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The Second New Deal
Franklin Delano Roosevelt's First New Deal was followed by what historians tend to call the Second New Deal (1935-1937). Like the First New Deal, it had its own "Hundred Days," known as the Second Hundred Days. If Roosevelt's First New Deal (1933-1935) concentrated on relief, dealing with the immediate issue of getting unemployed Americans back to work, then the Second New Deal (1935-1937) concentrated on social reform issues. This Second New Deal came about partly because of the social concerns of the President and Mrs. Roosevelt, but also because of mounting criticisms of the policies of the First New Deal from the political left and the political right.
One of the most vocal of the conservative critics of the New Deal was Father Charles Coughlin, a Roman Catholic priest and political activist who had a weekly radio show. 'The Golden Hour of the Little Flower," broadcast from Detroit, had an estimated 40 million listeners. Father Coughlin's rhetoric was a unique combination of anti-communism, anti-capitalism, and anti-Semitism. At first, he supported the New Deal, calling it "Christ's Deal," but then he became disillusioned by the slow pace of reform as well as the fact that he had not been allowed to play the major role in the Roosevelt administration he thought he should have been offered. In addition, Coughlin condemned some of the tactics used under the AAA (Agricultural Adjustment Act) to limit overproduction. To Coughlin, plowing under crops or slaughtering livestock when people were starving was not only wasteful, it was criminal. (It is arguable that bringing up agricultural prices to the point that farmers could make a profit and thus stay in business was more essential at the time than temporarily feeding some people more than the meager rations available through charity. If farmers went bankrupt because of falling crop prices, there would be even less food available in future years.) Nevertheless, Coughlin launched the National Union for Social Justice to challenge the President, claiming that Roosevelt had "out-Hoovered Hoover."
The most powerful New Deal critic from the political left was Huey Long, a former governor of Louisiana and a U.S. senator from that state during the years of the first New Deal. Known as the "Kingfish," Long became the most powerful governor in Louisiana's history (and also one of the more corrupt). He used that power to expand his backward southern state's underdeveloped infrastructure, building hospitals, schools, highways, bridges, and a state university. Long's campaign slogan was "Every man a king, but no one wears a crown." Long's ideas on the redistribution of wealth were very popular among the lower and middle classes of Louisiana. At first, he supported the New Deal, but soon found it too conservative. Long noted, along with others, that big businesses often benefited more than average Americans from programs of the first New Deal. He felt that Roosevelt had become the handmaiden of big business. Long established the Share-Our-Wealth Society with the goal of taxing the rich in order to help the poor. He promised huge, confiscatory taxes on incomes over $1 million and inheritances over $5 million in order to provide poorer Americans with an array of benefits. These benefits included a $5,000 homestead credit allowance to all American families, a $2,000 guaranteed annual income for all Americans, a free college education for anyone who wanted one, limits on working hours, government purchase of surplus crops to help out the farmers and storage and distribution of those crops to help feed the poor.
Long's brand of politics, a sort of "Neo-Populism," found followers not only in Louisiana, but among rural, low income families across the country. By mid-1935, Long's Share-Our-Wealth Clubs had 7 million members; and the "Kingfish" was talking openly about challenging Roosevelt in the 1936 presidential race. In September of 1935, Senator Long returned to Louisiana to "supervise" a special session of the state legislature (i.e., to ensure that the state legislators did what he wanted them to and what they had been bribed and/or intimidated into doing) and was assassinated by the son-in-law of a ruined political opponent.
The New Deal had other critics as well. Governor Floyd Olson of Minnesota declared himself a socialist and sought a third party that would "preach the gospel of government and collective ownership of the means of production and distribution." Next door in Wisconsin, the Progressive legacy of "Fightin' Bob" La Follette lived on in his sons, U.S. Senator Robert La Follette, Jr., and Governor Philip La Follette. Norman Thomas, a perennial Socialist Party candidate for president, continued to speak out against many New Deal measures as "too little and too late." (Many measure that had been proposed by Thomas in pre-Depression campaigns were included in some form in programs of the First and Second New Deals, but years after Thomas would have tried to implement them. It was a source of consternation to Thomas to the end of his life that "Roosevelt had stolen [his] 1928 platform.")
