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Goal 9 . The New Deal. FDR’s Rise to Power. June, 1932 the Republicans met in Chicago and nominated Herbert Hoover as their nominee for president- many realized the depression hurt the Republican chances of victory

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goal 9

Goal 9

The New Deal


June, 1932 the Republicans met in Chicago and nominated Herbert Hoover as their nominee for president- many realized the depression hurt the Republican chances of victory

  • Late June, 1932 the Democrats met in Chicago and after four ballots nominated the governor of New York Franklin Delano Roosevelt
  • FDR’s polices to fix the economy became known as the New Deal

FDR was confident he could solve the nation’s economic problems

  • Hoover had not done anything to successfully improve life for Americans
  • FDR won 472 electoral votes to 59
  • FDR entered politics after completion of law school
  • 1910 he won a seat in the New York state Senate

FDR gained a reputation as a progressive reformer willing to stand up to the party bosses

  • FDR was a supporter of Wilson in 1912
  • Wilson rewarded FDR’s support with an appointment as Assistant Secretary of the Navy- a position FDR held during WWI
  • 1920 the Democrats nominated FDR for vice-president

Around 1920 FDR contracted polio- left him little use of his legs

  • FDR engaged in strenuous exercise to regain muscle control
  • FDR was able to walk with the aid heavy steel leg braces, a cane, and the help of another person
  • During his recovery period FDR’s wife Eleanor kept his name before the New York Democratic Party- kept his political career alive

Mid- 1920s once again active in New York politics

  • When Al Smith ran for President in 1928, FDR ran for the governorship of New York
  • FDR campaigned hard to overcome the perception that polio had slowed him down
  • Won a close election
  • As governor, FDR was popular with the citizens of New York

Cut taxes for farmers

  • Reduced utilities rates
  • 1931 as Depression worsened, FDR convinced the New York legislature to set up a state agency to help the unemployed of New York
  • The agency distributed over $25 million in aid to provide relief to about 10% of the families in New YOrk

FDR’s popularity as governor helped him get the nomination for president in 1932

  • Americans hoped FDR would use the government to help people
  • FDR won in November, 1932- the people had one more winter to endure before he took office
  • During the winter of 1933 unemployment continued to rise, bank runs increased, the banking system was in trouble

FDR’s first 100 days, he and his advisors took office with ideas for recovery- no clear agenda

  • Sent bill after bill to Congress between March 5 and June 16, 1933
  • Congress passed 15 major bills to meet the economic crisis
  • These programs later known as the New Deal

Some bank runs prior to FDR taking office were due to fears FDR would take the US off of the gold standard to reduce the value of the dollar to fight the Depression

  • Gold standard- one ounce of gold equaled a set number of dollars
  • Reduce the value of the dollar the US would have to stop exchanging dollars for gold

Many Americans and foreign investors with deposits in American banks took out their money and converted it to gold before the dollar lost value

  • People stood in long lines with paper bags and suitcases to withdraw money from banks
  • By March, 1933 over 4,000 banks closed, did away with 9 million savings accounts
bank holidays
Bank holidays
  • 38 state governors declared a bank holiday- closed remaining banks before the runs could put them out of business
  • FDR’s inauguration day, most banks in the US closed
  • One in four people out of work
  • Economy going nowhere
  • To restore national confidence, FDR proclaimed “ we have nothing to fear, but fear itself”

The New Deal was not one clear strategy, shaped by a single philosophy

  • FDR was not an intellectual, nor did he have a strong political ideology
  • FDR was a practical politician, open to a variety of approaches to see if they worked and to see if they hurt him politically
  • FDR named an intelligent group of advisors with experience in academia, business, agriculture, government, law and social work

These advisors were known as the “Brain Trust”

  • FDR chose advisors with different points of view
  • Pitted advisors against one another, FDR made the final decision on which policies to pursue
  • Advisors fell into one of three groups

1. New Nationalism of T. Roosevelt

  • Business and government should work together to manage the economy, impressed by business/government cooperation during WWI
  • Government agencies would work with business to regulate wages, prices, and production- lift the nation out of the Depression

