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- President Franklin D. Roosevelt
When Franklin Delano Roosevelt (FDR) was sworn into the office of President in the 1930s, the United States was in the midst of the Great Depression, a decade-long economic downturn that began in the United States itself. Faced with this crisis, FDR changed the face of American economics and instated the New Deal, which would then be expanded into the Second and Third New Deals.
The Great Depression was the worst economic downturn that Americans had ever faced. The stock market had crashed in 1929, and banks closed to prevent their customers from withdrawing their money. Many banks never reopened. In the United States, standards of living decreased. Around a quarter of the labor force struggled to find work. Those who had jobs saw wages decline dramatically. The American people were ready for new leadership. This was the landscape of America when FDR took his oath.
Fig. 1 - Franklin Delano Roosevelt
The First New Deal
Immediately after his inauguration, FDR sprang into action. He believed the economy would not and could not recover without the intervention of the government. Roosevelt wanted to stabilize the banking system, save the family farms, and put Americans back to work. In just three months, known as the Hundred Days, he was responsible for the creation of no less than 16 agencies and bills.
Fig. 2 - a farmer in despair during the Great Depression
The 3 R's of the New Deal
FDR believed in what he called "The 3 R's," which stood for relief, recovery, and reform. Most of the New Deal programs were based on this belief.
- Relief was for the poor people who were suffering during the Great Depression.
- Recovery was to heal the economy.
- Reform covered programs to move the United States into the future.
The New Deal would become the crown jewel of FDR's presidency, and its programs would make it one of the most successful recoveries in history.
The Second New Deal
Though the initiatives from the Hundred Days had provided some recovery, President Roosevelt knew there was more work to do. In 1935, he wanted Congress to pass legislation to provide more employment opportunities (by building roads and bridges), create a “social safety net” (commonly known as Social Security), and to protect workers’ rights. This is often called the Second New Deal.
The Third New Deal: 1937-1938
By the time FDR began his second term in 1937, the economy was showing signs of recovery, leading many to believe the economic turmoil was over. As such, there was a push in Congress to scale back the New Deal. Acknowledging their wishes and hoping to avoid deficit spending, Roosevelt cut spending on various relief programs that had been keeping Americans afloat--at the same time they were having to pay a new Social Security tax. The result was another recession, characterized by decreased industrial production and increased unemployment.
The Influence of John Maynard Keynes
John Maynard Keynes was a British economist who believed that government spending was the most effective way to mitigate a recession and reduce unemployment. The first two New Deals operated in this philosophy, and when Roosevelt reduced spending, the country plummeted into a new recession, seemingly proving his policy.
Fig. 3 John Maynard Keynes
Many policymakers who were in support of the New Deal convinced the president to authorize more spending in 1938 for assistance to unemployed and poor Americans. And soon the recession was over again. Again, belief in Keynesian Fiscal Policy was strengthened. It seemed deficit spending was vital to a strong economy and growth.
Social reformers looked to the president to save them once again, but despite this push for a Third New Deal (a term created by historians), FDR struggled to accomplish much of what he set out to do.
Roosevelt and the Third New Deal
Facing a Supreme Court that seemed intent to strike down his attempts at a Third New Deal, Roosevelt introduced a court-packing scheme that would add a new Supreme Court Justice for every member of the Supreme Court over 70. This greatly angered many conservatives who believed he was trying to expand his influence unjustly. A coalition formed, made up of conservative Republicans who feared another increase in spending and programs, but also Southern Democrats who believed the relief given to Black Americans was undermining their system of oppression. Together, they worked to undermine Roosevelt's proposed programs and legislation.
The Supreme Court actually upheld the legality of a number of legislation and programs, making Roosevelt's court-packing scheme an unnecessary, but detrimental move.
The Third New Deal: Legislation
Let's go over some key legislation that did make it past this conservative coalition:
United States Housing Act/Wagner-Steagall Act (1937): funded public housing projects run by individual states
Farm Tenancy Act/Bankhead-Jones Farm Tenant Act (1937): created the Farmers' Home Corporation to loan money to tenant farmers so that they could buy their own farms
Fair Labor Standards Act (1938): set a national minimum wage as well as guidelines for overtime pay, record-keeping, and the employment of minors
Executive Reorganization Bill (1939): gave the president the power to create and appoint his cabinet advisors
Much of the Executive Reorganization Bill did not actually pass in Congress because of the amount of power it would have given to the Executive Branch.
The Third New Deal: Programs
There were also several programs introduced, albeit with far less funding than those of the First or Second New Deal. These included:
- Bonneville Power Administration (1937): took control of selling and delivering power created by the Bonneville Dam
- Farm Security Administration (1937): loaned money to farmers and conducted training programs for them
- Federal Security Administration (1939): took control of Social Security and directing funding towards education as well as food and drug safety
However, opposition to these programs was strong, and eventually, as the US became involved in World War II, the calls for these programs dried up.
Impact of the Third New Deal
Most historians agree that the Third New Deal failed to live up to the successes of the First and Second New Deal. As we discussed earlier, Roosevelt was facing an inflamed and enlarged conservative coalition that stifled many of his goals. Still, many believed that it was Roosevelt's push for a Third New Deal and the return of government spending that pulled the nation out of its brief dip back into a recession. While this might have played a role, today, most agree that it was World War II (and the increase in production) that definitively pulled America out of the Great Depression.
Third New Deal - Key takeaways
- By Franklin D. Roosevelt's second term, the economy was showing signs of recovery, and many believed that the recession was finally over. But a decrease in government spending led to another recession in 1937.
- Roosevelt wished to implement a Third New Deal, but his court-packing scandal had led to the formation of a conservative coalition with the goal of undermining his attempts at further programs and legislation.
- As such, the Third New Deal did not amount to the same success as the First and Second New Deals.
- Most historians agree that while the Third New Deal did include some notable legislation and programs, it was World War II that definitely pulled America out of the Great Depression.
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Frequently Asked Questions about Third New Deal
What did 3rd New Deal do?
The 3rd New Deal introduced several new pieces of legislation and programs, but did not have as much impact as the 1st and 2nd New Deals.
What were the 3 R's/3 parts of the New Deal?
The 3 R's of the New Deal were relief, recovery and reform.
On what date was the Third New Deal over?
The Third New Deal ended in 1939.
What was the essence of Roosevelt's Third New Deal?
The Third New Deal was meant to address lingering problems of the Great Depression and pull the nation out of the recession that began in 1937.
How long did the Third New Deal last?
The Third New Deal lasted three years.
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