US_Ch8_info

=**Chapter 8 - Enlarging the Public Sector Background Information**=

FDR defeated Herbert Hoover in 1932 (22.8 million to 15.7 million) with his Happy Days are Here Again theme. FDR hoped to capitalize on the economic collapse and the timid Congress. His policies to deal with the depression would be called the **New Deal**. The myth that is often portrayed in modern textbooks is that FDR and the New Deal saved capitalism by putting in new regulations and social programs that kept the market economy from "excesses" or people making too much money at the expense of others. The theme of FDR's New Deal was that government could and should do things that citizens had previously done themselves - in other words __increase the reliance people have on the government__. Then, as Nazi Germany invaded Poland, New Dealers realized that in the coming war - if it came - they needed capitalists. __World War II saved capitalism__ - not the New Deal.
 * __The New Deal__:**

FDR found advisors from the nation’s universities and produced what became known as the “**Brain Trust**” of intellectuals at the advice of Raymond Moley, a Columbia University professor. Some looked to balance the budget, while others looked to expand the role of government. Rexford Tugwell for example spoke about the “myths” of laissez-faire. Most of FDR’s advisors believed in the theories of John Maynard Keynes that government spending (even going into debt) would increase demand and pull the nation out of depression. Secretary of the Treasury Henry Morganthau noted that some in the government worked to make sure that federal spending was transformed “from a temporary expedient to a permanent instrument of government.” Morganthau argued for cutting government spending to encourage private investment. However, FDR sided with the Keynesians and the race to spend federal money was on. He had few business leaders as advisors, but didn’t trust them. In addition, few in America were troubled by the fact that Britain had pursued Keynesian policies with little success well before FDR’s election. From 1932 to 1939, America’s debt tripled. The New Deal had little to do with philosophy other than that the government should “do something.”

FDR looked to give a sense of confidence, which led to his “**fireside chats**,” or radio addresses, which is where he said “//the only thing there is to fear is fear itself.//” Historians characterize New Deal programs into categories of relief, reform, and recovery. However, the truth is the programs were passed in a haste with no one knowing if they’d be effective or politically beneficial. The bank collapse was the most serious threat to the nation – 5,500 banks closed in three years, which was stimulated by the outflow of gold. FDR announced on March 5, 1933 that a banking holiday was in effect in which all state and national banks were closed and then examined with sound banks being allowed to reopen. Not tied to the __banking holiday__, FDR got the U.S. off of the gold __standard__ – good move which helped save the banking system.
 * __The Hundred Days__: **

Over the first 100 days in office, FDR put out numerous initiatives focused mainly on raising wages or provided jobs as Congress passed his “alphabet soup” agencies due to the abbreviations of the new offices. The **CCC** (Civilian Conservation Corps) and **PWA** (Public Works Administration) looked to put people (mostly young men) to work in government-paid make-work jobs. The CCC paid boys from cities to work in forests planting trees, cutting fire breaks, and in general doing something that would justify government paying them. Two million jobs were created and the program made for good press for FDR.

Two Brain Trusters, Harry Hopkins and Harold Ickes, battled for control of the piles of new public monies to be spent. Ickes headed the PWA and insisted that the jobs involve meaningful work and that they pay a wage that would allow workers to purchase goods to stimulate consumption – large scale public works like schools, hospitals, city halls, sewage plants, and courthouses. The results of the public works projects all seem to be good ideas, however the tradeoff – debt and higher taxes – wasn’t beneficial. On the surface, it looked like the government was doing something and America was building again, but the capital for these projects came from the private sector where it could have been market driven demanded by the market. Hopkins headed the WPA (Works Progress Administration), which extended initiatives of the CWA (Civil Works Administration) that began a year earlier). The WPA came about even as FDR warned Congress that welfare was “__a narcotic, a subtle destroyer of the human spirit__.” WPA jobs were more dubious than the PWA. The WPA did complete roads, bridges, public buildings, storm drains, and sewers and job did restore some self-respect. Over the long haul, what the New Dealers failed to do was give incentives to invest and make profits. The __New Deal was putting a drain on the economy as private investment stopped and industry felt punished__.

