The New Deal

The new deal

The New Deal refers to a series of programs, public work projects, and financial reforms enacted by President Roosevelt in response to the Great Depression in order to stabilize the economy, create jobs, and provide relief to Americans who were suffering.

1933 - 1939

The Great Depression was an economic depression which began in the 1930s. During “the Roaring Twenties,” the U.S. economy expanded rapidly. Everyone poured their savings into stocks, and as a result the stock market grew rapidly. At that time, production had declined and unemployment had risen, so stock prices were higher than their value. In addition, wages were low, there was lots of consumer debt, and agriculture was struggling due to droughts and food prices dropping. Banks had too many large loans. The American economy went into a mild recession in the summer of 1929 and unsold goods piled up, which slowed factory production. However, stock prices kept rising and by the fall had reached extremely high levels. The stock market crash occurred on October 24th, 1929 when nervous investors began selling their overpriced shares all at once. On that day, known as “Black Thursday,” a record 12.9 million shares were traded. Millions of shares become worthless, and investors who bought stocks with borrowed money were wiped out. Although President Herbert Hoover assured Americans the crisis would run its course, the situation continued to worsen over the next three years. In 1930, there were 4 million Americans that could not find work, and by 1931, it had risen to 6 million Americans.

Despite all of Roosevelt’s efforts, the Great Depression persisted. As a result, Roosevelt began a second, even more ambitious series of federal programs in the spring of 1935 which are sometimes called the Second New Deal. In April 1935, Roosevelt created the Works Progress Administration (WPA), a permanent jobs program which employed 8.5 million people from 1935 to 1943. In July of 1935, the National Labor Relations Act created the National Labor Relations Board to prevent workers from being treated unfairly. In August, Roosevelt signed the Social Security Act into law. This act provided Americans with unemployment insurance, help for the disabled, and pensions for the first time. Thanks to his strong efforts to help Americans, Roosevelt won the 1936 election by a landslide. However, the Great Depression continued.

The New Deal also faced many setbacks. The Supreme Court had invalidated reform programs like the National Recovery Administration and the Agricultural Adjustment Administration, saying they were an unconstitutional extension of federal authority. To protect the New Deal programs, Roosevelt announced he would fill the Supreme Court with liberal justices who would balance out the conservatives. As it turned out, Roosevelt didn’t even need to add more justices because once they heard this plan, the conservative justices began upholding New Deal projects. However, Roosevelt still struggled because this incident damaged his administration’s reputation. In addition, the economy went back into a recession when the government reduced stimulus spending in 1937, and it was difficult to enact more programs to fix it because anti-Roosevelt sentiment was on the rise. However, World War II stimulated the American industry and ended the Great Depression. After the Japanese attack on Pearl Harbor on December 7th, 1941, America officially entered World War II, and American factories went into full production mode. Expanding industrial production paired with conscription, or mandatory enlistment in armed forces, reduced the unemployment rate to below the pre-Depression level. The Great Depression was over, and now the United States was focused on World War II.

At the time of the 1932 election, the country was in the depths of the Great Depression with more than 15 million people unemployed. Therefore, it is unsurprising that Democrat Franklin D. Roosevelt won an overwhelming victory over President Hoover, a Republican who believed that government should not intervene in the economy and did not have the responsibility to provide economic relief to its citizens. By Inauguration Day on March 4th, 1933, every state had ordered remaining banks to close. The U.S. Treasury did not have enough money to pay all government workers. Roosevelt took immediate action, declaring a four day long “bank holiday” where banks would close so Congress could pass reform legislation and then reopen some banks. Roosevelt’s Emergency Banking Act was passed by Congress on March 9th, 1933, and the act reorganized the banks and closed banks that were insolvent, or unable to pay their debts. Roosevelt also addressed the nation over the radio, which helped restore public confidence, and encouraged Americans to put their savings back in the banks. By the end of March, 1993, almost 3/4 of the banks had reopened.

During “The First 100 Days” of Roosevelt’s presidency, he began enacting the programs that made up the New Deal, rolling out 15 major pieces of legislation in his first 100 days in office. First, he asked Congress to move towards ending Prohibition, which would make it legal for Americans to buy alcohol again. By the end of the year, Congress ended Prohibition by ratifying the 21st Amendment, which repealed the 18th Amendment (Prohibition). In May, Roosevelt signed the Tennessee Valley Authority Act (TVA) into law, which enabled the federal government to build dams along the Tennessee River to control flooding and generate hydroelectric power. Also in May 1933, Congress passed a bill which paid farmers to leave their fields unsown to end the agricultural surplus and raise prices. The National Industrial Recovery Act, passed in June 1933, gave workers the right to unionize and fight for better wages and working conditions. It also established the Public Works Administration. Roosevelt passed a dozen other major laws during his first 100 days in office, including an important banking bill (the Glass-Steagall Act) and the Home Owners’ Loan Act.

History.com Editors. “New Deal.” History.com, A&E Television Networks, 29 Oct. 2009, www.history.com/topics/great-depression/new-deal.