Chapter 37 FDR and the New Deal

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					                         Chapter 33 FDR and the New Deal

How serious was the situation? FDR’s friend said, “If you succeed you’ll go down as
the greatest president.” FDR replied, “If I fail, I’ll go down as the last one.”

4 March 1933      25% Unemployment—35% for Blacks
                  13 million unemployed = 30 million family members w/o support
                  Not enough money in the Federal Treasury to meet the payroll

FDR didn’t know what to do. No one did.
    But FDR was willing to try. If it worked—fine. If it didn’t—try something

Hoover believed: Depression was spawned overseas                 we’re powerless.
FDR believed: Depression was spawned in USA                      we can do something.

FDR’s Three R’s

Relief, Reform, Recovery

100 Days—March 9-June 16, 1933

Short range goals: Relief and short-term recovery.
Long term goals: Recovery and reform.

*Congress was willing to let FDR lead. FDR was the first “imperial president.”

Banks:      FDR closes banks for one week—“Bank Holiday”
            Purpose: review the stability of each bank in the US
            At that time banks held $6 billion in assets v. $41 billion in debt.

            Much of the $6 billion was tied-up on mortgages
            People were keeping their money in their homes—they didn’t trust the
            banks—5,500 had already failed

EBRA (March 9, 1933) Banks closed and inspected
Glass-Steagall Banking Reform Act (June 16, 1933) Creates FDIC (up to $5,000)

FDR orders gold supplies turned in for currency and takes US off gold standard except
for foreign debt obligations.

FDR causes inflation by increasing gold price: $21 oz in 1933           $35 oz in 1934
Beer and Wine Revenue Act—March 22, 1933 (lite beer and wine—less than 3.2%
18th Amendment repealed in late 1933


CCC—March 31, 1933              3 million young men are eventually put to work
                                (75% of their pay is sent home)

FERA (the dole) May 12, 1933—designed to limit adult unemployment
    Eventually $3 billion in payments and work projects

Farm Relief:

AAA May 12 , 1933—made millions of dollars in help available to farmers to help
them pay their mortgages.

“Parity Prices” for goods were established by “artificial scarcity”
      Prices were set at 1909-1914 levels—not war boom years

Money was to be raised by taxing the food processors             pass cost on to the

People were outraged when farmers destroyed crops and livestock.

Supreme Court kills the AAA in 1936 (which was good for FDR because it was
floundering anyway)

Homeowner Relief

HOLC June 13, 1933—Refinanced over 1,000,000 home mortgages

Emergency Jobs

CWA (Civilian Works Administration)—Not in the 100 days, but it’s a relief
organization—makes work during the winter of 1933-34

NRA and the PWA are also created during the 100 Day—more later.
Other Voices:

   1. Father Coughlin: Catholic Priest from Michigan—believed in “social justice”
            At first he was pro-FDR, but soon grows very conservative (almost a
   2. Huey P. Long: From Louisiana—“Every man a king” and “Share our wealth.”
            Every family was to receive $5,000 (taken from the wealthy)
            Long is assassinated in summer 1935 by a man who didn’t like his policies.
   3. Francis Townsend, California—Every person 60 + years gets $2,000 a month, but
      must spend it that month. This plan was far too costly to carry-out. The amount
      = ½ of the national income.

After the 100 Days—Into Early 1934

Economy is still a shambles—but things are a little better—the bottom hasn’t fallen out
and anarchy doesn’t rule. No-one is starving (at least there isn’t mass starvation).
      *Tell Harlem story.

National Recovery Act (NRA) and the PWA—June 16, 1933

Designed to cover all three Rs both short and long term. (labor, industry, unemployed)
     1. Industries work-out max hours and minimum pay schedules               more folks
     getting hired.
     2. Labor—gets the right to organize and bargain collectively

NRA is very popular at first—blue eagle is displayed in store windows.
     At first business activity goes up but the NRA concept requires too much self-
     sacrifice—idea is to get rid of wasteful competition.
     NRA goals were mandatory.

1935—Supreme Court rules in the Schecter “sick chicken” decision to kill the NRA.
     FDR is angry, but the NRA is dying by 1935.

PWA (Public Works Administration)

Harold L. Ickes—spends over $4 billion on 34,000 projects


Late 1933 drought strikes the Great Plains
      1933-1938 over 350,000 Arkies and Okies trek to California alone
Frazier-Lemke Farm Bankruptcy Act 1934—imposes a five year suspension on
foreclosures. SC strikes it down. FDR revises it to three years. SC says ok.