2. second group distrusted big business

  • Blamed business leaders for causing the Depression
  • Wanted government planners to run key parts of the economy
  • 3. third group- New Freedom of Wilson
  • Blamed trusts for the Depression
  • Government had to restore competition in the economy

Wanted FDR to support trust busting by breaking up big companies and allow competition to set wages, prices, and production levels

  • The government should impose regulations on the economy to maintain fair competition

FDR- first priority; restore confidence in the banking system

  • First night in office, told Sec. of Treasury William H. Woodin he wanted an emergency banking bill ready for Congress in less than 5 days
  • FDR declared a national bank holiday, closed all banks and called Congress into a Special Session

The House of Representatives passed the Emergency Relief Banking Act, Senate approved the bill the same day

  • The new law required Federal examiners to survey the nation’s banks and issue Treasury Department licenses to those that were financially sound
  • March 12, 1933 FDR talked directly to the nation via radio, 60 million listened to the first of his “fireside chats”

FDR told the people what he was trying to do

  • Assured them their money would be safe if they put it back in the bank
  • Banks that were sound reopened and deposits outnumbered withdrawals
  • The banking crisis had passed

To Securities Act of 1933 was enacted to protect investors in the stock market

  • The law required brokers to provide complete and truthful and information to investors
  • 1934, Congress created the Securities and Exchange Commission (SEC) to regulate the stock market and prevent fraud

The Glass-Steagall Act provided for more regulation of the banking system

  • Glass-Steagall separated commercial and investment banking
  • -commercial banks handled daily transactions, deposits, paid interest, cashed checks, lent money
  • Commercial banks could no longer risk depositor money by speculating on the stock market

Glass-Steagall also created the Federal Deposit Insurance Corporation

  • The federal government insurance for bank deposits up to a set money amount
  • The FDIC further increased confidence in the banking system
debt relief
Debt Relief
  • Some Roosevelt advisors believed low prices caused the Depression
  • Debt was the main barrier to economic recovery
  • Incomes fell, people used most of their money to pay debts
  • Feared losing homes and farms, cut spending to pay off debt

To help homeowners pay their mortgages Congress created the Home Owners Loan Corporation (HOLC)

  • The HOLC bought mortgages from lenders of homeowners who were behind in their payments
  • The HOLC restructured the loans with longer terms and lower interest rates

10% of all homeowners received HOLC loans

  • Made loans to people who were employed
  • If a person lost their job and could not make payments the HOLC foreclosed
  • By 1938 the HOLC foreclosed on over 100,000 mortgages
  • The HOLC did help refinance 1 in 5 mortgages on private homes
the farm credit administration
The Farm Credit Administration
  • The FCA helped farmers refinance mortgages
  • Within 7 months the FCA lent four times the amount to farmers that banks had in the year before
  • The FCA pushed interest rates lower
  • Helped farmers in the short term, less efficient farmers kept their land, less money to lend to efficient farmers in the economy

FCA loans may have slowed overall economic recovery, did save poor landowners who would have lost their land

farm and industry
Farm and Industry
  • FDR’s advisors felt industry and agriculture were hurt by low prices and overproduction
  • Some advisors saw competition as inefficient and bad for the economy
  • Wanted business and government to work together along with federal agencies and manage the economy

To aid farmers hurt by the Depression FDR wanted a new farm program

  • The Agricultural Adjustment Act- the federal government would pay farmers not to raise certain livestock (hogs) or grow certain crops (cotton, corn, wheat, and tobacco)
  • The program was put in place after farmers had already planted crops and were raising livestock for the season

The AAA paid cotton farmers to plow under 25% of their acreage

  • Hog producers slaughtered 6 million piglets
  • Over the next two years farmers took millions of acres of land out of farm production and got over $1 billion in support
  • Farm surpluses fell in 1936, food prices rose as did farm income by 50%

Rising food prices in the midst of the Depression was not welcomed by the public

  • Not all farmers benefitted from the AAA
  • Commercial farmers who specialized in one crop profited more than the small farmer who raised several products
  • Tenant farmers became homeless and jobless when the landowner took land out of production

