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Chapter 28: New Deal America

• Welfare Capitalism: refers either to the combination of a capitalist economic

system with a welfare state or, in the American context, to the practice of businesses
providing welfare-like services to employees. Welfare capitalism in this second
sense, or industrial paternalism, was centered in industries that employed skilled
labor and peaked in the late 19th and early 20th centuries.

From Hooverism to the New Deal

• With the election of 1932 approaching, Republicans re-nominated Hebert Hoover

under a cloud of defeat while Democrats, realizing they were probably choosing the
next president, nominated Franklin D. Roosevelt.

o “I pledge you, I pledge myself to a new deal for the American people” –
FDR at his acceptance speech for the nomination

• In 1910, FDR won a Democratic seat in the New York State Senate. He backed
Wilson in 1912 and served as assistant secretary of the navy. In 1921, he contracted
polio, which transformed him and gave him “a new humility of spirit.”

• In 1928, he won became governor of New York in a landslide victory. Overall, he

possessed “a bulldog determination to succeed, to overcome all obstacles, to triumph
over despair and adversity, and in the process achieve greatness.”

• FDR launched a grueling campaign for the 1932 race in an effort to dispel doubts
about his health. On the tour, he began to define what he meant by the “New Deal.”
(pg 826 for specific info about programs)

• Socialist* and Communist parties, both radical alternative parties, polled approx.
900,000 and 100,000 respectively, which was rather high yet still lower than some
people thought with the general state of the country. *Norman Thomas

• The Twentieth Amendment was ratified on Jan 23, 1933. It established the
beginning and ending of the terms of the elected federal offices. It also deals with
scenarios in which there is no President-elect.

• The 1932-1933 winter had been extremely tough and the “run on the banks” had
caused 4/5 of them to close.

• FDR faced three main tasks: 1 revive the economy, 2 relieve the “human misery”
brought on by the Great Depression, 3 help farmers out of their plight

• Roosevelt’s New Deal would take the form of a series of trail-and-error actions,
several of which were misguided failures. Roosevelt’s staff had major disagreements
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about how to manage the recovery. Initially, the administration settled on a three-
pronged approach:

o Remedy the financial crisis and provide short-term relief for the jobless
o Promote industrial recovery by dramatically increasing federal spending
and by facilitating cooperative agreements between management and
organized labor
o Raise commodity prices by paying farmers to reduce the size of their crops
and herds

(Financial Recovery)

• On his second day in power, FDR declared a four-day bank holiday to halt hysteria
and restore confidence and passed the Emergency Banking Relief Act. On March
12, 1933, he gave his first “fireside chat” and insisted that banks were the safest
place for Americans to keep their money.

• By executive decree, Roosevelt reorganized all farm credit agencies in the Farm
Credit Administration. Both this administration and the Home Owners’ Loan
Corporation worked to refinance loans at lower interest rates for farmers and
homeowners, respectively.

• The Federal Deposit Insurance Corporation (FDIC) was created to insure

personal bank deposits up to $5000 and required commercial banks to separate
themselves from investment-brokerage operations.

• The Federal Trade Commission and later the Securities and Exchange
Commission both regulated the chaotic stock and bond markets.

(Employment Recovery)

• CCC: Civilian Conservation Corps provided useful jobs to working-class men aged
eighteen to twenty-five. Hired 3 million workers and run under military discipline.

• FERA: Federal Emergency Relief Administration addressed the broader problems of

human distress. Led by Harry L. Hopkins, it created jobs through state-finance
construction, adult literacy programs, education programs, day-cares, and food
distribution.

• CWA: The Civil Works Administration put 4 million people to work in 1933 as
FERA became inadequate, but costs soared to over $1 billion and Roosevelt ended
the program in 1934 to prevent dependency on government jobs/support.

• WPA: The Works Progress Administration, created in 1935 and run by Hopkins,
used a $4.8 billion bill to quickly provide new jobs, but many seemed to be “make
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work” or “mere leaning on shovels.” Created several arts and music agencies.
Overall, the WPA helped some 9 million Americans before 1943.

o NYA: The National Youth Administration aided youth in finding part-

time jobs and provided technical training.

