When Franklin Delano Roosevelt took office in 1933, he enacted a range of experimental programs to combat the Great Depression.
- The New Deal was a set of domestic policies enacted under President Franklin D. Roosevelt that dramatically expanded the federal government’s role in the economy in response to the Great Depression.
- Historians commonly speak of a First New Deal (1933-1934), with the “alphabet soup” of relief, recovery, and reform agencies it created, and a Second New Deal (1935-1938) that offered further legislative reforms and created the groundwork for today’s modern social welfare system.
- It was the massive military expenditures of World War II, not the New Deal, that eventually pulled the United States out of the Great Depression.
Origins of the New Deal
The term New Deal derives from Franklin Roosevelt’s 1932 speech accepting the Democratic Party’s nomination for president. At the convention Roosevelt declared, “I pledge you, I pledge myself, to a new deal for the American people.” Though Roosevelt did not have concrete policy proposals in mind at the time, the phrase "New Deal" came to encompass his many programs designed to lift the United States out of the Great Depression.
The New Deal created a broad range of federal government programs that sought to offer economic relief to the suffering, regulate private industry, and grow the economy. The New Deal is often summed up by the “Three Rs”:
- relief (for the unemployed)
- recovery (of the economy through federal spending and job creation), and
- reform (of capitalism, by means of regulatory legislation and the creation of new social welfare programs).
Roosevelt’s New Deal expanded the size and scope of the federal government considerably, and in doing so fundamentally reshaped American political culture around the principle that the government is responsible for the welfare of its citizens. As one historian has put it: “Before the 1930s, national political debate often revolved around the question of whether the federal government should intervene in the economy. After the New Deal, debate rested on how it should intervene.”
The First New Deal (1933-1934)
At the time of Roosevelt’s inauguration on March 4, 1933 the nation had been spiraling downward into the worst economic crisis in its history. Industrial output was only half of what it had been three years earlier, the stock market had recovered only slightly from its catastrophic losses, and unemployment stood at a staggering 25 percent.
The First New Deal began in a whirlwind of legislative action called “The First Hundred Days.” From March through June 1933, at Roosevelt’s behest, Congress passed legislation aimed at addressing the banking crisis, unemployment, and weak industrial performance, among other problems, through an “alphabet soup” of new laws and agencies. Among these, some of the most important were:
The Agricultural Adjustment Act (AAA), which boosted agricultural prices by offering government subsidies to farmers to reduce output.
The Civilian Conservation Corps (CCC), which employed young, single men at federally funded jobs on government lands.
The Federal Emergency Relief Act (FERA), which gave federal grants to states that funded salaries for government workers as well as local soup kitchens and other direct-aid to the poor programs.
The National Recovery Act (NRA), which sought to boost businesses’ profits and workers’ wages by establishing industry-by-industry codes that set prices and wages, as well as guaranteeing workers the right to organize into unions.
The Federal Deposit Insurance Corporation (FDIC), which guaranteed individuals that money they deposited in a bank would be repaid to them by the federal government in the event that their bank went out of business.
In 1934, Roosevelt supported the passage of the Securities and Exchange Commission (SEC), which brought important federal government oversight and regulation to the stock market.
The Second New Deal (1935-1938)
The second phase of the New Deal focused on increasing worker protections and building long-lasting financial security for Americans. Four of the most notable pieces of legislation included:
The Works Progress Administration (WPA), which employed millions of Americans in public works projects, from constructing bridges and roads to painting murals and writing plays.
The Wagner Labor Relations Act, which guaranteed workers the right to form unions and bargain collectively.
The Social Security Act, which required workers and employers to contribute—through a payroll tax—to the Social Security trust fund. That fund, in turn, makes monthly payments to retirees over the age of 65, as well as to the long-term disabled.
The Fair Labor Standards Act, which mandated a 40-hour work week (with time-and-a-half for overtime), set an hourly minimum wage, and restricted child labor.
The legacy of the New Deal
Roosevelt’s New Deal sought to reinvigorate the economy by stimulating consumer demand. The New Deal embraced federal deficit spending to promote economic growth, a fiscal approach that came to be associated with the British economist John Maynard Keynes. Keynes argued that government spending that put money in consumers' hands would allow them to buy products made in the private sector. Then, as employers sold more and more products, they would have the money to hire more and more workers, who could afford to buy more and more products, and so on.
In this way, Roosevelt and his supporters theorized, the Great Depression’s downward economic spiral could be reversed.
The New Deal was only partially successful, however. The Supreme Court ruled against several New Deal initiatives in 1935, leading a frustrated Roosevelt to suggest expanding the Supreme Court to as many as fifteen Justices (a political misstep that would haunt him for the rest of his career).
Despite the New Deal's lofty dreams, the United States only fully recovered from the Great Depression due to massive military spending brought on by the Second World War.
