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 did anything with their federal government was when they sent or got mail. Over time, the government took on more and more responsibility, but at the start the 1930s, few Americans paid federal taxes, and there were very few laws for businesses. All that changed with the new president’s New Deal. For Hoover, it was not the job of the government to take care of the people. Roosevelt didn’t agree. He thought that this was an important job for the government to do.
This was a new idea in the 1930s, but not anymore. 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 job for the government? Should we expect our government to take care of us, or are we our own 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. At the inauguration ceremony, Roosevelt rose with the aid of leg braces under his pants and placed his hand on a 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 who were there said that it was as though God himself was shining down on Roosevelt and the American people.
In the sunlight, Roosevelt gave one of the most famous inaugural speeches in history. He asked Americans to work with him to find answers to the nation’s problems and not to be scared. Roosevelt asked all Americans to come together and fight against the economic depression. He famously said, “The only thing we have to fear is fear itself.” Afterward, instead of going to the usual inaugural parties, the new president went straight back to the White House to begin his work to save the country.
In the past, putting money in a bank was not as safe as it is today. If a bank made bad choices and was forced to close, people who did not take out their money fast enough lost their money. 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 caused a panic, and people left their homes and jobs to get their money before it was too late. Sometimes all it took was a rumor of trouble to close down a bank.
These bank runs 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. Franklin Roosevelt made fixing these failing banks his first project after becoming president.
Within two days, Roosevelt closed all the banks, called a bank holiday, and asked Congress to pass a new law to fix the banking system. The Emergency Banking Act of 1933 took the country off the gold standard, which said that American money could be traded in for gold. This seemed like a good idea in normal times, but it limited the amount of paper money in the economy. After 1933, people who had gold were told to sell it to the government. Then, government officials traveled through the country, checking on each bank. In just a few weeks, 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 at using America’s new favorite way of communicating and gave his first radio speech. He explained what the bank officials had been doing. 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 way people felt. 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 where people were keeping it and put back in the country’s banks. The urgent banking problem had been fixed, 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 people would get the money they put into a bank even if the bank failed. This put an end to bank runs. The FDIC still insures bank deposits today.
Other ways to increase confidence in the overall economy included passing the Economy Act, which kept Roosevelt’s promise to lower government spending by cutting pay for government workers, including his own and those of the Congress. He also signed into law the Securities Act, which made sure information was given to the government and the public by business and investment banks that wanted to sell stocks and bonds. This helps people make better decisions when buying and selling stocks. Roosevelt also got new tax money through a tax on beer when the Twenty-First Amendment was ratified. This amendment reversed the Eighteenth Amendment and ended Prohibition. The new Beer Tax made beer legal again, but also put a tax on it.
Roosevelt knew that Americans needed homes and that many people were losing their homes because they couldn’t pay back the loans they had taken out from banks. They were also having a hard time getting loans to buy houses. So he got Congress to pass a law to protect homeowners from foreclosure by adjusting how much they had to pay each month to pay back their home loans. Later New Deal laws created the Federal Housing Authority (FHA), which helped people get loans by protecting banks from losing money if people couldn’t pay back their loans. A similar program provided the same service for farms. The FHA is still an important government program today.
For people who didn’t have a job, programs to fix the banks were not important because they didn’t have any money to put in the bank anyway. For unemployed Americans, a job that paid enough money to 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 country’s unemployed could only last so long. Like his banking laws, help came quickly. 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 get the economy going again 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 to pass along to jobless people. 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 do too much. Cash payments were important in helping to stop Americans from starving and losing their homes, but just giving away money might make people think they didn’t need to get jobs. Although FERA lasted two years, FDR soon moved on to work-relief programs that would pay people to work, instead of giving out money.
The first of these programs started in March of 1933. Called the Civilian Conservation Corps (CCC), this program gave jobs to 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. They followed military-style rules and built pools for water supply, 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 they sent home to their families. The CCC was very popular. Bored young people were taken off the streets and given paying jobs, provided with food and a place to live. Many of the country’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 jobs for people in the New Deal. In the fall of 1933, Roosevelt helped create the Civil Works Administration. Also run by Hopkins, this program gave jobs to over two million people in just a month’s time, and later the program grew to include four million workers. Earning $15 per week, CWA workers tutored those who could not read, built parks, repaired schools, and built athletic fields and swimming pools. Some people 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, giving people a job helped them feel important again and gave people a way to make money.