Membership in the Communist Party of the United States reached an all-time high in 1935. Americans were leery of communists well before the Cold War because of the fear generated during the "Red Scare" and the Palmer Raids. Proclaiming that "Communism is 20th century Americanism," American Communists of the 1930s were careful to distance themselves from the revolutionary policies of Soviet Bolsheviks. They did not call for an overthrow of the government, but instead began to work in cooperation with labor unions and student groups. Believing that they had something to offer a frightened and disillusioned American people and that they might further their agenda by educating the people as Marx suggested, they set up Communist Party cells and Marxist study groups at many universities to attract students and professors to their cause.
Most of the above mentioned critics of the New Deal were ideologues, people committed to a particular political doctrine. Franklin D. Roosevelt was a pragmatist, not an ideologue. He summed up his style of political action when he stated, "Do something. And when you have done that something, if it works, do it some more. And if it does not work, then do something else." That "something" turned out to be the Second New Deal. Beginning in 1935, Roosevelt began sending to Congress a host of new legislative initiatives. This is often characterized as Roosevelt's shift to the left, although it was more of a nod than a shift. The major laws that came out of the Second New Deal were the creation of the Works Progress Administration (WPA), National Labor Relations (Wagner) Act, the Social Security Act, and the Wealth Tax Act.
WPA stood for Works Progress (later "Projects") Administration, which promoted both relief and reform. Required to choose projects that would not compete with private business, the WPA built streets, highways, bridges, airfields, and post offices and other pubic buildings and facilities, restored forests, developed parks and recreation areas, built reservoirs, and extended electrical power to rural areas. Over its seven year history, the WPA employed about 8.5 million Americans. In addition to developing America's infrastructure, the WPA worked to promote American culture. The Federal Theater, Arts, Music, Dance, and Writers' Projects brought music and drama to even the smallest communities, sponsored public sculptures and murals, and commissioned noted American writers such as John Steinbeck, Richard Wright, John Cheever, and Claude McKay to write regional guidebooks and histories of the American people. This marked the first time that the federal government took on the responsibility to support and promote American art and culture.
The Wagner Act, known officially as the National Labor Relations Act, preserved and strengthened Section 7A of the NIRA. It guaranteed workers the right to unionize and the right of collective bargaining with management. For the first time, it committed the government to enforce these rights and created the National Labor Relations Board to mediate and arbitrate disputes. This time, the government took seriously the responsibility to enforce the law, and under the law, employers could no longer resist unionization.
The Social Security Act was initially drafted by a group of social work professionals, most teaching at universities. This act created a cooperative federal-state system to provide unemployment compensation and old-age insurance. Workers who paid Social Security taxes out of their wages would receive retirement benefits upon retirement at age 65. These benefits would be paid for from employee and matching employer contributions, not government funds. Many types of people were not covered in the initial Social Security program, but it was a start. The Social Security Act also created programs to compensate unemployed and disabled workers, widows and orphans. Amended many times over the years to expand coverage and types of programs, the Social Security Act was a major step in redefining government's responsibility for the welfare of individuals. Since the Social Security Act did not obligate the government to actually keep contributions accruing in individual accounts, someone asked Roosevelt why the system had assigned a Social Security number to individuals. Roosevelt's answer was "To keep them from dismantling it later," something that would entail paying back everyone's contributions.
The Wealth Tax Act brought about a sudden increase in taxes on the wealthy and created new and larger taxes on excess business profits, inheritances, large gifts, and profits from the sale of property. It also put new restrictions on trusts and holding companies. This act, more than anything else, made it impossible for the wealthiest Americans to continue building and maintaining the sorts of mansions they had during the Gilded Age and caused many of them to be donated to various non-profit historical and educational organizations.
