New Deal

The New Deal was a 1933–1938 series of economic, social, and political reforms in response to the Great Depression in the United States under President Franklin D. Roosevelt. He introduced the phrase when accepting the Democratic Party presidential nomination in the 1932 United States presidential election, winning in a landslide over incumbent Herbert Hoover, whose administration was widely viewed as ineffective. Roosevelt attributed the Depression to inherent market instability and inadequate aggregate demand, and argued that stabilizing and rationalizing the economy required massive government intervention.
During Roosevelt's first hundred days in office in 1933 until 1935, FDR introduced what historians refer to as the "First New Deal", which focused on the "3 R's": relief for the unemployed and for the poor, recovery of the economy back to normal levels, and reforms of the financial system to prevent a repeat depression. Roosevelt signed the Emergency Banking Act, which authorized the Federal Reserve to insure deposits to restore confidence, and the 1933 Banking Act made this permanent with the Federal Deposit Insurance Corporation. Other laws created the National Recovery Administration, which allowed industries to create "codes of fair competition"; the Securities and Exchange Commission, which protected investors from abusive stock market practices; and the Agricultural Adjustment Administration, which raised rural incomes by controlling production. Public works were undertaken in order to find jobs for the unemployed : the Civilian Conservation Corps enlisted young men for manual labor on government land, and the Tennessee Valley Authority promoted electricity generation and other forms of economic development in the drainage basin of the Tennessee River.
Although the First New Deal helped many find work and restored confidence in the financial system, by 1935 stock prices were still below pre-Depression levels and unemployment still exceeded 20 percent. From 1935 to 1938, the "Second New Deal" introduced further legislation and additional agencies which focused on job creation and on improving the conditions of the elderly, workers, and the poor. The Works Progress Administration supervised the construction of bridges, libraries, parks, and other facilities, while also investing in the arts; the National Labor Relations Act guaranteed employees the right to organize trade unions; and the Social Security Act introduced pensions for senior citizens and benefits for the disabled, mothers with dependent children, and the unemployed. The Fair Labor Standards Act prohibited "oppressive" child labor, and enshrined a 40-hour work week and national minimum wage.
In 1938, the Republican Party gained seats in Congress and joined with conservative Democrats to block further New Deal legislation, and some of it was declared unconstitutional by the Supreme Court. The New Deal produced a political realignment, reorienting the Democratic Party's base to the New Deal coalition of labor unions, blue-collar workers, big city machines, racial minorities, white Southerners, and intellectuals. The realignment crystallized into a powerful liberal coalition which dominated presidential elections into the 1960s, as an opposing conservative coalition largely controlled Congress in domestic affairs from 1939 onwards. Historians still debate the effectiveness of the New Deal programs, although most accept that full employment was not achieved until World War II began in 1939.
Contrary to some allegations, the New Deal legislation was in fact steered through Congress in large part through Roosevelt's influential vice president John Nance Garner.

Summary of First and Second New Deal programs

The First New Deal dealt with the pressing banking crisis through the Emergency Banking Act and the 1933 Banking Act. The Federal Emergency Relief Administration provided for relief operations by states and cities, and the short-lived CWA gave locals money to operate make-work projects from 1933 to 1934. The Securities Act of 1933 was enacted to prevent a repeated stock market crash. The controversial work of the National Recovery Administration was also part of the First New Deal.
The Second New Deal in 1935–1936 included the National Labor Relations Act to protect labor organizing, the Works Progress Administration relief program, the Social Security Act and new programs to aid tenant farmers and migrant workers. The final major items of New Deal legislation were the creation of the United States Housing Authority and the Farm Security Administration, which both occurred in 1937; and the Fair Labor Standards Act of 1938, which set maximum hours and minimum wages for most categories of workers. The FSA was also one of the oversight authorities of the Puerto Rico Reconstruction Administration, which administered relief efforts to Puerto Rican citizens affected by the Great Depression.
Roosevelt had built a New Deal coalition, but the economic downturn of 1937–1938 and the bitter split between the American Federation of Labor and Congress of Industrial Organizations labor unions led to major Republican gains in Congress in 1938. Conservative Republicans and Democrats in Congress joined the informal conservative coalition, which took control of both Houses of Congress following the 1938 midterm elections. By 1942–1943, they shut down relief programs such as the WPA and the CCC and blocked major progressive proposals. Noting the composition of the new Congress, one study argued