Nevertheless, key elements in the New Deal remain with us today, including federal regulation of wages, hours, child labor, and collective bargaining rights, as well as the social security system.
What do you think?
How was the New Deal's approach to the crisis of the Great Depression different from previous responses to economic slumps in American history?
Which do you think played a larger role in ending the Depression: the New Deal or World War II? Why?
What aspects of the New Deal, if any, do you see in American society today?
Want to join the conversation?
- "The Civilian Conservation Corps (CCC), which employed young, single men at federally funded jobs on government lands."
So if I was a older man, or married, or female etc. Would I be disqualified from working with the CCC? Was it truly just for "young, single men"(29 votes)
- Pretty much! The original program was for 18-23 year old men. Later on they added veterans to the program, who could be any age as long as they were in good physical condition (since the job involved heavy labor.) Most of the positions went to white men, as well -- although black men were in the program, they were segregated into different camps and never permitted to have supervisory positions, as this was still the height of Jim Crow. There was also a separate Native American division.
Why young men? I'm not 100% certain, but I have a feeling that the government wanted to prevent a bunch of angry young unemployed guys from getting into trouble. It was a bunch of angry young unemployed guys (the Sons of Liberty) who started the American Revolution, after all.(74 votes)
- I would say that World War II definitely played a larger part in ending the Depression than Roosevelt's New Deal did because not only did massive war spending and production boost the United States's economy, but it also brought many other European countries out of the Depression. It's important to note that the U.S. wasn't the only country experiencing drastic economic decline during the 1930s.(17 votes)
- Nothing boosts an economy like a war, the Factories began building tanks, which the Soviets and British payed for, we did do into debt but was able to pay troops, and factory workers, and I believe that boosted the US out of the great depression.(6 votes)
- Why were relief, recovery, and reform programs each needed to address the challenges Americans faced during the Great Depression?(3 votes)
- The Great Depression was a time in which people endured great hardships. People needed a way to climb back up from their economic depressions, so Roosevelt made the New Deal, which is what you are referring to: relief, recovery, and reform. These programs were needed because they gave aid to Americans during the Great Depression. For an example, one of the key plans of the New Deal was to give unemployed American's jobs.(8 votes)
- Why weren't banks held accountable for their actions?(2 votes)
- Actually, many of these banks were put under tighter regulations as the government became more aware of the easy credit that many of these banks were providing. For example, the Glass Steagall Act seperated different kinds of banking in order to make sure that the investment side was not merged with the retail side.(7 votes)
- In sooth, the effective and efficient measures in response to the economic downturn created by FDR markedly differed from the former presidents in launching approaches during the Great Depression. Assuredly, FDR formed several acts in the first deal and second deals, for example, build the trust between the banking systems and the depositors, structuring the big businesses and government, make pension funds for retirees, systematize the working hours for workers, and grant the rights to the workers to unionize. Thereof the New Deal's approach partially boosted the economy. However, the excessive military spending brought on by WW2 ground to a halt in the Great depression. These days, there are some policies derived from the New Deal, for instance, the Security Fund Act, Pension program, etc.(5 votes)
- I would like to know how the new deal differentiates from the rest of the attempts at fixing economic slumps in American history. I ask because we have not really discussed other economic depressions so well, and so I do not know them very well.(5 votes)
- Were there any negative consequences of high government spending during this time?(3 votes)
- yeah, this is kinda how America's debt to China started. Not necessarily because we solved our problems by going into debt, but because the government suddenly decided it was responsible for protecting the economy, providing money for the unemployed, funding education, social security, foreign aid, health insurance for all, and much more. In the long run, the government's paying for all of this has led to a multi-trillion dollar debt to China and several other nations.(4 votes)
- What impact did the legislation have on the unemployment rate?
What part of the New Deal is used today?(3 votes)
- Social security,Federal Deposit Insurance, and the securities and exchange commission (just to name a few).(4 votes)
- what were conservative criticisms of the new deal?(1 vote)
- Many conservatives were concerned that the new deal would allow for more government intervention in the economy and the people's lives. Many conservatives believed that government welfare would later lead to dependence of such program rather than trying to help themselves. Other conservatives were concerned of government spending and the debt. They were concerned that the New Deal programs would raise taxes and increase the federal debt.(6 votes)
- In reference to the Fair Labor Standards Act, why did Roosevelt decide to restrict working hour and child labor during a time when working families needed whatever they could get?(2 votes)
- Establishment of the 40 hour work week (something done by Henry Ford in his factories early in the 1920s) meant that manufacturers had to either pay extra for work beyond 40 hours (increasing take-home pay) or to hire more people (creating more jobs). The Fair Labor Standards Act was also politically astute, appealing to voters rather than to oligarchs and industrialists.
Restricting or ending child labor was a justice issue. Children are in a time of life prime for education, not for wage earning.(5 votes)