What was one major result of FDRs New Deal policy?

The New Deal is an economic policy launched by Franklin D. Roosevelt to end the Great Depression. Americans were battered by 25% unemployment, Dust Bowl droughts, and four waves of bank failures. They welcomed the government's rescue.

FDR proposed the New Deal to reverse the downward economic spiral. The goals were relief, recovery, and reform for those who were hardest hit. 

Key Takeaways

  • The New Deal was a series of large-scale relief programs and reforms that FDR implemented to counteract the economic effects of the Great Depression.
  • The New Deal advocated government spending as a key economic driver boosting consumer demand.
  • The New Deal played a significant role in countering the Great Depression and revitalizing the U.S. economy.
  • FDR’s plan revealed just how vital the government’s role is in the management of the nation’s economy.

New Deal Policies

FDR launched the New Deal in three waves from 1933 to 1939. Congress passed dozens of programs to stabilize the U.S. financial system. They provided relief to farmers, and jobs to the unemployed. They also built private-public partnerships to boost manufacturing.

FDR's New Deal policies introduced Keynesian economic theory. It said government spending could end the Depression by stimulating consumer demand. The New Deal was a far cry from President Herbert Hoover's "...hear-nothing, see-nothing, do-nothing Government," derided by FDR in his 1936 campaign speech.

Hoover believed a free-market economy would self-correct. Government revenue fell as the Depression wore on, so Hoover cut spending. He signed the Smoot-Hawley tariff to protect U.S. industries. He believed that business prosperity would trickle down to the average person. The Depression worsened instead.

First New Deal and Its Programs

Roosevelt was inaugurated on March 4, 1933. FDR pushed Congress to pass 15 new agencies and laws in his first 100 days in office. Together, they created "capitalism with safety nets and subsidies," according to historian Lawrence Davidson. 

  • Emergency Banking Act - March 9: FDR had proclaimed a four-day nationwide "banking holiday" 36 hours after he was inaugurated, to stop bank runs. On the fourth day of the bank closures, a special session of Congress passed a bill in seven and a half hours. This Act allowed banks to reopen once examiners found them to be financially secure. By March 15, banks controlling 90% of banking resources had reopened, and deposits far exceeded withdrawals. 
  • Government Economy Act - March 20: The act permitted Roosevelt to cut the pay of government and military employees by 15%. The $243 million saved went to finance New Deal programs.
  • Beer-Wine Revenue Act - March 22: This Act legalized the sale of low-alcohol beer and wine and taxed alcohol sales, raising federal revenue. The Beer-Wine Revenue Act was followed by the passage of the 21st Amendment, which effectively ended Prohibition.
  • Civilian Conservation Corps - March 31: The program hired three million workers over nine years to conserve public land. They planted forests, built flood barriers, and maintained roads and trails.
  • Abandonment of Gold Standard - April 5: FDR stopped a run on the precious metal. He ordered everyone to exchange all gold for dollars. 
  • Federal Emergency Relief Act - May 12: This program funded a wide variety of jobs in agriculture, the arts, construction, and education.
  • Agricultural Adjustment Act - May 12: This legislation subsidized farmers to reduce crops. It doubled crop prices by 1937. It was overturned by the Supreme Court in 1936 because it taxed processors but gave funds to farmers. That was remedied in 1938.
  • Emergency Farm Mortgage Act - May 12: This act provided loans to save farms from foreclosure.
  • Tennessee Valley Authority Act - May 18: The program established a federal corporation that built power stations in the Tennessee Valley, the poorest area in the nation.
  • Securities Act - May 27: This act required corporations to provide information to investors before issuing stock.
  • Abrogation of Gold Payment Clause - June 5: The government no longer had to repay dollars with gold.
  • Home Owners' Loan Act - June 13: This act established the Home Owners Loan Corporation that refinanced mortgages to prevent foreclosures. It also provided additional capital to mortgage lenders. It had refinanced 1 million homes when lending activities closed in 1936, which was the equivalent of 20% of all urban mortgages.
  • Glass-Steagall Banking Act - June 16: This law separated investment banking from retail banking. It prevented retail banks from using depositors' funds for risky investments. It gave the regulation of retail banks to the Federal Reserve, prohibited bank sales of securities, and created the Federal Deposit Insurance Corporation (FDIC). The act was repealed in 1999 by the Gramm-Leach-Bliley Act.
  • National Industrial Recovery Act - June 16: This labor and consumer law set up the Public Works Administration to create public works jobs, like the Hoover Dam, Route 66, and New York City's Triborough Bridge. This law also created the National Recovery Administration. It outlawed child labor, established minimum wage rates, and limited the workday to eight hours. It gave trade unions the legal right to bargain with employers. It was declared unconstitutional in 1935.
  • Emergency Railroad Transportation Act - June 16: This piece of legislation attempted to coordinate the national railway systems.
  • Civil Works Administration - November 9: Created thousands of construction jobs to put people to work. Congress allowed this temporary organization to expire on March 31, 1934. 

