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The Bubble Bursts:The Start of the Great Depression

Essential Questions:1. What happens when traditional and modern cultures interact?2. What influences do economic excesses have on American society? 3. What is the proper role of the government in people’s lives?4. Did America move closer to or further away from its founding ideals during the interwar period?

Enduring Understandings:Students will understand that …

1. Economic excess (overspending) and the unequal distribution (uneven spreading) of wealth can lead to instability in society.

2. Liberals (people who are more likely to want change) and Conservatives (people who are more likely to want to keep older traditions) have different beliefs about individual responsibility and the proper role of the government.3. As a result of the New Deal, the United States government took on greater responsibilities for promoting the general welfare (well-being) of people and society.

Knowledge:All Students will know …

1. How can economic excesses contribute to hardship (challenges/suffering) and instability in America?- Impact of the economic policies of the Harding and Coolidge Administrations on wealth distribution, investment, and taxes.- Basic operation of the stock market.-Causes and consequences of the Great Depression and Dust Bowl.- Reasons for the deepening crisis of the Great Depression and the Hoover administration’s responses.

2. What is the proper role of the government in people’s lives?- Leadership qualities of Franklin D. Roosevelt.- Philosophy, successes and failures of the New Deal.- Significance of New Deal policies and their arguments.

3. Did the New Deal move America closer or further away from its founding ideals?- How the ideals of liberty, equality, opportunity, rights and democracy were exemplified or contradicted during this time period.- Significance and legacy of the New Deal, including the Social Security Administration, FDIC and minimum wage.

Advanced Students will know …1. Location of ideologies (belief systems) including conservative, liberal, moderate, radical, reactionary on the

political spectrum.2. Basic operation of the banking system.3. Characteristics of the First and Second New Deal.

NOTE: Almost every word in this packet that is printed in bold print is a key concept (or at least a very major point), so know them.

PROCEED TO THE NEXT PAGE

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“The Stock Market Crash and Great Depression”Unit Outline/Organizer (for Preview and Review)

I. Causes of the CrashA. over-speculation (the main cause)

1. includes buying on margin (borrowing money to buy stocks)B. mob psychology [the idea that actions of a few (in this case, panic) triggers a similar action in a larger group of people]

II. Stock “Crash” Actually Not the Cause of the Great Depression

A. The “Crash” was NOT the cause of the Great Depression. It was a noticeable symptom that showed people that the economy had actually been sick for a long time. There were other LONG-TERM CAUSES (see below).

III. Long-term Causes of the Great Depression

A. over-speculation/buying on margin E. overproduction of agricultural and industrial productsB. uneven (unequal) distribution of wealth F. buying on margin/installment planC. high tariffs and war debts G. banking system crisisD. farm crisis H. domino (chain-reaction) effect

IV. Daily Life/Hard Times

A. nation-wide unemployment up to 25% by 1932 (some sources of statistics state that it might have been higher)B. people saw Great Depression as a permanent breakdown of our economic system (capitalism/free enterprise)C. “Hoovervilles” pop-up in just about every major cityD. Dust Bowl destroys farming in the West and Midwest and leads to an increased interest in conservation

V. Hoover and the Great Depression

A. Hoover’s belief in “rugged individualism” caused federal government not taking much direct action to stop the crisis 1. led to him losing the election and the Great Depression getting much worse

B. believed in indirect relief more than direct relief 1. indirect relief [“community chests”, Boulder (a.k.a. “Hoover”) Dam, RFC, Federal Home Loan Act] not enough to fix economy

C. Hoover’s handling of the Bonus Army incident helps destroy his chances of getting re-elected

VI. FDR, the Great Depression, and the New Deal

A. FDR believes government should take bold action to end the Great Depression and that it had the responsibility of helping people and society to be strong economically and socially

B. First Hundred Days – FDR and Congress passed 15 major laws; all future presidents are measured against thisC. FDR’s plan to end the Great Depression is called the “New Deal”

1. based upon the “Three R’s: Relief, Recovery, and Reform”2. New Deal Programs You Must Know:

a. “Bank Holiday” and the Emergency Banking Act d. Civilian Conservation Corps (CCC)b. Glass-Steagall Act e. Social Security Actc. Agricultural Adjustment Act (AAA)

D. Criticisms of the FDR and the New Deal1. deficit spending (a.k.a. “Keynesian economics”) is used to “jump-start” the economy

E. Labor Unions and Workers made major gains during the time of the New Deal 1. National Labor Relations Act – protected the right of workers to create- and to be in – unions2. Fair Labor Standards Act – maximum hours set at 44 hours, overtime pay, federal minimum wage, and employment rules for children under age 16

VII. Significance and Effects of the New Deal and Great Depression

A. Extension of the Power of Federal Government E. Greater Concern for Workers (Labor)B. Extension of the Power of the President F. Conservation GainsC. Deficit Spending G. Renewal of Faith in DemocracyD. Federal Social Programs

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I. A False Sense of Security and OptimismA. Many people believed that the U.S. economy was on an upswing that was going to continue, and which would result in many people becoming wealthy. Both the Democrats and Republicans were supportive of the economic policies that eventually led to the worst financial disaster in U.S. history.

II. Hoover Takes the Nation: The Election of 1928A. The Candidates and the Election

1. Herbert Hoover, the Republican nominee for President, beat Al Smith, the Democratic nominee

a. Hoover’s political platform/beliefs:1. wanted to continue the limited role of government (laissez faire) in society and the economy

a. apparently the majority of voters agreed with this idea

Visual: President Herbert Hoover (1929-1933)Source: http://eurekainn.com/aboutus.aspx

III. The Crash

A. What does the Dow Jones Industrial Average (the “Dow”) measure? Why is it useful? In what condition was it as of September 1929?

