Franklin D. Roosevelt

A3

c

Reform Legislation

The laws that later generations tended to think of as the New Deal were mainly reform laws. Franklin Roosevelt had been a reformer, a believer in progress and in government-sponsored social and economic change, from the time he first took public office in 1911. The reform impulse in America had been frustrated since the 1918 election victories by conservative politicians, who believed that government should not be involved in social reform. Now that impulse was revived in the Great Depression by President Roosevelt, often under pressure from congressional liberals, who were concerned with the development of personal freedom and social progress, and from reform movements outside the government. Between 1933 and 1938, major legislation passed by Congress constituted the most sweeping reform program since the progressive period of 1901 to 1907. In general, these reforms increased the existing regulatory activities of the federal government. After Roosevelt’s administrations the government was involved in regulating many more areas of economic activity.

Banking and currency were in obvious need of attention, since the banking system had virtually collapsed by March 1933 and the drain of gold had placed a great strain on the dollar. Banking legislation passed in the first Roosevelt term created insurance for small savings depositors, separated commercial and investment banking, and greatly increased the authority of the Federal Reserve Board, the government agency that oversees banking activity. In order to protect the currency, Roosevelt secured authority from Congress to take the United States off the gold standard and to devalue the dollar. However, once he discovered that devaluing the dollar did not in itself help to bring about economic recovery, he was unenthusiastic about tinkering with the currency. Related to these reforms was the establishment of the Securities and Exchange Commission, an independent agency empowered to regulate the sale of stocks and bonds. The first chairman of the commission was Joseph P. Kennedy, an early Roosevelt supporter who was himself a wealthy speculator.

In the campaign of 1932 Roosevelt had strongly criticized the tariff, or import tax, policies of the Harding, Coolidge, and Hoover administrations, blaming the decline of world trade on those Republican presidents. He appointed Senator Cordell Hull of Tennessee as secretary of state. A fervent free trader, Hull felt that his main duty should be to eliminate trade barriers by lowering import tariffs. Some of the early New Dealers did not share Hull’s enthusiasm. For more than a year they were able to block his program, while Roosevelt concerned himself with purely domestic efforts. However, Hull stubbornly persisted in his course, eventually winning the president’s support and the passage of the Reciprocal Trade Agreements Act, one of the most ingenious of the New Deal measures. This act did not attempt to alter existing import taxes by law. Hull and others knew very well how difficult it was to achieve tariff reform this way. Instead, the act authorized the president to negotiate agreements with other nations for a mutual lowering of import taxes. Such agreements did not have to be ratified by the Senate, and they could cut existing tariffs by 50 percent. The most-favored-nation clause promised that the United States would offer the same tariff rates to all countries with which it had signed a commercial treaty. If the United States lowered tariffs further in a treaty with another nation, it would have to lower tariffs for all nations with most-favored-nation status. By this method benefits from these agreements were slowly extended uniformly to all nations with whom such agreements had been made. Although Hull did not secure free trade, he did significantly lower tariff barriers. At the same time, he provided a method for taking tariff making out of the hands of Congress.

The federal government also became involved with housing. In the depths of the depression many people lost their homes because they were unable to make payments on their housing loans, called mortgages. Lending institutions then seized these homes but were often unable to resell them or even rent them. Two of the most popular of the early New Deal agencies were the Home Owners’ Loan Corporation, which helped individuals by refinancing their home loans so that banks did not seize the homes, and the Federal Housing Administration, which helped banks by taking most of the risk out of home loans by insuring loans up to 80 percent of the value of the property. In his second term, President Roosevelt secured the passage of legislation that allowed him to set up the U.S. Housing Authority. This agency helped to rebuild slums and encouraged low-cost housing construction, of major importance because it was the first direct involvement of the federal government in building houses.

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One of the most sweeping and imaginative New Deal reforms was the Tennessee Valley Authority (TVA), an independent federal corporation set up to improve conditions in a depressed area of 103,600 sq km (40,000 sq mi) in seven states. Chiefly responsible for this scheme was Senator George W. Norris of Nebraska, a progressive Republican who had almost single-handedly blocked the sale of government-owned power sites on the Tennessee River during the 1920s and who was a firm believer in government ownership and operation of public utilities such as power and water companies. Roosevelt was a widely known advocate of publicly owned power, which he saw as a yardstick with which to measure the real costs of private power companies. He was greatly attracted to the TVA because of its possibilities for the conservation of natural and human resources.

The TVA built a series of dams for power production, flood control, and navigation improvement. It distributed its own water-generated, or hydroelectric, power to many who never before had enjoyed the benefits of electricity. The TVA also produced cheap fertilizers. As a result, the standard of living of the people in its area steadily improved. The TVA was seen as a direct threat to the country’s private-power companies, and it was not imitated elsewhere, although the Roosevelt administration did build dams and power plants in the West.

