The Second New Deal 1935-1938

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The Second New Deal 1935-1938

Introduction
Issue Summary
Contributing Forces
Perspectives
Impact
Notable People
Primary Sources
Suggested Research Topics
Bibliography
See Also

Introduction

"When a man is getting over an illness, wisdom dictates not only cure of the symptoms but removal of their cause." President Franklin Delano Roosevelt (served 1933–1945) spoke these words before Congress in January 1935. The president was beginning his renewed push for reform legislation to supplement the earlier relief and recovery programs of the First New Deal from the previous two years.

As the Great Depression continued through the 1930s President Roosevelt was increasingly sensitive to outspoken critics claiming that the New Deal ignored the common man, the needy, and the aged—all of whom were affected by the economic downturn brought home by the stock market crash of 1929. Millions were unemployed, low on money, and in need of help and President Roosevelt was elected on promises that he would help. The charges leveled by critics—that the New Deal did not help—followed the continuing themes of Dr. Francis Townsend, Father Charles Coughlin, and U.S. Senator Huey Long, who were all vocal opponents of the First New Deal. By late 1934 Roosevelt came to the conclusion that trying to get something for everyone in the nation was only leading to everyone being dissatisfied to some degree. His political popularity was declining.

Under President Roosevelt's guidance Congress passed an impressive amount of legislation between 1933 and 1934, creating a number of relief and recovery programs, which sought to offer employment and social assistance to those in need due to the harsh economic times of the Great Depression. In early 1935 Roosevelt sent to Congress a new list of legislation to revive his economic recovery efforts. Hoping to soothe the growing discontent of workers before the 1936 presidential election, when he was up for reelection, the legislative package represented a major political shift by Roosevelt. No longer able to take a middle path in order to satisfy both big business and the common worker because of growing strife between the two groups, Roosevelt chose to take the side of the workers.

What became known as the Second New Deal essentially began in April 1935, with passage of the Emergency Relief Appropriation Act (ERAA). The act provided $4.8 billion in relief money, to be distributed by various agencies mostly created by the ERAA. These included the Works Progress Administration (WPA), the National Youth Administration (NYA), the Resettlement Administration (RA), and the Rural Electrification Administration (REA).

The WPA created public projects jobs; the NYA provided work for college and high school age youth; the RA resettled poor families to better lands; and the REA provided inexpensive electricity to rural areas for the first time. The ERAA not only put people to work, but its many programs substantially improved the quality of life for millions of citizens. Whereas the First New Deal was focused on national economic recovery largely through aid to businesses and large farm operators, the Second New Deal shifted to the economic needs of individuals, families, and minorities.

Other programs were established as well under the Second New Deal. These included the Soil Conservation Service (SCS) for the farmer, Social Security for the aged and infirm, and the National Labor Relations Act for laborers. The Second New Deal enjoyed strong momentum in 1935 and 1936. Controversy, however, over President Roosevelt's plan to reorganize the Supreme Court in early 1937 and the occurrence of a major economic recession later that year greatly distracted from further Second New Deal legislation.

Though economic recovery was not complete, the American economy was fundamentally changed by the First and the Second New Deal programs, yet many programs were highly scattered in their goals and actions. At times they were even contradictory with each other in what they sought to achieve. The key factor that held it all together, however, was Roosevelt's confident personality, which gave hope and courage to millions.

Chronology:

April 8, 1935:: Congress passes the Emergency Relief Appropriation Act, marking the beginning of Second New Deal.
April 27, 1935:: Congress passes the Soil Conservation Act to promote protection of the nation's farmlands from erosion and other impacts.
April 30, 1935:: Roosevelt creates the Resettlement Administration.
May 1935:: The Works Progress Administration and Rural Electrification Administration are formed.
May 27, 1935:: The U.S. Supreme Court issues the Schecter Poultry Corporation decision, striking down the National Industrial Recovery Act.
June 26, 1935:: Roosevelt establishes the National Youth Administration.
July 5, 1935:: Congress passes the National Labor Relations Act.
August 2, 1935:: The Federal Art Project, Federal Music Project, Federal Theatre Project, and Federal Writers' Project are established.
August 14, 1935:: The Social Security Act is passed by Congress.
August 23, 1935:: Congress passes the Banking Act.
August 28, 1935:: The Public Utilities Holding Company Act is accepted by Congress.
August 30, 1935:: The Wealth Tax Act is enacted.
February 5, 1937:: Roosevelt introduces a bill to Congress promoting reform of the U.S. Supreme Court, known as the "court-packing" bill.
February 16, 1938:: Congress passes the new Agricultural Adjustment Act.
June 25, 1938:: Congress passes the Fair Labor Standards Act, the last piece of New Deal legislation.

The major surge of legislation lasted just over three years. Combined with the First New Deal of 1933–1934, the total amount of legislation was staggering, more bills were passed than in any other period. It was clearly a unique period in the history of Congress. By 1939 the New Deal programs had run their course and attention shifted to events in Europe and the looming world war. Various programs of the Second New Deal expanded considerable influence for decades.

Issue Summary

A Change in Goals

By mid-1934 momentum was lost from the First New Deal's surge of economic relief and recovery programs established since early 1933. The Roosevelt administration began thinking of ways to regain its dynamic leadership role. Although the economy had improved through 1934, it was less than what was hoped for. Employment and industrial production continued to register below 1920s levels.

In addition Roosevelt was angered by the lack of business support for the First New Deal. Frustrated by the growing opposition of big business to his programs and aware of the continued fragility of the U.S. economy, he commented in November 1934 that, "One of my principle tasks is to prevent bankers and businessmen from committing suicide." Seeing the need for more government action and recognizing that he could not satisfy everyone, Roosevelt shifted to the left in regard to political philosophy. This meant he adopted a more politically liberal position by focusing on the needs of the common man, small businesses, laborers, and small farmers rather than primarily seeking to satisfy big business. In a sense, he was a politician trying to keep up with the constituency that still supported him.

To reach these new goals, Roosevelt dropped the First New Deal's idea of national planning best represented by the 1933 National Industrial Recovery Act (NIRA) and its industry codes. In its place he focused on social reform, anti-trust activity, and Keynesian finance, involving high government spending to stimulate the economy. Social reform would include such things as old-age pensions and labor union rights, which were represented in the Social Security Act and the National Labor Relations Act. Anti-trust efforts would seek to make business more competitive where small businesses could compete better with the giant corporations. The Public Utility Holding Company Act of 1935 was key in that regard. The push towards Keynesian economics meant that the federal government would increase spending to boost the economy even if it meant spending beyond its revenue, or income.

With gains by Democrats in the fall of 1934 midterm congressional elections, President Roosevelt was ready to make the charge to fix the economy. The resulting Second New Deal lasted from April 1935 to June 1938, though most activity occurred in 1935 and 1936. New people came forward bringing new ideas to the administration. Instead of the First New Deal's Raymond Moley and Hugh Johnson, there were advisors Felix Frankfurter, Thomas Corcoran, and Benjamin Cohen. They believed in a highly competitive economy not dominated by large corporations. They looked to small companies and labor to play an active role in reshaping U.S. economic policy. The Second New Deal also sought to help small farmers, including sharecroppers, tenant farmers, and migrant workers. Some of Roosevelt's harshest critics had maintained that the New Dealers had overlooked these groups.

