25% to 15%. The
recovery was modest, but the country was inching its way back to health.
b. In 1937, the economy took another downturn, which critics dubbed the “Roosevelt recession.” Government policies
did cause the downturn as payroll taxes cut into wages and the administration cut back on spending out of reverence
for the “balanced budget.”
c. At this late date, Roosevelt embraced the recommendations of John Maynard Keynes. In1937, Roosevelt announced
that the government would embrace planned deficit spending to stimulate the economy. This marked a turning point
for government as “Keynesianism” became the new economic orthodoxy.
d. In 1937, Roosevelt encouraged Congress to authorize reorganization in the national administration for efficiency.
However, it got caught up in the Justice thing and was rejected. In1939, Congress finally passed the Reorganization
Act which gave Roosevelt limited administrative reforms and the new Executive Office in the White House.
e. New Dealers were accused of having the biggest campaign chests, and Congress adopted the Hatch Act of 1939
which barred federal officials except for high-ranked policy officials from actively campaigning. Government fund
could now not be used for campaign purposes and contributions were disallowed form people on relief. In 1940, it
was expanded to include limits on contributions and campaigning, but ways were found around that.
19. New Deal or Raw Deal?
a. Critics of the New Deal condemned it for its waste, incompetence, confusion, contradictions and cross-purposes. It
was cited as a source of government graft. They also condemned Roosevelt’s appointees who included professors,
socialists, leftists, and Jews.
b. Businesspeople were shocked by the leap before you look attitude of Roosevelt. Others thought he purposely
confused noise and movement with progress, while others appreciated it.
c. Bureaucratic meddling became a common complaint of the anti-New Dealers. Indeed, the bureaucracy flourished
and soon overshadowed the states.
d. The balanced budget and other campaign promises had gone out the window. Critics charged the America was
becoming a handout state, undermining the old values of thrift and hard work.
e. Business was bitter. They accused the New Deal of causing class strife, and that the farmers and laborers were being
pampered. Businesspeople declared that they could pull themselves out of the depression if they could get
government off their backs. States rights were being ignored and the government was competing with its own
citizens. Enterprise was being swallowed by the planned economy.
f. People criticized Roosevelt for trying to created a “dummy Congress” and browbeat the judiciary.
g. The New Deal had failed to cure the Depression. It had merely put band-aids on problems. People began to believe
that more deficit spending was the answer.
20. FDR’s Balance Sheet
a. New Dealers defended that there had been some waste, but that recovery – not the economy – was the main goal,
and that there was minimal graft for the haste and spending.
b. New Dealers declared that it had relieved the worst of the crisis in 1933 and that it promoted the policy of
government taking care of its people.
c. New Dealers also declared that business tycoons should thank FDR for deflecting popular resentments against
business and saving American capitalism. He purged the system of its most blatant abuses in order to save it.
d. Roosevelt introduced a mild revolution – but basically took the middle road. He was Hamiltonian in his espousal of
big government but Jeffersonian in his concern for the common man. He protect America’s biggest asset – its
people. And when democracies abroad were failing he protected America’s and girded us for war.

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