Reference

Foner, Eric. Give Me Liberty!, 6th Edition (Volume 2). W. W. Norton, 2019.

Intext Citation: (Foner)

CHAPTER- 21
THE FIRST NEW DEAL
FDR and the Election of 1932
It is indeed paradoxical that Franklin D. Roosevelt, who had been raised in privilege on a
New York country estate, came to be beloved as the symbolic representative of ordinary
citizens. But like Lincoln, with whom he is often compared, Roosevelt's greatness lay in his
willingness to throw off the "dogmas of the quiet past" (Lincoln's words) to confront an
unprecedented national crisis. FDR, as he liked to be called, was born in 1882, a fifth cousin
of Theodore Roosevelt. He graduated from Harvard in 1904 and six years later won election
to the New York legislature from Dutchess County, site of his family's home at Hyde Park.
After serving as undersecretary of the navy during World War I, he ran for vice president on
the ill-fated Democratic ticket of 1920 headed by James M. Cox. In 1921, he contracted polio
and lost the use of his legs, a fact carefully concealed from the public in that pre-television
era. Very few Americans realized that the president who projected an image of vigorous
leadership during the 1930s and World War II 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 only vague hints of what this
might entail. Roosevelt spoke of the government's responsibility to guarantee "every man... a
right to make a comfortable living." But he also advocated a balanced federal budget and
criticized his opponent, President Hoover, for excessive government spending. The biggest
difference between the parties during the campaign was the
Democrats' call for the repeal of Prohibition, although Roosevelt certainly suggested a greater
awareness of the plight of ordinary Americans and a willingness to embark on new ways to
address the Great Depression. Battered by the economic crisis, Americans in 1932 were
desperate for new leadership, and Roosevelt won a resounding victory. He received
57 percent of the popular vote, and Democrats swept to a commanding majority in Congress.
The Coming of the New Deal
The Depression did not produce a single pattern of international public response. For nearly
the entire decade of the 1930s, conservative governments ruled Britain and France.
They were more interested in preserving public order than relieving suffering or embarking
on policy innovations. In Germany, Adolf Hitler, leader of the Nazi Party, established one of
the most brutal dictatorships in human history. Hitler banned all political opposition and
launched a reign of terror against Jews and others deemed to be "un-German." In the Soviet
Union, another tyrant, Joseph Stalin, embarked on successive five-year plans that at great
social cost produced rapid industrialization and claimed to have eliminated unemployment.
Roosevelt conceived of the New Deal as an alternative to socialism on the left, Nazism on the
right, and the inaction favored by upholders of unregulated capitalism. He hoped to reconcile
democracy, individual liberty, and economic recovery and development. "You have made
yourself," the British economist John Maynard Keynes wrote to FDR, "the trustee for those in
every country who seek to mend the evils of our condition by reasoned experiment within the
framework of the existing social system." If Roosevelt failed, Keynes added, the only
remaining choice would be between “orthodoxy" (that is, doing nothing) and "revolution."
Roosevelt did not enter office with a blueprint for dealing with the Depression. At first, he
relied heavily for advice on a group of intellectuals and social workers who took up key
positions in his administration. They included Secretary of Labor Frances Perkins, a veteran
of Hull House and the New York Consumers' League who had been among the eyewitnesses
to the Triangle fire of 1911; Harry Hopkins, who had headed emergency relief efforts during
Roosevelt's term as governor of New York; Secretary of the Interior
Harold Ickes, a veteran of Theodore Roosevelt's Progressive campaign of 1912; and Louis
Brandeis, who had advised Woodrow Wilson during the 1912 campaign and now offered
political advice to FDR while serving on the Supreme Court.
The presence of these individuals reflected how Roosevelt drew on the reform traditions of
the Progressive era. But Progressivism, as noted in Chapter 18, was hardly a unified
movement, and Roosevelt's advisers did not speak with one voice. Brandeis believed that
large corporations not only wielded excessive power but also had contributed to the
Depression by keeping prices artificially high and failing to increase workers' purchasing
power. They should be broken up, he insisted, not regulated. But the "brains trust"-a group of
academics that included a number of Columbia University professors-saw bigness as
inevitable in a modern economy. The competitive marketplace, they argued, was a thing of
the past, and large firms needed to be managed and directed by the government, not
dismantled. Their view prevailed during what came to be called the First New Deal.
