Quite simply, the Government sought to raise more revenue through taxation to pay for the New Deal reforms. It seemed logical to do this by targeting those who could most afford it – prior to this, taxes for the rich had been minimal. This provoked an anguished cry, as it was perceived by those affected by it to strike at the heart of wealth in the USA. The newspaper tycoon William Randolph Hurst called it ‘Soak the Successful’ tax. But Roosevelt’s main aim was not to see any major redistribution of wealth but rather to reduce the need for government deficit spending. The new tax raised comparatively little. Loopholes were found that clever lawyers could exploit. It did little to redistribute income but big business did begin to see Roosevelt as a traitor to his class. The Act did little by itself but set a precedent for the higher taxes of WW2.
During 1937 Roosevelt cut back the amount of money the Federal Government was spending. He did not want America to get into debt, and believed that the state Governments were able to deal with the problems of the Depression without more help from the Federal Government.
Unfortunately this cut in spending came at the same time as a decline in world trade. The sudden downturn of the economy in the late summer of 1937 ended 4 years of partial recovery and destroyed the illusion that the depression was beaten.
Industrial production declined
Stock market fell
Unemployment rose by 4 million and stood at 10.5 million in 1938
Steel and car production fell.
Roosevelt renewed heavy public spending though he didn’t fully understand the situation. Congress responded to Roosevelt’s request for large new appropriations for relief, public works and to approve a further modest instalment of reform. By the summer of 1938 the economy had resumed its slow upward climb. But public confidence in the administration had been further weakened.
The significance of the Second New Deal
It is important to note that the administration was seen to be acting; to be doing something; addressing issues and concerns. It did continue to involve itself in everyday issues which were important to people whose concerns probably would previously have been ignored.
The 1930s were a time of national trauma. Though the first New Deal broadened the scope of Federal action far beyond what it had ever been before, it failed to put an end to hunger and misery. It failed to spark a sustained recovery and it failed to bring an end to the Depression.
The second New Deal saw the important expansion of the role of the federal, state and local Governments that was new:
The worst excesses of capitalism were addressed
The attacks on unfair competition aided small firms
Trade unions were given a legal voice
Introduced the first system of benefits
Development of existing policies to aid relief and recovery
Some historians have said that the main difference between the first and second New Deal was that the first New Deal concentrated on relief and recovery whereas the second phase was more radical. Here, Roosevelt was genuinely trying to change the face of the USA, that he was favouring the poorer classes at the expense of the rich. The second New Deal concentrated more on social and economic reform; it was less interested in co-operating with business and more responsive to the needs of the less well off. The second New Deal concentrated on the creation of permanent reforms. This should not be exaggerated. Important elements of continuity existed between the first and second phase, i.e. in the commitment to preserve capitalism. It still remained shapeless, even chaotic, without any unifying philosophy.
After 1936 the New Deal was beset with problems and according to some historians petered out in 1938/9. It was ultimately, they argue, a failure because it did not radically change the face of the USA.
The New Deal on the land
If farmers faced only economic problems (see Problems in the Economy), their situation would have been bad enough, but during the very depth of the Depression another disaster arrived: drought. Lack of rain was first most severe in the east but then the centre of the dry spell moved to the Great Plains where temperatures reached 118° in Nebraska in 1934. Normal rainfall only returned in 1941. Between 1930 and 1936 over 20 million hectares of farmland in Kansas, Oklahoma, Texas, New Mexico and Colorado became desert. The area had once been animal grazing land, but during and since the First World War much of it has been ploughed up to grow crops. Without its covering of grass to protect it against the hot summers and fierce winters, the land turned into dust. The region became known as the ‘Dust Bowl’.
Source A: A Kansas wheat farmer described one of the windstorms that created the Dust Bowl:
The wind increases its velocity until it is blowing at forty to fifty miles an hour. The fine dirt is sweeping along like at express-train speed, and when the very sun is blotted out visibility is reduced to some fifty feet, or perhaps you cannot see at all, because the dust has blinded you.
From An Empire of Dust, written in the 1930s by Lawrence Svobida
Source B: A magazine reporter vividly described his impressions of the Dust Bowl:
The Dust Bowl is a dying land. I have not seen more than two cars on the road that parallels the railroad track for a hundred miles or more. I have seen human beings only when passing bleak villages, consisting of a few shacks. Houses empty, yards empty. I have not seen a single child in these ghost-like, pathetic villages. The few people I saw looked like a lost people in a lost land.
I do not exaggerate when I say that in this country there is now no life for miles upon miles; no human beings, no birds, no animals. Only a dull brown land with cracks showing. Hills furrowed with eroded gullies – you have seen pictures like that in ruins of lost civilisations.
From George Greenfield, in Reader’s Digest, May 1937