H102 Lecture 20: Dr. New Deal or Dr. Win-the-War?

If Roosevelt's First New Deal (1933-1935) concentrated on relief, dealing with the immediate issue of getting unemployed Americans back to work, then the Second New Deal (1935-1937) focused on social reform issues. This Second New Deal came about, in part, because of the social concerns of the President and his First Lady, Eleanor Roosevelt, but also because of mounting criticism--from the political left and the political right--of the policies of the First New Deal.

Father Charles Coughlin

Huey Long

The most powerful New Deal critic from the political left was Huey Long (1893-1935), governor of Louisiana and later a United States Senator from that state. Known as the "Kingfish," Long became the most powerful governor in Louisiana's history. He used his power to expand Louisiana's underdeveloped infrastructure and helped build new hospitals, schools, highways, bridges, and the state's university. Long's campaign slogan was "Every man a king, but no one wears a crown," and his ideas on the redistribution of wealth were very popular among the lower and middle classes of Louisiana. At first, he supported the New Deal, but soon found it too conservative and he increasingly believed that FDR had caved in to the demands of big business. Long established the Share-Our-Wealth Society, an organization that advocated taxing the rich to help the poor. He promised huge, confiscatory taxes on incomes over $1 million and inheritances over $5 million in order to provide the following:

Long's brand of politics was a type of "Neo-Populism" which found followers not only in Louisiana, but among low-income, rural families across the country. By mid-1935, Share-Our-Wealth Clubs had 7 million members and Long talked openly about challenging Roosevelt in the upcoming presidential election. Long's presidential aspirations, however, came to an abrupt and tragic end in September 1935 when he returned to Louisiana to supervise a special session of the state legislature and was assassinated by the son-in-law of a ruined political opponent.

Other Critics

The New Deal had other critics as well. Governor Floyd Olson of Minnesota declared himself a socialist and tried to build a third party that would "preach the gospel of government and collective ownership of the means of production and distribution." In Wisconsin, the Progressive politics of "Fighting Bob" LaFollette lived on in his sons, United States Senator, Robert LaFollette, Jr. and Governor Philip LaFollette. Membership in the Communist Party of the United States also hit a high in 1935. Proclaiming that "Communism is 20th-century Americanism," domestic Communists were careful to distance themselves from the revolutionary policies of Soviet Bolsheviks. They did not call for an overthrow of the government, but instead began to work in cooperation with labor unions and student groups to transform American economics and politics. They set up Communist Party cells and Marxist study groups at many universities to attract students and professors to their cause.

As we discussed in Lecture 19, Franklin D. Roosevelt was a pragmatist, not an ideologue. He summed up his style of political action when he stated:

"Do something. And when you have done that something, if it works, do it some more. And if it does not work, then do something else."

The Second New Deal

Cover to sheet music of "Welcome Mr. Roosevelt," by Eric Karll

That "something" turned out to be the Second New Deal. Beginning in 1935, Roosevelt began sending to Congress a host of new legislative initiatives. Some historians characterize the Second New Deal as FDR's radical shift to the left. In reality, however, this second stage of the New Deal was more of a tentative step towards the left. The laws that came out of the Second New Deal included:

WPA
Wagner Act
Social Security Act
Wealth Tax Act

WPA stood for Works Progress (later "Projects") Administration, which promoted both economic relief and reform. Required to choose projects that would not compete with private business, the WPA paved streets and highways; built bridges, airfields, and post offices; restored forests, and extended electrical power to rural areas. Over its seven-year history, the WPA employed about 8.5 million Americans. In addition to building the nation's infrastructure, the WPA funded unemployed artists and authors to promote American culture. The Federal Theater, Arts, Music, Dance, and Writers' Projects brought music and drama to even the smallest communities, sponsored public sculptures and murals, and commissioned noted American writers, such as John Steinbeck, Richard Wright, John Cheever, and Claude McKay, to write regional guidebooks and histories of the American people. The efforts of the WPA marked the first time that the federal government tried to support and promote actively American art and culture.

