With unemployment the highest it had ever been in the nation's history, the most pressing problem facing Roosevelt when he took office was to get people back to work. His first request to Congress was for the Unemployment Relief Act, which created the Civilian Conservation Corps (CCC). Over the course of its existence, the CCC employed some three million young men on conservation projects such as flood control, draining swamps, and planting trees. The CCC did more than just provide jobs—it kept many young men off the streets and gave them hope and dignity. CCC employees were not only able to earn money for themselves, but part of their pay was sent to their parents, so the benefit was spread to their families and ultimately to the economy. CCC workers were given uniforms, housed in barracks, and fed regular meals. Critics complained about the militarization of America's youth, but many CCC workers would have gone without the basic necessities of food, shelter, and clothing without this program.
To assist families and adult unemployed workers, Congress passed the Federal Emergency Relief Act (FERA), which gave $3 billion to states to be used as welfare and to supplement work projects. Harry L. Hopkins, a New York social worker, was put in charge of the agency. Roosevelt also ordered the Civil Works Administration (CWA) as a sub-agency of FERA. The CWA provided strictly temporary jobs, many of them inconsequential in nature, in order to help people through the winter of 1933 to 1934. While the CCC and FERA had both relief and recovery aims, the CWA was designed solely for relief.
Farmers and homeowners were also in desperate need of assistance. The Agricultural Adjustment Act (AAA) and the Home Owners' Loan Corporation (HOLC) provided millions of dollars in mortgage assistance so families could keep their homes and farms. Secondarily, mortgage-holding banks were saved from huge losses and in some cases even collapse with mortgage holders once again being able to make their payments. As with the CCC and FERA, these mortgage assistance agencies were for both immediate relief and longer-term recovery.
In addition, the Agricultural Adjustment Administration was created to maintain farm income. The agency's strategy was to reduce the supply in the market by paying farmers to decrease their acreage under production. The government also bought surpluses and destroyed them, to the chagrin of people who could not afford food. The scheme was to be paid for by taxes on food processors such as grain mills and slaughterhouses, who would pass on the increases to the public.
In Butler v. U.S. in 1935, the Supreme Court ruled the government's method of taxation unconstitutional and the AAA program was scrapped. In its place, the government created the Soil Conservation and Domestic Allotment Act of 1936 where the government paid farmers to allow some of their land to lie fallow or to plant part of their acreage in soil-conserving crops such as beans or buckwheat. In 1938, it followed up with the Second Agricultural Adjustment Act with the goal to support farm prices and restore farm income to be on a par with the incomes of other segments of society.
As if nature had joined in a conspiracy against the American economy, the 1930s witnessed a devastating drought in the region drained by the Mississippi River. Conditions were so dry that the especially hard-hit areas of eastern Colorado and western Texas, Oklahoma, Kansas, and Nebraska were called the Dust Bowl. Farming there became virtually impossible as the land turned to desert. Most of the region's farming population headed west in the great migration memorialized by John Steinbeck in his 1939 classic, Grapes of Wrath.
The Roosevelt administration endeavored to deal with in the problems caused by the Dust Bowl by sending to Congress the Frazier-Lemke Farm Bankruptcy Act of 1934, which mandated a suspension of mortgage foreclosures for five years. The Supreme Court struck down the Frazier-Lemke Act, but Congress passed an amended act that forestalled foreclosures for three years. In 1935, the government created the Resettlement Administration to assist Dust Bowl farmers with relocating to better land. Meanwhile, CCC workers planted 200 million seedling trees in the Dust Bowl region as windbreaks. The rains began to fall again by the 1940s, but after the 50-year experiment in farming this fragile area, much of it was returned to grazing because the tough prairie grasses hold the soil during the cyclical droughts that plague the region.
Along with banking and unemployment, the Roosevelt administration was committed to repealing prohibition. In practical terms, prohibiting alcohol had simply not been successful. Those who wanted a drink were seldom prevented from getting one. In fact, alcohol consumption had increased in the 1920s. From a sociological standpoint, prohibition was a disaster because the illicit market for alcohol was so lucrative that it fostered the growth of criminal organizations such as that of Al Capone in Chicago. When alcohol became legal, these organizations did not disappear but turned to making a profit in other criminal arenas, notably drugs and prostitution.
On March 22, 1933, just 18 days after Roosevelt took office, Congress legalized light (3.2% alcohol) beer and wine. This did more than end prohibition; it spurred employment in a domestic industry that had been suppressed for a decade. Even more important, perhaps, a tax of $5 was levied on each barrel of wine and beer, which provided needed revenue to the Treasury. Later in 1933, prohibition was abolished altogether with the Twenty-first Amendment.
Another institution in desperate need of reform was the stock market. Small margin requirements and insider trading had allowed swindlers to manipulate the market and make fortunes at the expense of investors. During the first hundred days of the emergency session, Congress passed the Truth in Securities Act that called for complete disclosure concerning a stock before it was sold. In 1934, Congress solidified its fair trading policy by creating the Securities and Exchange Commission (SEC). This agency set rules and regulations concerning trading that put all investors on a level playing field.
In 1935, Congress passed the Public Utility Holding Company Act to address the huge utility conglomerates that had swallowed up hundreds of local utility companies under the umbrella of a holding company that was held by a parent holding company, and so on. As an example of the dangers of this pyramiding, Samuel Insull's utility behemoth had failed in 1932 sending shocks throughout the business world and creating distress for the company's tens of thousands of customers. The Insull failure had an immediate response from the first emergency Congress. Roosevelt's New Deal cabinet and Congress wanted to counter the monopolistic utility companies, especially the electric power companies, with a model government program that could be used as a gauge for fair prices and practices. Senator George W. Norris of Nebraska was a particular champion of this idea.
