The Great Depression and The Great Depression and the New Deal (1929-41)the New Deal (1929-41)

Textbook chapters 8 and 9Textbook chapters 8 and 9

Sections in this unit:Sections in this unit:HooverHoover

First New DealFirst New Deal

Second New DealSecond New Deal

The Great DepressionThe Great Depression

Herbert Hoover elected 1928Herbert Hoover elected 1928 Black Thursday: October 24, 1929Black Thursday: October 24, 1929

– Stock prices drop precipitously, eventually Stock prices drop precipitously, eventually lose 80 percent of value by 1933lose 80 percent of value by 1933

Buying on margin 90 percent – for stocksBuying on margin 90 percent – for stocks Bank failures, bank runsBank failures, bank runs Most severe deflation in U.S. History (1/3)Most severe deflation in U.S. History (1/3) Unemployment level rises to 25 percent Unemployment level rises to 25 percent

by 1933by 1933

Hoover RespondsHoover Responds Republican Congress turns surplus into Republican Congress turns surplus into

deficitdeficit Proposed Reconstruction Finance Proposed Reconstruction Finance

Corporation, Congress agrees (1932) Corporation, Congress agrees (1932) – $2 billion in loans to get banks to lend$2 billion in loans to get banks to lend

Dust bowl: Farmers endure worst Dust bowl: Farmers endure worst drought in 100 yearsdrought in 100 years

– Impact increased by farming Impact increased by farming techniquestechniques

Strikes based on wage cutsStrikes based on wage cuts Bonus March on WashingtonBonus March on Washington

Hoover and “Austerity”Hoover and “Austerity”Your textbook stresses Hoover talks about local solutions, but... Your textbook stresses Hoover talks about local solutions, but...

Federal spending increases every year under Hoover (1929-33), and at Federal spending increases every year under Hoover (1929-33), and at a faster rate than under Roosevelt (though Congress spends money).a faster rate than under Roosevelt (though Congress spends money).In current dollars, Congress increased federal spending an average of In current dollars, Congress increased federal spending an average of 23 percent per year under Hoover (1929-33), compared with 13 percent 23 percent per year under Hoover (1929-33), compared with 13 percent per year under Roosevelt (1933-40). Roosevelt increased from a higher per year under Roosevelt (1933-40). Roosevelt increased from a higher base, however.base, however.

The New DealThe New Deal

The First New Deal (1933-35)The First New Deal (1933-35)

New Deal First “100 Days”New Deal First “100 Days”March 4: Inauguration “The only thing we have March 4: Inauguration “The only thing we have

to fear is fear itself.”to fear is fear itself.”

March 5-9: Roosevelt pronounces “Bank March 5-9: Roosevelt pronounces “Bank Holiday”Holiday”

March 12: Fireside chats beginMarch 12: Fireside chats begin

March: CCC passedMarch: CCC passed

April: Gold standard abolished by Executive April: Gold standard abolished by Executive Order 6102 (Americans must turn in gold to Order 6102 (Americans must turn in gold to Federal Reserve for $20.67/oz... dollar Federal Reserve for $20.67/oz... dollar officially valued at $35/oz. in 1935, though officially valued at $35/oz. in 1935, though Americans can not get gold coins any more)Americans can not get gold coins any more)

May: Federal Emergency Relief Act, AAA, TVA, May: Federal Emergency Relief Act, AAA, TVA, Federal Securities ActFederal Securities Act

Civilian Conservation CorpsCivilian Conservation Corps ((CCCCCC) )

One of the first New Deal programs One of the first New Deal programs (1933), and it survived until 1942(1933), and it survived until 1942

Built roads, bridges, dams, and Built roads, bridges, dams, and engaged in conservation effortsengaged in conservation efforts

Not very controversial (unlike NRA, Not very controversial (unlike NRA, and WPA in Second New Deal)and WPA in Second New Deal)

Agricultural Adjustment Agricultural Adjustment Administration (AAA)Administration (AAA)

Created May 1933Created May 1933Tried to keep agricultural prices upTried to keep agricultural prices upBought and destroyed agricultural Bought and destroyed agricultural products to reduce excess supply.products to reduce excess supply.Also paid farmers not to farm.Also paid farmers not to farm.Taxed some farmers to pay for the Taxed some farmers to pay for the subsidies, and some farmers sued to subsidies, and some farmers sued to stop the tax. They won in the Supreme stop the tax. They won in the Supreme Court, in the 1936 case, U.S. v. Butler.Court, in the 1936 case, U.S. v. Butler.