Given his focus on favoring the working man and woman rather than protecting business interests, Roosevelt and the New Dealers faced intense business opposition to their programs. They would also suffer setbacks by the U.S. Supreme Court who issued rulings blocking New Deal programs and would continue to see economic problems plague the nation.

Worker Relief

The first item of business in the Second New Deal was worker relief. Roosevelt sought temporary employment for the 3.5 million employable people who were still on unemployment relief. In response the Democratic Congress passed a $4.8 billion relief bill called the Emergency Relief Appropriation Act, which became law on April 8, 1935.

Under authority of the act, the biggest relief program of the Second New Deal became the Works Progress Administration (WPA). Roosevelt created the agency by executive order on May 6, 1935. He selected his trusted friend and adviser Harry Hopkins, who previously headed the First New Deal's Federal Emergency Relief Administration (FERA), to head the program. Through the new jobs it created, the WPA was dedicated to modernizing U.S. rural areas. The agency received $1.4 billion to build or renovate public buildings, water systems, recreational facilities, and rural roads. By its end in 1943 WPA workers had built 850 airports and 110,000 schools, hospitals, and libraries, and constructed or repaired 651,000 miles of roads and streets. Sewing groups that employed most of the female workers in the program made 300 million garments for the needy.

In addition to construction and garment production, in August 1935 the WPA was expanded to include programs for writers, artists, actors, and musicians. A wide variety of projects were tackled. For example while some writers in the Federal Writers Project wrote city guides others collected oral histories of former slaves. Artists in the Federal Arts Project painted murals on walls of public buildings, taught art classes, and made sculptures. Directors and actors in the Federal Theater Project (FTP) worked in organized theater groups producing plays, dance performances, and variety shows. By April 1936 six theaters in Los Angeles showed various FTP performances. In March 1936 the Federal Dance Project was added. The WPA not only helped the performing and fine arts survive the Great Depression but to grow in sophistication and become more distinctly American in character.

Although its name was changed in 1939 to the Work Projects Administration, the WPA lasted until 1943 and employed a total of eight million people. Recruiting workers from local relief rolls, the programs made special efforts at including youth, women, and minorities. The work not only greatly improved rural living standards for decades, but also gave many a sense of hope about the present and the future.

Relief for Youth

As the Civilian Conservation Corps (CCC), created in 1933, and other works programs continued to employ young adults, Roosevelt sought to also assist other youth, many of whom were still in school. In early 1935 estimates were that five million youth were unemployed. Roosevelt wanted to provide them with hope and faith in the U.S. economic system so they would be less likely to join radical political movements as was occurring in Europe. On June 26, 1935, Roosevelt created the National Youth Administration (NYA).

The NYA proved to be one of the more successful agencies of the New Deal. It employed more than two million high school and college students in part-time jobs at their schools, often in clerical positions. Unlike the CCC that was specifically created to employ young men between the ages of 18 and 25, the NYA reached both male and female students. These part-time jobs gave students just enough money so they could afford to stay in school. The NYA also provided jobs for almost three million youths out of school. In 1936 alone the NYA provided aid and assistance to over two hundred thousand students. Most of these outof-school youth were males being taught vocational skills. By the beginning of World War II, with the young men entering military duty, the NYA primarily benefited young women until it ended in 1943.

Besides clerical positions, some programs taught vocational skills. NYA workers paved 1,500 miles of road, built six thousand public buildings and 1,400 schools and libraries, and constructed two thousand bridges. Also unlike the CCC and other works programs, the NYA made a much stronger effort at recruiting black American youth. President Roosevelt had selected Aubrey Williams as executive director of the NYA, who was noted for his concern about minorities in America. Williams in turn hired Mary McLeod Bethune to establish the Division of Negro Affairs.

Farmer Relief

Just as with the First New Deal, the agricultural situation in the United States drew immediate attention once again. Not only was the agricultural economy continuing to struggle but farmers in the Dust Bowl region of the Southern Plains were experiencing episodes of massive soil erosion. The Dust Bowl was a region of five states that began experiencing a prolonged drought in 1932. The heart of the Dust Bowl was western Kansas, eastern Colorado, northeastern New Mexico, and the Oklahoma and Texas panhandles. The drought persisted for much of the 1930s, with crops withering and soils dried, windstorms swept across the Plains stirred up massive, dense clouds of dust burying fields and even homes in sand dunes. Farmers went broke and thousands migrated out of the region seeking new opportunities elsewhere, but finding few due to the Great Depression.

To provide assistance to this region and others Congress passed the Soil Conservation Act on April 27, 1935, which permanently established the Soil Conservation Service (SCS). The agency sought to establish soil conservation districts throughout the country to promote a wide range of conservation practices. Chief among its responsibilities was to guard against wind and soil erosion and conserve the nutrients in soils. Later the Flood Control Act of 1936 added more responsibilities to the SCS.

Next Roosevelt turned to the issue of providing electrical power to farmers because in early 1935 nearly 90 percent of farms had no electricity. Roosevelt had earlier gone to the private power companies urging them to supply power to farmers, however, the companies balked at such an idea. They claimed they would lose money since farmers had little need for electrical power and, besides, there were too few of them to make any rural project profitable. In response, under authority of the Emergency Relief Appropriation Act, President Roosevelt established the Rural Electrification Administration (REA), with Morris Cooke as the head, on May 11, 1935, to bring electricity to the rural areas.

With private power companies unwilling to participate, the REA was set up to use farmer-owned nonprofit electric cooperatives. Many new lines were built over the next fifteen years bringing inexpensive and much needed power to farmers. By 1945, 45 percent of farms and rural residences had electricity and 90 percent had it by 1951. Access to electrical power posed a major improvement on rural life in America and the REA was a major success.

In January 1936 the U.S. Supreme Court ruled in United States v. Butler that the Agricultural Adjustment Act of 1933, one of the hallmarks of the First New Deal, was unconstitutional. Under the act the Agricultural Adjustment Administration (AAA) raised money to pay farmers for reducing crops by taxing food processors. The Court held that federal government had no legal authority to impose such a tax. In reaction Congress passed the Soil Conservation and Domestic Allotment Act on February 29, 1936.

Rather than paying farmers to simply not plant crops as the earlier act did, this act focused on providing payments to farmers to voluntarily replace crops that were soil depleting, such as wheat and cotton, with crops that conserve the soil, as well as encouraging other good soil conservation practices. The act, however, proved a failure as not enough farmers volunteered to replace crops. Production for crops such as cotton actually soared because farmers were trying to sell as much as possible, although it only served to drive down prices by the increased oversupply.

Debate in Congress ran through 1937 on how to improve the agricultural situation. Finally on February 16, 1938, President Roosevelt signed the new Agricultural Adjustment Act. The act not only made permanent the conservation provisions of the 1936 act, but also provided for price supports and reduced crop production when two-thirds of the farmers in a struggling area voted to implement such measures. Price supports usually take the form of a government guaranteed minimum price for crops so that farmers can be protected from major financial losses due to plummeting produce prices. Despite broad farmer participation the 1938 act proved no more effective in curing the agricultural economic ills than its predecessors and crop surpluses continued to grow. It was not until the arrival of World War II and its demand for food that the agriculture problem would be finally resolved.