The **NIRA** (National Industrial Recovery Act) was to work in conjunction with employment measures and was headed by the National Recovery Administration under Hugh Johnson and was symbolized by the __blue eagle__. This group came up with __production codes, set prices and wages__, and recognized the right of workers to form unions and bargain collectively, which cemented organized labor as a voting bloc for Democrats. It tried to force businesses to operate by the agency’s codes and would later be __found unconstitutional__.

Overall, the New Deal spent money on a large scale and America was still in the Great Depression.

Democrats won Congress in 1932 and gained seats in 1934 increasing dominance and with union support, the Democrats and unions saw an opportunity to seize dominance, but unions overplayed their hand. **John L. Lewis** broke from the AFL to form the **CIO**, which led __union strikes in 1934 that were more violent__. More radical elements in the Democrat Party saw their majority in Congress as a way to make their power more permanent and saw union support as the way. The National Labor Relations Act, or **Wagner Act** set up the **NLRB** (National Labor Relations Board) that could impose sanctions on businesses anything the NLRB though management wasn’t acting in good faith. The entire weight of the government was now behind the unions. The **Fair Labor Standards Act** began the __minimum wage__, which shows that the legislators focused on raising wages and paid little attention to the __natural business reaction of trimming their workforces as they paid higher wages__. More than any other single policy, the minimum wage law cemented unemployment levels that were nearly twice of those in 1929 as many who wanted a job couldn’t accept just any wage, but could only work for an approved government mandated wage. The problem was that no set wage level creates wealth.
 * __Labor and Leviathan __****: **

Employment recovery was the industrial side of the New Deal whereas raising revenue was the aim in the agricultural side. The **AAA** (Agricultural Adjustment Act) sought to drive up prices by restricting farm output and was aimed at addressing overproduction. The AAA __gave money to farmers to NOT produce__, but rather restrict production. Farmers plowed over fields and eliminated millions of pounds of pork, while long soup lines were occupied by Americans. Farm income rose, but only because farmers took the government subsidies PLUS kept production levels up. Farm programs added to FDR’s Democrat voting coalition. The Supreme Court would eventually find the AAA to be unconstitutional.

With each new initiative, __reliance on the federal government grew__ and the party that would promise to maintain, or even expand, government assistance could count on votes of large numbers of Americans who saw the opportunity to benefit by taxing others. More and more Americans became dependent on the government rather than themselves and voted for the party that would continue to feed their dependency. That party was the Democrat Party. Some, such as Huey Long with his Share the Wealth Program, wanted more redistribution of wealth and posed a possible threat to FDR in a Democratic primary in 1936. Long ended up being assassinated. There were many who viewed him as a radical with his socialist ideas.

There were numerous programs that began under the banner of the New Deal:
 * __New Deal Policies __****: **


