Season 3: U.S. History

US History Ep. 14: The New Deal or, “Saving Mr. Banks!”

Last episode people danced while the economy crumbled. Today, we need to figure out what happened next. How do you bring an entire country out of total financial collapse and unemployment? No, really. I’m asking for us right now.

Well, if you’re a Democrat you would say, “The government needs to spend a ton of money investing in social services and programs to get people back to work and to regulate the banking industry!” And if you feel that way, then boy are you going to love this episode.

Today’s Episode is all about the New Deal or, “Saving Mr. Banks!” I’m Emily Glankler; settle in and let’s go back in time. 

Act 1: Hoover Tried

Before we just hop over to FDR, as many people want to do, we need to talk about Herbert Hoover for a minute. His name became synonymous with the government’s failure to react to the depression. Slums were nicknamed “Hoovervilles.” There’s a whole song about him being awful in Annie. But, I do want to redeem Hoover… slightly.

For one, I would like to show you that Hoover tried. He really did try to do some things that were pretty groundbreaking to stop the economic decline. In hindsight, those things were just not nearly enough.

But second, it’s important that we understand that up until this point the federal government was almost entirely hands off from the economy, especially when it came to peoples’ personal finances or job status. Like, the federal government had just amended the Constitution to allow for an income tax, which before had been seen as too much of an overreach. Not to mention that Hardin’s “Return to Normalcy” returned us to the Gilded Age, often obscuring what little economic regulations the progressives had been able to put in play. 

The Great Depression Hits

So with that context, let’s see what happened. The most damaging part of the economic decline was the failure of the banks. By 1932 1 out of every 4 banks had permanently closed and just one year later ¼ of the workforce was unemployed. And even before the stock market collapsed, the United States was already a country of haves and have-nots. In 1929, ⅔ of all families earned less than $2,500 a year while just 5% of the households in the country earned 30% of the nation’s income. I feel like I can hear Bernie screaming through this entire episode.

Unemployment on top of pre-existing poverty led to collapse. Breadlines and soup kitchens opened up, people were evicted and set up in shantytowns called Hoovervilles. So-called “hoboes” became a fixture of most cities, hitching rides on trains to find work. I should say that not every American in the 1930s instantly became poor. But everyone’s standard of living dropped significantly. Even if you had money left to buy things, stores were closed. And middle-class families who hadn’t had to worry too much about money on a daily basis suddenly had to tighten their belts and live according to the new normal.

 A lot of immigrants also left the United States, although a lot of these were… how should i say this?… involuntary.The federal government ramped up its deportation efforts and instituted “repatriation drives” to try to convince new immigrants to return to their country of origin. In the southwest, people who looked Mexican were rounded up and sent across the border, regardless of their citizenship status. During “Mexican Repatriation” between 500,000 to 2 million people were deported and it’s estimated that up to ½ of those people were American citizens. 

As always, farmers had it the worst during this time period. In addition to manmade disasters, the Great Plains were experiencing natural disasters on a regular basis. After decades of homesteading and converting land carefully maintained by indigenous groups for centuries, plus a decade of unusually high temperatures and low rainfall in the 1920s, the topsoil eroded into layers of dust. Throughout the 1930s, the Great Plains had on average 50 dust storms each year. 

The American Entertainment Industry

Through all of this, the American entertainment industry rolled up its sleeves and thought, “I know how to help! We’ll make movies!” But seriously, Americans desperately wanted to escape the reality of the 1930s and so, as counterintuitive as it seems, the movie industry boomed throughout the 1930s as 60 million people went to the movies each week. In 1937, the first feature-length animated film was debuted by Disney: Snow White and the Seven Dwarfs. In 1939, both The Wizard of Oz and Gone With the Wind premiered, with Hattie McDaniel becoming the first African American to win the Academy Award. 

The radio business also boomed with many shows like The Guiding Light sponsored by laundry soaps. Get it, “soap operas?” Authors didn’t have to look too far to find tragedy. John Steinbeck made an entire career writing about dusty landscapes and people trying to get buy. 

Visual Art

Photographers became important documentarians, bringing the full nature of the Great Depression into the homes of those less affected. In 1936 Time Magazine introduced a new weekly photojournalism magazine called Life and photographers like Dorothea Lange and Margaret Bourke-White, armed with new 35mm cameras, traveled around the country collecting images of migrant shelters and poor farmers.