To help the small farmer and sharecroppers, President Roosevelt created the Resettlement Administration (RA) on April 30, 1935, under authority of the Emergency Relief Appropriation Act. He placed his long time advisor Rexford Tugwell in charge to administer the funds. The primary goal of RA was to help poor farmers either improve the use of their lands or purchase better lands and get a new start. More and more farmers in the Depression were becoming tenant farmers working on lands leased from others and by late 1936 the problem of tenant farming became the subject of a congressional study.

On July 22, 1937, Congress passed the Bankhead-Jones Farm Tenancy Act, which made low-interest loans available to tenant farmers, farm laborers, and small landowners to purchase or expand their own lands. The RA also made loans available under a Rural Rehabilitation Program for operating expenses, educational programs, and conservation practices. Under authority of the act Roosevelt created the Farm Security Administration (FSA) on September 1, 1937, to issue the loans and to supervise the Resettlement Administration programs. The FSA loaned almost $300 million to help over 47,000 small farmers become landowners as well as improve the living conditions of migrant workers and by 1946 the FSA had provided almost 900,000 rehabilitation loans. The RA's Resettlement Program also built 164 resettlement projects for 15,000 poor families. The FSA would purchase land and subdivide it among the families; it also established 95 camps for 75,000 migrant workers. Both the Resettlement Administration and the Farm Security Administration attempted to address Roosevelt's critics who claimed the First New Deal policies had overlooked the poor farmers. The programs had only limited success as the problem of rural poverty stubbornly lingered.

Labor Reform

Besides immediate relief for the unemployed and farmers suffering from the struggling economy, President Roosevelt sought to establish long-term reforms for the laborer. On May 27, 1935, the Supreme Court struck down the National Industrial Recovery Act (NIRA) as unconstitutional. With the court ruling, the law giving workers the right to collective bargaining, providing for a minimum wage, and restricting certain forms of employer intimidation had ended. Collective bargaining refers to the right of workers to ban together, often through formation of labor unions, to negotiate better working conditions with the employer.

To restore the right of unions to organize and to collectively bargain, Congress passed the National Labor Relations Act that Roosevelt signed into law on July 5, 1935. The act was also known as the Wagner Act after one of its key sponsors, Senator Robert Wagner of New York. Like the NIRA, the Wagner Act recognized collective bargaining and supported the right of workers to join unions and also listed unfair business practices that were prohibited. These practices included interference with union organizing, and threats or firing of workers simply because they were union members. This act differed from the earlier NIRA by giving much stronger powers to the government to enforce its regulations. It created the National Labor Relations Board (NLRB) with extensive powers to hear charges of unfair practices and assist workers in organizing unions.

The combined effects of the NIRA and Wagner Act were large. From 1933 to 1941 union membership more than doubled growing from three to over eight million laborers. The growth and activity were particularly strong in the coal and various mass-production industries.

Still seeking a guarantee of minimum wages and maximum hours for workers, Roosevelt continued to push Congress through 1937 for passage of legislation. After much debate and opposition by business leaders, Congress finally passed the Fair Labor Standards Act that Roosevelt signed into law on June 25, 1938. The act replaced standards that set earlier and were no longer valid in the NIRA, plus added new ones. For example, a minimum hourly wage was set for the first time, starting at 25 cents an hour but increasing to forty cents by 1945. The national maximum workweek was initially set at 44 hours a week to be reduced to 40-hour workweeks by 1940. The act also prohibited youth less than 16 years of age from working in factories.

Social Security

Besides labor, reform legislation also tackled broader social issues. Creation of the social security system was one of the major accomplishments of the Second New Deal. Critics from the Left that had contributed to the lost momentum of the First New Deal had spoken out for the average citizen and the elderly. With a social security system, President Roosevelt largely thwarted their criticism of his actions. Congress passed the Social Security Act on August 14, 1935, under the guidance of the Secretary of Labor, Frances Perkins. The act provided old-age insurance for workers retiring at 65 years of age or older. Payments depended on the amount paid into the system by the worker, and originally it was only intended as a supplement to their regular pensions.

Contributions into the program came half from workers and the rest was matched by their employers. Excluded from the program at first were farm workers, domestic servants, and many hospital and restaurant workers. The Social Security Act also provided for unemployment compensation to be funded by a federal tax on employers. The states operated the unemployment program and provided between $15 and $18 a week to those who qualified. Federal funds were also provided to states to aid families with dependent children, including the blind, disabled, elderly, and mothers with dependent children.

Ironically, the newly created social security system was actually counterproductive to economic recovery. The social security tax that went into effect in 1937 took money out of the pockets of working citizens, decreasing their purchasing power to buy goods. The relief also excluded the most needy who did not have jobs. Regardless of these adverse aspects, the new system greatly helped Roosevelt politically. The general public's perception was that the government at last had responded to cries for old-age income assistance and income help during times of unemployment.

Banking and Business Reform

The New Dealers turned once again to banking reform. Banking laws in the First New Deal had stabilized the banking system and separated commercial from investment banking and created the Federal Deposit Insurance Corporation (FDIC) to guarantee bank deposits for depositors. Congress passed the Banking Act on August 23, 1935, as one of the most important laws dealing with banking in the United States. The act centralized control of the U.S. banking system into the Federal Reserve Board located in Washington, DC, rather than with the various regional Federal Reserve Banks. The act established a money management system capable of stabilizing the U.S. economy in difficult times, both in prices for goods and in employment.

To carry forward antitrust actions, in early 1935 President Roosevelt chose the highly unpopular power and utility companies to attack first. Companies called holding companies were buying up utility companies and managing them, some would even own several competing utility companies. By 1932 only 13 holding companies controlled 75 percent of private power utilities. Seeking to ban these kind of holding companies and to address financial corruption in the utilities industries, Congress passed the Public Utilities Holding Company Act in August 28, 1935. The act restricted ownership of utilities by holding companies. The companies, however, intensively fought its enforcement and the law was never fully successful. As other industries came forward to support the utilities resistance, this fight strengthened the break between President Roosevelt and the business community.

Tax Reform

President Roosevelt sought to counter Senator Huey Long's growing support to tax the rich and give to the poor. On June 19, 1935, Roosevelt gave a strong speech unveiling his tax scheme and decrying the "unjust concentration of wealth and economic power." Roosevelt had decided to push for a tax plan that would redistribute the nation's wealth on the same day the House passed the Wagner Act and the Senate passed the Social Security bill. Roosevelt called for federal inheritance and gift taxes, higher income taxes for the wealthy, and a corporate income tax, labeling the proposal a "wealth tax issue." The proposal brought much acclaim as well as criticism. Roosevelt, however, did little to actually push the proposals through Congress.

The resulting Wealth Tax Act passed on August 30, 1935, was much simplified, doing little of what the president originally wanted. The bill included a small corporate tax and a small inheritance tax, however, it did serve to dramatically change how taxes were applied. Taxes would be applied in a progressive manner in which the wealthy were taxed at higher rates than those with lower incomes. This is known as a graduated tax system. The speech and passage of a tax bill clearly established President Roosevelt as a representative of the working class.

More About… Keynesian Economics

A major breakthrough in the field of economics was introduced by British economist John Maynard Keynes. Keynes was interested in the dynamics of supply and demand at the national level, including a nation's capacity to produce to meet demands. When demand for goods falls below the industrial capacity to produce, then unemployment and economic depression occur. When demand exceeds production capacity, then inflation occurs as the price of goods rise. Few had considered economics at such a large level before. Keynes highlighted that demand for goods can come from consumer spending, investments, and government spending.

