"THE THIRD NEW DEAL"
Historians continue to debate when the New Deal ended. While some identify the end of Franklin Delano Roosevelt's unprecedented reform agenda as early as the beginning of his second term (1936-37), others agree that while the number and scale of initiatives introduced during the second term pale in comparison with those passed during Roosevelt's first term, the New Deal eventually and gradually ended in 1938, when Republicans recovered from their 1936 devastating loss and recorded substantial gains in Congress in the aftermath of the 1938 midterm election. On the one hand, the new balance of power in Congress made the passing of new legislation more and more challenging for the Roosevelt administration. On the other, first the threat and then the 1939 outbreak of World War II in Europe shifted Roosevelt's focus from domestic reforms to the war effort long before the U.S. formally joined the war. Although traditionally the New Deal is divided into two stages (First New Deal, 1933-34/5 and Second New Deal 1935-38), some historians refer to the final phase of the New Deal as the Third New Deal. The Third New Deal usually refers to the period around and following the Recession of 1937-38 with some pointing to the the 1939 Reorganization Act (which allowed the President to reorganize the executive branch) as the end of the final phase of the New Deal.
Still in the midst of the Great Depression, the U.S. economy entered another period of economic downturn in the spring of 1937, which continued through most of 1938. The Roosevelt administration was under assault and the President's opponents even referred to the crisis as the Roosevelt Recession. While some argued that the downturn was a result of a premature effort to curb government spending and balance the budget, conservatives believed that it was caused by what they saw as Roosevelt's attacks on business and the empowered position of organized labor. In response to this criticism, Roosevelt and his proponents intensified their earlier anti-monopoly efforts and blamed big business for the negative economic trends. Harold Ickes, Secretary of the Interior, attacked automaker Henry Ford, steelmaker Tom Girdler, and the superrich "Sixty Families" who supposedly comprised "the living center of the modern industrial oligarchy which dominates the United States." Ickes warned that they would create "big-business Fascist America—an enslaved America." In 1937, Roosevelt appointed Robert Jackson as the aggressive new director of the Antitrust Division of the Justice Department. However, this effort lost its effectiveness once World War II began and big business was urgently needed to produce war supplies. The anti-monopoly campaign aimed to hurt big business that Roosevelt and his advisers saw as obstructing economic recovery. However, the Roosevelt administration failed to pass any major trust-busting legislation.
Roosevelt rejected the advice of his Secretary of Treasury Henry Morgenthau to cut spending and announced more New Deal programs. In the fall of 1937, the Housing Act (known also as the Wagner-Steagall Act) introduced government subsidies for local public housing agencies to improve living conditions for low-income families. In February 1938, Congress passed the second Agricultural Adjustment Act (AAA), which authorized crop loans, crop insurance against natural disasters, and large subsidies to farmers who cut back production. In April of the same year, the President sent a new large-scale spending bill to Congress, requesting $3.75 billion for various government projects, including those focused on unemployment relief. One of the most influential pieces of legislation passed in the final stage of the New Deal was also the 1938 Fair Labor Standards Act (FLSA). It established a national minimum wage (25 cents per hour in the first year after the Act was passed), overtime standards, and prohibited most employment of minors (individuals under the age 16 or 18, depending on the nature of work) in "oppressive child labor." It also limited the work week to 44 hours (in 1940, amended to 40 hours a week). FLSA did not apply to all industries. Historians estimate that the Act's provisions covered not more than 20% of labor force. Also, the ban on child labor introduced in FLSA did not cover agriculture where child labor was rampant. However, FLSA was critical to establishing labor standards that remain the foundation of labor law in the United States.
THE END OF THE NEW DEAL
Roosevelt intended to introduce more legislation during his second term (1937-1941), but two main factors made this a much more challenging task than during his first term: the lack of political support and the threat of war. In 1938, Republicans gained seven Senate seats and 81 House seats. In the aftermath of the failure of the 1937 court-packing plan and the 1938 election, the bi-partisan Conservative Coalition solidified and strengthened in Congress and many liberal proposals were defeated. A handful of liberal measures did pass when the Conservative Coalition was divided (most notably the minimum wage laws).
The Depression continued with decreasing effect until the United States entered World War II in December 1941. Under the special circumstances of war mobilization, massive war spending doubled the GNP. Civilian unemployment was reduced from 14% in 1940 to less than 2% by the end of 1943.
Historians and economists disagree whether and, if yes, to what extent the New Deal helped the U.S. economy recover from the Great Depression. However, they all agree that the primary factor of the eventual economic growth that followed the New Deal was driven by the demands of the war effort.
A homeless family of seven walks along U.S. 99. bound for San Diego, where the father hopes to enroll on welfare because he once lived there. They walked from Phoenix, Arizona, where they picked cotton. Author: Dorothea Lange; 1939; the United States Library of Congress's Prints and Photographs
Despite the continuous economic crisis and hardships, the New Deal was largely over by 1939, where this family was seeking New Deal benefits.