New Deal Economic Policies FDR and the Congress, 1933 to 1938
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New Deal Economic Policies FDR and the Congress, 1933 to 1938 'Ytftöi»^ ^"n n rr^!ir»T'k"«'o WrXttT* New Deal • Economic Policies FDR and the Congress, 1933 to 1938 4^ m University Publications of America STAFF President Paul P. Massa Executive Vice President James F. Connolly Vice President and Editorial Director Susan I. Jover Director of Congressional and Legal Services Steven F. Daniel UPA Editor-in-Chief Paul Kesaris Editor Joan Sherry Indexer Tim Shank Editorial Assistant Vanessa B. Hubbard Production Coordinator Dorothy W. Rogers Asst. Production Coordinator Debra G. Turnell Applications Programming Manager Andrew M. Ross Systems and Operations Manager Mojtaba Anvari Operations Supervisor Melvin M. Turner Computer Operations Nahid Hamedani, Stephanie Hiñes, S. Allen Paige Administrative Services Manager Lee Mayer Micropublishing Projects Production and Services: Vice President, Manufacturing William C. Smith Plant Operations Manager William Idol Documents Control Supervisor Bea Lamkin Documents Control Assistant Denise Anderson Camera Operators Gloria Robinson, Abel David Published by: UPA, an imprint of Congressional Information Service 4520 East-West Highway, Bethesda, MD 20814, U.S.A. Copyright ©1990 by University Publications of America All rights reserved. Printed and Bound in the United States of America International Standard Book Number 1-55655-283-1 The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences-Permanence of Paper for Printed Library Materials, ANSI Z39-48-1984. CONTENTS New Deal Economic Policy in Perspective, by Prof. Jordan A. Schwarz p. v User Guide p. ix Reference Bibliography p. 1 Index by Subjects and Names p, 51 Index by Titles p 167 Index by Bill Numbers p 175 Index by Superintendent of Documents Numbers p 177 Index by Document and Report Numbers p, 181 NEW DEAL ECONOMIC POLICY IN PERSPECTIVE Introduction to UPA Index and Microfiche Collection BY JORDAN A. SCHWARZ University Research Professor Northern Illinois University INTRODUCTION The world confronted a grave peacetime crisis on March 4, funds. As the country awaited new leadership to conclude the 1933, the day Franklin D. Roosevelt was inaugurated as presi- interregnum between the Hoover and Roosevelt presidencies, dent of the United States. Nothing less than the future of liberal it pondered the meaning of Franklin D. Roosevelt's promise capitalism was at stake. Emerging from the fourth winter of in his acceptance speech at the Democratic convention to give the Great Depression, millions of Americans, one quarter of it a "New Deal." It soon became evident that a consensus the work force, were unemployed with little hope of a change among policymakers had emerged for capitalist planning that in their fortunes. The engines of capitalism, its banks, closed drew upon the regulatory experiences of the progressive era and by the thousands across the country, some temporarily, many the emergency measures of World War I. permanently. Moreover, it was a worldwide crisis•although in no country was the depression as severe as in the U.S. because no country enjoyed such extensive capitalist development as Banking the U.S. At stake was not merely a recovery of prosperity but the future of democracy itself. In Europe fascism was entrenched in Italy; Germany had just opted for the Nazi dic- The New Deal initially attacked the depression on several tatorship; and Russia had long since been captured by a Com- fronts: banking, agriculture, industry, public works, work relief, munist dictatorship. The rest of democratic Europe watched and regional development. Its policies were not consistent: these experiments in totalitariansim for indications that they Along with economic expansion, it paradoxically practiced could generate economic growth, security and stability, albeit governmental economy. But its first task was to save liberal at the price of liberty. At the same time, European attentions capitalism; Roosevelt had to save the banks. To resolve the bank- focused upon the U.S. for signs of how its liberal capitalism ing crisis Roosevelt first declared a national bank holiday under would fare. powers Congress conferred upon the president in the Trading- The U.S. response to the depression was exceptionally volun- with-the-Enemy Act of 1917. During the brief hiatus policy- taristic. The Hoover administration maintained that relief of makers agreed upon a strategy that closed many banks not the unemployed was the responsibility of private agencies and worth saving and reinforced stronger banks with RFC loans. state and local governments. President Hoover counted upon But loans only increased bank obligations and postponed com- the depression of