The stock market crashed on Oct. 24, 1929, a day known thereafter as Black Tuesday. The collapse gathered momentum like a snowball rolling downhill, sweeping away the whole economy before it. Banks failed, businesses closed, and wages – for those who still had jobs – plunged.
Farmers already had been in economic trouble for years. The Depression dealt a crippling blow to what was left of the agricultural economy. And when a massive drought turned the Great Plains into the Dust Bowl, thousands of farm operations were wiped out. Prices for farm products fell to their lowest level since the Civil War.
By 1932, industrial output had been cut in half. More than 90,000 businesses failed and one-fourth of the labor force was out of work. Workers were idle because businesses would not hire them. Businesses couldn't hire because consumers weren't buying. And consumers couldn't purchase because they had no income.
The New Deal
Franklin Roosevelt won the presidency in 1932 based on his promise of a "new deal." His ambitious program of economic recovery fell into two stages:
* The First New Deal (1933-1935) focused on the immediate problem of unemployment.
* The Second New Deal (1935-1937) moved beyond relief and focused on fundamental social and economic reform.
On taking office, FDR convened Congress in a special session and launched the New Deal with an avalanche of bills, creating an "alphabet soup" of new federal agencies.
Most New Deal legislation survived well into the 1940s, but a number of programs met an early end when invalidated by the Supreme Court. Tension between the court and FDR peaked in 1937 when Roosevelt attempted to enlarge the court and pack it with his own appointees. The attempt failed, and the battle cost him dearly in terms of political and public approval.
