The New Deal—Herbert Hoover and Franklin D. Roosevelt

Ironically, few Americans more qualified to deal with hard times than Herbert Hoover. Orphaned at eleven, he left Iowa to live with relatives in Oregon, eventually graduating from Stanford University. He became a millionaire by forty and a reputation as an expert in streamlining complex operations. In l928, Hoover’s accomplishments and energy won him the Republican nomination for President and easily defeated Democrat Al Smith (part of his defeat was due to his Catholic religion). Like most Americans, Hoover believed the l929 economic collapse was a garden-variety recession and would quickly work itself out. However, from the beginning, he was not willing to sit back and do nothing:

Called a special session of Congress to deal with depressed farm prices, and after much wrangling, Congress passed a law that provided federal loans to farm cooperatives. In l930, he asked and received a tax cut of 160 million dollars.

When conditions deteriorated in l931, Hoover moved further in the direction of governmental intervention. In June, the President called for a moratorium on the payment of war debts to America.

He accelerated work on Boulder Dam and developed plans for the Grand Coulee Dam started in l933.

Finally, he approved the creation of the Reconstruction Finance Corporation in late l931. The R.F.C. was authorized to lend $500 million to financial institutions to direct the “trickling down” of money to the public. In l932, he reluctantly agreed to let the R.F.C. lend $300 million to states for the relief of unemployment.

Unfortunately, Hoover’s efforts were too little too late. His belief that giving money to the financial institutions to trickle down never happened, and he was criticized for willing to earmark federal money for businesses while denying it to the unemployed. As comedian Will Rogers irreverently remarked that the “trickle-down theory always operated in reverse. He quipped, “You can drop a bag of gold in Death Valley, which is below sea level, and before Sunday, it will be home to Papa J.P. Morgan.”

Hoover made matters worse by supporting passage of the Hawley-Smoot Tariff in l930. The record high protective tariff had little impact on domestic prices or foreign exporters but provoked sharp retaliation from other countries, cutting American exporting in half between l930 and l932.

One of Hoover’s grievous mistakes was his move against the “bonus army” of l932. The so-called army consisted of 22,000 World War I veterans who had come to Washington, D.C., to lobby for immediate payment of bonuses due them in l945 for their service. When the Senate rejected the bonus bill, many dejected returned home. However, others made camp in ramshackle quarters on Anacostia Flats across the river from the Capital.

Following several skirmishes with the police in which bricks flew, and several veterans died, Hoover ordered the army in under the leadership of General Douglas MacArthur to remove the men from the camp. Unfortunately, MacArthur exceeded his assignment and burned down the entire encampment. Using tear gas and mounted bayonets, they wadded into the camp gassing a thousand men, women, and children. Seldom in American history have American troops been used with so little cause or restraint.

Franklin D. Roosevelt:

Franklin D. Roosevelt, a product of Hyde Park, New York tutors, and Harvard University, became President in l932. The distant cousin of Teddy Roosevelt, Franklin married Eleanor (also a distant relative) working his way up from Assistant Secretary of the Navy and Governor of New York. A second-rate intellect with an excellent temperament, Roosevelt had overcome the incredible challenge of polio in l921. Roosevelt waged a well-organized presidential campaign with a mix of wealthy backers and a “brain trust” of academic advisors who provided great ideas and well-written speeches. His campaign revealed one of his significant assets as President; the ability to attract able associates from diverse backgrounds and political persuasions.

Roosevelt and the New Deal

In l932, he promised to look after the “forgotten men, the unorganized but indispensable units of economic power.” Also, he pledged to end prohibition, restore purchasing power to the farmers, and bring relief to the small banks and homeowners. With his victory, he promised a bold federal government dedicated to promoting conservation (like his distant cousin Teddy), regulate public utilities, and curb the excesses of Wall Street.

In a statement characterizing the cornerstone of his political philosophy going into the White House, he remarked, “America demands bold, persistent experimentation. It is common sense to take a method and try it; if it fails, admit it frankly and try another. But above all, try something.” In other words, he was not going to be bound by a consistent economic philosophy.

His distant cousin Theodore Roosevelt had promised the American people a “square deal,” he offers the American people a “New Deal:”

1.The four months between the election and taking office were among the most dismal in American history.

2.Though he had promised America bold action during the campaign, he never explicitly pointed out precisely what he would do once elected. In his inaugural address, he hinted that he would seek broad executive power to wage war against the emergency, as “great” as the power given him had the country been invaded by a foreign foe.

3.In the first l00 days [March 9-June 16 l933] that followed, Roosevelt kept his promise to act, and an unprecedented volume of legislation flowed from Congress.

4.Immediately declared a national bank holiday and called Congress into a special session.

5.Emergency Banking Act—required each bank in the Federal Reserve System inspected and licensed before it could reopen, forbade the hoarding of gold, and extended loans to banks.

6.The Glass-Steagall Act (June, l933)—separated commercial and investment banking to limit bank speculation; established the Federal Deposit Insurance Corporation, which insured individual bank deposits up to $ 5000.

7.Agricultural Adjustment Act (May, l933)—The Act attempted to address one of the great tragedies of the depression, the surplus of farm products amid starvation. The excess caused a decline in farm income and, in turn, restricted farmers’ purchasing power. The AAA paid farmers to limit their production. The hope was to raise agricultural prices, increasing farmers’ income. In l936, the Supreme Court ended AAA, ruling the processing of tax regulated agricultural production was illegal.

8.The Civilian Conservation Corps (June, l933)—Brought together the preservation of natural resources and relief for the unemployed by taking men between the ages of 18 and 25 to work in the countryside and protect and develop forests and parks.

