New Deal, Second

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NEW DEAL, SECOND

In analyzing the New Deal and its development, historians have often distinguished between a "First New Deal" of 1933 and a "Second New Deal" of 1935. (Subsequently scholars also identified a "Third New Deal" that began in 1937.) In the First and Second New Deal model, the First New Deal, enacted during the first "Hundred Days" of the administration of President Franklin D. Roosevelt in the spring of 1933, especially involved efforts to achieve economic recovery by means of national planning and controls and to provide "relief" assistance to the unemployed and impoverished. The key programs of the First New Deal were the National Recovery Administration (NRA) and the Agricultural Adjustment Administration (AAA), designed to bring balanced recovery in the industrial and agricultural sectors, and the Federal Emergency Relief Administration (FERA), to provide assistance to the needy. Other important First New Deal programs were the Tennessee Valley Authority (TVA), the Civilian Conservation Corps (CCC), the Glass-Steagall Banking Act of 1933, and the Securities Act of 1933.

A second major burst of New Deal legislation, concerned especially with social reform, came in 1935. The defining programs of this Second New Deal began with the Emergency Relief Appropriation Act of April 1935, which produced the Works Progress Administration (WPA), followed in the spring and summer by a number of programs enacted in the "Second Hundred Days." These included the Social Security Act, the National Labor Relations Act (or Wagner Act), the Revenue Act (or "Wealth Tax") of 1935, the Banking Act of 1935, and the Public Utilities Holding Company Act.

But while scholars have generally agreed that the two major periods of New Deal reform came in 1933 and 1935, they have disagreed about other aspects of the First and Second New Deals. One view maintains that the New Deal moved in a more radical policy direction in 1935, with its emphasis on social-democratic programs to provide economic security, to support organized labor, and to implement more progressive taxation. Another version holds that while the New Deal became politically more radical in 1935, with anti-business rhetoric and appeals to the working class, it actually became more conservative ideologically and programmatically by moving away from federal planning and controls and towards regulatory efforts to ensure a more competitive market economy.

The disagreement about just what the First New Deal and the Second New Deal entailed helps explain why New Deal scholars have typically concluded that matters were more complicated than a simple First and Second New Deal dichotomy would suggest. Neither the 1933 nor the 1935 legislation was so coherent as the model suggests, and important continuities can be found between the two periods. Though a few New Dealers had envisioned thoroughgoing federal economic planning and controls, most had not, and the NRA and AAA in practice had cooperated with big business and farmers and often acted upon their preferences. Significant elements of the First New Deal (relief, agricultural policy, some planning, regulation of banking and securities, for example) continued into the Second, while much of the Second New Deal (including work relief, social security, progressive taxation) had been in the planning stages almost from the beginning. Moreover, Roosevelt had been an advocate of public utilities regulation since he was governor of New York, and New York Senator Robert F. Wagner had provided powerful impetus for more far-reaching New Deal labor policy beginning in 1933.

The First and Second New Deal framework thus seems to oversimplify and therefore to distort the nature and development of the New Deal. Policymaking was more complicated and had more continuity than the model suggests, and changing circumstances rather than ideological change largely accounted for the differences between the First and the Second New Deals. Yet the framework nonetheless remains a useful one that identifies the two principal, and different, periods of New Deal policymaking. The Second New Deal had a greater social-democratic character, with programs that aimed especially at economic security and at the working classes. In addition to the Wagner Act that enabled the growth in size and power of organized labor, the Social Security Act, with its old-age insurance, unemployment compensation, and public assistance provisions, constituted a major change laying essential foundations of the modern regulatory-welfare state.

To be sure, the programs of the Second New Deal did not do all that many claimed that they did or desired that they do. The Social Security Act, for example, did not cover large groups of people, agricultural and domestic workers most importantly. Surviving spouses initially had no benefits, and African Americans often held jobs not covered by the act. Benefits were relatively small, and the old-age and unemployment insurance were financed largely by regressive payroll taxes. The act did not include health insurance. In the reworking of social reform policy in 1935, "unemployables" (including such groups as children, the elderly, and the blind) fell to state responsibility, though the Social Security Act provided for matching grants for such categories of the needy. Other Second New Deal programs also had important limits. The "Wealth Tax" turned out to be something of a misnomer, for after Congress revised it, the legislation had little redistributionist character and did little to reduce concentrations of corporate wealth and power. The Public Utilities Holding Company Act also underwent significant revision, though ultimately it did help to decentralize the utilities industry and end some of the worst monopolistic practices.

