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His 122 new deal america 1929 1939
- 2. HISTORICAL CONTEXT Republican Resurgence & Decline
- 3. Harding and the Ohio Gang
- 4. Andrew Mellon andTrickle Down Economics
- 5. Mellon’sTreasury Policies ■ Mellon: Secretary of theTreasury (1920-1932-Harding, Coolege and Hoover administrations; 3rd richest man in U.S.) – 1920’s Reduced government spending – Lowered taxes (from 65% before 1921 to 20% in 1926 – Repealed the wartime excess profits tax – Revenue Act of 1926 ■ Lowered estate taxes ■ Repealed the gift tax
- 6. Harding-Mellon Domestic Policies ■ HighTarriffs on imported goods – Fordney-McCumberTariff of 1922 increased rates on chemical and metal products to prevent revival ofGerman chemical and steel industries – Increased tariffs on imported agricultural products ■ Regulatory reform – Appointed industry insiders to regulatory agencies to ensure regulatory policies friendly to business ■ Lax Regulation and excess investment speculation by the rich and banking institutions led to the financial collapse that resulted in the Great Depression ■ Anti-lynching bill – Defeated in Senate
- 7. Supply Side Economics ■ MacroeconomicTheory: Economic growth most effectively created by lowering barriers for people to produce (supply) goods and services. – Policy: lower taxes and less regulation ■ Theory: a state of general equilibrium exists in the economy: because the needs of consumers are always greater than the capacity of the producers to satisfy those needs, everything that is produced will eventually be consumed once the appropriate price is found for it. ■ individuals produce so that they can either consume what they have manufactured or sell their output so that they can buy someone else's output.
- 8. Keynesian Economics ■ a greater awareness of structural inadequacies: – unemployment, is not a result of moral deficiencies like laziness, but from imbalances in demand or whether the economy was expanding or contracting. – because there was no guarantee that the goods that individuals produce would be met with demand, unemployment was a natural consequence especially in the instance of an economy undergoing contraction. – government spending can be used to increase aggregate demand, thus increasing economic activity, reducing unemployment and deflation.
- 9. Isolationism in Foreign Affairs ■ War Debts and Reparations – Repayment of war loans from U.S. to allies were contingent on reparations from Germany to the allies. – Germany could not afford the reparations. – U.S. began making loans to Germany to pay reparations to the allies – Paradoxical Foreign & Domestic Policies ■ Payment of war debt from allies ■ Allies can’t pay war debt by selling goods to U.S. because of high tariff on imports
- 10. Isolationism in Foreign Affairs ■ The World Court – 15 international judges to arbitrate disputes between nations – U.S. refused to join the World Court ■ Improving Relations in Latin America – Reversal of Wilsonian diplomacy ■ Recognized the government in power, regardless of how it got there
- 11. The Harding Scandals ■ Administrative Corruption – Tea Pot Dome scandal ■ Government owned oil deposit administered by the Interior Department ■ Secretary of the Interior Albert Fall let private companies exploit the oil in exchange for bribes – Harding died in office August 2, 1923 ■ “Silent Cal” – Calvin Coolidge ■ Presidency should return to post-imperialistic ways introduced by Teddy Roosevelt, “speak softly & carry a big stick.”
