Chapter 21 The New Deal, 1932–1940 The Grand Coulee Dam on the Columbia River in the Pacific Northwest, when completed in 1941, was the largest man-made structure in world history. It eventually produced more than 40 percent of America’s hydroelectric power, creating cheap electricity for rapid economic and industrial growth in that region in the 1940s and beyond. The dam was part of a “public works revolution” that transformed the American economy and landscape in the 1930s. The administration of Franklin D. Roosevelt spent far more money on building roads, dams, airports, bridges, and housing as part of the New Deal than on any other activity. The Columbia River project was part of broad changes in American life and thought during the New Deal in the 1930s. The Democratic Party was transformed into a coalition of farmers, industrial workers, a reform-friendly urban middle class, liberal intellectuals, northern African-Americans, and the white-supremacist South, united by the belief that the federal government should protect Americans from the disruptions of modern capitalism. “Liberalism,” traditionally understood as limited government and laissez-faire economics, took on its modern meaning—an active national government that helped the less fortunate in society. The Great Depression and the New Deal also changed the meaning of freedom. Economic security became an essential element of how Americans thought of freedom. New Deal measures like the Social Security Act, which assisted the unemployed and elderly, and the Fair Labor Standards Act, which established a national minimum wage, guaranteed Americans the social conditions necessary for freedom. But the New Deal also expressed, and in some ways reinforced, the boundaries of freedom. Its programs benefitted industrial workers but not tenant farmers, men far more than women, and whites far more than blacks who, in the South, were still denied basic citizenship rights.

Warm Up 3.18.14 So…. Was FDR a socialist or a “champion of freedom?

Map 21.1 Columbia River Basin project, 1949 Give Me Liberty!: An American history, 3rd Edition Copyright © 2011 W.W. Norton & Company

The First New Deal FDR and the Election of 1932 Symbolically represented the ordinary American Privileged childhood & Harvard educated Contracted Polio after VP run in 1920 Promised a NEW DEAL Fairness, balanced budget, repeal Prohibition Won in a landslide = 57% of the popular vote Dems won majorities in both Senate and House Paradoxically, Franklin D. Roosevelt (FDR)—raised in privilege on a New York country estate, came to symbolically represent the ordinary American citizen. Like Lincoln, FDR’s greatness was his capacity to reject traditional ideas while confronting national crisis. FDR, as he liked to be called, was born in 1882, a fifth cousin of Theodore Roosevelt. He graduated from Harvard and served in the New York state legislature and as undersecretary of the Navy in World War I. After he ran for vice-president on the Democratic ticket in 1920, he contracted polio and lost the use of his legs—a fact concealed from the public in the pre-television era. Very few Americans realized that this powerful president was confined to a wheelchair. In his speech accepting the Democratic nomination for president in 1932, Roosevelt promised a “new deal” for the American people. But his campaign offered few specific proposals. Roosevelt discussed government’s responsibility to ensure that every man had “a right to make a comfortable living,” but he also wanted a balanced federal budget and criticized Hoover for excessive federal spending. The biggest difference between Hoover and FDR’s campaigns was the Democrats’ call to repeal Prohibition. Americans desperately wanted new leadership. Roosevelt won an overwhelming 57 percent of the popular vote, and Democrats gained a majority in both houses of Congress.

Map 21.2 The Presidential Election of 1932 Give Me Liberty!: An American history, 3rd Edition Copyright © 2011 W.W. Norton & Company