The National Industrial Recovery Act was enacted by Congress June, 1933

  • The law was an attempt to help industry similar to attempts to help agriculture under the AAA
  • The law suspended antitrust laws, allowed business, labor, and the government to cooperate and set up voluntary rules for each industry

The rules = codes for fair competition

  • The codes set prices, minimum wage, and limited factories to two shifts
  • Attempted to spread production among as many as producers as possible
  • Shortened worker hours to create more jobs
  • Guaranteed workers the right to form unions
  • The National Recovery Administration (NRA) was headed by Hugh Johnson

Business owners who signed the code agreements received signs, the blue eagle, and the slogan, “We do our part”

  • The NRA lacked enforcement power, used public opinion to pressure companies to comply
  • The NRA did revive some industries
  • Small business complained that the large corporations wrote the codes to favor themselves

Efficient producers did not like price fixing, limited competition, hard to increase market share by cutting prices

  • Employers did not like the codes that gave workers the right to unionize, and bargain collectively for wages and hours, the minimum wage forced producers to charge higher prices to cover costs
  • Codes were hard to administer, business leaders tended to ignore the codes

The NRA failed as production levels dropped

  • The NIRA was declared unconstitutional in 1935

The Tennessee Valley Authority (TVA) was a New Deal program

  • The TVA built dams to control floods, conserve forest land, and bring electricity to rural areas
  • The TVA included dams in Kentucky, 4 in Tennessee, and 2 in Alabama
  • Some FDR advisors thought the fastest road to economic recovery was an increase in consumption
  • FDR did not want to just give people money
  • Congress funded agencies to create work programs for the unemployed

The Civilian Conservation Corps (CCC)

  • March, 1933
  • Employment to males 18-25
  • Worked under the supervision of the National Forestry Service- plant trees, fight forest fires, and build reservoirs
  • The men lived in camps, earned $30 a month, worked for 6-12 months
  • The CCC stopped in 1942, put 3 million men to work
the federal emergency relief administration
The Federal Emergency Relief Administration
  • FERA- sent a half a billion dollars to state and local agencies to fund relief programs
  • FERA was headed by Harry Hopkins

June, 1933 Congress funded the Public Works Administration (PWA)- headed by Harold Ickes

  • PWA – construction projects, built and improved highways, dams, sewer systems, waterworks, public schools, and government facilities
  • The PWA did not employ workers, gave contracts to construction companies- had to hire African American workers in order to get contracts

The Civilian Works Administration (CWA)

  • Fall 1933, the federal hired workers directly, workers were on the government payroll
  • The first winter the CWA employed 4 million workers, 300,000 females
  • The CWA built or improved 1,000 airports, 500,000 miles of road, 40,000 school buildings, and 3,500 playgrounds, parks, and playing fields

The cost of the CWA was immense, spent almost $1 billion in five months

  • The CWA did help, FDR was concerned with the amount of money the CWA spent and that the public was getting used to the federal government providing them jobs
  • FDR shut down the CWA in April, 1934- fired 4 million workers
successes of the new deal
Successes of the New Deal
  • FDR’s first year in office he got Congress to support many new programs and policies
  • The First New Deal programs did not bring economic recovery
  • The First New Deal did show that FDR was committed to try anything and everything to help
  • FDR did bring hope and optimism to the American public

FDR was popular during his first two years in office- but opposition to his policies had grown

  • The New Deal had been in effect for two years with limited economic improvement
  • 2 million new jobs created
  • Over 10 million still unemployed
  • Average income still only about ½ of what it was in 1929

Opposition to the New Deal came from the right and the left

  • On the right, the New Deal programs had too many business regulations
  • The right wing included many Southern Democrats, felt the New Deal had expanded the power of the federal government at the expense of state’s rights

The right had opposed the New Deal from the start

  • Late 1934 opposition from the right increased, to pay for the New Deal programs the federal government had to resort to deficit spending
  • Business leaders were concerned at the growing deficit of the federal government
  • August, 1934 anti-New Deal politicians from both parties formed the American Liberty League

