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CHAPTER 33 REVIEW FOR BIELECKI
Terms in this set (18)
FDR and economic understanding - call for a balanced budget?
In the beginning of FDR's time in office (first term) he was very concerned with keeping the budget balanced and not running a deficit. By his second term, the British economist Keynes persuaded him to start running a deficit in the country in order to push more money into his programs and directly giving aid to the people. He began do do this but not to the extent that Keynes and others would have liked. It was the first time our country ran a deficit to pay for programs. It was a pretty small deficit that grew larger with the outbreak of WWII.
Hundred Days Congress (also known as the emergency Congress)
FDR began called for an emergency session of Congress that lasted 100 Days, between March 9 and June 16, 1933, where he began sending bill after bill to Congress. Congress passed 15 major acts to meet the economic crisis setting a pace for new legislation that has never been equaled. Later became known as 1st New Deal. The Goal was the 3 R's: Relief, Recovery and Reform (some overlapped into two or all three)
All the banks were ordered to close until new laws could be passed. An emergency banking law was rushed through Congress. The Law set up new ways for the federal government to funnel money to troubled banks It also required the Treasury Department to inspect banks before they could re-open.
Gave the President the power to regulate banks. Known as the Banking Act of 1933, effectively separated commercial banking from investment banking. Basically, commercial banks, which took in deposits and made loans, were no longer allowed to underwrite or deal in securities, while investment banks, which underwrote and dealt in securities, were no longer allowed to have close connections to commercial banks, such as overlapping directorships or common ownership. Banks had to decide which they were going to be. The Act was passed as an emergency measure to counter the failure of almost 5,000 banks during the Great Depression. the Glass-Steagall Act also created the Federal Deposit Insurance Corporation, which guaranteed bank deposits up to a specified limit.
The Glass-Steagall Act's primary objectives were twofold - to stop the unprecedented run on banks and restore public confidence in the U.S. banking system; and to sever the linkages between commercial and investment banking that were believed to have been responsible for the 1929 market crash. The rationale for seeking the separation was the conflict of interest that arose when banks were engaged in both commercial and investment banking, and the tendency of such banks to engage in excessively speculative activity.
Managed Currency Policy
FDR ordered all of the private holdings of gold to be returned to the treasury in return for paper money and to take the nation off the gold standard; the Treasury bought gold by hiking up the prices causing people to cash in for paper currency. The goal of Roosevelt's "managed currency" was to create inflation, which he believed would relieve debtor's burdens and stimulate new production.
The gold-buying idea came to an end in February 1934, when FDR returned the nation to a limited gold standard for purposes of international trade only—increased amount of $ circulation
"Kingfish", A Senator from Louisiana who proposed a "Share Our Wealth" program that promised a minimum annual income of $5,000 for every American family which would be paid for by taxing the wealthy. (100% tax on 1 million dollars). Announced his canidacy for president in 1935, but was killed by an assassin.
AAA (Agricultural Adjustment Act)
The 100 Day Congress (Emergency Congress) created the AAA to help farmers through the low prices and overproduction of farm goods. Through "artificial scarcity" this agency was to establish "parity prices" for basic commodities. "Parity" was the price set for a product that gave it the same real value from 1909 to 1914 ( when prices were good for farmers) and the AAA would eliminate price-depressing surpluses by paying growers to reduce their crops. The millions of dollars needed for these payments were to be raised by taxing of farm products.
The AAA was begun after planting of cotton crop for 1933, plants plowed, pigs slaughtered and much of their meat was distributed to people on relief.
The Supreme Court killed the AAA in 1936 by declaring its regulatory taxation provisions unconstitutional but the New Deal Congress passed the Soil Conservation and Domestic Allotment Act of 1936 and the withdrawal of acreage from production—shifted to conservation.
Late in 1933 a prolonged drought struck the states of the trans-Mississippi Great Plains.
Rainless weeks followed by high winds turned the area that stretched from eastern Colorado to western Missouri into the Dust Bowl and even the sun was darkened by powdery topsoil.
Drought and wind triggered the dust storms but there were other factors—high grain prices led to more land under cultivation, dry-farming techniques and mechanization had revolutionized Great Plains agriculture—stream tractor and disk plow left the powdery topsoil to be swept away
Tens of thousands of refugees fled their ruined acres and in five years 350,000 "Okies" and "Arkies" trekked to southern California (portrayed by John Steinbeck's The Grapes of Wrath)
The Frazier-Lemke Farm Bankruptcy Act (1934) made possible a suspension of mortgage foreclosures for five years, but the Supreme Court voided it—revised law was upheld (3 years).
In 1935 Roosevelt set up the Resettlement Administration, charged with the task of removing near-farmless farmers to better land—more than 200 million young trees were planted in prairie
Inspired by the Pueblo Indians of NM, Commissioner of Indian Affairs John Collier promoted the Indian Reorganization Act of 134 that encouraged tribes to establish local self-gov't and to preserve their native crafts and traditions—stop loss of Indian lands; other Indians refused.
NRA (National Recovery Administration)
National Recovery Administration: Represented by a blue eagle that would be shown in store windows and displayed in parades. It was designed to provide all three R's (Relief, Recovery and Reform). it established and adminstered a system of industrial codes to control production, prices, labor relations, and trade practices. it was to encourage "fair competition", where hours of employment would be reduced so more people could be employed. Minimum wage was also established. The NRA had been a godsend to organized labor—walkouts occurred in the summer of 1934, including a paralyzing general strike in San Francisco, broken by vigilante tactics. Eventually the NRA failed due to the Supreme Court.
