The New Deal: Part II

By John E. Hansan, Ph.D.

Introduction: The term “New Deal” was coined during Franklin Delano Roosevelt’s 1932 Democratic presidential nomination acceptance speech, when he said, “I pledge you, I pledge myself, to a new deal for the American people.” Roosevelt summarized the New Deal as a “…use of the authority of government as an organized form of self-help for all classes and groups and sections of our country.”

The public’s acceptance of New Deal programs and services initiated by President Roosevelt in his first term was to a large extent a result of the pain and fear caused by the Great Depression.  How bad the conditions were is worth remembering, since this is a means of gauging the enormous pressure for significant changes in government policy. One of the worst thing about the 1929 depression was its length of time. Men who had been sturdy and self-respecting workers can take unemployment without flinching for a few weeks, a few months, even if they have to see their families suffer; but it is quite different after a year, two years, three years. Among the miserable creatures curled up on park benches, selling apples on the street corner or standing in dreary lines before soup kitchens in 1932 were white men who had been jobless since the end of 1929. This traumatic experience marked millions of people for the rest of their lives, and made them security conscious.

Worse, perhaps, were the signs that law and order were beginning to crumble. There was also the Bonus March of veterans of World War I to Washington in 1932 when an estimated 30,000 veterans traveled to Washington, D.C. to make their presence known and pressure Congress to issue the bonuses promised to them after WWI.  Those that had marched victoriously down Pennsylvania Ave. at the end of WWI now lived a bleak existence in our nation’s capital, some clothed in scraps of their old uniforms. Eleven days after Congress failed to compensate the “Bonus Army,” General Douglas MacArthur and the Army were ordered by President Hoover to drive the camp inhabitants away and bulldoze their settlements after riots erupted.

The Social Security Act

One of the most significant programs enacted as part of the New Deal was the Social Security Act of 1935.  Social security is the term commonly used to describe the Old Age, Survivors Insurance program (OASI) created by Title II of the Social Security Act of 1935. The original OASI legislation was developed as one part of the federal response to the economic vulnerabilities of a certain class of workers and their families revealed by the Great Depression. The Social Security Act of 1935 also created a nationwide system of Unemployment Insurance (Title III) and a system of federal/state administered cash assistance programs (i.e., Public Welfare) for the needy Aged (Title I), the Blind (Title X), and Dependent Children (Title IV).

To fully understand the purpose and nature of the original OASI legislation, it is important to note that in the 1930s, the predominant social mores and values of the era viewed only “white men” as workers. When the legislation was being shaped, the nation’s unemployment rate was 25 percent. Regardless of how social security is perceived today, it is essential to remember that in 1935, OASI was specifically designed to remove older people from the workforce, not keep them in it.

Structure: OASI was designed as a “universal contributory social insurance” program to protect workers and their families against loss of income due to retirement or death of the wage earner. To be eligible for social security, a person had to work in “covered employment” and pay Federal Insurance Contributions Act (FICA) taxes for at least 10 years (40 quarters). Until 1950, Social security covered only employees in manufacturing and commerce. Government employees, public school employees, farmers and domestic workers and others were excluded. As a result, the vast majority of women and racial minorities were not eligible to participate in the program from the beginning, leaving them fewer years with which to build up their benefit levels resulting in significantly smaller retirement benefits.

Basic Principles of Social Security Insurance: There are a number of basic principles underlying the structure of our social security system:

• The system is work related — Benefit levels for retirees and their families are related to earnings history and wage levels. Those who make higher contributions receive higher benefits on retirement.
• Benefits are not means-tested — Benefits are paid regardless of an individual’s income from saving, pensions, insurance, or other forms of non-work income. Workers do not have to prove financial need to receive benefits.
• Universal compulsory coverage — Workers may not opt out of the social security system. By mandating participation, adverse selection is avoided.
• Law defines benefits — Any person who meets the legal requirements qualifies for benefits. Disagreements may be taken to court.