The American Liberty League was organized opposition to the New Deal

  • The criticism from the right threatened to split the Democratic Party and reduce business support for Roosevelt
opposition to the new deal from the left
Opposition to the New Deal from the Left
  • The left opposed the New Deal because it did not do enough
  • The left wanted the federal government to become more involved, shift wealth from the rich to the middle-income and the poor

Democrat, Senator from Louisiana, fiery speaker

  • As governor of Louisiana Long became the champion of the poor, improved schools, colleges, and hospitals
  • Built roads and bridges
  • Very popular and built a strong corrupt political machine

Long’s attack on the rich earned him a national following

  • Long supporters organized 27,000 “Share Our Wealth” clubs across the US
  • Pollsters estimated if Long ran against FDR he would take 10% of FDR’s vote as a third party candidate- this would enable the Republicans to win

Long’s challenge to FDR grew when his supporters joined with those of Father Coughlin

  • A Catholic priest with a daily national radio show with 30-45 million listeners
  • Coughlin was an early supporter of the New Deal- wanted more- called for heavy taxation on the rich and the nationalization of the banking system

Coughlin organized the National Union for Social Justice in 1935

  • The Democrats feared the emergence of a new national political party

A third left wing challenge came from Dr. Francis Townsend, former public health official

  • Townsend proposed the federal government pay citizens over age 60 $200 a month, but they had to spend all $200 each month
  • The increase in spending and the removal of older workers from the work force = more jobs for the unemployed

The proposal gained great support, most among the elderly

  • The elderly organized as a political force for the first time
  • The program was very popular in the West
  • Combined with supporters of Long and Coughlin it was possible the coalition would draw enough votes from FDR to defeat him in the 1936 election

January, 1935 FDR asked Congress for $5 billion for work relief and to increase employment by providing useful projects

  • Most of the money went to the Works Progress Administration (WPA) headed by Harry Hopkins
  • Over the next few years the WPA spent $11 billion

Employed 8.5 million workers

  • Constructed 650,000 miles of road
  • 125,000 public buildings
  • 8,000 parks
  • Built or improved 124,000 bridges and 853 airports
  • The most controversial part of the WPA was “Federal Number One’

Federal Number One provided work for artists, musicians, theater people, and writers

  • Artists created thousands of murals and sculptures for the halls and walls of public buildings
  • Musicians created 30 public symphony orchestras

FDR had asked for WPA funding, thought it would pass quickly, opposition growing in Congress to New Deal programs, funding was not approved until April, 1935

  • May, 1935 the Supreme Court struck down the National Industrial Recovery Act in the Schechter v. US case
  • The Schechter brothers were poultry dealers in Brooklyn, NY

The brothers had been convicted in 1933 for violating the NIRA’s Live Poultry Code

  • Accused of selling diseased chickens and violated codes for wage and hour provisions
  • The “sick chicken” case ruling by the US Supreme Court was that the Constitution did not allow Congress to delegate its powers to the executive branch

FDR feared the Court would strike down the rest of the New Deal

  • FDR wanted new programs, the threat from the Supreme Court and the right and the left was cause for concern
  • FDR called congressional leaders to the White House and told them Congress could not end its session until it passed his new bills
  • Congress worked into the summer to pass new bills, newspapers called the session the “second hundred days”
the rise of industrial unions
The Rise of Industrial Unions
  • When the Court stuck down the NIRA it also did away with the section that allowed labor to unionize
  • FDR and the Democrats felt they needed the labor vote to get re-elected
  • Believed unions would help end the Depression, high union wages = more money to spend = a boost to the economy
  • Opponents claimed high wages force companies to charge higher prices and hire fewer people

The National Labor Relations Act (Wagner Act), 1935

  • Gave workers the right to organize without employer interference, and the right to collective bargaining
  • Dissatisfied union workers could take complaints to binding arbitration, a neutral third party would hear both sides and decide the issue

NLRB had the power to investigate the actions of employers and the power to issue cease and desist orders against unfair practices


