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FDR's New Deal

FDR's New Deal

 Table of Contents

Politics in FDR's New Deal

The Hundred Days

President Roosevelt called Congress into special session on 9 March 1933, determined to put his plan of "bold, persistent experimentation" into action. What ensued was "The Hundred Days," a flurry of legislative accomplishment unprecedented in American history.

On the very first day of the special session, Congress passed Roosevelt's bill to stabilize the country's failing banking system. (In his first days in office, FDR had had to declare a nationwide "bank holiday"—closing down every bank in the country—in order to stop a devastating run of bank failures.) The House passed Roosevelt's banking bill unanimously, after just 38 minutes of debate, without even seeing the text of the legislation. Representative Robert Luce captured the mood, saying "this is a case where judgment must be waived, where argument must be silenced, where we should take matters without criticism lest we may do harm by delay."13 The Senate—the self-proclaimed "world's greatest deliberative body"—took a few hours longer, but still passed the bill by a vote of 73-7 later that evening. Roosevelt signed the bill into law less than eight hours after he sent it up to Capitol Hill.

The banking bill worked. On 12 March, Roosevelt went on the radio for the first of his "Fireside Chats," in which he confidently reassured the American people that their banks were once again safe; when the bank holiday ended the next morning, customers across the country deposited more money than they withdrew, and the banking crisis ended.

Buoyed by the success of his first legislative venture, Roosevelt pressed on to push Congress to implement the rest of his agenda with startling speed.

It took two days for Congress to pass Roosevelt's second piece of legislation, an ultraconservative measure to slash government spending by cutting half a billion dollars in scheduled payments to veterans and federal employees. Less than a week later, Congress passed FDR's third bill, ending Prohibition by legalizing the sale of beer and wine. (When a few old-line "dry" Senators fought to save Prohibition via filibuster, impatient House members invaded the Senate chamber, chanting "Vote! Vote! We want beer!"14)

Congress would not adjourn until 16 June, exactly 100 days after FDR called it into session. In all, the Hundred Days Congress received fifteen proposed bills from the President, and passed them all. The Hundred Days legislation made the New Deal—and its famed "alphabet agencies"—real. The Agricultural Adjustment Act (AAA) subsidized price supports for farmers and took the United States off the gold standard. The Civilian Conservation Corps (CCC) provided work for the jobless in National Forests. The Tennessee Valley Authority (TVA) proposed to build great dams to provide cheap public electricity and irrigation for farmers. The Home Owners Loan Corporation (HOLC) allowed homeowners to refinance their mortgages to avoid foreclosure. The Federal Emergency Relief Administration (FERA) provided funds to the states to distribute badly-needed cash relief to indigent citizens.

The Glass-Steagall banking act created a firewall between investment banking and commercial banking, so that bad investments by speculators wouldn't wipe out the savings of ordinary depositors, and empowered the federal government, for the first time, to regulate Wall Street. The Federal Deposit Insurance Corporation (FDIC) insured bank deposits and virtually ended bank failures in the United States. Finally, the giant National Industrial Recovery Act not only created new public works programs—the Public Works Administration (PWA) and Civil Works Administration (CWA)—and guaranteed the rights of organized labor for collective bargaining, but created the National Recovery Administration (NRA), a vast program of government-organized collusion among businesses, which mandated that entire industries cut production, raise prices, and uphold certain standards in wages and hours. The hope—which didn't work very well at all in practice—was that this anticompetitive cooperation among businesses and between government and business would overcome the devastating plague of underconsumption and ruinous price competition that had defined the Great Depression.

Ideologically, Roosevelt's Hundred Days program was all over the map; his first government spending bill was more conservative than anything Hoover ever proposed, while HOLC and FERA fulfilled liberal aspirations for government activism and the NRA embodied a downright radical departure from long-established American norms regarding the relationship between government and industry. If any one principle unified the legislative thrust of the first New Deal, it was the principle of "bold, persistent experimentation." No one could accuse Franklin D. Roosevelt or the Hundred Days Congress of failing to "above all, try something."

