Lecture

LEARNING OBJECTIVE II

Discuss the Patterns of the New Deal and the role of the THREE R’s 

New Deal Agencies

It seemed to many historians Roosevelt placed RELIEF and RECOVERY a bit ahead of Reform between 1933-35 (the first New Deal), and then reversed apparent priorities (while still wanting all three) from 1935 to the end of the New Deal, usually dated 1938 (second 1935-37 and the third 1937-38 New Deal).

In the area of RELIEF the first New Deal passed the following acts:

A. The Federal Emergency Relief ACT (FERA) 1933; authorized grants to states to states in proportion to amounts spent on relief by the states.

B. The Public Works Administration (PWA) 1933; established under NIRA to increase employment through projects such as construction of roads and public buildings.

C. Civilian Conservation Corps (CCC) 1933; an agency to give employment on soil, road, and reforestation projects to males between 18-25.

However, on of the major problems with relief programs was it led to an unbalanced budget and deficit spending. According to Keynes economic theory, this is the way it should be done (see video below for further details). During an economic downturn the government should,

stimulate the economy by spending more than it took in. When prosperity returned it should balance the scale by increasing taxes and cutting back spending .

RECOVERY was based on government planning by the use of the National Recovery Administration which was created under the National Industrial Recovery Act of 1933. Its main goal was to cut excess production so as to stabilize the market for big producers and develop a co-operative relationship with business, consumers and labor. The TVA was another attempt at recovery by trying to rebuild the economy of a 5-6 state region through government planning and financing .

The second New Deal (1935-37) came into being in 1935 after Roosevelt delivered his annual State of the Union Message to Congress declaring he must "quit this business of relief." He spoke of unfinished business, including public works and a comprehensive social security program. In the same year the Supreme Court by a 9-0 vote invalidated the NRA which was the centerpiece of the first New Deal. Roosevelt denounced the Court for a horse-and-buggy interpretation of the Constitution and energetically engaged in a broad range of REFORMS such as:

The Social Security Act of 1935 established Programs for retirement pensions, unemployment insurance, and other social welfare services. The act was an attempt to redistribute income to the lower end of the social scale.

The Wagner Act of 1935, also known as the National Labor Relations Act, made it illegal for an employer to refuse to bargain with a union and allowed the federal government to intervene in relations between labor and capital in a more forceful way in order to protect labor from being deprived of their negotiating power by big business. The act also outlawed a list of unfair labor practices. Partly as a result of the Wagner Act but also as a result of the 1937 depression, union membership tripled between 1933-1939, from three million to over nine million. The Wagner Act was another way of redistributing the income of society through the wage and job benefit system.

Another attempt at redistributing income and an indication of the direction of the Second New Deal was a changed emphasis in the taxation policy. On June 19, 1935, Roosevelt urged Congress in a special message ·to

revise the federal tax system with a view to accelerating progressive income taxation and "encouraging a wider distribution of wealth." · Congress quickly responded with a new tax law that sharply increased inheritance taxes, imposed a new surtax on net incomes over $50,000 (which went up as high as 75%), and initiated a graduated net income tax on corporations.

The last reform measure was the Banking Act of 1935. It was designed to centralize the control of national banking in Washington in order to prevent some of the problems and abuses that took place in the 1920s and early 30s.

Relief was still an issue for the second New Deal as Roosevelt focused on direct aid to workers and farmers (rather than on recovery programs for business like in the first New Deal). The Works Progress Administration created in 1935 (WPA) employed over 3 million people in its first year and 8 million by 1943. Before it expired in 1943 the WPA had spent over 11 billion dollars on public projects.

The Third New Deal (1937-38).

By the end of 1936 and early '37 it appeared the country was getting back on its feet, so Roosevelt supported measures of balancing the budget, cutting government spending and increasing taxes as Keynes' economic theory had advocated for recovery. In 1937 he cut federal spending by about 25 percent, while tax revenues rose by about 50 percent. These actions shaved the federal deficit to slightly over $1 billion. The dampening effects smothered economic recovery. Of course, others factors played a role, but the decline in deficit spending helped triggered on of the sharpest recession in history (a recession within a depression).  

Two major events of 1937 were to bring an end to the New Deal in 1938. The first was the depression of 37 which led to the stock market dropping in the spring of 1938 and increased unemployment. The second was Roosevelt's "Court packing" fight with the Supreme Court. Voters apparently disliked the idea of Roosevelt's attempt to alter the balance of power within the Constitution . These events shook the confidence not only of many voters but of many New Dealers themselves.

The congressional elections of 1938 brought a coalition of conservative Republicans and Democrats to power , a coalition that made it virtually impossible to achieve any new legislative victories .

Roosevelt was the ;victim of what some political scientists have called "the deadlock of democracy ." Presidential liberalism was neutralized by congressional conservatism. A president may have strong ideas, but Congress, however loosely organized and internally divided, is able at least to say "NO." Between 1938-41 there was a stalemate between Roosevelt and Congress . By 1941 the lend-lease program and the impact of World War II pushed the economy into high gear.