The Banking Crisis
"This nation asks for action and action now," Roosevelt announced on taking office on March
4, 1933. The country, wrote the journalist and political commentator Walter
Lippmann, "was in such a state of confused desperation that it would have followed almost
any leader anywhere he chose to go." FDR spent much of 1933 trying to reassure the public.
In his inaugural address, he declared that "the only thing we have to fear is fear itself."
Roosevelt confronted a banking system on the verge of collapse. As bank funds invested in
the stock market and corporate bonds lost their value and panicked depositors withdrew their
savings, bank after bank closed its doors. By March 1933, banking had been suspended in a
majority of the states-that is, people could not gain access to money in their bank accounts.
Roosevelt declared a "bank holiday," temporarily halting all bank operations, and called
Congress into special session. On March 9, it rushed to pass the Emergency
Banking Act, which provided funds to shore up threatened institutions.
Further measures soon followed that transformed the American financial system. The Glass-
Steagall Act barred commercial banks from becoming involved in the buying and selling of
stocks. Until its repeal in the 199os, the law prevented many of the irresponsible practices
that had contributed to the stock market crash. The same law established the
Federal Deposit Insurance Corporation (FDIC), a government system that insured the
accounts of individual depositors. And Roosevelt took the United States off the gold standard
-that is, he severed the link between the country's currency and its gold reserves, thus making
possible the issuance of more money in the hope of stimulating business activity.
Together, these measures res rescued the financial system and greatly increased the
government's power overer it. About 5,000 banks-one-third of the nation's total-had failed
between 1929 and 1933, representing a loss of tens of millions of dollars to depositors. In
1936, not a single bank failed in the United States.
The NRA
The Emergency Banking Act was the first of an unprecedented flurry of legislation during the
first three months of Roosevelt's administration, a period known as the Hundred
Days. Seizing on the sense of crisis and the momentum of his electoral victory, Roosevelt
won rapid passage of laws he hoped would promote economic recovery. He persuaded
Congress to create a host of new agencies, whose initials soon became part of the language of
politics-NRA, AAA, CCC. Never in American history had a president exercised such power
in peacetime or so rapidly expanded the role of the federal government in people's lives.
The centerpiece of Roosevelt's plan for combating the Depression, the National Industrial
Recovery Act, was to a large extent modeled on the government-business partnership
established by the War Industries Board of World War I, although in keeping with FDR's
nondogmatic approach, it also owed something to Herbert Hoover's efforts to build stronger
government-business cooperation. Roosevelt called it "the most important and far-reaching
legislation ever enacted by the American Congress." The act established the
National Recovery Administration (NRA), which would work with groups of business
leaders to establish industry codes that set standards for output, prices, and working
conditions. Thus, "cutthroat" competition (in which companies took losses to drive
competitors out of business) would be ended. These industry-wide arrangements would be
exempt from antitrust laws.
The NRA reflected how even in its early days, the New Deal reshaped understandings of
freedom. In effect, FDR had repudiated the older idea of liberty based on the idea that the
best way to encourage economic activity and ensure a fair distribution of wealth was to allow
market competition to operate, unrestrained by the government. And to win support from
labor, section 7a of the new law recognized the workers' right to organize unions-a departure
from the "open shop" policies of the 192os and a step toward government support for what
workers called "industrial freedom."
Headed by Hugh S. Johnson, a retired general and businessman, the NRA quickly established
codes that set standards for production, prices, and wages in the textile, steel, mining, and
auto industries. Johnson launched a publicity campaign to promote the NRA and its symbol,
the Blue Eagle, which stores and factories that abided by the codes displayed. But after initial
public enthusiasm, the NRA became mired in controversy. Large companies dominated the
code-writing process. An inquiry conducted by the labor lawyer Clarence
Darrow in 1934 concluded that they used the NRA to drive up prices, limit production, lay
off workers, and divide markets among themselves at the expense of smaller competitors.
