The New Deal

Origins of the New Deal

At the 1932 speech Democratic Party’s national convention, Franklin D. Roosevelt declared, “I pledge you, I pledge myself, to a new deal for the American people.”

The New Deal created a broad range of federal government programs with three goals: offer economic relief to the suffering, regulate private industry, and grow the economy.

The New Deal is often summed up by the “Three Rs”:

  • relief for the unemployed)
  • recovery of the economy through federal spending and job creation
  • reform of capitalism, by means of regulatory legislation and the creation of new social welfare programs

The New Deal expanded the size and scope of the federal government, fundamentally reshaping American political culture around the principle that the government is responsible for the welfare of its citizens.

The First New Deal (1933-1934)

In the first hundred days of Roosevelt’s first term, Congress passed legislation addressing the banking crisis, unemployment, and weak industrial performance. The new laws and agencies were nicknamed “alphabet soup.” Some of the more important agencies included:

  • The Civilian Conservation Corps (CCC): employed young, single men at federally funded jobs on government lands
  • The Federal Deposit Insurance Corporation (FDIC): guaranteed individuals that money they deposited in a bank would be repaid to them by the federal government if the bank failed
  • The Securities and Exchange Commission (SEC): established federal government oversight and regulation of the stock market

The Second New Deal (1935-1938)

The second phase of the New Deal focused on increasing worker protections and building long-lasting financial security for Americans. Four of the most important pieces of legislation included:

  • The Works Progress Administration (WPA): employed millions of Americans in public works projects, from constructing bridges to painting murals
  • The Wagner Labor Relations Act: guaranteed workers the right to form unions and bargain collectively
  • The Social Security Act: established a fund that makes monthly payments to retirees and disabled individuals; required workers and employers to contribute to the Social Security trust fund through a payroll tax
  • The Fair Labor Standards Act: mandated a 40-hour work week (with time-and-a-half for overtime), set an hourly minimum wage, and restricted child labor

The legacy of the New Deal

The New Deal accepted federal deficit spending to stimulate economic growth. The theory was that government spending that put money in consumers’ hands would allow them to buy products. As employers sold more, they would have the money to hire additional workers, who could afford to buy more products, and so on.

The United States only fully recovered from the Great Depression due to massive military spending after the outbreak of World War II.

Key elements in the New Deal remain with us today, such as federal regulation of wages, hours, child labor, and collective bargaining rights, and the social security system.

Source: The New Deal
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