New Deal

Origins

Economic collapse (1929–1933)

From 1929 to 1933 manufacturing output decreased by one third, which economist Milton Friedman later called the Great Contraction. Prices fell by 20%, causing deflation that made repaying debts much harder. Unemployment in the United States increased from 4% to 25%. Additionally, one-third of all employed persons were downgraded to working part-time on much smaller paychecks. In the aggregate, almost 50% of the nation's human work-power was going unused.

Before the New Deal, USA bank deposits were not "guaranteed" by government. When thousands of banks closed, depositors temporarily lost access to their money; most of the funds were eventually restored but there was gloom and panic. The United States had no national safety net, no public unemployment insurance and no Social Security. Relief for the poor was the responsibility of families, private charity and local governments, but as conditions worsened year by year demand skyrocketed and their combined resources increasingly fell far short of demand.

The depression had psychologically devastated the nation. As Roosevelt took the oath of office at noon on March 4, 1933, all state governors had authorized bank holidays or restricted withdrawals—many Americans had little or no access to their bank accounts. Farm income had fallen by over 50% since 1929. Between 1930 and 1933, an estimated 844,000 non-farm mortgages were foreclosed on, out of a total of five million. Political and business leaders feared revolution and anarchy. Joseph P. Kennedy Sr., who remained wealthy during the Depression, recalled that "in those days I felt and said I would be willing to part with half of what I had if I could be sure of keeping, under law and order, the other half."

Campaign

The phrase "New Deal" was coined by an adviser to Roosevelt, Stuart Chase, who used A New Deal as the title for an article published in the progressive magazine The New Republic a few days before Roosevelt's speech. Speechwriter Rosenman added it to his draft of FDR's presidential nomination acceptance speech at the last minute. Upon accepting the 1932 Democratic nomination for president, Roosevelt promised "a new deal for the American people". In campaign speeches, Roosevelt committed to carrying out, if elected, several elements of what would become the New Deal, such as unemployment relief and public works programs.

First New Deal (1933–1934)

Roosevelt entered office with clear ideas for policies to address the Great Depression, though he remained open to experimentation as his presidency began implementing them. Among Roosevelt's more famous advisers was an informal "Brain Trust", a group that tended to view pragmatic government intervention in the economy positively. His choice for Secretary of Labor, Frances Perkins, greatly influenced his initiatives. Her list of what her priorities would be if she took the job illustrates: "a forty-hour workweek, a minimum wage, worker's compensation, unemployment compensation, a federal law banning child labor, direct federal aid for unemployment relief, Social Security, a revitalized public employment service and health insurance".

The New Deal policies drew from many different ideas proposed earlier in the 20th century. Assistant Attorney General Thurman Arnold led efforts that hearkened back to an anti-monopoly tradition rooted in American politics by figures such as Andrew Jackson and Thomas Jefferson. Supreme Court Justice Louis Brandeis, an influential adviser to many New Dealers, argued that "bigness" (referring, presumably, to corporations) was a negative economic force, producing waste and inefficiency. Other leaders such as Hugh S. Johnson of the NRA took ideas from the Woodrow Wilson Administration, advocating techniques used to mobilize the economy for World War I. They brought ideas and experience from the government controls and spending of 1917–1918. Other New Deal planners revived experiments suggested in the 1920s, such as the TVA. The "First New Deal" (1933–1934) encompassed the proposals offered by a wide spectrum of groups (not included was the Socialist Party, whose influence was all but destroyed). This first phase of the New Deal was also characterized by fiscal conservatism (see Economy Act, below) and experimentation with several different, sometimes contradictory, cures for economic ills.

Roosevelt created dozens of new agencies. They are traditionally and typically known to Americans by their alphabetical initials.

U.S. Vice President John Nance Garner would have a very prominent role in shaping the president's policies, with Roosevelt using Garner's knowledge and experience to pilot New Deal legislation through Congress. In 1933 alone, U.S. Senate Majority Leader Joseph T. Robinson would also propel legislation through the U.S. Senate.

The First 100 Days (1933)

The American people were generally extremely dissatisfied with the crumbling economy, mass unemployment, declining wages, and profits, and especially Herbert Hoover's policies such as the Smoot–Hawley Tariff Act and the Revenue Act of 1932. Roosevelt entered office with enormous political capital. Americans of all political persuasions were demanding immediate action and Roosevelt responded with a remarkable series of new programs in the "first hundred days" of the administration, in which he met with Congress for 100 days. During those 100 days of lawmaking, Congress granted every request Roosevelt asked and passed a few programs (such as the Federal Deposit Insurance Corporation to insure bank accounts) that he opposed. Ever since, presidents have been judged against Roosevelt for what they accomplished in their first 100 days. Walter Lippmann famously noted: At the end of February we were a congeries of disorderly panic-stricken mobs and factions. In the hundred days from March to June, we became again an organized nation confident of our power to provide for our own security and to control our own destiny.

The economy had hit bottom in March 1933 and then started to expand. Economic indicators show the economy reached its lowest point in the first days of March, then began a steady, sharp upward recovery. Thus the Federal Reserve Index of Industrial Production sank to its lowest point of 52.8 in July 1932 and was practically unchanged at 54.3 in March 1933. However, by July 1933 it reached 85.5, a dramatic rebound of 57% in four months. Recovery was steady and strong until 1937. Except for employment, the economy by 1937 surpassed the levels of the late 1920s. The Recession of 1937 was a temporary downturn. Private sector employment, especially in manufacturing, recovered to the level of the 1920s but failed to advance further until the war. The U.S. population was 124,840,471 in 1932 and 128,824,829 in 1937, an increase of 3,984,468. The ratio of these numbers, times the number of jobs in 1932, means there was a need for 938,000 more jobs in 1937, to maintain the same employment level.

The Economy Act, drafted by Budget Director Lewis Williams Douglas, was passed on March 15, 1933. The act proposed to balance the "regular" (non-emergency) federal budget by cutting the salaries of government employees and cutting pensions to veterans by fifteen percent. It saved $500 million per year and reassured deficit hawks, such as Douglas, that the new president was fiscally conservative. Roosevelt argued there were two budgets: the "regular" federal budget, which he balanced; and the emergency budget, which was needed to defeat the depression. It was imbalanced on a temporary basis.