Many anti-union employers ignored section 7a. The government lacked the manpower to
police the 750 codes in effect by 1935. The NRA produced neither economic recovery nor
peace between employers and workers. It did, however, help to undercut the pervasive sense
that the federal government was doing nothing to deal with the economic crisis.
Government Jobs
The Hundred Days also brought the government into providing relief to those in need.
Roosevelt and most of his advisers shared the widespread fear that direct government
payments to the unemployed would undermine individual self-reliance. Indeed, one of the
first measures of the Hundred Days had been the Economy Act, which reduced federal
spending in an attempt to win the confidence of the business community. But with nearly a
quarter of the workforce unemployed, spending on relief was unavoidable. In May 1933,
Congress created the Federal Emergency Relief Administration, to make grants to local
agencies that aided those impoverished by the Depression. FDR, however, much preferred to
create temporary jobs, thereby combating 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, flood control, and the
improvement of national parks and wildlife preserves. By the time the program ended in
1942, more than 3 million persons had passed through CCC camps, where they received
government wages of $30 per month. The CCC made a major contribution to the
enhancement of the American environment.
Public-Works Projects
One section of the National Industrial Recovery Act created the Public Works Administration
(PWA), with an appropriation of $3.3 billion. Directed by Secretary of the Interior
Harold Ickes, it contracted with private construction companies to build roads, schools,
hospitals, and other public facilities, including New York City's Triborough (now Robert F.
Kennedy) Bridge and the Overseas Highway between Miami and Key West, Florida. In
November 1933, yet another agency, the Civil Works Administration (CWA), was launched.
Unlike the PWA, it directly hired workers for construction projects. By January 1934, it
employed more than 4 million persons in the construction of highways, tunnels, courthouses,
and airports. But as the cost spiraled upward and complaints multiplied that the New Deal
was creating a class of Americans permanently dependent on government jobs, Roosevelt
ordered the CWA dissolved.
Some New Deal public-works initiatives looked to government-planned economic
transformation as much as economic relief. product of the Hundred Days, built a series of
dams to prevent floods and deforestation along the Tennessee River and to prov seven-state
region where many families still lived in isolated log cabins. The TVA put the federal
government, for the first time with private companies. It significantly improved the lives of
many southerners and offered a preview of the program of region of the West.
The New Deal and Agriculture
Another policy initiative of the Hundred Days addressed the disastrous plight of American
farmers. The Agricultural Adjustme set production quotas for major crops and pay farmers to
plant less in an attempt to raise farm prices. Many crops already in ordered more than 6
million pigs slaughtered as part of the policy, a step critics found strange at a time of
widespread hunger.
The AAA succeeded in significantly raising farm prices and incomes. But not all farmers
benefited. Money flowed to property-c worked on land owned by others. The AAA policy of
paying landowning farmers not to grow crops encouraged the eviction of t joined the rural
exodus to cities or to the farms of the West Coast.
The onset in 1930 of a period of unusually dry weather in the nation's heartland worsened the
Depression's impact on rural An century's most severe drought. Mechanized agriculture in
this semiarid region had pulverized the topsoil and killed native gra of the soil away, creating
the Dust Bowl, as the affected areas of Oklahoma, Texas, Kansas, and Colorado were called.
A local n Some New Deal public-works initiatives looked to government-planned economic
transformation as much as economic relief. The Tennessee Valley Authority (TVA), another
product of the Hundred Days, built a series of dams to prevent floods and deforestation along
the Tennessee River and to provide cheap electric power for homes and factories in a seven-
state region where many families still lived in isolated log cabins. The TVA put the federal
government, for the first time, in the business of selling electricity in competition with private
companies. It significantly improved the lives of many southerners and offered a preview of
the program of regional planning that spurred the economic development of the West.
The New Deal and Agriculture
Another policy initiative of the Hundred Days addressed the disastrous plight of American
farmers. The Agricultural Adjustment Act (AAA) authorized the federal government to set
production quotas for major crops and pay farmers to plant less in an attempt to raise farm
prices. Many crops already in the field were destroyed. In 1933, the government ordered
more than 6 million pigs slaughtered as part of the policy, a step critics found strange at a
time of widespread hunger.