With respect to insurance, the act contained both unemployment insurance and old age pensions (commonly known as “Social Security”). The program of Unemployment Insurance was very unpopular with business leaders. To illustrate, as late as 1931, Henry Ford persisted in blaming mass unemployment on individual laziness. He claimed there was plenty of work for those who wanted it!  Yet, packaging unemployment insurance with more popular programs such as old age pensions, Roosevelt was able to pass the legislation.

The Social Security Act also contained several federal poor relief programs. Intended to be a continuing federal responsibility, these programs included Old Age Assistance, Aid to the Blind, and Aid to Dependent Children (ADC). ADC, as the name suggests, targeted relief to poor children in single parent families. It was not until 1950 that the single parent became officially eligible for assistance also. With the New Deal, poor relief became a right of American citizens who met certain eligibility standards, including of course, financial need. In other words, poor relief became, not a “means” to rehabilitation, but rather, an “end in itself.” The Social Security Act promoted cooperation between the federal government and the states in providing poor relief through the use of “matching funding formulas.” That is, for every dollar of state funding expended in the Old Age Assistance, Aid to the Blind, and Aid to Dependent Children programs, the federal government contributed a specified percentage of funding. Yet, the legislation allowed each state to determine eligibility standards and levels of benefits. Also contained in the legislative package were a number of smaller scale health and human service programs. These included child welfare and maternal health programs in Title V of the act and public health programs in Title VI of the legislation.

Conservative Opponents of the New Deal

By 1934, the New Deal was encountering opposition from both ends of the political spectrum. Conservatives argued that Roosevelt had done too much. Some of them organized the American LibertyLeague in August 1934 to galvanize the right and oppose the President and his policies. The League leadership sought to fuse a partnership between the segregationist governor of Georgia Eugene Talmadge and other conservative leaders to create a grassroots opposition to the New Deal.  Liberty League speakers toured the country accusing Roosevelt of instituting creeping socialism.

In the mid-term elections in 1934, the Democrats gained enough seats in both houses of Congress to enjoy veto-proof majorities. The nation saw measurable progress by 1935, but businessmen and bankers increasingly opposed the New Deal. The president`s experiments alarmed them. The rich, conservatives and numerous businessmen vigorously opposed the New Deal. They were dismayed by his toleration of budget deficits and his removal of the nation from the gold standard, and they were disgusted by legislation favorable to labor.

The Reverend Charles Edward Couglin (The Radio Priest)

Father Charles Coughlin, a Catholic Priest, born to American citizens then living in Canada, first took to the airwaves in Detroit in 1926, broadcasting weekly sermons over the radio. By the early 1930s the content of his broadcasts had shifted from theology to economics and politics. Just as the rest of the nation was obsessed by matters economic and political in the aftermath of the Depression, so too was Father Coughlin. Coughlin had a well-developed theory of what he termed “social justice,” predicated on monetary “reforms.” He began as an early Roosevelt supporter, coining a famous expression, that the nation’s choice was between “Roosevelt or ruin.” Later in the 1930s he turned against FDR and became one of the president’s harshest critics. His program of “social justice” was a very radical challenge to capitalism and to many of the political institutions of his day.  Father Coughlin’s influence on Depression-era America was enormous. Millions of Americans listened to his weekly radio broadcast. At the height of his popularity, one-third of the nation was tuned into his weekly broadcasts. In the early 1930s, Coughlin was, arguably, one of the most influential men in America.

As his influence grew, so did the criticism of his politics. Detroit Bishop Michael Gallagher refused to discipline Fr. Coughlin, saying: “Until a lawful superior rules otherwise, I stand steadfastly behind this priest.”  Archbishop Edward Mooney, newly arrived as Detroit’s first archbishop in 1937, was that superior. Fr. Coughlin was maneuvered out of the limelight and eventually silenced.

