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A New Era or the New Deal?

by Nick Underwood
Mr. Underwood holds a masters degree in history from American University.

President Barack Obama aims to “hit the ground running” in his attempt to fix the current economic situation.  This immediacy has enabled a public discussion that equates Obama’s American Recovery and Reinvestment Plan (ARRP) with that of Franklin Delano Roosevelt’s first “New Deal” and the “Three Rs”—Relief, Reform, and Recovery.  Little discussion, however, has been made of three Rs themselves, muddying the comparisons between Obama's New Deal and FDR's.

So what were the three R's exactly?

The first New Deal (1933-1935) included a series of policies and programs designed for the relief of individuals, the recovery of the economy, and the reform of institutions.  Relief was a precondition for Recovery, which, it was hoped, would lead to Reform—including, but not limited to, the elimination of financial and business abuses, centralization of economic authority, augmentation of workers’ economic power, and the nationalization of social welfare services. 

The Relief component of FDR’s plan comprised:

  • The Civilian Conservation Corps (CCC), which was created in March 1933, and provided for jobs for young unemployed men in agriculture and forestry.
  • The Federal Emergency Relief Act (FERA), which was passed in May 1933 and devoted $500 million from the Reconstruction Finance Corporation (RFC) to state and local authorities for direct assistance to the unemployed.
  • The Civil Works Administration (CWA), which, created in January 1934, provided jobs on public works projects such as roads, buildings, and other public spaces. The CWA was a “national” program, in the sense that the federal government issued checks directly to individual recipients.  The goal was to dignify relief by providing work, not handouts, to employees. Unlike FERA, CWA was federally administered.   Creating federal agencies enabled Roosevelt to combat corruption at the local and state level and have successes attributed to his plan and administration, thereby leveraging political power.

Relief was seen as a precondition for eventual economic and social recovery.  This aspect of the New Deal included initiatives such as the Agricultural Adjustment Act (AAA), which tried to confront the “severe and increasing disparity between the prices of agriculture and other commodities.” The National Industrial Recovery Act (NIRA), June 1933, tried to stimulate business by nullifying antitrust laws, permitting price fixing and ensuring fair competition through new codes.  NIRA led to the development of the Public Works Administration (PWA), which created jobs by implementing new public infrastructure and building projects. 

The central agency for recovery during the New Deal era was the National Recovery Administration (NRA).  The NRA controlled prices, wages, hours, and working conditions and “codes of fair competition.”   The Federal Housing Administration (FHA) was created to help prospective homeowners and builders. Components of the Recovery program, such as NIRA and AAA, fed directly into the overall goals of Reform. 

What was the difference between programs aimed at Recovery and those at Reform? Recovery programs had a more immediate effect while those billed as Reforms sought permanent, institutional change.  Examples of reforms include:

  • The passage of the Banking Acts of 1933 and 1935, which increased the power of the Federal Reserve Board to regulate banking and put control of the Fed in its board, not its bankers. 
  • The creation of a permanent Federal Deposit Insurance Corporation (FDIC) .
  • The establishment of the Securities and Exchange Commission (SEC), which was designed to prevent lenders’ misuse of insider information; regulate stock and bond trading; require the disclosure of fair stock information; and create “financial transparency.” 
  • The establishment of the National Labor Relations Board (NLRB), which followed a wave of strikes, which shut down entire cities.  The law required businesses to negotiate with union representatives and allow for the institution of a unionized majority rule.
  • The passage of the landmark Social Security Act.

Given that serving of alphabet soup, how, if at all, can President Barack Omaba’s ARRP be compared to the New Deal? 

President Obama’s plan hinges on the creation of 3 to 4 million jobs: 80 percent in the private sector.  To accomplish this, initiatives will be put in motion to double renewable energy production and make public buildings more energy efficient; rebuild crumbling roads, bridges and schools; computerize the health care system; modernize classrooms, labs and libraries; and provide tax breaks to workers.  According to Obama, "we must make strategic investments that will serve as a down payment on our long-term economic future.” Obama will try to reform the process by banning earmarks.

A Recovery Act Accountability and Transparency Board is envisioned to review the management of recovery dollars and warn against possible problems.  The Government Accountability Office and the Inspectors General of the Transparency Board will review recovery funding. “We must demand vigorous oversight and strict accountability for achieving results,” according to Obama, “and we must restore fiscal responsibility and make the tough choices so that as the economy recovers, the deficit starts to come down.”

Even with all of the hopes and reports of a “new New Deal,” Obama’s plan promises to be new, but not exactly a New Deal.  Obama himself has been careful to signal a stronger commitment to the free enterprise system than Roosevelt. But he has sounded like FDR. In a recent speech, Obama, clearly alluding to FDR, said “the need for this action has never been more urgent.”  Obama has echoed Roosevelt's famous commitment to try something and see if it works, but to above all, try something: “We’ve looked ahead to the next big idea, that next new breakthrough,” Obama said a few days before his inauguration. “We’ve experimented and innovated, and when we’ve failed, we’ve picked ourselves up and tried again.

Obama’s rhetoric illustrates a desire to acknowledge history and create something his own. With any hope, his experimentation and innovation will lead to successful recovery and reinvestment and a “new era.”