Fine art also reflected the times. The Regionalist School of art rose, emphasizing and glorifying traditional American values with a focus on the rural Midwest. Most famously, Grant Wood’s American Gothic became an instant classic in 1930. Many people now see the painting as satire, poking fun at uptight midwesterners, but Wood intended for his painting to be a reassurance and a spotlight on hardworking farmers trying to get by.

Hoover Rises in the Republican Party

OK. So things were bad. What did Hoover do? Well, Hoover did a lot, if you were to ask Republicans during his presidency. Hoover was a poster child for 1920s Republicanism. From the midwest – Iowa – he was the first president to be born west of the Mississippi River. He was part of the first graduating class from Stanford and he took up a lucrative job as a mining engineer. He was incredible smart, hardworking, and respected, eventually becoming a multimillionaire. 

During World War I, he used his time and resources to organize food and supplies to be delivered to Europe. When the US entered the war, Wilson appropriately appointed him to head up the Food Administration, where he encouraged Americans to conserve food wherever they could so that meals could be shipped over to Europe. He received thousands of letters from people across Europe thanking him for the free meals that became known as “Hoover lunches.” Aw. I’m so sad that’s the Hoover nickname that didn’t stick.

He served Harding and Coolidge as Secretary of Commerce throughout the 1920s and while the decade saw the economy go mostly unregulated, Hoover took an active role in promoting new industries. He helped get the new radio broadcasting and civilian aviation industries off the ground (get it? Because planes.) And he laid the groundwork for a massive dam on the Colorado River in the Southwest. It would be completed in 1936 and named the Hoover Dam. Damn, this guy gets a lot of stuff named after him. 

And then, in a “No! Don’t go in the basement!” kind of way, Hoover was elected president in 1928. At his inauguration he said, “We are nearer to the final triumph over poverty than ever before in the history of any land.” So I guess we can blame Hoover. He jinxed an entire nation. 

President Herbert Hoover

When the Great Depression hit, Hoover was in a bind. His entire philosophy was based on the idea of “rugged individualism.” He was a capitalist who believed that the best thing for the economy was for the government to stay out of it and let individual Americans get to work. Even with this background, he recognized that times called for extreme measures.

For one, he pushed Congress to lower tariffs to encourage overseas trade but Congress ignored him and passed the highest tariff in American history – the Hawley-Smoot Tariff. Obviously, other countries were offended and passed their own high tariffs and global trade basically came to a halt. Cool, great work guys.

Hoover did a lot, especially relative to the previous president’s role in the economy. He organized conferences to get heads of banks and other industries in the room with labor leaders and government officials. He increased funding for public works. He asked the Federal Reserve to put more money into circulation so that banks could loan money to businesses but the Fed refused. He went ahead and created the Reconstruction Finance Corporation that lent $238 million to businesses. He signed the Emergency Relief and Construction Act that gave $1.5 billion to public works and $300 million in emergency loans to states for direct relief. This was the first time in American history that the federal government just gave money to citizens, but all of this was still not enough to jumpstart the economy.

As we so often do, Americans blamed the president for all of their problems and other political parties capitalized. The Democrats did well in the 1930 midterms and the American Communist Party had a moment to shine, organizing hunger marches on Washington with 1,200 people chanting “feed the hungry, tax the rich.”

The Bonus Army

But the most famous protest of this era came from the historically-untouchable group in American history: veterans. So after WWI, Congress promised each veteran a $1,000 bonus in 1945. The thinking was this was right around when many of them would retire so it was kind of like a pension. When the Depression hit, veterans were like, “You know what? I think I’ll take that money now.” In 1932 over 1,000 veterans showed up in the capital wearing ragged military uniforms. They named themselves the Bonus Army and they set up camps in DC. Eventually 15,000 people joined the movement but Congress vetoed the bonus bill and Hoover refused to meet with the protesters. 

