Our federal government is big and affects much of our everyday lives. We receive the mail, pay taxes, drive on roads paid for by federal money, store our food refrigerators that follow federal energy-saving laws, are paid a federal minimum wage, put on seat belts because of federal laws and plan to pay for college in part with government scholarships.
This was not always the case. In fact, when the nation was started the only time most Americans dealt with their federal government at any point in their entire lives was when they sent or got mail. Over time, the government took on more and more responsibility, but at the dawn of the 1930s, few Americans paid federal taxes, and there were little laws for businesses. All that changed with the new president’s New Deal. For Hoover, the primary responsibility of caring for people fell to the people themselves. For Roosevelt, that responsibility rested with the government.
This is a radical idea that has become less radical. Today we think that the government is supposed to watch out for us. We know that our government will protect us from dangerous foods, dangerous drivers, suspicious business, and support us when we lose our jobs and suffer through natural disasters. But, is this the right role of government? Should we expect our government to take care of us, or are we our own personal responsibility?
What do you think? Should the government be responsible for the welfare of everyone?
THE ONLY THING WE HAVE TO FEAR
March 4, 1933, started off gray and rainy. Roosevelt rode in an open car along with old president Hoover, facing the public, as he made his way to the Capitol Building. Hoover’s mood was down, still personally angry over his loss in the general election the previous November. He never smiled at all during the ride among the crowd. At the ceremony, Roosevelt rose with the aid of leg braces under his pants and placed his hand on a Dutch family Bible as he promised to do his job as president. At that very moment, the rain stopped and the sun began to shine directly on the stage, and those present would later say that it was as though God himself was shining down on Roosevelt and the American people.
In the sunlight, Roosevelt delivered one of the most famous inaugural speeches in history. He encouraged Americans to work with him to find answers to the nation’s problems and not to be scared. Roosevelt called upon all Americans to come together and fight an battle against the economic depression. He famously said, “The only thing we have to fear is fear itself.” Upon hearing his inaugural speech, one person in the crowd later said, “Any man who can talk like that in times like these is worth every ounce of support a true American has.” Instead of going to the traditional inaugural parties, the new president immediately returned to the White House to begin his work to save the nation.
In the past, putting money in a savings account carried a degree of risk. If a bank made bad choices and was forced to close, people who did not take out their money fast enough found themselves out of luck. Sometimes a simple rumor could make a bank close. When people were scared that a bank was not safe and began taking out their money, the news would often spread to other customers. This often caused a panic, leading people to leave their homes and work to get their money before it was too late.
These runs on banks happened a lot during the early days of the Great Depression. In 1929 alone, 659 banks closed their doors. By 1932, an additional 5,102 banks went out of business. Families lost their life savings overnight. Thirty-eight states had adopted laws to limit the amount of money a customer could take out in an effort to keep panics from happening. Bank failures went up in 1933, and Franklin Roosevelt made fixing these failing banks his first choice after being inaugurated.
Within 48 hours of his inauguration, Roosevelt said there would be an official bank holiday and called Congress into a special meeting to address the crisis. The resulting Emergency Banking Act of 1933 was signed into law on March 9, 1933, only eight hours after Congress first saw it. The law officially took the country off the gold standard, which usually seemed safe, really limited the amount of paper money in the economy. Those who held gold were told to sell it to the U.S. Treasury for a discount of a little over $20 per ounce. Also, dollar bills were no longer good to turn in for gold. Between March 11 and March 14, officials from the Reconstruction Finance Corporation, the Treasury Department, and other federal teams swept through the country, looking into each bank. By March 15, 70% of the banks were said to be safe and allowed to reopen.
On March 12, the day before the banks were set to reopen, Roosevelt proved how good he was in America’s new form of communication and gave his first radio speech to the American people, explaining what the bank officials had been doing over the last week. He told people that any bank open the next day was safe. The combination of his personality and the promise that the government was solving the problems worked magic in changing the popular mindset. Just as the culture of panic had made the country feel and do worse after the crash, so did this confidence-building move help to build it back up. Consumer confidence returned, and within weeks, close to $1 billion in cash and gold had been brought out from under mattresses and hidden bookshelves, and put back in the nation’s banks. The banking problem had been solved, and the public was ready to believe in their new president.
