The first 100 days of Franklin Roosevelt’s administration, of the New Deal, was one of the most creative periods in all of American political history. Congress moved fast and a great array of legislation and new federal administrations were created during this period. The nickname that historians gave to them was ‘alphabet soup’ because very often they had a three-letter acronym.
National Recovery Administration
One of the most important legislations was the National Industrial Recovery Act, which created the NRA, the National Recovery Administration, and the famous symbol of a blue eagle, holding in one claw a cogwheel, and in the other a cluster of lightning bolts.
The idea of the NRA was to organize American industry to prevent cutthroat competition. As consumer demand was falling, and as businesses were desperately looking for ways to prevent bankruptcy, they were tempted to get an edge over their competitors by cutting prices. Of course, though, the more they cut prices, the more their own operations became marginal, and they fell into bankruptcy for that reason.
Setting a Code of Conduct
The NRA, then, said, although until now in American history we’ve conscientiously opposed price fixing arrangements between businesses because that’s a monopoly practice, now we’re going to encourage it, so that manufacturers won’t have to worry about competition because it’s that much more likely to lead them to disaster.
Each industry was persuaded to draw up a code of conduct that its various members would honor. If one’s business was a participant in an NRA scheme, they’d feature the blue eagle in their windows.
The NRA was important also because it recognized the right of trade unions to collective bargaining with employers, and had the effect of increasing wages in textile manufacturing and several other industries.
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Public Works Administration
A second of these agencies was the PWA, the Public Works Administration, which was funded by the federal government, and undertook important public works that were clearly in the national interest. One of them was the building of Skyline Drive in the Blue Ridge Mountains. Another one was the creation of the Chicago subway system.
The idea here was: “We’ll do necessary public works, and the money we pay to the men we employ will give them greater spending power, and might have the effect of helping to prime the pump of the economy, and encourage new employment.”
Civilian Conservation Corps
A third and related program was the Civilian Conservation Corps, the CCC, which eventually hired three million, mainly young, men.
They also undertook bold public works that were in the national interest. They built a lot of the famous trails, such as the Appalachian Trail. They worked on state parks, on agricultural soil conservation districts, and in the Forest Service.
Agricultural Adjustment Administration
A fourth program was the AAA, the Agricultural Adjustment Administration. This administration addressed the old problem of American overproduction in farming. What it tried to do was to induce scarcities, and by inducing a scarcity, driving up the price of food.
It actually encouraged farmers to not plant as much acreage of crops as they had been doing in previous years, and usually paid them a premium for not planting crops. This was the beginning of a long period of agricultural subsidies, and they have continued right up to the present.
It was very difficult to enforce a policy like this; every individual was tempted to cheat. Certainly, it was the case that some of them did so.
Emergency Farm Mortgage Act and Homeowners Loan Act
The whole of American rural life was in catastrophic circumstances in the early 1930s. The Emergency Farm Mortgage Act, another piece of legislation, was designed to forestall bankruptcies on farms by temporarily giving federal aid to farmers who were unable to repay mortgages.
A comparable piece of legislation, the Homeowners Loan Act, had the same effect for homeowners in towns, supporting their mortgages during periods when they were unable, for reasons of unemployment, to pay them.
Glass-Steagall Banking Act
American banks in the early 1930s were regularly going out of business because of financial hard times, and just as Roosevelt was becoming president, there was a run on the banks. People who’d got savings in the bank, fearful that the bank would in fact collapse, would go to the bank to withdraw their money, making it that much more likely that the bank would collapse.
Thus, the Glass-Steagall Banking Act, another important part of the New Deal legislation, created the Federal Deposit Insurance Corporation, the FDIC, to guarantee ordinary citizens’ banking deposits up to a maximum of $5,000.
Tennessee Valley Authority
One of the most ambitious of all these schemes was the Tennessee Valley Authority, the TVA. It undertook work that President Herbert Hoover had refused to do.
One of the most economically backward areas of the whole of the United States was the southern mountains, the Appalachians, the area around the Tennessee Valley. By the 1930s, the technology for hydroelectric power production was well known, and the Tennessee Valley itself, because it’s fed by many tributary rivers, was a suitable area for building dams and then generating hydroelectric power.
Roosevelt said that the government was going to become directly involved in running the TVA, partly so that it could compete with the private power companies in the Tennessee Valley, as a way of estimating how reasonable the prices are that they charge for electricity, and also as a way of providing plentiful employment to citizens of the Appalachian Mountain states.
The TVA also became an important and lasting part of the federal government. Where Hoover had refused to get the government directly involved in major economic projects, the Roosevelt government was willing to do so.
Common Questions about the New Deal
The NRA recognized the right of trade unions to collective bargaining with employers, and had the effect of increasing wages in textile manufacturing and several other industries.
The Emergency Farm Mortgage Act was designed to forestall bankruptcies on farms by temporarily giving federal aid to farmers who were unable to repay mortgages.
The Homeowners Loan Act supported the homeowners’ mortgages during periods when they were unable, for reasons of unemployment, to pay them.