Recovery through Regulation

• Roosevelt and his advisers promoted the recovery of the agricultural and industrial
sectors and believed that the trend toward concentration (big business) was
inevitable.

(Agricultural Recovery)

• AAA: Created in 1933, the Agricultural Adjustment Administration sought to raise

commodity prices by paying farmers to cut back on production*. Under Agriculture
Secretary Henry A. Wallace, the AAA sponsored a plow-under program to destroy
crops that were already growing. From 1932 to 1935, production slowed** and farm
income went up 58%

o *The money used to pay farmers was raised from a “processing tax”
levied on businesses that processed the products such as meatpacking
plants. (see United States v. Butler)

o **The “dust bowl” also had a major impact on the declining production
from 1932 to 1935 through a heavy drought.

• CCC: The Commodity Credit Corporation extended loans to farmers above the
market price of their crops, which were kept off the market in federal warehouses,
and gave farmers the option to pay off the loan and retrieve their crops or else keep
the loan money.

• On January 6, 1936, the Supreme Court, in United States v. Butler, ruled the AAA’s
tax on food processors was unconstitutional, forcing the administration to find a new
way to manage production levels.

• The Soil Conservation and Domestic Allotment Act (1936) provided benefit
payments to farmers who engaged in soil-conservation practices and cut back on
soil-depleting staple crops.

• The act basically failed and congress passed the Agricultural Adjustment Act of
1938 to reestablish the earlier programs without the processing tax.

(Industrial Recovery)

• NIRA: National Industrial Recovery Act (1933) which contained two parts:
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o PWA: Public Works Administration was granted $3.3 billion for

buildings, highways, etc. Run by Harold L. Ickes, it not only helped
industrial relief, but also work relief through hiring private contractors.

o NRA: National Recovery Administration, the controversial aspect of

NIRA run by Hugh S. Johnson, was intended to stabilize the business
sector and generate more purchasing power for consumers. Helped set a
40 hour workweek and minimum wages of $13/wk as well as prohibiting
laborers under age 16.

• The NRA came under criticism when people began to think that
the major companies were controlling the labor code negotiations
and given that the codes excluded agricultural and domestic
workers, which included ¾ of employed African-Americans.

• Supreme Court declare NRA unconstitutional in 1935

• TVA: The Tennessee Valley Authority sought to bring cheap electricity to the
Tennessee Valley, build fertilizer plants, provide jobs and recreation, and educate
rural folk in the ways of modern life. The TVA constructed 9 high dams and many
smaller dams along the Tennessee River and paved the way for the Rural
Electrification Administration to bring electricity to 288,000 rural household in TN
and across the nation.

The Social Cost of the Depression

• Ordinary Americans suffered because the economy was slow to recover in the 1930s.
As late as 1939, 9.5 million workers were unemployed (17%). Petty theft, begging,
homelessness, and prostitution increased. 1.5 million husbands had left home. The
birthrate plummeted and 1/5 of children did not get enough food. 900,000 children
left home and became “tramps”.

• The “dust bowl” hit hard in Colorado, New Mexico, Kansas, Nebraska, Texas, and
Oklahoma. In 1937, there were seventy-two major dust storms known as “black
blizzards.” By 1938, 25 million acres of prairie land had lost most of its topsoil. The
dust storms were worse than usual because of the spread of industrial agriculture and
new farming techniques which had loosened the soil.

• Some 800,000 people migrated to California from Arkansas, Texas, Missouri, and
Oklahoma (and other states) during the dust bowl. Many felt that California had
plenty of jobs, but competition with Latinos and Asians, social prejudice, and poor
living conditions forced almost 1/3 to return home.

• FDR was fearful of alienating conservative southern Democrats, so many of the New
Deal programs were for whites only.
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• To earn federal payment for reducing crop production, many farmers would first cut
production on the marginal land used by tenants and sharecroppers, most of whom
were blacks or Latinos. Over 200,000 African American tenant farmers nationwide
were displaced by the AAA.

• Many Mexican-Americans, due to ignorance about regulations or inability to meet

residency requirements, were unable to prove US citizenship and, therefore, were
ineligible for New Deal relief programs. By 1935, 500,000 Mexican-Americans and
there American-born children returned to Mexico.

