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The New Deal
The New Deal represents the response of President Franklin D. Roosevelt's administration to the Great
Depression that gripped the nation from 1929 to 1941. In accepting the Democratic nomination for president
in 1932, Roosevelt proposed a "new deal for the American people," a promissory phrase that described a wide
array of bold policies and programs. Roosevelt himself maintained that the New Deal would be an experiment
that might indeed meet with failure, but that it was better for the country if the government tried to bring
some relief and failed, than for it never to try at all. The New Deal bolstered the banking system, stabilized the
stock market, put many unemployed people to work, assisted those unable to find work or incapable of
working, fought poverty, and instituted an old-age insurance system. It brought tremendous controversy as
well, particularly regarding the expansiveness of the federal government's role in American society. While the
avowed goal of ending the depression was not achieved (economic mobilization for World War II accomplished
that end), the New Deal decisively determined the domestic economic and political contours of American
society for the remainder of the 20th century.
In the throes of the country's worst economic depression, Roosevelt used the legislative leverage gained by
the 1932 electoral victories of Democrats, who captured both the White House and substantial majorities in
Congress, to launch an astonishing number of bills during a specially convened session of Congress termed the
First Hundred Days from March 9 to June 16, 1933. The legislation passed during the Hundred Days revolved
around three major issues that Roosevelt deemed crucial to stabilizing the country: shoring up the failing
banking system; assisting ailing farmers across the country to produce more food and ensure it reached
consumer markets; and getting as many Americans back to work as possible. Toward this end, Congress passed
a series of innovative laws that extended federal influence into unprecedented areas of American life.
To restore confidence in American banks and financial institutions, Congress passed the Emergency Banking
Relief Act (March 9), the Economy Act (March 20), the Federal Securities Act (May 27), the Gold Repeal Joint
Resolution (June 5), and the Banking Act (June 16), the latter of which created the Federal Deposit Insurance
Corporation (FDIC) to insure depositors' accounts, thereby lowering the risk of runs on individual banks and
general bank panics. To aid farmers, Congress enacted the Agricultural Adjustment Act (May 12), the Farm
Credit Act (June 16), and the Emergency Railroad Transportation Act (June 16). The most important of these
acts was the Agricultural Adjustment Act, which subsidized farmers who curtailed production toward
increasing prices and decreasing the volatility of the market. Congress also undertook the massive Tennessee
Valley Authority project (May 18), which not only promised to create a huge power source for much of the
Southeast, but also offered flood control for thousands of farmers in the Mississippi River Valley. In an effort to
reduce the overwhelming unemployment rate in the country, Congress passed the Civilian Conservation Corps
Reforestation Relief Act (March 31), the Federal Emergency Relief Act (May 12), the National Employment
System Act (June 6), and most important, the National Industrial Recovery Act (NIRA) (June 16). The latter of
these bills marked a monumental change in the federal government's role in the economy. Its many provisions
established both the National Recovery Administration (for setting standards for production, prices, and
wages, as well as provisions protecting labor that included specifications regarding maximum hours, minimum
wages, safe working conditions, and the right of collective bargaining) and the Public Works Administration,
the first national peacetime effort at job creation, employing workers to reconstruct the nation's infrastructure
of highways, dams, airports, low-cost housing, and so forth.
While incomplete, this list reveals the breadth and depth of New Deal programs, many of which were from
blueprints of the so-called brain trust that advised the president. This diverse group of academics often
assumed leading roles in the agencies of their design. In tandem with Roosevelt's pragmatic political
temperament, these public intellectuals made certain the apparent hodgepodge of New Deal programs would
not take on any one ideological hue. While any one group of constituents may have taken offense at a part of a
program or policy, there was plenty in the New Deal that was sufficiently redolent of vision and purpose to
mobilize the vast majority of Americans behind successive Roosevelt administrations.
Although the most dramatic congressional action came during the First Hundred Days, New Deal policies
continued to be enacted on a fairly continuous basis over the next several years. For example, the Securities
Exchange Act of 1934 supplemented legislation from the previous year, establishing the Securities Exchange
Commission to further counter deception, manipulation, and fraud in the buying and selling of stocks, bonds,
and other securities. While such measures significantly fortified the fragile financial system, progress on the
broader front for the relief of suffering and improved economic welfare was far more uneven and sporadic. To
be sure, Roosevelt did succeed in improving the general mood and modest expectations of the citizenry—no
small achievement given the tenacity of the economic depression. However, the overall financial picture of
both the country as a whole and individual citizens remained bleak.