In July, Hoover ordered the shantytowns to be cleared. Police were ill-equipped to handle the crowd and they ended up firing at the crowd, killing 2 war veterans. Hoover debated whether or not to send in troops, but his Army Chief of Staff thought, “Eh, I got this.” He sent in cavalry, infantry, and tanks to clear the camps. Again, this is the US military sending in troops against… unarmed military veterans. 700 soldiers teargassed the crowds and burned their shacks. Who was that Army Chief of Staff, you ask? Oh none other than eternally infuriating General Douglas MacArthur. That’s the first in a long line of moments when MacArthur will ignore orders and say, “Eh, I got this.”

OK. All of this is to say that by the 1932 election Hoover was… unpopular. Republicans were swept out of power across the nation and in Washington, the Granddaddy of all Democrats entered the Oval Office. 

Act 2: The First New Deal

OK wait. Before I even talk about FDR,  allow me to wax poetic about my favorite historical figure… ever. 

A Close-Up of My School Yearbook Photo, 2019-2020

An Ode to Eleanor Roosevelt:

Eleanor, the First Lady of my Heart

You were walked down the aisle by Teddy Roosevelt

To meet your husband, whose career you saved

The husband who had an ongoing affair with your social secretary

When you learned of his unfaithfulness did you weep or run away?

No. You used it as leverage to carve out an equal place for you in the relationship.

You became Franklin’s voice on the campaign trail and you had his ear

You reminded him to include women and minorities in his New Deal programs

You only gave interviews to female reporters, prompting every major newspaper in the country to immediately hire women

You learned to fly a plane with your friend, Amelia Earhart

Who needs men? Not you. You a had a loving friendship – and most likely a romantic one – with your friend and journalist Lorena Hickok

During the war, you built a garden at the White House to show families how to help the war effort – something that wouldn’t be replicated until another First Lady (a kindred spirit named Michelle) would use it to convince Americans that vegetables weren’t disgusting

 And did you retreat from the public when your husband died and you were no longer First Lady? Of course not.

You were appointed the first US Ambassador to the United Nations

You wrote the freakin’ UN Declaration of Human Rights

You became the Mother of the Democratic Party for decades – any candidate who wanted to rise to the national stage had to earn your approval

You took on, and beat, the literal mafia when they intimidated your son out of running for governor

At the end of your life, you were still working for equality

You chaired JFK’s Presidential Commission on the Status of Women and drafted what would become the Equal Pay Act, although you didn’t live to see it signed into law

You were criticized for your appearance and your power but you never let that change  your path

You are still the most influential First Lady in history and a true American icon

I love you Eleanor, but now I’m told I have to go talk about your husband for some reason

FDR

Franklin Delano Roosevelt entered the White House at 50 years old and he wouldn’t leave it until he died 13 years later. He had risen up through the ranks of New York politics until he became Assistant Secretary of the Navy under Wilson, a position also held by his distant cousin Teddy Roosevelt. (Hey Teddy!) But that wasn’t the only connection to TR; he married his niece, Eleanor Roosevelt. So Eleanor didn’t even have to change her last name, that was nice of him.

In 1921, FDR contracted polio and had to retreat from politics. He all but disappeared from the public eye except for the work done by his wife Eleanor to keep him in everyone’s minds throughout the 1920s. In 1928, as Hoover was getting elected president, FDR became the Governor of New York. Four years later, he won in a landslide promising “a new deal for the American people.” 

President Franklin Delano Roosevelt

When he became president, most of the banks across the country were closed and 1 in 4 workers were unemployed. In his inaugural speech he famously told the crowd, “The only thing we have to fear is fear itself.” 

Now if Hoover tried, then FDR really tried. He didn’t enter the White House with a clear agenda or ideology but he told his Cabinet members, “Above all, try something.” The New Deal is kind of like the government just throwing money and acronyms at a wall and seeing which ones stick. 

FDR was faced with a few options, and he intentionally surrounded himself with advisers who disagreed with each other in the hopes of finding a decent compromise. Should the government continue what Hoove had been doing – work with businesses to try to regulate wages and production like they might in war time? Or were businesses the problem and they should be broken up and regulated? Or should the government just take over and run parts of the economy itself? That wasn’t off the table considering democratic socialism was on the rise in Europe at the same time.

FDR took it step by step but he took those steps at a run. Instead of attending inaugural balls, he called his advisers in to start writing legislation the day he moved into the White House. In his first Hundred Days in office, Congress passed 15 major acts of legislation. That’s insane. And these acts became known as the First New Deal.

