The New Deal
It’s possible to interpret presidents Harding, Coolidge, and Hoover in
very different ways. Historians are even farther apart in their
interpretations of our next president, Franklin D. Roosevelt. FDR
promised the American people a "new deal," and he gave them just
that. Roosevelt's presidency saw many fundamental changes in the
American political system. These changes made Roosevelt a hero to
many, and Roosevelt is one of the most loved presidents in American
history--with good reason. But many would argue that Roosevelt's
"New Deal" was a raw deal, and Roosevelt also has the distinction of
being one of the most hated of American presidents--with good reason!
In 1932, the country was in the midst of the worst depression it had
ever experienced, and Hoover’s attempts to end that depression hadn’t
helped. Maybe they had made things worse! Yet was there and
alternative? The Republicans didn’t seem to have much choice
other than sticking with the “Wonder Boy,” “Hoo but Hoover.”
The depression and unhappiness with Hoover meant that FDR, the
Democratic candidate, was going to have a relatively easy time winning
the general election. He made few promises other than the promise
of a “new deal.” Whatever it was, Americans were ready: let’s
throw in this hand and try something else.
During the campaign, Roosevelt gave no hint of what he was actually
going to do as president. His slogans included “Out of the Red
with Roosevelt” and “Throw the Spenders Out!” Hardly an
indication that he planned to get us to expand government programs:
quite the reverse.
His campaign theme song, “Happy Days are Here Again” was upbeat but
Repeal of Prohibition
Step number one in bringing back the happy days: the repeal of
prohibition. Roosevelt quickly got legislation legalizing the
sale of wine and 3% beer, and, in surprisingly short order, a new
Constitutional amendment repealed the 18th Amendment. The great
national experiment with prohibition was over: and many, probably a
majority thought this a good thing. But there is a turning point
here that is easy to miss. Up to this point, the push for reform
in this country, especially among the Democrats, had been led by
individuals motivated by religious values, people like William Jennings
Bryan. They had *thought* national prohibition had been a great
victory, and the rejection of prohibition was a great disappointment:
so great, that many of them began to withdraw from the political
scene. There is, then, a lasting change in the underlying
philosophy of American reformers at this point: a move from Christian
themes to secular themes.
Roosevelt also moved quickly in the area of banking. He declared
a “bank holiday,” temporarily closing the banks. He then had the
banks carefully examined, reopening each bank when it was proven to be
sound. Roosevelt took to the airwaves with a series of “Fireside
Chats.” These radio talks, for really the first time, brought the
President of the United States directly into the homes of millions of
Americans, creating a personal connection to the president unlike
anything before in history. Roosevelt assured folk that no bank
would be opened unless it was sound: no need to panic, no need for a
run on the bank.
Roosevelt also took steps to make sure deposits *were* safe. He
pushed through Congress legislation creating the FDIC, the Federal
Deposit Insurance Corporation. This “bank insurance” plan
guaranteed that the first $5000 of your account was protected
absolutely by a federal agency. Bank failures stopped for a long,
long time—and, up to this point, no American has ever lost a penny in
an FDIC insured account.
Roosevelt also set up the SEC, the Securities Exchange Commission, to
oversee/regulate securities fraud. The SEC was charged with
making sure accurate information on stocks was readily available to
stock holders and prospective buyers and to prevent “insider trading”
and other corrupt practices.
Roosevelt also wanted to prevent individuals from hoarding gold and the
panicky conversion of dollars to gold. He did this by taking away
the guarantee that paper dollars could be exchanged for gold.
Further, individuals weren’t allowed to hold gold at all (except as
jewelry, etc.). Gold dollars *had* to be turned in for
paper. This seemed to solve an immediate problem, but only at the
cost of creating a very difficult set of long-term problems. What
backs our currency today? Nothing at all. As Dr. Neumann
noted, our paper money says, “In God We Trust.” I think what he
was driving at is that “God” we are trusting here is the government: a
very fallible god indeed!
When Roosevelt took office, more than ¼ of all Americans were
out of work, and the thing they wanted most was a job. Roosevelt
stole some pages from the Hoover book and started massive public works
programs, programs like the TVA. Many, of course, were grateful
for the jobs this provided, but private companies weren’t happy.
Roosevelt’s Policy here drove Wendell Willkie into the Republican Party
where (eventually) he was Roosevelt’s opponent in the 1940 Presidential
election. Willkie thought the TVA was an inefficient enterprise
carrying on work much better left to the private sector—which would
have created just as many jobs but in a more effective way.
Roosevelt also started the CCC, the Civilian Conservation Corps, a jobs
program aimed particular at unemployed young men. These men were
put to work on reforestation projects, fire-fighting projects, swamp
drainage, etc. Again: a program that might make one love the
president. Young men *want* a job, a job that makes them feel
like they are doing something worthwhile, and, if they don’t have that,
they can become angry and dangerous.
Another Roosevelt jobs program: the WPA (Works Progress
Administration). This agency provided jobs working on all sorts
of projects, bridges, dams, public buildings, etc. It also
provided work for unemployed intellectual types. WPA money put
unemployed historians to work investigating and writing up all sorts of
things. Other unemployed intellectual types also got WPA jobs,
and many credit Roosevelt’s WPA with preventing the radicalization of
the unemployed intellectuals. Certainly, many of these formerly
unemployed academic types were lastingly grateful to Roosevelt.