Conservative businessmen criticized the New Deal for being too socialistic in 1934. Others, like Louisiana politician Huey Long, said it didn't do enough for the poor. FDR pushed for these additional programs despite their criticisms:

  • Gold Reserve Act - Jan. 30: FDR prohibited private gold ownership. He increased the price of gold to $35 per ounce, up from $20.67 per ounce where it had been for 100 years. That doubled the value of the gold held in U.S. Federal Reserve Banks from $3.56 billion in January 1934 to $7.57 billion by December 1935, making the United States the world's largest owner of gold.
  • National Housing Act - June 27: This law established the Federal Housing Administration, which provides federal insurance for mortgages.
  • Securities Exchange Act – June 6: The law created the Securities and Exchange Commission, which regulates stocks and the stock market.
  • Federal Communications Act – June 19: The act consolidated all federal regulations of telephone, telegraph, and radio communications under the Federal Communications Commission.

Second New Deal Programs

The Supreme Court struck down the National Industrial Recovery Act in 1935. Concerned that other programs would also be eliminated, FDR launched the second round of New Deal programs.

These focused on providing more services for the poor, the unemployed, and farmers. FDR spoke about helping the "...millions who never had a chance—men at starvation wages, women in sweatshops, children at looms."

  • Soil Conservation and Domestic Allotment Act - February 29:  This program paid farmers to plant soil-building crops, like beans and grasses, to counteract the Dust Bowl.
  • Emergency Relief Appropriation of 1935 - April 8: The program replaced Federal Emergency Relief Act of 1933 and funded the new Works Progress Administration with $4.8 million. It employed 8.5 million people to build bridges, roads, public buildings, public parks, and airports. It paid artists to create 2,566 murals and 17,744 pieces of sculpture to decorate the public works.
  • Rural Electrification Act - May 20, 1936: The law provided loans to farming cooperatives to generate electricity for their rural areas.
  • National Labor Relations Act / Wagner Act - July 5, 1935: This law protected the rights of employees to organize and address working conditions, with or without a union, and created the National Labor Relations Board.
  • Emergency Relief Appropriation Act - April 8, 1935:  It created the Resettlement Administration that trained farmers and administered farm debt adjustment activities. It bought 10 million acres of submarginal farmland and paid farmers to convert it to pasture, preserves, or parks. It resettled farmers onto better land and taught them modern conservation and farming techniques.
  • Social Security Act - August 14, 1935: This law created the Administration and the predecessor of the Social Security Trust Fund to provide income to the elderly, the blind, the disabled, and children in low-income households.

Third New Deal Programs

FDR rolled out the Third New Deal in 1937. Concerned about budget deficits, he did not fund it as much as the previous two. 

  • United States Housing Act: Also called the Wagner-Steagall Act, it funded state-run public housing projects.
  • Bonneville Power Administration: Congress created a federal agency that delivered and sold power from the Bonneville Dam near Portland, Oregon, which had been built by the PWA.
  • Farm Tenancy Act: Called the Bankhead-Jones Farm Tenant Act, it created the Farmers’ Home Corporation to provide loans for tenant farmers to buy their farms.
  • Farm Security Administration: This replaced the Resettlement Administration to provide loans and training for farmers.

The cutback in New Deal spending pushed the economy back into the Depression. FDR urged Congress to enact a $5 billion relief program that consisted of:

  • Federal National Mortgage Association: This organization resells mortgages on the secondary market to provide more funds for banks to lend.
  • New Agricultural Adjustment Act: The law remedied the AAA of 1933.
  • Fair Labor Standards Act: This labor law established a U.S. minimum wage, overtime pay, record keeping, and youth employment standards.