Primary Source: Government Document
The official plaque placed in banks announcing that they participate in the FDIC and that a depositor’s money is guaranteed by the US government. The FDIC was an essential part of the New Deal and helped prevent future bank runs.
In June 1933, Roosevelt helped pass the Glass-Steagall Act. This law stopped banks from getting into investment banking, stopping banks from trying to make money too fast and too irresponsibly in the stock market. This law also created the Federal Deposit Insurance Corporation, or FDIC, which made sure the bank could pay a customer their money in their account, up to $2,500. With FDIC protection, Americans knew that if their bank failed, the government would pay them back. This put an end to bank runs. The amount has gone up since then.
Other ways to increase confidence in the overall economy included passing the Economy Act, which kept Roosevelt’s promise to lower government spending by lowering paychecks, including his own and those of the Congress. He also signed into law the Securities Act, which made sure full information was given to the federal government from all business and investment banks that wanted to sell stocks and bonds. Roosevelt also got new tax money through the Beer Tax. As the Twenty-First Amendment, which would repeal (get rid of) the Eighteenth Amendment which started Prohibition, moved towards ratification (passing), this law allowed the making of beer and put a tax on it.
The final part of Roosevelt trying to help homeowners was the Home Owners’ Refinancing Act. Created by the Home Owners’ Loan Corporation (HOLC), the program saved homeowners from foreclosure (losing one’s house to a bank) by adjusting their home loans. This saved the homes of many, many homeowners. Later New Deal laws created the Federal Housing Authority (FHA), which started the 30-year home loan and helped a lot of people buy homes after World War II. A similar program, created through the Emergency Farm Mortgage Act and Farm Credit Act, provided the same service for farms. The FHA is still an important government program today – one of the parts of the New Deal.
Out of work Americans needed jobs. To the unemployed, many of whom had no money left in the banks, a job that put food on the dinner table was the most important thing. Unlike Herbert Hoover, who didn’t offer unemployment money, Franklin Roosevelt knew that the nation’s unemployed could last only so long. Like his banking laws, aid would come right away. Roosevelt created a strategy known as pump priming. To start a dry pump, a farmer often has to pour a little water into the pump to start a heavy flow. Using the same idea, Roosevelt believed the national government could jump-start a dry economy by pouring in a little federal money. The first major help to large numbers of jobless Americans was the Federal Emergency Relief Act (FERA). This law gave $3 billion to state and local governments for cash payments. Under the direction of Harry Hopkins, FERA helped millions of Americans in need. While Hopkins and Roosevelt believed this was necessary, they were nervous to continue this type of aid. Cash payments were important in helping keep Americans from starvation and homelessness, but simply giving away money could stop Americans from getting jobs. Although FERA lasted two years, efforts were soon moved to work-relief programs that would pay individuals to perform jobs, rather than provide cash handouts.
The first such program began in March 1933. Called the Civilian Conservation Corps (CCC), this program was aimed at over two million unemployed unmarried men between the ages of 17 and 25. CCC members left their homes and lived in camps in the countryside. Subject to military-style rules, the men built pools for water supply and bridges, and cut fire lanes through forests. They planted trees, dug ponds, and cleared lands for camping. They earned $30 dollars per month, most of which was sent directly to their families. The CCC was extremely popular. Bored young people were taken off the streets and given paying jobs and provided with room and shelter. Many of the nation’s parks and trails were built or improved by the men of the CCC.
Primary Source: Photograph
A CCC work team stopped to eat lunch while on a job in Virginia. Hundreds of parks were improved during the 1930s as part of this innovative program.
There were plenty of other opportunities for the unemployed in the New Deal. In the fall of 1933, Roosevelt helped create the Civil Works Administration. Also run by Hopkins, this program employed 2.5 million in a month’s time, and later grew to four million at its peak. Earning $15 per week, CWA workers tutored those who could not read, built parks, repaired schools, and built athletic fields and swimming pools. Some were even paid to rake leaves. Hopkins hired about three thousand writers and artists. There were plenty of jobs to be done, and while many felt that the government was simply giving busy work as an excuse to give away money, it gave very important help during hard times.