 * **CCC**: Civilian Conservation Corps was to provide employment to 2.5 million Americans to address conservation concerns.
 * **<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">PWA **<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">: Public Works Administration to give money to people to work.
 * **<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">FERA **<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">: Federal Emergency Relief Administration - money given to states for relief projects.
 * **<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">CWA **<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">: Civil Works Adminsitration - with FERA and PWA not reducing unemployment, this new agency would build infrastructure.
 * <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**AAA**: Agricultural Adjustment Act to control farm production to increase farm prices.
 * <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**Glass-Steagall Act** separated investment banking from commercial banking.
 * <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**HOLC**: Home Owners Loan Corporation gave banks money to help people restructure loans.
 * <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**FCA**: Farm Credit Administration was money to help farmers with their mortgages.
 * <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**TVA**: Tennessee Valley Authority provided electricity with government money.
 * <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**SEC**: Securities Exchange Commission was set up to regulate the stock market (no more loans to buy stock).
 * <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**FDIC**: Federal Deposit Insurance Corporation would insure bank deposits and make banks stable.
 * <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**Revenue Act** increased taxes to pay for budget deficits.
 * <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**WPA**: Works Progress Administration created public works jobs for 9 million to construct infrastructure.
 * <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**Social Security Act** set up pensions for the elderly.
 * <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**Fair Labor Standards Act** set a minimum wage.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">Society changed in terms of Prohibition with the 21st Amendment, which repealed the 18th amendment. Saloons would re-establish business (and would be the only growing enterprise). Motion pictures also grew since they were a low cost way for people to temporarily escape the depression. Actors/actresses included Greta Garbo, Joan Harlow, Clark Gable, Cary Grant, and Joan Crawford. Full-length animated features were pioneered by Walt Disney with //Snow White and the Seven Dwarfs// in 1937. The greatest year was 1939 with //The Wizard of Oz, King Kong, Of Mice and Men, Wuthering Heights, Gone With the Wind// and was the same year that Judy Garland, John Wayne, and Jimmy Stewart appeared in roles that defined their careers.
 * __<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">Social Change in the Great Depression __****<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">: **

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">Radio was still a major form of entertainment with comedians Jack Benny and Edgar Bergen and adventures like //The Lone Ranger// and Orson Welles’s //War of the Worlds// (some tuned in during the broadcast and actually believed the earth was under attack by Martians). Books included //Grapes of Wrath// and //Gone With the Wind// as people wanted stories of courage, hope, and optimism.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">Marian Anderson, from PA, broke the color barrier for singing concerts when she performed at the Lincoln Memorial with the help of Eleanor Roosevelt. The mysterious disappearance of Amelia Earhart took place in the 1930s. The 1936 Olympics took place in Berlin and was where Jesse Owens, an African-American, took home 4 gold medals. The Pennsylvania Turnpike became the first superhighway of its kind in America and was built with WPA funds. The city of Johnstown also experienced its second major flood in 1936.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">After four years of the New Deal, many programs were showing some positive short-term results as unemployment dropped, banks were saved and panic over the market crash stopped. Most Americans believed FDR was looking out for them while the hidden problems of the New Deal weren’t showing yet. FDR defeated Alf Landon (R) in 1936 who ran on a me-too-only-better attitude. The Democrat Party completed its comeback from near destruction of the Reconstruction era with support from farmers, labor, and a new group – blacks began to go Democrat due to the New Deal and the Republicans never challenged segregation laws.
 * __<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">The First Referendum __****<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">: **

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">There would be a new set of radical taxes and measures to redistribute wealth aimed at ending inheritance, punishing successful corporations, and beginning a steady attack on top wage earners with FDR’s re-election and a big Democrat majority in Congress. The New Deal was aimed only in part to recover in terms of the economy, but mostly was aimed at keeping the Democrat Party in power as virtually every New Deal program made people more reliant on the government rather than more independent. Voters reached the conclusion that whatever they “got” from the government “came” from Democrats.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">FDR wasn’t able to run rampant over the entire government. The Supreme Court found parts of the New Deal (including the NIRA and AAA) unconstitutional. Therefore, FDR tried to add 6 justices to the court but wasn’t supported in Congress (his own party disagreed). Furthermore, the nation went back into a recession in 1937. Businesses were frightened due to the combination of minimum wage, Wagner Act, and Keynesian inflation with unchecked power in the hands of FDR. New Dealers used class envy to keep support and waved the unemployment compensation check instead of the bloody shirt from the Reconstruction days.
 * __<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">The New Deal Stalls __****<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">: **

