The New Deal and Second New Deal

What was the New Deal?

The New Deal was the name given by Roosevelt to his plans for solving the Depression by providing the 'three Rs' - relief, recovery and reform.

What did Roosevelt mean by relief in the New Deal?

Roosevelt promised to provide relief in the form of federal money to directly help the unemployed or by providing them with short-term work.

What did Roosevelt mean by recovery in the New Deal?

Roosevelt promised that the New Deal would bring economic recovery, kickstarting the cycle of prosperity and raising incomes.

What did Roosevelt mean by reform in the New Deal?

Roosevelt promised the New Deal would reform, or change, the law so people had security in times of trouble and banks and businesses were safer.

What was 'pump-priming' under Roosevelt in the New Deal?

Pump-priming described Roosevelt's belief that government money could be used to break the cycle of depression.

• ❖ The federal government would provide money for schemes that employed people.
• ❖ People would be able to spend their wages on goods.
• ❖ This would stimulate demand.
• ❖ More demand would lead to greater production.
• ❖ Businesses would employ more people to produce more goods, leading to more money.

What happened in the First Hundred Days of the New Deal?

As soon as Roosevelt was inaugurated in March 1933, he pushed a number of important laws through Congress to expand the role of the federal government and set up the so-called 'alphabet agencies'. This three-month period of change became known as the First Hundred Days.

How did Roosevelt solve problems with the banks in the New Deal?

Since the Crash, people had stopped trusting the banks. One of Roosevelt's first actions was to restore confidence in the banks and encourage people to deposit their money in them again.

• ❖ Under the Emergency Banking Act on 9th March 1933, all banks were closed for a four-day bank holiday.
• ❖ Government inspectors checked the banks to make sure that they were run properly and money could be safely deposited.
• ❖ When the banks reopened, people knew they were safe institutions.
• ❖ Roosevelt passed a law to insure banks for $2,500 per customer. People now knew that they would get some money back if the bank failed.
• ❖ About 5% of banks were closed down as they were unsound, but confidence was restored in those that were left.

What did the New Deal do for the banks in the long-term?

The Banking Act of 1935 gave the government more power to control the banks.

Was the New Deal limited?

The New Deal was criticised by many and did have some clear limitations.

• ❖ It did not solve unemployment. There was always at least one in ten people unemployed throughout the 1930s.
• ❖ Women faced discrimination. Some of the National Recovery Administration (NRA) codes set wages for women lower than those for men.
• ❖ It continued to discriminate against African Americans. For example, some Civilian Conservation Corps (CCC) campsites were segregated.
• ❖ After his re-election in 1936, Roosevelt became concerned about the cost of job creation schemes like the TVA. He cut down the amount of spending but unemployment rose to 3 million.
• ❖ The Supreme Court limited the New Deal with cases such as Schechter Poultry v. United States which struck down the National Industrial Recovery Act.

What was the Second New Deal?

By 1935, under the New Deal, unemployment had fallen but remained high. In 1936 Roosevelt created a second New Deal to implement further reform. This mainly affected:

• ❖ Work.
• ❖ Housing.
• ❖ Labour relations.
• ❖ Farmers.
• ❖ Social security.
• ❖ Banks.
• ❖ Electrification.

Why did FDR set up the Second New Deal?

There were a number of reasons why FDR set up the Second New Deal in 1936.

• ❖ The Supreme Court had declared a number of alphabet agencies unconstitutional and shut them down. They needed to be replaced.
• ❖ The election of Congress in 1934 had led to more politicians who wanted further reform.
• ❖ Roosevelt won another election by promising more changes.

What were the aims of the Second New Deal?

The Second New Deal expanded on the aims of the first.

• ❖ More work relief for the unemployed.
• ❖ Improve workers' rights.
• ❖ Helping the rural poor settle on their own land.
• ❖ Provide for the old and vulnerable.

How did the Second New Deal provide work?

The Second New Deal gave more money to provide more relief work for the poor and unemployed.

• ❖ The Second New Deal set up the Works Progress Agency (WPA), which spent $11 billion on employing eight million American men and women from all ethnic and working backgrounds.
• ❖ The CCC and PWA received $4 billion to provide more relief work for the unemployed.

What did the Second New Deal do about housing?

The Second New Deal aimed to solve the problem of housing and Hoovervilles.

• ❖ The Resettlement Administration was set up to help the rural poor.
• ❖ The Housing Act set up an agency to build new suburban towns and homes to replace shanty towns.

How did the Second New Deal help workers?

The NRA was declared unconstitutional in 1935, so the Wagner Act was introduced in the Second New Deal to change the law around trade unions.

• ❖ Workers were legally entitled to join trade unions. Union membership had risen to nine million by 1940.
• ❖ One union could be chosen for all the workers in a workplace to join. This was called a closed shop.
• ❖ Businesses were no longer allowed to fire workers for joining a union or to set up their own company unions.
• ❖ A National Labour Relations Board (NLRB) was set up for the federal government to work with the unions.
• ❖ There were more strikes after the Wagner Act. Some of these became quite violent.

How did Second New Deal help farmers?

Agricultural workers were hit especially hard by the Depression. Many families travelled the country looking for work and living in terrible conditions. The Second New Deal aimed to help.

• ❖ The Farm Security Administration (FSA) offered loans for poor farmworkers and sharecroppers to buy their own land and set up camps for migrant farmworkers.
• ❖ The first Agricultural Adjustment Act had been declared unconstitutional, but the second set up quotas to control farm production, using heavy taxes on goods that were sold above the quota.

How did the New Deal help the vulnerable?

The Social Security Act was introduced in 1935 and offered support to vulnerable members of American society. It was part of the Second New Deal.

• ❖ Workers paid 1% of their income into a pension scheme, which was matched by tax payments from their employer.
• ❖ Unemployed workers could get 16 weeks of half-pay after losing their jobs. This came from a tax paid by businesses with more than eight employees.
• ❖ Federal funding also provided support for families with children, very poor old people and the disabled.

How did the New Deal increase the use of electricity?

From 1935, the scheme to bring electricity to remote and rural areas of the USA was extended. This was part of the Second New Deal.

• ❖ The Rural Electrification Administration (REA) took over electrification and gave loans to rural areas across the US.
• ❖ By 1941, 35% of farms had electricity.
• ❖ Some electricity companies tried to stop the REA by building 'spite lines' to prevent poor communities from obtaining permission to access electricity.