- 12. The Coolidge Conservatism ■ Pro-Business Conservatism – Coolidge, “The chief business of the American people is business.” Businesses =best entities to regulate business ■ The Election of 1924 – Calvin Coolidge (R) vs. John W. Davis (D) and Robert La Follett (P)
- 14. The New Era ■ Stabilizing the Economy – Herbert Hoover led the Commerce Department, the most active agency in the Federal Government. – Encouraged trade associations to stabilize the market by promoting voluntary cooperation in sharing information and promote standardization and efficiency ■ The Business of Farming – Agriculture- weakest section of economy in 1920’s – Wartime boom: 1914-1920 sales of agricultural products abroad. – Speculation in farmland and increased debt to acquire new land
- 15. Farming Bubble Bursts ■ 1920: Commodity prices collapsed as European agriculture returned to pre-war levels ■ Overproduction=lower crop prices ■ 18 months: – wheat $2.50/bushel to less than $1/bushel – Cotton $0.35/pound to $0.13/pound – 1926 bumper cotton crop caused collapse of prices (South tasted Great Depression) – Paradox of efficiency, technology and crop prices ■ McNary-Haugen bill – “equality for agriculture in benefits of protective tariff” – Surplus American crops to be sold on world market – passed twice in Congress—vetoed twice by Coolidge
- 16. Charles McNary (R, Oregon ) Gilbert Haugen (R, Iowa)
- 17. Hoover, Coolidge and Moral Hazard ■ Hoover opposed McNary Haugen Bill it in favor of Hoover Plan – Efficiency, electricity, diversity, production reduction and cooperative associations – Keep tariff on imports high ■ Basis for Opposition to McNary-Haugen Bill – Big business leaders opposed it – Involved government regulation in business of farming – Cause farmers to become dependent on government regulation and destroyed self reliance
- 18. The New Era ■ Setbacks for Unions – Unions weakened by Red Scare – In 1929 membership dropped by 1.5 million – The American Plan – “Yellow Dog” contracts – “Welfare Capitalism” profit sharing, bonuses, pensions, health programs
- 19. Coolidge decides not to run in 1928 ■ Summer 1927: while vacationing in the Black Hills of South Dakota,Calvin Coolidge announced, “I do not choose to run for President in 1928. If I take another term I will be in the White House until 1933…10 years inWashington is longer than any man has had it—too long!”
- 20. Republican Convention of 1928 ■ Coolidge chose not to endorse a candidate. – Regarding Hoover: “For six years that man has given me unsolicited advice—all of it bad” – Nomination of Dawes asVice President would be “a personal affront” ■ Herbert Hoover won the nomination for Republicans
- 21. Election of 1928 Herbert C. Hoover (R) 444 21,391,381 Alfred E. Smith (D) 87 15,016,443
- 22. Hoover Acceptance Speech ■ We in America today are nearer to the final triumph over poverty than ever before in the history of this land...We shall soon with the help of God be in sight of the day when poverty will be banished from this land.”
- 23. October 29, 1929
- 30. Smoot –HawleyTariff ■ Passed in 1930 ■ Authored by Republican protectionist advocates in Congress, Representatives,WillisC. Hawley and Reed Owen Smoot – Initially intended to protect farmers by reducing farm imports from overseas – Corporate lobbyists convinced Congress to add hundreds of items – Hawley-SmootTariff actually raised prices on most raw materials and consumer products – Other countries retaliated against goods from the U.S. causing exports to plummet – Depression deepened
- 31. Smoot and Hawley in 1929
- 32. Smoot- Hawley Tariff • May 1930: 1,200 economists signed a petition against the tariff • Henry Ford went to theWhite House to beg Hoover to veto the tariff • J.P. Morgan CEO “I almost went down on my knees to beg Hoover to veto the ‘asinine’ tariff.” • Tariff taxed 3,200 products at a rate of 60% U.S. Imports decreased 66% from 4.4 billion in 1929 to 1.9 billion in 1933. Steep reduction in imports had a negative effect on banks already weakened by the stock market crash.
