Franklin Roosevelt and the New Deal, 1932-1941
By the end of this section, you should be able to:
- Identify the key pieces of legislation included in Roosevelt’s “First New Deal”
- Assess the strengths, weaknesses, and general effectiveness of the First New Deal
- Explain Roosevelt’s overall vision for addressing the structural problems in the U.S. economy
Much like a surgeon assessing the condition of an emergency room patient, Roosevelt began his administration with a broad, if not specific, strategy in mind: a combination of relief and recovery programs designed to first save the patient (in this case, the American people), and then to find a long-term cure (reform through federal regulation of the economy). What later became known as the “First New Deal” ushered in a wave of legislative activity seldom before seen in the history of the country. By the close of 1933, in an effort to stem the crisis, Congress had passed over fifteen significant pieces of legislation—many of the circulated bills allegedly still wet with ink from the printing presses as members voted upon them. Most bills could be grouped around issues of relief, recovery, and reform. At the outset of the First New Deal, specific goals included 1) bank reform; 2) job creation; 3) economic regulation; and 4) regional planning.
REFORM: THE BANKING CRISIS
When Roosevelt took office, he faced one of the worst moments in the country’s banking history. States were in disarray. New York and Illinois had ordered the closure of their banks in the hopes of avoiding further “bank runs,” which occurred when hundreds (if not thousands) of individuals ran to their banks to withdraw all of their savings. In all, over five thousand banks had been shuttered. Within forty-eight hours of his inauguration, Roosevelt proclaimed an official bank holiday and called Congress into a special session to address the crisis. The resulting Emergency Banking Act of 1933 was signed into law on March 9, 1933, a scant eight hours after Congress first saw it. The law officially took the country off the gold standard, a restrictive practice that, although conservative and traditionally viewed as safe, severely limited the circulation of paper money. Those who held gold were told to sell it to the U.S. Treasury for a discounted rate of a little over twenty dollars per ounce. Furthermore, dollar bills were no longer redeemable in gold. The law also gave the comptroller of currency the power to reorganize all national banks faced with insolvency, a level of federal oversight seldom seen prior to the Great Depression. Between March 11 and March 14, auditors from the Reconstruction Finance Corporation, the Treasury Department, and other federal agencies swept through the country, examining each bank. By March 15, 70 percent of the banks were declared solvent and allowed to reopen.
On March 12, the day before the banks were set to reopen, Roosevelt held his first “fireside chat” ([link]). In this initial radio address to the American people, he explained what the bank examiners had been doing over the previous week. He assured people that any bank open the next day had the federal government’s stamp of approval. The combination of his reassuring manner and the promise that the government was addressing the problems worked wonders in changing the popular mindset. Just as the culture of panic had contributed to the country’s downward spiral after the crash, so did this confidence-inducing move help to build it back up. Consumer confidence returned, and within weeks, close to 2,500. Other measures designed to boost confidence in the overall economy beyond the banking system included passage of the Economy Act, which fulfilled Roosevelt’s campaign pledge to reduce government spending by reducing salaries, including his own and those of the Congress. He also signed into law the Securities Act, which required full disclosure to the federal government from all corporations and investment banks that wanted to market stocks and bonds. Roosevelt also sought new revenue through the Beer Tax. As the Twenty-First Amendment, which would repeal the Eighteenth Amendment establishing Prohibition, moved towards ratification, this law authorized the manufacture of 3.2 percent beer and levied a tax on it.
THE FIRST HUNDRED DAYS
In his first hundred days in office, the new president pushed forward an unprecedented number of new bills, all geared towards stabilizing the economy, providing relief to individuals, creating jobs, and helping businesses. A sympathetic Democrat-controlled Congress helped propel his agenda forward.
Relief: Employment for the Masses
Even as he worked to rebuild the economy, Roosevelt recognized that the unemployed millions required jobs more quickly than the economy could provide. In a push to create new jobs, Roosevelt signed the Wagner-Peyser Act, creating the United States Employment Service, which promised states matching funds if they created local employment opportunities. He also authorized 4.5 million through relief payments. But the larger part of the program paid southern farmers to reduce their production: Wheat, cotton, corn, hogs, tobacco, rice, and milk farmers were all eligible. Passed into law on May 12, 1933, it was designed to boost prices to a level that would alleviate rural poverty and restore profitability to American agriculture. These price increases would be achieved by encouraging farmers to limit production in order to increase demand while receiving cash payments in return. Corn producers would receive thirty cents per bushel for corn they did not grow. Hog farmers would get five dollars per head for hogs not raised. The program would be financed by a tax on processing plants, passed on to consumers in the form of higher prices.