Now, I could go into detail about all the agencies and administrations and recovery organizations created under the New Deal. But I don’t want to. So I’m going to take you through some of the highlights, especially parts of the New Deal that still impact our world today.

Fixing the Banks

His first challenge was to save the banks – most of them across the country had declared a banking holiday to prevent another run that would take the last of their reserves out. Within his first week as president, he passed a law that would allow federal examiners to survey all the banks in the country and allow those deemed financially sound to open. He explained all of this on the radio in his famous fireside chats. You should go listen to them, they’re up on YouTube. But FDR was incredibly effective at communicating to the public. He spoke plainly and openly about what the government was doing and why. And it worked. When the banks reopened the next week, people lined up to put their money back into the banks.

After this band aid, he went on to pass the Securities Act, which created the SEC to regulate the stock market and the Glass-Steagall Banking Act, which separated commercial banking (the everyday banking you and I do) with riskier investment banking. This also created the FDIC to insure bank deposits and increase confidence in the banking system. 

This on its own was a massive increase of federal power. Up until this point, all bank regulation had been left up to states and the stock market had been essentially unregulated. But as FDR put it, “This is why we can’t have nice things.”

Keeping People in their Homes and on their Farms

After getting the banks stabilized, he wanted to focus on individuals who were struggling. He created an organization to buy up peoples’ mortgages who were late on payments, restructure their loans and lower their interest rates. The Farm Credit Administration gave farmers money to refinance their mortgages at lower rates. All of this is brand new. The idea that the federal government would step in and directly help individuals pay their mortgage was unheard of. 

But FDR went further. In the Agricultural Adjustment Act, the government paid farmers to not produce certain livestock or crops. Let me say that again: over 2 years the government gave farmers over $1 billion to not farm. It helped get supply down which was good in the long term, but it also meant prices went up which made people… you know… not happy. The Supreme Court eventually struck down the AAA as an overreach of federal power.

Getting People Back to Work

Finally, the last step of the First New Deal was to get people working. He created a ton of organizations all with different acronyms but the gist was that the federal government hired young men to build infrastructure and complete other public works projects that the government made up for them. It’s like if you’re a parent and you make up a random chore for your kid to do so you can give them an allowance. But with the entire nation. 

The most famous of these was the CCC or, Civilian Conservation Corps. Men worked for 6-12 months planting trees, building reservoirs, and generally improving the environment, especially in the Midwest that had been ravaged by dust storms. Of the $30 they made each month, $25 of that was sent directly home to their families. While they were working, they were given food and shelter and taught to read and write. Ironically, over 80,000 Native Americans were employed by the CCC, helping a bunch of white dudes try to undo all the damage that had been done since it was taken from them. Other agencies built parks, playgrounds, airports, and roads – anything the government could justify as necessary infrastructure to pay people to work. One program alone spent $1 billion in five months. 

Reactions to the First New Deal

So… did it work? Sort of. The goal of the First New Deal was to stop further decline and it definitely did that. But most of the government jobs were temporary and even though the government created 2 million jobs, there were still 10 million unemployed. But what the First New Deal inspired hope and restored faith in the nation. People calmed down and at least felt like there might be a light at the end of the tunnel.

And, as always happens with politics, almost everyone found something wrong with it. Ironically, left wing Democrats felt like it hadn’t gone far enough. They wanted more direct redistribution of wealth and power from the rich to the middle class and poor. FDR was faced with some primary challengers who campaigned on ideas like nationalizing the entire banking system or just directly paying citizens over 60 a pension. Although none of them had a real chance, some of the policies mobilized new voting blocs for the Democrats – especially retirees – for the first time.

On the other side, Conservatives felt like this was way too far and put too much regulation on businesses that would now never be able to build themselves back up. And they were concerned about FDR’s deficit spending – meaning, he abandoned the idea that we needed a balanced budget and just borrowed money to pay for programs we needed right then. 

And in some cases the Supreme Court agreed that FDR had overstepped. In 1935, a few of his agencies were struck down as unconstitutional and FDR became afraid that his whole New Deal might fall apart. He needed to keep moving fast to get as much legislation passed before he lost his momentum and his support, and even the 1936 election.