the 1930's repeating the brevity of the plete recovery. Congress in the hastily devised Banking Act of 1920-1921 depression. He resisted proposals for escalated 1933 (B-333-H10) conferred additional powers and funds upon federal public works spending, arguing that such panicky the RFC and it now offered bankers a "Partnership" with measures would exacerbate cycle behavior from deflation to government by purchasing a bank's preferred stock. That gave inflation. But Hoover compromised on control of fiscal policy the banks new capital resources in exchange for tighter federal with Congress; some works spending was initiated and taxes supervision. Because many bankers opposed any apparent were increased in an abortive effort to make up the federal federal intrusion into their management, RFC Chairman Jesse deficit. Also, he conceded to bankers assistance from the federal Jones, a Houston banker, secured congressional creation of the treasury in the form of the Reconstruction Finance Corpora- Federal Deposit Insurance Corporation (FDIC) and coupled tion (RFC), a credit relief agency capitalized initially at a half it with bank sale of preferred stock (B-361-H1). Roosevelt had billion dollars and modeled after the War Finance Corpora- resisted suggestions for deposit "guarantees," maintaining that tion of 1918-1929. It was intended to engender public confidence without proper regulation bankers would take unnecessary in- in the absence of private credit pools. Many critics and sup- vestment risks or engage in corrupt practices for which the porters of the RFC recognized in it the beginnings of state federal government would be responsible. Yet he accepted Con- capitalism that drew upon public financial experiments dur- gress's linkage of FDIC with regulation and it became one of ing the Great War of 1917-1918. But Hoover strenuously op- the New Deal's distinct successes. However, along with most posed additional federal programs. RFC administration over American bankers, Roosevelt demanded the separation of com- the winter of 1932-1933 was timid with the consequence that mercial and investment banking, while resisting bank consolida- several state governors had to contain bank closings by declar- tions that also permitted branch banking. These requirements ing "bank holidays" to prevent depositors from withdrawing automatically limited the size and strength of American banks. New Deal Economic Policies Agriculture credit. Although AAA policies were more dramatic, farmers believed that CCC went further toward restoring farm pros- Roosevelt's decision to confront next the depression in perity by ridding them of a great burden. agriculture stemmed from the fact that nearly half of all Americans depended upon farm prosperity and that a rural National Industrial Recovery Act crisis had persisted in varying degrees since 1920. Most policy- makers favored a strategy using farmer cooperatives•cartel- Early in the New Deal some congressmen, led by Senator like organizations exempt from prosecution under the Sherman Hugo Black of Alabama, proposed legislation mandating the Antitrust Law. In particular, a handful of agricultural reduction of hours worked in interstate trade to no more than economists promoted a "domestic allotment" scheme that thirty per week (I-351-S1). Economists and the administration would have the cooperatives create national commodity deemed this effort to spread work among more workers as organizations to restrain production for the purpose of reduc- inefficient in restoring prosperity. Nevertheless, it compelled ing supplies and increasing prices. The New Deal's Agricultural policymakers to offer alternative proposals for planning the Adjustment Administration (AAA) bought the scarcity scheme. industrial marketplace. The result was an omnibus bill that Initially it sought to slash farm output through emergency promised something for everybody: the National Industrial measures such as the slaughter of pigs before they reached Recovery Act (NIRA) (I-332-S1). It had two distinct parts; the market size, trampling cotton before it could be picked, or dum- first created a National Recovery Administration (NRA), and ping milk. At a time filled with deprivation, the wanton destruc- the second called for a Public Works Administration (PWA). tion of necessities horrified people. But AAA policy emphasized The NRA was given blanket powers to concoct a strategy for democratic decision-making to limit output so that commodity increasing industrial prices. Modeled on 1918's War Industries prices rose in a controlled manner. It established target prices Board (WIB), which had successfully boosted wartime produc- based upon prices during the last prosperous pre-war period, tion while restraining prices, NRA's commission called for 1909-1914. However,