7.10 The New Deal

Roosevelt took office in March 1933, in the middle of a banking panic. He declared a bank holiday, and the Emergency Banking Act let sound banks reopen under federal inspection. In radio 'fireside chats' he explained his policies directly to Americans. In his first 'Hundred Days', Congress passed a flood of laws. The Banking Act of 1933 (Glass–Steagall) created the Federal Deposit Insurance Corporation (FDIC) to insure bank deposits, and bank runs largely stopped.

The Agricultural Adjustment Act paid farmers to grow less to raise crop prices. The National Recovery Administration let industries write codes setting prices and wages. The Supreme Court struck down the NRA in Schechter Poultry Corp. v. United States (1935) and the first AAA in United States v. Butler (1936).

In 1935 a 'Second New Deal' turned toward long-term security. The Social Security Act created old-age pensions, unemployment insurance and aid to dependent children. The Wagner Act (National Labor Relations Act) guaranteed workers' right to organize and bargain collectively, enforced by the National Labor Relations Board. Union membership soared, helped by the new Congress of Industrial Organizations (CIO), which organized whole industries like autos and steel, and by the 1936–1937 sit-down strike at General Motors in Flint, Michigan. The Fair Labor Standards Act (1938) set a minimum wage of 25 cents an hour, required overtime pay beyond a standard workweek that dropped to 40 hours by 1940, and banned most child labor.

• Too little: Louisiana senator Huey Long's 'Share Our Wealth' plan proposed taxing large fortunes to guarantee every family an income; he was assassinated in 1935. Radio priest Father Charles Coughlin attacked bankers, and Dr. Francis Townsend proposed generous pensions for the elderly. These pressures pushed FDR toward Social Security.
• Too much: conservatives and business groups like the American Liberty League called the New Deal socialist, wasteful and a threat to liberty. The Supreme Court struck down key programs.
• Court-packing: after winning a landslide in 1936, FDR proposed adding up to six justices. Even many supporters saw it as an attack on the separation of powers, and it failed. The Court then began upholding New Deal laws, starting with West Coast Hotel v. Parrish (1937).

Unemployment fell from about 25 percent in 1933 but stayed above 14 percent through the 1930s, and spending cuts helped cause a sharp recession in 1937–1938. World War II spending, not the New Deal, ended the Depression.

The New Deal's reach was uneven. Social Security at first left out farm workers and domestic servants, jobs held by many Black and Mexican American workers; historians debate how much this reflected pressure from Southern Democrats in Congress and how much it was about what was easy to run. Many programs paid less in the South or were run in segregated ways. Still, figures like Mary McLeod Bethune advised FDR, and Eleanor Roosevelt pushed for fairer treatment. The Indian Reorganization Act (1934) ended allotment and encouraged tribal self-government.

The New Deal coalition, made up of urban workers, union members, immigrants and their children, African Americans in the North (who largely shifted to the Democrats in 1936) and white Southerners, kept Democrats dominant for decades. Historians still debate whether the New Deal saved capitalism, transformed it, or did not go far enough.