Relief

Relief was the immediate effort to help the one-third of the population that was hardest hit by the depression. Relief was also aimed at providing temporary help to suffering and unemployed Americans. Local and state budgets were sharply reduced because of falling tax revenue, but New Deal relief programs were used not just to hire the unemployed but also to build needed schools, municipal buildings, waterworks, sewers, streets, and parks according to local specifications. While the regular Army and Navy budgets were reduced, Roosevelt juggled relief funds to provide for their claimed needs. All of the CCC camps were directed by army officers, whose salaries came from the relief budget. The PWA built numerous warships, including two aircraft carriers; all the money came from the PWA agency. PWA also built warplanes, and the WPA built military bases and airfields.

To prime the pump and cut unemployment, the NIRA created the Public Works Administration (PWA), a major program of public works, which organized and provided funds for the building of useful works such as government buildings, airports, hospitals, schools, roads, bridges, and dams. From 1933 to 1935, PWA spent $3.3 billion with private companies to build 34,599 projects, many of them quite large. The NIRA also contained a provision for the "construction, reconstruction, alteration, or repair under public regulation or control of low-cost housing and slum-clearance projects".

Many unemployed people were put to work under Roosevelt on a variety of government-financed public works projects, including the construction of bridges, airports, dams, post offices, hospitals, and hundreds of thousands of miles of road. Through reforestation and flood control, they reclaimed millions of hectares of soil from erosion and devastation. As noted by one authority, Roosevelt's New Deal "was literally stamped on the American landscape".

The rural U.S. was a high priority for Roosevelt and his energetic Secretary of Agriculture, Henry A. Wallace. Roosevelt believed that full economic recovery depended upon the recovery of agriculture and raising farm prices was a major tool, even though it meant higher food prices for the poor living in cities.

Many rural people lived in severe poverty, especially in the South. Major programs addressed to their needs included the Resettlement Administration (RA), the Rural Electrification Administration (REA), rural welfare projects sponsored by the WPA, National Youth Administration (NYA), Forest Service and Civilian Conservation Corps (CCC), including school lunches, building new schools, opening roads in remote areas, reforestation and purchase of marginal lands to enlarge national forests.

Recovery

Recovery was the effort in numerous programs to restore the economy to normal levels. By most economic indicators, this was achieved by 1937—except for unemployment, which remained stubbornly high until World War II began. Recovery was designed to help the economy bounce back from depression. Economic historians led by Price Fishback have examined the impact of New Deal spending on improving health conditions in the 114 largest cities, 1929–1937. They estimated that every additional $153,000 in relief spending (in 1935 dollars, or $1.95 million in the year 2000 dollars) was associated with a reduction of one infant death, one suicide, and 2.4 deaths from infectious diseases.

From 1929 to 1933, the industrial economy suffered from a vicious cycle of deflation. Since 1931, the U.S. Chamber of Commerce, the voice of the nation's organized business, promoted an anti-deflationary scheme that would permit trade associations to cooperate in government-instigated cartels to stabilize prices within their industries. Though existing antitrust laws clearly forbade such practices, the organized business were entertained by the Roosevelt Administration.

Roosevelt's advisors believed that excessive competition and technical progress had led to overproduction and lowered wages and prices, which they believed lowered demand and employment (deflation). He argued that government economic planning was necessary to remedy this. New Deal economists argued that cut-throat competition had hurt many businesses and that with prices having fallen 20% and more, "deflation" exacerbated the burden of debt and would delay recovery. They rejected a strong move in Congress to limit the workweek to 30 hours. Instead, their remedy, designed in cooperation with big business, was the National Industrial Recovery Act (NIRA). It included stimulus funds for the WPA to spend and sought to raise prices, give more bargaining power for unions (so the workers could purchase more), and reduce harmful competition.

At the center of the NIRA was the National Recovery Administration (NRA), headed by former General Hugh S. Johnson, who had been a senior economic official in World War I. Johnson called on every business establishment in the nation to accept a stopgap "blanket code": a minimum wage of between 20 and 45 cents per hour, a maximum workweek of 35–45 hours and the abolition of child labor. Johnson and Roosevelt contended that the "blanket code" would raise consumer purchasing power and increase employment. To mobilize political support for the NRA, Johnson launched the "NRA Blue Eagle" publicity campaign to boost what he called "industrial self-government". The NRA brought together leaders in each industry to design specific sets of codes for that industry—the most important provisions were anti-deflationary floors below which no company would lower prices or wages and agreements on maintaining employment and production. In a remarkably short time, the NRA announced agreements from almost every major industry in the nation. By March 1934, industrial production was 45% higher than in March 1933.

Reform

Reform was based on the assumption that the depression was caused by the inherent instability of the market and that government intervention was necessary to rationalize and stabilize the economy and to balance the interests of farmers, business, and labor. Reforms targeted the causes of the depression and sought to prevent a crisis like it from happening again. In other words, this sought to financially rebuild the U.S. while ensuring not to repeat history.

Most economic historians assert that protectionist policies, culminating in the Smoot-Hawley Act of 1930, worsened the Depression. Roosevelt already spoke against the act while campaigning for president during 1932. In 1934, the Reciprocal Tariff Act was drafted by Cordell Hull. It gave the president power to negotiate bilateral, reciprocal trade agreements with other countries. The act enabled Roosevelt to liberalize American trade policy around the globe and it is widely credited with ushering in the era of liberal trade policy that persists to this day.

The Puerto Rico Reconstruction Administration oversaw a separate set of programs in Puerto Rico. It promoted land reform and helped small farms, it set up farm cooperatives, promoted crop diversification, and helped the local industry.

Second New Deal (1935–1936)

In the spring of 1935, responding to the setbacks in the Court, a new skepticism in Congress, and the growing popular clamor for more dramatic action, New Dealers passed important new initiatives. Historians refer to them as the "Second New Deal" and note that it was more progressive and more controversial than the "First New Deal" of 1933–1934.

Social Security Act

Until 1935, only a dozen states had implemented old-age insurance, and these programs were woefully underfunded. Just one state (Wisconsin) had an insurance program. The United States was the only modern industrial country where people faced the Depression without any national system of social security. The work programs of the "First New Deal" such as CWA and FERA were designed for immediate relief, for a year or two.

The most important program of 1935, and perhaps of the New Deal itself, was the Social Security Act. It established a permanent system of universal retirement pensions (Social Security), unemployment insurance and welfare benefits for the handicapped and needy children in families without a father present. It established the framework for the U.S. welfare system. Roosevelt insisted that it should be funded by payroll taxes rather than from the general fund—he said: "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program".