The AAA succeeded in significantly raising farm prices and incomes. But not all farmers
benefited. Money flowed to property-owning farmers, ignoring the large number who worked
on land owned by others. The AAA policy of paying landowning farmers not to grow crops
encouraged the eviction of thousands of poor tenants and sharecroppers. Many joined the
rural exodus to cities or to the farms of the West Coast.
The onset in 1930 of a period of unusually dry weather in the nation's heartland worsened the
Depression's impact on rural America. By mid-decade, the region suffered from the century's
most severe drought. Mechanized agriculture in this semiarid region had pulverized the
topsoil and killed native grasses that prevented erosion. Winds now blew much of the soil
away, creating the Dust Bowl, as the affected areas of Oklahoma, Texas, Kansas, and
Colorado were called. A local newspaper described the situation in Cimarron
County, Oklahoma: "Not a blade of wheat; cattle dying on the range, ninety percent of the
poultry dead because of the sand storms, milk cows gone dry." One storm in 1934 carried
dust as far as Washington, D.C. The drought and dust storms displaced more than 1 million
farmers. John Steinbeck's novel The Grapes of Wrath (1939) and a popular film based on the
book captured their plight, tracing a dispossessed family's trek from Oklahoma to California.
Another New Deal initiative, the Resettlement Administration, established in 1934, sought to
relocate rural and urban families suffering from the Depression to communities planned by
the federal government. Headed by Columbia University economist Rexford G. Tugwell, one
of Roosevelt's advisers, it set up relief camps for migrant workers in California (many of
whom had been displaced by the dust storms) and built several new communities, including
Greenbelt just outside Washington, D.C.
The New Deal and Housing
Owning one's home had long been a widely shared American ambition. "A man is not a
whole and complete man," Walt Whitman had written in the 185os, "unless he owns a house
and the ground it stands on." For many members of the middle class, home ownership was a
mark of respectability. For workers, it offered economic security at a time of low wages,
erratic employment, and limited occupational mobility. On the eve of World War I, a
considerably higher percentage of immigrant workers than the native-born middle class
owned their homes.
The Depression devastated the American housing industry. The construction of new
residences all but ceased, and banks and savings and loan associations that had financed
home ownership collapsed or, to remain afloat, foreclosed on many homes (a quarter of a
million in 1932 alone). In 1931, President Hoover convened a Conference on Home Building
and
Home Ownership to review the housing crisis. The president called owning a home an
American "birthright," the embodiment of the spirit of "enterprise, of independence, and of
freedom." Rented apartments, he pointed out, did not inspire "immortal ballads" like Home,
Sweet Home or The Little Gray Home in the West. Papers presented at the conference
revealed that millions of Americans lived in overcrowded, unhealthy urban slums or in
ramshackle rural dwellings. Private enterprise alone, it seemed clear, was unlikely to solve
the nation's housing crisis.
Hoover's administration established a federally sponsored bank to issue home loans. Not until
the New Deal, however, did the government systematically enter the housing market.
Roosevelt spoke of "the security of the home" as a fundamental right akin to "the security of
livelihood, and the security of social insurance." In 1933 and 1934, his administration moved
energetically to protect home owners from foreclosure and to stimulate new construction. The
Home Owners Loan Corporation and Federal Housing Administration (FHA) insured
millions of long-term mortgages issued by private banks. At the same time, the federal
government itself built thousands of units of low-rent housing. New Deal housing policy
represented a remarkable departure from previous government practice. Thanks to the FHA
and, later, the Veterans' Administration, home ownership came within the reach of tens of
millions of families. It became cheaper for most Americans to buy single-family homes than
to rent apartments.
Other important measures of Roosevelt's first two years in office included the ratification of
the Twenty-first Amendment to the Constitution, which repealed Prohibition; the
establishment of the Federal Communications Commission to oversee the nation's broadcast
airwaves and telephone communications; and the creation of the Securities and
Exchange Commission to regulate the stock and bond markets. Taken together, the First New
Deal was a series of experiments, some of which succeeded and some of which did not. They
transformed the role of the federal government, constructed numerous public facilities, and
provided relief to millions of needy persons. Public employment rescued millions of
Americans from the ravages of the Depression. But while the economy improved somewhat,
sustained recovery had not been achieved. Some 10 million Americans-more than 20 percent
of the workforce-remained unemployed when 1934 came to an end.
