Members Only | May 2, 2022 | Reading Time: 4 minutes
New Deal 1.0 was racist. New Deal 2.0 must reflect America as it is
It used facially neutral policies to cause racial discrimination.
Roosevelt’s New Deal is often held up as the gold standard in social welfare programs. Many call for a similar attempt from the Biden administration to rebuild the social safety net and address widening economic inequality.
Unfortunately, without a lot of effort, a “New” New Deal could be repeating the past mistakes of policy that seemed universal but really had built in loopholes to expand the racial disparity in wealth, homeownership and labor protections.
While the New Deal did many important things, it’s also a case study in how to use facially neutral policies to cause racial discrimination.
If we are serious about another New Deal, it must not only ensure there are no discriminatory loopholes, but also include targeted protections and redress for the historical harm done to Black people.
It is fairly well accepted among historians that the particular exclusion of agricultural and domestic workers from New Deal labor protections was a race-neutral proxy for excluding Black people, an exclusion that is still part of many of these programs today.
Before passing the National Recovery Act of 1933, which gave the president authority to set wages and prices and was overturned by the Supreme Court, the National Recovery Administration (NRA) conducted hearings to determine regulations for each industry.
During these hearings, many southerners argued for rules that would include explicit racial differentials to allow for paying Black workers less than white workers.
Not only were southern industries dependent on a large underpaid Black workforce, but they argued that it was actually better for Black people to not be paid at the highest wage.
While the explicitly racially discriminatory regulations were not adopted, their intent was accomplished through geographic and industry specifications that resulted in Black workers often being paid less than white workers.
Even though the law was overturned, the debates are indicative of a racially discriminatory intent through out many New Deal programs.
It was advantageous to exclude Black people from New Deal programs as over half of Black people lived in the South in the 1930s where they were economically and politically disenfranchised and Roosevelt was trying to placate southern Democrats to support New Deal policies.
Minimum wage and overtime pay were eventually guaranteed in the Fair Labor Standards Act (FLSA) of 1938, but the act still excluded many jobs that were disproportionately held by Black workers.
Hearings on the law included desires for racially explicit exclusions in order to keep Black people in their place and apparently not further inflame race relations in the South. Instead the Congress relied on their race-neutral proxy exclusions of agricultural workers.
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While many changes have been made to the FLSA since 1938, farm workers and “informal” care workers are still exempt from its protections.
The Social Security Act of 1935 established a program to use payroll taxes to address poverty among those too old to work. It also implemented unemployment insurance. Later iterations established disability payments as well as medicaid and medicare.
While this program significantly helped people retire, and survive through unemployment, many professions were left out of the program despite the initial plan to include them.
Without mentioning race once, the choice of professions to exclude, such as agricultural and domestic workers, ultimately left out 65 percent of Black workers and only 27 percent of white workers.
The public historian for the Social Security Administration argues that this was a result of administrative feasibility, not racism, but it’s hard to ignore the impact of the law, especially in the context of the period and other New Deal programs.
New Deal programs outside of labor also promoted racial disparities in wealth. Home ownership is one of the best ways for a family to create generational wealth and economic stability in this country. Unfortunately, this was an avenue that was particularly difficult for Black Americans to access.
After the Civil War de jure segregation pervaded the South and de facto segregation was rampant in the North. Many neighborhoods ensured Black people wouldn’t move in through “restrictive covenants” which forbade the sale of property to Black people, and sometimes other groups, including Jews.
This segregation practices meant even when Black people were able to buy property, it would not appreciate as an investment because they were not in “desirable” neighborhoods.
When the federal government passed the National Housing Act of 1934, which created the Federal Housing Administration (FHA) to make housing more affordable and increase access to mortgages, it again used its power to exclude Black people.
Rather than discouraging restrictive covenants, the FHA promoted attaching restrictive covenants to property under the justification of protecting people’s investments.
Additionally, mortgage applications got higher ratings for homes in white neighborhoods or if the home already had a restrictive covenant attached. The language of the act did not include any explicit discrimination, but the clear policy of the FHA was to promote segregation and deny access to homeownership to Black people.
Restrictive covenants were eventually ruled unconstitutional in Shelley v. Kraemer in 1948, but it remained policy to deny mortgages to Black people. Between 1934 and 1962, 98 percent of FHA mortgages were issued to white applicants.
Many of the programs passed during the New Deal have been updated since the 1930s but there are still discriminatory practices that haven’t been fixed from these laws today.
The persistent exclusion of Black people from homeownership and labor protections means the Black community has not had the opportunity to build generational wealth.
Even if we fix every discriminatory loophole in these programs, we can’t fix decades lost in building investments.
If we are serious about another New Deal package, it must not only ensure there are no discriminatory loopholes, but also include targeted protections and redress for the historical harm done to Black people.
Mia Brett, PhD, is the Editorial Board's legal historian. She lives with her gorgeous dog, Tchotchke. You can find her @queenmab87.
This is why I cringe a bit when folks talk about a new (or green) ‘New Deal’. Even if well-intentioned, it’s bad branding.