Labor relations

The National Labor Relations Act of 1935, also known as the Wagner Act, finally guaranteed workers the rights to collective bargaining through unions of their own choice. The Act also established the National Labor Relations Board (NLRB) to facilitate wage agreements and to suppress the repeated labor disturbances. The Wagner Act did not compel employers to reach agreement with their employees, but it opened possibilities for American labor. The result was a tremendous growth of membership in the labor unions, especially in the mass-production sector, led by the older and larger American Federation of Labor and the new, more radical Congress of Industrial Organizations. Labor thus became a major component of the New Deal political coalition. However, the intense battle for members between the AFL and the CIO coalitions weakened labor's power.

To help agricultural labor, the 1934 Jones-Costigan Act included provisions such as the prohibition of child labor under the age of 14, limiting the working hours of children aged 14–16, and the granting to the USDA "the authority to fix minimum wages, but only after holding public hearings 'at a place accessible to producers and workers'". In addition, the Act called for farmers "to pay their workers 'promptly' and 'in full' before collecting their benefit payments as a way to deal with the historic inequalities embedded in staggered payments and hold-back clauses". This Act was replaced by the 1937 Sugar Act after the Supreme Court ruled the AAA unconstitutional. In passing the Act, Congress not only followed Roosevelt's advice by continuing the previous Act's labor provisions but strengthened them. As noted by one study, the Act "once again prohibited child labor and made the 'fair, reasonable and equitable' minimum wage determinations mandatory". The Public Contracts (Walsh-Healey) Act of 1936 established labor standards on government contracts, "including minimum wages, overtime compensation for hours in excess of 8 a day or 40 a week, child and convict labor provisions, and health and safety requirements". The Anti-Strikebreaker (Byrnes) Act from that same year declared it unlawful "to transport or aid in transporting strikebreakers in interstate or foreign commerce".

The Davis-Bacon Act Amendment (Public Act 403) was approved in August 1935, "Establishing prevailing wages for mechanics and laborers employed on public buildings and public works". Under the Miller Act of 1935, as noted by one study, "every construction worker or person who furnished material on a covered contract has the right to sue the contractor or surety if not fully paid within 90 days after performing labor or furnishing such material". The Motor Carrier Act of 1935, as noted by one study, "authorized the Interstate Commerce Commission to limit the hours of service and to prescribe other measures to safeguard motor carrier employees and passengers, as well as the users of highways generally". The Merchant Marine Act of 1936 directed the Maritime Commission "to investigate and specify suitable wage and manning scales and working conditions with respect to subsidized ships". Public Act 783 of March 1936 sought to extend "the facilities of the Public Health Service to seamen on Government vessels not in the military or Naval establishments". The Railway Labor Act Amendment (Public Act 487) was approved in April 1936, "Extending protection of Railway Labor Act to employees of air transportation companies engaged in interstate and foreign commerce".

Consumer rights

Various laws were also passed to advance consumer rights. In 1935 the Public Utility Holding Company Act of 1935 was passed "to protect consumers and investors from abuses by holding companies with interests in gas and electric utilities". The Federal Power Act of 1935 sought "to protect customers and to assure reasonableness in the provision of a service essential to life in modern society". The Natural Gas Act of 1938 sought to protect consumers "against exploitation at the hands of natural gas companies". The Food, Drug and Cosmetic Act of 1938 granted to the Food and Drug Administration "the power to test and license drugs and to test the safety of cosmetics, and to the Department of Agriculture the authority to set food quality standards." In addition, the Wheeler-Lea Act "gave the Free Trade Commission, an old Progressive agency, the power to prohibit unfair and deceptive business acts or practices."

Works Progress Administration

Roosevelt nationalized unemployment relief through the Works Progress Administration (WPA), headed by close friend Harry Hopkins. Roosevelt had insisted that the projects had to be costly in terms of labor, beneficial in the long term and the WPA was forbidden to compete with private enterprises—therefore the workers had to be paid smaller wages. The Works Progress Administration (WPA) was created to return the unemployed to the workforce. The WPA financed a variety of projects such as hospitals, schools, and roads, and employed more than 8.5 million workers who built 650,000 miles of highways and roads, 125,000 public buildings as well as bridges, reservoirs, irrigation systems, parks, playgrounds and so on.

Prominent projects were the Lincoln Tunnel, the Triborough Bridge, the LaGuardia Airport, the Overseas Highway and the San Francisco–Oakland Bay Bridge. The Rural Electrification Administration used cooperatives to bring electricity to rural areas, many of which still operate. Between 1935 and 1940, the percentage of rural homes lacking electricity fell from 90% to 40.% The National Youth Administration was another semi-autonomous WPA program for youth. Its Texas director, Lyndon B. Johnson, later used the NYA as a model for some of his Great Society programs in the 1960s. The WPA was organized by states, but New York City had its own branch Federal One, which created jobs for writers, musicians, artists and theater personnel. It became a hunting ground for conservatives searching for communist employees.

The Federal Writers' Project operated in every state, where it created a famous guide book—it also catalogued local archives and hired many writers, including Margaret Walker, Zora Neale Hurston and Anzia Yezierska, to document folklore. Other writers interviewed elderly ex-slaves and recorded their stories.

Under the Federal Theater Project, headed by Hallie Flanagan, actresses and actors, technicians, writers and directors put on stage productions. The tickets were inexpensive or sometimes free, making theater available to audiences unaccustomed to attending plays.

One Federal Art Project paid 162 trained woman artists on relief to paint murals or create statues for newly built post offices and courthouses. Many of these works of art can still be seen in public buildings around the country, along with murals sponsored by the Treasury Relief Art Project of the Treasury Department. During its existence, the Federal Theatre Project provided jobs for circus people, musicians, actors, artists, and playwrights, together with increasing public appreciation of the arts.

Tax policy

In 1935, Roosevelt called for a tax program called the Wealth Tax Act (Revenue Act of 1935) to redistribute wealth. The bill imposed an income tax of 79% on incomes over $5 million. Since that was an extraordinarily high income in the 1930s, the highest tax rate actually covered just one individual—John D. Rockefeller. The bill was expected to raise only about $250 million in additional funds, so revenue was not the primary goal. Morgenthau called it "more or less a campaign document". In a private conversation with Raymond Moley, Roosevelt admitted that the purpose of the bill was "stealing Huey Long's thunder" by making Long's supporters of his own. At the same time, it raised the bitterness of the rich who called Roosevelt "a traitor to his class" and the wealth tax act a "soak the rich tax".

