Name ________________________

The New DealWhen Franklin D. Roosevelt accepted the Democratic nomination for the presidency in 1932, the United States was in the grips of the Great Depression. Millions of Americans had lost their jobs since the Great Depression began. Many people who had worked hard and saved their money lost everything when hundreds of banks collapsed a short time later. By 1932, there was a general feeling that the American promise of prosperity and security in exchange for hard work and dedication had been broken. Roosevelt recognized this. In his campaign, he pledged a "new deal for the American people." When he won the presidential election in 1932, he followed through on his promise with a series of sweeping economic, political, and social reforms. These reforms came to be called the New Deal.

The New Deal began with the creation of a series of government programs. These programs regulated sections of the economy that had failed during the Depression. Within two days of taking office, the Roosevelt administration issued an emergency order closing all American banks. Three days later he sent Congress the Emergency Banking Act, which was meant to stabilize banks and prevent bank runs. A bank run is when large numbers of people become concerned about a bank's stability and withdraw their money all at once. If a bank doesn't have sufficient cash on hand to meet the withdrawals, the bank can run out of money and collapse. Bank runs had led to the collapse of hundreds of banks since the stock market crash of 1929. The Emergency Banking Act required banks to keep enough cash in reserve to meet the withdrawals of a potential run. It also authorized the federal government to loan money to a bank that was having financial difficulties. Most American banks reopened within five days after the passage of the Act and many people felt the banks were more stable in the wake of the new legislation.

The Roosevelt administration followed the Emergency Banking Act with the Economy Act. The Economy Act attempted to balance the federal budget by reducing salaries for millions of government employees and veterans. During his first term, Roosevelt believed that a balanced budget was extremely important to a stable economy. Next came the Agricultural Adjustment Act (AAA), which increased the demand for farm goods by reducing the supply of such goods in the American market. The AAA used two main tactics to achieve this goal. The first was to destroy existing surplus stocks of grain and farm animals. The second was to pay farmers to allow some of their land to lie unused. This helped American farms recover from the ecological damage of the Dust Bowl. It also served to drive the price of crops up. This allowed farmers to earn enough to survive without over-farming theirland.

The Roosevelt administration created a number of other agencies during FDR's first term in office. Some of the better known organizations include the Securities and Exchange Commission (SEC), which regulates the behavior of companies that trade stock on American stock exchanges. The SEC was aimed at preventing the practices that had contributed to the stock market crash of 1929. The Federal Deposit Insurance Corporation (FDIC) enhances the Emergency Banking Act by insuring deposits made in FDIC-member banks up to $100,000, so even if the bank collapses the FDIC will make sure bank customers get their money back. The Tennessee Valley Authority was an organization that was created to build dams and other improvements in the Tennessee River Valley. These improvements were aimed at preventing flooding and generating electricity for the region.

In addition to these potent initiatives, the Roosevelt administration created the National Industrial Recovery Act (NIRA), which was intended to give workers a fair minimum wage and reduce the number of hours they had to work. The Act also protected workers' collective bargaining rights and reduced unemployment by creating job programs. The Act allowed for the creation of the National Recovery Administration (NRA), which allowed industry to voluntarily comply with the new labor standards.

By 1935, the Depression showed no signs of abating. Roosevelt responded with a more radical program of social and economic reforms. When the NIRA was declared unconstitutional by the Supreme Court, Roosevelt replaced it with the National Labor Relations Act (also known as the Wagner Act) and the Works Progress Administration (WPA). The Wagner Act increased the scope of federal protection for unions, while the WPA created hundreds of thousands of jobs for American workers. The majority of these jobs were in blue collar occupations such asconstruction. The government used WPA workers to build public works projects, aimed at improving infrastructure. Public works are facilities like dams and roads that are owned by the government and used by the public. Infrastructure is the network of public works, such as telephone wires and freeways, which support commerce and society by allowing people to travel, ship goods, and communicate. The WPA built thousands of roads, bridges, dams, public parks, and works of public art across the nation. Some famous WPA projects include the Golden Gate Bridge, Camp David, and various dams and bridges built by the Tennessee Valley Authority.

Arguably the most important of Roosevelt's 1935 initiatives was the creation of Social Security Act. Social Security is essentially an insurance policy against old age and disability, based on a special payroll tax. The insurance policy kicks in when a person is severely injured or when they become a senior citizen (over age 65). The goal of the program is to ensure that people who can no longer earn a living are never left without an income of some kind.While the New Deal made Roosevelt extremely popular (he was the only President in American history to be elected to office four times in a row), it also cost a great deal of money. Much of the government money needed to pay for the New Deal was accumulated as an enormous federal deficit. A federal deficit occurs when the government spends more money that it takes in with taxes. The practice of creating a deficit by using tax dollars to supplement the economy was based on the theories of the British economist John Maynard Keynes. While Roosevelt essentially believed in Keynes' theories, he was also reluctant to allow the deficit to grow unchecked. One measure the Roosevelt administration put in place to manage the growing deficit was the creation of a wealth tax, with theRevenue Act of 1935. The wealth tax took up to 75 percent of the highest incomes in the country. Many wealthy Americans resorted to loopholes in the tax code to evade paying. The Revenue Act of 1937 created laws to close those loopholes and prosecute people who evaded the wealth tax.

The New Deal transformed the way the United States federal government and the national economy function. Many New Deal measures live on to this day. However, in spite of the New Deal, the United States did not make significant progress toward overcoming the Great Depression until the start of World War II.

Write the word from the list below next to the correct definition.• New Deal • Securities and Exchange Commission• Tennessee Valley Authority • Works Progress Administration• federal deficit • Social Security• Wagner Act • Agricultural Adjustment Act

1. ______________________________________ An act which increased the demand for farm goods by reducing the supply of such goods in the American market.2. _____________________________________ An act which increased federal protections for collective unions after the NIRA was declared unconstitutional.3. _____________________________________ An agency which regulates the behavior of companies that trade stocks on American stock exchanges.4. _____________________________________ An agency which created hundreds of thousands of blue collar jobs after the NIRA was declared unconstitutional.5. _____________________________________ President Roosevelt's sweeping program of social, political and economic reforms.6. _____________________________________ When the federal government spends more money in a given year than it will take in with taxes.7. _____________________________________ An insurance policy for old age and disability, paid for with a special payroll tax.

8. _____________________________________ An organization that was created to build dams and other improvements in the Tennessee River