The largest relief program of all was the Works Progress Administration (WPA). When the CWA ended, Roosevelt appointed Hopkins to head the WPA, which employed nearly nine million Americans before it ended. Americans of all skill levels were given jobs to match their skills. Most of the money was spent on public works programs such as roads and bridges, but WPA projects spread to art projects, too.
The Federal Theater Project hired actors to perform plays across the land. Artists such as Ben Shahn made cities more beautiful by painting larger-than-life paintings called murals. Even such famous authors as John Steinbeck and Richard Wright were hired to write regional histories. WPA workers took traveling libraries to rural areas.
Some people called the WPA “We Piddle Around” or “We Poke Along,” calling it the worst waste of taxpayer money in American history. But most every county in America received some service by the newly employed, and although the average monthly salary was barely what people needed to live, millions of Americans earned needed cash, skills, and self-respect.
Another government program designed to provide jobs was the Public Works Administration (PWA). The PWA set aside $3.3 billion to build public projects such as highways, federal buildings, and military bases. Secretary of the Interior Harold Ickes ran the program, which completed over thirty-four thousand projects, including the Golden Gate Bridge in San Francisco and the Queens-Midtown Tunnel in New York. Between 1933 and 1939, the PWA built over one-third of all new hospitals and 70% of all new public schools in the country.
While most Americans got richer for most of the 1920s, the Great Depression for the American farmer really began after World War I. Much of the 1920s was losing and owing a lot of money for the American farmer, because of falling farm prices and the need to purchase expensive machinery. When the stock market crashed in 1929, sending prices even lower, many American farmers wondered if their lives would ever get better.
The first major New Deal program tried to help farmers by trying to raise farm prices was the Agricultural Adjustment Administration (AAA). One method of driving up prices of a product is to create a fake need to more of that product. Simply put, if farmers made less, the prices of their crops and livestock would increase. The AAA identified seven basic farm products: wheat, cotton, corn, tobacco, rice, pigs, and milk. Farmers who produced these goods would be paid by the AAA to reduce the amount of farmland or the amount of livestock raised. In other words, farmers were paid to farm less!
The press and the public immediately complained. To follow the AAA rules, farmers destroyed millions of acres of already planted crops. Six million young pigs were killed to meet the rules. In a time when many were out of work and tens of thousands starved, this waste was seen as wrong.
But farm income did increase under the AAA. Cotton, wheat, and corn prices doubled in three years. Although they weren’t sure about it, farmers were ok with the program. Unfortunately, the help did not trickle down to the poorest. Tenant farmers and sharecroppers (farmers who paid for rent using whatever they grew and raised) did not receive government help; the subsidy went to the landlord (the person who owned the farm/land). The owners often bought better machinery with the money, which further decreased the need for farm workers. In fact, the Great Depression and the AAA brought an end to the practice of sharecropping in America.
The Supreme Court put an end to the AAA in 1936 by declaring it unconstitutional (not allowed by the constitution of a country or government). By this time the Roosevelt administration decided to use federal money to save the environment after the Dust Bowl. The Soil Conservation And Domestic Allotment Act paid farmers to plant clover and alfalfa instead of wheat and corn. These crops give nutrients back to the soil. At the same time, the government achieved its goal of reducing crop acreage of the key crops.
Another major problem faced by American farmers was mortgage foreclosure (to take back property because the money owed for the property has not been paid). Unable to make the monthly payments, many farmers were losing their property to their banks. Across the Corn Belt of the Midwest, the situation grew desperate. Farmers put together money to bail out needy friends. Minnesota and North Dakota passed laws stopping farm foreclosures. In Le Mars, Iowa, an angry mob beat a foreclosing judge almost to death in April 1933.
FDR wanted to stop the madness. The Farm Credit Act, passed in March 1933 recalculated many mortgages in danger of going unpaid. The Frazier-Lemke Farm Bankruptcy Act allowed any farmer to buy back a lost farm at a cheap price. Despite being declared unconstitutional, most of the parts of Frazier-Lemke were kept.