A tax called the undistributed profits tax was enacted in 1936. This time the primary purpose was revenue, since Congress had enacted the Adjusted Compensation Payment Act, calling for payments of $2 billion to World War I veterans. The bill established the persisting principle that retained corporate earnings could be taxed. Paid dividends were tax deductible by corporations. Its proponents intended the bill to replace all other corporation taxes—believing this would stimulate corporations to distribute earnings and thus put more cash and spending power in the hands of individuals. In the end, Congress watered down the bill, setting the tax rates at 7 to 27% and largely exempting small enterprises. Facing widespread and fierce criticism, the tax deduction of paid dividends was repealed in 1938.

Housing Act of 1937

The United States Housing Act of 1937 created the United States Housing Authority within the U.S. Department of the Interior. It was one of the last New Deal agencies created. The bill passed in 1937 with some Republican support to abolish slums.

National political alignment

By 1936, the term "progressive" was typically used for supporters of the New Deal and "conservative" for its opponents. Roosevelt was assisted in his endeavors by the election of a liberal Congress in 1932. According to one source "We recognize that the best liberal legislation in American history was enacted following the election of President Roosevelt and a liberal Congress in 1932. After the midterm congressional election setbacks in 1938, labor was faced with a hostile congress until 1946. Only the presidential veto prevented the enactment of reactionary anti-labor laws." In noting the composition of the Seventy-Third Congress, one study has stated: "Though much of the Democratic congressional leadership remained old-guard, southern, agrarian, and conservative, the rank-and-file Democratic majorities in both houses were largely made up of fresh, northern, urban-industrial representatives of at least potentially liberal bent. At a minimum they were impatient with inaction, and not likely to be silenced by appeals to tradition. They were, as yet, an unformed and reckoned force, one that Roosevelt might mould to his purposes of remaking his party – or one whose very strength and impetuosity might force the president's hand." As stated by another study, in regards to the gains the Democrats made in the 1932 midterm elections, "The party gained ninety seats in the house and thirteen in the Senate. Even more significant, from the standpoint of potential support for urban programs, was that non-Southern Democrats represented a working majority in the House for the first of what would be only a few times in the twentieth century. Roosevelt's political instincts mood paralleled the mood of Congress, and he sought policies to tie the party's new urban supporters into a permanent majority coalition behind the Democratic Party." As noted by another study, "President Roosevelt's extraordinary legislative accomplishments between 1933 and 1938 owed much to his personal political qualities, but ideologically favourable large partisan majorities in the House and the Senate were a prerequisite of success."

As one journal reflected in 1950: "Look back to the 1930's and you can see how winning in mid-terms years affects the kind of laws that are passed. A tremendous liberal majority was swept in with Franklin Roosevelt in 1932. In the 1934 mid-term races that liberal majority was increased. After 1936 it went even higher."

From 1934 to 1938, there existed a "pro-spender" majority in Congress (drawn from two-party, competitive, non-machine, progressive and left party districts). In the 1938 midterm election, Roosevelt and his progressive supporters lost control of Congress to the bipartisan conservative coalition. Many historians distinguish between the First New Deal (1933–1934) and a Second New Deal (1935–1936), with the second one more progressive and more controversial.

Big city voting

Franklin Delano Roosevelt had a magnetic appeal to the city dwellers—he brought relief and recognition of their ethnic leaders and ward bosses, as well as labor unions. Taxpayers, small business and the middle class voted for Roosevelt in 1936 but turned sharply against him after the recession of 1937-38 seemed to belie his promises of recovery. Roosevelt's New Deal Coalition discovered an entirely new use for city machines in his three reelection campaigns of the New Deal and the Second World War. Traditionally, local bosses minimized turnout so as to guarantee reliable control of their wards and legislative districts. To carry the electoral college, however, Roosevelt needed to carry the entire state, and thus needed massive majorities in the largest cities to overcome the hostility of suburbs and towns.

With Harry Hopkins his majordomo, Roosevelt used the WPA as a national political machine. Men on relief could get WPA jobs regardless of their politics, but hundreds of thousands of well-paid supervisory jobs were given to the local Democratic machines. The 3.5 million voters on relief payrolls during the 1936 election cast 82% of their ballots for Roosevelt. The vibrant labor unions, heavily based in the cities, likewise did their utmost for their benefactor, voting 80% for him, as did Irish, Italian and Jewish voters. In all, the nation's 106 cities over 100,000 population voted 70% for FDR in 1936, compared to his 59% elsewhere. Roosevelt won reelection in 1940 thanks to the cities. In the North, the cities over 100,000 gave Roosevelt 60% of their votes, while the rest of the North favored Willkie 52%-48%. It was just enough to provide the critical electoral college margin. With the start of full-scale war mobilization in the summer of 1940, the cities revived. The new war economy pumped massive investments into new factories and funded round-the-clock munitions production, guaranteeing a job to anyone who showed up at the factory gate.

Court-packing plan and jurisprudential shift

When the Supreme Court started abolishing New Deal programs as unconstitutional, Roosevelt launched a surprise counter-attack in early 1937. He proposed adding five new justices, but conservative Democrats revolted, led by the Vice President. The Judiciary Reorganization Bill of 1937 failed—it never reached a vote. In addition, Senate Majority Leader and New Deal "marshal" Joseph T. Robinson would die on July 14, 1937, thus depriving the Democrat controlled-Senate of an influential "towering leader." Momentum in Congress and public opinion shifted to the right and very little new legislation was passed expanding the New Deal. However, retirements allowed Roosevelt to put supporters on the Court and it stopped killing New Deal programs.

Recession of 1937 and recovery

The Roosevelt administration was under assault during Roosevelt's second term, which presided over a new dip in the Great Depression in the fall of 1937 that continued through most of 1938. Production and profits declined sharply. Unemployment jumped from 14.3% in May 1937 to 19.0% in June 1938. The downturn could have been explained by the familiar rhythms of the business cycle, but until 1937 Roosevelt had claimed responsibility for the excellent economic performance. That backfired in the recession and the heated political atmosphere of 1937.

John Maynard Keynes did not think that the New Deal under Roosevelt single-handedly ended the Great Depression: "It is, it seems, politically impossible for a capitalistic democracy to organize expenditure on the scale necessary to make the grand experiments which would prove my case—except in war conditions."

World War II and full employment

The U.S. reached full employment after entering World War II in December 1941. Under the special circumstances of war mobilization, massive war spending doubled the gross national product (GNP). Military Keynesianism brought full employment and federal contracts were cost-plus. Instead of competitive bidding to get lower prices, the government gave out contracts that promised to pay all the expenses plus a modest profit. Factories hired everyone they could find regardless of their lack of skills—they simplified work tasks and trained the workers, with the federal government paying all the costs. Millions of farmers left marginal operations, students quit school and housewives joined the labor force.

