OVERVIEW / U.S. History II
Depression & New Deal
Part 1: Roosevelt's New Deal
The Twentieth Amendment, which moved the presidential inauguration from March 4 to January 20, was ratified in early 1933, making Roosevelt the last president elected under the old system. In the four‐month interregnum between the election and the inauguration, the economy deteriorated rapidly. Industrial production fell to its lowest level, more Americans lost their jobs, and banks failed at such an alarming rate that virtually all were closed by the time Roosevelt took the oath of office. With the aid of a group of economic and academic advisors known as the brain trust and a cabinet that included the first woman (Frances Perkins, Secretary of Labor), Roosevelt met the devastation of the Depression with a willingness to act and experiment. Through his speeches and famous radio addresses (popularly called “fireside chats”), he encouraged Americans to have confidence in the future.
THE HUNDRED DAYS
The Hundred Days refers to the almost frantic period of legislative activity initiated by the White House between March and June 1933 to deal with the immediate economic crisis and the country's long‐term recovery. On March 5, Roosevelt declared a four‐day bank holiday. All financial institutions in the country were closed and, under the Emergency Banking Reform Act (March 9), only those that were fiscally sound were allowed to reopen. Roosevelt's quick action did much to restore faith in the banking system. The Glass‐Steagall Banking Act (June 16) boosted confidence even further by setting up the Federal Deposit Insurance Corporation (FDIC), which guaranteed bank deposits up to $5,000. The Civilian Conservation Corps (March 31) addressed unemployment and provided work for young men between the ages of 18 and 25 in national parks and on road building, reforestation, and flood‐control projects. The Federal Emergency Relief Administration (FERA), headed by social worker Harry Hopkins, provided money to states and municipalities for direct relief through massive public works projects.
During the Hundred Days, the administration also implemented a regional planning program. In preparing for war in 1916, the federal government had developed hydroelectric‐power and nitrate plants at Muscle Shoals, Alabama. After the war, the future of the Muscle Shoals plants was caught up in the struggle between private utilities and public power. An advocate for public power while governor of New York, Roosevelt supported the creation of the Tennessee Valley Authority (TVA), established May 18. Building dams and power plants and stringing transmission lines, the TVA brought electricity, flood control, and recreational facilities to the seven states through which the Tennessee River flowed, substantially improving the economy and daily lives of the people in one of the poorest regions of the country. As useful as much of the Hundred Days legislation was, however, the two most important and controversial acts passed in that period dealt with agriculture and industry.
CHANGES IN AGRICULTURE
The New Deal significantly enlarged the role the federal government played in agriculture. Its emphasis was on those who were severely hurt by the Depression, and it had significant success in restoring a measure of prosperity to agriculture even before the start of World War II. The Farm Credit Act (1933) protected farmers against foreclosure on their property, while the Commodity Credit Corporation extended loans to farmers on their crops. The loans made to electrical cooperatives through the Rural Electrification Administration (1935) doubled the number of farms receiving electricity by 1941. Meanwhile, agencies such as the Soil Conservation Service (1935), the Resettlement Administration (1935), and the Farm Security Administration (1937) were committed to improving farming techniques as well as the lot of migrant farm workers, tenant farmers and sharecroppers, and the rural poor.
The most important New Deal program aimed at helping agriculture, however, was the Agricultural Adjustment Act (AAA), passed on May 12. The purpose of the AAA was to get at the root of the farmers' dilemma — whenever prices fell, farmers increased production, which caused a market glut and depressed prices further. Through the AAA, farmers were paid to reduce their crops, either by plowing them under or by not cultivating a certain amount of acreage. The targeted commodities were wheat, cotton, corn, tobacco, rice, milk, and hogs (young livestock were slaughtered). The cost of the program was assumed by a tax on middlemen and food processors, such as grain elevator operators and meatpacking companies. The goal was to restore parity, or to give the American farmer the same purchasing power he enjoyed in the boom years between 1909 and 1914. By 1934, the production of several staple crops had decreased and farm prices, as well as farm income, rose accordingly.
The overall upward trend in farm prices and income was helped, ironically, by several years of drought in the mid 1930s that turned much of the topsoil of the Great Plains farmland into dust and made producing crops in these regions impossible. The farmers living in the drought‐stricken areas watched their crops, grass, and livestock slowly die. Although some impoverished families migrated to California in the hope of finding work, the majority of farmers remained on their land and endured the dust storms and hardships of the drought until it broke in 1939.
The New Deal also expanded the government's role in industry. Passed on June 16, the National Industrial Recovery Act (NIRA) suspended antitrust laws and instituted codes of fair competition in each industry. The legislation recognized the right of workers to organize and engage in collective bargaining, and the labor provisions of the fair‐competition codes established the 40‐hour week, set a minimum weekly wage, and prohibited child labor under the age of 16. The National Recovery Administration (NRA)pushed the drafting of codes by rallying public support behind the program; shops, stores, and business that complied with the codes in their industry were encouraged to display the “Blue Eagle” symbol of the NRA and consumers were expected to patronize those establishments. The codes seemed to encourage increases in both wages and prices, but critics claimed the NRA actually limited competition and encouraged monopoly. The NIRA was ultimately declared unconstitutional by the Supreme Court in 1935.
The NIRA also earmarked $3.3 billion for public works through the Public Works Administration (PWA). The purpose of the PWA was to “prime the pump” — in other words, government spending would provide jobs that would both increase consumer buying power and provide industry with a much needed stimulus. Under Secretary of the Interior Harold Ickes, who also served as the head of the PWA, the effort focused on permanent and socially useful projects, including the first federal housing program, support for public power through reclamation projects in the West, and a range of public improvements from bridges to lighthouses.