The Court and the New Deal
In 1935, the Supreme Court, still controlled by conservative Republican judges who held to
the nineteenth-century understanding of freedom as liberty of contract, began to invalidate
key New Deal laws. First came the NRA, declared unconstitutional in May in a case brought
by the Schechter Poultry Company of Brooklyn, which had been charged with violating the
code adopted by the chicken industry. In a unanimous decision, the Court declared the NRA
unlawful because in its codes and other regulations it delegated legislative powers to the
president and attempted to regulate local businesses that did not engage in interstate
commerce. In January 1936, the AAA fell in United States v. Butler, which declared it an
unconstitutional exercise of congressional power over local economic activities. In June, by a
5-4 vote, the justices ruled that New York could not establish a minimum wage for women
and children.
Having failed to end the Depression or win judicial approval, the First New Deal ground to a
halt. Meanwhile, pressures were mounting outside Washington that propelled the
administration toward more radical departures in policу.

THE SECOND NEW DEAL

Spurred by the failure of his initial policies to pull the country out of the Depression and the
growing popular clamor for greater economic equality, and buoyed by Democratic gains in
the midterm elections of 1934, Roosevelt in 1935 launched the Second New Deal. The first
had focused on economic recovery. The emphasis of the second was economic security-a
guarantee that Americans would be protected against unemployment and poverty. "Boys,"
Roosevelt's relief administrator, Harry Hopkins, told his staff, "this is our hour. We've got to
get everything we want-a [public] works program, social security, wages and hours,
everything-now or never."
The idea that lack of consumer demand caused the Depression had been popularized by Huey
Long, Francis Townsend, and the CIO. More and more New Dealers concluded that the
government should no longer try to plan business recovery but should try to redistribute the
national income so as to sustain mass purchasing power in the consumer economy. A series
of measures in 1935 attacked head-on the problem of weak demand and economic inequality.
Congress levied a highly publicized tax on large fortunes and corporate profits
-a direct response to the popularity of Huey Long's Share Our Wealth campaign. It created
the Rural Electrification Agency (REA) to bring electric power to homes that lacked it80
percent of farms were still without electricity in 1934-in part to enable more Americans to
purchase household appliances.
The REA proved to be one of the Second New Deal's most successful programs. By 1950, 9o
percent of the nation's farms had been wired for electricity, and almost all now possessed
radios, electric stoves, refrigerators, and mechanical equipment to milk cows. In addition, the
federal government under the Second New Deal tried to promote soil conservation and family
farming. This effort resulted from the belief that the country would never achieve prosperity
so long as farmers' standard of living lagged well behind that of city dwellers, and that rural
poverty resulted mainly from the poor use of natural resources. Thus, farmers received
federal assistance in reducing soil loss in their fields. These measures (like those of the AAA)
mainly benefited landowners, not sharecroppers, tenants, or migrant workers. In the long run,
the Second New Deal failed to arrest the trend toward larger farms and fewer farmers.
The WPA and the Wagner Act
In 1934, Roosevelt had severely curtailed federal employment for those in need. Now, he
approved the establishment of the Works Progress Administration (WPA), which hired some
3 million Americans, in virtually every walk of life, each year until it ended in 1943. Under
Harry Hopkins's direction, the WPA changed the physical face of the United States.
It constructed thousands of public buildings and bridges, more than 500,000 miles of roads,
and 600 airports. It built stadiums, swimming pools, and sewage treatment plants.
Unlike previous work relief programs, the WPA employed many out-of-work white-collar
workers and professionals, even doctors and dentists.
Perhaps the most famous WPA projects were in the arts. The WPA set hundreds of artists to
work decorating public buildings with murals. It hired writers to produce local histories and
guidebooks to the forty-eight states and to record the recollections of ordinary Americans,
including hundreds of former slaves. Its Federal Theater Project put on plays, including an
all-black production of Macbeth and Sinclair Lewis's drama It Can't Happen Here, about
fascism coming to the United States. The Federal Music Project established orchestras and
choral groups, and the Federal Dance Project sponsored ballet and modern dance programs.