1935 Resettlement Administration: job is to move dustbowl farmers

Native Americans

Dawes Act of 1887—overturned by the Indian Reorganization Act of 1934 (also known
as the Indian New Deal). This act allows tribes to reorganize and have local govt’s.
200 Tribes reorganize.


   1. Truth in Securities Act—1933
   2. SEC—1934
   3. Public Utilities Holding Company Act—1935
            Keeps huge super corporations from being formed


Eventually $13 billion was invested—original law was passed during the 100 Days

Land affected = size of England
2.5 million of the poorest Americans

TVA resulted in a “planned economy”

Electricity: TVA         20 dams built along the Tennessee River and tributaries
                         US Gov’t gets into the electricity business
                         *contrast that with Hoover

US & Tenn. Valley        cheap electricity, housing, nitrates, soil restoration,
                         reforestation, schools, improved navigation, flood control

Supporters want the TVA concept carried to the Missouri, Colorado & Columbia Rivers
                       Conservatives limited it to the Tenn. River Valley

FHA 1934 Federal Housing Authority: loaned $ to folks to remodel or build houses.
                          Outlasts the Depression.

USHA 1937 United States Housing Authority—specifically aimed at replacing slums.
                          650,000 units planned but it falls far short

Social Security

Social Security Act of 1935 provides for Federal and State unemployment insurance and
                         old age payments ($10-$85 a month)

By 1939 45 million Americans are eligible.

Strikes and Labor Laws and Unions

NRA gave some rights to strike, but the SC struck the NRA down in 1935

Later in 1935 Congress passes the Wagner Act which creates the NLRB
                        National Labor Relations Board

The Wagner Act is important because it protects labor.

John L. Lewis and the Congress of Industrial Workers split from the AF of L in 1938
         The CIO is a union of unskilled workers
         The two unions reunite in the 1950s     AFL-CIO America’s largest Union

General Motors Strike of 1936—sit down strike and it works

US Steel is next target        US Steel gives in to workers’ demands and gives CIO
         negotiating rights
However, the smaller companies crack-down violently on strikers
         But unlike the 1920s and earlier the American Populace is shocked

1938 Fair Labor Standards Act     sets min wage and max hours on interstate
        commerce. Child labor under 16 is banned and under 18 if dangerous.
1936 Election

FDR vs. Gov. Alf Landon—Gov. of Kansas

Who supported FDR? Look at the alphabet soup agencies and see who he helped—
        remember the cartoon of FDR and the “forgotten man”

         FDR                                Landon
         27,750,000 PV                      16,679,000 PV
         523 EV                             8 EV

*Demos get a 2/3 majority in the House and Senate
*FDR sees his election as a mandate to continue the New Deal
    He ends up blowing much of his political capital on hare-brained schemes

The Court Packing Fiasco

The Supreme Court was obstructionist and not a help to recovery.

1937 (out of the blue) FDR proposes adding one justice for every justice over 70 who
wouldn’t retire (max # of justices 15)

People (even FDR supporters) are hugely opposed to this—it upsets the balance of
power between the branches of gov’t

OUTCOME:           1. Justice Roberts switches and starts voting in favor of New Deal
                   programs—this swings the balance from 4-5 to 5-4

                   2. Congress passes laws giving SC justices who retire full pay—one
                      immediately retires—eventually FDR appoints all nine

1937 Recession

FDR thought the economy was doing better so he cut-back gov’t programs—the result
was a down-turn of the economy.

Unemployment lingered at near 15%

FDR switches to a Keynesian “planned deficit” mode of spending

FDR has the economy off life support but not out of the hospital

1. Balanced Budget Folks:                Debt: $19.5 billion in 1932
                                               $40.4 billion in 1939
                                               $258 billion in 1945

2. Pre-planners:    Couldn’t stand FDR’s “try anything” approach

3. Ardent Anti-Communists: “Red Deal”

4. Anti-Semites: “Jew Deal” and “President Rosenfield”

5. Businessmen: “we can’t pull ourselves out of trouble because of high taxes”

6. Checks and balances folks: FDR tried to make the president too powerful
                  This group was particularly upset in 1940 when FDR breaks the 3rd
                  term precedent

Did the New Deal Work?

      YES                                                   NO

People didn’t revolt                                 Still in the Depression in 1937
Unemployment somewhat lower                          $20+ billion spent for what$
Crisis made somewhat tolerable                       Only WW II ended the Depression
Saved capitalism from itself
Killed socialism in America
       “carried it out on a stretcher”

Final analysis: Do you live in a capitalist/democratic society today?