- 33. Structural Problems with the Stock Market ■ Speculation in stocks had replaced speculation in real estate prior to 1929 ■ Buying stock “On Margin” ■ Banks and Brokers – Margin calls and stock value – Domino effect on banks when stock speculators could not pay margin calls
- 34. Structural Flaws in Broader Economy ■ High prices, low wages and mounting consumer debt ■ Mellon’s financial policies did not trickle down to consumers ■ 1/3 of personal income was held by the top 5% of the population ■ Profits invested in business expansion and speculation while wages did not rise ■ Consumer spending declined ■ Investment in new factories and businesses plummeted ■ Small businesses and consumers increased borrowing ■ Result was weakened businesses, weakened consumers and weak banks
- 35. Gold Standard ■ Value of paper currency tagged to size of national gold reserves – Money supply shrinks or falls depending on amount of gold in a national treasury – When economic output, prices and savings began to fall in 1929, Hoover administration and Mellon tightened the money supply – Mellon, “purge the rottenness out of the system” ■ From 1929 to 1933, 40% of American banks disappeared and millions of Americans lost their entire savings (FDIC did not yet exist). ■ Defaults and bank failures fed deflation ■ Nation’s money supply shrank by 1/3 ■ 1936 U.S. along with 36 other nations abandoned the gold standard – Money supply expanded, leading to economic growth
- 36. President Hoover, the Engineer ■ The Human Toll of the Depression – By 1933, 13 million people were out of work – People with jobs worked fewer hours – Soup Kitchens run by local charities depended on donations ■ Hoover’s Efforts at Recovery – Too little too late – Government funds for construction projects to local governments who had no tax revenue – Local and state agencies cut back on employees
- 37. Global Concerns ■ Japan Invades China – 1931 explosion destroyed a section of railway in Manchuria – Japanese investors demanded recourse by Japanese government – Japan invaded Manchuria to protect its investment ■ Japanese invasion rendered the post WWI treaties moot. – Neither the League of Nations nor the United States responded to China’s please for assistance. – Japan withdrew from the League of Nations in response to a resolution condemning Japan’s invasion. ■ Stresses and Strains at home mean Japan’s invasion of Manchuria is not an issue for American people.
- 40. Presidential Election of 1932 Roosevelt/ Garner (D) E.C. 472, PopularVote: 22,818,740 57.4; 57.4 Hoover/Curtis (R) E.C. 59, PopularVote : 1 15,760,425 39.6; % 39.6
- 42. Questions ■ What is the biggest issue to conquer? ■ How does Roosevelt describe “fear” ■ Why would “fear” be a topic of a Presidential inaugural address? ■ What does the President suggest America needs? ■ Who or what does the President blame for the depression? ■ What action does he urge Americans to take?
- 43. The Galloping Snail, Detroit News, March, 1933
- 44. New Deal America ■ Relief Measures – Hoover opposed any direct federal assistance to individual Americans in need. – Roosevelt bypassed states to directly aid individual Americans. ■ Civilian Conservation Corps: jobs for unmarried men 18-25 ■ Plant trees, construction projects ■ Work = pay; directed by army officers; semi-military discipline ■ Like Hoover, he hoped to avoid creating a generation on the “dole”
- 46. Regulatory Efforts ■ Agricultural Assistance – Agricultural Adjustment Act of 1933 ■ Sought to raise prices by paying farmers and ranchers to reduce production ■ Reviving Industrial Growth – National Industrial Recovery Act ■ Public Works Administration built buildings, roads and flood control systems, greatly improving infrastructure ■ National Recovery Administration: standardize wages and prices
- 49. Regulatory Efforts ■ Regional Planning – Tennessee Valley Authority ■ Electrical power and jobs ■ Dams/cheap electricity/electric power lines to rural homesteads
- 51. The Dust Bowl
- 54. Causes of the Dust Bowl ■ Irresponsible use of technology – Technological advances in farm equipment sold to farmers to increase acreage and yield – Between 1925 and 1930 more than 5 million acres of previously unused farmland was plowed ■ Failure to recognize the natural ecology of the land – Tall prairie grasses necessary to combat erosion – As grasses were destroyed to make way for wheat fields, natural balance of the land was also destroyed – Wheat and cleared fields enabled erosion of topsoil as drought increased ■ War & Market failures – Wheat was overproduced by American farmers to make up for underproduction in Europe – As wheat prices plummeted during the early years of the Great Depression farmers planted more wheat hoping that quantity would compensate for low prices ■ Climate Change – Increased temperatures – Drought – Dust Storms increased from 14 in 1932 to 40 in 1933
