"The New Deal or Radical Change"


The newly-elected president set the tone for his administration when in his inaugural address he said: "The only thing we have to fear is fear itself". Such a statement seemed ridiculous given the fact that the United States was at the very depths of the Great Depression at the time. What Franklin Roosevelt, of course, was saying was that as long as the nation and its citizens remained paralyzed by an irrational and all-consuming fear, it and they would never take the bold steps necessary to improve the economic situation. While conducting a relatively conservative campaign for the presidency in 1932, he had said: "The country needs and, unless I mistake its temper, demands bold persistent experimentation. It is common sense to take a method and try it. If it fails, admit it freely and try another. But above all else, try something !"

Such a statement was of course designed to fix in voters' minds the image of incumbent President Hoover as a do-nothing executive who accepted the depression as a fact of life and who had done nothing to alleviate the suffering it caused. Such an image, though widespread, was absolutely fallacious. Hoover had applied a business-oriented approach which unfortunately had failed. The main thrust of Hoover's actions had been to restore business and investor confidence by keeping the federal budget in balance, raising protective tariffs, rejecting demands that the currency system be inflated, etc. With the failure of this conservative approach, Hoover acquired the reputation as an uncaring and do-nothing president.

Roosevelt's pledge of experimentation was also designed to prepare the country for change if he were elected and his countrymen were certainly ready for change. Roosevelt garnered 57 percent of the popular vote in 1932 and mauled Hoover in the Electoral College by a vote of 472 to 59. If the country was ready for action and change, Roosevelt was ready to lead.

The "Hundred Days" and the First New Deal

In the one hundred days following FDR's inauguration, the United States witnessed a flurry of legislative activity the likes of which had never been seen before. It seemed that the new president got everything he asked for from Congress in a matter of days, and in some cases hours. Congressmen - liberal and conservative, Democrat and Republican - felt a national emergency existed. Their speedy passage of Roosevelt's program, known as the New Deal, was an expression of their preference for a legislative revolution to a violent and bloody revolution in the streets. Thus, the entire nature and direction of American government changed during the "Hundred Days". The following programs are only the most important components of that legislative revolution.

The First New Deal

In order to buy time to solve the banking crisis caused by "bank runs" since 1929, FDR declared a "Bank Holiday" within hours of his inauguration, temporarily shutting down every bank in the country by executive order. Congress then immediately passed the Emergency Banking Act of 1933, lending government money to shaky banks and thereby restoring confidence. Shortly thereafter FDR and Congress created a more permanent solution - the Federal Deposit Insurance Corporation (FDIC). FDIC was and still is a government-sponsored insurance program guaranteeing the security of deposits in member banks. If the bank fails, the FDIC reimburses depositors. The program eliminated the fear of losing one's life savings and therefore largely ended bank runs. REFORM

Home Owners Loan Corporation (HOLC) - a government lending agency which attempted to save people's homes by refinancing mortgages and deferring or spreading out mortgage payments. RELIEF

Civilian Conservation Corps (CCC) - a government employment program whereby unemployed young men were put on the government payroll to work on reforestation and conservation projects. The CCC concurrently provided job training skills which prepared the men to step into private sector jobs as soon as the economy recovered. RELIEF

Agricultural Adjustment Act (AAA) - The AAA was FDR's attempt to solve the problem of agricultural overproduction and resulting depressed crop values. Farmers who agreed to limit their acreage in production in line with a national plan to drive up agricultural prices would receive monetary payments from the government. Roosevelt's hope was to drive up crop prices through government-engineered scarcity. The effort, in conjunction with the Dust Bowl phenomenon of the mid-1930s, was only moderately successful. While the value of farm commodities rose somewhat, 1929 values were not achieved again until World War II. The program also had unintended consequences - ending sharecropping in most parts of the country and giving rise to huge agribusinesses. The program was declared unconstitutional by the Supreme Court in 1936 in the case of United States vs. Butler . The program was revived almost immediately however with congressional passage of the Soil Conservation and Domestic Allotment Act. RECOVERY

Federal Emergency Relief Act (FERA) - established a system of federal relief or welfare payments to the needy throughout the nation. RELIEF