FDR abolished mark-to-market accounting in 1938. Some experts believed that it forced many banks out of business. The rule forced banks to write down their real estate as values fell. FDR's new rule allowed them to keep these assets on their books at historical prices.

FDR launched the Federal Security Agency in 1939. It administered Social Security, federal education funding, and food and drug safety. Congress abolished it in 1953. 

Why the New Deal Was a Success

The New Deal worked. The economy grew 10.8% in 1934 after FDR had launched the first New Deal. The economy increased by 8.9% in 1935 and 12.9% in 1936 when the second New Deal rolled out. The economy contracted 3.3% after FDR cut government spending in 1937.

The debt only grew by approximately $3 billion a year from 1932, the year before the New Deal, to 1941, when the United States entered the war. Defense spending added $23 billion to the debt in 1942. The amount added tripled to $64 billion in 1943. It would have ended the Depression right there and then if that much had been spent in the first year of the New Deal.

Some say that the New Deal didn't work, because the Depression lasted for 10 years. They point out that defense spending on World War II was the only thing that ended the Depression, but it would have ended the Depression if FDR had spent the same amount on the New Deal as he did on the war.

New Deal programs softened the extremes of the business cycle. There were 33 major economic downturns, 22 recessions, four depressions, and seven bank runs and panics before the New Deal, from 1797 through 1932, according to Lawrence Davidson of West Chester University. They impacted 60 of the 132 years covered. Recessions were more severe than they are in the millennium because there weren't New Deal federal agencies in place to control corruption, fraud, and exploitation. 

Note

There have been 11 recessions that impacted just 10 out of 60 years since WWII. They were milder than those before, thanks to the safety nets of the New Deal.

How the New Deal Could Have Prevented World War II

FDR spent 30 times more in 1943 on the war than he did in 1933 on the New Deal. There was no resistance to war spending as there was to domestic spending. No one was concerned about the budget deficit when the world was worried about Hitler's military dominance.

But concerns about the budget deficit sabotaged the New Deal from ending the Depression's global economic catastrophe. It would have ended the Depression if FDR had spent as much on the New Deal in 1933 as he did in the war in 1943, by creating jobs, demand, and economic growth. The Depression's misery helped propel the German people to put the Nazis and Hitler in power.

The United States could have turned its resources to helping its allies, Great Britain and France, sooner if FDR and the New Deal had ended the Depression in the early 1930s. It would have at least shortened, if not prevented, World War II.

New Deal Timeline

  • 1929: Hoover became president. The stock market crash in October kicked off the Depression. There was a $1 billion surplus. Unemployment was at 3.2%. 
  • 1930: Congress passed the Smoot-Hawley tariff to protect jobs. Trading partners retaliated, driving world trade down by 66%. The economy contracted 8.5%, and unemployment rose to 8.7%. Another $1 billion surplus resulted.
  • 1931: The Fed raised rates to defend the gold standard, worsening the depression. The economy contracted 6.4%, unemployment rose to 15.9%, and debt increased by $1 billion. 
  • 1932: FDR campaigned on New Deal promises. The economy contracted 12.9%, and unemployment rose to 23.6%. Lower revenues added $3 billion to debt.  
  • 1933: FDR took office. He immediately launched 15 programs under the First New Deal. This added $3 billion to debt. Depression started to lift as the economy only contracted 1.2%. Unemployment rose to 24.9%. 
  • 1934: The economy grew by 10.8%, and unemployment fell to 21.7%. Five billion dollars was added to the debt. 
  • 1935: FDR launched the Second New Deal, adding $2 billion to debt. The economy grew 8.9%, and unemployment fell to 20.1%. 
  • 1936: The economy grew 12.9%, reducing unemployment to 16.9%. Five billion dollars was added to the debt. 
  • 1937: FDR started his second term. Fearing a budget deficit, he cut spending, only adding $3 billion to debt despite rolling out the Third New Deal. The economy grew 5.1%, and unemployment fell to 14.3%. 
  • 1938: No more New Deal legislation was passed. Spending was cut, so only $1 billion was added to the debt. Unemployment rose to 19%. The economy shrank 3.3%. 
  • 1939: The Dust Bowl drought ended. The United States spent to build up the military as Europe entered WWII. The expenditures added $3 billion to debt. The economy grew 8%, and unemployment fell to 17.2%. 
  • 1940: The unemployment rate fell to 14.6% as the United States began the draft. FDR won reelection. America assisted Great Britain by sending weapons. This added $3 billion to debt. The economy grew by 8.8%. 
  • 1941: FDR began his third term. Japan attacked Pearl Harbor in December. The United States entered WWII. Spending eliminated the Depression and added $6 billion to debt. The economy grew 17.7%, and unemployment fell to 9.9%.  
  • 1942: Unemployment fell to 4.7% while the economy grew 18.9%. War spending added $23 billion to debt. 
  • 1943: The war added $64 billion to debt. Gross domestic product growth was 17% and unemployment fell to 1.9%. Italy surrendered. 
  • 1944: GDP growth was 8%, while unemployment was 1.2%. The Bretton-Woods Agreement made the dollar the global currency. 
  • 1945: FDR died in April. Truman became president. Truman added $58 billion to debt. Germany surrendered in May. Truman dropped a nuclear bomb in August. Japan surrendered in September, ending WWII. The economy contracted 1%. Unemployment edged up to 1.9% as soldiers returned home.

