The New Deal programs during the Great Depression of the 1930s showed how to solve economic crises without resorting to war.
In President Franklin Delano Roosevelt’s first term, there was sufficient peace-time government spending to end the 1929 economic crisis, although not yet enough to eliminate unemployment. Reducing government spending in FDR’s second term brought about a new crisis that was not ended until World War II.
Shortly after winning the presidency, President Obama used the Three R’s of the New Deal to describe his plans to solve the economic crisis: “The New Deal had three components: direct relief, economic recovery, and financial reform; these three were also called the Three R’s.
Relief was the immediate effort to help the one-third of the population that was hardest hit by the depression…. Recovery was the effort in numerous programs to restore the economy to normal health…. Reform was based on the assumption that the depression was caused by the inherent instability of the market and that government intervention was necessary to rationalize and stabilize the economy, and to balance the interests of farmers, business, and labor…” (President Barack Obama, in his weekly radio address, November 22, 2008).
The Democratic Congress agreed with those Three R’s, but the Republicans apparently missed the history lessons of the New Deal that taught us that government action is necessary to end economic crises.
FDR said of the New Deal relief programs, “No one should be permitted to starve.” There were three types of relief. The first, distress relief, offered unemployment insurance and social security. The original Social Security Act of 1935 provided not only for both unemployment compensation and senior citizen security, but aid to the blind, aid to dependent and crippled children, maternal and child health cervices, public health, and vocational rehabilitation. Both unemployment insurance and social security continue to the present time.
Back then some fiercely opposed the relief programs. FDR had to contend with not only conservative Republicans but also Jim Crow Democrats. Combined they had enough votes to destroy the relief programs. FDR compromised: only whites were eligible for distress relief, leaving millions of needy people unprotected.
Debt relief brought immediate aid to farmers, homeowners, and other debtors. In his fourth fireside chat, broadcast on October 23, 1933, FDR announced, “If there is any family in the United States about to lose its home or about to lose its chattels, that family should telegraph at once either to the Farm Credit Administration or the Home Owners Loan Corporation in Washington requesting their help.”
The Farm Credit Administration made loans of more than $2 billion dollars to more than one-half million farmers and reduced their high interest rates from five percent to three and one-half percent.
Of the Home Owners Load Act of 1933, FDR said, “The Act extends the same principle of relief to home-owners as we have already extended to farm-owners. Furthermore the Act extends this relief not only to people who have borrowed money on their homes but also to their mortgage creditors.” The latter part of the Act was a compromise. The Act not only protected impoverished debtors, but also was forced to grant government-guaranteed low-interest bonds to lenders.
Work relief brought jobs to the unemployed. The WPA (Works Progress Administration) hired millions of jobless. Opponents called WPA jobs “meaningless” and the worker “lazy and shiftless.” They demanded that wages be far less than in private sector employment.
However, those “lazy and shiftless” unemployed constructed hundreds of thousands of roads, streets, and highways; thousands of bridges, parks, public buildings, schools, and hospitals; hundreds of airports, playgrounds, swimming pools, and recreation centers. Millions attended more than one hundred thousand WPA adult education classes. WPA trained personnel operated more than nine thousand community centers and worked in six thousand others. The nation enjoyed the music, plays, and works of art composed by WPA artists.
At the same time, the nation faced overproduction in food and manufacturing.
Recovery in farming was the responsibility of the AAA (Agricultural Adjustment Act), which engaged in soil conservation. But the AAA called for crop reduction rather than using the surplus to feed the hungry.
For solution of the manufacturing crisis the PWA (Public Works Administration) was established. While WPA employed only jobless workers, the PWA hired workers in the open market. Those workers were responsible for water conservation; flood control; reclamation projects; slum clearance; construction of housing, hospitals, schools, and public buildings.
The billions spent by the PWA brought the nation out of the depression, but much more spending was needed to end the unemployment crisis. If fully funded, relief and recovery would have completely solved the immediate crisis that only ended with massive World War II spending.
Reforms were needed to correct past failures. To carry out the task of reform the New Deal established various government agencies. The U.S. Housing Authority would provide affordable homes. The Tennessee Valley Authority provided regional development. The Federal Deposit Insurance Corporation protected bank deposits against bank failure. The Securities and Exchange Commission protected investors from fraud. The Wagner Act declared that workers had the right to organize. The wage and hour law established the minimum wage and set a maximum for the workday.
Despite their necessity, Wall Street and Republicans opposed each measure.
Even though job creation was the deciding issue in the November 2010 elections, the party that offered legislation that would have created millions of jobs lost to the party of obstruction.
In the December 2010 Jobs Report AFL-CIO President Richard Trumka wrote, “Without a bold and committed investment in job creation and infrastructure modernization, we will see paltry job growth indefinitely.
The cuts being proposed by Republicans in Washington and around the country including undermining Social Security and Medicare and cutting transportation spending are the wrong remedies at the wrong time and threaten our economic future. We need dramatic action to invest in America and give states and cities breathing room to prevent further layoffs and create jobs. Only then will our economy see the robust and sustained recovery we need to put millions of Americans back to work.”
The GOP smear campaign against Democrats contributed to GOP victories in 2010. Republicans claimed that the private sector would create the necessary jobs. However, while waiting for private sector jobs to materialize, the unemployed, the nation, and the economy have other requirements. The New Deal defined those requirements with three R’s: Relief, Recovery, and Reform. Most Democrats embrace the modern version of those requirements; the GOP vehemently objects, to the nation’s detriment.
After examining the Democratic Party support for and the Republican Party opposition to New Deal (and Stimulus) principles, those workers who did not vote and even those that voted Republican are deluding themselves if they continue to believe that there are no important differences between the two parties.