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The '''New Deal''' was President Franklin Delano Roosevelt's legislative program. As implemented during the 1933-1938 period, it included numerous congressional enactments and presidential orders that were intended to provide economic relief, recovery, and reform during the [[Great Depression]].
:''(For an annotated list of New Deal measures see [[/Addendum|the addendum subpage]])''
:''(For the sequence of New Deal legislative measures see [[/Timelines|the timelines subpage]])''
==Origins==
Roosevelt first promised "a new deal for the American people" in his acceptance speech at the 1932 Democratic National Convention.
:''(The background to the New Deal is described in the article on the [[Great Depression in the United States]] and its economic implications and international context are described in the article on the [[Great Depression]].)''
==The three Rs==
The New Deal had three components: relief, recovery, and  reform - ''The Three RS''.
The ''Relief'' component was intended to put the unemployed to work and  help those hardest hit by the depression.  It expanded the previous administration's  work relief program, and added an extensive further  sequence of  employment-generating schemes,  followed by the introduction of a number of social security and unemployment insurance systems.
The ''Recovery'' component was intended to  return the country to prosperity by direct government intervention in its economy. It included programmes of financial assistance to banks and mortgage-lenders, subsidies to farms and busineses, the encouragement of trade union  membership, and the maintenace of wage levels.
The ''Reform'' component included the creation of the ''Federal Deposit Insurance Corporation'', which had the immediate purpose of restoring confidence in the country's banks and the longer term purpose of regulating their conduct; and the setting up of the ''Securites and Exchange Commission'' to regulsate other parts of it financial system.
==A review of the programs==
===Emergency measures=== 
====The "Bank Holiday" and the Emergency Banking Relief Act====
The exceptionally severe [[US banking crises of 1931-33]] led to the failure of large numbers of banks and by March 1933, many of the survivors were on the point of closing their doors to depositors.<ref> for details see "Bottom" in ''Time Magazine'' (March 13, 1933) online at [http://www.time.com/time/printout/0,8816,745289,00.html]</ref>  Just one day into his presidency, Roosevelt declared a "bank holiday," effectively putting all financial transactions to a halt. Four days later, Congress passed his [[Emergency Banking Relief Act]], much of which had been drafted by [[Herbert Hoover|Hoover]] administration officials. This legislation provided for reopening sound banks under Treasury Department supervision. Three-quarters of the remaining banks in the [[Federal Reserve System]] reopened within the next three days and currency and gold flowed back into them within a month, thus stabilizing the banking system. Despite presidential opposition, Congress also created the [[Federal Deposit Insurance Corporation]] (FDIC), which insured deposits for up to $5,000, and which put an immediate stop to the Depression Era spate of [[bank run]]s, and provided for the supervision of banks.
====The Economy Act====
As a result of pressure from "deficit-hawks" among its members (who feared that the government's would cause a large departure from the President's election promise of a balanced budget), Congress passed the ''Economy Act'' which cut the salaries of government employees and cutting pensions to veterans  and reduced government expenditure by about  $500 million a year.
===Relief programs===
The administration launched a series of programmes and agencies to provide work for the unemployed, the largest of which were the ''Civilian Conservation Corps'', the ''Civil Works Administration'', the ''Federal Emergency Relief Administration'' the ''National Youth Administration'', and largest of all, the ''Works Progress Administration'' (WPA).  (The numbers employed by  last-mentioned reached  3.3 million in November 1938.<ref>According to Nancy Rose' Put to Work.</ref> and although there had by then been a major reduction in level of  unemployment even then amounted to 12.5% of the working population<ref>Darby, Michael R.''Three and a half million U.S. Employees have been mislaid: or, an Explanation of Unemployment, 1934-1941.'' Journal of Political Economy 84, no. 1 (1976): 1-16.</ref>.)
Other programmes established the concept of a minimum wage, created insurance for the unemployed, sick and old, established  healthcare supprt  systems, and abolished child labor. However, it  is often claimed that the most important  of the relief  measures that were introduced was  the ''Social Security Act of 1935''.