The First New Deal The Coming of the New Deal crisis around the globe Britain, France, Germany, Soviet Union, & Japan all react conservatively FDR viewed New Deal as alternative to socialism, fascism, and unregulated capitalism *what is Fascism again? The Depression provoked different responses across the globe. For most of the 1930s, conservative governments ruled in Britain and France, and they did little to resolve the crisis. In Germany, Adolf Hitler of the Nazi Party established one of the most brutal dictatorships in human history, banning all political opposition and terrorizing Jews. In the Soviet Union, the tyrannical Joseph Stalin launched five-year plans that industrialized that nation and allegedly eliminated unemployment, at great social cost. Japan’s militarist government invaded China in 1937 and aspired to dominate all Asia. Roosevelt envisioned the New Deal as an alternative to socialism, fascism, and unregulated capitalism. He wanted to reconcile democracy, individual liberty, and economic planning. But he did not begin his first term as president with a full-fledged plan. He initially depended on a group of intellectuals and social workers who took key positions in his administration. They included secretary of labor Frances Perkins, a veteran of Hull House and the New York Consumers’ League; Harry Hopkins, who directed emergency relief during Roosevelt’s term as New York’s governor; secretary of the interior Harold Ickes, a veteran of Theodore Roosevelt’s Progressive campaign of 1912; and Louis Brandeis, who had advised Woodrow Wilson in 1912 and now advised FDR while serving on the Supreme Court. Although these individuals represented the influence of Progressivism on Roosevelt and the New Deal, they had no unified position. Brandeis, for one, thought large corporations not only were too powerful but also had contributed to the Depression by keeping prices artificially high and limiting workers’ purchasing power. He argued they should be broken up, not regulated. Yet the “brains trust,” a group of academics that included a number of Columbia University professors, thought bigness was inevitable in a modern economy. They believed the competitive marketplace had disappeared and that large firms should be managed and directed by the government, not broken up. Their view most decisively shaped what came to be known as the First New Deal.

The First New Deal The Banking Crisis More financial reforms: Restore confidence! Declared a “bank holiday” Temp halted all banking in the U.S. Called special session in Congress and passed: Emergency Banking Act More financial reforms: Glass- Steagall Act FDIC Not one bank failed in 1936! FDR realized that Americans needed leadership and action immediately, and when he took office on March 4, 1933, he acted quickly. He started a campaign of reassuring Americans and restoring their confidence. At his inauguration, he declared that “the only thing we have to fear is fear itself.” His first step was to confront a banking system about to collapse. Banks that had invested funds in the stock market were failing, and by March 1933, banking was suspended in most states. Roosevelt declared a “bank holiday,” temporarily halting all bank operations, and called a special session of Congress, which, on March 9, passed the Emergency Banking Act to provide funds to endangered banks. Additional measures transformed the American financial system. The Glass-Steagall Act barred commercial banks from buying and selling stocks, and until its repeal in the 1990s helped prevent many irresponsible practices that led to the stock market crash. The same law established the Federal Deposit Insurance Corporation (FDIC), which ensured the accounts of individual depositors. Roosevelt also took the United States off the gold standard, thus breaking the link between the nation’s currency and the gold reserves, making it possible to issue more money and stimulate more business activity. These efforts together saved the financial system and greatly increased the government’s power over it. While 5,000 banks had failed between 1929 and 1933 (a full third of the total banks in the United States), not one bank failed in 1936.

The First New Deal The NRA, AAA, & CCC Government Jobs National Recovery Administration Agricultural Adjustment Administration Civilian Conservation Corps Government Jobs Federal Emergency Relief Administration CCC – temporary jobs that improved the nation The banking acts were the first of a series of laws in the first three months of FDR’s administration, a period known as the “Hundred Days.” Roosevelt used the crisis and his electoral mandate to pressure Congress into passing laws to stimulate the economy. Congress established a plethora of “alphabet” agencies, such as the National Recovery Administration (NRA), Agricultural Adjustment Administration (AAA), and the Civilian Conservation Corps (CCC), to direct the recovery. Never had an American president exercised such power or so quickly expanded the role of the federal government in Americans’ lives. The key to Roosevelt’s plan for recovery was the National Industrial Recovery Act (NIRA), largely based on the government-business partnership created by the War Industries Board in World War I. The law established a National Recovery Administration (NRA) to set industry codes with groups of business leaders that would be guidelines for output, prices, and working conditions. This, it was hoped, would end the cutthroat competition that drove companies out of business, in part by exempting these industry-wide agreements from antitrust laws. FDR thus effectively repudiated an older idea of liberty based on the belief that the best way to encourage economic activity and ensure a fair distribution of wealth was to allow market competition to unfold free from government interference. To win support from labor, section 7a of the NIRA recognized workers’ right to organize unions, a sharp departure of the open-shop policies of the 1920s and a move toward “industrial freedom.” The NRA soon adopted codes that set standards for production, prices, and wages in the textile, steel, mining, and auto industries. The agency launched a publicity campaign to promote itself and its symbol, the Blue Eagle, was displayed in stores and factories affected by the codes. But the NRA became controversial when it was shown to have allowed large companies to dominate the code-writing process. Large corporations and companies raised prices, limited production, laid off workers, and divided markets among themselves at the expense of smaller competitors. Many anti-union companies ignored section 7a. The agency lacked the personnel to enforce the 750 codes throughout the nation by 1935. The NRA did not create recovery or cooperation between capital and labor. The Hundred Days also saw government relief to the needy. Roosevelt and most of his advisors believed direct government payments to the unemployed would erode individual self-reliance, and the Economy Act reduced federal spending in the hopes of winning business support. But with nearly 25 percent unemployment, relief spending was inevitable. In May 1933, Congress established the Federal Emergency Relief Administration to make grants to local relief agencies. But FDR preferred to create temporary jobs that would decrease unemployment while improving the nation’s infrastructure of roads, bridges, public buildings, and parks. In March 1933, Congress established the Civilian Conservation Corps (CCC), which set unemployed young men to work on projects like forest preservation and the improvement of national parks and wildlife preserves. By its end in 1942, the CCC had employed more than 3 million people.