With the passage of the Wagner Act, union activity increased

  • The United Mine Workers Union led by John L. Lewis worked with other industrial unions to form the Committee for Industrial Organizations
  • The CIO attempted to organize industrial unions, started with the auto and steel industries
  • These were the largest industries where workers were not yet organized

December, 1936, General Motors Plant, two union men were demoted, an unplanned protest took place, 135 workers sat down and a new type of strike started

  • They stopped work and refused to leave the factory
  • Several days later at a GM plant in Flint, Michigan another sit-down strike occured

Violence broke out at the Flint plant, the police used tear gas to break the strike

  • Strikers were turned by the police assault
  • The police wounded 13 strikers and two bystanders with gunfire
  • Feb. 11, 1937 GM gave in and recognized the CIO’s United Autoworkers (UAW)

The UAW got a 40 hour work week

  • 10% pay raise
  • The small steel producers did not recognize the union
  • Strikes occurred across the nation
  • By 1941, the steelworkers union had contracts with the steel industry

By 1941 the steelworkers union had contracts with the steel industry

  • In six years union membership went from 3 million in 1933 to 9 million by 1939
  • In 1938 the CIO changed its name to Congress of Industrial Organizations, it became a federation of industrial unions

Social Security Act, 1935- security for the elderly and unemployed

  • Supported by Secretary of Labor Frances Perkins
  • The creators saw Social Security as an insurance bill
  • Workers earned the right to benefits because they paid premiums

The bill provided a small welfare payment for needy people, disabled, poor families with dependent children

  • A worker could receive retirement benefit at age 65
  • The bill provided unemployment insurance if a worker was temporarily out of work

Critics did not like that benefits were funded from payroll taxes of workers and employers

  • FDR stated the taxes were important, a worker paid then was entitled to receive retirement and unemployment benefits
  • The people getting benefits had already paid for them, no politician could take the benefits away

The creators of Social Security did not foresee Congress taking money from the fund for other purposes and not raising payroll taxes enough to pay for the benefits

  • Social Security helped many, but in the beginning left out the neediest – farm and domestic workers
  • 65% of African Americans in the 1930s fell into one of those two categories

Social Security – the principle that the federal government should be responsible for those who through no fault of their own were unable to work


African American voters switched from the Republican Party to the Democratic Party due to New Deal policies

  • Election of 1936, millions owed their jobs, mortgages, bank accounts to the New Deal
  • The white South, the core of the Democratic Party, now was part of a coalition that included farmers, laborers, African Americans, immigrants, ethnic minorities, women, progressives, and intellecutals

Eleanor Roosevelt brought the African American and female vote to the Democratic Party

  • She showed sympathy for those groups
  • Told FDR about her experiences travelling the nation
  • African Americans and women made gains under the New Deal

FDR appointed the first women to a cabinet level post, Secretary of Labor Frances Perkins

  • Also placed women in lower level government jobs
  • The general view was not that the government should work to provide equal treatment for women, but to provide women certain protections

Republicans nominated Alfred Landon- had supported the New Deal- felt it was time to ease restrictions on business

  • Landon stated that “the New Deal violated the basic principles of the American system, if we are to preserve our American form of government this administration must be defeated”

FDR and the New Deal were still popular

  • The challenge from the left was weakened by the assassination of Huey Long
  • Long supporters joined with Father Coughlin and Francis Townsend to from a new party, the Union Party
  • No strong leader the party had no chance in the election

The US Supreme Court in January, 1936 declared the Agricultural Adjustment Act unconstitutional

  • Cases were pending on the Wagner Act and the Social Security Act
  • FDR moved to stop the Supreme Court from dismantling the New Deal
  • FDR claimed the Court was overburdened with work

FDR went to Congress with a bill to increase the number of Supreme Court justices

  • Any justice who had served ten years and did not retire within 6 months of reaching age 70, the president could appoint an additional justice to the Court
  • 4 justices were in their 70s and 2 in their late 60s

If the bill passed FDR could quickly appoint as many as 6 new justices

  • Big political mistake- newspapers called it court-packing
  • Congress could change the size of the Supreme Court, looked like FDR was interfering with the separation of powers in the Constitution