Below are some of Coughlin’s quotes as reported in The Detroit News:

“I believe that when a banker speaks, you can go the opposite way and be right. That has been proved in recent years.”
— March 6, 1934

“… we shall barter our sovereignty as a free, independent nation or accept the decisions of a World Court as a super-nation to manage our affairs …”
“While we sympathize with the Serbian or the Russian, with the Jew in Germany or the Christian in Russia, the major portion of our sympathy is extended to our dispossessed farmer, our disconsolate laborers who are being crushed at this moment while the spirit of internationalism runs rampant in the corridors of the Capitol, hoping to participate in setting the world aright while chaos clamors at our doors.”
— January 28, 1935

“Roosevelt has a poor brand of Russian communism … I think it is significant the leaders among the communists of the world never once attacked international bankers. Roosevelt will not touch that subject.”
— August 31, 1935

“I need not recall for you that both the laboring and agricultural classes of America are forced to work for less than a living wage while the owners of industry boastfully proclaim that their profits are increasing.”
— April 6, 1936

“If Jews persist in supporting communism directly or indirectly, that will be regrettable. By their failure to use the press, the radio and the banking house, where they stand so prominently, to fight communism as vigorously as they fight Naziism, the Jews invite the charge of being supporters of communism.”
— November 28, 1938

“From European entanglements, from Naziism, communism and their future wars, America must stand aloof. Keep America safe for Americans and the Stars and Stripes the defender of God.”
— January 2, 1939

“Must the entire world go to war for 600,000 Jews in Germany who are neither American, nor French, nor English citizens, but citizens of Germany?”
— January 30, 1939

From The Detroit News: http://apps.detnews.com/apps/history/index.php?id=43#ixzz2CsFazTvC

Radical Opponents of the New Deal

U.S. Senator Huey Long

The most prominent left-wing threat to Roosevelt was a U.S. Senator from Louisiana, Huey Long, who railed at the New Deal for not doing enough.  Huey Long was Governor of Louisiana from 1928 to 1932 and was elected to the U.S. Senate in 1930. A nominal Democrat, Huey Long was a radical populist, of a sort we are unfamiliar with in our day. As Governor, he sponsored many reforms that endeared him to the rural poor. An ardent enemy of corporate interests, he championed the “little man” against the rich and privileged. A farm boy from the piney woods of North Louisiana, he was colorful, charismatic, controversial, and always just skating on the edge. He gave himself the nickname “Kingfish” because, he said, “I’m a small fish here in Washington. But I’m the Kingfish to the folks down in Louisiana.”

Huey Long was the determined enemy of Wall Street, bankers and big business and he was also a determined enemy of the Roosevelt administration because he saw it as too beholden to these powerful forces.

Huey Long did not suffer from excessive modesty. A high-school dropout who taught himself law and got a law degree in only one year of study, Long was confident he would become President of the United States in 1936. So confident was he that he wrote a book entitled My First Days in the White House in which he named his cabinet (including President Roosevelt as Secretary of the Navy and President Hoover as Secretary of Commerce) and in which he conducted long imaginary conversations with FDR and Hoover designed to humiliate them and show their subservience to the boy from the piney woods of Louisiana.

The Kingfish wanted the government to confiscate the wealth of the nation’s rich and privileged. He called his program “Share Our Wealth.”  The program called upon the federal government to guarantee every family in the nation an annual income of $5,000, so they could have the necessities of life, including a home, a job, a radio and an automobile. He also proposed limiting private fortunes to $50 million, legacies to $5 million, and annual incomes to $1 million. Everyone over age 60 would receive an old-age pension. His slogan was “Every Man A King.”

THE SHARE OUR WEALTH SOCIETY

By Huey P. Long, United States Senator

People of America: In every community get together at once and organize a share-our-wealth society–Motto: Every man a king

Principles and platform:

1. To limit poverty by providing that every deserving family shall share in the wealth of America for not less than one third of the average wealth, thereby to possess not less than $5,000 free of debt.