CCC (Civilian Conservation Corps)
The CCC (Civilian Conservation Corps) was a branch of the Federal Emergency Relief Act (FERA) and was designed to provide temporary jobs during the cruel winter emergency. Thousands were employed in leaf raking and other jobs.
Truth in Securities Act
Reformists were determined to curb the "money changers" who had played with investors before the Wall Street crash of 1929—HDC passed "Truth in Securities Act" (Federal Securities Act) which required promoters to transmit information regarding the soundness of stocks and bonds.
TVA (Tennessee Valley Authority)
The Hundred Days Congress passed an act creating the Tennessee Valley Authority (TVA) in 1933 and this enterprise was largely a result of Senator George Norris of Nebraska. Critics called it socialism. It was the most revolutionary of all of the New Deal programs.
This new agency was to discover precisely how much the production and distribution of electricity cost and to establish fair rates charged by private electric companies. These utility corporations lashed back at this low cost of TVA power. New Dealers accused electric companies of using excess rates—Tennessee River provided a rare opportunity.
The river contained some 2.5 million of the most poverty-stricken people in America; by developing the hydroelectric potential of area, Washington could combine immediate advantage of putting thousands to work with a long-term project for reforming the power monopoly
The gigantic project brought to the area not only full employment and cheap electric power, but low-cost housing, abundant cheap nitrates, restoration of eroded soil, reforestation, flood control
Conservative reaction against the "socialistic" New Deal would confine the TVA to Tennessee.
The Social Security Act of 1935 provided for federal-state unemployment insurance and to provide security for old age, categories of retired workers were to receive regular payments from Washington that was financed by a payroll tax on both employers and employees (dependents).
Republican opposition to the sweeping new legislation was bitter
Social security was largely inspired by the example of some of the more highly industrialized nations of Europe—American workers had to be employed to get coverage.
Labor Unions and the Wagner Act
Wagner or National Labor Relations Act of 1935, which recreated a powerful new National Labor Relations Board for administrative purposes and reasserted the right of labor to engage in self-organization and to bargain collectively.
Encouraged by the NLRB, a host of unskilled workers began to organize into effective unions
The leader of this drive was John L. Lewis and in 1935, he succeeded in forming the Committee for Industrial Organization (CIO) within the ranks of the skilled American Federation of Labor
In 1936, the older federation suspended the unions associated with the new organization
The rebellious CIO moved on a concerted scale into the huge automobile industry; late in 1936, workers resorted to a technique known as the sit-down strike and refused to leave the factories
The CIO won a resounding victory when General Motors recognized its union
The US Steel Company granted rights of unionization to its CIO-organized employees but the little steel companies fought back savagely—Memorial Day massacre in Republic Steel Company
In 1938, Congress passed the Fair Labor Standards Act (Wages and Hour Bill) and industries involved in interstate commerce were to set up minimum wage and maximum-hour levels
Labor by children under sixteen was forbidden and these reforms were bitterly opposed by many industrialists, especially by southern textile manufacturers who profited from low-wage labor
The CIO surged forward, breaking completely with the AF of L in 1938 and became known as the Congress of Industrial Organization under the presidency of John L. Lewis (4 million)
FDR and his Court Packing Scheme
In nine major cases involving the New Deal, the Roosevelt administration had been thwarted seven times and he grew impatient to the obstruction conservatism of the Court. Early in 1937, Roosevelt caught the country by surprise bluntly asking Congress for legislation to permit him to add a new justice to the Supreme Court for every member over seventy who would not retire—the maximum membership could then be fifteen and would be more favorable to the New Deal Programs. Congress and the nation were promptly convulsed over the scheme to "pack" the Supreme Court with a "dictator bill"—Roosevelt was looked down on for attempting to upset the balance in government. Justice Owen J. Roberts began to vote on the side of his liberal colleagues—upheld principle of state minimum wage for women, upheld Wagner Act and the Social Security Act
Congress voted to pay for justices over seventy who retired—replaced by Justice Hugo Black
Congress finally passed a court reform bill, a version that applied only to lower courts—Roosevelt suffered his first major legislative defeat at the hands of his own party in Congress.
The Court, as he had hoped, became markedly more friendly to New Deal reforms—a succession of deaths and resignations enabled him in time to make nine appointments to the tribunal, the most of any president since Washington.
FDR aroused conservatives of both parties in Congress that few New Deal reforms were passed after 1937; Roosevelt squandered much of the political goodwill that had carried him previously.
In 1937, the economy took another sharp downturn, a depression within a depression. Critics called this "The Roosevelt Recession". Social Security taxes were cutting in on people's paychecks. The government cut back spending because they wanted to maintain a balanced budget.
During the "Roosevelt Recession", FDR decided to listen to British economist John Maynard Keynes, and began a bold program to stimulate the economy by "planned deficit spending". This marked a major turning point in the government's relation to the economy. Keynesianism is the use of government spending and fiscal policy to "prime the pump" of the economy and encourage consumer spending. Keynesianism became the new economic policy under FDR's second term and stayed that way for decades.
Legacy of the New Deal
The legacy of the New deal was relief, not economy and that it relieved the worst of the crisis in 1933. It was reform without revolution. It pushed away communism and bloody rebellions that were happening in other countries. It began deficit spending and many social programs that we still have in place today (SEC and Social Security are two of them).
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