9.The National Industrial Recovery Act (June, l933)—The Act attempted to balance supply and demand, as well as labor and business relations. The N.R.A. oversaw the Act’s formation of “fair codes of competition.” Under the N.R.A., the creation of voluntary codes made it necessary for employers to “comply with the maximum hours of labor, minimum rates of pay, and other conditions of employment by approved or prescribed by the President. The symbol of the program was the Blue Eagle, which appeared in store windows, billboards, etc.

10.Section 7-A of the N.R.A. attempted to undo some of the limitations on organized labor. Such attempts began had begun under President Hoover with the passage of the Norris-LaGuardia Act (l932). Specifically, Section 7-A guaranteed the workers’ right to organize and bargain collectively through representatives of their choosing and receive the maximum hours to work, and the minimum rates of pay. In l935, the Supreme Court in Schechter v. Poultry Co. v. United States invalidated the N.R.A. codes system as an unconstitutional delegation of the making power to the executive and a federal invasion of intrastate commerce.

11.The Tennessee Valley Authority (May, l933), created a “corporation clothed in the power of government but possessed the flexibility and initiative enterprise” to develop the entire Tennessee River to solve fundamental environmental problems. The Act also included bringing better living conditions to its inhabitants—electricity under federal supervision and control.

12.Federal Emergency Relief Administration (May, l933) provided federal money to states to combat unemployment and set up labor projects.

13.Public Works Administration (June 1933), under Secretary of the Interior Harold Ickes, administered a fund of 3.3 billion dollars to construct public-works projects such as highways, buildings, and dams. By l935, Ickes received criticism for handling the program too slow, and not reducing unemployment.

The Works Progress Administration in l935 under Harry L. Hopkins favored small public projects, replaced the PWA. The program provided work-relief for nearly 3 million Americans who participated in the building of airports, schools, production of plays, maps, and books.

14.Toward the end of the first New Deal, the administration passed several important pieces of legislation to supplement the Glass-Steagall Act.

15.The Securities Exchange Act (l934) set up the Securities and Exchange Commission (SEC) to supervise the activities of all stock exchanges and to protect the public against deceit and other forms of corruption. The Act met with much hostility on Wall Street but helped to restore public confidence in the stock market:

a.The Federal Securities Act of l935 set standards for Wall Street in the issuance of new securities.

b.The Banking Act of l935 gave the Federal Reserve Board more power to limit the credit of the member banks, hence controlling their operations.

c.To move away from the gold standard and the deeply entrenched deflationary policies, Roosevelt passed the Gold Reserve Act of l934. The Act gave President Roosevelt the power to order the Federal Reserve banks to turn over their supply of gold to the U.S. Treasury in return for gold certificates and then devalued the dollar by cutting the amount of gold backing for each dollar. It allowed printing more money to help groups like the farmers pay their debts.

Other relevant New Deal Legislation:

16.The Wagner Act of l935 or the National Labor Relations Act) harkened back to section 7-A of the N.I.R.A. by clearly defining the government’s support of workers’ right to organize. The Act also provided for the establishment of a National Labor Relations Board to protect the right to self-organization. The Act included the right join, assist labor organizations, and collective bargaining through representatives of their choosing.

17.One of the most significant laws of the New Deal was the Social Security Act of l935. This law stole the thunder from the appeal of Dr. Francis Townshend, a retired physician who felt, “We owe every decent living to the older people,” and supported a plan that would give every citizen over the age of $60 a monthly income of $200.

18.The Social Security Act guaranteed a pension plan for the elderly, which was coupled with unemployment benefits for younger workers. Finance of the new system would come from payroll taxes. Government responsibility for the aged, the unemployed, and eventually, the dependent and disabled, was guaranteed. The New Deal peaks in 1935.

Critics of Roosevelt and the New Deal:

1.By the end of the 100 days, when statistics indicated the depression was only slowing down, critics of specific legislation made their feelings known.

2.Attacks from both the right and the increased left-wing pressure on the President.3.Business demanded a return to the days of laissez-faire philosophy, attacking Roosevelt for favoring the ordinary people while hampering industrial growth. The National Recovery Act was seen by business as a direct challenge to the free-enterprise system.

4.Demagogues rose to attack Roosevelt and the New Deal:

Huey Long, the United States Senator from Louisiana, proposed redistribution of income to pay a guaranteed income of $5000 to every family in America and “Make Every Man a King.” His “Share the Wealth” program received considerable support and made Long a potential presidential candidate in l936. His folksy and racist ways made him a real man of the people during these desperate times until his assassination in l936.

-Father Charles E. Coughlin, “the Radio Priest,” turned his weekly religious message from the subject of God to social reform. He claimed Roosevelt had failed and was now the “great betrayer.” He warned his listeners that the nationalization of industry and that Jews had taken over the New Deal.

-After the Second New Deal, Roosevelt and the Democratic Party was at war with itself.

-In response to Supreme Court Justices, who had invalidated his earlier legislation, Roosevelt proposed the Court Packing Plan in l937. Emboldened by his landslide presidential election in l936, the plan would provide retirement at full salaries for Justices over seventy. If a justice refused to retire, an “assistant” justice with full-court voting rights was to be appointed, increasing the size of the court. The extraordinary plan failed after Roosevelt learned he did not have enough Congressional support to pass the bill.

With the 1937 recession and the rise again in unemployment and a weak stock market, Roosevelt’s New Deal ended.

Assessment of the New Deal:

It changed the relationship between the national government and the people.

It began a civil war within the Democratic Party that would last into the l960’s when Southern white Democrats began to leave the party because of its stand on civil rights, women’s rights, and affirmative action. Those Democrats became the basis of the “new Republican Party.

Still, while the New Deal failed to end the depression, it made millions of American lives more bearable.

It passed laws that prevented another collapse of the economy by business and Wall Street until 2008’s Great Recession