Professor John Doe
3 April 2018
During The Great Depression, the American nation was in need of recovery from economic collapse, relief, and reform to prevent further depressions. An effort to create these new reforms came in the form of The New Deal. The New Deal comprised of domestic economic programs that were passed by the government in the 1930s as a response to the Great Depression. As Hardman observes, though the New Deal did not end the depression, it changed the American government for good (Hardman).
With the New Deal, there was a larger role for the government. First, President Franklin Roosevelt increased the power of the president, with the White House becoming the center of government. In addition to this, President Roosevelt expanded the federal government, with the national government becoming directly responsible for the well-being of the people in a way that it had not been before. The government would now make relief payments, serve school lunches and run pension programs. Instead of local and state governments, it was the federal government that became the protector of the people’s welfare.
The measures under The New Deal meant direct government involvement in economic areas never contemplated before. For example, the National Recovery Act was concerned with steps to achieve a planned economy. The Works Progress Act saw the government’s involvement into almost every aspect of the economy. Jobs were created for almost every aspect of employment. At the same time, major steps in government social programs were made. For example, the Tennessee Valley Authority tried to remake the social and physical environment of an entire area.
The programs spelt out under the New Deal led to increased spending by the government and unbalanced budgets. While American citizens had little expectations before the New Deal, many of them had bigger expectations from the federal government after the New Deal. According to Hardman, critics of the New Deal argue that “deficit and government spending absorbed the credit that was available, and this made the recovery of the private sector difficult” (Hardman).
A number of measures were instituted under the New Deal and they included the Emergency Banking Act, the Economy Act, the Federal Emergency Relief Act, the Agricultural Adjustment Act, the Tennessee Valley Authority Act and many other programs. In terms of fiscal policy, Bordo et al. observe that during the New Deal period, a regime shift took place and it increased the federal fiscal share by about 9 % points (25). Data suggests that programs under the New Deal led to an increase in fiscal centralization as well as setting in motion processes for further centralization.
With these programs, the political setting was such that local and state officials demanded and go active roles in their administration, with the central government setting up general guidelines and providing much of the funds in form of matching grants. As such, the political economy of these New Deal programs took the shape of a cooperative enterprise between various government levels, a factor that is still evident in today’s system of governance.
Also, this pattern of intergovernmental relations created by the New Deal is responsible for the struggles that exist between national and state governments, as well as between Congress and the President over the control of the programs. According to Bordo et al., ever since the New Deal, “congress has portrayed less inclination in locating either financial or administrative control at the state level” (26). Due to this, the national government continues to experiment with a broad range of intergovernmental forms. Therefore, the New Deal basically increased the government’s role in the economy.
Bordo, Michael, Claudia Goldin, and Eugene N. White. The Defining Moment: The Great Depression and the American Economy in the 20th Century. University of Chicago Press, 1998.
Hardman, John. “The Great Depression and the New Deal” Edge, 1999, Stanford University, web.stanford.edu/class/e297c/poverty_prejudice/soc_sec/hgreat.htm. Accessed 2 Dec. 2017.