Four Ways the New Deal Affects You

Many of the New Deal's programs are still safeguarding your finances. The four most significant are Social Security, the minimum wage, the Securities and Exchange Commission, and the FDIC.

Social Security

The Social Security program provides a guaranteed income for workers who have paid into the system. Most people are familiar with the retirement benefits which can also be extended to the retiree's spouse.

Social Security also pays disability benefits to eligible beneficiaries who become disabled before reaching retirement age. It pays children, surviving spouses, and dependent parents of eligible beneficiaries who die or become disabled. It will even pay benefits to divorced spouses in some cases.

There's also a Supplemental Security Income program that pays benefits to disabled children and adults with limited income. A Special Benefits program provides for qualified World War II veterans.

Minimum Wage

The minimum wage is the lowest legal wage that companies can pay workers. Its purpose is to prevent employers from exploiting desperate workers. The U.S. federal minimum wage was $7.25 per hour as of January 2022, although President Joe Biden signed an executive order on April 27, 2021, requiring all federal contractors to pay a minimum wage of $15 to workers on federal contracts beginning on Jan. 30, 2022.

The minimum wage should provide enough income to afford a living wage. That's the amount needed to provide sufficient food, clothing, and shelter. 

Note

Unfortunately, Congress hasn't raised the minimum wage enough to keep pace with inflation.

The minimum wage translates to $15,080 a year at 40 hours per week for 52 weeks. That's more than the federal poverty level for a single person, but it's lower than the poverty level for a couple. Someone trying to support a family by earning minimum wage would qualify for federal poverty assistance.

SEC

The SEC regulates stocks, bonds, and mutual funds, making investing safer. The SEC also provides information through Investor.gov that can help you invest. It provides basic education, such as how the markets work, asset allocation, and a review of the different retirement plans. It has a section on "Selecting Your Broker." It provides financial planning tools, such as how much money you'll need to retire.

FDIC

The FDIC insures savings, checking, and other deposit accounts up to $250,000 for each account ownership category at each bank. It insures $250,000 per owner for some joint accounts. The FDIC also examined and supervised more than 5,000 banks and savings associations as of 2020.

The FDIC steps in when a bank fails. It sells the bank to another bank and transfers the depositors to the purchasing bank. The transition is seamless from the customer's point of view.

Frequently Asked Questions (FAQs)

When was the New Deal passed?

The New Deal wasn't passed on a single date. FDR's New Deal ideas were rolled out in a series of laws passed throughout the 1930s. The first piece of the New Deal, the Emergency Banking Act, was passed on March 9, 1933.

What was the basic idea of the New Deal?

The central goals of the New Deal were to stabilize the financial system, provide relief to farmers, find jobs for the unemployed, and boost manufacturing. Historians have described it as "capitalism with safety nets and subsidies."

What was a major result of FDR New Deal?

Major federal programs and agencies included the Civilian Conservation Corps (CCC), the Civil Works Administration (CWA), the Farm Security Administration (FSA), the National Industrial Recovery Act of 1933 (NIRA) and the Social Security Administration (SSA).

What was one outcome of the new deal quizlet?

The new deal expanded governments role in our economy, by giving it the power to regulate previously unregulated areas of commerce. Those primarily being banking, agriculture and housing. Along with it was the creation of new programs like social security and welfare aid for the poor.