- average dollar value of stocks from the nation’s 30 largest corporations (mostly industrial companies);- is often used by economists and investors as a way of identifying investors’ opinions/mood about the condition/health of the economy, both now and for the near future

- value of Dow tends to go up when investors are confident about the economy’s current and future health - value of Dow tends to go down when investors are pessimistic (not confident) about the economy’ current and future health

- value had increased by 370% over 5 years!; (much faster than normal; we now know it was too fast)

Recent Connection: the Dow Jones still exists today (dropped by about 50% during from Sept. 2008- March 2009)

1. Define “bull market” and “bear market”. Which kind of market was the U.S. economy in during most of the 1920’s?

“bull market” – a nickname for an extended period of time when the average value of stocks is going up“bear market” – a nickname for an extended period of time when the average value of stocks is going down

- The U.S. had been in a “bull market” for most of the 1920’s

B. What was “buying on margin”? What was it and exactly what role did it play in causing the Crash?

- an investor was only required to give a stock broker or bank a fraction (marginal amount) of the real value of stocks to make an investment; the rest is borrowed from the broker or a bank

- in the example below, $5,000 of your own money is invested and $5,000 is borrowed from the broker

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- buying on margin allowed many people to invest much more money than they should have been able to invest; it caused market to rise too fast (to “overheat”) because this caused too much money to be invested in stocks (higher demand mixed with limited supply of shares = big increase in stock prices)- this is related to the concept of over-speculation

over-speculation:- too many investors in the market spending too much money (much that was not theirs) in the hope of

making quick profits (instead of making stable, long-term investments)

1. buying on margin’s role in “The Crash”:

- when stock values began to drop, brokers and banks demanded to be paid back (“margin call”) for the money they had lent, but investors had lost it;- caused banks to fail, which caused bank customers to lose their life savings;

- that caused a negative “chain-reaction” effect in our economy, which caused more investors to sell their shares of stock for a loss, which caused the Dow to drop even more

IMPORTANT: The graph below shows the effects of buying on margin – a fast increase in the Dow followed by a panic and a fast drop.

C. What is “mob psychology” and how did it contribute to the Crash?

- the actions of a few cause many others to react without thinking; often seen during large-scale riots; people take actions but cannot tell you why other than that they are doing them because somebody else was too

- caused people to panic (and sell stocks) when other people began to sell large numbers of shares; this caused an oversupply of available stocks, which resulted in the very thing that people feared – a stock market crash

(AH 16-17)D. Important: Why is October 29, 1929 known as “Black Tuesday”? Describe in detail what happened.

- “black” has a negative meaning in this case, as in it is a “dark” day- prices and values of stocks plunged; value of losses between $6-8 billion ($84-112 billion in today’s money!)- This marked the start of the Great Depression;

***- it WAS NOT, however, the true cause of it

IV. The Depression Takes Hold (Note: This is a VERY important section.)A. The Great Depression (definition):

- the longest period of economic decline in U.S. history (1929-1941); became world-wide in scope- it led to massive unemployment, starvation, homelessness, etc.

*B. Explain why some economists believe that the Crash WAS NOT necessarily the cause of the Great Depression.

- there were already existing underlying problems with the economy before the Crash took place; the Crash was just a symptom that the economy was sick, not necessarily the real cause of it being sick- the assassination of Franz Ferdinand was similar to this in regards to the start of WWI;

- his assassination was not the true cause of WWI; it just marked the start of it; other long-term causes (“M.A.I.N”) were already in place just ready to explode

C. Explain how each of the following things were potentially long-term causes of the Great Depression (old, pp. 344-346).

1. over-speculation/buying on margin:

(REFER TO THE PREVIOUS DESCRIPTION)

- this recently happened in our nation’s stock market and housing industry; this caused prices to skyrocket, only to then crash down

2. the uneven (unequal) distribution of wealth:

- richest 1% had 14.5% if nation’s wealth; the rich invested into stocks or savings accounts, causing not enough money to go to farmers or workers, who would have bought consumer goods and, therefore, kept money in circulation (money = fuel for our “economic engine”)- still a problem todayDistribution of Wealth (source: http://bss.sfsu.edu/tygiel/hist427/texts/1920seconomy.htm)

Rise in per capita (per person) income for top 1% of population, 1920-1929: 75%Rise in per capita income for nation as a whole: 9%Percentage of American families with no savings: 80%Percentage of savings held by top 0.1% of Americans: 34%Percentage of savings held by top 2.3% of Americans 67%

(AH 16-17)3. high tariffs (Fordney-McCumber Tariff) and war debts:

- 1922 Fordney-McCumber Tariff set high tax rates that discouraged European companies from selling in U.S.; made it difficult for them to re-pay war debts (nearly all of Europe was in debt to us)- Europeans passed high tariffs in retaliation, which slowed international trade; this meant the flow of money went down across the world, which slowed our economies even more

4. the farm crisis:

- farmers had bought more land and equipment to meet demand for products during WWI’; demand dropped after war, but production had remained high (overproduction), which caused prices to fall; led to financial crisis for farmers; this hurt other industries because farmers began placing fewer orders for equipment

5. overproduction in industry and agriculture:

