Politically Influenced New Deal Policy

Name Course number Instructor’s name Date Politically Influenced New Deal Policy Franklin D. Roosevelt initiated the new deal policies as a response to the nineteenth century economic downturn caused by a collapse of the stock market leading to a massive dip in the country’s gross domestic product from $104 billion to about $74 billion, an unemployment rate of almost 25% in the US and a higher rate of 40 percent in Chicago, the closing down of more than 11000 banks, the damage of unmarketable farm products in rural America and a 62% drop in exports (Roosevelt Institute, n.d). The monetary policy contributed to the great contraction and the slow recovery. It seemed that the policy retarded instead of promoting recovery from the depression causing long term consequences from programs such as social security, AFDC and agricultural price support and output restriction programs. The artificial separation of financial activities and the government control of the deposit interest rates had a harmful effect and were removed in the 1970’s.The Agricultural Adjustment Act policies to lower production failed because this underproduction was unwise at a time when many Americana were starving. The Social Security Act financing for its programs was derived from deductions from workers’ paychecks which was counterproductive as it stagnated economic development and muted the purchasing power. The programs were also not equitably distributed among the states in the north and the south. Additionally the Agricultural workers, domestic servants were rendered ineligible for social security and the farm laborers were ineligible for unemployment insurance (Wallis, 1987). The purpose of the new deal policy was to bring about relief recovery and reform. It is believed that political considerations were in play in administrative decisions on how funds were allocated to different states. An examination of the agricultural expenditures in different states revealed that relief and recovery of the pre-depression income levels were given higher priority than economic reform. It was reported that almost eighty per cent of the state-by-state variation in New deal expenditures per capita could be statistically accounted for by political variables influenced by Roosevelt attempt for reelection (Anderson & Tollison,...