Persistent Poverty

The Hundred Days marked a huge triumph for the new president, and the New Deal inspired hope among many Americans that recovery would soon be at hand. But the New Deal didn't solve the Depression. The economy did improve under Roosevelt's tutelage; in retrospect, it became clear that the darkest days of the Great Depression had passed in the winter of 1932-33, after FDR was elected but before he assumed office. But economic progress under the New Deal was painfully, brutally slow. Under Roosevelt the economy began to grow again, rather than shrink as it had throughout Hoover's term, but growth came at a glacial pace. (The country's gross national product wouldn't match its 1929 level until 1941.) Under Roosevelt unemployment declined from its 1932-33 peak, but still remained shockingly high. (The unemployment rate, which peaked at 25% just as FDR took office, still hovered above 20% as late as 1935, and never dropped below 14% until World War II.) Throughout Roosevelt's first term, despite the New Dealers' best efforts, the American economy remained broken.

The continuing economic malaise inspired a number of radical (and, to many minds, dangerous) alternatives. Louisiana's populist Senator Huey Long proposed simply taking money from the rich and giving it to the poor, à la Robin Hood. A California doctor named Frances Townsend proposed to spend nearly half the national wealth to fund a generous state-funded retirement plan for the elderly. Socialist writer Upton Sinclair almost won the governorship of California on a platform of collectivized production. Communists organized unions of the urban unemployed, teaching class consciousness in hopes of inspiring revolution.

Roosevelt, frustrated by the New Deal's slow progress in restoring prosperity and feeling pressure to pre-empt more radical alternatives, pushed for a second round of reform.

The Second New Deal

In 1935, FDR pushed through his second round of reforms, seeking to make many of the emergency measures of 1933 permanent while striking a more populist tone by overtly attacking big business and the rich. The so-called "Second New Deal"—much of it passed in the "Second Hundred Days" in the summer of 1935—included much of the most important and long-lasting legislation of the New Deal era.

The Wagner National Labor Relations Act ratified the pro-labor provisions of the NRA, ensuring a federal guarantee of the right of workers to form unions and fueling the greatest boom in union membership in American history.

The Emergency Relief Appropriations Bill vastly enlarged the federal relief apparatus that had been created two years earlier, creating the mother of all work-relief institutions, the Works Progress Administration (WPA). The WPA put millions of jobless Americans to work on projects ranging from the San Francisco-Oakland Bay Bridge to Oregon's Timberline Lodge to New York's LaGuardia Airport to thousands of schools and courthouses around the country. The WPA even supported artists and writers, supporting thousands of poets, muralists, folklorists, songwriters, novelists, and actors. ("Hell, they've got to eat just like other people," was relief administrator Harry Hopkins's reply to critics of the state-funded arts.)15 In all, the WPA allowed millions of Americans to escape starvation, and by allowing them to work for their relief checks it relieved the social stigma (and possible moral hazard) of the dole.

More important, in the long run, was the Social Security Act. Social Security's very name captured best the core principle of the New Deal at full flood—the idea that the government could and should provide a social safety net to protect individual citizens from the uncertainties of the free market. Social Security is best known today as a retirement plan, but it also provided unemployment insurance and welfare for fatherless children and their mothers. Prior to the passage of the Social Security Act, a large majority of Americans worked until the day they died; the notion of "retirement" was foreign to all but the wealthiest elite. Prior to the passage of the Social Security Act, almost all Americans who suffered sudden economic calamity—the loss of a job, or the death or abandonment of a family's chief breadwinner—would soon find themselves homeless and starving. Social Security helped millions of Americans step back from the precipice of economic ruin. Still today one of the most popular government programs ever instituted, Social Security forever changed the relationship between the free market, the American people, and their government.

The final piece of the Second New Deal was a tax reform bill that unleashed a largely symbolic attack upon the wealthy. Admitting in private that the "Wealth Tax" of 1935 was aimed at "stealing Huey Long's thunder," Roosevelt boosted the top marginal tax rate for those earning more than $5 million to a staggering 79%. Considering, however, that this new tax bracket was populated by exactly one person—John D. Rockefeller—the new tax rate had little real impact on redistributing wealth from the rich few to the poor many. One congressman accurately described the tax as "a hell raiser, not a revenue raiser."16 More than 95% of American families continued to pay no federal income tax whatsoever, and even taxpayers at the 99th percentile of the income distribution faced tax rates of only 5%. Still, Roosevelt's supposed "soak the rich" plan had its desired political effect; Huey Long's "Share The Wealth" movement was pre-empted, FDR's status as a hero to the working class was cemented, and the plutocrats denounced Roosevelt as a class traitor. William Randolph Hearst rather preposterously called the tax "Communism," and even began calling FDR "Stalin Delano Roosevelt."17

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