- production of industrial products/consumer products increased rapidly after WWI, but wages did not rise as much; problem was hidden somewhat by credit being available (installment plan), which allowed people to buy products, which boosted the economy, but left people in debt; this, however, reduced their buying power in the future

6. buying on credit/installment plan:

- caused people to spend beyond their means (overspend and go into debt); this affected their ability to spend in the future; leads, in the long-run, to a decrease in spending and, therefore, less economic activity- overspending and debt is a massive problem facing both regular people and the government today

Consumer Credit: (source: http://bss.sfsu.edu/tygiel/hist427/texts/1920seconomy.htm)

1925: $1.38 billion (consumer credit outstanding, meaning not yet paid back)1927: 15% of all consumable durables (long-lasting products) bought on installment plans

60% of all automobiles bought on installment plans80% of all radios bought on installment plans

1929: $3 billion (consumer credit outstanding; more than 100% higher than in 1925) $7 billion (total consumer goods purchased on credit)

Visual: The cartoon below demonstrates the consumerism of the 1920’s. These women are discussing how they both bought new washers – probably using the installment plan. The installment plans generally caused many people to overspend and go into debt.

Source: http://www.trailend.org/ind-nationalbrands.htm

Text of Visual:

Woman on left: “Come in and see my new washer, Mrs. ….”

Woman on right: “… Oh! Did you get one too?!”

(AH 16-17)7. the banking system (banking crisis):

- poorly managed banks w/ little government regulation; many failed (5,000 in first 3 years of Depression = 9 million people losing savings); some failures because of Crash (margin buying), some because of panics (mass withdrawal from accounts); even “healthy” banks were forced to close when everyone pulled-out their money

- a deepening of the crisis can be blamed on the widespread failure of the banks- this part of our economy is also currently in a crisis

Visual: The graph below shows the number of bank failures (in thousands) starting in the year 1921.

- Notice the huge increases in 1930 and 1931.- The peak of the bank failures was in 1933.- The graph also shows bank failures again taking place in the 1980’s and early 1990’s.- Notice the bank failures increasing once again by the year 2009 (shown all the way to the right).

o The creation of the FDIC during the Great Depression has prevented many bank failures since that time, which the data in the graph helps to show.

Source: http://www.andersontalkzone.com/2009/11/01/fdic-bank-closures-top-100-this-year-and-there-may/

8. the domino/chain-reaction effect (old, pp. 346):

- essentially the same thing as the “multiplier effect”- a chain reaction (sometimes positive, but this time negative)

a. Review the “Depression Indicators” explanation on pp. 470 of your textbook to see how the domino effect worked. BE SURE YOU ANALYZE THIS INFORMATION CLOSELY. MAKE CONNECTIONS BETWEEN THE VARIOUS TRENDS AND VISUALS.

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V. Worldwide Crisis (new, pp. 469-471)

A. Explain how the Great Depression in the United States quickly caused economic chaos throughout Europe.

- refer to the question regarding “high tariffs and war debts”- the “multiplier effect” became worldwide (even affected Europe)- today: the economies of the world are very connected; things that affect one country tend to affect others (both in positive and negative ways)

B. Why did the U.S. pass the Hawley-Smoot Tariff? What effect did it have on our economy?

- was passed to protect American businesses from foreign competition (Americans would buy from U.S. companies instead of foreign ones, thereby helping to employ Americans)- other countries retaliated (got back) by passing tariffs on the goods we exported; this caused worldwide trade to decrease; every major country’s economy got worse because the flow of money from country to country went down

- The chart below shows the increase of tariff rates on specific products from the time of the Fordney-McCumber Tariff of 1921 to the Hawley-Smoot Tariff of 1930.

- Source: http://www.freetrade.org/node/453/print

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The Great Depression: The Economy “Goes Bust”VI. Daily Life in Hard Times

*Main Idea/Question: Describe the effects of the Great Depression on American citizens.

A. The Meaning of the Depression

1. How did many people view the Depression in relation to the American economy? Provide hard data that would support that point of view. (old, pp. 337)

- people were shocked; they saw the Great Depression as a permanent breakdown of the U.S. economy- 1932: 25% unemployment; 4/5th of steel mills shut down; farm income less than ½ of 1929’s

Visual: - The following graph shows the unemployment rate in the U.S. from 1929 to 2009.

- The graph allows us to get some perspective on how bad the Great Depression was (in terms of unemployment) compared to other times since then, including recently. - The current U.S. unemployment was about 8.6 % as of November 2011 (down from recession highs). It is currently less than 6% (January, 2015).Source: http://barrdear.com/john/2009/03/13/us-february-employment-and-recession-vs-depression/

B. The Depression in the Cities (old, pp. 347; new, pp. 472-473)

1. Identify the items/things that were seen as necessities and luxuries during this time

luxuries:- telephone, household appliances, furniture, jewelry, candy

necessities:- gasoline, radios, electric refrigerator, cigarettes, movies (as an escape)

(AH 16-17)2. What was a shantytown? Why did they become known as “Hoovervilles”?

- a collection of shacks where poor/homeless people lived;- became known as “Hoovervilles” because many of the people who lived there blamed Hoover for their situation (they were disgusted with him)- conditions here were horrible (people even living in the rubble of landfills/garbage dumps)

Visual: A Hooverville in Seattle, Washington during the 1930’s.

