Great Depression in The United States - Political Results of The Depression

Political Results of The Depression

In the "First New Deal" of 1933-4, programs, such as the National Recovery Administration (NRA), sought to stimulate demand and provide work and relief through increased government spending. To end Deflation the Gold standard was suspended and a series of panels comprising business leaders in each industry set regulations which ended what was called "cut-throat competition," believed to be responsible for forcing down prices and profits nationwide.

The NRA, which ended in March 1935 when the Supreme Court of the United States declared it unconstitutional, had these roles:

• Setting minimum prices and wages and competitive conditions in all industries. (NRA)
• Encouraging unions that would raise wages, to increase the purchasing power of the working class by 93%. (NRA)
• Cutting farm production so as to raise prices and make it possible to earn a living in farming (done by the AAA and successor farm programs).

In 1934–36, during what the U.S. Department of State calls the "Second New Deal," Roosevelt and his party added social security; the Works Progress Administration (WPA), a national relief agency; and, through the National Labor Relations Board, a strong stimulus to the growth of labor unions. Unemployment fell by ⅔ in Roosevelt's first term (from 25% to 9%, 1933–1937), but fell continually until the war.

In 1929, federal expenditures constituted only 20% of the GDP. Between 1933 and 1939, federal expenditures tripled, but the national debt remained about level at 40% of GNP. (The debt as proportion of GNP rose under Hoover from 20% to 40%; the debt as % of GDP soared during the war years, 1941–45.) Following the Recession of 1937 and the debate on "court packing", southern Democrats joined with Republicans in a conservative coalition to stop further expansion of the New Deal. By 1943, during World War II, all of the relief programs had ended with the exception of Social Security. The labor laws were revised by conservatives in the Taft Hartley Act of 1947.

The New Deal was, and still is, widely debated. The Great Depression and the New Deal remain a benchmark amongst economists for evaluating severe financial downturns, such as the economic crisis of 2008.