- 56. Minorities and the New Deal – African Americans – FDR’s New Deal did not address longstanding patterns of racism and segregation in the South ■ FDR feared that to do so would alienate Southern Democratic congressmen – Agricultural Adjustment Act ■ African American tenant farmers hurt when AAA required farmland to go fallow because white landowners targeted farmland leased by African Americans to be plowed under first. – FHA refused to guarantee mortgages purchased by African Americans in white neighborhoods – Mexican immigrants & Hispanic Americans ■ CA, NM, CO, TX, AZ and many Midwestern states ■ Hispanic people required to prove citizenship and denied New Deal benefits when they could not do so ■ Hispanics deported: 500,000 Mexican parents and American-born children deported by 1935 (Texas: 250,000) – Native Americans ■ Indian Reorganization Act – Permitted Native American tribes to revise constitutions – Restored some land lost in the Dawes Act – Women could vote and hold office
- 57. Court Cases and Civil Rights Laws ■ Grovey v.Townsend (1935) upheld theTexas Democrats white primaries ■ “Scottsboro Boys” trials (1931 – 1937) – Last defendant left Alabama in 1943 – “Let justice be done, though the heavens may fall." – Effective assistance of counsel – Questions of “white” only juries – Who should be tried as an adult – Right to a speedy trial – Questioning victims of rape
- 59. Culture in the Thirties ■ Literature and the Depression – The Grapes of Wrath ■ Popular Culture – Mass communication ■ Roosevelt’s fireside chats ■ Newsreels – Movies ■ Westerns ■ Shirley Temple ■ Marx Brothers ■ Musicals
- 60. The Second New Deal ■ Supreme Court Opposition – Many New Deal programs ruled unconstitutional – “Nine Old Men” – “Packing” the Court ■ The Second New Deal (1935–1936) – Works Progress Administration replaced Federal Emergency Relief Administration – Wagner Act (Fair Labor Standards Act) – Social Security
- 61. WagnerAct ■ Prohibited employers from interfering with union activities ■ Workers permitted to bargain through Union chosen by workers ■ Required a minimum wage
- 62. Social SecurityAct of 1935 ■ Stipend paid to aged, disabled, widows ■ Payroll tax on employees and a matching payroll tax on employers
- 63. RevenueAct of 1935 ■ WealthTax – Raised income taxes on persons making more than $50,000 ($50,000 in today’s dollars would be $847, 457.63 – Progressive tax could tax up to 75% of income of $5,000,000. ($84,745,762.71 today). ■ “Soak the Rich” tax – Rich people were against it ■ InflationCalculator http://inflationdata.com/Inflation/Inflation_Calculators/Inflatio n_Rate_Calculator.asp
- 64. 1936 Election FDR (D) E.C. 523 PopularVote : 27,752,648 (60.8%) Alfred Landon (R) E.C. 8 PopularVote: 16,681,862 (36.5%)
- 65. Roosevelt’s Second Term ■ A New Direction for Unions – Union membership soared ■ A Slumping Economy – To slow economic growth and minimize inflation FDR cut government spending on social programs – Stock Market slumped – 4 million workers laid off
- 66. Grumbling Among Southern Democrats ■ FDR had courted African American voters to help win election of 1936 ■ Southern Democrats opposed any attempts to reform segregation or encourage social equality ■ Southern Democrats stayed home in the midterm elections of 1938 and Republicans took control of the House of Representatives ■ Dissatisfaction among Southern Democrats would erupt during Lyndon B. Johnson’s administration with the Equal Employment Act and theVoting Rights Act ■ Richard Nixon would use the “Southern Strategy” of luring Southern Democrats to the Republican party in his successful election campaigns in 1968 and 1972
Editor's Notes
- Following the conclusion to the Great War, most Americans desired to return to their isolationist days before the war. The Red Scare, the return to a high tariff rate, and immigration restriction were all examples of these desires. Although the United States would never join the League of Nations, it was not long before it sent unofficial observers to the League to combine forces to fight international crime. War loans to the Allies were contingent on reparations from the Germans. When the Great Depression struck, Germany began to get loans from the United States to pay its debts. After a one-year moratorium negotiated by Hoover, the Allies would default on their loans and Congress would forbid further loans to any government that had already defaulted on its debts to the United States.