2. To limit fortunes to such a few million dollars as will allow the balance of the American people to share in the wealth and profits of the land.

3. Old-age pensions of $30 per month to persons over 60 years of age who do not earn as much as $1,000 per year or who possess less than $10,000 in cash or property, thereby to remove from the field of labor in times of unemployment those who have contributed their share to the public service.

4. To limit the hours of work to such an extent as to prevent overproduction and to give the workers of America some share in the recreations, conveniences, and luxuries of life.

5. To balance agricultural production with what can be sold and consumed according to the laws of God, which have never failed.

6. To care for the veterans of our wars.

7. Taxation to run the Government to be supported, first, by reducing big fortunes from the top, thereby to improve the country and provide employment in public works whenever agricultural surplus is such as to render unnecessary, in whole or in part, any particular crop.

To explain the title, motto, and principles of such a society I give the full information, viz:

Title: Share-our-wealth society is simply to mean that God’s creatures on this lovely American continent have a right to share in the wealth they have created in this country. They have the right to a living, with the conveniences and some of the luxuries of this life, so long as there are too many or enough for all. They have a right to raise their children in a healthy, wholesome atmosphere and to educate them, rather than to face the dread of their under-nourishment and sadness by being denied a real life.

Motto: “Every man a king” conveys the great plan of God and of the Declaration of Independence, which said: “All men are created equal.” It conveys that no one man is the lord of another, but that from the head to the foot of every man is carried his sovereignty.

Now to cover the principles of the share-our-wealth society, I give them in order:

1. To limit poverty:

We propose that a deserving family shall share in our wealth of America at least for one third the average. An average family is slightly less than five persons. The number has become less during depression. The United States total wealth in normal times is about $400 billion or about $15,000 to a family. If there were fair distribution of our things in America, our national wealth would be three or four or five times the $400 billion, because a free, circulating wealth is worth many times more than wealth congested and frozen into a few hands as is America’s wealth. But, figuring only on the basis of wealth as valued when frozen into a few hands, there is the average of $15,000 to the family. We say that we will limit poverty of the deserving people. One third of the average wealth to the family, or $5,000, is a fair limit to the depths we will allow any one man’s family to fall. None too poor, none too rich.

2. To limit fortunes:

The wealth of this land is tied up in a few hands. It makes no difference how many years the laborer has worked, nor does it make any difference how many dreary rows the farmer has plowed, the wealth he has created is in the hands of manipulators. They have not worked any more than many other people who have nothing. Now we do not propose to hurt these very rich persons. We simply say that when they reach the place of millionaires they have everything they can use and they ought to let somebody else have something. As it is, 0.1 of 1 percent of the bank depositors nearly half of the money in the banks, leaving 99.9 of bank depositors owning the balance. Then two thirds of the people do not even have a bank account. The lowest estimate is that 4 percent of the people own 85 percent of our wealth. The people cannot ever come to light unless we share our wealth, hence the society to do it.

3. Old-age pensions:

Everyone has begun to realize something must be done for our old people who work out their lives, feed and clothe children and are left penniless in their declining years. They should be made to look forward to their mature years for comfort rather than fear. We propose that, at the age of 60, every person should begin to draw a pension from our Government of $30 per month, unless the person of 60 or over has an income of over $1,000 per year or is worth $10,000, which is two thirds of the average wealth in America, even figured on a basis of it being frozen into a few hands. Such a pension would retire from labor those persons who keep the rising generations from finding employment.

4. To limit the hours of work:

This applies to all industry. The longer hours the human family can rest from work, the more it can consume. It makes no difference how many labor-saving devices we may invent, just as long as we keep cutting down the hours and sharing what those machines produce, the better we become. Machines can never produce too much if everybody is allowed his share, and if it ever got to the point that the human family could work only 15 hours per week and still produce enough for everybody, then praised be the name of the Lord. Heaven would be coming nearer to earth. All of us could return to school a few months every year to learn some things they have found out since we were there: All could be gentlemen: Every man a king.