In 1933, only about one out of every ten American farms was powered by electricity. The Rural Electrification Authority addressed this problem. The government began a mission of getting electricity to the nation’s farms. Faced with government competition, private utility companies started, sending power lines to rural areas very quickly. By 1950, nine out of every ten farms enjoyed the benefits of electric power.
Roosevelt believed that his administration’s success depended upon good communication with voters and the best way for him to do so was through radio. Roosevelt’s opponents had control of most newspapers in the 1930s which meant that his messages were changed before the public read them. Historian Betty Houchin Winfield wrote, “He and his advisers worried that newspapers’ biases would affect the news columns and rightly so.” Historian Douglas B. Craig wrote that by using radio, Roosevelt “offered voters a chance to receive information unadulterated by newspaper proprietors’ bias…”
Primary Source: Photograph
FDR sitting down for one of his fireside chats. Appearances mattered little during these speeches since they were heard on the radio. Their effect was tremendous since the president’s soothing tone put many voters concerns to rest.
Roosevelt offered his messages in the form of simple conversations he imagined friends might have sitting by the fireside in the evening after dinner. These fireside chats eventually numbered 30 between 1933 and 1944. Roosevelt spoke about New Deal programs, and later the course of World War II. On radio, he was able to stop rumors and explain his decisions. His tone and personality communicated confidence during hard times. Roosevelt was seen as an effective communicator on radio, and the fireside chats kept him popular during his presidency. He is remembered as a master of communication, both for the content of his messages and for his ability to make good use of the new technology.
EVALUATING THE FIRST NEW DEAL
It would be a mistake to give the president all the credit for all of the good things that the New Deal accomplished, just as it is unfair to blame Hoover for all of the bad things of the Depression. Roosevelt certainly did not do everything himself. It was the hard work of his advisors – the so-called Brain Trust of scholars and thinkers from leading universities he asked to help plan and start that New Deal – as well as Congress and the American public who helped the New Deal succeed as well as it did. It was the American people’s volunteer spirit that Roosevelt was able to encourage.
Primary Source: Photograph
FDR signs a bill surrounded by members of his cabinet and other advisors and supporters. The new president’s team were nicknamed the Brain Trust since many of them had come from academia.
The first hundred days of his administration was not a master plan that Roosevelt dreamed up and did on his own. In fact, it was not a master plan at all, but rather a lot of messy efforts made from different ideas he believed. But after taking office and analyzing the crisis, Roosevelt and his advisors felt that they had a larger sense of what had caused the Great Depression and thus tried many solutions to fix it. They believed that it was caused by abuses on the part of a small group of bankers and businessmen, and by Republican decisions that built wealth for a few but hurt many.
The answer, they felt, was to root out these abuses through banking reform, as well as adjust how people made and bought farm and industrial goods. This adjustment would come about by increasing the purchasing power of everyday people, as well as through rules and decisions like the NRA and AAA. While it may seem backwards to raise crop prices and set prices on industrial goods, Roosevelt’s teams wanted to stop prices from falling and economic uncertainty that had prevented businesses from committing to investments and consumers from parting with their money.
Many Americans were happy with the president’s plans. Roosevelt had helped the economy’s, put new money into struggling banks, rescued homeowners and farmers from foreclosure and helped people keep their homes. The New Deal offered some direct relief to the unemployed poor but more importantly, it gave new encouragement to farmers and industry alike, and put people back to work. The total number of working Americans rose from 24 to 27 million between 1933 and 1935. Perhaps most importantly, Roosevelt’s first term New Deal programs had changed the negative attitude that the country had since the end of 1929. For the first time in years, people had hope.
During the first 100 days of the Roosevelt Administration the role government played in the lives of everyday Americans really changed. People had always trusted their leaders with the responsibility of protecting them from outside attack and keeping peace within their borders, but had not viewed their government as being responsible for protecting them from hard times. The idea that the government would help you find a job, or make sure you were paid a living wage, was totally different. And it has been a responsibility the government has never given back. If anything, we have become more used to the idea that our leaders owe us protection from unemployment, or protection when we cannot pay our home loan.
