The Great Depression encouraged drastic changes in the landscape of government and the economy in the United States. Citing a peacetime emergency, the administration under President Franklin D. Roosevelt established a “New Deal” for America. The programs had laudable goals, from raising farm incomes to raising wages, offering liquidity to housing markets, providing insurance for bank deposits, and building social overhead capital. This chapter discusses the widespread changes made during the New Deal that contributed to a permanent expansion of all governments and in the federal government's...

The Great Depression encouraged drastic changes in the landscape of government and the economy in the United States. Citing a peacetime emergency, the administration under President Franklin D. Roosevelt established a “New Deal” for America. The programs had laudable goals, from raising farm incomes to raising wages, offering liquidity to housing markets, providing insurance for bank deposits, and building social overhead capital. This chapter discusses the widespread changes made during the New Deal that contributed to a permanent expansion of all governments and in the federal government's role in the economy. It first describes macroeconomic policy during the 1930s and how the U.S. Federal Reserve contributed to the Great Depression. It then examines federal fiscal policy by looking at spending and taxation at the national level. It also focuses on the Reconstruction Finance Corporation, formed in February 1932, along with emergency relief and public works programs, the farm programs, the National Industrial Recovery Act of 1933 and the National Recovery Administration, the geographic distribution of federal funds, and the Social Security Act of 1935.