Perhaps most notable in his economic models was that no automatic built-in tendencies exist for a national economy to maintain a stable full-employment economy on its own. This was shocking to many who considered national economies cyclical and almost organic in nature, with built in tendencies to remain healthy. Consequently, Keynes argued that if consumer spending or investments dramatically decline causing the national economy to slump, then government spending must increase to fill the void, even if it means deficit spending until the economy normalizes once again.

Keynes's ideas posed a significant influence on New Dealers trying to solve the nation's economic woes. Economists Marriner Eccles, Lauchlin Currie, and Alvin Hansen embraced Keynesian economic models. To improve the economy, they encouraged President Franklin Roosevelt to increase government deficit spending rather than seeking a balanced budget as Roosevelt had personally favored. This spending approach distinguished the Second New Deal from the First New Deal. Adopting this approach, President Roosevelt chose massive new funding, and all deficit spending, for work relief to get the Second New Deal underway. The Emergency Relief Appropriations Act, passed on April 8, 1935, was the largest funded Congressional bill in U.S. history at that time.

Opportunities Lost

The Second New Deal programs created in 1935 and 1936 brought the desired political results President Roosevelt was seeking and his popularity rose once again. In the 1936 presidential election 83 percent of registered voters voted and 60 percent of them voted for Roosevelt. Roosevelt received 27.7 million votes to Republican candidate Alfred Landon's 16.6 million. The landslide victory was a major show of public support for Roosevelt's programs and still remains the largest victory in U.S. history. Democrats won a 76 to 16 margin in the U.S. Senate and 331 to 89 in the House.

Labor unions and miners played a huge role in the victory. It was also the first presidential election that most black Americans voted for a Democrat candidate. In fact 70 percent of black voters voted for Roosevelt. Other support came from big city political machines, ethnic groups, Catholics, and Jews. The South also remained Democratic. These various groups formed the core of the new Democratic majority, a coalition that would continue to support Democratic candidates for the next few decades.

The great public expectations of President Roosevelt and the Democratic controlled Congress of providing more relief did not last long. Roosevelt had great disgust for the Supreme Court justices over their rulings, which struck down key New Deal programs, particularly the AAA and NIRA. With a major election victory under his belt in the fall of 1936, Roosevelt boldly introduced a Supreme Court reform bill on February 5, 1937 that he had secretly developed with U.S. Attorney General Homer Cummings. Among its various provisions, the bill proposed to increase the number of justices on the Court from nine to fifteen. President Roosevelt could then appoint additional justices friendly to his programs and end the series of rulings against New Deal programs. The surprised legislators were greatly alarmed and debate over the controversial proposal dominated Congress for the next six months. Despite urging by his supporters, Roosevelt refused to back down. As a result momentum on New Deal programs was almost completely lost.

In addition to Congress losing focus, in early 1937 many believed the Great Depression was drawing to a close. The public and Congress became less supportive of further new government programs, industrial production levels were finally back to 1929 levels, and unemployment was down to 14 percent, well below early 1930s levels. As a result the president came under pressure to scale back programs.

In addition many of the Democrats elected to Congress in 1936 were actually not very supportive of the president's programs, proving to be much more conservative politically. With the controversial Supreme Court proposal being forced on Congress, many of these conservatives decided they had enough of liberal New Deal reforms. Massive government borrowing to fund relief programs, a compulsory, or required national social security program, an income tax system that taxed the rich at progressively higher rates than others, and labor collective bargaining was all they could handle. Congressional members began to organize in opposition to further New Deal programs.

One Last Push

To try to generate enthusiasm for his programs once again, Roosevelt toured across the northern portion of the country in September 1937. His primary goal was to promote the accomplishments of the WPA and other New Deal works programs. He highlighted the construction of hydroelectric dams, irrigation projects, airports, rural roads, urban infrastructure, and conservation work in national forests. With enthusiastic crowds greeting him through the tour, he returned to Washington, DC eager to do more.

Roosevelt called for a special session of Congress as he did when he first took office in 1933. He wanted a new agricultural act, a bill for minimum wage and maximum hours, reorganization of government to give the executive branch more power, and creation of the seven regional planning boards patterned after the First New Deal's Tennessee Valley Authority (TVA).

The timing was not good, however, and by the time Congress gathered in special session to consider the proposals a new economic downturn had struck. The economic growth that began increasing steadily in 1934 was not as evenly spread as hoped in the various industries. By late in 1937 the demand for goods and services slowed to a stop and farm surpluses grew once again. Farm prices and industrial production fell and unemployment rose making economic recovery come to a stop. Trying to keep public morale up, President Roosevelt introduced a new term to the world of economics. He referred to the economic downturn as a "recession," trying hard to avoid the term "depression." The number of unemployed workers increased from seven million in early 1937 to 11 million by early 1938.

In addition to Roosevelt's unpopular Supreme Court proposal and the new economic recession, labor, one of the New Deal's biggest allies, was embroiled in major issues. Organized labor become badly split in a political battle between the main two labor organizations, the American Federation of Labor (AFL) and Congress of Industrial Organizations (CIO). Union membership had been growing quickly with CIO's industrial unions growing the most. In unpopular moves, the CIO was electing some socialists and communists to leadership positions as well as aggressively supporting racial integration. Also organized labor strikes became numerous, with most aimed at obtaining union recognition from their employers under the Wagner Act. More than 4,700 strikes occurred in 1937 alone and these various union activities alarmed conservative members of Congress and much of the public.

Housing

The late 1937 special session of Congress lasted five weeks, but the legislators resisted passing any major bills. What did see passage at this time was the Wagner-Steagall Housing Act on September 1, 1937. This bill which provided public housing for the needy had been debated in Congress for several years. Proponents claimed it would also revive the construction industry. Construction interests, however, opposed the bills because they believed it would be unfair competition against the private housing industry. Those congressmen representing rural areas also opposed the bills because they saw them as only benefiting cities.

With final passage of the bill into law, the newly created U.S. Housing Authority was to provide $500 million in loans for low-cost housing. By 1941 over five hundred projects had been funded totaling over $690 million. During World War II the Housing Authority became involved in defense housing projects. Congress addressed housing once again a few months later. A federal housing construction program begun under the First New Deal's Progress Works Administration (PWA) became permanent under the Housing Act passed on February 3, 1938.

The Last New Deal Legislation

When Congress began their next regular session in January 1938 proposed anti-lynching legislation dominated debate. Though the legislation was ultimately defeated, the anti-lynching debates pushed New Deal programs to the back burner once again as the Supreme Court reorganization debates did earlier. Some new legislation did pass, however, the last of the New Deal era. These included the new Agricultural Adjustment Act, signed on February 16, 1938, and another $250 million for ongoing WPA projects.

An important consumer protection bill was also passed. President Roosevelt signed the Food, Drug, and Cosmetic Act into law on June 24, 1938. The act greatly expanded government control over the processing of food and drugs in the United States. The law required all ingredients in drugs be listed and food labels be complete when they are provided on a product. It also brought cosmetics under federal control for the first time. The Fair Labor Standards Act, passed on June 25, 1938, proved to be the last New Deal measure. Roosevelt's bill to set up the regional planning projects was eventually killed by congressional conservatives.

The New Deal Ends

Congressional elections in the fall of 1938 marked the close of the New Deal era. Conservative Democrats and Republicans, enjoying election victories, took even stronger control of Congress. This meant that in 1939 Roosevelt would have to compromise much more in getting new bills through the legislature. Bills that did pass usually provided for cuts in New Deal relief programs and termination of others long unpopular with conservatives such as the Federal Theater Project. More pro-business legislation began passing as well.