The First New Deal Public Works Projects The New Deal and Agriculture $3.3 Billion in funding Roads, schools, hospitals, and other public facilities. Employed over 4 million people The New Deal and Agriculture AAA – raise farm prices Benefited large farmers, not small farmers or field laborers Severe drought (most severe in America’s history!) Dust Bowl The NIRA also created the Public Works Administration (PWA) and funded it with $3.3 billion. Directed by secretary of the interior Harold Ickes, the PWA built roads, schools, hospitals, and other public facilities. In November 1933, the Civil Works Administration (CWA) was launched, and in a few months it employed more than 4 million people in constructing highways, tunnels, courthouses, and airports. But costs soon skyrocketed and criticisms mounted that the New Deal was creating a class of Americans permanently dependent on government jobs. In response, FDR dismantled the CWA. Other public-works projects involved government planned economic transformation, such as the Tennessee Valley Authority (TVA), which built dams to prevent floods along the Tennessee River Valley and provide cheap electricity in a region with many isolated and rustic households. The TVA for the first time had the federal government producing electricity in competition with private companies and served as a model for regional planning that would economically develop the West. The Hundred Days also included efforts to improve conditions for farmers. The Agricultural Adjustment Administration (AAA) let the government try to raise farm prices by establishing production quotas for major crops and paying farmers not to plant more. Many crops were destroyed, and most controversially, 6 million pigs were slaughtered. The AAA successfully raised farm prices and incomes. But large farmers benefitted the most, and few small farmers, tenant farmers, and agricultural laborers received assistance. AAA policies actually encouraged the eviction of tenants, many of whom took to the roads and migrated to the West Coast. The beginning, in 1930, of unusually dry weather in the Midwest also worsened the Depression’s effect on rural America. By the mid-1930s, the most severe drought in the nation’s history caused soil that had deteriorated from modern farming methods to simply blow away in the wind, creating the Dust Bowl, as areas in Oklahoma, Texas, Kansas, and Colorado were called. The drought and storms displaced more than 1 million farmers, whose massive trek to the Pacific Coast was captured in John Steinbeck’s novel, The Grapes of Wrath.

Map 21.3 The Dust Bowl, 1935-1940 Give Me Liberty!: An American history, 3rd Edition Copyright © 2011 W.W. Norton & Company

