Franklin D. Roosevelt

During the Great Depression of the 1930s, Roosevelt created the New Deal to provide relief for the unemployed, recovery of the economy, and reform of the economic system. His most famous legacies include the Social Security system and the regulation of Wall Street. His aggressive use of an active federal government reenergized the Democratic party. Roosevelt built the New Deal coalition that dominated politics into the 1960s. He and his wife Eleanor Roosevelt remain touchstones for American liberalism. The conservatives fought back, but Roosevelt consistently prevailed until he tried to pack the Supreme Court in 1937, and the new Conservative coalition successfully ended New Deal expansion, and ended many programs like the WPA when the war started.

After 1938, Roosevelt championed re-armament and led the nation away from isolationism as the world headed into World War II. He provided extensive support to Winston Churchill and the British war effort before the attack on Pearl Harbor pulled the U.S. into the fighting. During the war, Roosevelt, working closely with his aide Harry Hopkins, provided decisive leadership against Nazi Germany and made the United States the principal arms supplier and financier of the Allies who defeated Germany, Italy and Japan. Roosevelt led the United States as it became the Arsenal of Democracy, putting 16 million American men into uniform.

On the homefront his term saw the end of unemployment, restoration of prosperity, significant new taxes and controls, 120,000 Japanese and Japanese Americans sent to relocation camps, and new opportunities opened for African Americans and women. As the Allies neared victory, Roosevelt played a critical role in shaping the post-war world, particularly through the Yalta Conference and the creation of the United Nations. Roosevelt died on the eve of victory in World War II and was succeeded by Vice President Harry S. Truman.

Roosevelt's administration redefined liberalism for subsequent generations and realigned the Democratic Party based his the New Deal coalition on labor, ethnic and racial minorities, the South, big city machines, and the poor.
 

First term, 1933-1937
See also: New Deal
When Roosevelt was inaugurated in March 1933, the U.S. was at the nadir of the worst depression in its history. A quarter of the workforce was unemployed. Farmers were in deep trouble as prices fell by 60%. Industrial production had fallen by more than half since 1929. In a country with limited government social services outside the cities, two million were homeless. The banking system had collapsed completely. Historians later categorized Roosevelt's program as "relief, recovery and reform." [9] Beginning with his inauguration address, he began blaming the economic downturn on businessmen, the quest for profit, and the self-interest basis of capitalism:

"Primarily this is because rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men. True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish. The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit."
Relief was urgently needed by tens of millions of unemployed. Recovery meant boosting the economy back to normal. Reform meant long-term fixes of what was wrong, especially with the financial and banking systems. Roosevelt's series of radio speeches, known as Fireside Chats, presented his proposals directly to the American public.


First New Deal, 1933-1934
Roosevelt's "First 100 Days" concentrated on the first part of his strategy: immediate relief. From March 9 to June 16, 1933, Franklin D. Roosevelt sent Congress a record number of bills, all of which passed easily. To propose programs, Roosevelt relied on leading Senators such as George Norris, Robert F. Wagner and Hugo Black, as well as his own Brain Trust of academic advisers. Like Hoover, he saw the Depression as partly a matter of confidence, caused in part by people no longer spending or investing because they were afraid to do so. He therefore set out to restore confidence through a series of dramatic gestures.

FDR's natural air of confidence and optimism did much to reassure the nation. His inauguration on March 4, 1933, occurred in the middle of a bank panic, hence the backdrop for his famous words: "The only thing we have to fear is fear itself." [10] The very next day he announced a plan to allow banks to reopen, which they largely did by the end of the month. This was his first proposed step to recovery.


