A “New Deal” | The Great Depression and the Transformation of American Politics

“All that progressives ask or desire is permission…to interpret the Constitution according to the Darwinian principle; all they ask is recognition of the fact that a nation is a living thing and not a machine.”

— Woodrow Wilson, The New Freedom,“What is Progress?” —

The United States of America has, in many ways, always been a progressive nation. We progressed beyond the limits of colonial existence under British rule, beyond the shackles that held our fellow citizens of African descent in bondage, beyond the geographical limits of the Thirteen Colonies. And yet, America has also been a nation of conservatives, clinging to the principles of representative government promised in the English Bill of Rights, to the Constitution amidst the turmoil of civil war, to the way things have always been. For much of its history, progress was driven by individuals who invented new labor-saving devices; only once, during the Civil War, did the federal government impose what we would call “progress” on the nation when it abolished slavery in the Thirteenth Amendment. That began to change, however, during the late 19th century when the progressive movement began to urge social advancement using the power of government. The arch-progressive of the early 20th century, Woodrow Wilson, urged the American people to support his programs in his 1913 book The New Freedom, and his presidency saw waves of change sweep across the country in finance, political reform, and most importantly women’s suffrage with the passage of the Nineteenth Amendment to the Constitution. However, when the First World War ended, Americans elected Warren Harding and Calvin Coolidge, who returned to the conservative roots of American politics. Coolidge was famous for his desire to remain out of economic and social affairs. Progressives tried to regain their momentum, but only when the Great Depression struck did their cause find a receptive audience.

Here on 15-Minute History, we do our best to remain nonpartisan in how we teach American history, but political affairs have obviously shaped the course of America’s growth and development. In the next two podcasts, we will trace the rise of the modern conservative and liberal political ideologies back to their roots in American history. Our hope is that we can give our audience a clear and unbiased view of where Republicans and Democrats got their ideas and how the two parties came to believe what they now proclaim each night on cable news and in their election campaigns.

The United States had faced economic downturns since at least 1807 when President Thomas Jefferson imposed the Embargo Act on the country and collapsed the national economy. What happened in 1929 was, at least on paper, little different from the panics of 1819, 1837, 1857, 1873, 1884, and 1907. Of course, its impact was felt far more dramatically by the American people because, during the 1920s, more Americans than ever had begun to invest their hardearned money in the stock market and various industrial ventures. As New Yorkers saw investors hurling themselves from buildings as their fortunes vanished, the American people realized that their way of life was on the brink of collapse. Soon, millions of Americans were out of work and unable to feed their families. The crisis deepened when dust bowl storms devastated the Great Plains and wiped out farms and livestock. In America and across the world, the people turned to their leaders and cried out for relief.

President Herbert Hoover’s efforts to stem the tide of economic distress had utterly failed as his tariff proposals drove prices up and destroyed more jobs than they created. By 1933, his presidency was in ruins, and while he still won the Republican nomination his defeat was almost certain. The Democratic Party, which had been out of power since the Civil War except during the administrations of Grover Cleveland and Woodrow Wilson, saw an opportunity to regain the White House. This was not merely political opportunism; the party had long wished to present itself to the people as agents of positive, progressive change. It just took an economic crisis of global proportions to bring the American people around to their side.

Over the course of sixteen primary contests in 1932, the Democratic Party had winnowed its field of eight candidates down to three. At their convention in Chicago at the end of June, two former governors of New York, Franklin Roosevelt and Al Smith, and Speaker of the House John Nance Garner of Texas vied for the nomination. Roosevelt’s supporters represented Southern segregationists and western farmers (both traditional Democratic strongholds), as well as ethnic minorities and urban elites. Smith’s support came from the political machines of New York City and Chicago, but his base did not extend beyond these two cities. Garner had little backing from the political establishment but did earn favor with the powerful California newspaper editor William Randolph Hearst. In the end, the party chose Roosevelt, and in his acceptance speech on July 2nd he promised “a new deal for the American people.”

Roosevelt’s nomination represented a change in direction for the Democratic Party. Since its inception under Andrew Jackson in the late 1820s, the Democrats had always been a party of Southerners, Westerners, and Northern bankers. This last group had shifted to the Republicans during the Civil War and were the strongest backers for that party and a reason why the Republicans had dominated the political landscape since the 1860s—they had the money. By bringing ethnic minorities and urban elites into the Democratic fold, Roosevelt was able to recast the party as the one which spoke for the American underclass. His message of a “new deal” resonated far more effectively than even he had hoped, and his victory over Herbert Hoover was the largest in American history since that of George Washington.

A “New Deal” for the American People

Franklin Roosevelt’s plan for reviving the American economy centered around a single economic principle, first articulated by the British economist John Maynard Keynes. In his Treatise on Money, Keynes wrote that governments needed to increase their spending (if necessary by borrowing money and running deficits) during an economic downturn to maintain total national spending. Once the economy recovered, government spending would decrease as the nation’s private sector began to grow. To put this plan into action, Roosevelt began to create new programs, collectively known as the New Deal, to stabilize the economy and put the American people back to work. During his first one hundred days in office, the administration declared a “bank holiday” and reformed the banking system, printed vast sums of money and took the country off the gold standard, repealed the Eighteenth Amendment to increase revenue through the sales of alcohol, and, most critically, created massive public works programs to create jobs.