The First New Deal The New Deal and Housing The Court and the New Deal Depression destroyed housing industry FHA – Federal Housing Administration Insured millions of long-term mortgages Built low rent housing The Court and the New Deal 21st Amendment – repealed Prohibition (18th Amendment) SEC – Securities and Exchange Commission FCC – Federal Communications Commission Supreme Court began to strike at New Deal policies Majority of Justices were Republican By the late 1920s, home ownership had become a sign of respectability among the middle class and offered security to workers who faced low wages, irregular employment, and limited occupational mobility. The Depression destroyed the American housing industry. The building of new homes virtually halted, and banks and savings and loans associations that financed home ownership collapsed or survived by foreclosing on mortgages. President Hoover established a federally sponsored bank to issue home loans, but only with the New Deal did the federal government systematically intervene in the housing market. Roosevelt stated that “the security of the home” was a fundamental right. In 1933 and 1934, and his administration undertook efforts to protect home owners from foreclosure and stimulate new construction. The Home Owners Loan Corporation and Federal Housing Administration (FHA) insured millions of long-term mortgages issued by private banks. The government also built thousands of units of low-rent housing. Thanks to the FHA and later the Veterans Administration, home ownership became a reality for tens of millions of families. In FDR’s first two years, the Twenty-first Amendment, repealing Prohibition, was ratified, the Federal Communications Commission was established to supervise radio and telephone communications, and the Securities and Exchange Commission was created to regulate stock and bond markets. The First New Deal was a series of experiments, some of which failed, that transformed the role of the federal government and assisted millions of Americans in the mist of the Depression. But it did not end the Depression. In 1934, 10 million Americans, more than 20 percent of the labor force, was still out of work. In 1935, the Supreme Court, still dominated by conservative Republican judges who believed in nineteenth-century notions of freedom such as liberty of contract, began to strike down New Deal laws. The NRA was declared unconstitutional because its codes and regulations delegated legislative powers to the president and attempted to regulate local businesses not engaged in interstate commerce. In January 1936, the Court killed the AAA, which it declared an unconstitutional use of congressional power over local economic activity. In June 1936, the Court ruled that New York could not set a minimum wage for women and children.

Warm Up 3.21.14

Warm Up 3.21.14 Please answer the following question in your binder: Why do you think FDR was so popular?

Agenda 03.21.14 Announcements/ Housekeeping New Deal Cont…. APUSH EXAM SIGN UP  Q3 EXAM WWI, 20’s, Depression, New Deal New Deal Cont…. Notes ( 5 slides) VoF #140 HW: GML 884 - 898

The Second New Deal The Works Progress Administration (WPA) and the Wagner Act Launched in 1935 Centered around economic security Rural Electrification Agency (REA) Brought electricity to homes Promoted soli conservation and family farming Works Progress Administration (WPA) 3 million Americans a year until 1943 Buildings, murals, historical guidebooks These popular movements and the CIO helped create the Second New Deal, launched by Roosevelt in 1935 after Democratic gains in Congress in 1934 and his failure to lift the Depression. The First New Deal focused on economic recovery; the Second was centered on economic security—the guarantee that government would protect Americans from unemployment and poverty. The belief that a lack of consumer demand caused the Depression had become popularized by Long, Townsend, and the CIO. By 1935, many New Dealers believed government should no longer try to stimulate business recovery but should redistribute income in order to sustain mass purchasing power in the consumer economy. Congress imposed a tax on large fortunes and corporate profits, and created the Rural Electrification Agency (REA) to bring electricity to homes, thus enabling rural Americans to purchase household appliances. The REA brought electricity to millions of homes and was one of the most successful New Deal programs. The federal government also tried to promote soil conservation and family farming, as policymakers believed that prosperity was impossible when farmers’ standard of living lagged behind that of urban workers and the middle class. In 1934, FDR had limited federal employment programs. But now he established a Works Progress Administration (WPA), which hired 3 million Americans each year until it ended in 1943. Directed by Harry Hopkins, the WPA transformed the American landscape. It built thousands of public buildings, bridges, roads, airports, stadiums, swimming pools, and sewage treatment plants. The WPA even employed white-collar professionals. The most famous WPA projects were in the arts and included murals, historical and tourist guidebooks, and also in Federal Theater and Dance Projects. In 1935, Congress also created a National Youth Administration to provide relief to American teenagers and young adults. The Wagner Act was another major Second New Deal measure. It democratized the American workplace by empowering a National Labor Relations Board to supervise elections in which employees voted on union representation. Sponsored by Robert Wagner of New York, the bill also made illegal “unfair labor practices” such as firing and blacklisting union organizers that had stymied organization in the past. Collective bargaining was redefined as a crucial element of American freedom and, now legally protected, would offer workers a mechanism by which they could win higher wages and thus contribute to the recovery.