The Congress that assembled in January 1939 was quite unlike any with which Roosevelt had to contend before.
Since all Democratic losses took place in the North and the West, and particularly in states like Ohio and Pennsylvania, southerners held a much stronger position. The House contained 169 non-southern Democrats, 93 southern Democrats, 169 Republicans, and 4 third-party representatives. For the first time, Roosevelt could not form a majority without the help of some southerners or Republicans. In addition, the president had to contend with several senators who, having successfully resisted the purge, no longer owed him anything. Most observers agreed, therefore, that the president could at best hope to consolidate, but certainly not to extend, the New Deal. James Farley thought that Roosevelt's wisest course would be "to clean up odds and ends, tighten up and improve things already has but not try start anything new."
In any event, Farley predicted that Congress would discard much of Roosevelt's program.

As noted by another study, "the 1938 elections proved a decisive point in the consolidation of the conservative coalition in Congress. The liberal bloc in the House had been halved, and conservative Democrats had escaped 'relatively untouched". In the House elected in 1938 there were at least 30 anti-New Deal Democrats and another 50 who were "not at all enthusiastic". In addition, "The new Senate was split about evenly between pro- and anti-New Deal factions." The Fair Labor Standards Act of 1938 was the last major New Deal legislation that Roosevelt succeeded in enacting into law before the conservative coalition won control of Congress. Though he could usually use the veto to restrain Congress, Congress could block any Roosevelt legislation it disliked.
Nonetheless, Roosevelt turned his attention to the war effort and won reelection in 1940–1944. Furthermore, the Supreme Court declared the NRA and the first version of the Agricultural Adjustment Act unconstitutional, but the AAA was rewritten and then upheld. Republican President Dwight D. Eisenhower left the New Deal largely intact, even expanding it in some areas. In the 1960s, Lyndon B. Johnson's Great Society used the New Deal as inspiration for a dramatic expansion of progressive programs, which Republican Richard Nixon generally retained. However, after 1974 the call for deregulation of the economy gained bipartisan support. The New Deal regulation of banking lasted until it was suspended in the 1990s.
Several organizations created by New Deal programs remain active and those operating under the original names include the Federal Deposit Insurance Corporation, the Federal Crop Insurance Corporation, the Federal Housing Administration, and the Tennessee Valley Authority. The largest programs still in existence are the Social Security System and the Securities and Exchange Commission.

Origins

Economic collapse (1929–1933)

From 1929 to 1933 manufacturing output decreased by one third, which economist Milton Friedman later called the Great Contraction. Prices fell by 20%, causing deflation that made repaying debts much harder. Unemployment in the United States increased from 4% to 25%. Additionally, one-third of all employed persons were downgraded to working part-time on much smaller paychecks. In the aggregate, almost 50% of the nation's human work-power was going unused.
Before the New Deal, USA bank deposits were not "guaranteed" by government. When thousands of banks closed, depositors temporarily lost access to their money; most of the funds were eventually restored but there was gloom and panic. The United States had no national safety net, no public unemployment insurance and no Social Security. Relief for the poor was the responsibility of families, private charity and local governments, but as conditions worsened year by year demand skyrocketed and their combined resources increasingly fell far short of demand.
The depression had psychologically devastated the nation. As Roosevelt took the oath of office at noon on March 4, 1933, all state governors had authorized bank holidays or restricted withdrawals—many Americans had little or no access to their bank accounts. Farm income had fallen by over 50% since 1929. Between 1930 and 1933, an estimated 844,000 non-farm mortgages were foreclosed on, out of a total of five million. Political and business leaders feared revolution and anarchy. Joseph P. Kennedy Sr., who remained wealthy during the Depression, recalled that "in those days I felt and said I would be willing to part with half of what I had if I could be sure of keeping, under law and order, the other half."