Nevertheless, despite some conservative criticism of the New Deal and its expanded vision of government
involvement in American life, most of the public enthusiastically supported Roosevelt's programs, particularly
as his reassuring fireside chats, a series of radio broadcasts to the public beginning on March 12, 1933,
reinforced public support for his policies. However, the New Deal suffered a series of setbacks from within the
federal government that threatened to dismantle much of Roosevelt's program.
The U.S. Supreme Court was deeply involved in determining the structure, limits, and fate of the New Deal
agenda. At first, it appeared the Court would accept New Deal acts and policies, along with state regulatory
actions in concert with the spirit of those initiatives, as seen in its ruling in Home Building and Loan Association
v. Blaisdell (1934) and Nebbia v. New York (1934) when it supported some New Deal legislation. However, the
Court's judicial philosophy had been shaped in a cultural milieu of laissez-faire economic doctrine as taught in
the classical school of economics, which championed free-market ideology and employers' rights over those of
organized labor. On May 27, 1935, a day that Roosevelt and his supporters later labeled Black Monday, the
Supreme Court declared NIRA unconstitutional in Schechter Poultry Corp. v. United States (1935).
Furthermore, in Humphrey's Executor v. United States (1935), the Court denied the president the power to
replace members of independent regulatory agencies, a crucial executive function to ensuring the success of
New Deal programs as Roosevelt decreed. The following year, in United States v. Butler (1936), the Court
voided the Agricultural Adjustment Act, and in Carter v. Carter Coal Co. (1936), the Court made clear its
constricted view of the interstate commerce clause of the Constitution, rejecting Roosevelt's contention that
the clause justified such high levels of federal involvement, the constitutional thesis on which the entire New
Deal program was based.
The Court's ruling on such essential components of the New Deal forced Roosevelt and his supporters to
revise much of the legislation passed during the First Hundred Days during another flurry of congressional
activity known as the Second New Deal, a period lasting approximately from the spring of 1935 to the middle
of 1936. Once again, Congress passed an extraordinary number of laws in a fairly short period of time. Among
the most important of the new legislation was the National Labor Relations Act (July 5, 1935), also known as
the Wagner Act. Replacing the NIRA, this act established the National Labor Relations Board (NLRB), which was
empowered to oversee elections for prospective union representation and exercise oversight functions with
respect to possible unfair labor practices, both of which did much to elevate the status of organized labor in
the country. The same year saw the passage of the Social Security Act (August 14), perhaps the most important
achievement of the New Deal, as it established funding for old-age pensions (through taxes on employers and
employees), unemployment compensation, and welfare benefits for dependent children and the handicapped.
The most lasting achievement of the New Deal era, the Social Security Act not only provided relief to millions
of people during the depression, but it also served as the basis of the modern American welfare system.
Finally, 1935 witnessed the birth of the Works Progress Administration (WPA), which created jobs for millions
of unemployed Americans, largely on infrastructural public projects similar to those of the earlier PWA.
Unprecedented in scale, the WPA also directed a small portion of its funds to support public works projects in
the arts, marking the first time in American history that the federal government granted such subsidies.
After his landslide reelection in 1936, Roosevelt was determined not to let the Supreme Court obstruct his
efforts to impose government control on America's unregulated market economy. He thus proposed a judicial
reorganization bill in early 1937 in an attempt to increase the number of justices on the Supreme Court,
planning to appoint justices more sympathetic to his views who could then out-vote the justices on the existing
Court. Soon known by friend and foe alike as the Court-packing plan, this attempt by the executive branch to
expand the federal judiciary failed for a number of reasons, particularly as both Congress and the public looked
askance at Roosevelt's attempt to force a separate branch of the federal government to conform to his will.
Yet while Roosevelt lost this battle, one that many understood as a threat to the independence and integrity of
the Court, he may have inadvertently prodded the standing Court in a new direction, as at least two justices
switched their stances in future decisions to give the Court a more pro-Roosevelt leaning. Several major pieces
of New Deal legislation were soon upheld by the nation's highest tribunal, including the Social Security Act and
the Wagner Act.
Just as Roosevelt was rejoicing in the Court's compliance with his policies, another crisis emerged to heighten
tensions and threaten financial disaster once again, prompting the final phase, or the Third New Deal.
