Roosevelt & the New Deal

1. Roosevelt & the New Deal • CAUSES: Overproduction of agriculture & consumer goods, weak financial regulations (banks), purchasing stock on margins (over speculation) & runs on the banks (no reserve requirements) • Results of Crash & Depression – • Lasted 10 yrs (WWII gets us out) • 25% unemployment (today under 5%) • If employed, 50% faced pay cuts. What % untouched? • 6,000 banks failed, 32,000 businesses failed, 186,000 homeless, 14,000 hopped trains to go west pop=125 m • Farmers couldn’t get decent price for crops (burned crops in protest)(killed livestock & poured milk out on streets) • Hungry people rioted, communists & socialists blamed capitalism (party membership grew) (highest #s ever) • Suicide rate 18 per 100,000, divorce rate up, birth rates down (what will result from Birth rates down? & why)

2. Why does the Crash become a Depression? • Stock prices cont. to decline for almost 4 yrs. (no chance to make up $ lost) • Prosperity of 20’s relied on durable goods once purchased, they last long time so demand leveled off & declined (how should they fix this?) • Over production by farmers & factories (too much supply not enough demand) (farmers never adjusted to lower demand levels after WWI) show dustbowl • Over expansion of credit through installment plans (buying beyond means) (80% without savings – little glitch becomes major decline) • Europe never fully recovered from WWI so couldn’t sell there & high tariff shut us out

3. Herbert Hoover blamed? ? • As depression worsened, he lost popularity • 30yrs fighting humanitarian causes (Food Administration Board during WWI) but blamed for depression: • Shanty towns =Hoovervilles • Newspapers=Hoover blankets • Empty pockets =Hoover flags • Hoover hogs = rabbits & rats used as food (Hoover stew) • “Hoover wagons” = cars pulled by mules because no $ for gas • “hard times are still Hoovering over us”

4. Biggest Mistake Hoover • Not able to communicate w/ people about how he was helping • Republican philosophy of Laissez faire “leave business alone” prevented him from helping (Republicans believe in less govt interference and Democrats believe in more govt interference) • When he does help, gives aid to businesses & banks to TRICKLE DOWN to masses (doesn’t trickle down because businesses don’t reinvest)

5. Election of 1932 & FDR Takes Over • NY Governor & assistant Sec. of Navy /Suffered from Polio disease that left him paralyzed (a fact he hid from public) (radio not TV) • Election of 1932 – FDR wins big (Dem) • Inauguration speech –sun broke through: “the only thing we have to fear is fear itself” -(FDR rallied a frightened nation) video • Wife Eleanor (FDR’s eyes & ears) distant cousin & TR’s niece • Three R’s –Relief, Recovery & Reform: • Relief= legislation meant to give immediate aid to those suffering (jobs) • Recovery=legislation meant to bring country out of depression (stop deflation by changing supply & demand or FED actions) • Reform=legislation meant to change policies so economic crisis doesn’t happen again (regulations & rules) bye to what? Like reserve rate & no bank deposits in stock market

6. Brain Trusts • During 4 months between election & inauguration day, FDR went into seclusion • (20th Amendment will change time between election & inauguration- March to January) • Met w/ experts on agriculture, industry, taxation, finance (many were professors from Columbia & Harvard Univ) • All these experts will help formulate his program = The NEW DEAL (changed role of govt to a more active participant in solving problems)

7. 1st Hundred Days • March 9 – June 16, 1933 -3 ½ months • Passed more legislation than any president/Congress prior • Goals: • 1. increase consumer’s purchasing power (people need $$$ in form of Jobs not handouts) - 4 million put to work but still 10 million w/ out jobs (jobs, jobs, jobs, jobs) • 2. Restore prices to level that make it worth factories to start producing again (w/ NO jobs demand is way down so massive deflation) (price fixes) • Called special session & introduced 15 pieces legislation & received back 15 laws –NEW DEAL

8. Fireside Chats • FDR will use the radio to address the people • Explain his programs so people can understand • In conversational tone he told the people what he & Congress were doing & what he needed from them • Used talks to encourage & persuade (cheerleader –n- chief) • Very unlike Hoover who cut himself off & didn’t communicate w/ public

9. BANK HOLIDAY begin here friday • (Banks in 48 States were either closed or heavily restricted on how much one could withdrawl) (5,000 banks failed & 10,000 in crisis mode) Day after FDR sworn in, Proclaimed all banks closed for 4 days - Treasury Dept. would determine which ones could be saved - using loans from the Federal Govt • On fifth day - EMERGENCY BANKING RELIEF ACT = only re-opened sound banks (had to have permit from Treasury dept. to reopen ) • Glass Steagall Act = created FDIC(Federal Deposit Insurance Corporation) no worries about losing $ in banks now/ insured accounts in banks / banks have rules now that they must adhere to $250,000 Relief, Recovery or Reform???

10. CIVILIAN CONSERVATION CORPS • During this era Fed becomes largest employer • Provided work for unemployed age 18-25 (3 month job) • Went off to work in camp like setting w/ military regiment (free food & living expenses) • Worked in U.S. National Parks planting trees, conservation projects, irrigation projects & constructing buildings (Smoky Mt. National Forest example) • Paid $30 month & required to send $22 to family so $ put in circulation why? • (men in camp didn’t need $) (important!!!!) which R’s • Relief & Recovery

11. Agriculture Adjustment Act • Farmers told to plow crops under in exchange for $ & slaugter their pigs etc. (what???) • Very controversial People starving in cities while destruction of crops in rural areas • Supply down, prices up (then farmers have $ to spend in economy) • Increased crop prices & farmers incomerelief,recovery or reform??? • RELIEF How? & RECOVERY How? • Will get ruled unconstitutional! FDR will pass 2nd AAA

12. Works Progress Administration -9 million put to work (artists, writers, researchers)painted murals, write state guidebooks & interview people for history books (skilled jobs)(WPA) Relief, Recovery or Reform • National Recovery Administration set standards for wages (minimum wage laws)(solving what cause of Great Depression?) • limit hours to 8 a day or overtime (limit production so what happens to prices & WHY? • prices go up - supply & Down) & conditions for workers Improve Relief, Recovery or Reform? • Laissez faire or not? Role of Fed Govt changing?

13. End of Gold Standard – Took country off gold standard so to put more $ in circulation/ made it illegal to hoard gold or export it. • (Fort Knox built to house U.S. supply of gold) • If $ supply isn’t set to pieces of Gold then FED can pump $ in & pull $ out aggressively as necessary= • 1. sell & buy bonds, • 2. raise & lower reserve rate? • 3. raise & lower interests rates. • Monetary Policy v. Fiscal Policy?

14. Social Security Act • 1. Unemployment Compensation (safe guards) • (6 months to bridge gap between finding another job (26 weeks today) (stabilization mechanism?) (prevents domino effect) • 2. Old Age Insurance (age 65) (take elderly out of job market so more jobs free up) –labor supplyside adjustment • 3. Relief to blind, homeless, & crippled (disability) • Relief, Recovery or Reform?? • Benefits paid for w/ payroll taxes (You pay your whole working life into system – SS# issued to all citizens) • (show FDR 28:53 part 6)