THE NEW DEAL

The Situation in ,000,000 unemployed 34,000,000 belonged to families with no full time wage earner (out of 125,000,000) Industrial production had fallen by 45% from 1929 Homebuilding dropped 80% from 1929 About 5,000 banks went under from ’ By 1933, 11,000 of 25,000 banks had failed. GDP fell by 30%, the stock market by 90% By 1933, 25% of all workers and 37% of an non-farm workers were unemployed The income of the average family dropped 40%

The Banking Crisis 3/6/33 – Closes banks 3/9/33 – Emergency Banking Relief Act: All Federal Reserve approved banks would be guaranteed cash flows from the Fed. Bank: bank runs end 6/16/33 – Glass-Steagall Act: Creates the Federal Deposit Insurance Corporation to guarantee bank deposits. Requires banks to separate their investment and commercial banking activities. (repealed in 1999)

The Hundred Day Congress Financial Reform 4/5 – FDR orders US gold coins to be exchanged for paper dollars 4/19 – US abandons the gold standard This begins the era of a managed currency. 5/27 – Federal Securities Act Immediate Relief 3/31 - Unemployment Relief act creates the CCC 5/12 – Federal Emergency Relief Administration created CWA 5/12 – AAA created 5/18 – TVA created 6/13 – HOLC created 6/16 – NRA created (PWA)

The AAA Agricultural Adjustment Act Attempted to raise the price of farm goods by paying farmers not to farm. Instead, they would be paid “parity prices” – what the crop would have sold for. This was intended to end overproduction and put more wealth in farmers’ hands. Ruled unconstitutional in Congress replaced it with a conservation plan to pay parity prices if farmers planted soil conserving crops like alfalfa. The government has been very involved in agricultural production ever since.

The NRA All encompassing attempt to boost wages and production. Largely voluntary. Created a minimum wage and a maximum work week. Created the PWA to “prime the pump” Gave more bargaining power to unions Ruled unconstitutional in The Wagner Act and National Labor Relations Act was salvaged from the NRA to preserve union bargaining power. Industrial production did rise 55% in the two years the NRA was operating.

Public Works CWA - Immediate “make work” CCC – Young men sent to the woods to do conservation work (the beginnings of the American Army of WWII) TVA – Built 20 dams in the Tennessee River Valley, electrified the South. REA – Spread electric power lines through rural areas. PWA – Mostly larger scale public works projects (dams, bridges, hospitals, schools, warships) WPA – Mostly smaller scale projects like parks, poverty relief, roads and educational projects (writers, poets and artists)

Long Term Reform 6/6/34 – Securities Exchange Commission founded to investigate fraud on Wall Street. 6/12/34 – Reciprocal Trade Agreement allowed the President to lower tariffs with other countries that did the same 6/18/34 – Indian Reorganization Act (Indian New Deal) 4/30/35 – Resettlement Administration moves farmers off poor lands 8/14/35 – Social Security Act 6/25/38 – Fair Labor Standard Act: Minimum wage created, overtime rules, no child labor 8/2/39 – Hatch Act prevents civil servants from campaigning

Social Security Covers old age, disability, and survivors (orphans) of those who die during their wage earning years. Originally included unemployment insurance (it was later moved into a separate program). At first, agricultural, domestic and government workers were exempted from the program. Few blacks and women benefitted at first. Money is withdrawn from paychecks (payroll tax) to pay for the program. Over time, it came to include almost everyone.

Recession of 1937 Disputed causes. FDR bowed to pressure to balance the budget. He cut spending in the PWA and WPA. Also, Social Security taxes were being collected but benefits were not being paid out. The Federal Reserve also tightened the money supply. Overall constricting of demand. Unemployment went from 14% to 19%. Industrial production fell 37% FDR responded by putting more money into WPA and PWA. The economy recovered some, but would await WWII for a full recovery.

The Roosevelt Recession UnemploymentGovernment spending