Tennessee Valley Authority (TVA) - a multi-purpose agency in the Tennessee River Valley which used government funds to construct and operate a series of hydroelectric dams. The program was designed to achieve flood control, soil conservation, recreation, production of fertilizers, production and distribution of cheap electricity, and increased employment. The TVA served as the model for the Lower Colorado River Authority which continues to operate in Central Texas. RELIEF

Securities and Exchange Commission (SEC) - a governmental regulatory commission to regulate the securities markets (stocks, bonds, etc.). The SEC was intended to prevent a recurrence of the speculative credit-based bull market of the 1920s. REFORM

Public Works Administration (PWA) - a government lending program designed to lessen unemployment by lending funds for the construction of numerous structures throughout the country. Local examples include Mansfield and Tom Miller Dams, the annex at ACC's Rio Grande Campus, House Park Football field, and the University of Texas Tower. RELIEF

National Recovery Administration (NRA) - The NRA was an attempt to stimulate industrial recovery through centralized planning on a cooperative basis by management, labor, and government economists. The program was based on the idea of "countervailing powers", initially laid out in Theodore Roosevelt's "New Nationalism" program.

Big business would not be broken up; rather, its influence would be controlled by enlarging and strengthening organized labor and government. Together, all three would plan out the economy - collectively determining production levels of each product, what it would sell for, how much workers would be paid, etc.

This program was an economic cornerstone of the First New Deal and was anything but anti-big business. Management was assured that if they cooperated, accepted codes of fair conduct, and agreed to preset wage scales, big business would be exempted from antitrust prosecution. It was "regulated monopoly" designed to produce recovery of the industrial sector of the economy through planned shortages.

It was declared unconstitutional by the Supreme Court in 1935 in the case of Schechter vs. United States. RECOVERY

The Second New Deal, 1935-36

By early 1935 President Roosevelt had spent two full years exploring ways he hoped would end the Depression. Unrestrained by any overall philosophy of government, the administration tried a virtual plethora of programs - some designed to provide relief, some designed to engineer an economic recovery. In the aftermath of the congressional elections of 1934, which the Democrats and liberal candidates swept, he decided to go in a more liberal direction.

FDR shifted directions for a variety of reasons. First, while the economy was slightly improved and absolute despair had been vanquished, the Depression continued. The First New Deal, a relatively conservative approach which had attempted to work with a concentrated business sector, had failed to produce complete recovery and thus was easily abandoned. Secondly, the Supreme Court was beginning to strike down important pieces of the New Deal, including the National Recovery Administration and the Agricultural Adjustment Act. Finally, FDR perceived a significant electoral threat emerging from the liberal end of the political spectrum. While the Democratic party had done exceptionally well in the just completed elections, critics such as Huey Long, Father Charles Coughlin, and Dr. Francis Townsend were attracting more and more support by calling for programs far more liberal than those of the New Deal to date. In order to improve his chances of reelection in 1936, Roosevelt determined to coopt his liberal critics by supporting somewhat more liberal and anti-big business measures. Thus, the Second New Deal was born.

Works Progress Administration (WPA) - an immense government employment program with unemployed Americans building roads, airports, parks, writing and conducting plays, writing books, conducting musical concerts, etc. The WPA attempted to relieve unemployment by hiring far more workers than the programs of the First New Deal. Between 1935 and 1941, more than eight million Americans were employed by the WPA. It spent over $11 billion on 250,000 projects. The WPA was criticized by many as a highly-politicized boondoggle (i.e., "We Piddle Around") RELIEF

Wagner Labor Relations Act - Referred to as organized labor's Bill of Rights, the act was an attempt to equalize the power of big business by giving government support to unionization. The act gave a governmental guarantee regarding the rights of collective bargaining by a union chosen by employees under the supervision of the National Labor Relations Board (NLRB) and legalized peaceful strikes and boycotts. With government support, labor unions tripled their membership, from a low of 3 million members in the early 1930s to about 9.5 million in 1941. Labor unions thus became an acceptable part of American society during the Great Depression. REFORM

Wealth Tax - an attempt to coopt the "soak the rich" aspects of Huey Long's Share-Our-Wealth program of confiscatory taxation and radical redistribution of wealth in the United States. The legislation instituted slightly higher income tax levels on the upper income groups and a corporate income tax. The proposal, mild at best to begin with, was watered down in the process of congressional enactment. While far more moderate than Long's ideas on redistributing the wealth of America, it did rhetorically embrace redistributive taxation and lessened the appeal among voters of the Share-Our-Wealth program.