New Deal First “100 Days”New Deal First “100 Days”

Last day of 100 day session of Last day of 100 day session of Congress, the National Industrial Congress, the National Industrial Recovery Act is passed, creating the Recovery Act is passed, creating the National Recovery Administration National Recovery Administration (NRA). (NRA).

NRA: National Recovery NRA: National Recovery AdministrationAdministration

Symbol: Blue EagleSymbol: Blue Eagle Sought to regulate Sought to regulate

prices and wages prices and wages by combining by combining industry with industry with governmentgovernment

Headed by WWI Headed by WWI General Hugh S. General Hugh S. JohnsonJohnsonHollywood support for NRA enlisted: Hollywood support for NRA enlisted:

http://www.youtube.com/watch?v=DZ-F-bh4Upo

Hugh S. JohnsonHugh S. JohnsonTimeTime magazine “Man of the Year” magazine “Man of the Year” 19331933

Creeped out Roosevelt’s Secretary Creeped out Roosevelt’s Secretary of Labor Frances Perkins (first of Labor Frances Perkins (first female cabinet member) by female cabinet member) by distributing distributing The Corporate StateThe Corporate State by by Mussolini’s favorite economist Mussolini’s favorite economist Raffaello Viglione.Raffaello Viglione.

TimeTime magazine said he gave a magazine said he gave a “fascist salute” during a New York “fascist salute” during a New York City NRA paradeCity NRA parade

Fell out of favor with Roosevelt after Fell out of favor with Roosevelt after he rebelled against Roosevelt’s he rebelled against Roosevelt’s “court-packing” scheme“court-packing” scheme

NRA rules included …NRA rules included …

Ban on pressing pants for less than Ban on pressing pants for less than $0.40. One man jailed for pressing pants $0.40. One man jailed for pressing pants for only $.035for only $.035

Maximum of four strippers in a Maximum of four strippers in a burlesque actburlesque act

Chickens can’t be picked by customers, Chickens can’t be picked by customers, they must be randomly picked.they must be randomly picked.

10 million pages of rules and regulations10 million pages of rules and regulations

“The NRA was discovering it could not enforce its rules. Black markets grew up. Only the most violent police methods could procure enforcement.… They roamed through the garment district like storm troopers. They could enter a man’s factory, send him out, line up his employees, subject them to minute interrogation, take over his books on the instant. Night work was forbidden. Flying squadrons of these private coat-and-suit police went through the district at night, battering down doors with axes looking for men who were committing the crime of sewing together a pair of pants at night. But without these harsh methods many code authorities said there could be no compliance because the public was not back of it.”

- New Deal Opponent John T. Flynn

Schechter v. U.S. (1935)Schechter v. U.S. (1935)

Chicken farmer wanted to let customers pick Chicken farmer wanted to let customers pick out their own chickensout their own chickensNRA argued: In order for national rules to be NRA argued: In order for national rules to be uniform, chicken picking must be randomuniform, chicken picking must be randomSchechter flouted the NRA (like a lot of Schechter flouted the NRA (like a lot of people) and took his case to the Supreme people) and took his case to the Supreme Court and won a 9-0 decision.Court and won a 9-0 decision.Court ruled that the legislature can’t Court ruled that the legislature can’t delegate authority to the NRA.delegate authority to the NRA.NRA abolished that year.NRA abolished that year.