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">In the 1937 recession, unemployment went from 12% to 19%. What FDR didn’t understand is that most people accepted the New Deal programs but saw them as temporary. The 1938 midterms showed that people were against the unchecked power of the Democrats and the Republicans won seats in Congress and governorships. FDR tried to get a bill passed to reorganize the federal government, which failed in the House (108 Democrats voted against) and some papers portrayed FDR as a dictator and Congress started to think he was infringing on separation of powers. The public showed that the American people were still against socialist-leaning programs and the people still valued private property, opportunity, and upward social mobility for those who work hard and earn it.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**__Demons Unleashed__:** <span style="font-family: 'Arial','sans-serif'; font-size: 13px;">U.S. enjoyed relative peace in foreign affairs for more than a decade and took the lead in so-called arms control agreements, but events in Asia and Europe began to pose more of a threat than the depression. U.S. relations with Japan had been deteriorating after Japan's 21 Demands on China that led to the Lansing-Ishii Agreement that acknowledged special interests of Japan in China, ending the Open Door Policy. Japan felt discriminated against at the Washington Conference so they tied the U.S. down with meaningless agreements while secretly building their navy.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**General William "Billy" Mitchell** showed air power while signers of the Washington Conferenced believed that the battleship was the dominant military force. Mitchell showed had a bomber aircraft could sink a battleship (used an old German ship obtained after WWI), but most admirals had thought this was impossible and after the demonstration some thought it was a trick. In 1925 simulation, naval aircraft "destroyed" 60 ships and the navy was embarassed. Mitchell outlined how air attacks could destroy a navy and used as an example the Japanese attacked the Pacific fleet at its base at Pearl Harbor. The Japanese took careful notes and the 1941 attack bore an eerie resemblance. By the time of his death in 1936, few besides Mitchell saw the Japanese as a threat.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**Totalitarian** dictators, ones that control every aspect of life, rose to power in Europe due to the Great Depression and instability.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">Italy was taken over by **Benito Mussolini**, who set up **Fascism**, a combination of state corporatism (government controlling businesses), nationalism, and socialism with no free market, but rather the illusion of a group of independent business owners. Fascists claimed to be the opposite of Communism, but in reality, they were similar. Mussolini, or Il Duce, censored the press, manipulated voting laws, and put all power in his hands as a dictator. He promised to restore the Roman Empire and did so by going into Africa attacking Ethiopia in 1935. The League of Nations did nothing and some in the American government even supported his style of rule.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">**Adolf Hitler** rose to power in Germany with Nazism. Like Mussolini, Hitler had a troubled childhood and failed at art and architecture. He fought in the German army in WWI and after the war became part of the National Socialist German Workers Party, or the **Nazi Party**. When hyperinflation almost brought down the Weimar Republic, he tried to take over Germany by force in the Munich Putsch, but failed and was put in jail. While in prison, he wrote **//Mein Kampf//** ("my Struggle") laying out his plans for anyone willing to take him seriously. He was released from jail after a few months and within 2 years got control of the party and was able to use economic problems to get public support. The Rome-Berlin Axis of Hitler and Mussolini brought in Japan with the Anti-Comintern Pact of 1935 on common ground of disliking the USSR and oppressive rule. In the 1930s, Hitler hadn't committed his mass murders yet whereas Stalin had.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">Hitler violated the Treaty of Versailles numerous times. He increased the size of the army and formed an air force (the **Luftwaffe**) headed by **Hermann Goering**. Also, he remilitarized the Rhineland, which led France to completing the **Maginot Line** for defense. Furthermore, Hitler expanded Germany's border with the Anschluss (absorption of Austria into the German Empire) and then pushing to get the Sudetenland, which was part of Czechoslovakia. Hitler wanted to form what he called the Third Reich.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">Mussolini and Hitler had an ally in Spain when General **Francisco Franco** established Fascist control in the Spanish Civil War from 1936 to 1939.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">Pleas from Ethiopia resembled those from China when Japan invaded Manchuria in 1931 called the **Manchurian Incident** (Japan staged an attack on their railroad then blamed China in the city of Mukden). Assassinations in Japan ended with the military in control. The **Second Sino-Japanese War** began in 1937 with the Japanese military showing their ruthless tactics. The League's refusal to act in either Ethiopia or China proved to be a costly error. Japan would get careless and attacked several ships on the Yangtze River with some of those ships being American trade ships. American admirals argued that Japan wanted war, but warnings were ignored by government officials. Japan knew they were heading toward a war they didn't want to be in so offered an apology and agreed to pay. Fortunately for Japan, the U.S. was in a policy of isolation. The emperor of Japan was **Hirohito**, but the military was controlling the Japanese expansion policies and would be led by **Tojo** Hideki.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">In the U.S. the public believed the **Merchants of Death Theory**, which believed business took America into WWI to make money and the Senate's committee led by Gerald Nye agreed. Cordell Hull became Secretary of State and believed in free trade and felt that with harsh dictators in the world, the U.S. shouldn't have high tariffs on other free nations. The U.S. had passed neutrality acts to ensure isolationism, but in reality punished the nations we should've helped, namely China and Ethiopia. Joseph P. Kennedy was the ambassador to Britain, who wanted democracies to try to get along with the Axis. Kennedy was part of the **Munich Conference appeasement policy** championed by British Prime Minister **Neville Chamberlain**, which gave Hitler part of Czechoslovakia (the Sudetenland) if he agreed not to make any more demands. Chamberlain said "we've achieved peace in our time." A year later, Hitler took the rest of Czechoslovakia and was making war plans. The American left - liberal Democrats - pushed isolation and made excuses for the USSR and Stalin's oppressive rule. FDR sent a letter to Hitler and Mussolini looking for assurance that they would not attack a list of 31 nations - Hitler mocked the letter in his parliament.
 * __<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">Isolationism Ascendant __<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">: **