• Native Americans were devastated by the Great Depression but hopeful at FDR’s
appointment of John Collier as commissioner of the Bureau of Indian Affairs. Collier
gained the Indians access to New Deal benefits, but was mainly concerned with the
passage of the Indian Reorganization Act, which passed Congress in a diluted
form. (pg 841 for proposed legislation)

Culture in the Thirties

• John Steinbeck’s Grapes of Wrath: novel published in 1939 and written by John
Steinbeck, who was awarded the Pulitzer Prize in 1940 and the Nobel Prize for
Literature in 1962. Set during the Great Depression, the novel focuses on the Joads, a
poor family of sharecroppers driven from their Oklahoma home by drought,
economic hardship, and changes in financial and agricultural industries.

• Richard Wright’s Native Son: Wright was an American author of powerful,

sometimes controversial novels, short stories and non-fiction. Much of his literature
concerns racial themes. His work helped redefine discussions of race relations in
America in the mid-20th century. Native Son tells the story of 20-year-old Bigger
Thomas, an African American living in utter poverty.

• Radio: By the 1930s, 10 million households had radios and that tripled by the end of
the decade as they became a major source of family entertainment. Late-afternoon
radio was tailored towards children, and evening broadcasts were usually family
comedy or adventure dramas. Religious services were often broadcast on Sunday and
people also listened to sporting events. FDR was the first president to take full
advantage of radio broadcasting through his “fireside chats”.

• Movies: Even more popular than they are today, movies attracted more than 60% of
the population every week during the 1930s. Movies rarely dealt with the issues of
the Depression, as they were seen as a way to escape the realities of life.

o Horror Films: Dracula (1931), Frankenstein (1931), etc.

o Comedy Films: Marx Brothers, The Cocoanuts (1929), etc.

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V. The Second New Deal

• The president’s travels and speeches, twice-weekly press conferences, and his
radio-broadcast fireside chats brought vitality and warmth in contrast to
Hoover’s aloof coldness
• Congressional elections of 1934- Dems increase strength in House and Senate
• Only 7 Repub governors remain
A. Eleanor Roosevelt
1. Embraced social service
2. 1918- Roosevelt affair with secretary Lucy Mercer
3. First women to address natl political convention, write a natl
syndicated column and hold regular press conferences
4. Represented the president, defied local segregation ordinances to
meet with African American leaders, supported women’s causes
and organized labor, highlighted plight of unemployed youth,
implored Americans to live up to egalitarian/humanitarian ideals
B. Criticism
1. Unemployment rate rising 10 mill out of work of 1935, more
than 20% of workforce
2. Growth of executive power and emergence of welfare
capitalism workers developed sense of entitlement to fed
support programs
3. American Liberty League- group of conservative businessmen
and politicians, including Alfred E. Smith and John W. Davies;
opposed New Deal measures as violations of personal and
property rights
4. “Kingfish” Senator Huey P. Long
a. Political boss of LA state dictator using bribery, physical
intimidation and blackmail to achieve ends
b. Initially supported New Deal grew suspicious of NRA’s
collusion with big business and jealous of Roosevelt’s
popularity
c. Long’s Share-the-Wealth Program- proposed to confiscate
large personal fortunes, guarantee every fam a cash grant of
$5000 and every worker an annual income of $2500, provide
pensions to aged, reduce working hrs, pay veterans’ bonuses,
ensure college education for every qualified student
d. Claimed 7.5 mill supporters
5. Francis E. Townsend
a. Townsend Recovery Plan- pay $200 a month to every citizen
over 60 who retired from employment and promised to spend
money within each month
b. Lure of providing financial security for the aged and
stimulating econ growth
c. Critics noted that cost would be more than half of natl income,
benefit only 9% of pop
6. Father Charles E. Coughlin
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a. “radio priest”
b. National Union for Social Justice- promoted schemes for
coinage of silver and made attacks on bankers that increasingly
hinted at anti-Semitism
7. Long had widest following of three
8. Pol pressures impelled Roosevelt to move to left, but so did
growing influence within admin from Supreme Court justices
Louis Brandeis and Felix Frankfurter urged to be less cozy
with big business and push for restored competition and heavy
taxes on large corporations