Is this a good thing? Should we live in a nation in which we expect our government to behave as a sort of mother dog, watching carefully over her puppies? Is this power we never should have given away? Or, is it a fair and smart use of government?
What do you think? Should the government be responsible for the welfare of everyone?
BIG IDEA: FDR tried to deal with the immediate problems facing the country by creating many new government programs. These stabilized the banking system, gave people jobs and addressed food shortages.
President Franklin Roosevelt told Americans they only thing they had to fear was fear itself. He implemented many new programs to try to solve the problem. Most involved spending large amounts of government money to jumpstart the economy.
His programs became known as the New Deal. In the first 100 days of his presidency, FDR implemented programs to help solve the banking crisis, to give people jobs, and to support farmers. Many of the New Deal programs are known by their acronyms. (FDIC, FHA, CCC, WPA, AAA, etc.)
FDR was an excellent communicator. He was known for his speeches on the radio in which he explained his ideas in simple terms that regular Americans could understand.
Part of the New Deal were laws to fix the banking system. One program gives insurance to people who deposit money in banks so they will not lose it if their bank fails. This program prevents bank runs. Other financial programs provided regulation for the stock market.
New government programs helped people get loans to buy houses.
To help people find jobs, FDR created programs building roads, bridges, dams, parks, trails, painting murals, writing, acting, and much more.
For farmers, FDR signed laws paying farmers to grow less. This stabilized food prices. The New Deal also included programs to provide electricity to rural areas.
PEOPLE AND GROUPS
Harry Hopkins: Secretary of Commerce and one of Franklin Roosevelt’s closest advisors. He was one of the architects of the New Deal.
Harold Ickes: Secretary of the Interior who ran the Public Works Administration and was an important advisor to Franklin Roosevelt.
Brain Trust: Nickname for the group of advisors Franklin Roosevelt assembled to help solve the Great Depression. Many had come from universities, thus giving rise to the nickname.
Pump Priming: Idea that the government should spend during an economic downturn, thus putting money into the economy which will in turn be spent by individuals and private businesses. Without the government’s initial investment, recovery would not have been possible.
First Hundred Days: The nickname for the first few months of Franklin Roosevelt’s presidency in which he was able to work with Congress to pass numerous laws that established the beginning of the New Deal.
Federal Deposit Insurance Corporation (FDIC): Government agency with provides insurance for individual depositors at commercial banks, thus preventing bank runs.
Federal Housing Authority (FHA): Government agency that provides backing for home loans and helped stabilized the housing market during the Great Depression, as well as spur the housing boom in the post-WWII era.
Civilian Conservation Corps (CCC): New Deal program that provided jobs to young men building parks, trails, reservoirs, bridges and fire lanes.
Works Progress Administration (WPA): Major New Deal program that provided jobs to 9 million Americans building major infrastructural projects such as bridges, and roads, but also writing and painting murals as well.
Public Works Administration (PWA): New Deal program that provided jobs building highways, federal buildings and military bases. Among the programs projects were the Golden Gate Bridge and Queens-Midtown Tunnel. Over 1/3 of all hospitals and 70% of all new schools built in the 1930s were completed by workers in this program.
Agricultural Adjustment Administration (AAA): New Deal agency that provided payments to farmers to lower agricultural production. The program broke a cycle in which farmers increased output in an effort to increase returns. In reality, excessive output drove up supply and drove down prices.
Rural Electrification Authority: New Deal agency that worked to provide electricity to rural areas.
FDR’s First Inaugural Address: Famous speech given on March 4, 1933 in which incoming President Franklin D. Roosevelt said “The only thing we have to fear is fear itself.”
Fireside Chat: Nickname for President Franklin Roosevelt’s radio speeches in which he tried to use plain language to explain his ideas.
Emergency Banking Act of 1933: One of the first pieces of New Deal legislation. It took the country off the gold standard and helped stabilize the banking system.
Glass-Steagall Act: Replacement for the Emergency Banking Act of 1933. This law prohibited commercial banks from engaging in investment banking and created the FDIC.
Federal Emergency Relief Act (FERA): New Deal legislation that gave $3 billion to state and local governments for direct payments to needy Americans. It provided help to prevent people from losing their homes or starving, but did not provide work.