The Modern United States hasexperienced and observed an array of economic highs and lows throughout itshistory.
Notable lows include the Great Depression that occurred during the1930’s and the Great Recession that occurred in 2008. It is very interesting tostudy the many parallels between the two, as many political leaders andeconomists have in order to gain further insight to the causation and effectsof these two significant moments in American History. Chronologically, the New Deal isdefined as a series of federal programs, financial reforms, and regulationsenacted by the United States government during the 1930s in response to theGreat Depression. The Great Depression was a period of low business activitywhich began with the stock-market crash in October, 1929, and continuing wellinto the1930s (Schaller 791). Some of these federal programs included the CCC,the CWA, the FSA, the NIRA, and the SSA. Another prominent component of the NewDeal was that it established restrictions and provided safeguards for thebanking industry and vastly altered the monetary system.
Most of the programsestablished were derived from laws passed by congress or presidential executiveorder during Franklin D. Roosevelt’s first term. Schaller and many otherhistorians describe the primary focus of the New Deal as the “3 R’s”: relieffor the unemployed and poor, recovery of the economy, and reform of the financialsystem in order to prevent another catastrophic depression (Schaller 793-816).
The New Deal’s effects were feltnationwide and on a variety of platforms. Politically, realignment wasinitiated, making the Democratic party establish a foundation in liberalideals, and empowerment of labor unions and ethnic minorities. This basis hascontinued throughout the modern political climate. In contrast, the Republicanswere completely against the New Deal and perceived it as an enemy of businessand growth. The “First New Deal” is arguably more successful than the “SecondNew Deal” (Schaller 802). The former focused on the monetary system and bankingcrisis by enacting the Emergency Banking Act in 1933 and the Federal EmergencyRelief Administration provided over 500 million dollars to relief operations atthe state and local level. The Securities Act was also enacted in 1933 toprevent another detrimental stock market crash. The “Second New Deal” includedthe Wagner Act of 1935 which involved protection of labor organizing, the WorksProgress Administration relief program, the Social Security Act, and other variousprograms that provided aid to tenant farmers and migrant workers (Schaller805).
One of the most significant aspects of the “Second New Deal was the FairLabor and Standards Act 0f 1938, which set maximum hours and minimum wages formost categories of workers. These standards are relatively unchanged today. Thelargest and most prominent programs that are still in existence today stemmingfrom the “Second New Deal” are the Social Security System and the Securitiesand Exchange Commission. Interestingly the New Deal’sbanking regulation lasted until it was suspended in the 1990’s which someeconomists believe was a fatal mistake that inevitably led to the GreatRecession.
Arguably, the causation of both national crisis lie at the hands ofthe federal government; however U.S. History invariably reveals its citizens toturn to, or rely on the federal government to create some form of reparation intimes of need. The Great Recession primarily involved the financial crisis ofthe 2000s-2010s and the U.S. mortgage crisis of 2008.
From an internationalperspective, this recession was not felt evenly in global markets. Most of theworld’s developed economies, such as those in Europe, suffered greatly; while,many newer developing economies such as India and China saw substantial growthduring this time period.. A large portion of U.
S. mortgaged-backed securitieswere supported by subprime mortgages. Regrettably, the U.S. housing bubbleburst in 2008, due to the negligence of homeowners who began to default ontheir mortgage payments. As a result, over inflated asset prices and riskyloans within the market were exposed. Similar to the Great Depression,countless banks suffered huge losses, which required massive public financial assistance.The government’s response, as it was during the 1930s, was to establishpolicies that stimulated the economy and reduced financial system risks.
Forexample, President Obama, followed FDR’s lead and began targeting spending withininterest groups. Under executive order, Congress signed into law the AmericanRecovery and Reinvestment Act of 2008, which sent tax dollars to cities andvoting groups across the country. The ARRA was undoubtedly fundamental in endingthe Great Recession. Unfortunately, the most controversial effect of the policyimplementations of FDR and Obama during two of the greatest economic tragediesin U.S. History was the significant increase in national debt during each oftheir terms in office.
Numerous Americans, economists, andpoliticians criticize the cause and subsequent effects of the Great Recessionby trying to lay blame on one sector or the other. Samuelson offers a bluntperspective by stating, “In a more honest telling of the story, avaricious WallStreet types, fumbling government regulators, and clueless economists becomesupporting players in a larger tragedy that is not mainly of their making. Ifyou ask who did make it, the most honest answer is: We all did.” Moreover he deemsthat the cause of the great recession lies within America’s “widely sharedquest for ever improving prosperity contributed to the conditions that led tothe financial and economic collapse.” This notion has been a transcendentelement seen throughout U.
S. History. Arguably, this ideal is the essentialparallel, encompassing the true cause, which links the Great Recession to theGreat Depression. Despite the various changes seenthroughout American History, the U.
S. government is consistently available toits citizens in times of strife. As a result Americans are accustomed torelying on their government to provide aid. The government’s interventions areknown to have positive effects and negative effects on the U.S.
economy,political climate, and work force. As a nation there is no one entity, being,or source that can be blamed for the two greatest economic tragedies in modernU.S. History. Developing a deeper understanding to the complex aspects of thepast is vital and allows individuals to make greater strides, in terms ofprogress, as they advance into the future.