Act 3: The Second New Deal

In 1935, FDR demanded that Congress come in over the summer and told them they could not go home until they passed his new bills. The Second New Deal went beyond just trying to stop the decline of the Depression, but it looked into the future to try to build a stronger economy and social safety net to prevent collapses like this one in the future. 

The Works Progress Administration was the largest public works program of the New Deal, spending $11 billion to build 650,000 miles of road, 125,000 public buildings, 853 airports, 124,000 bridges, and 8,000 parks. Look up the WPA sites in your city – I guarantee there are a few. My favorite part of the WPA though is Federal Project Number One. Despite it’s less than creative name, it was a government program to finance artists, musicians, writers, and actors to create. They were paid by the federal government to write plays and paint murals and set up orchestras. This is an amazing moment where the government is recognizing the power of art to lift people up in critical times. 

Even more amazing, is the effort within this project to send people across the country to record the stories of people who had been enslaved. Recognizing that the last generation of African Americans who had been born in bondage were quickly dying off, the government funded the Slave Narrative Project which went on to collect more than 2,300 first person accounts from previously enslaved Americans. 

A few other groundbreaking acts included the Wagner Act, which guaranteed workers the right to unionize and bargain  collectively. It also established the National  Labor  Relations Board to oversee factory elections, investigate employers accused of unfair practices, and arbitrate disputes. This led to a burst of union activity, empowered by this show of support from the government, and union membership tripled in the 1930s from 3 to 9 million.

The most famous, and long-lasting, action taking as part of  the New Deal was the Social Security Act. This was a precedent-breaking piece of legislation that created  the first “entitlement” program in American history. Basically, it’s not welfare or relief, but a payment  that all Americans  are entitled to – guaranteed by the government – because they pay into it during their working years. Now, today we understand the issues with Social Security – mainly that the government eventually starting taking money out of the fund to pay for other programs and Boomers are straining the system because so many are retiring at the same time. But that shouldn’t dilute the historical significance of the act. Whatever your current thoughts on Social Security are, this was one of the most expansive and impactful pieces of legislation of the 20th century.

Was FDR a (Democratic) Socialist?

And at this point, I would like to let you in on an ongoing conversation between me and my dad about FDR. My dad is a wonderful man who sarcastically identifies himself as a “capitalist pig” but is, in fact, an intelligent, moderate conservative who  just enjoys saying things that make his daughter roll her eyes. He’s very good at it. And we have had more than one conversation about FDR that goes  something like this.

Rick: “FDR was a socialist.”

Emily: “No, FDR saved us from socialism.”

Rick: “Are you crazy? If it weren’t for World War Two he would have spent all that money building a socialist country modeled on Europe and we would have sunk into even more debt.”

Emily: “Well, World War Two did happen. But the legislation he enacted satisfied most of those who might have otherwise pushed the country further to the left because they were desperate during the Depression. He basically cherry picked some parts of the socialist agenda and put them into our  capitalist system to appease both sides.”

Rick: “And then no one was happy.”

Emily: “Right, but no one overthrew the government, either.”

Anyway, both sides are right to some extent. Pick whichever one makes more sense to you. Either way, FDR is the most important Democratic president… ever? Yeah, I think I’m comfortable making that statement. In the same way that Harding and Hoover set the Republican Party on its path toward laissez-faire economic policy and “rugged individualism,” FDR set up a Democratic coalition that would steer its party toward the progressive liberalism we see today. 

The New Deal Coalition

Essentially, almost everyone in the country liked and benefited from some aspect of FDR’s New Deal. Except rich white guys. Their businesses became more regulated and they had to pay more taxes and provide more benefits for their workers. So they became the heart of the Republican Party. But really, everyone else had some good reason to vote Democrat.

Working class white people benefited immensely from the New Deal. Workers, including immigrants, in the cities got more power through labor unions while farmers got support that brought them out of debt. Progressives were happy about the social safety nets that were built, including the Fair Labor Standards Act  that finally abolished child labor (all those kids were taking jobs away from unemployed adults) and established a minimum wage and 44-hour work week. Intellectuals appreciated the philosophical shift to Keynesian economics and the support for the arts and education. African Americans were included in most of these New Deal support systems  and so this is the moment we see many black people finally abandoning the Republican “Party of Lincoln” to vote Democrat. It’s important to note that, in terms of ideology, the 19th century Republican Party was more like the 20th century Democratic Party and vice versa. But it’s so confusing let’s not worry about it right now.

