The New Deal:  II

The First New Deal

Programs of the"first"  New Deal addressed three broad areas of concern, in order of priority:  relief, recovery, and reform.  Relief programs would aid the unemployed, while recovery programs sought to restore economic growth.  Reform measures would address weaknesses in the economy that experts felt had contributed to the Depression.

Federal Emergency Relief Administration (FERA)
Administrator:  Harry Hopkins
Dates:  1933-1935

The most pressing need before Roosevelt and the New Congress involved relief for the millions of unemployed.  Local charities and state agencies had quickly been overwhelmed, so the government stepped in to assist.  FERA offered millions in block grants to the states to spend either on direct or work relief projects. This method of disbursing funds through the states, rather than directly through Washington agencies, had a number of advantages:  (1)  in view of the nature of the emergency situation, it was faster to use state agencies already in place than to wait for the creation of new federal agencies; (2) allowing state politicians--congressmen and senators and governors--to decide on where the money would be spent insured their political support for the New Deal.  The latter point--the political dimensions--illustrated FDR's keen political skills in the implementation of the First New Deal.

The Civilian Conservation Corps (CCC)
Administrator:  United States Army
Dates:  1933-1943

The Unemployment Relief Act, passed on March 31, 1933, created the Civilian Conservation Corps (CCC).  The Civilian Conservation Corps (CCC) was one of the most popular of the New Deal agencies from start to finish.  The CCC, which was run by the Army, enrolled young men of draft age (18-25) and put them in paramilitary-style camps out in the country, where they worked on conservation projects.  Thousands of young men across America flocked to the CCC, packed up and moved to rural work camps, where they planted trees, fought forest fires, repaired trails, and built flood control levees. TheCCC enrolees received a wage for their work; however, 80% of their pay was sent directly back home to their families.  This way, the CCC could help keep these families off relief rolls, and also keep young and impulsive men from "blowing" their wages on entertainment.  By moving these young men out of the cities and placing them on socially useful projects, the CCC also helped avert a potential problem in that the presence of large numbers of young, unemployed men in the cities presented a possible threat to law and order.   Finally, just as with the FERA, the use of an existing bureaucratic structure--the United States Army--allowed the CCC to go into action as soon as possible and cut down on overhead.  For all these reasons and more, the CCC represented one of the most effective programs of the First New Deal.

The Agricultural Adjustment Administration (AAA)
Administrator:  Secretary of Agriculture
Dates:  1933-1936 (first AAA)

While programs like the CCC helped ease the immediate pain of the Depression, Roosevelt worked to effect more permanent changes on the economy. In May, Congress passed FDR's Agricultural Adjustment Act, which established the Agricultural Adjustment Administration (AAA).  Like the other programs of the First New Deal, the AAA utilized bureaucracies and organizations already in place in order to speed up implementation and cut the cost of overhead.  In this case, the AAA disbursed money to state agricultural bureaus (normally the agricultural extension service run by the state university).  They, in turn, looked to local committees of farmers to carry out the details of the plan.

The primary goal of the AAA was to raise farm prices.  For most of the 1920s, farm prices had dropped precipitously, while the Republican administrations of Harding, Coolidge, and Hoover devoted their attentions to business, largely ignoring the farm sector.  Thus, when the Stock Market crashed, farmers had already been in a depression for nearly a decade.  In planning relief for agriculture, FDR put his main advisor on agriculture, Rexford G. Tugwell, onto the case.  The first question Tugwell asked was:  why were farm prices so low?  The answer:  overproduction.  American farmers were growing too much.  Given the laws of supply and demand, the more farmers produced, the less demand, and thus lower prices.  If farmers could just produce less, it naturally followed the demand would increase and, therefore, so would prices.  But how could one get farmers not to grow when they could hardly support themselves now?  The solution:  subsidies.  In short, the AAA paid farmers not to grow.   The government would "rent" part of a farmer's land on condition that he let the land lay fallow, or plant it in some other crop.  This would decrease the amount of overproduced items on the market (like cotton, corn, and wheat) and thereby raise prices.  It would promote diversification of crops, encouraging farmers not to grow just one thing (putting all their eggs in one basket, so to speak), and thus offer stability in future if the price of one of the crops went down temporarily.  Finally, it put money in the farmer's pocket right away to help sustain him and his family and thus provide relief.

Because Congress did not create the AAA until June, the agency faced a problem right off the bat:  farmers had already planted their crops for the year.  How, then, could the AAA work in the current year?  Simply put, farmers who "rented" land to the government had to agree to plow up those crops already planted on that land.  This same theory also applied to animals, since the AAA also paid farmers to reduce the size of their herds of cattle, pigs, and sheep.  Farmers were forced to slaughter animals and bury them in mass graves.  This picture of farmers destroying food at a time when many Americans were hungry created some consternation in public opinion--the first of many controversies associated with the New Deal.

The National Industrial Recovery Act (NIRA)

The NIRA, passed on May 17, 1933, was the New Deal plan for instigating economic recovery in the nation's industrial sector (just as the AAA's goal was recovery in the agricultural sector).  The NIRA set fair-practice codes for business and industry, established minimum wages and maximum hours, and gave labor the guaranteed right to bargain collectively.  The bill also created two agencies:   the National Recovery Administration (NRA) and the Public Works Administration (PWA).  The NRA would implement one part of the recovery plan by creating a structure for implementing fair codes, minimum wages, etc.  The PWA would help spur immediate recovery by giving the states over $2 billion in block grants to spend on public work projects.  The money from these projects would spread out to the local economy, keep people employed and businesses afloat until the long-term recovery could kick in.

The creation of  these two agencies, and their different purposes, reflected the different opinions among the New Dealers as to what had caused the economy to slide after 1929 and why it had failed to recover since.  On one side, there were those who said that business had responded to the Depression by slashing prices and cutting jobs--normal responses of a businessman trying to keep his business afloat in hard times.  The problem was, when one businessmen did this, he could undersell his competitors, so they felt forced to slash prices and cut jobs.  When this failed to bring about recovery, they repeated the action, further slashing prcies and cutting more jobs.  This only drove the economy further into Depression.  (Businessmen's actions were similar to those of farmers who responded to lower prices by planting more crops.  The resulting oversupply only forced prices lower, thus foiling the original intent.)   So, members of the Brains Trust concluded that the reason business had failed to recover after the Crash owed to too much--and thus "harmful"--competitition.  If this was the case, then competition must be reduced.  Another set of thinkers looked at the short term problem of economic depression and concluded that businessmen were afraid to risk their capital to create new jobs because they lacked confidence in the economy.  One solution to this problem would be to encourage businessmen to create new jobs by artifically stimulating the economy--"priming the pump."

Let's take a look at the agencies created by the NIRA and how they intended to solve these problems as perceived by the New Dealers.