- The isolationist strain was quite evident in the U.S .Senate’s refusal to join the World Court, which was composed of fifteen international judges that were charged to arbitrate disputes between nations. Following the Great War, the Harding administration turned its attention to improving relations with Latin America and the Caribbean nations. Hoover would reverse a policy of Wilson and would recognize any government, regardless of the manner in which it came to power. Franklin Roosevelt would remove the marines from Nicaragua and Haiti and ended any claim that the United States had to Cuba.
- The major issue of Harding’s administration was the Tea Pot Dome scandal. The Tea Pot Dome was a government-owned oil deposit that was administered by the Interior Department. Secretary of the interior Albert Fall let private companies exploit the oil there, and soon afterward was discovered to have taken bribes in return for allowing the companies to have their way. Harding would die in office before too many of these scandals erupted. Harding would be succeeded by his vice-president, Calvin Coolidge. He believed that the presidency should return to the post-imperialistic ways introduced by Roosevelt.
- Coolidge believed that businesses were the best entity to regulate businesses. Coolidge would distance himself from the corruption of the Harding administration and in 1924 was nominated for his own term by the Republican party. The Democrats would nominate Robert La Follette. Coolidge won.
- The efficiency craze, already discussed in earlier chapters, led to the transformation of the Commerce Department into the most active agency in the government. Led by Herbert Hoover, it encouraged economic growth and the creation of more trade associations to stabilize the markets. Farmers were still the weakest sector of the economy. Elevated by the wartime boom, the farmers bought on credit to plant and harvest more. When the boom ended, they found themselves with too much land and too much debt. As a result, farms were foreclosed on and bankruptcies were rampant. Congress would try to help them, but by the time legislation was passed, it was vetoed by Coolidge, who considered the concept unconstitutional.
- Unions had been weakened by the Red Scare and the strikes of 1919. A brief depression in 1921 further added to this weakness, and membership dropped by 1.5 million in 1929, to 3.5 million. Anti-union sentiment was strongest in the South. During the war, demands for military clothing created a boom for the textile-based South. After the war, the lack of military need as well as changing fashion for women caused a dramatic decline in the need for southern products. A prolonged walkout at the Loray Mill in Gastonia, North Carolina, escalated into conflict and involved two deaths.
- By 1933, 13 million people were no longer employed, and those who still had jobs found themselves working fewer hours. Soup kitchens would be created to feed the hungry, and local welfare agencies would run our of charity and funds. Thousands of unemployed men would hop trains in search of jobs. Known as hobos, they would continue on the rails until they found employment. Hoover would try to restore American confidence in the economy by accelerating the start of government-funded construction projects to employ more people. However, as these projects expanded, local and state government agencies continued to cut back.
- When an explosion in 1931 destroyed a section of railway in Manchuria, Japanese investors demanded recourse. Japan used this as cause to enter into this northern province of China. The entrance of its army rendered the Nine Power Treaty, the Kellogg-Briand Pact, and pledges before the League of Nations all moot. China would request assistance from the League as well as the United States. Neither would respond. When the League condemned its actions, Japan withdrew from the agreements. Citizens in the United States were not overly concerned with the crisis in the Pacific; they were more concerned with their own affairs and the dwindling economy at home.
- Japan and China Japan’s seizure of Manchuria in 1931 prompted this American condemnation.
- Opposite to Hoover, who had opposed any direct federal assistance to the needy, FDR would bypass the states to directly aid those in need. The Civilian Conservation Corps was created to provide jobs for unmarried males aged eighteen to twenty-five. They would plant trees and do assorted construction projects. When plans to provide money to the states through the Federal Emergency Relief Administration failed, FDR bypassed them. Thus the alphabet agencies of the New Deal were formed. By paying people once they completed jobs instead of the unemployed, FDR hoped to prevent a generation of idlers on the government dole.
