Reform And New Deal Wrap-Up

Between 1933 and 1935, President Roosevelt and Congress created 10 essential programs designed provide immediate relief to those in need and to help the economy recover, putting it back on track.

The third goal of the New Deal was reform. What was this “R” all about?

Glass-Steagall Banking Act (1933) - Created the FDIC which ensured individual bank deposits up to $5,000. - If banks collapsed, the US govt. would give people the money they lost, up to $5,000. - Separated savings / commercial banks from investment banks.

The stock market crash was caused, in part, by unwise practices such as speculation, and a lack of education about the health of American companies. FDR wanted to fix these problems.

Federal Securities Act FSA did two things of importance: - Forced companies to disclose information about their profits and losses, and their overall ability to succeed. - Established the SEC to enforce regulation and prevent corrupt practices.

In 1935, the Supreme Court dealt FDR and the New Deal a series of setbacks.

The court declared parts of the NRA unconstitutional arguing that they overstepped the boundaries of power in the federal government.

FDR, and Democrats in Congress, attempted to save various parts of the NRA by passing new versions they hoped would be found constitutional if challenged.

Wagner Act - Guaranteed workers the right to join a union, bargain for a contract, and strike if necessary. - Established the National Labor Relations Board to mediate labor disputes and enforce pro-labor laws.

Fair Labor Standards Act - Re-established a federally mandated minimum wage. - Re-established the 9 hour work day. - Put an end to child labor. Minimum working age was 16, 18 in hazardous jobs

The Supreme Court was not the only critic of Roosevelt and his New Deal polices as we have suggested.

Some, like Henry Ford, argued that much of Roosevelt’s job programs, went too far. Americans were being paid by the U.S. government to perform pointless tasks and build unnecessary projects. Mostly men like Ford were worried about the massive amount of debt the New Deal created.

All told, Roosevelt’s programs cost the U. S. $32 billion by 1939 All told, Roosevelt’s programs cost the U.S. $32 billion by 1939. Today that equals ½ a trillion.

Were did this money come from? Bonds

In doing so, he cutback programs like the WPA. In an attempt to silence critics like Ford, and to keep a campaign promise made in 1932, Roosevelt slashed government spending to balance the budget and reduce the national debt. In doing so, he cutback programs like the WPA.

Because programs were scaled back, fewer jobs were created, less money was spent, and demand for consumer products went down. This is known as…. The Roosevelt Recession

Roosevelt began to realize that if he was really going to turn things around he would have to spend more money and sink the U.S. into massive debt.

To support this decision, FDR turned to the economic philosophy of John Maynard Keynes.

Keynsian Economics Taking the government into debt was okay in times of crisis. Jobs had to be created to get the economy going again. - Using government money to create those jobs was the only way to make that happen. (Priming the pump)

Jobs give people paychecks Govt $ Creates Jobs Jobs give people paychecks People hopefully buy stuff with that $ Increases demand for consumer goods To meet that new demand, factories hopefully hire more workers This gives more people a paycheck and the cycle starts over

Keynsian Economics They key to the whole thing was the government starting the process. Any debt acquired by the government would be short term. - Once the economy had recovered, the government could slowly raise taxes to collect the necessary $ to pay of the debt.

Government spending increased largely halting the recession by the end of 1938. However, by 1938-1939, foreign affairs began to dominate American politics, and the debate over the New Deal faded into the background.

What did the New Deal accomplish? 1. It helped put millions of Americans back to work, giving them a paycheck, making positive contributions to society at the same time. To a certain extent it brought about Relief, Recovery, and Reform. 2. It did not solve the overall problem of the Great Depression. Even though the US government had spent the equivalent of $500 Billion, the programs were still not large enough!

What did the New Deal accomplish? 3. It greatly expanded the size and power of the federal government. It created huge government programs like Social Security, and vastly increased the national debt. 4. It increased the role of government in people’s lives. The government began to provide social welfare and promised to help Americans in times of need. 5. It split America between those who believed the government should help and those who did not. This split has grown over time.

Fin.