C. Opposition from the Court

1. Schechter Poultry Corporation v. United States (1935)- killed
the NIRA by unanimous vote
2. Ruled that Congress had delegated too much power to the
executive branch when it granted code-making authority to the
NRA
3. Congress also exceeded its power under commerce clause by
regulating interstate commerce
D. Legislative Achievements of the Second New Deal
1. National Labor Relations Act (Wagner Act)- gave workers the
right to bargain with employers through unions of their own
choice and prohibited employers from interfering with union
activities
a. National Labor Relations Board- supervise plant elections
and certify unions as bargaining agents where a majority of the
workers approved
b. Investigate actions of employers and issue “cease-and desist”
orders against specified unfair practices
2. Social Securities Act of 1935
a. New Deal’s “cornerstone” and “supreme achievement”
b. Proposed by Progressives in early 1900s, enacted by other
nations
c. Center-piece a federally administered pension fund for retired
ppl over age of 65 and their survivors
d. 1937- workers and employees contributed payroll taxes to
establish fund; 1940- benefit programs started and avg $22 per
month
e. Shared federal-state unemployment insurance program,
financed by payroll tax on employers
f. New legislation committed natl govt to broad range of social
welfare activities based upon assumption that “unemployables
would remain state responsibility while natl govt would
provide work relief for able-bodied
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g. Federal grants-in-aid for old-age- assistance, aid to dependent

children and aid to blind and further aid for maternal, child-
welfare and public health services
h. Financed on earnings of workers: most other countries funded
such programs out of general revenues
i. Regressive tax: single fixed rate for all, regardless of income
level
j. Took money out of workers’ pockets and placed it in pension
trust fund, exacerbating the shrinking money supply
k. Blunted sharp increase in public consumption; initially
excluded 9.5 mill workers who most needed new program
3. Revenue Act of 1935 (Wealth-Tax Act of soak-the-rich tax)-
raised tax rates on income above $50000; estate and gift taxes
rose as did corporate tax on all but small corporations
a. By “soaking” the rich, Roosevelt stole thunder of political left,
although results of tax policy fell short of promise
b. Failed to increase fed revenue significantly, nor did it result in
significant redistribution of wealth
VI. Roosevelt’s Second Term
A. The Election of 1936
1. Democrats- Roosevelt
2. Republicans- Alfred M. Landon of Kansas
3. Republicans hoped followers of Long, Coughlin and Townsend
would combine to draw enough votes from Roosevelt to throw
election to them, supported William Lemke of ND
4. Roosevelt held support of traditional Dems in N and S, made
strong gains among beneficiaries of New Deal farm programs in
W
5. In N cities, Roosevelt held to ethnic groups helped by New Deal
welfare programs
6. Middle-class voters who property had been saved flocked to
support him as did intellectuals and revived trade unions
7. 81% of those with income under $1000 opted for Roosevelt;
46% of earnings over $5000 voted for FDR
8. Roosevelt won by carrying every state except Maine and
Vermont, with a popular vote of 27.7 mill to Landon’s 16.7 mill
9. Dems dominated Repubs in new Congress
B. The Court-Packing Plan
1. End of 1936 term, Court ruled against New Deal programs in 7
of 9 major cases it reviewed; suits against Social Security and
Wagner Acts pending
2. Resolved to change Court’s conservative stance by enlarging
Court create 50 new fed judges, including 6 new SC justices,
and diminish pwr of judges who served 10 or more yrs or
reached 70
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3. Affronted elder men in Congress including Justice Brandeis and