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">On September 1, 1939, German invaded Poland unleashing its **blitzkrieg** ("lightning war"). Hitler had negotiated a non-aggression pact with the Soviet Union, which shocked the world, but Hitler didn't want the USSR posing a problem for him. As a secret part of this agreement, the Soviets took eastern Poland. Britain pressed the U.S. for help and made the **Destroyers for Bases Deal** in which Britain got old U.S. naval destroyers and the U.S. got 99 year leases on British naval bases. In March of 1941 the **Lend-Lease Act** passed which would give weapons to Britain and they could pay later. In August of 1941 FDR and **Winston Churchill** met and developed the **Atlantic Charter**, a basic statement of war aims and common principles that each nation agreed to.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">FDR's pre-war legacy is mixed. He saw Hitler as a threat and made deals with Britain to help the British war effort against the Axis, but he failed to gain public opinion. Instead, he waiting for events to dictate a change in public opinion. He also failed to find the Soviets guilty of any territorial violations. In reality, the war saved FDR from history's criticism. The war got the U.S out of the depression since the New Deal wasn't working and the attack on Pearl Harbor got America mobilizing toward war and prevent FDR from being criticized for his lack of pre-war preparations.

<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">FDR kept his intentions to run for a 3rd term secret as long as he could and wanted it to be a draft - him getting asked to run again or a ''Roosevelt movement." The Republicans put up Wendell Wilkie who ran on the economic failures of the New Deal since FDR's programs failed to eliminate mass unemployment. Wilkie also tried to portray FDR as a warmonger, but without having a clear vision himself, he was doomed. FDR won 449-82, but made gains in the popular vote. Not getting into the war did have a benefit: if the U.S. aided Britain and Britain fell to Germany, America would've been basically defenseless. Advisors close to FDR expected Britain to fall. Germany's Operation Sea Lion began the Battle of Britain. The use of radar helped save Britain, but the British remained isolated, broke, and under danger or starvation with German U-boats in the Atlantic. Nazi Germany would also double-cross Stalin and attack the USSR in Operation Barbarossa. Japan was continuing to expand in the Pacific. FDR's decision not to rebuild the military when the Axis was expanding so that he didn't risk losing the election would ensure that the U.S. military forces would take a beating somewhere at some time.
 * __<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">Re-election and Inevitability __<span style="font-family: 'Arial','sans-serif'; font-size: 13px;">: **

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