The Second New Deal The American Welfare State Social Security Act The MOST important element of the 2nd New Deal Gov’t responsibility to look out for material welfare of ordinary Americans Unemployment Insurance Pensions Aid to disabled, elderly, and families with dependent children American version of the welfare state The Social Security Act was the most important element of the Second New Deal. It represented Roosevelt’s belief that the government had to guarantee the material well-being of ordinary Americans. It established a system of unemployment insurance, old age pensions, and aid to the disabled, elderly poor, and families with dependent children. Though these programs built on old Progressive proposals, this was a permanent system of social insurance. The Social Security Act created the American version of the welfare state—a term with origins in World War II-era Britain that referred to income assistance, medical care, and social services for all citizens. Although unprecedented in American history, the American welfare state, compared to welfare states in Europe, was more decentralized, spent less, and covered fewer citizens. The original Social Security bill contained a system of national health insurance that was eliminated after vehement opposition by the American Medical Association, which feared government regulation of doctors’ incomes and practices. While some New Dealers wanted a universal program funded by general tax revenues with a single set of eligibility standards administered by federal officials, Secretary of labor Frances Perkins and powerful Congressmen wanted to keep relief in state and local hands and make workers contribute to the costs of their own benefits. FDR wanted Social Security taxes to come from employers and workers, rather than general revenues, in order to give working citizens a “legal, moral, and political right” to collect their old age pensions and unemployment benefits, which Congress would not dare violate. Thus Social Security became a mixture of national and local funding, control, and eligibility standards. Old age pensions were administered nationally but paid for by taxes on workers and employers. These taxes also paid for unemployment insurance, but this was decentralized, allowing states to set unemployment benefit levels. The states paid most of the costs for direct poor relief in a program called Aid to Dependent Children, and eligibility and payment varied greatly. Social Security was a significant departure in American government’s traditional function, and the Second New Deal dramatically changed the relationship between the federal government and American citizens. Before the 1930s, Americans asked whether the government should intervene in the economy. After the New Deal, Americans asked only how the government should intervene.

The Social Security System A mixture of national and local funding, control, and eligibility standards. Pensions administered nationally, but paid for by taxes on workers and employers. unemployment insurance, The states paid most $$ for direct poor relief in a program called Aid to Dependent Children Key Ideas: Social Security was a significant departure in American government’s traditional function New Deal dramatically changed relationship between Gov’t and People Before the 1930s, Americans asked whether the government should intervene in the economy. After the New Deal, Americans asked only how the government should intervene.

A Reckoning with Liberty FDR and the Idea of Freedom Tied freedom to the growing power of the federal gov’t The Election of 1936 Fireside Chats Liberalism Large, active, and socially conscious gov’t Opponents painted FDR as a dictator who threatened traditional American freedoms FDR vs. Alfred Landon FDR won in landslide w/ the New Deal Coalition The Depression ensured that Americans would face, in the words of one writer, a “reckoning with liberty.” FDR declared that for too many Americans, “life was no longer free; liberty no longer real; men no longer follow the pursuit of happiness.” Most Americans assumed that liberty required a new meaning. The New Deal transformed the idea of freedom by tying it to the growing power of the national government. Roosevelt was not just a master politician but also a brilliant communicator, and with his opponent controlling most newspapers, he turned to the radio to reach Americans with weekly broadcasts called “fireside chats” in order to build support for his policies. FDR adopted old terms and ideas to defend his innovative policies, most notably “liberalism,” which he redefined as large, active, and socially conscious government. In his second fireside chat, Roosevelt contrasted the older notion of liberty as liberty of contract, which served the “privileged few,” to his definition of liberty as “greater security for the average man.” He continued to positively associate freedom with economic security and identify economic inequality as its greatest foe. Yet, “liberty” defined as freedom from powerful government animated his opponents. They argued that New Deal spending undermined fiscal responsibility and that new regulations suppressed American freedom. Conservative businessmen and politicians formed an organization to oppose his policies called the American Liberty League. As the 1930s went on, his opponents increasingly employed the language of liberty to paint FDR as a dictator who threatened traditional American freedoms. By 1936, politics reflected class divisions more than at any other point in American history. Working-class voters provided large majorities for the Democratic Party, and large and small businessmen were alienated from the New Deal. Americans divided over their definitions of liberty. One magazine editor said that citizens had two opposing concepts of liberty, one based on free enterprise, the other a “socialized liberty” based on an equality of wealth and goods. A fight over the ideal of freedom defined the 1936 presidential campaign. The Democrats insisted that in a modern economy the government is obliged to guarantee a “democracy of opportunity” for all. Roosevelt, in his speech accepting the nomination, attacked “economic royalists” who intended to establish a tyranny over ordinary people. He insisted that economic rights were the precondition for liberty and that poor men “are not free men.” FDR argued that large corporations constituted a “new despotism” that threatened economic freedom. FDR faced Republican nominee and former Kansas governor Alfred Landon, who denounced Social Security and other New Deal programs as a threat to individual liberty. Roosevelt, however, won by a landslide, carrying every state except for Maine and Vermont. Strong support from organized labor, and his ability to unite southern white and northern black voters, Protestant farmers and urban Catholic and Jewish ethnics, and industrial workers and middle-class home owners won him the election. These groups formed the so-called New Deal coalition that dominated American politics for the next fifty years.

