🎯 The New Deal: Economic, Social, and Political Reforms

Core Overview & Roadmap:
- Background and origins of the Great Depression (1929–1933)
- Campaign and political rise of Franklin D. Roosevelt
- The First New Deal (1933–1934): The First 100 Days, Fiscal/Banking/Monetary reforms, Relief, and Recovery initiatives
- Housing sector developments and discriminatory practices (Redlining)
- Reform initiatives including Trade Liberalization and Puerto Rico programs
- The Second New Deal (1935–1936): Social Security and Labor Relations

📚 1. Introduction and Overview

The New Deal refers to a series of economic, social, and political reforms enacted in response to the Great Depression in the United States under the first and second administrations of President Franklin D. Roosevelt.

Economic Theory: Following a demand-side economic theory (drawing from the Keynesian economic model), Roosevelt sought to utilize the authority of the federal government to increase spending and introduce programs to spur growth.
Key Objectives: Combat issues specific to the depression, including:
- Unemployment
- Labor relations
- Financial reform
- Social welfare
Political Origin: Roosevelt introduced the phrase when accepting the Democratic Party presidential nomination in the 1932 United States presidential election, winning in a landslide over incumbent Herbert Hoover, whose administration was widely viewed as ineffective.

📉 2. Origins (1929–1933)

Economic Collapse

From 1929 to 1933, the U.S. economy suffered a catastrophic contraction:

Manufacturing Output: Decreased by one third (termed the Great Contraction by Milton Friedman).
Deflation: Prices fell by 20%, making debt repayment significantly harder.
Unemployment: Increased dramatically from 4% to 25%.
Underemployment: One-third of employed persons were downgraded to part-time work with drastically reduced paychecks (almost 50% of the nation's human work-power went unused).
Agricultural Crisis: Farm income fell by over 50% since 1929. Between 1930 and 1933, an estimated 844,000 non-farm mortgages were foreclosed out of five million.

The Financial and Social Crisis

Lack of Safety Net: Bank deposits were not government-guaranteed. Thousands of banks closed, causing widespread panic as depositors temporarily lost access to their money.
Absence of Relief Systems: There was no national safety net, public unemployment insurance, or Social Security. Relief relied on families, private charities, and local governments, whose resources were quickly overwhelmed.
Psychological Toll: The nation was psychologically devastated, leading political and business leaders to fear revolution and anarchy.

The Campaign

Coining the Term: The phrase "New Deal" was coined by Stuart Chase, an adviser to Roosevelt, who used A New Deal as the title of an article in The New Republic. Speechwriter Rosenman added it to FDR's nomination acceptance speech at the last minute.
Commitments: Roosevelt promised "a new deal for the American people," committing to unemployment relief and public works programs.

🛠️ 3. First New Deal (1933–1934)

The First New Deal (1933–1934) encompassed proposals from a wide spectrum of groups. It was characterized by fiscal conservatism and experimentation with multiple, sometimes contradictory, economic cures. Key figures included the informal "Brain Trust", Secretary of Labor Frances Perkins, Vice President John Nance Garner, and Senate Majority Leader Joseph T. Robinson.

The First 100 Days (1933)

Roosevelt entered office with immense political capital. During the first 100 days, Congress granted every legislative request.

Economic Rebound: The economy hit bottom in March 1933 and expanded rapidly. The Federal Reserve Index of Industrial Production rebounded by 57% in four months (rising from 54.3 in March 1933 to 85.5 in July 1933).

Fiscal Policy

The Economy Act (March 15, 1933): Drafted by Budget Director Lewis Williams Douglas, it balanced the "regular" federal budget by cutting government employee salaries and veteran pensions by 15%, saving $500 million annually.
Budget Distinction: Roosevelt separated a balanced "regular" budget from a temporarily imbalanced "emergency" budget to fund depression-fighting programs.
The Bonus Bill: Despite Roosevelt's strenuous opposition, Congress passed the Bonus Bill over his veto in 1936, distributing $1.5 billion in cash to 4 million WWI veterans.

Banking Reform

The Banking Crisis: Triggered by bank failures and bank runs where self-fulfilling panics depleted the money supply. Between 1929 and 1933, 40% of all banks (9,490 out of 23,697) failed.
Emergency Banking Act (March 9, 1933): Passed the same day it was introduced, it provided for reopening sound banks under Treasury supervision with federal loans. Three-quarters of Federal Reserve banks reopened within three days.
The Glass–Steagall Act: Limited commercial bank securities activities and established the Federal Deposit Insurance Corporation (FDIC), insuring deposits up to $2,500 and ending the risk of bank runs. Bank failures dropped from over 500 per year in the 1920s to less than 10 per year after 1933.