But the programs of the Second New Deal nonetheless had a profound impact. The work relief programs of the WPA gave work and income to millions of people—not only in the varied construction programs of the WPA, but also in its programs for writers, theater workers, musicians, and artists. The WPA also implemented the National Youth Administration, which helped young people gain education and skills, and the Rural Electrification Administration, which ultimately helped to transform the American countryside. The Social Security Act provided the beginnings of an old-age insurance program that, starting with 1939 amendments, would expand in various ways over subsequent decades, and its other provisions had large future implications as well. The Wagner Act, and the National Labor Relations Board it created, played an instrumental role in the growing size and power of organized labor—both the American Federation of Labor (AFL) and the new Congress of Industrial Organizations (CIO). The Banking Act of 1935 substantially increased the power of the Federal Reserve Board over the banking system and thus enhanced its ability to support the economy. The 1935 legislation also contributed to Roosevelt's landslide reelection victory in the election of 1936.

The idea of a Second New Deal thus usefully focuses on the important legislation of 1935 and helps to illuminate what was different and important about it. But the First and Second New Deal concept has another advantage: it provides a chronological framework that enables understanding of the dynamics of New Deal policymaking and the development of the New Deal.

To a significant extent, the programs of the Second New Deal came as a result of policy planning underway for some time. That was certainly the case with the Social Security Act, recommended by the Committee on Economic Security formed in 1934 but with roots going back well before that. In the case of the WPA, the New Deal had begun work-relief programs in 1933, and Roosevelt and Relief Administrator Harry Hopkins preferred work relief over direct relief as a way to safeguard self-respect and build the national infrastructure. Roosevelt had been concerned about progressive taxation and utilities regulation long before 1935, and for some time Senator Robert Wagner had advocated stronger labor policy and a National Labor Relations Board with real authority and power. The Supreme Court's invalidation of the NRA in 1935 (and with it Section 7(a) of the National Industrial Recovery Act that had provided some protection for organized labor) required policy adjustments and paved the way for the passage of the Wagner Act.

But the Second New Deal was a product of politics as well as of policy planning and adjustment. By 1935 the efforts at national unity of the early New Deal had dissipated. Much of business had soured not only on the NRA but also on Roosevelt and the New Deal, and for his part, Roosevelt was no longer inclined to propitiate business. As anti-New Deal rhetoric escalated among businessmen, so did anti-business rhetoric increase among New Dealers.

While business, the wealthy, and conservatives increasingly criticized Roosevelt and the New Deal for doing too much, leaders on the left, often reflecting discontent among the poor, the working class, and the lower middle-class criticized the New Deal for doing too little. Especially prominent were Louisiana Senator Huey P. Long with his redistributionist "Share Our Wealth" program, California physician Francis Townsend and his plan for generous federal old age pensions, and the Michigan "Radio Priest" Father Charles Coughlin and his populist attacks on the New Deal and calls for monetary reform. These men attracted millions of followers and reflected widespread sentiment that the New Deal should do more to help struggling Americans. Despite economic improvement since 1933, unemployment had only fallen from 25 percent to 20 percent by 1935, and New Deal programs had only begun to provide assistance to the impoverished and unemployed.

To some degree, the Social Security Act, the "Wealth Tax," and other Second New Deal programs can be understood as responses to the criticisms and proposals of Long, Townsend, and Coughlin and as efforts to undercut their apparently growing political appeal. But while Long and the others did help focus attention on such measures and help build momentum for them, planning for Social Security, progressive taxation, and other 1935 legislation did not arise from their agitation. Moreover, policymaking in 1935 was also strongly affected by the outcome of the 1934 elections. Typically parties winning the presidency had lost significant strength in the subsequent off-year congressional elections; in earlier twentieth-century off-year elections, the president's party had lost an average of some three dozen seats in the House and three or four in the Senate. In 1934, however, Democrats gained an additional nine Congressmen and nine Senators (on top of the great increases in 1930 and especially 1932). Those results reflected both a vote of confidence in FDR and a desire for more reform—and produced a Congress that was more Democratic and more liberal than the Congress elected in 1932—and a Congress in which urban liberals in particular had significantly more power. Led by Senator Wagner, urban liberals provided both leadership and support for the programs of the Second New Deal.

The Second New Deal was thus a product of many forces—longstanding policy planning, the continued ravages of the Great Depression, the inadequacies or termination of some First New Deal programs, growing tension between the Roosevelt administration and business, pressure from such leaders as Long, Townsend, and Coughlin, and the election of 1934. Reflecting such factors, the legislation and programs of 1935 had a different character than those of 1933 and great importance for politics and government thereafter. Whatever its flaws, the First and Second New Deal framework thus does provide a way to understand the nature and importance of the 1935 legislation and the policy and political dynamics that shaped it.

See Also: NEW DEAL; NEW DEAL, THIRD; PUBLIC UTILITIES HOLDING COMPANY ACT; SOCIAL SECURITY ACT; TAXATION; WORKS PROGRESS ADMINISTRATION (WPA).