The issue split the Democrats

  • Southern Democrats feared FDR would place justices on the Court to overturn segregation
  • African American leaders afraid FDR would set a precedent of changing the makeup of the Court, future presidents might pack the Court with justices opposed to civil rights
  • Many felt it gave the president too much power

FDR’s actions did calm down the Court, April 1937 the Court upheld the Wagner Act and in May declared Social Security to be constitutional

  • One of the more conservative justices retired and FDR was free to appoint a justice that supported the New Deal
  • The Senate quietly killed the court-packing bill

FDR did change the view of the Supreme Court of the New Deal

  • Hurt his reputation with the people
  • Encouraged conservative Democrats in Congress to work with Republicans to oppose additional New Deal programs

Late 1937 FDR suffered another blow to his reputation

  • Unemployment shot up
  • Earlier in 1937 it appeared the nation was near full recovery
  • Industrial output almost back to pre-depression levels
  • Unemployment remained high

FDR wanted to balance the federal budget

  • Felt too much debt was dangerous
  • Ordered WPA and PWA funding cuts
  • FDR cut spending just as the first Social Security taxes removed $2 billion from the economy
  • The economy dropped- end of 1937 2 million out of work

The recession of 1937 led to discussion within the administration as to what to do

  • Treasury Secretary Henry Morganthau wanted to balance the federal budget, in order to reassure business leaders and encourage them to invest in the economy
  • Harry Hopkins head of the WPA and Harold Ickes head of the PWA wanted renewed government spending- used Keynesian economics as their argument

1936 British economist John Maynard Keynes published a book stating that governments should spend heavily during a recession, even if it meant running a budget deficit

  • According to Keynes FDR had done the wrong thing when he cut programs in 1937
  • FDR was not ready to resume deficit spending
  • Some thought the recession proved the people were too dependent on government spending

The National Housing Act, 1937 created the United States Housing Authority

  • $500 million to subsidize loans for builders willing to tear down blocks of slums and build low cost housing
  • This was to help those who could not afford to buy a house and benefit from the Home Owners Loan Corporation

The Farm Security Administration gave loans to tenant farmers to buy their own land

  • Over a 4 year period extended $1 billion in loans
  • Many in Congress felt this made farm problems worse, increased production where the AAA had helped reduce production and increase prices
  • Congress kept funding low to prevent too many from getting loans

The Fair Labor Standards Act, 1938 more worker protection

  • Banned child labor
  • Established a 40 hour work week for many workers
  • Congress turned against the New Deal, the recession of 1937 allowed Republicans to win a number of Congressional seats in the 1938 mid-term elections

Republicans joined with conservative Southern Democrats to block New Deal legislation

  • FDR was concerned with events in Asia and Europe

The New Deal had limited success in bringing an end to the Great Depression

  • Unemployment still high
  • Recovery was not complete until WWII
  • The New Deal did give citizens a sense of security and stability
  • The New Deal attempted to balance competing economic interests

Business leaders, farmers, workers, consumers, homeowners looked to the government to protect their interests

  • The US Supreme Court upheld the government’s role in two decisions
  • 1937, NLRB vs. Jones and Laughlin Steel, the Court ruled the federal government had the authority under the interstate commerce clause to regulate production within a state

1942, Wickard vs. Filburn, the federal government had the authority to regulate consumption in the states

  • Both decisions gave the federal government more power over the economy and to mediate between competing groups
  • The role of mediator, the federal government established a broker state

The federal government would work out conflicts among different interests

  • The broker role has continued under administrations of both parties
  • The New Deal brought a new role for the federal government
  • Also brought a change in attitude of the public towards government

New Deal programs created a safety net for the average citizen

  • Programs to protect citizens against economic disaster
  • FDR years ended the government felt an obligation to continue the safety net even if it meant a larger more expensive federal government

Critics argued the New Deal made the government too powerful

  • The additional New Deal legacy was the debate over how much the government should intervene in the economy or support the disadvantaged