Public Utilities Holding Company Act - outlawed the pyramiding of control of gas and electricity companies and gave various federal commissions the power to regulate strictly the rates and financial practices of these companies. This was FDR's attempt to shift from the "New Nationalism" of Rexford Tugwell, Adolph Bearle, and Gardiner Means in favor of the "New Freedom" ideas supported by Felix Frankfurter and Louis Brandeis. It also illustrates the ease with which a totally non-ideological FDR could shift directions. REFORM

Rural Electrification Administration (REA) - lent funds to rural communities and cooperatives to either manufacture or buy electricity and construct transmission lines to bring electricity to rural areas, ninety-five per cent of which were still without electrical services in the 1930s. A local example would be the Pedernales Electric Cooperative, which brought electricity to the Texas Hill Country through the REA program in the late 1930s. RELIEF

Social Security Act - creation of the Social Security system was FDR's attempt to coopt the Townsend Plan with a far more moderate program. The law created a government sponsored old-age and survivors insurance plan (retirement) and a federal-state plan of unemployment insurance. The program was far more moderate than the Townsend Plan - it required both employers and employees to finance the program rather than simply having the government pick up the total costs. REFORM

By the end of 1936 the New Deal for all practical purposes had come to an end for a variety of reasons. Though he would win a landslide reelection to the presidency in November against Alf Landon of Kansas in what amounted to a national referendum on FDR and the New Deal, factors conspired in the election aftermath to rob the president of the masterful control of Congress, the Democratic party, and the national political scene that had characterized his first term. As a response to the Great Depression and the despair of the American people, the New Deal had been an innovative, non-ideological, experimentive, and inherently conservative program that while it greatly enlarged the size and power of the federal government did not end the economic collapse in the United States. There had been some improvement in unemployment levels. There had been a limited upswing in industrial production. Agricultural production levels had been cut and prices driven up moderately. Nonetheless, the depression continued. However, the American people as a whole felt better about the economy and the future. Roosevelt's activism and buoyant optimism restored hope that had not been present when he assumed the presidency in March of 1933. Americans as a whole felt better about themselves and the country and exhibited greater willingness to wait the crisis out.

From the perspective of the 1920s, the New Deal appears quite liberal in nature. It certainly brought about a phenomenal expansion in the size, activity level, and cost of government at the federal level. Yet from another perspective the New Deal was quite a conservative and incremental response to the worst economic collapse in all of American history. Given the anger of millions of Americans toward the business and financial communities and the free reign that Franklin Roosevelt was accorded when he assumed the presidency, he could have taken even more revolutionary steps such as nationalization of the banking industry or implementation of truly redistributive taxation. Roosevelt's actions also appear inherently conservative when compared to some of the more radical proposals being pushed by other political figures during the 1930s.

From FDR's perspective, his most threatening liberal critic was Senator Huey P. Long of Louisiana. "The Kingfish", as he liked to be called, founded a political machine in the Pelican State in the late Twenties that gave him almost dictatorial control of the state and elected him to the United States Senate. An early if tepid supporter of FDR in 1932, Long turned against the president in early 1934, charging that the New Deal was a sham which protected the interests of the wealthy and the aristocratic while giving the appearance of change. In reacting to conservative Senate critics of the New Deal, Long addressed his colleagues saying: "Men, it will not be long until there will be a mob assembling here to hang senators from the rafters of the Senate. I have to determine whether I will stay and be hung with you, or go out and lead the mob."

His enunciation of the "Share Our Wealth" program by mid-1934 revealed, if not his decision to lead the mob, his determination to offer voters a truly liberal alternative to FDR and the New Deal in 1936. Long's populist program offered depression-weary Americans the following:

While such proposals seem ludicrous, Long's pie-in-the-sky promises were made in the environment of the Great Depression when millions of Americans blamed the wealthy financiers and big business interests for their economic suffering and were therefore more willing to entertain such proposals than would normally have been the case. Furthermore, Long did understand that one of the most important causes of the Great Depression was the inequitable distribution of wealth in the United States and his soak-the-rich proposals, though radical, addressed this fact.