The most far-reaching of the New Deal reform measures was the Social Security Act of 1935. During the first two years of Roosevelt’s presidency a commission studied the problems caused by unemployment, old age, and physical disability and sought to determine the part that should be played by the federal government in alleviating these problems. Unemployment insurance, financed by a federal payroll tax paid in equal parts by employers and employees, was established as a joint federal-state program. An old-age pension system was set up to be administered by the federal government and financed by taxes on both employers and employees. Other provisions of the Social Security Act provided federal money to encourage the states to care for dependent children and the blind. The Social Security Act did not include health insurance because the commission and the president considered that its inclusion would jeopardize the passage of the act (see Social Security).

After the National Industrial Recovery Act was declared unconstitutional, Congress passed the National Labor Relations Act, which guaranteed to workers the right to organize and bargain collectively, free from interference by employers. The act set up the National Labor Relations Board as an independent agency. The board was a major force assisting the rapid growth of trade unions in the New Deal era. By statute it was required to be in favor of labor, and it played its role with enthusiasm. The Fair Labor Standards Act of 1938 was the last important act of the New Deal. This measure set a minimum wage and a limit to the hours worked. It was moderate in its provisions, gradual in its application, and limited in its scope, but it established an important precedent.

A

4

New Deal Politics

The New Deal programs were closely associated with the personality of President Roosevelt, about whom the politics of the 1930s revolved. His skill at clarifying problems and in explaining the solutions he and his associates had devised made him almost an intimate friend of the American people. For almost six years his popularity with the majority of the people grew. In 1934 the already huge Democratic majorities in Congress were increased, a rare thing for a party in power in non-presidential, or off-year, elections. In 1936 these majorities were raised even higher. The number of Republicans left in the House was less than 100; only 17 Republicans remained in the Senate, and about half of them supported the New Deal. Not until the off-year election of 1938 did the Republican Party show any signs of renewed vigor.

Roosevelt did have opponents during these years. During his first year in office his most vigorous enemies were on the political left. Leftists felt that he was missing a priceless opportunity to move toward socialism, or the direct involvement of government in the economy. From 1935 on, however, his principal opposition came from conservatives, especially the reviving business community. These elements had been so stunned by the depression and so grateful at first to Roosevelt for his efforts to promote recovery within the framework of the capitalist system that they scarcely opposed him. However, beginning in 1935, the economy began to recover and the labor movement, encouraged by New Deal legislation, began to be effective. In addition the Supreme Court began to declare New Deal legislation unconstitutional. These developments encouraged conservatives to oppose the administration.

A4

a

The 1936 Election

In 1936 Roosevelt won his greatest victory when he received more than 60 percent of the popular vote and won every state except Maine and Vermont. The Republican candidate, Governor Alfred M. Landon of Kansas, was a progressive himself and accepted much of the New Deal program while deploring how it was being administered. However, Landon was a dull campaigner. His advisers pushed him to the right during the campaign, and he ended with very little support. Careful students of politics saw in the 1936 election a considerable amount of voting by social or economic class, with workers and those who lived in the cities voting overwhelmingly for the Democratic Party.

A4

b

Decline in Popularity

Middle-class support for the New Deal began to slip away in 1937 and 1938, and the Democratic Party became more than ever the party of urban labor. Three major events seem to have contributed to this change. First was a series of sit-down strikes, in which the militant new unions of the Committee for Industrial Organization, later known as the Congress of Industrial Organizations (CIO), kept their men inside plants during strikes. This technique, used by the new unions in the automobile industry, violated property rights. Many middle-class Americans were antagonized by this, as they were by the labor war between the CIO and the more traditional American Federation of Labor (AFL).

The second event was Roosevelt’s so-called court-packing plan, a scheme to enlarge the Supreme Court that he suddenly presented to Congress in 1937. Roosevelt argued that the court was behind in its work, partly due to the advanced age of many members. However, it was clear that what really irritated him was a series of decisions that had declared much of his program unconstitutional. A group of Democratic senators, including several former New Deal supporters, deserted the administration on this issue, and the president suffered his first major defeat in Congress. However, the court reversed the trend of its decisions after the court plan, and most New Deal legislation was allowed to stand.

The third event was probably the most damaging of all. It was the so-called Roosevelt recession that began in the fall of 1937 with another stock market crash. The recession lasted until after the resumption of large-scale government spending the following spring. This recession had been preceded by more efficiency in government and a balanced budget, courses promoted by conservative secretary of the treasury, Henry Morgenthau, Jr. The effect of the Roosevelt recession was to convince many people that the administration did not have any magic formula for prosperity and that the earlier recovery had been based on the government spending more money than it collected.

A4

c

The 1940 Election

In the elections of 1938 the Republicans made a comeback in several key industrial states and substantially increased their congressional representation. It was freely predicted that the Republicans would regain the presidency in 1940. Many felt that Roosevelt would not run for president again, thanks to the tradition that no candidate ran for more than two terms. However, by the time the Democratic National Convention met in the summer of 1940, a grave international crisis was at its height, and Roosevelt was given his third nomination for president. Roosevelt defeated the Republican candidate, the lawyer and businessman Wendell L. Willkie, but he won by a much narrower margin than he had in 1936. Whether Roosevelt would have been renominated, and whether he would have accepted if nominated, in the absence of the world crisis will never be known. However, it is clear that his experience in foreign affairs had much to do with his winning an unprecedented third term.

B

Foreign Policy (1933-1941)

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