The New Deal is an economic policy launched by Franklin D. Roosevelt to end the Great Depression. Americans were battered by 25% unemployment, Dust Bowl droughts, and four waves of bank failures. They welcomed the government's rescue.
FDR proposed the New Deal to reverse the downward economic spiral. The goals were relief, recovery, and reform for those who were hardest hit.
Key Takeaways
- The New Deal was a series of large-scale relief programs and reforms that FDR implemented to counteract the economic effects of the Great Depression.
- The New Deal advocated government spending as a key economic driver boosting consumer demand.
- The New Deal played a significant role in countering the Great Depression and revitalizing the U.S. economy.
- FDR’s plan revealed just how vital the government’s role is in the management of the nation’s economy.
New Deal Policies
FDR launched the New Deal in three waves from 1933 to 1939. Congress passed dozens of programs to stabilize the U.S. financial system. They provided relief to farmers, and jobs to the unemployed. They also built private-public partnerships to boost manufacturing.
FDR's New Deal policies introduced Keynesian economic theory. It said government spending could end the Depression by stimulating consumer demand. The New Deal was a far cry from President Herbert Hoover's "...hear-nothing, see-nothing, do-nothing Government," derided by FDR in his 1936 campaign speech.
Hoover believed a free-market economy would self-correct. Government revenue fell as the Depression wore on, so Hoover cut spending. He signed the Smoot-Hawley tariff to protect U.S. industries. He believed that business prosperity would trickle down to the average person. The Depression worsened instead.
First New Deal and Its Programs
Roosevelt was inaugurated on March 4, 1933. FDR pushed Congress to pass 15 new agencies and laws in his first 100 days in office. Together, they created "capitalism with safety nets and subsidies," according to historian Lawrence Davidson.
- Emergency Banking Act - March 9: FDR had proclaimed a four-day nationwide "banking holiday" 36 hours after he was inaugurated, to stop bank runs. On the fourth day of the bank closures, a special session of Congress passed a bill in seven and a half hours. This Act allowed banks to reopen once examiners found them to be financially secure. By March 15, banks controlling 90% of banking resources had reopened, and deposits far exceeded withdrawals.
- Government Economy Act - March 20: The act permitted Roosevelt to cut the pay of government and military employees by 15%. The $243 million saved went to finance New Deal programs.
- Beer-Wine Revenue Act - March 22: This Act legalized the sale of low-alcohol beer and wine and taxed alcohol sales, raising federal revenue. The Beer-Wine Revenue Act was followed by the passage of the 21st Amendment, which effectively ended Prohibition.
- Civilian Conservation Corps - March 31: The program hired three million workers over nine years to conserve public land. They planted forests, built flood barriers, and maintained roads and trails.
- Abandonment of Gold Standard - April 5: FDR stopped a run on the precious metal. He ordered everyone to exchange all gold for dollars.
- Federal Emergency Relief Act - May 12: This program funded a wide variety of jobs in agriculture, the arts, construction, and education.
- Agricultural Adjustment Act - May 12: This legislation subsidized farmers to reduce crops. It doubled crop prices by 1937. It was overturned by the Supreme Court in 1936 because it taxed processors but gave funds to farmers. That was remedied in 1938.
- Emergency Farm Mortgage Act - May 12: This act provided loans to save farms from foreclosure.
- Tennessee Valley Authority Act - May 18: The program established a federal corporation that built power stations in the Tennessee Valley, the poorest area in the nation.
- Securities Act - May 27: This act required corporations to provide information to investors before issuing stock.
- Abrogation of Gold Payment Clause - June 5: The government no longer had to repay dollars with gold.
- Home Owners' Loan Act - June 13: This act established the Home Owners Loan Corporation that refinanced mortgages to prevent foreclosures. It also provided additional capital to mortgage lenders. It had refinanced 1 million homes when lending activities closed in 1936, which was the equivalent of 20% of all urban mortgages.
- Glass-Steagall Banking Act - June 16: This law separated investment banking from retail banking. It prevented retail banks from using depositors' funds for risky investments. It gave the regulation of retail banks to the Federal Reserve, prohibited bank sales of securities, and created the Federal Deposit Insurance Corporation. "When a Bank Fails - Facts for Depositors, Creditors, and Borrowers."
What impact did the new deal have on American society?
The New Deal was responsible for some powerful and important accomplishments. It put people back to work. It saved capitalism. It restored faith in the American economic system, while at the same time it revived a sense of hope in the American people.What two elements of the New Deal are present today?
The largest programs still in existence today are the Social Security System and the Securities and Exchange Commission (SEC).