Source: http://www.semp.us/publications/biot_reader.php?BiotID=626

3. Describe the federal government’s (and Hoover’s) reaction to the rising levels of unemployment.

- fed. government did too little to provide direct relief to unemployed and homeless

4. Who/what ended-up helping those people who could not help themselves? Be sure to describe the function of soup kitchens and bread lines.

- the job fell to local and state governments, and to charities such as the Red Cross (also community chests)- soup kitchens and bread lines provided food to the poor and homeless, often several times a day; again, most were run by churches and other private and community charities- some people would have literally starved without their help

C. The Dust Bowl: Drought on the Great Plains (new, pp. 474; old, pp. 350-351)

*Main Idea/Question: Describe the Dust Bowl and the migration patterns of the Okies.

1. Define “Dust Bowl”:

- area (east of the Rocky Mountains) of Texas (part), Oklahoma, Kansas, Colorado, and New Mexico that was very dry due to drought and poor farming practices

2. Identify the causes and effects of the Dust Bowl.causes:

- over-farming and incorrect crops caused soil to become loose and easy to blow away - weather: long-lasting drought, as well as dust storms

effects:- dust storms ruined crops and livestock; businesses had to close temporarily- led to some starvation and a loss of farmers for the area- caused migration of farmers (“Okies”) to better places, like California- led to an increased interest in conservation during the time of the New Deal

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VII. Hoover Struggles with the Depression*Main Idea/Question: Describe Hoover’s immediate reactions to the Great Depression.

A. Background

1. Hoover had been orphaned as a child and was quite poor. Through hard work he became a very successful and wealthy businessman and engineer, as well as a government administrator (became a hero running the Food Administration during WWI).

2. Hoover’s actions during the first few years of the Great Depression transformed his public image from that of being a caring and efficient leader to an uncaring man who was more willing to help businesses than people.

B. Hoover’s Philosophy: (a more individual-based approach)

1. “Rugged Individualism” (definition; new, pp. 479):

- Hoover’s belief that the individual determination of people to survive and to work themselves out of the bad economic situation would save them, as well as get the economy back on-track- the government did not need to “bail-out” (help) people and businesses; they will figure out how to survive on their own

Reading/Primary Source:Source: http://www.samuelbrenner.com/URIHIS142/Documents/rugged%20individualism.htm

The following reading is an excerpt of Herbert Hoover’s “Rugged Individualism” campaign speech from 1928 in which he explains his belief that the freedoms given to individuals has made America – including its economy – great. In it he also explains how the opposite situation – governmental interference in the economy – would threaten America, its people, and its economy.

When the war closed, the most vital of issues both in our own country and around the world was whether government should continue their wartime ownership and operation of many [instruments] of production and distribution.  We were challenged with a... choice between the American system of rugged individualism and a European philosophy of … socialism.  The acceptance of these [socialist] ideas would have meant the destruction of self-government through centralization... [and] the undermining of the individual initiative and enterprise through which our people have grown to unparalleled greatness.

The Republican Party [in the years after the war] … restored confidence and hope in the American people, it freed and stimulated enterprise, it restored the government to a position as an umpire instead of a player in the economic game.  For these reasons the American people have gone forward in progress....

I would like to state to you the effect that... [an interference] of government in business would have upon our system of self-government and our economic system.  That effect would reach to the daily life of every man and woman.  It would impair the very basis of liberty and freedom....

By adherence to the principles of decentralized self-government, ordered liberty, equal opportunity, and freedom to the individual, our American experiment in human welfare has yielded a degree of well-being unparalleled in the world.  It has come nearer to the abolition of poverty, to the abolition of fear of want, than humanity has ever reached before.  Progress of the past seven years is proof of it....

The greatness of America has grown out of a political and social system and a method of [a lack of governmental] control of economic forces distinctly its own our American system which has carried this great experiment in human welfare farther than ever before in history.... And I again repeat that the departure from our American system... will jeopardize the very liberty and freedom of our people, and will destroy equality of opportunity not only to ourselves, but to our children....

a. How did this philosophy affect Hoover’s view of the roles of, and relationships between, citizens,

(AH 16-17) businesses, and the government in helping to solve the problems brought about by the Great Depression?

- he believed that government could encourage a relationship between citizens and businesses which could allow those groups to tackle tough economic problems; the role of the government was to encourage voluntary cooperation between citizens and businesses – not to force it or control it

2. How did this belief held by Hoover probably cause the Great Depression to be longer in length, as well as be more difficult for people to endure?

- Hoover’s belief that the federal government should not take direct action, as well as take the lead in solving the economic crisis, probably caused the Great Depression to be longer in length and severity than it could have been otherwise- many historians and economists believe that the government could have taken steps early on in the crisis that could have minimized the length, as well as the severity, of the Great Depression and the effects that it had on people

CURRENT CONNECTION: You should take note of the fact that the Bush (the T.A.R.P. program) and Obama (the “Stimulus” program) administrations had both taken action with the intention being to prevent the recent recession from turning into another major depression. These actions were very popular with some people but not popular with others. We don’t yet know what the long-term effects of these programs will be.

3. direct relief v. indirect relief:

a. Explain the difference between these two concepts.

1. indirect relief:- the government helping people indirectly by creating jobs, employing people, stabilizing the economy (etc. banks, stock market, etc.)- these actions don’t directly give people the things that they need to survive; these actions create opportunities and situations that will help them to get the things that they need to survive- indirect relief may also take the form of the government encouraging private businesses, charities, institutions, or individuals or community groups to get involved in helping people

2. direct relief:- cash payments or food provided by the government to the poor

b. Describe the following things/actions that were related to Hoover’s response to the Great Depression. Describe the degree of success or failure for each.