The Public Works Administration built airports, hospitals, roads, and dams; the Civilian Conservation Corps planted forests, drained swamps, and built national parks; and the Works Progress Administration constructed public buildings like docks, theaters, and observatories across the country. These one hundred days set a standard of federal government action on behalf of struggling Americans that still continues to this day.

The Roosevelt administration also raised taxes on wealthy Americans to help pay for the recovery and limit deficit spending. The 1935 Revenue Act imposed a top marginal rate of 79% (the highest since the end of the Great War) and redistributed the wealth of rich Americans to the poor. Many of Roosevelt’s supporters felt betrayed by this measure, as wealthy elites had been among his strongest backers during the 1932 campaign. A year later, the government raised taxes on companies which held their profits in reserve rather than spending them on new equipment or raising employees’ salaries. This angered many American business owners, and the act was repealed after only two years. However, it put the Democratic Party firmly in the progressive taxation camp, where it has remained ever since.

Most of the New Deal programs created during the Depression were ended either during or after the Second World War. One which has stood the test of time is Social Security, which guarantees a pension to older Americans once they retire. Social Security was probably the most controversial action of the Roosevelt administration during the Depression—one Republican opponent called it “the lash of the dictator”—but it has become one of the most popular entitlement programs in American history. The program has been reformed several times but never departed from its basic structure: Americans pay a portion of their income out of each paycheck to fund current retirees with the promise that future workers with pay for their retirement in return. Again, the Democratic Party took a position in favor of a welfare state and ensuring the well-being of the American people.

Unfortunately, while the New Deal helped some Americans, it did not end the Great Depression. A recovery of sorts began in 1936, but a year later a second recession struck the country and drove unemployment numbers back up. President Roosevelt’s efforts at new programs were opposed by a conservative backlash, especially on the Supreme Court, and he sought unsuccessfully to add justices to the court in order to get his programs through. This also backfired, but as justices retired, Roosevelt was able to put New Dealers on the Supreme Court who ruled his programs as constitutional. What ultimately ended the Great Depression was the outbreak of the Second World War. By 1941, as the United States began to ship arms to Great Britain and the Soviet Union, unemployed Americans found work in factories, and when Japan attacked at Pearl Harbor and America entered the war, the country reached full employment in the first weeks of 1942. Fears of a return to depression peaked as the war drew to a close, but the skies soon cleared as America celebrated its victory. There have been economic downturns since the Great Depression (most recently in 2008), but America has not again suffered the woes of a national depression.

The Political Legacy of the New Deal

The 1936 presidential election would be the first test of Roosevelt’s “New Deal coalition.” The great question was whether or not it would hold together and, more broadly, if the American people would support their president’s radical transformation of the American economy. The Republicans chose Governor Alf Landon of Kansas to run against Roosevelt, and most observers predicted the campaign would be close. However, Landon was an ineffective candidate who agreed with Roosevelt on most issues; he supported the entirety of the New Deal but then criticized it as “anti-business” and insisted he could do a better job of managing the economy. On election day, the American people returned Roosevelt to the White House in the largest popular vote margin of any campaign since 1820 to that point. Roosevelt won every state in the Union except Maine and Vermont and eleven million more votes than Governor Landon.

Roosevelt would go on to win reelection twice more (breaking the precedent set by George Washington of serving only two terms) and would die only one month into his fourth term in 1945. Alf Landon’s campaign of supporting the New Deal’s new welfare state and interventionist attitude in the economy would become a model for the Republican Party for more than three decades. Except in 1948, in every presidential election from 1936 to 1972 the Republican candidate would express support for welfare to help poor Americans but insist that he was better able to run these programs. The shift in the Democratic Party during the New Deal was thus mirrored in the Republican Party in the decades after the Depression—rather than critique the idea of progressive intervention in the economy, the Republicans accepted it as necessary but promised a “me-too-only-better” vision for the country. For Dwight Eisenhower and Richard

Nixon, this campaign model proved successful (though in each case there were likely other mitigating factors). By 1972, the Republicans had wholeheartedly embraced both the New Deal and its successor, Lyndon Johnson’s Great Society, and President Nixon went even further than either Roosevelt or Johnson could have dreamed when it came to government action in the economy. He imposed wage and price controls, created the Occupational Safety and Health Administration and the Environmental Protection Agency, and become the first president since Roosevelt to support a universal healthcare system. All this came out of his campaign promise to clean up the “welfare mess.”

So what became of conservatism within the American political system? For much of the middle portion of the 20th century, critics of conservatism linked the ideology to the economic policies which had created the Great Depression (though this critique is debatable). When conservatives tried to stand up against the ever-increasing spate of government regulation, the cry went up that these politicians wished to return America to the “Roaring Twenties”—implying that a second Depression would be around the corner if their ideas were implemented. 1936 to 1972 was the summit of progressivism, not just in the United States but around the world. The federal government protected workers, paid benefits to the unemployed and the elderly, provided medical care to the disabled, and regulated the business cycle to prevent a depression. Only time would tell if this progressive wave could be sustained.