Business leaders were highly critical of this Second New Deal and many viewed Roosevelt as a traitor to his class and a socialist who was out to strip them of their wealth. One of Roosevelt's aides, noting the strength of the anti-Roosevelt attitude of American business leaders, quipped, "There's a vast bitterness welling up from the grass roots of every country club in America."
Although the United States Congress had a number of members far to the left of Roosevelt, because of his radio addresses and press coverage, Roosevelt himself was seen to personify a new anti-business era. Nonetheless, Roosevelt actually preserved capitalism through his relief and reform efforts. Roosevelt made no effort to nationalize industries, as some had suggested. The AAA, the NIRA, new banking regulations, the SEC (Securities and Exchange Commission) and regulations of securities on Wall Street all ultimately helped big business. Even the Wagner Act proved as much a benefit to business as to labor.
With big business leaders turning against him, the President had to look for support elsewhere if he was going to stay in office. For the presidential campaign of 1936, Roosevelt led the Democratic Party in building what came to be called the "Roosevelt Coalition," an unlikely set of political alliances which altered the shape of modern politics. While Republicans were still relying on their traditional support base (big business, big farmers, and conservatives), Democrats broadened their base of support, appealing to small farmers of the Midwest, urban political bosses, ethnic blue collar workers, Jews, intellectuals, African-Americans, and Southern Democrats. The most dramatic shift was seen in the voting patterns of African-Americans. Up until 1936, continuing the legacy of President Lincoln, most blacks had voted Republican. But in 1936, African-American allegiances shifted, permanently, to the Democratic Party.
The election of 1936 marked the greatest electoral shift in American history. In 1932, the Republican party had won 10 of the 12 largest U.S. cities. In 1936, the twelve largest cities voted overwhelmingly Democratic. Having won the 1936 presidential election by the biggest margin up to that time, Roosevelt and his advisors and administration thought that they had everything going their way. However, the volatile U. S. economy collapsed once again in 1937. It would not fully recover until employment and production were given an enormous push by the United States entry into World War II.
Why did this recession occur? One reason is that the whole idea of "deficit financing" by government was not yet accepted. Not only Roosevelt, but the American people were committed to the idea that the national government had to get back to living within its means. Because Roosevelt wanted a balanced federal budget as soon as possible, he began in January of 1937 to cut funding for some of his own New Deal programs. Funding for the WPA, for example, was halved. As a result, unemployment rose by 1.5 million by July of that year. With farm subsidies cut, farmers' incomes also fell. By August of 1937, an additional four million Americans were out of work. Roosevelt had abandoned his own advice about doing more of whatever is working and turned away from the new set of economic theories his advisors had used to help structure New Deal programs.
Roosevelt himself, who probably had only a very limited understanding of economics, brought about the Recession of 1937 because he turned away from the new Keynesian economic theories his advisors had followed in shaping the New Deal. John Maynard Keynes was a British economist who rejected classical economics and traditional theories of the free market. Keynes claimed that there was a direct correlation between government spending and the welfare of the private sector economy. In addition, Keynes advocated vast government spending--even deficit spending--in times of economic recession. Only when the economy had recovered, Keynes argued, should government spending be cut back. Roosevelt (and Congress, at his urging) had simply moved too soon to cut federal spending, with the result that they undid most of the good that New Deal programs were starting to do. Most Western economies today follow Keynesian economic principles; but in the 1930s, Roosevelt did not believe in deficit spending during economic downturns any more than Hoover and the Republicans did. It took World War II to prove the validity of Keynes' theories.
The New Deal was not a revolution, and it did not bring about radical change. It did not accomplish its intended goal, ending the Great Depression. It did, however, affect American culture social relationships, and the relationship between government and business. It is as a consequence of the New Deal that Americans tend to look to Washington rather than to their own local and state governments for solutions to serious social problems. For the first time, the American public came to expect that the federal government would actually "promote the general welfare" through the kinds of measures we have come to call "welfare legislation."