Legacy

According to the Encyclopædia Britannica, "perhaps the greatest achievement of the New Deal was to restore faith in American democracy at a time when many people believed that the only choice left was between communism and fascism".

Analysts agree the New Deal produced a new political coalition that sustained the Democratic Party as the majority party in national politics into the 1960s. A 2013 study found, "an average increase in New Deal relief and public works spending resulted in a 5.4 percentage point increase in the 1936 Democratic voting share and a smaller amount in 1940. The estimated persistence of this shift suggests that New Deal spending increased long-term Democratic support by 2 to 2.5 percentage points. Thus, it appears that Roosevelt's early, decisive actions created long-lasting positive benefits for the Democratic party... The New Deal did play an important role in consolidating Democratic gains for at least two decades".

However, there is disagreement about whether it marked a permanent change in values. Cowie and Salvatore in 2008 argued that it was a response to Depression and did not mark a commitment to a welfare state because the U.S. has always been too individualistic. MacLean rejected the idea of a definitive political culture. She says they overemphasized individualism and ignored the enormous power that big capital wields, the Constitutional restraints on radicalism and the role of racism, antifeminism and homophobia. She warns that accepting Cowie and Salvatore's argument that conservatism's ascendancy is inevitable would dismay and discourage activists on the left. Klein responds that the New Deal did not die a natural death—it was killed off in the 1970s by a business coalition mobilized by such groups as the Business Roundtable, the Chamber of Commerce, trade organizations, conservative think tanks and decades of sustained legal and political attacks.

Historians generally agree that during Roosevelt's 12 years in office there was a dramatic increase in the power of the federal government as a whole. Roosevelt also established the presidency as the prominent center of authority within the federal government. Roosevelt created a large array of agencies protecting various groups of citizens—workers, farmers, and others—who suffered from the crisis and thus enabled them to challenge the powers of the corporations. In this way, the Roosevelt administration generated a set of political ideas—known as New Deal Progressivism—that remained a source of inspiration and controversy for decades. New Deal liberalism lay the foundation of a new consensus. Between 1940 and 1980, there was the progressive consensus about the prospects for the widespread distribution of prosperity within an expanding capitalist economy. Especially Harry S. Truman's Fair Deal and in the 1960s Lyndon B. Johnson's Great Society used the New Deal as inspiration for a dramatic expansion of progressive programs.

Historiography and evaluation of New Deal policies

Historians debating the New Deal have generally been divided between progressives who support it, conservatives who oppose it, and some New Left historians who complain it was too favorable to capitalism and did too little for minorities. There is consensus on only a few points, with most commentators favorable toward the CCC and hostile toward the NRA.

Consensus historians of the 1950s, such as Richard Hofstadter, according to Lary May:

[B]elieved that the prosperity and apparent class harmony of the post-World War II era reflected a return to the true Americanism rooted in liberal capitalism and the pursuit of individual opportunity that had made fundamental conflicts over resources a thing of the past. They argued that the New Deal was a conservative movement that built a welfare state, guided by experts, that saved rather than transformed liberal capitalism.

Progressive historians argue that Roosevelt restored hope and self-respect to tens of millions of desperate people, built labor unions, upgraded the national infrastructure, and saved capitalism in his first term when he could have destroyed it and easily nationalized the banks and the railroads. Historians generally agree that apart from building up labor unions, the New Deal did not substantially alter the distribution of power within American capitalism. "The New Deal brought about limited change in the nation's power structure". The New Deal preserved democracy in the United States in a historic period of uncertainty and crises when in many other countries democracy failed.

The most common arguments can be summarized as follows:

Harmful

The New Deal vastly increased the federal debt (Billington and Ridge). However, Keynesians argue that the federal deficit between 1933 and 1939 averaged only 3.7% which was not enough to offset the reduction in private sector spending during the Great Depression

Fostered bureaucracy and administrative inefficiency (Billington and Ridge) and enlarged the powers of the federal government

Fiscal policy

Julian Zelizer (2000) has argued that fiscal conservatism was a key component of the New Deal. A fiscally conservative approach was supported by Wall Street and local investors and most of the business community—mainstream academic economists believed in it as apparently did the majority of the public. Conservative southern Democrats, who favored balanced budgets and opposed new taxes, controlled Congress and its major committees. Even progressive Democrats at the time regarded balanced budgets as essential to economic stability in the long run, although they were more willing to accept short-term deficits. As Zelizer notes, public opinion polls consistently showed public opposition to deficits and debt. Throughout his terms, Roosevelt recruited fiscal conservatives to serve in his administration, most notably Lewis Douglas the Director of Budget in 1933–1934; and Henry Morgenthau Jr., Secretary of the Treasury from 1934 to 1945. They defined policy in terms of budgetary cost and tax burdens rather than needs, rights, obligations, or political benefits. Personally, Roosevelt embraced their fiscal conservatism, but politically he realized that fiscal conservatism enjoyed a strong wide base of support among voters, leading Democrats, and businessmen. On the other hand, there was enormous pressure to act and spending money on high visibility work programs with millions of paychecks a week.

Douglas proved too inflexible and he quit in 1934. Morgenthau made it his highest priority to stay close to Roosevelt, no matter what. Douglas's position, like many of the Old Right, was grounded in a basic distrust of politicians and the deeply ingrained fear that government spending always involved a degree of patronage and corruption that offended his Progressive sense of efficiency. The Economy Act of 1933, passed early in the Hundred Days, was Douglas's great achievement. It reduced federal expenditures by $500 million, to be achieved by reducing veterans' payments and federal salaries. Douglas cut government spending through executive orders that cut the military budget by $125 million, $75 million from the Post Office, $12 million from Commerce, $75 million from government salaries and $100 million from staff layoffs. As Freidel concludes: "The economy program was not a minor aberration of the spring of 1933, or a hypocritical concession to delighted conservatives. Rather it was an integral part of Roosevelt's overall New Deal".

Revenues were so low that borrowing was necessary (only the richest 3% paid any income tax between 1926 and 1940). Douglas, therefore, hated the relief programs, which he said reduced business confidence, threatened the government's future credit and had the "destructive psychological effects of making mendicants of self-respecting American citizens". Roosevelt was pulled toward greater spending by Hopkins and Ickes, and as the 1936 election approached he decided to gain votes by attacking big business.