- Federal relief programs Civilian Conservation Corps enrollees in 1933, on a break from work. Directed by army officers and foresters, the CCC adhered to a semi-military discipline.
- The Agriculture Adjustment Act of 1933 sought to raise the prices of crops and herds by paying farmers to reduce their production. After World War I, when government subsidies to plant more were discontinued, the farmers found themselves in debt with a surplus of crops. The overproduction of land and then the rapid decline in prices forced many farmers to neglect their fields. Coupled with a vast drought in the Central Plains of the United States, this led to the dust bowl, in which thousands to pounds of topsoil was gathered by winds and swept as far away as Washington, D.C. It would not be until the Soil Conservation and Domestic Allotment Act was added that attempts to contain the dust bowl were initiated. The National Industrial Recovery Act (NIRA) dealt with economic recovery and public works projects. The Public Works Administration, created by the NIRA, built buildings, roads, flood control systems, and other improvements to the internal infrastructure. Another part of the act, the National Recovery Administration, worked to stabilize businesses by regulating wages and prices and establishing workplace standards.
- “The Spirit of the New Deal” In this cartoon, employer and employee agree to cooperate in the spirit of unity that inspired the National Recovery Administration.
- Norris Dam The massive dam in Tennessee, completed in 1936, was essential to the TVA’s effort to expand power production.
- The Tennessee Valley Authority brought electrical power and jobs to the interior of the United States. It would build dams capable of generating cheap electricity and would provide electrical lines to rural homesteads.
- What was the Tennessee Valley Authority? Why did Congress create it? How did it transform the Tennessee Valley?
- Dust storm approaching, 1930s When a dust storm blew in, it brought utter darkness, as well as the sand and grit that soon covered every surface, both indoors and out.
- FDR’s New Deal failed to address longstanding patterns of racism and segregation in the South. He feared that to do so would alienate his southern supporters in Congress and the New Deal would crumble. The requirement of the Agricultural Adjustment Act to plow under lands affected African American tenant farmers the worst, as their lands were the first that farmers would allow to go fallow. During the turbulence in Mexico of the 1910s, thousands of Hispanics had immigrated north and were now denied access to government programs because of their lack of citizenship. Many states deported the illegal immigrants. During the New Deal, African Americans gained legal victories in the Supreme Court concerning their civil rights. Although they would not be all-encompassing, they would set the foundation for future legislation in the 1950s and 1960s.
- As much as the populism of the Gilded Age and the rampant consumerism of the Roaring Twenties affected the writers of their eras, so did the hardships of the thirties. John Steinbeck’s masterpiece, The Grapes of Wrath, illustrated the journey of displaced Oklahomans fleeing the dust bowl. By the time of the Great Depression, over 10 million families had a radio, which came to be the focus for family gatherings and news dissemination. FDR used this to his advantage in his fireside chats, in which he regularly broadcast his ideas for the New Deal to garner popular support for the programs. By the late 1920s, silent movies gave way to those with sound, and many made during this time avoided the harshness of people’s lives.
- Many of FDR’s New Deal programs found themselves outside constitutional authority, and some, like the National Industrial Recovery Act, were killed for this violation by the Supreme Court. FDR would find the greatest problem to fulfilling his plans to end the Great Depression in an unexpected area, the judicial branch of the federal government. FDR’s Second New Deal would address labor and unemployment issues. A new agency created under Harry Hopkins, the Works Progress Administration (WPA), replaced the Federal Emergency Relief Administration (FERA), which had concentrated on improving the nation’s infrastructure.
- The NIRA’s requirement that every worker had the right to join a union was quickly picked up by unions and translated by opportunistic union leaders as “the president wants you to join a union.” As a result, union membership during the New Deal exploded. After almost ten years of depression and almost four years of the New Deal, the economy began to show signs of recovery. To control inflation, FDR ordered cuts in government spending to wean the American people off federal pay. However, the opposite from what FDR intended to happen occurred when the stock market entered a slump and 4 million more people found themselves unemployed.