The End of the New Deal

The beginning of the end of the New Deal came in 1936 when, after winning in a landslide reelection, FDR tried to use his power to intimidate the Supreme Court. They had just struck down the Agricultural  Adjustment Act that paid farmers not to farm and they were eyeing two of his landmark acts: the Wagner Act, protecting labor unions, and the Social Security Act. 

FDR introduced a bill in Congress: Hey guys, the Supreme Court is pretty old, right? They really should retire when they turn 70 – none of this “lifetime appointment” stuff anymore. OK what about this – for every Supreme  Court justice who stays on after they turn  70, the president gets to appoint an additional justice to the Supreme Court. That sounds fair right? Well, you know what, you’re right.  That would mean that I would immediately get to appoint 6 new justices to the Supreme Court. Weird, I hadn’t even thought of that.

Anyway, this Court Packing Plan did not go over well. It was clear that FDR was getting a little bit power hungry and the public responded by handing over a lot of seats to Republicans in the 1938 midterms to check his power. But, in some ways FDR’s intimidate worked – they upheld the Wagner and Social Security Acts and most of his New Deal remained intact.

And it’s at this point that I would like to make a slightly controversial observation.

We won’t talk about it in depth until next episode, but the 1930s were the decade of rising totalitarian governments. Stalin was grabbing control and using the Communist Party to reorganize the entire Soviet economy. And a guy named Hitler was working his way through the democratic process to gain more and more political power to advance his agenda. It seems crazy to think about this now, but at the time there must have been those in the United States looking at FDR and wondering… Is he doing the same thing? The Democratic Party was so dominant in the first half of the 1930s that they, effectively, could do whatever they wanted. And FDR was 100% taking more power for the executive branch than any president had ever done before him. Sure, he was doing it for the good of the nation but that’s exactly what Hitler was saying at the same time as he gained power by rebuilding the German economy after its collapse. This fear will be made even worse when FDR breaks with tradition and runs for a third term in 1940… and then a fourth term in 1944… 

Anyway, in hindsight we know that he was not becoming a dictator in the way others were around the globe, but it was a reasonable fear that many had – especially conservatives – at the time. 

Legacy of the New Deal

OK. So what is the legacy of the New Deal? Why is the New Deal such a Big Deal? 

FDR changed the relationship between the American people and the federal government. For the first time in history, people began to look to the federal government to potentially solve daily problems they were facing, whether that was their housing situation, their job, or their bank account. And the federal government began to intervene in the economy, and regulate industry, significantly more than they ever had before. 

In a lot of ways, one throughline of American history is the rise of the federal government, specifically the increasing power of the president. Remember that the Articles of Confederation didn’t even have a president and it gave the federal government  essentially no power. George Washington saw his role as mostly symbolic and the Founding Fathers in general believed the  executive would be the weakest branch. Andrew Jackson expanded presidential power, but mostly by just straight-up ignoring the Constitution. But  in times of extreme crisis, like with Lincoln during the Civil War or now FDR in the Great Depression, the president became an important leader who took drastic measures to solve the crisis. And we live in a country based on the legal idea of precedent – once something has been established once as legal or constitutional, it is assumed to be acceptable in the future. 

So our modern relationship with the government  was really founded during the 1930s. And it would continue to expand – for now, most Americans still see the federal government’s realm as specifically economic issues, but later on during another decade of crisis – the 1960s – its role will expand  even more. 

Love him or not, FDR was the most prolific president in history. Because, of course, the New Deal was just the domestic side of his  presidency. And, in fact, the New Deal wasn’t really the thing that got us out of the Depression. It stopped the bleeding and set up measures to prevent something like it from happening again. But what really pulled us out of the 1930s and shot us into the spotlight as the most powerful economy in the world was World War Two. That’s right, FDR’s not satisfied with just drastically reorganizing almost every aspect of socioeconomic policy at home… he also wants to save the world. 

Now that I’m saying it out loud, he may have had a slight God complex…

To be continued.

https://www.history.com/topics/us-presidents/herbert-hoove

https://www.artic.edu/artworks/6565/american-gothicr