This was a bold attempt to help farmers address the systemic problems of overproduction and lower commodity prices. Despite previous efforts to regulate farming through subsidies, never before had the federal government intervened on this scale; the notion of paying farmers not to produce crops was unheard of. One significant problem, however, was that, in some cases, there was already an excess of crops, in particular, cotton and hogs, which clogged the marketplace. A bumper crop in 1933, combined with the slow implementation of the AAA, led the government to order the plowing under of ten million acres of cotton, and the butchering of six million baby pigs and 200,000 sows. Although it worked to some degree—the price of cotton increased from six to twelve cents per pound—this move was deeply problematic. Critics saw it as the ultimate example of corrupt capitalism: a government destroying food, while its citizens were starving, in order to drive up prices.
Another problem plaguing this relief effort was the disparity between large commercial farms, which received the largest payments and set the quotas, and the small family farms that felt no relief. Large farms often cut production by laying off sharecroppers or evicting tenant farmers, making the program even worse for them than for small farm owners. Their frustration led to the creation of the Southern Tenant Farmers Union (STFU), an interracial organization that sought to gain government relief for these most disenfranchised of farmers. The STFU organized, protested, and won its members some wage increases through the mid-1930s, but the overall plight of these workers remained dismal. As a result, many of them followed the thousands of Dust Bowl refugees to California ([link]).
And if the growers get in the way, we’re gonna roll right over them
We’re gonna roll right over them, we’re gonna roll right over them
And if the growers get in the way, we’re gonna roll right over them
We’re gonna roll this union on
—John Handcox, “Roll the Union On”
“Mean Things Happening in This Land,” “Roll the Union On,” and “Strike in Arkansas” are just a few of the folk songs written by John Handcox. A union organizer and STFU member, Handcox became the voice of the worker’s struggle, writing dozens of songs that have continued to be sung by labor activists and folk singers over the years. Handcox joined the STFU in 1935, and used his songs to rally others, stating, “I found out singing was more inspiring than talking . . . to get the attention of the people.”
Racially integrated and with active women members, the STFU was ahead of its time. Although criticized by other union leaders for its relationship with the Communist Party in creating the “Popular Front” for labor activism in 1934, the STFU succeeded in organizing strikes and bringing national attention to the issues that tenant farmers faced. While the programs Roosevelt put in place did not do enough to help these farmers, the STFU—and Handcox’s music—remains a relevant part of the country’s labor movement.
The AAA did succeed on some fronts. By the spring of 1934, farmers had formed over four thousand local committees, with more than three million farmers agreeing to participate. They signed individual contracts agreeing to take land out of production in return for government payments, and checks began to arrive by the end of 1934. For some farmers, especially those with large farms, the program spelled relief.
While Roosevelt hoped the AAA would help farms and farmers, he also sought aid for the beleaguered manufacturing sector. The Emergency Railroad Transportation Act created a national railroad office to encourage cooperation among different railroad companies, hoping to shore up an industry essential to the stability of the manufacturing sector, but one that had been devastated by mismanagement. More importantly, the NIRA suspended antitrust laws and allowed businesses and industries to work together in order to establish codes of fair competition, including issues of price setting and minimum wages. New Deal officials believed that allowing these collaborations would help industries stabilize prices and production levels in the face of competitive overproduction and declining profits; however, at the same time, many felt it important to protect workers from potentially unfair agreements.
A new government agency, the National Recovery Administration (NRA), was central to this plan, and mandated that businesses accept a code that included minimum wages and maximum work hours. In order to protect workers from potentially unfair agreements among factory owners, every industry had its own “code of fair practice” that included workers’ rights to organize and use collective bargaining to ensure that wages rose with prices ([link]). Headed by General Hugh S. Johnson, the NRA worked to create over five hundred different codes for different industries. The administration of such a complex plan naturally created its own problems. While codes for key industries such as automotive and steel made sense, Johnson pushed to create similar codes for dog food manufacturers, those who made shoulder pads for women’s clothing, and even burlesque shows (regulating the number of strippers in any one show).
The NIRA also created the Public Works Administration (PWA). The PWA set aside 3 billion to states to operate direct relief programs from 1933 to 1935, as well as undertook several employment projects.
How did the NRA seek to protect workers? What difficulties did this agency face?
The National Recovery Administration (NRA) established a “code of fair practice” for every industry. Business owners were made to accept a set minimum wage and maximum number of work hours, as well as to recognize workers’ rights to organize and use collective bargaining. While the NRA established over five hundred different codes, it proved difficult to adapt this plan successfully for diverse industries with very different characteristics and practices.