Race and gender

While many Americans suffered economically during the Great Depression, African Americans also had to deal with social ills, such as racism, discrimination, and segregation. Black workers were especially vulnerable to the economic downturn since most of them worked the most marginal jobs such as unskilled or service-oriented work, therefore they were the first to be discharged and additionally many employers preferred white workers. In all African American workers were much more likely to receive public assistance or relief than white workers. Thus In Detroit, blacks made up 4 percent of the population, and accounted for 25 percent of the relief cases. In Chicago, one-half of all black families were on relief.

Roosevelt appointed an unprecedented number of African Americans to second-level leadership positions in his administration—these appointees were collectively called the Black Cabinet. The WPA, NYA, and CCC relief programs allocated 10% of their budgets to blacks (who comprised about 10% of the total population, and 20% of the poor). They operated separate all-black units with the same pay and conditions as white units. Some leading white New Dealers, especially Eleanor Roosevelt, Harold Ickes and Aubrey Williams, worked to ensure blacks received at least 10% of welfare assistance payments. However, these benefits were small in comparison to the economic and political advantages that whites received. Most unions excluded blacks from joining and enforcement of anti-discrimination laws in the South was virtually impossible, especially since most blacks worked in agricultural and hospitality sectors.

The New Deal programs put millions of Americans immediately back to work or at least helped them to survive. The programs were not specifically targeted to alleviate the much higher unemployment rate of blacks. Some aspects of the programs were even unfavorable to blacks. The Agricultural Adjustment Acts, for example, helped land owners who were predominantly white but reduced the need of farmers to hire tenant farmers or sharecroppers which were predominantly black. Though the AAA stipulated that a farmer had to share the payments with those who worked the land, this policy was never enforced. The Farm Service Agency (FSA), a government relief agency for tenant farmers, created in 1937, made efforts to empower African Americans by appointing them to agency committees in the South. Senator James F. Byrnes of South Carolina raised opposition to the appointments because he stood for white land owners who were threatened by an agency that could organize and empower tenant farmers. Initially, the FSA stood behind their appointments, but after feeling national pressure FSA was forced to release the African Americans from their positions. The goals of the FSA were notoriously progressive and not cohesive with the southern voting elite. Some harmful New Deal measures inadvertently discriminated against blacks. Thousands of blacks were thrown out of work and replaced by whites on jobs where they were paid less than the NRA's wage minimums because some white employers considered the NRA's minimum wage "too much money for Negroes". By August 1933, blacks called the NRA the "Negro Removal Act". An NRA study found that the NIRA put 500,000 African Americans out of work.

Relief

The New Deal expanded the role of the federal government, particularly to help the poor, the unemployed, youth, the elderly and stranded rural communities. The Hoover administration started the system of funding state relief programs, whereby the states hired people on relief. With the CCC in 1933 and the WPA in 1935, the federal government now became involved in directly hiring people on relief in granting direct relief or benefits. Total federal, state and local spending on relief rose from 3.9% of GNP in 1929 to 6.4% in 1932 and 9.7% in 1934—the return of prosperity in 1944 lowered the rate to 4.1%. In 1935–1940, welfare spending accounted for 49% of the federal, state and local government budgets. In his memoirs, Milton Friedman said that the New Deal relief programs were an appropriate response. He and his wife were not on relief, but they were employed by the WPA as statisticians. Friedman said that programs like the CCC and WPA were justified as temporary responses to an emergency. Friedman said that Roosevelt deserved considerable credit for relieving immediate distress and restoring confidence.

Recovery

Roosevelt's New Deal Recovery programs focused on stabilizing the economy by creating long-term employment opportunities, decreasing agricultural supply to drive prices up, and helping homeowners pay mortgages and stay in their homes, which also kept the banks solvent. In a survey of economic historians conducted by Robert Whaples, Professor of Economics at Wake Forest University, anonymous questionnaires were sent to members of the Economic History Association. Members were asked to disagree, agree, or agree with provisos with the statement that read: "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression". While only 6% of economic historians who worked in the history department of their universities agreed with the statement, 27% of those that work in the economics department agreed. Almost an identical percent of the two groups (21% and 22%) agreed with the statement "with provisos" (a conditional stipulation) while 74% of those who worked in the history department and 51% in the economic department disagreed with the statement outright.

From 1933 to 1941, the economy expanded at an average rate of 7.7% per year. Despite high economic growth, unemployment rates fell slowly.

John Maynard Keynes explained that situation as an underemployment equilibrium where skeptic business prospects prevent companies from hiring new employees. It was seen as a form of cyclical unemployment.

There are different assumptions as well. According to Richard L. Jensen, cyclical unemployment was a grave matter primarily until 1935. Between 1935 and 1941, structural unemployment became the bigger problem. Especially the unions successes in demanding higher wages pushed management into introducing new efficiency-oriented hiring standards. It ended inefficient labor such as child labor, casual unskilled work for subminimum wages and sweatshop conditions. In the long term, the shift to efficiency wages led to high productivity, high wages and a high standard of living, but it necessitated a well-educated, well-trained, hard-working labor force. It was not before war time brought full employment that the supply of unskilled labor (that caused structural unemployment) downsized.

At the beginning of the Great Depression, many economists traditionally argued against deficit spending. The fear was that government spending would "crowd out" private investment and would thus not have any effect on the economy, a proposition known as the Treasury view, but Keynesian economics rejected that view. They argued that by spending vastly more money—using fiscal policy—the government could provide the needed stimulus through the multiplier effect. Without that stimulus, business simply would not hire more people, especially the low skilled and supposedly "untrainable" men who had been unemployed for years and lost any job skill they once had. Keynes visited the White House in 1934 to urge President Roosevelt to increase deficit spending. Roosevelt afterwards complained, "he left a whole rigmarole of figures—he must be a mathematician rather than a political economist."

Reform

The economic reforms were mainly intended to rescue the capitalist system by providing a more rational framework in which it could operate. The banking system was made less vulnerable. The regulation of the stock market and the prevention of some corporate abuses relating to the sale of securities and corporate reporting addressed the worst excesses. Roosevelt allowed trade unions to take their place in labor relations and created the triangular partnership between employers, employees and government.

David M. Kennedy wrote, "the achievements of the New Deal years surely played a role in determining the degree and the duration of the postwar prosperity."

Paul Krugman stated that the institutions built by the New Deal remain the bedrock of the United States economic stability. During the 2008 financial crisis, he explained that conditions would have been much worse if the New Deals Federal Deposit Insurance Corporation had not insured most bank deposits and older Americans would have felt much more insecure without Social Security. Economist Milton Friedman after 1960 attacked Social Security from a free market view stating that it had created welfare dependency.