1. Indirect Relief:

a. President’s Committee for Unemployment Relief (old, pp. 352):

- raise funds for the needy in towns and cities across the country; people would give to privately run organized welfare funds called “community chests” to help their needy neighbors- these things could not keep up with the number of people who needed help

b. Boulder Dam (later re-named the “Hoover Dam”) (new, pp. 479):

- one program that Hoover created that did make an economic difference- stimulated agricultural development of California, and provided electricity and water to the local region

- world’s tallest dam, and the world’s second largestc. Reconstruction Finance Corporation (RFC) (new, pp. 481; old, pp. 353):

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- had power to lend money from national treasury to banks, insurance companies, loan associations, railroads and other businesses (up to $2 billion)- indirect in nature because it aimed to stabilize the entire economy by saving major institutions from bankruptcy (“trickle-down” economics)- aided 5,000 firms in 1932, but number of business failures continued to rise

d. Federal Home Loan Bank Act:

- lowered mortgage rates for homeowners and allowed farmers to refinance their farm loans to prevent them from losing their farms- it helped a little bit but, by itself, it was not enough to stabilize the economy

Question: Should the federal government take direct action to help people who are in danger of losing their houses as a result of the recent mortgage crisis? Should

it help the financial institutions (banks) that lent those homebuyers the money to buy their houses – financial institutions that were making a lot of money but are now in danger of failing? What do you think and why?

C. Hoover and the Bonus Army (new, pp. 483-484)

*Main Idea/Question: What brought the Bonus Army to Washington D.C. and how did Congress respond to their demands?

1. What was the Bonus Army (who was in it)? What did its members want and why then? What were the effects of this group’s actions?

- WWI veterans who had been promised a cash bonus; they demanded immediate payment (the cash bonus) in 1932 instead of 1945 because they needed it NOW! They marched into Washington D.C. and set up tents and intended to stay until they had gotten what they had come to get- Pres. Hoover sent soldiers to clear-out the veterans who had not left after being told to go home; led to violence against the veterans (men, women and children were beaten and gassed; 63 people injured)- bad press helped to ruin Hoover’s chance at re-election (helped F.D.R. to win)

Visual (on next page):- U.S. soldiers attack the Bonus Army.Source: http://firedirectioncenter.blogspot.com/2010/11/brief-poem-for-armistice-ie-veterans.html

D. The Election of 1932 (and its candidates)

1. Did Hoover lose the Election of 1932 or did FDR win it? Explain the reasoning behind your response.

- many historians believe that Hoover lost the election instead of FDR winning it because it is believed that almost anyone would have beaten Hoover because he had become so unpopular; as much as anything, a vote for FDR was a vote against Hoover

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The New Deal

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VIII. Roosevelt Takes OfficeA. Roosevelt’s Inauguration

1. In FDR’s first inaugural address he stated “the only thing we have to fear is fear itself.” What does this statement mean and what were its effects on the public?

- fear caused the panic and/or inaction (to not do anything), which helped to create the Crash and the Great Depression; we need to get beyond our fears of trying something new, or our fears that cause us to panic, so that we can do whatever is necessary to get out of the Great Depression

Visual: President Franklin Delano Roosevelt (a.k.a. “F.D.R.”)Source: http://www.vcsc.k12.in.us/staff/mhutch/modpres/fdr/index.htm

B. FDR and the Background of the New Deal (a philosophy that favored more direct government action)

1. Copy (onto the back of this page) the graphic organizer from the overhead that outlines the major and specific elements of FDR’s New Deal, his program to end the Great Depression.

*2. What was the philosophy motivating the New Deal, especially regarding the role of the federal government?

- FDR’s New Deal was based upon the philosophy that the government had the “responsibility to ensure to the utmost the economic and social well-being of the people”.

- *** wanted to expand the responsibility of the government to include meeting the needs of the people

- it was based upon a planned economy (socialism?), moving more away from pure capitalism (definitely not laissez faire)

- this was a major shift in philosophy regarding the role of government; still exists today

C. “The Hundred Days”

1. When was it? What happened and why is it important (even today)?

- March 9 – June 16, 1933 (the first hundred days of FDR’s first administration)- a remarkable period of cooperation between Congress and the President- passed more than 15 major pieces of New Deal legislation that set the foundation for later laws, and also expanded the government’s role in the economy- every new president is judged by how well their accomplishments in their first 100 days compare to FDR’s

(AH 16-17)D. The “Three R’s”: (NOTE – THIS IS AN EXTREMELY IMPORTANT SECTION!)

The three goals that came out of the New Deal are often referred to as the “THREE R’s”.

a. Identify the “THREE R’s” and explain what each of them meant.

RELIEF:- programs to relieve (ease/end) the suffering of the needy by providing money, loans to make mortgage payments, or jobs

RECOVERY:- programs intended to create future economic growth by passing laws to help business, labor and agriculture get strong once again

REFORM:- programs to prevent future economic crisis by changing and fixing institutions, such as banking system

Visual: An illustration that shows the purpose of each of the “Three R’s” of Roosevelt’s New Deal program. Look at how all of the different parts relate to each other.

Source: http://nbleadership.com/blog1/2010/11/03/the-great-depression/

NOTE: SEE PAGE 500 IN THE NEW TEXT, AND PAGE 373 IN THE OLD TEXT, TO HELP YOURSELF UNDERSTAND THE FOLLOWING MATERIAL.