ran headlong into deep-rooted public veneration of courts and
aroused fears that a future president might use precedent for
quite diff purposes
4. 1937- SC reverse previous judgments in order to uphold Wagner
and Social Security Act; named vacancy in SC to Senator Hugo
Black of AL (New Dealer)
5. Fractured Dem party and blighted Roosevelt’s prestige
C. A New Direction for Unions
1. John L. Lewis- head of United Mines Workers; increased
membership from 150,000 to 500,000 within a yr
2. Sidney Hillman and David Dubinsky joined Lewis in promoting
campaign to organize workers in mass-production industries
3. found smaller, more restrictive craft unions to be obstacles to
organizing country’s basic industries
4. Committee for Industrial Organization (CIO)- fear
submergences by mass unions of mostly unskilled workers
5. AFL expelled CIO unions in 1936 renamed Congress of
Industrial Organization
6. CIO main drives in automobile and steel industries were
thwarted by management’s use of blacklisting, private detectives,
labor spies, vigilante groups and other forms of intimidation to
suppress unions
7. “sit-down strikes”- workers refused to leave a plant until
employers had granted collective-bargaining rights to their union
8. Walter Reuther- led thousands of employees at General Motors
to occupy factories and stop all production
9. Standoff lasted a month, signed contract recognizing United
Automobile Workers
10. US Steel capitulated the Steel Workers Organizing Committee
(US Steelworkers of America) granting union recognition and its
members a 10% wage hike and a 40 hr workweek
11. Union membership in US grew from under 3 mill in 1933 to 8.5
mill in 1940
12. Wages rose and working conditions improved
13. Union members solidly Democrats
D. A Slumping Economy
1. 1935-1936 economy showed signs of recovery
2. Spring of 1937- econ output moved above 1929 level
3. Roosevelt ordered sharp cuts in fed spending and reduced
disposable income out of fear of deficits and rising inflation
4. Slump of 1937- sharper than that of 1929
5. End of 1937- addtl 4 mill ppl thrown out of work
6. One group, led by Treasury Secretary Henry Morgenthau,
favored less federal spending and a balanced budget
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7. Other group, included Harry Hopkins and Harold Ickes, argued

for renewed govt spending and stricter enforcement of anti-trust
laws
E. Economic Policy and Later Reforms
1. Spring of 1938, FDR asked Congress to adopt a large-scale
spending program intended to increase mass purchasing pwr and
Congress voted almost $3.3 bill, mainly for public-works
projects
2. Only massive crisis of WWII would return US econ to full
production/employment
3. Wagner-Steagall Natl Housing Act of 1937
a. Set up the US Housing Authority in Dept of Interior-
extended long-term loans to local agencies willing to assume
part of the cost of slum clearance and public housing;
subsidized rents for low-income residents
4. Bankhead-Jones Farm Tenant Act
a. Offered loans to prevent marginally profitable farm owners
from sinking into tenancy
b. Offered loans to help tenants purchase their own farms
c. Proved to be little more than another relief operation tiding a
few farmers over during difficult times
5. Fair Labor Standards Act of 1938
a. Applied only to employees in enterprises that operated in or
affected interstate commerce
b. Set a minimum wage of 40 cents an hour and a maximum
workweek of forty hrs to be put into effect over several yrs
c. Prohibited employment of children under 16
d. Southern congressmen opposed bill bc it raised wages in region
and increased employer’s expense
VII. The Legacy of the New Deal
A. Setbacks for the President
1. S Dems were uneasy of organized labor and Afr Americans and
more began cooperating with Repubs
2. By end of 1937, anti-New Deal bloc developed in Congress
3. FDR announced plan to campaign in Dem primaries as party
leader with goal of seeing own supporters nominated
4. Opponents tagged intervention an attempt to “purge” the Dem
party of S conservatives
5. Elections of 1938- Dem House and Senate numbers dropped
6. Administrative Reorganization Act of 1939- president could
“reduce, coordinate, consolidate, and reorganize” the agencies of
govt
B. A Halfway Revolution
1. Bigger govt and revived public confidence
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2. Went beyond concept of regulated capitalism by insisting that

govt not simply respond to social crises but take positive steps to
avoid them
3. New Deal programs sought to ensure min level of well-being for
all Americans
4. Established min qualitative standards for labor conditions and
public welfare and helped middle-class Americans hold on to
savings, homes and farms
5. Protection afforded by bank-deposit insurance, unemployment
pay and Social Security pensions would come to be universally
accepted as safeguards against future depressions
6. Between extremes of laissez-faire capitalism and socialism
7. FDR flexible in developing policy; kept what worked, discarded
what didn’t