Thanks to the WPA, audiences across the country enjoyed their first glimpse of live musical
and theatrical performances and their first opportunity to view exhibitions of American art.
Also in 1935, Congress created the National Youth
Administration to provide relief to American teenagers and young adults.
Another major initiative of the Second New Deal, the Wagner Act, was known at the time as
"Labor's Magna Carta" (a reference to an early landmark in the history of freedom).
This brought democracy into the American workplace by empowering the National Labor
Relations Board to supervise elections in which employees voted on union representation.
It also outlawed "unfair labor practices," including the firing and blacklisting of union
organizers. The bill's main sponsor, Robert Wagner of New York, told the Senate that the
ability of workers to pool their strength through collective bargaining represented the "next
step" in "the evolution of American freedom." He also promised that unionization and higher
wages would aid economic recovery by boosting the purchasing power of ordinary
Americans.
The American Welfare State
The centerpiece of the Second New Deal was the Social Security Act of 1935. It embodied
Roosevelt's conviction that the national government had a responsibility to ensure the
material well-being of ordinary Americans. It created a system of unemployment insurance,
old age pensions, and aid to the disabled, the elderly poor, and families with dependent
children.
None of these were original ideas. The Progressive platform of 1912 had called for old age
pensions. Assistance to poor families with dependent children descended from the mothers'
pensions promoted by maternalist reformers. Many European countries had already adopted
national unemployment insurance plans. What was new, however, was that in the name of
economic security, the American government would now supervise not simply temporary
relief but a permanent system of social insurance.
The Social Security Act launched the American version of the welfare state-a term that
originated in Britain during World War II to refer to a system of income assistance, health
coverage, and social services for all citizens. The act illustrated both the extent and the limits
of the changes ushered in by the Second New Deal. The American welfare state marked a
radical departure from previous government policies, but compared with similar programs in
Europe, it has always been far more decentralized, involved lower levels of public spending,
and covered fewer citizens. The original Social Security bill, for example, envisioned a
national system of health insurance. But Congress dropped this after ferocious opposition
from the American Medical Association, which feared government regulation of doctors'
activities and incomes.
The Social Security System
Some New Dealers desired a program funded by the federal government's general tax
revenues and with a single set of eligibility standards administered by national officials. But
Secretary of Labor Frances Perkins, along with powerful members of Congress, wished to
keep relief in the hands of state and local authorities and believed that workers should
contribute directly to the cost of their own benefits. Roosevelt himself preferred to fund
Social Security by taxes on employers and workers, rather than out of general government
revenues. He wanted to ensure that Social Security did not add to the federal deficit and
believed that paying such taxes gave contributors "a legal, moral, and political right" to
collect their old age pensions and unemployment benefits, which no future Congress could
rescind.
As a result, Social Security emerged as a hybrid of national and local funding, control, and
eligibility standards. Old age pensions were administered nationally but paid for by taxes on
employers and employees. Such taxes also funded payments to the unemployed, but this
program was highly decentralized, with the states retaining considerable control over the
level of benefits. The states paid most of the cost of direct poor relief, under the program
called Aid to Dependent Children, and eligibility and the level of payments varied
enormously from place to place. As will be discussed later, the combination of local
administration and the fact that domestic and agricultural workers were not covered by
unemployment and old age benefits meant that Social Security at first excluded large
numbers of Americans, especially unmarried women and non-whites.
Nonetheless, Social Security represented a dramatic departure from the traditional functions
of government. The Second New Deal transformed the relationship between the federal
government and American citizens. Before the 1930s, national political debate often revolved
around the question of whether the federal government should intervene in the economy.
After the New Deal, debate rested on how it should intervene. In addition, the government
assumed a responsibility, which it has never wholly relinquished, for guaranteeing Americans
a living wage and protecting them against economic and personal misfortune. "Laissez-faire
is dead," wrote Walter Lippmann, "and the modern state has become responsible for the
modern economy [and] the task of insuring... the standard of life for its people."