Major concerns of Congress and the president shifted from domestic economic problems to developing problems overseas. Fear was growing of political developments elsewhere in the world involving the spread of fascist and communist dictatorships. Conservatives charged that the liberal programs of the New Deal might have political infiltration by people sympathetic to these world developments. This fear finally led to investigations of New Dealers, New Deal agencies, and even the CIO labor unions. Seeing the clear shift in the public mood, Roosevelt finally dropped his domestic economic proposals as they were increasingly dividing the nation. He shifted his focus to the foreign threats, becoming committed to inspiring national unity once again as well as reviving his own political popularity.

Economic Recovery Arrives

By late 1938 economic growth resumed with renewed government spending programs and by 1940 expansion of the military industry triggered a more substantial improvement. World War II's (1939–1945) massive government borrowing, investment, and spending brought real economic recovery. Spending greatly escalated for tanks, guns, airplanes, ships, and other warfare materials.

As with the First New Deal of 1933 and 1934, effects of the Second New Deal programs were broad. The National Labor Relations Act supported workers and labor unions, a host of acts including the Soil Conservation Act and the new AAA helped farmers, the Banking Act helped depositors, the Housing Act helped homeowners, the Food, Drugs, and Cosmetic Act helped consumers, and the WPA helped workers just about everywhere. For those who were desperately poor the TVA, Farm Credit Administration, and several relief programs such as the WPA lessened discontent.

The New Deal programs had given many people hope and a sense of dignity by providing jobs, while the provision of jobs, food, and money reduced suffering for thousands. Important for the national psyche, throughout this period of economic strife, President Roosevelt had projected a fatherly image that led to greater public comfort. In the end, however, the New Deal legislation could not by itself resolve mass unemployment and low prices. It would take the massive spending in preparation for World War II to finally end the economic crisis.

Contributing Forces

Lost Momentum in the First New Deal

The First New Deal under the guidance of a confident President Roosevelt produced an impressive array of relief and recovery programs. A very receptive Congress passed an amazing amount of legislation. However, by early 1934 business leaders were increasingly turning against the First New Deal programs. They felt the programs interfered with their business activities through increasing federal regulations and government control of economic activity.

The NIRA codes and regulations were of particular concern and they believed the works programs competed with private business. Business leaders were also displeased with the devaluing of the U.S. dollar, which meant the dollar would have less value. In turn this would mean goods would cost consumers more and it would also decrease the value of savings accounts and business investments. During this period the value of U.S. currency had decreased by 40 percent. The devaluation had helped increase the prices of products but it also decreased the value of savings accounts and business investments.

As congressional elections approached for that fall, some business leaders decided to politically organize to defeat candidates who supported the president's programs, calling themselves the Liberty League. President Roosevelt was dismayed by the intensity of business opposition, which came after he believed he had acted to help save them from economic ruin. Roosevelt was much irritated by business' seemingly short collective memory of what business conditions had been like when he had first taken office.

Many in the public as well as business were also concerned with the increasing federal debt driven by the growth of New Deal programs. Congress was spending millions of dollars on public works and relief programs. The occurrence of federal deficits was new to many because balanced federal budgets had always been the guiding principle in the past.

On the other hand, liberals were also expressing increased disappointment over First New Deal results. The NRA also had proven not very effective and they wanted Roosevelt to bring banks under stricter control. Pushing even further, the socialists, communists, and other radicals wanted an entirely new economic system in place of free-market capitalism. They pushed for nationalizing banks and industries, meaning the government would own and operate those industries for the benefit of the general population. Minnesota's radical governor, Floyd B. Olson commented that what was needed was "not just a new deal, but also a new deck."

With the economy still lagging, President Roosevelt had to chart a new course. He had found that cooperation with big business did not produce results. In early 1935 Roosevelt was gradually losing public support. The public was also losing confidence in the First New Deal programs as many remained unemployed and the economy continued to suffer. President Roosevelt decided it was time to try something new.

Perspectives

Lasting Impressions

Public perspectives over Second New Deal programs ranged from high praise to bitter criticism but by late 1935 business and President Roosevelt had clearly parted ways. Industry fiercely opposed his public utilities holding company bill that Congress had passed in August. Business also celebrated the NRA ruling by the Supreme Court in Schecter v. United States on May 27, 1935. The Court ruled that Congress had unconstitutionally delegated its powers to regulate interstate business to the executive branch of government.

The president had been given responsibility to oversee the development of operating codes by cooperative industry groups. The codes essentially represented regulations guiding business activity of the industries. In addition, much of the business was not actually interstate in character, therefore not even subject to congressional authority. Business was pleased to see both Congress's and the president's authority to regulate business greatly limited. The codes were also proving not to be effective in providing relief to business.

The Conservative View Conservatives of both political parties, the Republicans and Democrats, believed government had grown far too large and become too involved in the nation's economic activities in agriculture, industry, and housing. Government regulation suppressed free enterprise they claimed. Bankers argued that the business of lending money should be left to private enterprise and not the government through its low-interest loan programs. They contended true prosperity could only come through private business activity, not government action.

The Liberal Position Unlike the conservatives, the politically liberal felt President Roosevelt could have gone much farther in aiding the poor who had little political voice in the United States. He also could have promoted civil rights issues by seeking racial integration and greater protection under the law for minorities. Liberal critics claimed the New Deal never truly raised the poor out of poverty, closed the gap in wealth, or came close to establishing economic equality. Some even believed that by not working harder specifically for the poor and minorities, the New Deal actually strengthened the inequality that already existed by simply letting social injustice exist relatively unchallenged for yet another decade. Many charged the reform programs stopped way short of providing financial security by not including some form of national healthcare system, an issue that rose again in controversy in the mid-1990s. Overall a great disparity between the few wealthy and the many poor persisted at the end of the 1930s.

American Liberty League

One of President Franklin Roosevelt's chief opposing organizations during the waning days of the First New Deal and the growth of the Second New Deal was the American Liberty League (ALL). ALL was composed of leaders from American industry, business, finance, law, and other professions. Their numbers were actually relatively few but they had considerable wealth and prestige. Jouett Shouse, a leader of the Democratic Party from 1920 to 1932, was president of ALL. Its membership included Democratic Party candidates for 1924 and 1928 and was funded by the industrially prosperous Du Pont family. ALL's membership peaked at almost 125,000 people in the summer of 1936.

ALL members were conservatives who vehemently opposed New Deal policies and worked hard to end the First New Deal and defeat Roosevelt in the 1936 president election. The same group of leaders who formed the Association Against the Prohibition Amendment, which helped successfully bring Prohibition to an end, formed ALL in August 1934. In fact Shouse had been president of that organization as well. Their goal was to defend "the rights of persons and property." They charged that Roosevelt and the New Deal were socialistic and endangering the U.S. Constitution. ALL claimed New Deal economic policies were slowing recovery from the Great Depression and hindering free enterprise. Leading up to the 1936 elections ALL raised as much money as either major political party. It spent much of its funds on massive publicity campaigns. From August 1934 to November 1936 ALL produced and distributed 135 pamphlets and used the radio extensively.

