New Deal Programs: Reform or Politics as Usual

Page Summary

New Deal Programs: Reform or Politics as Usualary Text

 

Opinions and Evidence - The rhetoric surrounding the New Deal called for programs to reform the economy, promote recovery, and provide relief to unemployed workers. Geographic spending patterns show that the programs promoted recovery and provided relief to some extent, while also showing signs that Congress and the President were practicing pork-barrel politics.

Outline

  1. Many views of the overarching philosophy of the New Deal are misleading

    1. The New Deal was not a Keynesian policy of deficit spending to stimulate the economy

    2. The New Deal was generally a response to a series of problems that led to overlapping and sometimes contradictory programs

    3. If there was a theme, it was to raise prices and provide relief

  2. A brief overview of the New Deal spending programs

    1. Relief and work relief
      1. Programs include the Federal Emergency Relief Administration, the Civil Works Administration, and the Works Progress Administration
      2. Responsibility for work relief in 1933 shifted from state and local to the federal level
      3. Hopkins ran FERA differently from the way Ickes ran the CWA
      4. In 1935, responsibility for unemployables shifted back to the state and local governments
      5. Work relief programs may have crowded out some private employment

    2. We saw the beginning of modern farm programs
      1. Payments to reduce acreage
      2. Payments through loans to offset declines in farm prices

  3. An examination of the factors influencing the distribution of New Deal spending

    1. Relief, Recovery, and Reform

    2. Interest group politics

    3. Protection of federal lands

    4. Presidential politics

    5. Congressional politics

  4. New Deal spending led to

    1. a rise in farm productivity

    2. limited success at reducing unemployment

    3. a small rise in property values

  5. A brief discussion of other programs

    1. National Recovery Administration placed limitations on competition among producers

    2. The Social Security Act established old-age pensions, AFDC, and unemployment insurance

    3. The Fair Labor Standards Act established the federal minimum wage

Connections to Economics

Rules of the Game - During the Great Depression, we saw an enormous change in the federal government's role in the economy. Some of this was in response to an enormous crisis, while some of the changes may have been responses to politics as usual. The New Deal programs met with some success, but may not have been as successful as many have thought.

Trade-offs - How did the responsibilities of the federal and state and local governments change? When Roosevelt and Congress distributed the money, what factors determined their actions?

Incentives - New Deal programs changed incentives for farmers, employers, and workers and led to some unintended consequences, like crowding out of private sector jobs.

The Economic Way of Thinking - The government can be useful at solving various economic problems, but their solutions lead to changes in the incentive structure in the economy. As government begins to play a larger role in the economy, interest groups begin to devote more resources to influencing how the government spends its resources.

Economic concepts that support the historical analysis

  • crowding out
  • deficit spending
  • unemployment
  • interest group competition
  • political economy
  • Keynesian analysis
  • cartels