The largest relief program of all was the Works Progress Administration (WPA). The WPA gave jobs to almost 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 country. Artists such as Ben Shahn made cities more beautiful by painting pictures on walls called murals. Even famous authors like 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,” saying it was a waste of taxpayer money. But almost every town in America was helped in some way by people working for the WPA, 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 34,000 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 were getting richer during the 1920s, the Great Depression for the American farmer began early. Many farmers were losing money in the 1920s because of falling farm prices and the loans they had taken out during World War I. 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 that tried to help farmers was the Agricultural Adjustment Administration (AAA). A big problem was that prices of food were very low because farmers were growing so much. If farmers grew less, the prices of their crops and livestock would go up. The AAA identified seven basic farm products: wheat, cotton, corn, tobacco, rice, pigs, and milk. Farmers who produced these goods got paid by the AAA to stop growing so much. In other words, farmers were paid to farm less!
Newspaper writers 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 of Americans were hungry, this waste was seen as wrong.
But the AAA worked. Cotton, wheat, and corn prices went up and farmers started to make enough money to survive. Unfortunately, the help did not trickle down to the poorest farmers. Tenant farmers and sharecroppers who lived on someone else’s land and paid rent did not receive government help. Instead, the government money went to the person who owned the land. The owners often bought better machinery with the money, which meant they needed less helpers on their farms. In fact, the Great Depression and the AAA brought an end to sharecropping in America.
The Supreme Court put an end to the AAA in 1936 by declaring it unconstitutional, but farmers today still get government money to grow less food than they could. By this time Roosevelt had 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 plants give nutrients back to the soil. At the same time, the government was able to meet its goal of lowering the total amount of land used to grow crops to sell.
Another big problem for American farmers was mortgage foreclosure. This was when the banks took a farm when the owner was unable to pay back a loan. In the Midwest where many farmers grew corn, the situation grew desperate. Farmers put together money to help 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 changed many mortgages so farmers had to pay less each month and had more time to pay off all the money they had borrowed. The Frazier-Lemke Farm Bankruptcy Act allowed any farmer to buy back a lost farm at a cheap price.
In 1933, only about one out of every ten American farms had electricity. The Rural Electrification Authority fixed this problem as the government tried to get electricity to every farm in America. By 1950, nine out of every ten farms enjoyed the benefits of electric power.
Roosevelt believed that good communication with voters was important if the New Deal was going to work, and the best way for him to do so was through radio. Roosevelt’s opponents owned most newspapers in the 1930s which meant that his messages were changed before the public read them. By using the radio, Roosevelt was able to talk directly to the American people without the chance of newspapers adding their own spin to what he was saying.
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. In the end, he gave 30 of these fireside chats while he was president. Roosevelt spoke about New Deal programs, and later what was happening in World War II. On the 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 did, 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 professors from leading universities he asked to help plan and start the New Deal, as well as Congress and the American public who helped the New Deal succeed as well as it did.
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 that sounded good. Roosevelt and his advisors thought that the Depression had been caused by a small group of bankers and businessmen who had made bad decisions and by Republicans who had tried to help a few people get rich while hurting many others.
The answer, they felt, was to root out these problems through banking reform, as well as adjust how people made and bought things. This change would happen if of everyday people had more money to spend and by changing the rules banks and investors in the stock market had to follow. The NRA and AAA were two key programs that made these changes. While it may seem backwards to raise crop prices and set prices on industrial goods, Roosevelt’s team thought that the only way to end the Great Depression was for the government to get involved in the economy.
Many Americans were happy with the president’s plans. Roosevelt had helped the economy, 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 people jobs. 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 gave people hope for the first time in years.
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 to protect them from outside attack and to keep the peace, 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 enough was totally new. And it has been a responsibility the government has never given up. If anything, we have become more used to the idea that our leaders should protect us from unemployment, or protection when we cannot pay our home loans.
Is this a good thing? Should we live in a country in which we expect our government to behave as a sort of mama dog, watching carefully over her puppies? Or is this responsibility something we never should have given away? Is it even 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.