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E. New Deal Programs (summary of)

Act or Program Acronym Year Enacted Significance

**Agricultural Adjustment Act AAA 1933

Protected farmers from price drops by providing crop subsidies to reduce production, educational programs to teach methods of preventing soil erosion. It helped to raise farm prices by reducing the production of crops

Civil Works Administration CWA 1933 Provided public works jobs at $15/week to four million workers in

1934. **Civilian Conservation Corps

CCC 1933 Sent 250,000 young men to work camps to perform reforestation and conservation tasks. Removed surplus of workers from cities, provided healthy conditions for boys, provided money for families.

Federal Emergency Relief Act FERA 1933 Distributed millions of dollars of direct aid to unemployed workers.

**Glass-Steagall Act FDIC 1933

Created federally insured bank deposits ($2500 per investor at first) to prevent bank failures. It was created to re-establish confidence in the American banking system

National Industrial Recovery Act NIRA 1933 Created NRA to enforce codes of fair competition, minimum wages,

and to permit collective bargaining of workers. National Youth Administration NYA 1935 Provided part-time employment to more than two million college and

high school students. Public Works Administration PWA 1933 Received $3.3 billion appropriation from Congress for public works

projects.

Rural Electrification Administration REA 1935

Encouraged farmers to join cooperatives to bring electricity to farms. Despite its efforts, by 1940 only 40% of American farms were electrified.

Securities and Exchange Commission

SEC 1934 Regulated stock market and restricted margin buying.

**Social Security Act 1935

Response to critics (Dr. Townsend and Huey Long), it provided pensions, unemployment insurance, and aid to blind, deaf, disabled, and dependent children. It remains an example of the government’s increased role in the lives of the American people.

Tennessee Valley Authority TVA 1933 Federal government built series of dams to prevent flooding and sell

electricity. First public competition with private power industries

Wagner Act NLRB 1935 Allowed workers to join unions and outlawed union-busting tactics by management.

Works Progress Administration WPA 1935 Employed 8.5 million workers in construction and other jobs, but

more importantly provided work in arts, theater, and literary projects.

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NOTE: You must, at the very least, know the following New Deal programs:

a) bank holidays and Emergency Banking Relief Act (not in the above chart; is described below)

- March 9, 1933; purpose was to stabilize banking system in order to restore public’s confidence in banks; idea was that this should result in more deposits, more loans, and more economic activity- banks not allowed to re-open until they proved they were safe (starting March 6) by being able to show that they could meet their financial obligations

*Main Idea/Question: What was the intent of the Emergency Banking Act and the ensuing bank holiday? Did the bank holiday achieve its aim?

b) Glass-Steagall Act of 1933 (and the FDIC)c) Agricultural Adjustment Act (AAA)d) Civilian Conservation Corps (CCC)e) Social Security Act (and the Social Security Administration)

E. FDR’s “Fireside Chats”:

1. What was the purpose of FDR’s “fireside chats”?

a. gain support of the American people for his programs by speaking directly to them in a simple and friendly way; done the first time to discuss the banking crisis and what was being done about it; it was successful

1. President Obama has been doing something similar to this through the TV

IX. Criticisms of FDR and the New Deal (from the “Right” and the “Left”)

A. Deficit Spending (Keynesian Economics):

1. What is deficit spending (see the “Economic Background” box on pp. 492)?

- the practice of the government spending more money than it receives in revenue (tax dollars)- also called “Keynesian economics”, after the influential economist who encouraged the idea- is meant to inject money into the economy to help stimulate (bring about) an economic recovery- our nation’s deficit spending has resulted in the U.S. having a national debt of over $17 trillion

Visual: The graph below shows our government’s deficit (that means our government has spent more money than it has collected in a year) from decade to decade as a percentage of its GDP (Gross Domestic Product), which is the total value of the goods and services that it produces in one year.Source: http://www.econosseur.com/2009/02/only-difference-from-great-depression-is-monetary-and-tarp.html

- The deficit went up in 1930. Notice how before 1930 the U.S. had no deficit.- Notice how the deficit skyrocketed during WWII (1941-1945).- All of these deficits added together has helped lead to our $17 trillion national debt.

(AH 16-17)

a. F.D.R. did not really like deficit spending. Why, then, did he do it? Explain.

- saw it as a necessary evil that should only be used during a time of economic crisis, which the Great Depression was;- was willing to attempt it because the conservative approach of Hoover had not solved the problem; something more drastic appeared to be needed

b. pros (positives) of deficit spending:

- can inject much needed capital (money) into the economy; this money becomes income to some people and businesses, which is then spent and becomes income to other people and businesses, and so on (think about the multiplier effect that we learned about at the start of the unit)

- can lead to more employment, more productivity and a higher standard of living

c. cons (negatives) of deficit spending:

- the money needs to be paid back at some point, which means money that currently is being spent on products and services will eventually need to be redirected toward paying off old debts for products and services that have already been used- will probably need to be paid back through a mixture of tax increases as well as major cuts in government programs, such as education, Social Security, Medicare, defense, road systems, etc.

