The world's postwar depression had a drastic effect on America's economy. Millions of Americans lost thier jobs; millions went hungry; inflation posed serious problems; unemployment reached record highs; Americans were quite literally depressed. In the midst of this crisis, new leadership emerged and America tried bold, new strategies to confront its economic problems.
Macroeconomic problems
· More than 15 million people were unemployed
· Thousands of homes and farms were foreclosed for failure to pay mortgages
· Millions lost their savings
· Businesses lost money
Herbert Hoover
· Feb. 1930: "Let us be thankful that we are getting back on our feet again."
· March 1930: "The crisis will be over in sixty days."
· May 1930: "I am convinced we have now passed the worst."
· September 1930: "We have hit the bottom and are on the upsweing."
Franklin Roosevelt
· 1882: born in New York
· Wall Street lawyer
· Served in the Wilson administration
· 1920: chosen as V.P. running mate
· 1921: contracted polio
· 1928: elected governor of New York
· 1932: elected president
Crisis in the banking system
· Banks did not have cash
· Thousands of banks started closing
· Fear prompted more people to withdraw
· Panic created more banking problems
A new role for federal government
· Financed farm credit at a lower interest rate
· Financed loans for homebuyers
· Insured bank deposits up to $5,000
· required new stock and bond issues register with with a commission
· Set up government agencies to examine bank records and regulate banking
Federal Relief
· Creation of the Civilian Conservation Corps
· Provided useful jobs for young working-class men from 18 to 25
· Built roads, bridges, camping facilities, planted trees, taught farmers about soil erosion
Works Progress Administration
· Provided millions of jobs
· Buildings, bridges, hard-surfaced roads, airports, schools
· Employed a wide range of talents: Ralph Ellison, Saul Bellow, Orson Wells
A New Deal for agriculture
· Addressed sharp decline of crop prices
· Farmers were paid to destroy crops
· William Faulkner: "Our economy is not agricultural any longer. Our economy is the federal government. We no longer farm in Mississippi cotton fields. We farm now in Washington corridors and Congressional committee rooms."
New Deal for Industry
· Public buildings, highway programs, flood control, bridges, tunnels, aircraft carriers
· Stabilize the business sector
· Reducing competition
· Federal codes set wages and prices
· Protected hour and wage standards
Tennessee Valley Authority
Electric power
· Nitrate plants (built dynamite)
· Water-power development
· Improved flood control
· Conservation of soil
· Tennessee, Alabama, Mississippi, Kentucky, Virginia, North Carolina, Georgia
Social Security
· Cornerstone of the New Deal
· Money for the aged, indigent, disabled and unemployed
· Financed by payroll tax
· Aid for elderly citizens, dependent children, blind citizens, public health agencies
Eleanor Roosevelt
· Not satisfied with the traditional role of First Lady
· Traveled extensively
· Spoke before huge crowds
· Wrote a daily newspaper column
· Sometimes criticized her husband's policies
· Took on segregation in New Deal programs
Paying for the New Deal
· Wealth Tax Act
· A "Soak the Rich" tax
· William Randolph Hearst: the Wealth Tax was "essentially communism"
· FDR: "I am fighting communism. I want to save our system, the capitalistic system."
A New Deal coalition
· 1936: Roosevelt easily wins reelection
· Traditional Democrats
· Rural Farmers
· Middle-class voters
· Intellectual
· Labor
· Blacks
FDR's 1937 inaugural speech
· "I see one third of a nation ill-housed, ill-clad and ill-nourished."
· 1936 election was a mandate for more radical changes
· Traditionalists were uncomfortable with a government role for helping ill-housed, ill-clad and ill-nourished
Supreme Court opposition
· Republican justices were uncomfortable with scope of federal expansion
· Just as the second wave of New Deal plans were taking off, the first New · Deal was in trouble of being nullified
· A generational divide
Court-packing plan
Congress — not the Constitution — decides how many judges will sit on the Supreme Court
· Roosevelt wanted to add six new Supreme Court justices
· Ample precedent for the plan, but it seemed desperate
Effect of court-packing plan
· Roosevelt lost credibility
· Older Supreme Court justices retired
· Court sided with Roosevelt
· Republican opposition found a powerful issue
Opposition to New Deal
· New Dealers were "Red dupes"
· Southern Democrats had an uneasy alliance with labor leaders and blacks
· FDR was called "that man" by fierce opponents
Legacy of the New Deal
· Power of the national government was vastly enlarged
· Public confidence was restored
· A departure from older governing style
· Government should not merely respond to events but take preemptive action
· Emergence of the welfare state