Schechter Case and Schechter Case and “Fuhrerprinzip”“Fuhrerprinzip”

Hitler’s Germany:Hitler’s Germany: “The Fuhrer's “The Fuhrer's Orders have the Force of Law" Orders have the Force of Law" Mussolini:Mussolini: “Duce,” the “boss,” also “Duce,” the “boss,” also said “In every class, among all citizens, said “In every class, among all citizens, nothing is done against the state, nothing is done against the state, nothing is done outside the state”nothing is done outside the state”U.S. Constitution begins:U.S. Constitution begins: “All “All legislative powers legislative powers herein grantedherein granted shall be vested in a Congress…”shall be vested in a Congress…”

U.S. v. Butler (1936)U.S. v. Butler (1936)

““The act invades the reserved rights of the The act invades the reserved rights of the states. It is a statutory plan to regulate states. It is a statutory plan to regulate and control agricultural production, a and control agricultural production, a matter beyond the powers delegated to matter beyond the powers delegated to the federal government. The tax, the the federal government. The tax, the appropriation of the funds raised, and the appropriation of the funds raised, and the direction for their disbursement, are but direction for their disbursement, are but parts of the plan. They are but means to parts of the plan. They are but means to an unconstitutional end. “an unconstitutional end. “- U.S. Supreme Court, citing the 10U.S. Supreme Court, citing the 10thth Amendment Amendment

to the U.S. Constitution.to the U.S. Constitution.

Court-Packing SchemeCourt-Packing SchemeAfter Schechter and Butler cases … After Schechter and Butler cases …

Roosevelt proposes increasing the number Roosevelt proposes increasing the number of Supreme Court justices from 9 to 15 of Supreme Court justices from 9 to 15 (giving him an opportunity to appoint a (giving him an opportunity to appoint a majority of justices).majority of justices).

Congress refuses to consider the proposal, Congress refuses to consider the proposal, but by the end of his third term but by the end of his third term Roosevelt has appointed all the justices Roosevelt has appointed all the justices anyway.anyway.

New Deal OpponentsNew Deal OpponentsFrom the right:From the right: American Liberty League: Al Smith and John W. American Liberty League: Al Smith and John W.

Davis, Democratic Presidential nominees for 1928 Davis, Democratic Presidential nominees for 1928 and 1924 – seek repeal of New Deal and 1924 – seek repeal of New Deal spending/regulationsspending/regulations

John T. Flynn, progressive writer/authorJohn T. Flynn, progressive writer/author

From the left:From the left: Fr. Charles Coughlin, radio talk show host and Fr. Charles Coughlin, radio talk show host and

anti-Semite (sympathizes with some fascist anti-Semite (sympathizes with some fascist policies)policies)

Louisiana Democratic Governor Huey Long Louisiana Democratic Governor Huey Long (“Kingfish,” Share the Wealth), assassinated 1935(“Kingfish,” Share the Wealth), assassinated 1935

Socialists, communistsSocialists, communists

The New DealThe New Deal

Second New Deal (1935-39)Second New Deal (1935-39)

WPA: Works Progress WPA: Works Progress Administration (1935)Administration (1935)

Largest New Deal Agency; 8 million Largest New Deal Agency; 8 million employed in it at one time or another employed in it at one time or another before it was abolished in 1943before it was abolished in 1943

Cost $7 billion 1936-39Cost $7 billion 1936-39 Built roads, bridges, airports, schools and Built roads, bridges, airports, schools and

other public buildingsother public buildings Labeled “make-work” by critics, Labeled “make-work” by critics, Headed by Headed by Brain-TrustBrain-Trust member member Harry Harry

HopkinsHopkins (later revealed as a WWII-era (later revealed as a WWII-era Soviet spy by the Venona documents) who Soviet spy by the Venona documents) who was known for “tax, spend and elect” was known for “tax, spend and elect” quote (not a quote, but a paraphrase)quote (not a quote, but a paraphrase)

Fair Labor Standards Act of Fair Labor Standards Act of 19381938

First national minimum wage of $0.25 per First national minimum wage of $0.25 per hour (~$7.00 in today’s dollars)hour (~$7.00 in today’s dollars)

Today the minimum wage is $7.25 per Today the minimum wage is $7.25 per hour ($8.00 in Mass.)hour ($8.00 in Mass.)