Following Roosevelt's landslide victory in November 1936, ALL, which had never gained much support from the general public, declined significantly. It was officially disbanded in 1940, as New Deal policies had ended and foreign issues were outweighing domestic concerns.

Public Perspectives

Public perspectives on the New Deal, like those in government, were mixed. One example was found regarding the Works Progress Administration. The WPA programs supporting the arts were typically targets of varying public perspectives. Many were critical of spending public monies on art and writing projects claiming it was not "real" work. Many young artists and actors, however, got their start in these New Deal programs and became widely recognized later in their careers. For example, painter Jackson Pollock received $7,800 from the WPA to produce paintings and by the mid-1990s those paintings he produced had an estimated value of over $500,000.

Despite these criticisms coming from all directions, many people felt that President Roosevelt struck a satisfactory middle road that eased the nation's economic problems through the 1930s. The New Deal showed that practical national solutions were possible to solve national problems. Government had forever assumed a greater responsibility for the economic prosperity of its citizens.

Impact

Economic production of goods and services significantly grew from 1934 to 1937. During this period the United States had one of the highest economic growth rates of the world's industrialized nations. Only Germany and Japan, who were arming for war, had a higher rate. Eight million more workers had been added to the payrolls since 1933, wage and hour standards were established, including 40-hour workweeks, and labor unions were rapidly expanding. By the spring of 1937 the economy was better than before the October 1929 stock market crash.

Changing Government Role

The New Deal was the most significant liberal reform era of the federal government in U.S. history. Public faith in a private enterprise system that had previously operated largely free from government restraints was badly shaken. The First New Deal stopped the downward spiral of the economy in 1933 and 1934 through relief and recovery. The Second New Deal sought to establish greater economic security for the future through reform. The New Dealers promoted economic security as a political right of the nation's population.

At a Glance Key Bills of the Second New Deal

Emergency Relief Appropriation Act, April 8, 1935
Soil Conservation Act, April 27, 1935
National Labor Relations Act, July 5, 1935
Social Security Act, August 14, 1935
Banking Act, August 23, 1935
Wealth Tax Act, August 30, 1935
Soil Conservation and Allotment Act, February 29, 1936
Rural Electrification Act, April 20, 1936
Bankhead-Jones Farm Tenancy Act, July 22, 1937
Wagner-Steagall Housing Act, September 1, 1937
Housing Act, February 3, 1938
Agricultural Adjustment Act, February 16, 1938
Fair Labor Standards Act, June 25, 1938
Food, Drug, and Cosmetic Act, June 25, 1938

Both the First and Second New Deal programs marked the beginning of big government in the United States. The active role of government in the nation's economy increased in several ways. The federal government (1) placed millions of dollars into the economy; (2) created federally funded jobs; (3) orchestrated the supply and demand for certain products; (4) directed business and labor relations; and, (5) regulated banking and stock market activities. The New Deal represented the largest increase in government involvement in the nation's private economy. Supporters proclaimed that a more centralized government with greater powers was created to stabilize a large complex economy while still preserving a free democratic society.

Washington's relation to its citizens also dramatically changed, now the federal government took responsibility for the unemployed, infirm, and aged. Liberals praised the New Deal programs for bringing relief to millions, while conservatives and other opponents claimed New Deal policies allowed large inefficient government bureaucracies to take away from personal property rights and individual rights.

Regardless of the debate over New Deal policies that would continue well after the 1930s, the New Dealers did create a much greater sense of compassion and caring by the government toward its citizens. Selfish attitudes of the past gave way to a period of greater cooperative action. For the first time, many people realized that a completely unrestrained economic marketplace did not always act for the common good of the nation or its citizens.

A New Political Coalition

In addition to the increased role of government in everyday life in America, the politics of America also significantly changed. Throughout President Roosevelt's fight to gain public support for proposed Second New Deal programs, he sought to build diverse support. The diverse categories of people who supported and benefited from New Deal programs essentially represented a loose political coalition in future elections. The coalition was indeed broad and had a dramatic long-term benefit to the Democratic Party. Roosevelt had gained support from racial and ethnic minorities, workers, intellectuals, urban groups, and Southern whites. Groups included labor unions, government relief recipients, and religious organizations. The combined political clout of this coalition dominated politics throughout much of the remainder of the twentieth century.

Labor union members saw their work conditions improve through the late 1930s as their bargaining power increased. Labor unions considered Roosevelt a "friend of labor" and they in turn became a major financial supporter in his reelection campaigns.

By appealing to a broad public support, the New Deal brought a broad recognition to cultural differences in the nation's population for the first time and the idea of cultural pluralism was born in the United States. Pluralism means people of different ethnic backgrounds were recognized and included in government and labor. Roosevelt appointed many people of diverse backgrounds into government posts, Including black Americans, Irish, Italians, and eastern Europeans. White supremacy, which had ruled American politics up through the 1920s, was no longer nationally acceptable. The 1930s became a more purely democratic era, more than any previously in the nation. Racial equality was beginning to rise more prominently as a national goal. In addition to minorities, religious organizations including Roman Catholics and Jews supported Democrats.

Culturally diverse voters in northern urban centers such as New York City, Chicago, Boston, and Philadelphia strongly supported work relief programs and labor reform. In the 1936 election Roosevelt carried the nation's twelve largest cities. As a result of this increased pluralism, the New Deal and its coalition not only posed obvious economic influences but also greatly influenced American society and culture for years to come.

A Changed American Landscape

Twenty million people participated in federal work relief programs in the 1930s. The FERA, CWA, WPA, and NYA construction programs left a physical as well as social legacy. The federal government had become the nation's master builder. The programs left evidence everywhere—streets, sidewalks, sewers, parks, schools, and numerous public buildings.

Not only were the projects occurring in the populous East, but out West as well. To expand the geographic focus, the government took some monies from the East and spent them on the West. As a result of these New Deal programs the rural West saw spectacular changes benefiting those who lived in the Rocky Mountain and Pacific Coast states. Until the New Deal projects, the West had been sparsely populated and economically underdeveloped. New Deal programs built hydroelectric dams, many water projects, and irrigation canals and agricultural potential greatly expanded. New roads also opened up new areas for settlement. Making use of these new facilities the population greatly expanded during World War II and afterwards. The TVA and other New Deal projects posed similar effects in the rural Southeast as well.

Economic Protection

Many of the programs established by the New Deal served to soften the impacts of later economic downturns. These programs included unemployment compensation, Social Security, welfare payments, and bank deposit insurance. Welfare programs provided a safety net for those unable to benefit from the highly centralized capitalist system. In addition, the economic notion of increasing government spending to revive the economy in slow times, known as Keynesian economics, had gained more acceptance.

The WPA was a highly popular program for many because it actually provided jobs, not just money, helping to maintain the individual's self-respect. A well-established work ethic made such an approach much more appealing to the public. By 1943 WPA workers had built 5,900 new schools and 13,000 playgrounds.

Despite their opposition to the New Deal, big business gained greatly by having more secure investments and profits than ever before. They also had more government subsidies in addition to more federal regulation.

Johnson's Great Society

The New Deal's influence extended well beyond the 1930s. The Second New Deal in particular, laid the foundation for civil rights and social services initiatives promoted by later Democratic presidents. John F. Kennedy (served 1961–1963) proposed the New Frontier in his 1960 campaign, with a focus on economic reforms to assist those who did not benefit from the prosperous years of the President Dwight Eisenhower (served 1953–1961) administration. He also proposed Medicare to assist the elderly, redevelopment of inner cities, and more funding for education. Most of Kennedy's proposals, however, were blocked by a coalition of Republicans and conservative Southern Democrats.