City of Milwaukee work project for the Depression-era WERA (Wisconsin Emergency Relief Administration)

The Wagner Act, known officially as the National Labor Relations Act, preserved and strengthened Section 7A of the NIRA. It guaranteed workers the right to unionize and the right to bargain collectively with management. For the first time, the federal government recognized and protected labor unions.

The Social Security Act was initially drafted at the University of Wisconsin. This act created a cooperative federal-state system to provide unemployment compensation and old-age insurance. Workers who paid Social Security taxes out of their wages would receive benefits upon retirement at age 65. Employee and employer contributions would cover the costs of these benefits. On the one hand, Social Security seemed a fairly radical piece of reform legislation, since the government committed itself to provide help for the elderly. In reality, however, it was a fairly conservative program, since workers and their employers, and not the government, were footing the bill. In addition, the initial Social Security Act did not include provisions for farm workers, domestic workers, employees of the restaurant and service industries, or health-care providers. Still, the act was a milestone in American history because it acknowledged the responsibility of society at large to take care of the less fortunate.

"Wisconsin Unemployment Insurance," drawing by Charles Silver

The Wealth Tax Act increased taxes on the wealthy and created new and larger taxes on excess business profits, inheritances, large gifts, and profits from the sale of property. The act also put new restrictions on trusts and holding companies.

FDR: Socialist or Capitalist?

Business leaders were highly critical of this Second New Deal and many viewed Roosevelt as a traitor to his class and a socialist who was out to strip them of their wealth. One of Roosevelt's aides noted the strength of the anti-Roosevelt attitude of American business leaders:

"There's a vast bitterness welling up from the grass roots of every country club in America."

Although many members of Congress were far to the left of FDR, he seemed to personify the new anti-business position in America. Nonetheless, FDR's relief and reform efforts actually preserved capitalism. The AAA, the NIRA, new banking legislation, and regulations of securities on Wall Street ultimately helped big business.

The Roosevelt Coalition

With big business turning against him, the President had to look for support elsewhere. For the presidential campaign of 1936, Roosevelt built what was called the "Roosevelt Coalition," a political bloc that remade modern politics. While Republicans were still relying on their traditional base of political support (big business, big farmers, and conservatives), Democrats broadened their constituency by appealing to small farmers in the Midwest, urban political bosses, ethnic blue collar workers, Jews, intellectuals, and African Americans. The shift of African-American support to the Democratic party, in particular, demonstrates how FDR was transforming American politics. Up until 1936, most blacks continued to celebrate the memory of Abraham Lincoln and emancipation, and had voted for Republicans. In 1936, however, many of these voters changed political allegiance and supported Roosevelt. The election of 1936, in fact, marked the greatest electoral shift in American history. In 1932, Republicans had won 10 of the 12 largest United States cities. In 1936, the twelve largest cities voted overwhelmingly Democratic.

The Roosevelt Recession

Having won the 1936 presidential election by the biggest margin up to that time, it seemed that everything was going well for Roosevelt and the New Deal. In 1937, the president, in fact, believed that the nation had recovered its economic health and he tried to balance the federal budged by cutting back on New Deal programs. Roosevelt, for example, reduced funding for the WPA by half. Such policies, however, proved disastrous for the American economy. As a result of such cuts, unemployment rose by 1.5 million by July 1937. With farm subsidies cut, farm prices also fell, and by August an additional 4 million Americans were out of work. The economy would not recover fully from the Roosevelt Recession until the United States entered World War II.

Keynesian Economics

Roosevelt brought about the Recession of 1937 because he refused to follow the advice of his economic aides and turned away from Keynesian (KAYN-zee-uhn) economics. John Maynard Keynes (KAYNZ) (1883-1946) was a British economist who rejected classical economics and traditional theories of the free market. He claimed that there was a direct correlation between government spending and the welfare of the private sector economy. In addition, he advocated vast government spending--even deficit spending--in times of recession. Then, when the economy had recovered, Keynes argued, the government should reduce spending. Today, many Western nations accept the principles of Keynesian economics. In the 1930s, however, Roosevelt remained suspicious of deficit spending during tough economic times. Only World War II would prove the truth of Keynes's theories.