Exempted farms, gratuity-based Exempted farms, gratuity-based professions and some family businessesprofessions and some family businesses

Prohibited child laborProhibited child labor Guaranteed time-and-a-half for more than Guaranteed time-and-a-half for more than

48 hours per week.48 hours per week.

New Deal Agencies TodayNew Deal Agencies Today FDIC: FDIC: Federal Deposit Insurance Federal Deposit Insurance

CorporationCorporation (insured up to $25,000) (insured up to $25,000) Social Security AdministrationSocial Security Administration (initial tax (initial tax

1% for employers plus 1% for employees; 1% for employers plus 1% for employees; today it’s a combined 15.5%)today it’s a combined 15.5%)

Federal Housing AdministrationFederal Housing Administration: Bank : Bank guarantees for home loans.guarantees for home loans.

FCICFCIC: Federal Crop Insurance Corporation : Federal Crop Insurance Corporation insures farmers against weather, climate insures farmers against weather, climate change and pests.change and pests.

New Deal Agencies Today, New Deal Agencies Today, cont’dcont’d

Fannie MaeFannie Mae: The Federal National : The Federal National Mortgage Association buys mortgages Mortgage Association buys mortgages from banks to keep banks lending. (And from banks to keep banks lending. (And recently precipitated the housing crisis)recently precipitated the housing crisis)

SECSEC: Securities and Exchange Commission : Securities and Exchange Commission regulates the buying and selling of stocks.regulates the buying and selling of stocks.

TVATVA: Tennessee Valley Authority helped : Tennessee Valley Authority helped electrify rural areas of the Appalachian electrify rural areas of the Appalachian mountains. Also construction projects.mountains. Also construction projects.

New Deal Agencies Today, New Deal Agencies Today, cont'dcont'd

Social Security ProgramSocial Security ProgramCreated from an idea by Francis Townshend, Created from an idea by Francis Townshend,

who proposed a national minimum income who proposed a national minimum income for retired people.for retired people.

Guaranteed a minimum income for people who Guaranteed a minimum income for people who worked and paid into the system and are worked and paid into the system and are over 65.over 65.

Guaranteed income for people disabled on the Guaranteed income for people disabled on the job.job.

Pays a $255 death benefitPays a $255 death benefit

In 1960s, partial medical treatment passed In 1960s, partial medical treatment passed (Medicare) to program(Medicare) to program

Pay-as-you-go programPay-as-you-go program

Why the depression startedWhy the depression started

Austrian School Austrian School (Hayek and von (Hayek and von Mises)Mises)

Low interest rates (easy Low interest rates (easy credit)credit)

Animal spiritsAnimal spirits

Too much investment in Too much investment in stocksstocks

Appropriate correction Appropriate correction (recession is the cure)(recession is the cure)

Why the depression startedWhy the depression started

Keynesian Keynesian School: School:

““Animal spirits,” a Animal spirits,” a stampede to buying stampede to buying stocksstocks

Too much Too much investment in stocksinvestment in stocks

Correction Correction symptoms need to symptoms need to be fixed to a be fixed to a

“liquidity trap.“liquidity trap.””

Why did it last?Why did it last?

KeynesianKeynesian Government Government

spending cuts spending cuts in 1937 led to in 1937 led to crash same crash same yearyear

AustrianAustrian Too much Too much

government government interference/ interference/ spending led to spending led to new economic new economic bubbles, 1937 bubbles, 1937 recessionrecession

Spending and Unemployment Spending and Unemployment Under PresidentsUnder Presidents

Racial Change in the New Racial Change in the New DealDeal

Roosevelt initiates “Black Cabinet” of Roosevelt initiates “Black Cabinet” of African-American advisors (Federal African-American advisors (Federal Council of Negro Affairs) to advise Council of Negro Affairs) to advise him, including one woman, him, including one woman, Mary Mary McLeod Bethune. McLeod Bethune.

In June 1941, he issued Executive Order In June 1941, he issued Executive Order 8802, creating the Fair Employment 8802, creating the Fair Employment Practices Committee (FEPC), which Practices Committee (FEPC), which prohibited discrimination in federal prohibited discrimination in federal employment (not always followed).employment (not always followed).