- this will probably lead to a slow-down in the economy (another recession or depression)- the U.S. may have difficulty getting loans from other countries and private individuals if it does not pay back the debt, or if it has trouble paying it back; this could affect future economic growth because we need capital for growth- the value of the U.S. dollar drops against other nations’ money, making it more difficult for the U.S. to buy goods from other countries (too expensive)

B. Critics of the New Deal

1. Summarize, on the back of this page, the criticism of each group/individual towards FDR and the New Deal. If it applies, explain the plans/actions suggested by each of these people/groups as an alternative or supplement to the New Deal:

a. Dr. Francis E. Townsend (and the Townsend Plan) d. Upton Sinclair (and EPIC):b. Huey Long e. American Liberty League:c. Charles Coughlin

X. The Second New Deal (a.k.a. “The Second Hundred Days”)

A. Background of the Second New Deal

1. Many Americans supported FDR’s and the Democrats’ New Deal programs, as was shown by the overwhelming victory by the Democrats in the 1934 congressional elections. This gave FDR the support that he needed to continue implementing and expanding his New Deal policies and programs. FDR moved to make the government a tool that would protect Americans from economic hardship – not just on a temporary basis, but permanently. He

(AH 16-17) also tried to fix some of the problems associated with the unequal distribution of wealth.

B. Housing

1. Federal Housing Administration (FHA):

a. What was the FHA’s purpose and how was it supposed to achieve that goal?

- created in 1934 to issue loans for building and for repairing homes;- meant to stimulate growth of the housing industry (a major industry)- encouraged banks to make housing loans and encouraged customers to apply for them- offered banks insurance on loans that were made to families buying new homes; that meant that the bank would still get its money even if the homeowner could not pay back the loan- government required banks to offer customers low down payments on housing loans, which allowed more people to get into a home- forced banks to spread out mortgage payments more so that the loans would be easier to repay- helped people to get into homes, which usually creates economic stability for families, which is good for the overall economy

b. What were its effects & degree of success? Does it still exist?

- very successful (many people got into/built homes, which caused the industry to thrive)- the agency still exists

C. Social Security (THIS CONCEPT IS EXTREMELY IMPORTANT TO US TODAY!)

1. What was the goal of the Social Security Act?

- created to help elderly Americans during the Great Depression by giving monthly payments to retired workers or their survivors; money also distributed to workers who lost jobs, and for the care of dependent and crippled children;

Visuals: Advertisements for the new Social Security program (1935).Source (1st item): http://socialsecurity.procon.org/view.resource.php?resourceID=003971Source (2nd item): http://www.irs.gov/app/understandingTaxes/student/whys_thm02_les04.jspSource (3rd item): http://blog.dearmyrtle.com/2010/08/social-security-marks-75th-anniversary.html

2. How did/does Social Security work?

- established a nationwide federal unemployment tax;- a second tax taxed both employers and employees equally (currently 6.2% of income for Social Security and 1.45% of income for Medicare); this provided for the payment of old-age pensions for retired people- each generation of workers supports the retired workers who have come before them

- there is a problem with this because there will be too many retirees (the “Baby Boom”

(AH 16-17) Generation) and not enough workers contributing to the system to support them

3. What were the effects of the Social Security Act?

- it provided substantial benefits to millions of Americans (helped them to survive), and it still does

a. Does this program still exist today? What are many economists saying about Social Security in the future? Why do they believe that this will happen? Explain.

- program still exists today, but it will go bankrupt by about 2037 (last year the government said it would be 2040 – it’s getting worse) if the system is not fixed (too many retirees collecting money but not enough active workers to pay for it; each generation of workers pays for the benefits of the workers who came before them)

D. The Growth of Labor Unions (IMPORTANT)

*Focus Question: Explain the Fair Labor Standards Act and explain why it was important in raising the standard of living for all Americans.

1. FDR was a strong supporter of organized labor (labor unions) during his time in office. More people began to join labor unions during this time, which was made possible by the passage of laws like the National Industrial Recovery Act (NIRA), which created the National Recovery Administration (NRA). This established minimum standards in the workplace. In addition, the National Labor Relations Act (NLRA – a.k.a. the “Wagner Act”) – which we learned about earlier – was created to help settle disputes between employers and employees and protected the right of labor unions to organize. The Fair Labor Standards Act, which set maximum hours at 44 a week, set minimum wages at 25 cents an hour, and set employment rules for workers under age 16.

E. The Election of 1936

1. FDR easily won the election while getting 61% of the popular vote. This, he believed, gave him the support that he needed to implement even more changes and programs. He may have overestimated the support that he would actually get.

F. FDR and the “Court-Packing” Scandal

1. Describe the “Court-Packing” Controversy. Explain what it was, why F.D.R. attempted to do it, and what its effects were.

- some of FDR’s New Deal and 2nd New Deal legislation was being declared unconstitutional by the Supreme Court, which upset him very much- he attempted to dilute (decrease) the power of the existing judges who were causing him problems by trying to add more judges to the court – judges that he would pick and judges who would rule in his favor

- he stated that he should be allowed to add up to 6 new judges to the Court to help decrease the workload for the aging justices who were over the age of 70

- this would essentially upset the system of checks and balances that were put into our Constitution to help prevent any one branch of the government from gaining too much power

effects:- he lost the support of much of the public for a while after this event because people believed that he was going too far to try and get what he wanted ; some people felt that he was trying to trick America- even many of his own supporters withdrew their support of him- this caused him to only get one more major piece of New Deal legislation passed after this

Question: Looking back at it, would it have been good for the U.S. had FDR gotten his way with the Supreme Court? Explain your answer by referring to specific information.

XI. Life During the Roosevelt Years

(AH 16-17)A. Copy down the notes from the overhead onto the back of this page regarding what life was like during the Great Depression for:

African-Americans Mexican-Americans American Indians women

B. Identify a total of four important facts/details regarding art and popular culture of the 1930’s.

1.