By 1935 yet another initial supporter had turned against FDR. In 1933 Father Charles Coughlin, a Roman Catholic priest from a Detroit suburb whose radio program attracted millions of listeners nationally, had declared "The New Deal is Christ's Deal". Following Roosevelt's election, Coughlin began pressing the president to embrace and implement the priest's panaceic ideas on how to end the depression. First, Coughlin proposed that the banking industry in the country be nationalized and all banking services be provided on a nonprofit basis by the federal government. Secondly, the priest pressured FDR to enact immediate and massive monetary inflation as a way of dealing with the unprecedented deflation which had crippled the economy since late 1929. When the president refused to accommodate Coughlin and instead pursued a far more moderate course, Coughlin instructed his radio audience and the supposed 7.5 million members of his National Union for Social Justice that FDR had betrayed them. The New Deal had become the "Jew Deal" and the president was "a liar" and an "anti-God." In a Cincinnati speech Coughlin went so far as to advocate the elimination of Roosevelt by the "use of bullets." Coughlin was the moving force behind the Union Party, a short-lived third political party that tried unsuccessfully to deny Roosevelt reelection in 1936.

Another radical alternative to the New Deal was proposed in 1935 by a retired physician from California, Dr. Francis Townsend. His claim to fame was an economic panacea known as the "Townsend Plan." Under this proposal, the federal government would give $200 a month to every American sixty years of age or older. The only requirement was that the recipient had to spend the entire $200 within thirty days in order to receive the next month's allotment. Townsend argued that not only would such a program provide relief for older Americans, it would end the Depression overnight. The massive increase in consumer spending would result in increased production of consumer goods which would result in higher employment - the cycle would be self-perpetuating and the depression would be over within sixty days. The fact that the program, that would be financed by a national sales tax that would cut into the spendable income of the majority of Americans, was estimated to cost $24 billion a year bothered neither Townsend or the millions he claimed supported the plan. Just as President Roosevelt found it necessary to propose and support the Tax Act of 1935 as a means of coopting Huey Long's Share-Our-Wealth plan, his proposal of the Social Security Act, creating a fiscally responsible program of old age assistance, was a means of satisfying the demand for some program to help the elderly while avoiding what would have been the devastating impacts of Townsend's proposal.


While Franklin Roosevelt's New Deal failed to end the Great Depression, it nonetheless changed America in a most profound manner. Organized labor gained both respectability and power with government support. The quality of life in rural agricultural areas had been greatly enhanced through the AAA and REA. The expectations of racial minorities had been elevated by the rise of an activist government even though the New Deal had failed to make significant progress in the field of civil rights. The power of the federal government had been greatly increased vis-a-vis state and local governments as the latter, under the economic pressures of the Depression, transferred more and more responsibility and power to Washington, D. C. The executive branch of the federal government grew more powerful as Congress and the judiciary gave the presidency primary responsibility for curing the economic collapse. The presidency has been the dominant branch of the federal government ever since.

The New Deal also marked the commitment of the federal government to active, interventionary programs in the areas of social welfare, regulation of business, and management of the economy. The New Deal marked the death of laissez-faire capitalism in its purest form in the United States.

Perhaps the greatest impact of the New Deal was what it prevented in the United States during the Great Depression - radical, revolutionary change such as that which occurred at least partially in response to the global depression in the same years in Nazi Germany, Fascist Italy, and a Japan dominated by a military government. During a Philadelphia speech in the campaign of 1936, Roosevelt made the following statement:

There is a mysterious cycle in human events. To some generations much is given. Of other generations much is expected. This generation of Americans has a rendezvous with destiny. In this world of ours in other lands, there are some people, who, in times past, have lived and fought for freedom, and seem to have grown too weary to carry on the fight. They have sold their heritage of freedom for the illusion of a living. They have yielded their democracy. I believe in my heart that only our success can stir their ancient hope. They begin to know that here in America we are waging a war against want and destitution and economic demoralization. It is more than that; it is a war for the survival of democracy. We are fighting to save a great and precious form of government for ourselves and for the world. The New Deal offered just enough change and restored just enough hope to make radical change undesirable and unacceptable to the majority of Americans. While pure laissez-faire capitalism died, democracy and capitalism survived the tremendous ordeal of the Great Depression. If the New Deal failed to end the Great Depression, its successes nonetheless transformed America permanently.