The most pressing problems of the Great Depression included unemployment. Low prices and wages, bank failures, and an unbalanced budget (government deficit). While the New Deal was unable to fully solve these problems, for the most part it ameliorated them and was therefore a 7 in effectiveness.
Unemployment spiked during the Great Depression, and the New Deal addressed it. By providing states with the funds to create work relief (FERA) and providing federal jobs (CCC, CWA, TVA, WPA). Although the FERA was mostly unsuccessful because of demand for direct cash relief. Federal intervention had better results. By creating temporary jobs with the CCC, CWA, and TVA, consumers earned money to spend on businesses and start the economy going again.
The programs additionally opened up permanent employment options in original jobs, decreasing unemployment and lasting past the CWA’s abandonment. Both including and excluding farm employment numbers, there was a downward trend in unemployment after the New Deal’s implementation, by ten to twenty percent. Including government relief employment, the decrease was even more significant. When FDR began pulling back from these programs due to business complaint, there was a brief recession that appeared to improve after FDR once again pushed for them. Additionally, the SSA allowed the elderly to retire and open up labor spots- however, unemployment did not fully drop to pre-depression levels until WWII.
The New Deal sought to fix the low prices/wages of the Great Depression by inflation. It did this with the AAA by raising the demand for agricultural products, ultimately pushing prices up by 50%. Once again, however, prices did not return to “parity” until much later (2000); also, this initially hurt many consumers because they could not afford the goods at higher prices and were starving as farmers razed their crops (if consumers could not buy products, farmers could not benefit).
Additionally, FDR took the U.S. off the Gold Standard and Congress passed the Gold Repeal Joint Resolution and Gold Reserve Act, which allowed FDR to set a high gold value of the dollar: causing gold to flow into Fort Knox and effectively raising prices as seen by the immediate rise in CPI after 1933. With the NRA, the New Deal attempted to set codes (e.g. minimum wage) to get money in the hands of consumers; this act was initially successful but ultimately declared unconstitutional and repealed. The New Deal did propagate inflation, but once again, U.S. prices did not fully recover until WWII.
The New Deal addressed bank failures with the Four Day Banking Holiday and by passing the Emergency Banking Relief Act, which restored public faith in the previously unstable banking structure. It allowed all banks to close simultaneously and “regroup” as well as only allowed “sound” banks to reopen; afterwards, many people stopped withdrawing money and instead started depositing it back. Additionally, with the FDIC’s guarantee on deposits up to $5,000 and FSA’s disclosure of information on stocks/bonds, people further regained faith in the economy and the banking system stabilized; bank failures dropped to less than 1%.
The New Deal was least effective in addressing the unbalanced budget (i.e. government debt). One reason for the decrease in government revenue was the number of homeless people who were not contributing to the economy. To address this issue, the New Deal pushed the HOLC and FCA to help people keep their mortgages and farms. The Economy Act also allowed executive branch to cut wages for a balanced budget, though this contradicted its push for inflation.
Much later on, the Revenue Act of 1935 was passed as a graduated income tax and “evened the distribution of wealth” or took more revenue from the rich. However, despite the significant decrease in farm foreclosures and subsequent success of at least the FCA, government deficit rose and government debt almost doubled as expenditures nearly quadrupled. Though the New Deal addressed the problem, its solution was inconsequential in balancing the budget.
The New Deal “primed the pump” for the economy’s recovery, but although it may have started fixing many of the Great Depression’s problems, it was unable to solve them as WWII was what ultimately ended the depression.