===Recovery programmes===
====The Farm Programs====
Several measures were introduced to arrest the fall in agricultural prices that had been causing hardship in the country's farming industy. The first [[Agricultural Adjustment Act]], which was passed enacted on May 12, 1933, created the [[Agricultural Adjustment Administration]]. This agency imposed  negotiated limits on the production of corn, cotton, dairy products, hogs, rice, tobacco, and wheat, and compensated farmers from funds raised by a tax on food processing. It also ordered crops to be destroyed and livestock to be slaughtered. Over the next three years, food prices rose, and farm incomes increased significantly
<ref>Cushman, Barry (1998). Rethinking the New Deal Court. Oxford University Press. p. 34</ref> A Gallup Poll printed in the Washington Post revealed that a majority of the American public opposed the AAA.<ref>Cushman, Barry (1998). Rethinking the New Deal Court. Oxford University Press. p. 34</ref>
Several other agencies  were also introduced  to help the farming community, including  the [[Resettlement Administration]],  the [[Farm Security Administration]], the [[Rural Electrification Administration]], and the [[Tennessee Valley Authority]]. The government also sponsored rural welfare projects such as the provision of school lunches, the building of new schools, the opening of roads in remote areas, and the transfer of marginal lands to national forests.
====Infrastructure projects====
A number of  infrastructure projects were created by the [[PWA|Public Works Administration (PWA)]] <ref name=PWA>[http://www.bartleby.com/65/pu/PublicWo.html PWA - Public Works Administration,The Columbia Encyclopedia, Sixth Edition, 2001-05]]</ref>, that had been  established by  the ''National Industrial Recovery Act'', and the ''Tennessee Valley Authority'' <ref name=TVA>[http://www.tva.gov/abouttva/history.htm TVA - Tennessee Valley Authority: From the New Deal to a New Century]]</ref>. By June 1934 the Public Works Administration  had created over 13,000 federal projects and  over2,000 non-federal projects, including rural electrification, canals, tunnels, bridges, highways, streets, sewage systems, and housing areas, as well as hospitals, schools, and universities.<ref name=ROOSELVELT1>[http://www.kansaspress.ku.edu/mcjfdr.html McJIMSEY, George. ''The Presidency of Franklin Delano Rooselvelt'', American Presidency Series. University Press of Kanasas, April 2000. ISBN 978-0-7006-1012-9]</ref>.
====Industrial policies====
The cornerstone of New Deal industrial policy was the National Industrial Recovery Act, that was devised in the belief that the severity of the Depression was due to excessive business
competition that reduced prices and wages, which in turn lowered demand and employment
<ref name=Cole>[http://www.economics.hawaii.edu/research/seminars/02-03/02-21.pdf Harold L. Cole: ''New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis'', Federal Reserve Bank of Minneapolis Research Department Staff Report XXX, February 2003]</ref>.  New Deal agencies encouraged collusive agreements to refrain from price competition and the strengthening of  the bargaining power of trade unions. Businesses were asked to accept a  "blanket code" which set  a minimum wage of between 20 and 40 cents an hour, a maximum working week of 35 to 40 hours. The principal enabling legislation for those policies was the ''National Industrial Recovery Act'' (NIRA), and its main implementing agencies were  the ''Public Works Administration'', the ''National Planning Board'' and the ''National Recovery Agency''. By 1934, NRA codes covered over 500 industries, which accounted for nearly 80 percent of private, non-agricultural employment.
On May 27, 1935 the Supreme Court ruled that the NIRA was an unconstitutional delegation of legislative power, mainly because of to the NIRA’s suspension of the antitrust laws. President Roosevelt objected to the Court’s decision, declaring that "The fundamental purposes and principles of the NIRA are sound. To abandon them is unthinkable. It would spell the return to industrial and labor chaos". The ''National Labor Relations Act'' - known as the "Wagner Act" - which replaced The National Industrial Recovery Act, made negotiations with  trades unions compulsory, and created the National Labor Relations Board with the duty to enforce the provisions of the Act.