5. To balance agricultural production with consumption:

About the easiest of all things to do when financial masters and market manipulators step aside and let work the law of the Lord. When we have a supply of anything that is more than we can use for a year or two, just stop planting that particular crop for a year either in all the country or in a part of it. Let the Government take over and store the surplus for the next year. If there is not something else for the farmers to plant or some other work for them to do to live on for the year when the crop is banned, then let that be the year for the public works to be done in the section where the farmers need work. There is plenty of it to do and taxes of the big fortunes at the top will supply plenty of money without hurting anybody. In time we would have the people not struggling to raise so much when all were well fed and clothed. Distribution of wealth almost solves the whole problem without further trouble.

6. To care for the veterans of our wars: A restoration of all rights taken from them by recent laws and further, a complete care of any disabled veteran for any ailment, who has no means of support

7. Taxation:

Taxation is to be levied first at the top for the Governments support and expenses. Swollen fortunes should be reduced principally through taxation. The Government should be run through revenues it derives after allowing persons to become well above millionaires and no more. In this manner the fortunes will be kept down to reasonable size and at the same time all the works of the Government kept on a sound basis, without debts.  (Source: www.socialsecurity.gov)

Dr. Francis Townsend

Introduction: A second radical proposal was sponsored by Dr. Francis Townsend, a dentist from California. Senator Long proposed a “share the wealth” program where millionaires would be taxed to fund pensions for anyone over 60 years of age. The cost of the program, to be funded by an income tax, was projected to be $3.6 billion, a huge amount of money at the time. Dr. Townsend proposed a special sales tax to pay every American citizen over 60 years of age (except convicted felons) $200 per month. The total cost of the proposal was estimated to be $2.4 billion. About 25 million people signed petitions in support of Townsend’s plan! Partly in response to these pressures, the Roosevelt Administration established a two-tier federal system of insurance and relief programs.

Background: After World War I,  the Townsends lived in Long Beach, Calif. But Townsend’s private medical practice did not prosper so he took a position as assistant city health director. Because of the Great Depression, he soon lost that job. Then, at the age of 66 and wanting to retire, Townsend grew increasingly indignant over the plight of the large number of poverty-stricken old people like himself. In 1933 he proposed a plan whereby the Federal government would provide every person over 60 years of age a $200 monthly pension.

The plan called for a guaranteed monthly pension of $200, a quite-considerable sum in the 1930. The pension would be sent to every retired citizen age 60 or older, to be paid for by a form of a national sales tax of 2% on all business transactions with the stipulation that each pensioner would be required to spend the money within 30 days. His idea was to end the Depression through consumer spending by way of ending poverty among the elderly.

After proposing his idea in the People’s Forum column of the local Long Beach newspaper in September 1933 and advertising for canvassers to obtain endorsements, Dr. Townsend was inundated with volunteers. Robert Earl Clements, a young real estate broker, signed on as promoter and fund-raiser, and on New Year’s Day 1934 the two opened the first headquarters for their new “Old Age Revolving Pensions, Ltd.” In short order, the Townsend movement emerged as a political force with which to be reckoned. By September, their office in Long Beach was averaging two thousand letters a day from interested people, and within a year more than a thousand Townsend clubs were functioning. By 1936, a presidential election year, the organization claimed to have more than three and a half million members, and it obtained more than twenty million signatures on petitions calling for congressional approval of the Townsend Plan. The simplicity of the proposal, the apostolic zeal of Townsend, and the organization of the Townsendites into a formidable pressure group brought increasing support for the plan despite its condemnation by economists.

Sources:

Social Security Online: History: www.ssa.gov/history/

The Detroit News: http://apps.detnews.com/apps/history/index.php?id=43#ixzz2CsFazTvC

How to Cite this Article (APA Format): Hansan, J.E. (2012). The New Deal: Part II. Retrieved [date accessed] from /?p=8034.