Dorothea Lange's Migrant Mother depicts destitute pea pickers during the depression in California, centering on Florence Owens Thompson, a mother of seven children, age 32, March 1936.Relief measures included the continuation of Hoover's major relief program for the unemployed under the new name, Federal Emergency Relief Administration. The most popular of all New Deal agencies, and Roosevelt's favorite, was the Civilian Conservation Corps (CCC), which hired 250,000 unemployed young men to work on rural local projects. Congress also gave the Federal Trade Commission broad new regulatory powers and provided mortgage relief to millions of farmers and homeowners. Roosevelt expanded a Hoover agency, the Reconstruction Finance Corporation, making it a major source of financing to railroads and industry. Roosevelt made agriculture relief a high priority and set up the first Agricultural Adjustment Administration (AAA). The AAA tried to force higher prices for commodities by paying farmers to take land out of crops and to cut herds.
Reform of the economy was the goal of the National Industrial Recovery Act (NIRA) of 1933. It tried to end cutthroat competition by forcing industries to come up with codes that established the rules of operation for all firms within specific industries, such as minimum prices, agreements not to compete, and production restrictions. Industry leaders negotiated the codes which were then approval by NIRA officials. Industry needed to raise wages as a condition for approval. Provisions encouraged unions and suspended anti-trust laws. The NIRA was found to be unconstitutional by unanimous decision of the U.S. Supreme Court on May 27, 1935. Roosevelt opposed the decision, saying "The fundamental purposes and principles of the NIRA are sound. To abandon them is unthinkable. It would spell the return to industrial and labor chaos."[11] In 1933, major new banking regulations were passed. In 1934, the Securities and Exchange Commission was created to regulate Wall Street, with 1932 campaign fund raiser Joseph P. Kennedy in charge.
Recovery was pursued through "pump-priming" (that is, federal spending). The NIRA included $3.3 billion of spending through the Public Works Administration to stimulate the economy, which was to be handled by Interior Secretary Harold Ickes. Roosevelt worked with Republican Senator George Norris to create the largest government-owned industrial enterprise in American history, the Tennessee Valley Authority (TVA), which built dams and power stations, controlled floods, and modernized agriculture and home conditions in the poverty-stricken Tennessee Valley. The repeal of prohibition also brought in new tax revenues and helped him keep a major campaign promise.
Roosevelt tried to keep his campaign promise by cutting the regular federal budget, including 40% cuts to veterans' benefits and cuts in overall military spending. He removed 500,000 veterans and widows from the pension rolls and slashed benefits for the remainder. Protests erupted, led by the Veterans of Foreign Wars. Roosevelt held his ground, but when the angry veterans formed a coalition with Senator Huey Long and passed a huge bonus bill over his veto, he was defeated. He succeeded in cutting federal salaries and the military and naval budgets. He reduced spending on research and education—there was no New Deal for science until World War II began.


Second New Deal, 1935-1936

Dust storms were frequent during the depression; this one occurred in Texas in 1935.After the 1934 Congressional elections, which gave Roosevelt large majorities in both houses, there was a fresh surge of New Deal legislation. These measures included the Works Progress Administration (WPA) which set up a national relief agency that employed two million family heads. However, even at the height of WPA employment in 1938, unemployment was still 12.5% according to figures from Micheal Darby.[12]The Social Security Act, established Social Security and promised economic security for the elderly, the poor and the sick. Senator Robert Wagner wrote the Wagner Act, which officially became the National Labor Relations Act. The act established the federal rights of workers to organize unions, to engage in collective bargaining, and to take part in strikes.

While the First New Deal of 1933 had broad support from most sectors, the Second New Deal challenged the business community. Conservative Democrats, led by Al Smith, fought back with the American Liberty League, but it failed to mobilize much grass roots support. By contrast, the labor unions, energized by the Wagner Act, signed up millions of new members and became a major backer of Roosevelt's reelections in 1936, 1940 and 1944.


Economic environment
See also: Unemployment and the New Deal and Effects of the Great Depression

Government spending increased from 8.0% of gross national product (GNP) under Hoover in 1932 to 10.2% of the GNP in 1936. Because of the depression, the national debt as a percentage of the GNP had doubled under Hoover from 16% to 33.6% of the GNP in 1932. While Roosevelt balanced the "regular" budget, the emergency budget was funded by debt, which increased to 40.9% in 1936, and then remained level until World War II, at which time it escalated rapidly.

Deficit spending had been recommended by some economists, most notably by John Maynard Keynes of Britain. Some economists in retrospect have argued that the National Labor Relations Act and Agricultural Adjustment Administration were ineffective policies because they relied on price fixing. [15] The GNP was 34% higher in 1936 than in 1932 and 58% higher in 1940 on the eve of war. That is, the economy grew 58% from 1932 to 1940 in 8 years of peacetime, and then grew 56% from 1940 to 1945 in 5 years of wartime. However, the economic recovery did not absorb all the unemployment Roosevelt inherited. In his first term, unemployment fell by two-thirds from 25% when he took office to 9.1% in 1937 but then stayed high until it vanished during the war.

During the war, the economy operated under such different conditions that comparison is impossible with peacetime. However, Roosevelt saw the New Deal policies as central to his legacy, and in his 1944 State of the Union speech, he advocated that Americans should think of basic economic rights as a Second Bill of Rights.

The U.S. economy grew rapidly during Roosevelt's term. However, coming out of the depression, this growth was accompanied by continuing high levels of unemployment; as the median joblessness rate during the New Deal was 17.2 percent. Throughout his entire term, including the war years, average unemployment was 13%. Total employment during Roosevelt's term expanded by 18.31 million jobs, with an average annual increase in jobs during his administration of 5.3%.

Roosevelt's administration also saw significant changes to the income tax in the American tax system. Just prior to Roosevelt's election in 1932, Congress passed the Revenue Act of 1932, increasing the top marginal tax rate on individual income from 25% to 63% and enacting a wide range of additional excise taxes. In 1936, the Roosevelt administration added a higher top rate of 79% on individual income greater than $5 million, and that rate was increased again in 1939. During World War II, the top marginal tax rate was moved up to 91%. More significantly for most Americans, the overall rate structure was heavily compressed in 1943, with the highest rate made applicable to individuals with income of $200,000 or more, and withholding taxes were introduced.[