The End of the Second New Deal The Court Fight Proposed that presidents should be able to appoint a new SC justice for each who remained on the Court past age 70. (six at the time were over this age) Goal – change the balance of power to the Dems Worked to “influence the Court” The End of the Second New Deal The Second New Deal slowed after the court-packing fight. Although the Housing Act,. By 1938, Roosevelt adopted this solution, known as Keynesian economics, and he asked Congress for billions for more work relief and farm aid. The New Deal had shifted from economic planning, to economic redistribution, to public spending. The Second New Deal was over. At his inauguration, FDR admitted the Depression was not over and promised to do more to help the significant minority of American still in need of assistance. Encouraged by his massive victory, Roosevelt committed what many believe was an enormous error. Arguing that several Supreme Court justices were too old to perform their functions, he proposed that the president be allowed to appoint a new justice for each who remained on the Court past age seventy (six at that time). FDR’s goal was to change the balance of power on a Court that might invalidate Social Security, the Wagner Act, and other parts of the Second New Deal. Immediately FDR was criticized as an aspiring dictator. Congress rejected the plan. But Roosevelt influenced the Supreme Court, as the “court-packing” threat seemed to persuade the Court to accept economic regulation by the state and federal governments. The Court soon upheld a minimum wage law, affirmed federal power to regulate wages, hours, child labor, and rejected challenges to Social Security and the Wagner Act. Chief Justice Charles Evans Hughes said that while “freedom of contract” did not appear in the Constitution, “liberty” did, and it required legal protections against social evils that menace the people’s welfare. The Second New Deal slowed after the court-packing fight. Although the Housing Act, passed in 1937, signaled the first major effort to build homes for the poorest in America, the Fair Labor Standards bill languished in Congress for a year before it passed in 1938, banning goods produced by child labor, setting a minimum wage, and requiring overtime pay for more than forty hours of work per week. This established federal regulation of wages and working conditions, a radical departure from pre-Depression policies. In 1937, the economy slumped sharply, after FDR, who saw economic improvements in 1936, had decreased federal farm and WPA work relief. This caused business investment, production, and stocks to also fall and unemployment to rise. In 1936, in The General Theory of Employment, Interests, and Money, John Maynard Keynes criticized economists’ commitment to balanced budgets. He argued that massive government spending was needed, even at the cost of deficits, to sustain purchasing power and stimulate economic activity during downturns. By 1938, Roosevelt adopted this solution, known as Keynesian economics, and he asked Congress for billions for more work relief and farm aid. The New Deal had shifted from economic planning, to economic redistribution, to public spending. The Second New Deal was over.

Figure 21.2 Unemployment, 1925–1945 Give Me Liberty!: An American history, 3rd Edition Copyright © 2011 W.W. Norton & Company