NEW DEAL, THIRD

Historians have long distinguished between the "First New Deal" of 1933 and the "Second New Deal" of 1935 in tracing the development of the New Deal programs of President Franklin D. Roosevelt. A number of New Deal scholars later identified a "Third New Deal" that began in 1937. As with the First and Second New Deal typology, the idea of a Third New Deal has involved different interpretations and can suggest too great a discontinuity in priorities and programs from previous New Deal policy. But also as with the First and Second New Deal framework, understanding the notion of a Third New Deal helps to understand the dynamics of New Deal policymaking and the nature and legacy of the New Deal. While the First and Second New Deals laid the foundations for the modern regulatory-welfare state, the Third New Deal entailed both a new liberal agenda based on Keynesian fiscal policy and a more conservative political context that would be central to wartime and early postwar American politics.

Historians have identified at least two versions of an "intended" Third New Deal that did not materialize. One involved efforts to enlarge the policy planning and coordinating capacity of the executive branch and thus to implement a more powerful administrative state. Early in 1937, FDR sent Congress two measures towards that end: the Executive Reorganization Bill and the Judiciary Reorganization (or "Court-Packing") Bill. The Court-Packing Bill created a furor, and ultimately Roosevelt got only a shadow of what he had requested (though the bill may have contributed to creation of a more liberal Court in the next few years). In the context of the Court fight and of an emerging conservative coalition in Congress wary about expanding federal and presidential power, the Executive Reorganization Bill also stood little chance. A substantially watered down, though still significant, Executive Reorganization Act was passed in 1939. Some New Dealers also wanted to enhance the anti-monopoly power of the federal government, but little came of the Temporary National Economic Committee established in 1938 and of other anti-trust efforts.

Another version of an intended but essentially unsuccessful expansion of the New Deal, consistent with Roosevelt's second inaugural address in 1937 in which he talked about "one-third of a nation illhoused, ill-clad, ill-nourished," was to enlarge the welfare state. The sharp and shocking recession of 1937 and 1938 reinforced the priority that social reformers gave to expanding social welfare and public assistance programs. But those efforts encountered effective opposition in the late 1930s, and then wartime prosperity seemed to make them unnecessary.

The more powerful administrative state and an expanded social welfare state failed to win approval largely because of the unexpected strength of conservatism in Washington and the nation after the overwhelming landslide victory of Roosevelt and the Democrats in 1936. In Congress, a conservative coalition of Republicans and conservative Democrats, enhanced by GOP gains in the election of 1938, stymied efforts to expand the New Deal. Among the forces creating this increased conservative opposition to liberal reform were the courtpacking controversy and the recession of 1937 and 1938, though other events (for example, the sitdown strikes of the Congress of Industrial Organizations and Roosevelt's effort to "purge" conservative Democrats in the 1938 elections) played a role, too.

The recession of 1937 and 1938 was an especially important event in shaping the Third New Deal, for besides strengthening conservatives it also helped change the liberal agenda. Influenced by the British economist John Maynard Keynes, a number of influential New Deal policymakers became persuaded that the recession had occurred because Roosevelt had cut back on spending programs that had unbalanced the budget and contributed to the economic expansion (though far short of full recovery) between 1933 and 1936. In the spring of 1938, they persuaded FDR to return to a spending program, especially to provide relief assistance to the poor and jobless, and the deficits helped to reverse the recession. This sequence of events strengthened the belief that fiscal policy was vital to the performance of the economy. It also convinced many policymakers that compensatory fiscal policy could produce both reform and recovery—that deficit spending on desired social programs might also provide the economic stimulus for economic growth. During World War II, the massive deficits to finance mobilization (which dwarfed the relatively small and mostly unintended deficits of the 1930s) at last ended the Depression, restored prosperity, and created a full-production, full-employment economy. Keynesian fiscal policy thus became central to the liberal agenda of the Third New Deal of the late 1930s and beyond.

See Also: CONSERVATIVE COALITION; KEYNESIAN ECONOMICS; NEW DEAL; NEW DEAL, SECOND; RECESSION OF 1937.

BIBLIOGRAPHY

Brinkley, Alan. The End of Reform: New Deal Liberalism in Recession and War. 1995.

Jeffries, John W. "A 'Third New Deal'? Liberal Policy and the American State, 1937–1945." Journal of Policy History 8(4) (1996): 387–409.

Graham, Otis. L., Jr. "Franklin D. Roosevelt and the Intended New Deal." In Essays in Honor of James MacGregor Burns, edited by Michael R. Beschloss and Thomas E. Cronin. 1989.

Karl, Barry D. "Constitution and Central Planning: The Third New Deal Revisited." In The Supreme Court Review, 1988, edited by Philip B. Kurland, Gerhard Casper, and Dennis J. Hutchinson. 1989.

Milkis, Sidney M. The President and the Parties: The Transformation of the American Party System since the New Deal. 1993.

John W. Jeffries