Monetary Reform

Suspension of the Gold Standard: In March and April 1933, the government suspended the gold standard, prohibited gold exports, and mandated the exchange of gold coinage for fixed U.S. dollars.
Gold Reserve Act (1934): Changed the nominal price of gold from $20.67 to **$ 35 per troy ounce**, allowing the Federal Reserve to increase the money supply and end price deflation.

Securities Act of 1933 & SEC

Securities Act of 1933: Required publicly traded firms to disclose balance sheets, profit/loss statements, and officer compensations verified by independent auditors.
SEC (1934): The U.S. Securities and Exchange Commission was established to regulate the stock market and prevent corporate abuses.

Repeal of Prohibition

Roosevelt signed a bill to legalize the manufacture and sale of alcohol, preceding the ratification of the 21st Amendment in late 1933, securing tax revenue for states and immense popularity in urban and ethnic areas.

🏗️ 4. Relief Programs

Relief programs provided immediate help to the hardest-hit third of the population, employing workers while building essential public infrastructure.

Public Works

Public Works Administration (PWA): Created by the NIRA, spending $3.3 billion between 1933 and 1935 on 34,599 projects including government buildings, airports, hospitals, schools, roads, bridges, and dams (including warships and military facilities).

Farm and Rural Programs

Agricultural Adjustment Act (AAA): Created the Agricultural Adjustment Administration (AAA) in May 1933 to raise commodity prices through artificial scarcity (paying landowners subsidies to leave land idle, plowing up 10 million acres of cotton, and discarding 6 million piglets).
- Supreme Court Ruling: Declared unconstitutional in 1936, leading to its replacement with programs subsidizing soil-enriching crops.
Tennessee Valley Authority (TVA): Launched in 1933 for dam construction on an unprecedented scale to curb flooding, generate electricity, and modernize poor farms in the Tennessee Valley.
Other Rural Legislation: Included the Farm Security Act, Farm Credit Act of 1933, Farm Mortgage Foreclosure Act of 1934, Rural Electrification Administration (REA), and the Bankhead–Jones Farm Tenant Act of 1937 (creating the Farm Security Administration (FSA)).
Food Stamp Plan (1939): Established to provide stamps for the urban poor to purchase food at retail outlets.

Youth Programs

Civilian Conservation Corps (CCC): Reached 3 million unemployed young men (ages 17–28) in construction camps, providing food, clothing, medical care, and $25 monthly payments sent to their parents.
National Youth Administration (NYA): Funded work-study programs for students in high schools and colleges.
Aid to Dependent Children (ADC): Provided cash payments to poor parents, helping reduce orphanage populations.

📈 5. Recovery Initiatives

Recovery programs aimed to restore the economy to normal levels through industrial codes, labor standards, and housing support.

NRA "Blue Eagle" Campaign

National Industrial Recovery Act (NIRA): Sought to raise prices, empower unions, and reduce harmful competition.
National Recovery Administration (NRA): Headed by Hugh S. Johnson, it established a "blanket code" (minimum wages of 20–45 cents/hour, 35–45 hour workweeks, and abolition of child labor) and mobilized support via the "NRA Blue Eagle" campaign.
Supreme Court Ruling: Found unconstitutional in A.L.A. Schechter Poultry Corp. v. United States on May 27, 1935. Standards were later revived by the Fair Labor Standards Act of 1938.

Housing Sector and Redlining

HOLC & FHA: The Home Owners' Loan Corporation (HOLC) simplified mortgages, while the Federal Housing Administration (FHA) established national construction standards.
Discriminatory Redlining: HOLC and FHA maps systematically denied federally backed mortgages to Black Americans and integrated neighborhoods by marking them "red" or "yellow" based on race, enforcing racially restrictive covenants.

⚖️ 6. Reform Initiatives

Trade Liberalization: The Reciprocal Tariff Act (1934), drafted by Cordell Hull, empowered the president to negotiate bilateral, reciprocal trade agreements, ushering in modern liberal trade policy.
Puerto Rico: The Puerto Rico Reconstruction Administration promoted land reform, farm cooperatives, crop diversification, and local industry.

🛡️ 7. Second New Deal (1935–1936)

Responding to Supreme Court setbacks and growing public demand for dramatic action, the Second New Deal was more progressive and controversial.

Social Security Act (1935)

Framework: Established a permanent system of universal retirement pensions, unemployment insurance, and welfare benefits for the handicapped and needy children.
Funding: Funded through payroll taxes rather than the general fund to ensure contributors retained a legal, moral, and political right to collect benefits ("so no damn politician can ever scrap my social security program").

New Deal: US History Study Notes