Another, more enduring legacy of the New Deal was the rise of the "corporate state." Prior to the New Deal, big business had nearly monopolized political power. Through the regulation of business activities, the New Deal created two new power players: big labor and big government. Business, government and labor were drawn more closely together by New Deal legislation and by U.S. involvement in World War II. Labor provided a steady workforce and the government promised predictability in the economy, rather than dramatic highs and lows. Under these terms, business made some concessions to labor and government.
While all of these domestic changes were going on, the United States found itself unwillingly drawn into world affairs. Recall that Roosevelt had defined himself as "Wilsonian," that is, an internationalist. The American public, however, was overwhelmingly (again) isolationist. Many movies, plays, and fiction of the 1930s that depicted the horrors of war. One example is Margaret Mitchell's Civil War-era novel Gone with the Wind, which won the Pulitzer Prize in 1936; the film version was released in 1939. Meanwhile, the Senate Investigation of the Munitions Industries in 1934-1936 had determined that U.S. involvement in World War I had been provoked by greedy industrialists and munitions manufacturers. That is, it concluded that the United States had, in effect, been "suckered" into joining the Allies by heeding accounts of the horrors Germany had inflicted on conquered people. This Senate report reinforced the popular idea that America should ignore European and Manchurian "propagandists" of the 1930s who were relating the atrocities of Hitler, Mussolini, and Hirohito. The major force behind the isolationists was a group called "America First" dominated by prominent businessmen, such as Henry Ford, celebrities, such as pilot Charles Lindbergh, and even some members of the government who spoke out against war.
Roosevelt's one significant foreign policy move prior to World War II was the recognition of the government of the Soviet Union. Until that point, the Soviet government had not been recognized as a legitimate state, which meant that we exchanged no diplomatic or consular representatives with it. Roosevelt appealed to American business interests by arguing, mistakenly, as it turned out, that diplomatic relations with the Soviet government would open up that country to trade. Only a relative handful of Americans, most prominently the industrialist Armand Hammer, did significant business with the Soviet Union from the time the United States extended diplomatic recognition until the collapse of the Soviet Union in the early 1990s.
While hostilities were increasing in Europe and the Far East, Congress passed three pieces of legislation, known collectively as the Neutrality Act, designed to keep the United States out of war. Congress was determined to avoid the "mistakes" which had drawn America into the First World War. The first of these, the Neutrality Act of 1935, prohibited shipment of American weapons to any nation at war. This act did not differentiate between nations defending themselves from attack and nations attacking others. It prohibited aiding both sides. The Second Neutrality Act of 1936 forbade American loans to any belligerent nation, again without distinguishing between aggressors and victims. The Third Neutrality Act of 1937 made the two previous laws a permanent part of American national policy and also forbade United States citizens to travel on ocean-going vessels of nations at war (which would prevent the effects of another incident like the sinking of the Lusitania, the British passenger ship with Americans aboard that was torpedoed by Germany before the U. S. entered World War I.) The third act did allow the President to draw up a list of non-military goods, such as grain, which the U.S. could sell to belligerent nations (that is, nations at war), but strictly on a "cash and carry" basis. Belligerent nations would have to pay up front, and would have to transport the goods on their own ships.
Publicly, Roosevelt stated and restated his promise not to get the United States involved in the European war. He said in the 1940 presidential campaign, "I hate war now more than ever. I have one supreme determination: to do all that I can to keep war away from these shores for all time." On another occasion during that campaign, Roosevelt said, "I have said this before, but I shall say it again and again and again. Your boys are not going to be sent to any foreign war." In private to his aides, Roosevelt admitted that U.S. involvement in the world war was inevitable. Already in 1938 and 1939, the United States had begun gearing up its industrial might and military power.
Of course, war became a reality for the U.S. after the attack on Pearl Harbor in 1941. After the U.S. declared war on Japan, Germany, recognizing its alliance with Japan, declared war on the U.S.; and isolationist America found itself fighting a war on two fronts. Ultimately, it was the purchasing power generated by war production that brought the Great Depression to an end.
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