Following Kennedy's assassination in November 1963 President Lyndon B Johnson (served 1963–1969) pursued Kennedy's earlier proposals in his "war on poverty." From 1965 to 1968 Congress passed many of the proposals as part of Johnson's Great Society program. Legislation and programs included Medicare (providing medical care for the very poor), Head Start (education for very young underprivileged children), Job Corps (employment for youth), and several major civil rights laws. This period represented the most significant expansion of the government role in U.S. society since the New Deal. Like the New Deal programs, however, success in addressing poverty was modest at best. By the 1970s a broad system of welfare services was established that became the focus of legislative action in the late 1990s as Congress passed major reforms.

Notable People

Benjamin V. Cohen (1894–1983). Son of Polish Jewish immigrants, Cohen excelled at the University of Chicago law school and had a distinguished private and public career from 1916 to 1933. He was recruited into New Deal activities by Felix Frankfurter to serve as a legal and legislative advisor to President Roosevelt. During the First New Deal Cohen had a key hand in crafting the Securities Exchange Act of 1934 and the Tennessee Valley Authority.

In the Second New Deal he authored the Public Utility Holding Company Act in 1935. He and Thomas Corcoran worked tirelessly behind the scenes in the New Deal authoring legislation and working with Congress in passage of numerous bills. To many Cohen was considered the top adviser to Roosevelt during the Second New Deal. Following various advisory roles during World War II, he served as delegate to the United Nations for President Harry Truman (served 1945–1953).

Thomas Corcoran (1900–1981). An Irish Catholic born in Pawtucket, Rhode Island, Corcoran graduated with honors from Brown University and from Harvard Law School where he was a favorite student of Felix Frankfurter. After serving for one year as secretary to Supreme Court Justice Oliver Wendell Holmes, Corcoran had a private practice in New York from 1927 to 1932. Though a Democrat, Corcoran was appointed by President Herbert Hoover (served 1929–1933), a Republican, as legal counsel to the Reconstruction Finance Corporation in 1932 with whom he remained off and on until 1941.

Corcoran had influence on New Deal legislation and programs well beyond the RFC. He teamed with Benjamin Cohen on considerable legislative activity including the Securities Exchange Act in the First New Deal and the Public Utility Holding Company Act in the Second New Deal. While Cohen served as chief author of New Deal legislation, Corcoran was chief lobbyist. Very outgoing, Corcoran would work to get the bills through Congress. Corcoran also played a major role in placing young lawyers in New Deal roles for Roosevelt. He returned to private practice in 1941 for the rest of his career.

Lauchlin Currie (1902–1993). Born in West Dublin, Nova Scotia, Currie received a degree from the London School of Economics in 1925 and a doctorate in economics from Harvard in 1936. Currie got a job with the Department of Treasury in 1934 where he met Marriner Eccles. Eccles gave him a job with the National Labor Relations Board later that year. Currie helped author the Banking Act of 1935 that reorganized the Federal Reserve System. He was also instrumental in providing monthly monetary calculations that guided New Deal policymaking. Currie, through Eccles, played a key role in influencing Roosevelt's adoption of Keynesian economics. He assumed increasingly important economic advisory roles to Roosevelt through the Second New Deal and World War II. Following the war Currie headed the International Bank of Reconstruction and Development.

Marriner Eccles (1890–1977). Eccles was born to a wealthy family in Logan, Utah. Following his Mormon missionary work in Scotland, he built the family's Eccles Investment Company into a multimillion dollar empire. As a highly respected banker, Eccles was called to testify in Congress in early 1933 about possible solutions to the Great Depression. Unlike many business leaders at the time, Eccles urged greater government spending on work relief and loan programs to stimulate the economy. Eccles joined the New Dealers in Washington in 1934 and helped draft the Banking Act of 1935 that reorganized the Federal Reserve System. He became head of the Federal Reserve Board and served on it until 1951.

Felix Frankfurter (1882–1965). Born to Jewish parents in Vienna, at age 12 Frankfurter immigrated to the United States with his family in 1894. He received a degree from Harvard Law School. After private practice and working in the U.S. attorney's office in New York, Frankfurter was appointed to a law position in the President William Taft (served 1909–1913) administration. He had become a friend of Franklin Roosevelt in the early 1920s, who shared ideas on politics and the economy with Roosevelt when Roosevelt became governor of New York in 1928.

While teaching at Oxford in England in the early 1930s he became friends with economist John Maynard Keynes and introduced him to Roosevelt. Frankfurter and Keynes would play influential roles in convincing Roosevelt to adopt major spending programs in 1935 as part of the Second New Deal. A strong shaper of the Second New Deal in general, he was appointed to the U.S. Supreme Court by President Roosevelt in 1939 and helped write the Wealth Tax Act. Frankfurter served on the Court until 1962 when he retired due to ill health.

Alvin Hansen (1887–1975). Born to Danish immigrants in Viborg, South Dakota, Hansen earned his doctorate in economics from the University of Wisconsin. During the Great Depression Hansen began preaching Keynesian economic proposals on government deficit spending to spur economic growth. In 1937 he moved to Harvard University from Minnesota University. Hansen never became part of President Roosevelt's administration, rather his influence was more through publication, advising various policy groups, and mentoring of various economics students who went on to become economic policy advisers. Hansen became known as the "American Keynes."

Harry L. Hopkins (1890–1946). Born in Sioux City, Iowa, Hopkins became a close friend and adviser to President Franklin Roosevelt and long-time leader of New Deal programs. He was the top relief and public works administrator during the Great Depression and during the First New Deal he was chief administrator of the Federal Emergency Relief Administration beginning in May 1933. While leading FERA he also directed the Civil Works Administration from 1933 to 1934 and the Works Progress Administration from 1935 to 1938. In 1938 he became secretary of commerce and served until 1940. Hopkins and the programs he led were known for honesty and efficiency. During World War II Hopkins consulted with Roosevelt on domestic and foreign matters and traveled extensively meeting with key foreign leaders.

John Maynard Keynes (1883–1946). Keynes was an influential British economist who promoted the idea of government deficit spending to stimulate economic recovery. During the boom years of the 1920s Keynes made a fortune speculating in international stocks. He was also an author on economics issues and professor at Cambridge University, who believed that to recover from a depression a government should increase its spending by placing money in the hands of consumers. The public could then buy goods and services from businesses and lead to economic recovery. His ideas were published in the 1936 book The General Theory of Employment, Interest, and Money. President Herbert Hoover did not agree with this approach.

In a visit to Washington, DC, in 1934, Keynes stressed the need for greater government spending on relief programs. Though somewhat receptive to Keynes' ideas, President Franklin Roosevelt greatly believed in balanced government budgets. Keynes ideas greatly influenced the Second New Deal and the expensive programs that were created. The massive government spending of World War II finally proved Keynes correct in his assessment to revive the economy and his belief that the economy could not recover on its own.

Primary Sources

An Assessment of the Second New Deal

New Republic magazine published a lengthy editorial in the May 20, 1940, issue titled "The New Deal in Review, 1936–1940." The editorial took an in depth look at the Second New Deal. The following excerpts look at the WPA, one of the largest New Deal programs (p. 692).

