new deal definition us history

new deal definition us history

The New Deal: A Comprehensive Examination in U.S. History

1. Introduction to the New Deal Era

Subsequent papers generally aimed to clarify the historical record and to provide quantitative disaster economics. In particular, relied on the National Industrial Recovery Act’s system of industrial codes being quasi-randomly imposed to provide evidence in support of the view that New Deal reforms had a positive impact on the labor market. Our answer is a qualified yes at best. In many cases, the New Deal was a response to deteriorating economic conditions. Data on GDP and the unemployment rate during the 1930s can be seen in Figure 2. Note that output and labor variables are indexed using 1929 as the base period.

This chapter provides evidence on the impact of the New Deal on several aspects of the economy, including labor, output, and stock returns. To fix ideas, Figure 1 summarizes the magnitude of the policy interventions during the New Deal era by focusing on government spending as a fraction of GDP. This chapter does not try to provide a comprehensive overview of the historical narrative surrounding the New Deal. In fact, many key events and ideas were laid out in his chapter in this volume.

2. Key Components and Programs of the New Deal

The degree of alterations due to the New Deal is significant. The New Deal shifted the framework of legislation so as to promote considerable social progressivity for the benefit of the American people. Presently, federal involvement is presumed to be part of supplying relief in case of economic crisis. Inarguably, the New Deal changed the essence of the American government. Institutional changes make it more unforeseeable that political leaders could make such changes. Such a remarkable pace of alterations is largely the product of policies formed throughout the twelve years following the Wall Street Crash.

The New Deal changed the essence of the federal government and created the blueprint for the modern America we live in today. President Roosevelt’s New Deal existed as a response to the economic and social devastation of the Great Depression. The New Deal’s government intervention policies sought to socialize and regulate the economy in order to restore balance following the radical economic fluctuation. As depicted by the stature of programs implemented, the New Deal was a comprehensive effort, which comprehensively altered political institutions and policies, both at the national and state levels.

3. Impact and Legacy of the New Deal

After the Presidential election of 1936, the New Deal reached its high point. For the first time in the nation’s history, the federal government assumed primary economic responsibility for an economic crisis. Within a remarkably short period of time, the New Deal provided direct relief in the form of money for those out of work; established government bodies designed to generate and regulate economic activity; and initiated an enormous series of public works projects, which, through construction and materials purchase, created new jobs. In a large sense, the New Deal was successful in several ways. It established a new political philosophy in America, one which was much more in tune with the country’s acceptance of a federal government deeply involved in the life of the nation. It was also successful in demonstrating the new phase of federalism – the sharing of power between the federal government and the states. Finally, the New Deal deserved credit for preserving both the democratic process and the capitalistic system at a time when it seemed these essential elements of American life were in jeopardy.

Throughout the 1930s, the nation was emerging from the depths of the Great Depression. In many respects, the New Deal produced a fundamental and durable realignment in American politics. Roosevelt’s victory in 1932 reflected the desire of many Americans for a strong leader who would take aggressive action to end the Depression. A majority of eight to nine million new voters supported Roosevelt, and his winning majority coalition included urban elements, such as labor, immigrants, and African Americans. Also included here were many more segments of the population than in traditional Democratic influence. The three leading groups were farmers, industrial workers, and people on relief. Having intervened sharply in the lives of individual citizens through social welfare micro-intervention, the federal government gradually assumed a prominent and frequently controlling macro-economic role.

4. Critiques and Controversies Surrounding the New Deal

The New Deal’s effectiveness and reach also became grist for the mill of a myriad of scholarly debates concerning both the Deal and its times. Here are a few of these discussions. Did the New Deal work? Scholarly opinions about the New Deal’s immediate success and long-range impact have always varied widely, largely because lengthy counter-factual arguments enter the debate. It is speculative to decide whether the New Deal cured the problems of the Great Depression or whether those economic demons’ life spans had simply expired in 1933. While stock market, home loan, industrial production, retail sales, and unemployment statistics showed incremental recovery during the mid-1930s, some scholars claim that these improvements were not unparalleled or unmatched by other nations suffering from the Depression, while temporary alleviation of some of the United States’ economic ills persisted throughout the 1930s. Arguing that businesses should rapidly shoulder the burden of economic revitalization and re-employment, the More For Business mindset second-guessed FDR unmercifully.

Some Americans criticized the New Deal for deviating widely from traditional laissez-faire concepts. In order to provide relief, help recover the economy, and prevent similar financial disasters in the future, New Dealers had to convince the public to give the government unprecedented peacetime powers. These new federal powers took on a unique dimension within the government as well. The New Deal changed the shape, color, and character of the U.S. Supreme Court as it retired seven aged justices and replaced them with like-minded New Dealers who then helped uphold much of the New Deal legislation. Although New Dealers aimed to help those groups disempowered during the Depression, some believe the New Deal extended paternalism and coercion to traditionally immune governors and citizens, shifted control of wealth from business to labor, and eroded the free enterprise system.

5. Comparative Analysis: New Deal Policies and Modern Economic Challenges

Directly, the New Deal did not focus on liberal tax policy because relief and recovery programs were crucial during the Depression, but setting top marginal tax rates very high did accomplish shaping the economy, at least temporarily. We know now the economy can be stimulated to full employment or beyond, that since the 1980s welfare programs seem to have been successful at redistributing money to the wealthiest, and that in the long run top-heavy tax cuts do not seem to be effective in stimulating general economic growth. Therefore, we have every incentive to reimpose taxation policy that supports equality to the greatest degree, bearing in mind the role of the income tax.

The New Deal addressed many issues at once and in doing so tried multiple solutions. Today’s liberal reforms are more carefully delineated and targeted. Still, the New Deal offers a wealth of successful policies that could be implemented relatively quickly assuming a liberal political regime, using trickle-up policies, shaping the economy and tax system, taming powerful interest groups, and taking advantage of the lessons we have learned about how the economy operates. In this chapter, I will examine ways the New Deal did these things and advantages and disadvantages of New Deal policies compared to proposed liberal responses to the same issues today.