For those who not even government work programs could help, Roosevelt
started FERA, the Federal Emergency Relief Act. This marked a
major change in government policy. Prior to this time Americans
had worried that welfare programs would sap the American work ethic and
create a class of people dependent on the government (like the
proletariat of ancient Rome). Roosevelt, to a certain extent,
shared this concern: but, in an emergency, perhaps the government could
make an exception. And even here, the local communities that
administered FERA funds could convert the program to a “workfare”
program as much as possible, asking for things like leaf raking as a
return for government handouts.
The above programs were intended only as temporary remedies. Long
term, Roosevelt wanted to get private business on the right
track. But he thought that here, too, government action was a
key. He started the NRA, the National Recovery
Administration. This guaranteed certain provisions unions had
long wanted: collective bargaining, minimum wage standards, the
forbidding of “no union” contracts, etc. In return, businesses
were allowed to get together to set prices, to keep prices high so
wages could be kept high.
Most people at the time thought this particular program was a
mistake. NRA=National Run Around or NRA=Nuts run America.
But the NRA did strengthen the labor movement, securing Roosevelt’s
place in the hearts of union members and their leaders.
Here, too, Roosevelt thought government intervention key to
recovery. The most controversial of his programs was the AAA, the
Agricultural Adjustment Act. This act tried to prevent
overproduction (and keep prices high) by paying farmers to hold acreage
out of production. Since crops had already been planted when the
legislation was passed, and since the government wanted an immediate
jump in prices, during the first year of the program farmers were paid
to plow their crops under or to slaughter animals without putting the
meat on the market. Such waste in a time of recession made lots
of people unhappy.
Roosevelt’s Soil Conservation Act—paying farmers to shift to soybeans
or let land lie fallow—was less controversial, but still was a major
step toward the situation we have today. Those looking long-term
point out that the ultimate result of government intervention was the
growth of huge corporate farms and large agri-business entities since
such groups were better poised to take advantage of government
subsidies. Even in the short term, one could see problems.
In the south particularly, those who worked the land were tenant
farmers: government subsidies to land owners weren’t going to help them
One of the longest lasting new deal programs was the FHA, the Federal
Housing Administration. FHA tried to ensure more home ownership
and improve the quality of housing by providing loan guarantees to
homes that passed FHA inspection. For a long time, it
seemed that there was little to really quarrel with about the FHA, but
recent developments show that the idea of Federal intervention in the
housing market is dangerous. The recent housing boom and bust
(and the subsequent ripples through the whole economy) were caused by
federal government policy, the *attempt* of government to make housing
affordable by requiring lending institutions to make loans that, as it
turns out, were way to risky.
In most of human history, the elderly are the group most likely to live
in poverty. Roosevelt tried to reverse this by making sure that
all workers were covered by a mandatory Federal retirement program,
Social Security. Initially, this meant only a small payroll tax
(1.5% matched by your employer). Eventually, though, politicians
couldn’t resist the temptation to promise bigger and bigger benefits
from the program. And, as life expectancy began to rise, the
program was more expensive than anyone had thought. Not to worry:
payroll taxes on the huge baby-boom generation created a substantial
surplus in immediately available funds, and the huge IOUs down the
road were—down the road. Payroll tax rates climbed as a partial
fix, but even with 15% of employee compensation going to payroll taxes,
the bill was eventually going to come do. Us boomers thought
*you* guys were going to be the ones getting stuck—but social security
is in the red already. Maybe we can up your payroll taxes to 40%
or 50%. And, while you’re at it, why not take on a whole bunch of
student loan debt so we don’t have to pay for your college education
and can pay for things that are more important: like our medical care.
Reaction to Roosevelt
Now many at the time were outraged at the tremendous growth of
government under Roosevelt. Your Johnson text notes that H.L.
Mencken called Roosevelt, “the Fuhrer” and “the quack,” saying that the
New Deal was “a political racket” and “a series of bogus miracles.”
Johnson notes other criticisms of Roosevelt. Roosevelt was “a
frustrated darling,” “a swollen-headed nitwit with a Messiah complex
and the brain of a boy scout,” “a weak-minded Louis XIV,” “insane,” “a
pledge-breaker,” “a communist,” “a tyrant,” “the Demoralizer,” “the
But while many were furious with Roosevelt, the vast majority of
Americans at the supported him. He won re-election in 1936 by an
overwhelming 27 million to 16 million vote—and he went on to win
re-election in 1940 and 1944 as well, the only man ever to win more
than two terms in office.
Overall, it’s at first a bit hard to see why. As many, many
people then and now pointed out, Roosevelt’s policies didn’t at all end
the depression. Unemployment remained high and the national debt
skyrocketed. Only the outbreak of war in Europe (1939) got
American industry going again.
But Roosevelt had done something important and lasting: he had created
a new political coalition. Since the Civil War, the Democrats had
been for the most part the minority party. Roosevelt turned them
into the majority party. The South had long been in Democrat
hands, and immigrant populations likewise had tended Democratic. Now
Roosevelt added labor to the mix and (for the first time) a substantial
number of blacks. But also he added a substantial number of
people who benefited directly from government intervention.
“Nobody shoots at Santa Claus,” said Al Smith, and the people that
benefited (or thought they benefited) from government programs—whether
farmers, businessmen, welfare recipients, or federal workers
themselves-- now in large numbers pledged their allegiance to the