The U.S. Economy in 1935

By 1935, unemployment in the United States had fallen from its recent high of around 25 percent down to around 17 percent. Many were working only part-time and many others had dropped out of the workforce. Industrial production was 25 percent lower than it had been in 1929.

The economy had bottomed out in mid-1932 during the Hoover administration, but President Roosevelt was giving himself credit for having stopped the downward spiral. Neither he nor Congress were supporting the kind of massive government intervention in the economy that would come at the start of World War II. In 1935 there was nothing in the US like the big emergency deficit spending in Sweden, but in the US there were more projects involving government spending. On 8 April 1935 the federal government enacted the Works Progress Administration (WPA) and Social Security, creating old age and unemployment pensions, the latter taking the United States close to what Otto von Bismarck had accomplished in Germany five decades before. The WPA started building roads and bridges across the country. It put women to work on useful sewing projects. The WPA included programs in the arts: in theater, music, literature and painting. And it included programs in education, including vocational training for needy youths. This amounted to a redistribution of money that came from borrowing and taxing some for the benefit of others, but it was a redistribution, some would argue, that served the need to put more wealth in the hands of common people.

Another move for more wealth to common people, in the form of higher wages, came with greater power to labor unions. The Wagner-Connery Act was signed into law on 5 July. It established a federal agency, the National Labor Relations Board (NLRB), which had the power to investigate and decide unfair labor practice issues and to conduct elections in which workers could decide whether they wanted union representation. It would be the view of liberal economists that workers would benefit not only from better working conditions but that higher wages would improve the economy by creating greater purchasing power.

Roosevelt tried to maintain good relations with big business, but his administration managed to increase taxes for the wealthiest people to seventy-five percent of their income. In July came the National Labor Relations Act, designed to free interstate commerce from the effects of strikes. The act displeased some business leaders, as it gave workers the right to organize without interference from employers, compelling employers to bargain in good faith with unions. And the act included a National Labor Relations Board to hear complaints. Some supporting the bill saw strong labor unions as protection against fascism and communism and a way of increasing purchasing power, while opponents of the act complained that it gave too much power to labor, denied individual rights sacred to the American way of life, and was unconstitutional.

In 2008 a conservative-libertarian perspective by Amity Shlaes would describe Roosevelt's NRA program as "forcing businesses to pay an above-market minimum wage." She thought it best to return to free-market relations (laissez-faire) and would write that the greater power that was given to labor unions contributed to higher wages that "hurt corporate profits and therefore hiring" and kept unemployment higher into the late 1930s. ^note28

By August 1935 the national debt rose above 30 billion dollars, exceeding by 4 billion the debt incurred during World War I and twice what it had been under President Hoover. Feeding the debt was the slow recovery and low incomes that were keeping tax revenues low .

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