The Tennessee River valley, which was badly eroded from incessant flooding and whose population had been especially hard hit by the depression, was the ideal location for a pilot project of impressive proportions. The president promoted and Congress passed the Tennessee Valley Authority (TVA) legislation that mandated the project. More than 20 dams on the river and its tributaries were constructed to prevent flooding and provide power to generate electricity for the entire region. Building this flood control and power generating system employed thousands of workers, which helped bring needed dollars to the local populace. Erosion was all but eliminated, and CCC workers restored much of the land to forest.
The TVA was a notable success, in spite of efforts by privately owned utility companies to discredit the achievement. Initiating similar large-scale projects on other river systems met with resistance, however, as conservatives and even moderate Democrats became concerned over the dangers of slipping into a socialistic, managed economy. But smaller projects and individual dams built to provide both water and power in the driest areas of the West proved great boons to those areas in the years to come.
Housing was another critical area addressed by the New Deal. In 1934, Roosevelt inaugurated the Federal Housing Administration (FHA) to make small loans to homeowners for home improvements or completing construction on a home. The project was extremely well received, and in 1937 Roosevelt supplemented it with the United States Housing Authority (USHA) aimed at sponsoring new home construction. Housing funds were allocated for over a half million low income families, but the initiative was obstructed by entrenched interests in real estate and construction who felt that government-sponsored, low-income housing would interfere with their livelihood. Enough housing was built to get many families out of the worst of the urban slums, however, and housing assistance through the FHA continues to this day.
A far-reaching program called the National Recovery Administration (NRA) attempted in 1933 to coordinate business and labor and to address unemployment both for the short and long term. The NRA called for self-restraint on the parts of both business and labor. Businesses were to abide by codes of fair competition. Minimum wages and maximum work hours were established for workers in order to employ a greater number of people. Labor was encouraged to use collective bargaining.
The National Recovery Administration program was expensive for industries, and workers who already had a job found their net pay reduced because they were restricted in the number of hours they could work. In addition, labor felt its bargaining impact blunted in not being able to threaten a strike. After a warm reception, the plan began to founder as each group felt it was being asked to sacrifice too much. The NRA's semi-voluntary nature made it easy for individuals to cheat on the rules when they felt unfairly burdened. Finally, in the Schechter case, the Supreme Court ruled that not only had Congress overstepped its bounds by delegating its legislative authority to the executive branch, but also that the federal government did not have jurisdiction for regulating local businesses that were not engaged in interstate activity.
A companion to the ill-fated NRA was the Public Works Administration (PWA) that was also aimed at unemployment relief and economic recovery. Headed by Secretary of the Interior Harold L. Ickes, the PWA pursued tens of thousands of public works projects, including the Grand Coulee Dam on the Columbia River, which provided water for irrigation and hydroelectric power for the region. The success of the PWA and later the Works Progress Administration (WPA) lay in the fact that government was much more successful as a contractor for work than as a mediator between business and labor, as it tried to be with the NRA.
The reforms of the New Deal placed a value on heritage as well as progress. Concerned that Indians under the Dawes Act, which had called for assimilation, were losing their native identity, the Roosevelt administration sponsored the Indian Reorganization Act of 1934, which provided for tribal self-government and the means to preserve native traditions. Of nearly 300 tribes, 200 participated in the reorganization. The remainder balked due to concerns that reviving Indian culture could lead to further marginalization of Native Americans in the predominantly white American culture.
In spite of pump priming, jobs programs, and outright welfare, unemployment was still high in 1935, and many people had exhausted every resource. The mood of the country was desperate. Roosevelt decided that all of the previous programs had not gone far enough to keep people employed, and he began another round of reforms sometimes called the Second New Deal. At his request, Congress created the Works Progress Administration (WPA) as a large-scale remedy. Harry Hopkins headed the WPA, which over time spent approximately $11 billion on public works projects, education, and the arts.
WPA workers constructed bridges, paved roads, and built public buildings. Many of the brick roads laid down by WPA workers are still in use today. Workers also assisted all levels of education as graders and teaching assistants. They wrote histories and produced art for government buildings. Wages were $.25 to $.35 an hour, but people who had been earning nothing were thrilled to get any sort of pay, and WPA jobs helped people keep their self-respect.
In an effort to help organized labor after the demise of the NRA, in 1935 Congress wrote the National Labor Relations Act, sometimes known as the Wagner Act, which created the National Labor Relations Board. This agency fostered the organization of unions and protected their right to bargain collectively.
Perhaps the most revolutionary New Deal reform for America was the Social Security Act of 1935. This law provided government-sponsored insurance for the unemployed, dependent children, retirees, and the handicapped. The plan was funded by mandated contributions from both workers and employers. Social Security payments were from $10 to $85 a month, but have regularly increased to keep pace with inflation. Originally the plan did not cover self-employed persons, though that provision soon changed.
Conservatives bitterly opposed Social Security as pernicious socialism that celebrated leisure and denigrated work. They also charged that the plan was a "ponzi scheme," an illegal form of investment where the incoming funds of people investing in the scheme are used to pay off those collecting their returns, but no principal is actually generating a dividend income. Mathematically, ponzi schemes always fail because at some point those who are receiving exceed in number those who are paying in.
Liberal theorists have maintained that if there should be shortfalls in the Social Security System, the federal government is large enough to absorb them. With the Baby Boom bulge in the population now approaching retirement, politicians and economists are scrambling to plan ways to keep Social Security afloat while shielding the working generation from a crushing tax burden. Time will tell how the story of Social Security plays out, but for the 70-some years of its existence it has provided necessary and humane retirement support for millions of Americans at a reasonable cost to those in the workforce.
Copyright 2006 The Regents of the University of California and Monterey Institute for Technology and Education