Lasting Impacts of the New Deal

From Main Street to Pennsylvania Avenue

The New Deal was not a revolution; it did not bring about radical change. Nor did it end the Great Depression. It did, however, transform American society and alter the relationship between government and business. For one thing, the New Deal redirected the eyes of the American public from Main Street, city council chambers, and state capitol buildings towards Washington, D. C. For the first time, many Americans expected the federal government to play a vital role in the nation's social welfare.

The "Corporate State"

Another more enduring legacy of the New Deal was the rise of the "corporate state." Prior to Roosevelt's time in office, big business had a virtual monopoly on political power. Through the regulation of business activities the New Deal created two new players at the political table: big labor and big government. New Deal legislation and United States involvement in World War II, in fact, drew together, more closely than ever before, business, government, and labor. Labor provided a steady workforce and the government promised to instill predictability in the market to avoid the dramatic highs and lows that had long plagued the nation's economy. Under these terms, business made some concessions to labor and government.

American Involvement in WWII

Isolationist sentiments

While all of these domestic changes were underway, a series of critical foreign events once again drew the United States onto the world's stage. During his time in office, Roosevelt had embraced "Wilsonian" internationalism. The American public, however, was overwhelmingly isolationist during the 1930s. Americans, for example, flocked to popular movies and plays and read books that depicted the horrors of war. Margaret Mitchell's Civil War-era novel, Gone with the Wind was a national bestseller, won the Pulitzer Prize in 1936, and became a hit movie in 1939.

Other events reinforced this popular suspicion of American involvement in European affairs. The "Senate Investigation of the Munitions Industries," a report produced by the Nye Committee between 1934 and 1936, contended that greedy industrialists and munitions manufacturers had provoked the United States to enter WWI. According to this report, war-mongering profiteers had popularized gruesome tales of Germany atrocities to convince the United States to join the Allies and to invest heavily in war production. This report helped convince many Americans that they should ignore European "propagandists" who claimed to document the brutalities of Hitler, Mussolini, and Hirohito during the 1930s.

Roosevelt's one significant foreign policy move prior to World War II was the recognition of the Soviet Union. Until that point, the United States had refused to recognize the Soviet Union as a legitimate state. Roosevelt appealed to American business interests by arguing, mistakenly, as it turned out, that diplomatic relations with the Soviet government would open up that country to trade.

While hostilities were building in Europe and the Far East, the United States Congress passed three pieces of legislation-- known collectively as the Neutrality Acts--designed to keep America out of war. Congress was determined to avoid the mistakes which had drawn America into the First World War.

"Your boys are not going to be sent to any foreign war."

Although we will not review the war battle by battle in these notes, we have developed a short time line (click to view) of some of the events leading up to American involvement in World War II. As Americans were calling for isolationism and pacifism, aggressions were mounting all over the world.

Publicly, Roosevelt stated and restated his promise not to get the United States involved in the European war. He said in the 1940 presidential campaign:

"I hate war now more than ever. I have one supreme determination: to do all that I can to keep war away from these shores for all time."

"I have said this before, but I shall say it again and again and again. Your boys are not going to be sent to any foreign war."

The major champion of isolation was America First, a group of prominent businessmen, celebrities, and politicians, such as pilot Charles Lindbergh and auto magnate Henry Ford, that spoke out against the war.

Roosevelt admitted privately that United States involvement in the World War II was inevitable. Already in 1938 and 1939, the United States began to gear up its industrial might and military power. Of course, war became a reality for the United States following the attack on Pearl Harbor in 1941. After the United States declared war on Japan, Germany, recognized its alliance with Japan and declared war on the United States. Suddenly, isolationist America found itself fighting a world war on two fronts. Participation in the war brought about profound changes for the United States and the American people in the 1940s. How profound? So profound, that we'll take them up in Lecture 21: "World War II: The Impact at Home."