2.

3.

4.

XII. The Legacy (Effects of the New Deal)A. The New Deal Ends

1. What began to take the focus of the country away from the effects of the Great Depression? What effect did this have on the economy of the U.S. (and on the Great Depression)?

- the entrance of the U.S. into WWII (because of the bombing of Pearl Harbor) forced the U.S. government to employ millions of people so that war products could be made (it had no choice but to do this)- the increased deficit spending of this time period injected tremendous amounts of money into the economy, which jump-started it and created economic growth

- our entrance into WWII effectively ended the Great Depression for our country

**B. The Significance and Effects of the New Deal**1. Identify, and summarize main aspects of, the seven (7) effects of the New Deal that are identified and described

on pages 382-383 of the old textbook. Your analysis and explanation MUST BE VERY DETAILED.

a. EXTENSION OF THE POWER OF THE FEDERAL GOVERNMENTNew Deal agencies came to the rescue of banking, industry, and agriculture in the early years of

the Depression. While government involvement in private business existed long before Roosevelt, the extent of that involvement increased greatly during the New Deal. Such involvement was not merely extensive; it was permanent. Seven decades after the Depression ended, the government continues to play an important role in the lives of Americans. The Federal Housing Administration (FHA) still insures mortgage loans. The Agricultural Adjustment Act still pays farms subsidies (payments to farmers to grow – or not grow – and raise – or not raise - crops and livestock). The TVA still provides electricity. Bank deposits are still federally insured, and the Securities and Exchange Commission (SEC) still watches over the stock market. The lasting effects of the financial and banking reforms have been especially important, assuring citizens of the long-term stability of the American economy.

b. EXTENSION OF THE POWER OF THE PRESIDENTFDR was probably the best-loved and most-hated president since Lincoln. Not only his policies

but also his forceful style of leadership aroused strong emotions on both sides. Critics, pointing to the Court-packing scheme and other Roosevelt policies, sometimes accused FDR of wanting to be a dictator. Even today he remains a controversial figure.

Without question, Roosevelt believed in an active presidency and did much to broaden the President’s power. Later Presidents continued the trend, helping to create what is often

called an “imperial presidency”. Defenders of presidential power have replied that as a large and complex nation, the U.S. cannot afford to be without strong executive leadership.

c. DEFICIT SPENDING

(AH 16-17)One of FDR’s most controversial actions was using deficit spending, that is, spending more

money that the government raises in taxes. FDR was not the first president to fail to balance the budget. He was, however, the first to consistently use deficit spending as a method of stimulating (trying to improve) the economy. This tactic, encouraged by the economist John Maynard Keynes, is called Keynesian economics. By the time FDR left office the national debt was nearly $260 billion. (However, much of this debt reflected wartime spending rather than New Deal programs). Presidents after FDR sometimes tried to balance the budget, but deficit spending has been more typical.

d. FEDERAL SOCIAL PROGRAMSThe New Deal established the welfare state – government based on the view that the state

(government) is responsible for the security and needs of the people. The Social Security Act has continued to provide aid to the elderly, the disabled, and the unemployed. Later administrations have used it as a precedent for extending aid to other groups, such as students, the handicapped, and mothers with dependent children. Like FDR, however, later presidents have favored “modified” social welfare programs that do not guarantee complete economic security. Few Social Security recipients can live entirely on their Social Security payments. People who received “unemployment” benefits (checks) eventually have to find work. FDR’s “modified” welfare approach was meant to help people in their time of need, not make them permanent dependents of the government.

e. GREATER CONCERN FOR WORKERSThe National Labor Relations Act of 1935 gave workers the right to join unions and to bargain

with their employers. The Fair Labor Standards Act was another major achievement in labor history. Later administrations built upon these two laws to provide workers with safer workplaces, rights to company pensions (retirement programs), and freedom of racial and sexual

discrimination.

f. CONSERVATION GAINS

The New Deal made conservation a permanent part of the political agenda. New Deal programs changed the face of the country, as government workers practices soil conservation, built

dams to prevent flooding, and reclaimed the grasslands of the Great Plains. After the 1930’s Americans would never wholly forget that farmlands and forests could not be used without thinking of the future.

g. RENEWAL OF FAITH IN DEMOCRACYPerhaps most importantly, the New Deal carried the U.S. through a time when the success of

democracy itself seemed to be in question. “The only bulwark of continuing liberty,” FDR once declared, “is a government strong enough to protect the interests of the people, and a people strong enough and well enough informed to maintain its sovereign control over its government.” By reviving the faith and strength of the American people, FDR ensured that the U.S. would be strong enough to defend democracy if the need arose. With a world war taking place (WWII) and the survival of freedom itself at stake, the U.S. was ready to play a fateful role in the course of world history.

C. Identify and describe ways that the Great Depression and the policies and programs of the New Deal still affect you today. Be specific and detailed in your explanation. Your analysis and explanation MUST BE VERY DETAILED.

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XIII. BIG CONCEPTS/IDEAS WORTH REMEMBERING – “THE GREAT DEPRESSION”

A. Identify the five (5) most important big concepts or ideas that you will take away from this unit. Remember, you are identifying the topics, themes, and lessons learned from this unit that you believe you should remember for the rest of your life because they are useful, because they are important, and, potentially, because they are relate to topics and situations beyond a study of American history.

1.

2.

3.

4.

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5.