The New Deal banking reform has weakened since the 1980s. The repeal of the Glass-Steagall Act in 1999 allowed the shadow banking system to grow rapidly. Since it was neither regulated nor covered by a financial safety net, the shadow banking system was central to the 2008 financial crisis and the subsequent Great Recession.

Impact on federal government and states

Though it is essentially consensus among historians and academics that the New Deal brought about a large increase in the power of the federal government, there has been some scholarly debate concerning the results of this federal expansion. Historians like Arthur M. Schlesinger and James T. Patterson have argued that the augmentation of the federal government exacerbated tensions between the federal and state governments. However, contemporaries such as Ira Katznelson have suggested that due to certain conditions on the allocation of federal funds, namely that the individual states get to control them, the federal government managed to avoid any tension with states over their rights. This is a prominent debate concerning the historiography of federalism in the United States and—as Schlesinger and Patterson have observed—the New Deal marked an era when the federal-state power balance shifted further in favor of the federal government, which heightened tensions between the two levels of government in the United States.

Ira Katznelson has argued that although the federal government expanded its power and began providing welfare benefits on a scale previously unknown in the United States, it often allowed individual states to control the allocation of the funds provided for such welfare. This meant that the states controlled who had access to these funds, which in turn meant many Southern states were able to racially segregate—or in some cases, like a number of counties in Georgia, completely exclude African-Americans—the allocation of federal funds. This enabled these states to continue to relatively exercise their rights and also to preserve the institutionalization of the racist order of their societies. Though Katznelson has conceded that the expansion of the federal government had the potential to lead to federal-state tension, he has argued it was avoided as these states managed to retain some control. As Katznelson has observed, "they [state governments in the South] had to manage the strain that potentially might be placed on local practices by investing authority in federal bureaucracies [...]. To guard against this outcome, the key mechanism deployed was a separation of the source of funding from decisions about how to spend the new monies".

However, Schlesinger has disputed Katznelson's claim and has argued that the increase in the power of the federal government was perceived to come at the cost of states' rights, thereby aggravating state governments, which exacerbated federal-state tensions. Schlesinger has utilized quotes from the time to highlight this point and has observed, "the actions of the New Deal, [Ogden L.] Mills said, 'abolish the sovereignty of the States. They make of a government of limited powers one of unlimited authority over the lives of us all.'"

Criticism

Claims of fascism

Worldwide, the Great Depression had the most profound impact in Germany and the United States. In both countries the pressure to reform and the perception of the economic crisis were strikingly similar. When Hitler came to power he was faced with exactly the same task that faced Roosevelt, overcoming mass unemployment and the global Depression. The political responses to the crises were essentially different: while American democracy remained strong, Germany replaced democracy with fascism and a Nazi dictatorship.

The initial perception of the New Deal was mixed. On the one hand, the eyes of the world were upon the United States because many American and European democrats saw in Roosevelt's reform program a positive counterweight to the seductive powers of the two great alternative systems, communism and fascism. As the historian Isaiah Berlin wrote in 1955: "The only light in the darkness was the administration of Mr. Roosevelt and the New Deal in the United States".

By contrast, enemies of the New Deal sometimes called it "fascist", but they meant very different things. Communists denounced the New Deal in 1933 and 1934 as fascist in the sense that it was under the control of big business. They dropped that line of thought when Stalin switched to the "Popular Front" plan of cooperation with progressives.

In 1934, Roosevelt defended himself against those critics in a "fireside chat": [Some] will try to give you new and strange names for what we are doing. Sometimes they will call it 'Fascism', sometimes 'Communism', sometimes 'Regimentation', sometimes 'Socialism'. But, in so doing, they are trying to make very complex and theoretical something that is really very simple and very practical.... Plausible self-seekers and theoretical die-hards will tell you of the loss of individual liberty. Answer this question out of the facts of your own life. Have you lost any of your rights or liberty or constitutional freedom of action and choice?

After 1945, only few observers continued to see similarities and later on some scholars such as Kiran Klaus Patel, Heinrich August Winkler and John Garraty came to the conclusion that comparisons of the alternative systems do not have to end in an apology for Nazism since comparisons rely on the examination of both similarities and differences. Their preliminary studies on the origins of the fascist dictatorships and the American (reformed) democracy came to the conclusion that besides essential differences "the crises led to a limited degree of convergence" on the level of economic and social policy. The most important cause was the growth of state interventionism since in the face of the catastrophic economic situation both societies no longer counted on the power of the market to heal itself.

Claims of conservatism, statism and favoritism

The New Deal was generally held in very high regard in scholarship and textbooks. That changed in the 1960s when New Left historians began a revisionist critique calling the New Deal a band-aid for a patient that needed radical surgery to reform capitalism, put private property in its place and lift up workers, women and minorities. The New Left believed in participatory democracy and therefore rejected the autocratic machine politics typical of the big city Democratic organizations.

In a 1968 essay, Barton J. Bernstein compiled a chronicle of missed opportunities and inadequate responses to problems. The New Deal may have saved capitalism from itself, Bernstein charged, but it had failed to help—and in many cases actually harmed—those groups most in need of assistance. In The New Deal (1967), Paul K. Conkin similarly chastised the government of the 1930s for its weak policies toward marginal farmers, for its failure to institute sufficiently progressive tax reform, and its excessive generosity toward select business interests. In 1966, Howard Zinn criticized the New Deal for working actively to actually preserve the worst evils of capitalism.

In a 1950s interview for the Columbia University Oral History Project, Paul H. Appleby, who served as assistant to Secretary of Agriculture Henry A. Wallace, described the New Deal's Agricultural Adjustment Act as "militantly for the larger farmers." Dorothy Day believed that by accepting the New Deal, labor was helping in the creation of a servile state instead of ownership of the means of production, and was also critical of the bureaus created by the New Deal.

By the 1970s, progressive historians were responding with a defense of the New Deal based on numerous local and microscopic studies. Praise increasingly focused on Eleanor Roosevelt, seen as a more appropriate crusading reformer than her husband.

In a series of articles, political sociologist Theda Skocpol has emphasized the issue of "state capacity" as an often-crippling constraint. Ambitious reform ideas often failed, she argued, because of the absence of a government bureaucracy with significant strength and expertise to administer them. Other more recent works have stressed the political constraints that the New Deal encountered. Conservative skepticism about the efficacy of government was strong both in Congress and among many citizens. Thus some scholars have stressed that the New Deal was not just a product of its progressive backers, but also a product of the pressures of its conservative opponents.