Unemployment relief has brought the New Deal more intimately into the lives of Americans than any other of its activities … The administration officials in charge of relief have had wide influence on general New Deal policy …
The shortcomings of the WPA have been greatly over-stressed, but they are insignificant beside the gigantic fact that it has given jobs an sustenance to a minimum of 1,400,000 and a maximum of 3,300,000 persons for five years. Its work projects have added immeasurably to the nation wealth; in some regions the school, health and recreation facilities it has called into existence have fairly revolutionized communal life. It must also be remembered that, as its permanent technique for dealing with the relief problem, the New Deal has been simultaneously developing its programs for unemployment insurance, old-age pensions, assistance to mothers, dependent children and the handicapped.
No doubt because the unemployed are politically the weakest members of the community, they have suffered most from the resurgent conservatism first manifested in the 1938 election …
The New Deal, even in its second term, has clearly done far more for the general welfare of the country and its citizens than any administration in the previous history of the nation. Its relief for underprivileged producers in city and country, though inadequate to the need, has been indispensable. Without this relief an appalling amount of misery would have resulted, and a dangerous political upheaval might have occurred.

Workers Complain

Worker dissatisfaction with President Roosevelt in 1935 was mounting as the Depression dragged on. Many began to believe Roosevelt's actions the previous two years had only helped business not the common person. A Columbus, Ohio, worker who decided to switch his support to Huey Long expressed such disappointment. He wrote a letter to the president explaining his decision to change loyalty (quoted in McElvaine's The Great Depression: America, 1929–1941, p. 254).

We the people voted for you, we had a world of faith in you, we loved you, we stood by you, it was a common thing to hear a man or woman say they would gladly die for you, but it is a different story now. Yes you have faded out on the masses of hungry, idle people … the very rich is the only one who has benefited from your new deal. Why didn't you turn a deaf ear to the United States Chamber of Commers, and turn to the left, and saved millions of starving people, who believed in you … but it is so diferent to day the people are disappointed, it is common now to her the people, every where you go say President Roosevelt, has proven to be no diferent from any other President, there all for big business after they get in office … Today the way people are thinking and talking, if you were to get the nomination in 1936 you will be beation by a great land slide.

More About… The Recession of 1937

By September 1937 the nation's economy had begun another major decline. Through June 1938 industrial production declined 33 percent, profits by 78 percent, national income by 13 percent, and employment in manufacturing by 23 percent. The recession triggered much debate about New Deal policies and whether or not they had failed.

Changes in government policies, influenced by the increasingly conservative Congress, led away from earlier New Deal strategies by early 1937. A shift in national economic policy away from massive government spending programs likely contributed to the national economic decline. President Roosevelt personally did not embrace deficit spending and believed in balanced budgets.

During 1936 the federal government had poured more than $4 billion into the national income. Most of the government spending had been bonus payments for World War I veterans, which did not continue in 1937. In addition, during 1937 Social Security taxes began withholding money from paychecks and out of circulation. The federal government's contribution to national income in 1937 dropped to $800 million. In addition to changes in veterans' bonus payments and Social Security taxes, the Federal Reserve Board in late 1936 changed its monetary policies. The Board tightened up the money supply and decreased availability of loans. These factors and others likely had a combined effect in contributing to the economic downturn.

With the decline in the national economy, business leaders saw a key opportunity to once again step up their attacks on New Deal policies. They claimed that Second New Deal economic reform efforts had interfered with private industry therefore causing major problems. They wanted government to return to balanced budgets and let industry regulate itself once again. Secretary of Treasury Henry Morgenthau, Jr., sided with this philosophy.

Others claimed business was to blame for the economic downturn, and that monopolies had decreased competition. They argued the government should pursue more anti-trust prosecutions and once again increase federal spending to increase national income and consumers' purchasing power. Proponents for this approach included Benjamin Cohen, Marriner Eccles, Thomas Corcoran, and Secretary of Interior Harold Ickes.

Influential economist Alvin Hansen blamed the recession on declining investment opportunities in American business, tight loan availability, and declining government spending. The loss of investment opportunities was resulting from a declining population growth, decreasing availability of land and resources, and a slowing of technological innovation during the Depression years. He and the others called their policies "compensatory government spending" based on Keynesian economics. The government infusion of money temporarily takes the place of private monies not being spent. They believed this would lead to increased national production, consumption, and higher employment levels. Debate raged among the New Dealers through the winter of 1937–38 over exactly what should be done.

In April 1938 President Roosevelt decided to follow the advice of Eccles and others and press for increased government spending. Congress, however, decided to take control of policy making. They established the Temporary National Economic Committee (TNEC) to help guide recovery efforts. The committee held 15 hearings between December 1938 and March 1941. The nation's economy began to improve in June 1938 causing fears of continued economic slump to decline. Real recovery, however, did not actually arrive until after the spring of 1940 when government spending for war preparations greatly escalated. Very little came from the TNEC's numerous hearings and resulting reports. The 1937 recession and its related debates did much to sidetrack Second New Deal momentum.

Roosevelt Leads the Charge

At his January 1937 inauguration President Franklin Roosevelt, newly reelected despite criticism from some quarters, was feeling strong and set the tone for the next four years by appealing for more liberal reform measures. Roosevelt claimed Social Security, the Wagner Act, and WPA were only a start. He highlighted the need to help impoverished farmers, create fair labor standards, take anti-trust actions, and establish public housing programs to replace the growing slums. The public in turn expected much from the Democratic control in the presidency and Congress (January 20, 1937).

Four years ago we met to inaugurate a President, the Republic, single-minded in anxiety, stood in spirit here. We dedicated ourselves to the fulfillment of a vision—to speed the time when there would be for all the people that security and peace essential to the pursuit of happiness.… We would not admit that we could not find a way to master economic epidemics just as, after centuries of fatalistic suffering, we had found a way to master epidemics of disease. We refused to leave the problems of our common welfare to be solved by the winds of chance and the hurricanes of disaster.…
A century and a half ago they established the Federal Government in order to promote the general welfare and secure the blessings of liberty to the American people.
Today we invoke those same powers of government to achieve the same objectives …
In fact, in these last four years, we have made the exercise of all power more democratic; for we have begun to bring private autocratic powers into their proper subordination to the public's government. The legend that they were invincible—above and beyond the processes of a democracy—has been shattered. They have been challenged and beaten …
By using the new materials of social justice we have undertaken to erect on the old foundations a more enduring structure for the better use of future generations.…
With … our rediscovered ability to improve our economic order, we have set our feet upon the road of enduring progress …
But here is the challenge to our democracy: In this nation I see tens of millions of its citizens—a substantial part of its whole population—who at this very moment are denied the greater part of what the very lowest standards of today call the necessities of life.
I see millions of families trying to live on incomes so meager that the pall of family disaster hangs over them day by day.
I see millions whose daily lives in city and on farm continue under conditions labeled indecent by a so-called polite society half a century ago.
I see millions denied education, recreation, and the opportunity to better their lot and the lot of their children.
I see millions lacking the means to buy the products of farm and factory and by their poverty denying work and productiveness to many other millions.
I see one-third of a nation ill-housed, ill-clad, ill-nourished.
It is not in despair that I paint you that picture. I paint it for you in hope—because the Nation, seeing and understanding the injustice in it, proposes to paint it out. We are determined to make every American citizen the subject of his country's interest and concern; and we will never regard any faithful, law-abiding group within or borders as superfluous. The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little …