Beginning in 1937, Roosevelt attempted to balance the federal budget, as he became increasingly concerned
that the massive public expenditures were placing the federal government hopelessly in debt, thereby
threatening the country's financial stability. He hoped that the economy had recovered sufficiently so that
private industry would reassume some of the responsibilities that the federal government had previously
upheld. Therefore, he advocated a reduction of public expenditures and federal funding to various programs.
The result was a major recession that lasted throughout 1938, although other factors contributed to the
recession as well. In response, Roosevelt renounced any intention to balance the budget and launched a
massive new public campaign against the power of monopolies in the American economy, which many people
blamed for the recession, by beefing up the antitrust division of the Justice Department. Congress passed
several new pieces of legislation during this period, although far fewer than either of the previous two New
Deal phases. Among the most important was the Agricultural Adjustment Act (1938) (February 16), the Fair
Labor Standards Act (June 25), and the Revenue Act (May 27).
After 1938, public enthusiasm for New Deal programs waned, as Americans saw little improvement in their
financial situations, despite the flurry of government activity in their behalf. Also, Roosevelt became increasing
involved in foreign affairs when the outbreak of World War II in Europe on September 1, 1939 plunged much
of the world into a brutal war. As Roosevelt negotiated with the belligerent powers to keep the United States
neutral, the war achieved what the New Deal did not: economic recovery. Industries and businesses
throughout the United States began expanding production to meet the demands of war-ravaged Europe,
initiating a wave of prosperity for America that lasted until the end of the century with few interruptions.
Historians, politicians, and the public continue to debate the effect and impact of the New Deal, with all
agreeing that it was a remarkable time in American history. Few can argue that organized labor made
substantial gains during the New Deal, benefiting from the political and economic climate that recognized the
rights of workers to bargain collectively for their labor. If unionization represented an attempt to loosen the
concentration of economic power from below, so to speak, the antitrust division of the Justice Department
represented a corresponding attempt from above, as a revival of antimonopoly sentiment was wedded to an
aggressive enforcement of antitrust law.
Roosevelt's massive spending programs also put to the test an economic theory that came to play a major role
in government behavior later in the century known as Keynesian economics. British economist John Maynard
Keynes argued that government intervention in the economy could moderate boom-to-bust cycles that had
become a permanent feature of the capitalist marketplace. Roosevelt's uninhibited willingness to use the
federal government to stimulate aggregate demand and thereby raise output and employment could be seen
as an empirical and historical confirmation of a key Keynesian proposition—namely, with the tools of fiscal
policy a government can influence aggregate demand in order to cut unemployment. Although few
understood Keynesian economics during the New Deal, the theory had a tremendous influence on the policies
of U.S. politicians in decades to come.
Perhaps most significantly, the New Deal instituted a division in American welfare practice between public
assistance and social insurance, the latter an entitlement program wherein eligibility is determined by fixed
criteria (e.g., age, as is the case with Social Security). Because social insurance programs cut through class lines,
they did not carry the historical stigma attached to public assistance to the poor. Furthermore, the New Deal
sanctioned a grants-in-aid model in which states receiving federal monies were responsible, within federal
guidelines, for setting precise benefit levels, a practice that historically has resulted in an irrational disparity
between states in their allocation of federal funds. A third feature of the contemporary welfare state bespeaks
a troublesome development: the government's increasing penchant for purchasing the delivery of welfare
services from corporations or agencies in the private sector. This so-called franchising has muddled distinctions
between "profit motive" and "social service," rendering the task of public oversight and accountability less
reliable and more onerous. Nevertheless, the very idea of providing basic social services to all Americans in
need originated with the New Deal and found full expression in President Lyndon B. Johnson's Great Society
vision during the 1960s.
The New Deal culminated in a uniquely American patchwork version of the welfare state, and it greatly
expanded the role of the federal government in American life, according it responsibilities that previously were
the arbitrary prerogative of individual states and the private sector. The value and wisdom of this American
welfare state remains one of the primary sources of political controversy in the United States to this day. While
liberals highlight the great disparities in American society between the "haves" and the "have nots,"
conservatives blame the American welfare system for fostering complacency and sapping the drive and
ambition of the American public.
"New Deal." American History. ABC-CLIO, 2010. Web. 8 Mar. 2010. <http://www.americanhistory.abc-clio.com>.