Claims of communism

Some hard-right critics in the 1930s claimed that Roosevelt was state socialist or communist, including Charles Coughlin, Elizabeth Dilling, and Gerald L. K. Smith, The accusations generally targeted the New Deal. These conspiracy theories were grouped as the "red web" or "Roosevelt Red Record", based significantly on propaganda books by Dilling. There was significant overlap between these red-baiting accusations against Roosevelt and the isolationist America First Committee. Roosevelt was concerned enough about the accusations that in a September 29, 1936 speech in Syracuse, Roosevelt officially condemned communism. Other accusations of socialism or claimed communism came from Republican representative Robert F. Rich, and senators Simeon D. Fess, and Thomas D. Schall.

The accusations of communism were widespread enough to misdirect from the real Soviet espionage that was occurring, leading the Roosevelt administration to miss the infiltration of various spy rings. Most of the Soviet spy rings actually sought to undermine the Roosevelt administration.

The Communist Party of the United States of America (CPUSA) had been quite hostile to the New Deal until 1935, but acknowledging the danger of fascism worldwide, reversed positions and tried to form a "Popular front" with the New Dealers. The Popular Front saw a small amount of popularity and a relatively restricted level of influence, and declined with the Molotov–Ribbentrop Pact. From 1935, the head of CPUSA Earl Browder sought to avoid directly attacking the New Deal or Roosevelt. With the Soviet invasion of Poland in mid September 1939, Browder was ordered by the Comintern to adjust his position to oppose FDR, which led to disputes within the CPUSA.

During the New Deal, the communists established a network of a dozen or so members working for the government. They were low level and had a minor influence on policies. Harold Ware led the largest group which worked in the Agriculture Adjustment Administration (AAA) until Secretary of Agriculture Wallace got rid of them all in a famous purge in 1935. Ware died in 1935 and some individuals such as Alger Hiss moved to other government jobs. Other communists worked for the National Labor Relations Board (NLRB), the National Youth Administration, the Works Progress Administration, the Federal Theater Project, the Treasury and the Department of State.

Works of art and music

The Works Progress Administration subsidized artists, musicians, painters and writers on relief with a group of projects called Federal One. While the WPA program was by far the most widespread, it was preceded by three programs administered by the US Treasury which hired commercial artists at usual commissions to add murals and sculptures to federal buildings. The first of these efforts was the short-lived Public Works of Art Project, organized by Edward Bruce, an American businessman and artist. Bruce also led the Treasury Department's Section of Painting and Sculpture (later renamed the Section of Fine Arts) and the Treasury Relief Art Project (TRAP). The Resettlement Administration (RA) and Farm Security Administration (FSA) had major photography programs. The New Deal arts programs emphasized regionalism, social realism, class conflict, proletarian interpretations and audience participation. The unstoppable collective powers of common man, contrasted to the failure of individualism, was a favorite theme.

Post Office murals and other public art, painted by artists in this time, can still be found at many locations around the U.S. The New Deal particularly helped American novelists. For journalists and the novelists who wrote non-fiction, the agencies and programs that the New Deal provided, allowed these writers to describe what they really saw around the country.

Many writers chose to write about the New Deal and whether they were for or against it and if it was helping the country out. Some of these writers were Ruth McKenney, Edmund Wilson and Scott Fitzgerald. Another subject that was very popular for novelists was the condition of labor. They ranged from subjects on social protest to strikes.

Under the WPA, the Federal Theatre project flourished. Countless theatre productions around the country were staged. This allowed thousands of actors and directors to be employed, among them were Orson Welles, and John Huston.

The FSA photography project is most responsible for creating the image of the Depression in the U.S. Many of the images appeared in popular magazines. The photographers were under instruction from Washington as to what overall impression the New Deal wanted to give out. Director Roy Stryker's agenda focused on his faith in social engineering, the poor conditions among cotton tenant farmers and the very poor conditions among migrant farm workers—above all he was committed to social reform through New Deal intervention in people's lives. Stryker demanded photographs that "related people to the land and vice versa" because these photographs reinforced the RA's position that poverty could be controlled by "changing land practices". Though Stryker did not dictate to his photographers how they should compose the shots, he did send them lists of desirable themes, such as "church", "court day", "barns".

New Deal programs

The New Deal had many programs and new agencies, most of which were universally known by their initials. Most were abolished during World War II while others remain in operation or formed into different programs. They included the following:

National Youth Administration (NYA), 1935: program that focused on providing work for students ages of 16 to 25. Ended in 1943.

Reconstruction Finance Corporation (RFC): a Hoover agency expanded under Jesse Holman Jones to make large loans to big business. Ended in 1954.

Federal Emergency Relief Administration (FERA): a Hoover program to create unskilled jobs for relief; expanded by Roosevelt and Harry Hopkins; replaced by WPA in 1935.

United States bank holiday, 1933: closed all banks until they became certified by federal reviewers.

Abandonment of gold standard, 1933: gold reserves no longer backed currency; still exists.

Civilian Conservation Corps (CCC), 1933–1942: employed young men to perform unskilled work in rural areas; under United States Army supervision; separate program for Native Americans.

Homeowners Loan Corporation (HOLC): helped people keep their homes, the government bought properties from the bank allowing people to pay the government instead of the banks in installments they could afford, keeping people in their homes and banks afloat.

Tennessee Valley Authority (TVA), 1933: effort to modernize very poor region (most of Tennessee), centered on dams that generated electricity on the Tennessee River; still exists.

Agricultural Adjustment Act (AAA), 1933: raised farm prices by cutting total farm output of major crops and livestock; replaced by a new AAA because the Supreme Court ruled it unconstitutional.

Statistics

Depression statistics

"Most indexes worsened until the summer of 1932, which may be called the low point of the depression economically and psychologically". Economic indicators show the American economy reached nadir in summer 1932 to February 1933, then began recovering until the recession of 1937–1938. Thus the Federal Reserve Industrial Production Index hit its low of 52.8 on July 1, 1932, and was practically unchanged at 54.3 on March 1, 1933, but by July 1, 1933, it reached 85.5 (with 1935–39 = 100 and for comparison 2005 = 1,342). In Roosevelt's 12 years in office, the economy had an 8.5% compound annual growth of GDP, the highest growth rate in the history of any industrial country, but recovery was slow and by 1939 the gross domestic product (GDP) per adult was still 27% below trend.

(1) in 1929 dollars

(2) 1935–1939 = 100

Darby counts WPA workers as employed; Lebergott as unemployed

Source: Historical Statistics US (1976) series D-86; Smiley 1983