The Second New Deal: 1935 - 1938

     During his second inaugural address on January 20, 1937, President Roosevelt stated, "I see one-third of a nation ill-housed, ill-clad, ill-nourished."  However, as he began his second term, the economy was improving, enough so that many Americans believed that the worst was behind them.  Many Republicans in Congress advocated for scaling back the New Deal, arguing against fiscal largesse and referencing the anti-business nature of New Deal policies.  With the economy improving, Roosevelt seized the opportunity to return to a balanced budget.  He reduced spending on several relief programs, albeit at a time when Americans were paying the new Social Security tax.   Unfortunately for Roosevelt, these measures resulted in decreased production and increased unemployment, in short, a recession.   

     Lasting from May 1937 to June 1938, the "Roosevelt Recession" saw the gross national product drop 10% and unemployment levels hit 20%.  For Roosevelt and his advisors, the recession served as a cautionary tale about the too early removal of economic support from a massive government intervention.  Through the second half of 1937 and into 1938 Roosevelt heeded the lessons learned by initiating another government spending program.  In August 1937, he signed the Bonneville Power Act that spurred the creation of the Bonneville Power Authority; the authority would provide rural electrification and distribute the benefits of Federal hydroelectric power to millions of residents in the Pacific Northwest.  Via the newly established United States Housing Authority (September 1937), loans were made available for the construction of hundreds of affordable housing developments; in that same month, the newly created Farm Security Administration began loaning money as well as providing grants and agricultural training to farmers.  The Fair Labor Standards Act (June 1938) provided protection and support to curtail wage and hour abuses against the American workforce.  By the middle of 1938 the recession crisis had passed.  

   During the 1938 mid-term elections, conservative Southern Democrats campaigned against the continuation of the New Deal.  Roosevelt, in turn, campaigned against these Democrats but to little avail.  The Democratic Party lost 72 seats in the House of Representatives and 8 seats in the U.S. Senate, primarily to Republican candidates.  While the Democrats maintained control of Congress,  the "Conservative Coalition," an alliance of Republicans and Southern Democrats, took control of Congress and thwarted Roosevelt's efforts for additional reform legislation.  The mid-term election coupled with the "Roosevelt Recession" and the defeat of his  "Court Packing" plan (see below) drove President Roosevelt's popularity to the lowest level of his administration to date.