===Reform progammes===
===Reform progammes===
The reform programmes were an expression of  belief in the need to regulate the country's financial system in order to preserve public confidence and maintain economic stability. The [[Federal Deposit Insurance Corporation]] was given responsibility for supervision of the thrifts and of those banks that were not members of the [[Federal Reserve System]] and the [[Securities and Exchange Commission]] for the supervision of other financial organisations. The [[1933  Glass-Steagall Act]] (Banking Act) sought to protect depositors by prohibiting  commercial banks from engaging in  the more risky activity of investment banking.
The reform programmes were an expression of  belief in the need to regulate the country's financial system in order to preserve public confidence and maintain economic stability. The [[Federal Deposit Insurance Corporation]] was given responsibility for supervision of the thrifts and of those banks that were not members of the [[Federal Reserve System]] and the [[Securities and Exchange Commission]] for the supervision of other financial organisations. The [[1933  Glass-Steagall Act]] (Banking Act) sought to protect depositors by prohibiting  commercial banks from engaging in  the more risky activity of investment banking.
==Social Implications==
==Political implications==
===The New Deal's constitutionality===
The New Deal was a major departure from the country's traditions and it was frequently challenged as unconstitutional.
In 1934, the Supreme Court found  several parts of the New Deal to be unconstitutional, in 1935, it found the National Recovery  Act  to be unconstitutional, and in 1936, it  declared the Agricultural Adjustment Act 1933 to be "a matter beyond the powers delegated to the federal government...". In 1937 President Roosevelt responded with a proposal to pack the Supreme Court by adding five new justices. The "court packing" proposal failed, but the Court subsequently began upholding New Deal legislation, and by 1942 it had nearly  abandoned its  earlier "judicial activism."
==Economic implications==
===Recovery===
The extent to which the New Deal hastened or hampered America's recovery from the Great Depression is a matter of continuing controversy. There are, nevertheless, a few aspects of the question on which there is some semblance of a consensus. For example, few would now question the proposition that the restoration of confidence in the banking system was a necessary condition for recovery, or the success of  Roosevelt's actions in that respect. But it is also well established that the effect of the National Industrial Recovery Act was to delay recovery <ref name=Cole/> by  introducing a seriously damaging reinforcement into the "stickiness" of wage-determination. Opinions differ concerning the effectiveness of the New Deal's fiscal stimulus, but since that stimulus  was in any case, small by comparison with the downturn <ref>[http://krugman.blogs.nytimes.com/2008/11/08/new-deal-economics/, Paul Krugman: ''New Deal economics'', New York Times February 20, 2009]</ref>, that question cannot be considered to be of much importance
:''(For a more detailed examination of the economic consequences of the New Deal, see the article on the [[Great Depression]], and its Tutorials subpage [http://en.citizendium.org/wiki/Great_Depression/Tutorials] and for a summary of the relevant economic statistics see the Tutorials subpage of the article on the Great Depression in the United States [http://en.citizendium.org/wiki/Great_Depression_in_the_United_States/Tutorials].)''
==References==
<references/>
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[[Category:CZ Live]]
[[Category:Economics Workgroup]]
[[Category:History Workgroup]]
[[Category: Politics Workgroup]]

Revision as of 01:46, 21 February 2009

Reform progammes

The reform programmes were an expression of belief in the need to regulate the country's financial system in order to preserve public confidence and maintain economic stability. The Federal Deposit Insurance Corporation was given responsibility for supervision of the thrifts and of those banks that were not members of the Federal Reserve System and the Securities and Exchange Commission for the supervision of other financial organisations. The 1933 Glass-Steagall Act (Banking Act) sought to protect depositors by prohibiting commercial banks from engaging in the more risky activity of investment banking.

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