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The Dust Bowl was the name given to the drought-stricken Southern Plains region of the United States, which suffered severe dust storms during a dry period in the 1930s. As high winds and choking dust swept the region from Texas to Nebraska, people and livestock were killed and crops failed across the entire region. The Dust Bowl intensified the crushing economic impacts of the Great Depression and drove many farming families on a desperate migration in search of work and better living conditions.

What Caused the Dust Bowl?

The Dust Bowl was caused by several economic and agricultural factors, including federal land policies, changes in regional weather, farm economics and other cultural factors. After the Civil War, a series of federal land acts coaxed pioneers westward by incentivizing farming in the Great Plains.

The Homestead Act of 1862, which provided settlers with 160 acres of public land, was followed by the Kinkaid Act of 1904 and the Enlarged Homestead Act of 1909. These acts led to a massive influx of new and inexperienced farmers across the Great Plains.

Many of these late nineteenth and early twentieth century settlers lived by the superstition "rain follows the plow." Emigrants, land speculators, politicians and even some scientists believed that homesteading and agriculture would permanently affect the climate of the semi-arid Great Plains region, making it more conducive to farming.

This false belief was linked to Manifest Destiny -an attitude that Americans had a sacred duty to expand west. A series of wet years during the period created further misunderstanding of the region's ecology and led to the intensive cultivation of increasingly marginal lands that couldn't be reached by irrigation.

Rising wheat prices in the 1910s and 1920s and increased demand for wheat from Europe during World War I encouraged farmers to plow up millions of acres of native grassland to plant wheat, corn and other row crops. But as the United States entered the Great Depression, wheat prices plummeted. Farmers tore up even more grassland in an attempt to harvest a bumper crop and break even.

Crops began to fail with the onset of drought in 1931, exposing the bare, over-plowed farmland. Without deep-rooted prairie grasses to hold the soil in place, it began to blow away. Eroding soil led to massive dust storms and economic devastation-especially in the Southern Plains.

When Was The Dust Bowl?

The Dust Bowl, also known as "the Dirty Thirties," started in 1930 and lasted for about a decade, but its long-term economic impacts on the region lingered much longer.

Severe drought hit the Midwest and Southern Great Plains in 1930. Massive dust storms began in 1931. A series of drought years followed, further exacerbating the environmental disaster.

By 1934, an estimated 35 million acres of formerly cultivated land had been rendered useless for farming, while another 125 million acres-an area roughly three-quarters the size of Texas-was rapidly losing its topsoil.

Regular rainfall returned to the region by the end of 1939, bringing the Dust Bowl years to a close. The economic effects, however, persisted. Population declines in the worst-hit counties-where the agricultural value of the land failed to recover-continued well into the 1950s.

'Black Blizzards' Strike America

During the Dust Bowl period, severe dust storms, often called "black blizzards" swept the Great Plains. Some of these carried Great Plains topsoil as far east as Washington, D.C. and New York City, and coated ships in the Atlantic Ocean with dust.

Billowing clouds of dust would darken the sky, sometimes for days at a time. In many places, the dust drifted like snow and residents had to clear it with shovels. Dust worked its way through the cracks of even well-sealed homes, leaving a coating on food, skin and furniture.

Some people developed "dust pneumonia" and experienced chest pain and difficulty breathing. It's unclear exactly how many people may have died from the condition. Estimates range from hundreds to several thousand people.

On May 11, 1934, a massive dust storm two miles high traveled 2,000 miles to the East Coast, blotting out monuments such as the Statue of Liberty and the U.S. Capitol.

The worst dust storm occurred on April 14, 1935. News reports called the event Black Sunday. A wall of blowing sand and dust started in the Oklahoma Panhandle and spread east. As many as three million tons of topsoil are estimated to have blown off the Great Plains during Black Sunday.

An Associated Press news report coined the term "Dust Bowl" after the Black Sunday dust storm.

New Deal Programs

President Franklin D. Roosevelt established a number of measures to help alleviate the plight of poor and displaced farmers. He also addressed the environmental degradation that had led to the Dust Bowl in the first place.

Congress established the Soil Erosion Service and the Prairie States Forestry Project in 1935. These programs put local farmers to work planting trees as windbreaks on farms across the Great Plains. The Soil Erosion Service, now called the Natural Resources Conservation Service (NRCS) implemented new farming techniques to combat the problem of soil erosion.
READ MORE: Did New Deal Program Help End the Great Depression?
Okie Migration

Roughly 2.5 million people left the Dust Bowl states- Texas, New Mexico, Colorado, Nebraska, Kansas and Oklahoma-during the 1930s. It was one of the largest migrations in American history.

Oklahoma alone lost 440,000 people to migration. Many of them, poverty-stricken, traveled west looking for work. From 1935 to 1940, roughly 250,000 Oklahoma migrants moved to California. A third settled in the state's agriculturally rich San Joaquin Valley.

These Dust Bowl refugees were called "Okies." Okies faced discrimination, menial labor and pitiable wages upon reaching California. Many of them lived in shantytowns and tents along irrigation ditches. "Okie" soon became a term of disdain used to refer to any poor Dust Bowl migrant, regardless of their state of origin.
READ MORE: How the Dust Bowl Made Americans Refugees in Their Own Country

Dust Bowl in Arts and Culture

The Dust Bowl captured the imagination of the nation's artists, musicians and writers.

John Steinbeck memorialized the plight of the Okies in his 1939 novel The Grapes of Wrath. Photographer Dorothea Lange documented rural poverty with a series of photographs for FDR's Farm Securities Administration. Artist Alexander Hogue painted Dust Bowl landscapes.

Folk musician Woody Guthrie's semi-autobiographical first album Dust Bowl Ballads in 1940, told stories of economic hardship faced by Okies in California. Guthrie, an Oklahoma native, left his home state with thousands of others looking for work during the Dust Bowl.

SOURCES

FDR and the New Deal Response to an Environmental Catastrophe. Roosevelt Institute.
About The Dust Bowl. English Department; University of Illinois.
Dust Bowl Migration. University of California at Davis.
The Great Okie Migration. Smithsonian American Art Museum.
Okie Migrations. Oklahoma Historical Society.
What we learned from the Dust Bowl: lessons in science, policy, and adaptation. Population and Environment.
The Dust Bowl. Library of Congress.
Dust Bowl Ballads: Woody Guthrie. Smithsonian Folkways Recordings.
The Dust Bowl. Ken Burns; PBS.

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The Dust Bowl was the name given to the drought-stricken Southern Plains region of the United States, which suffered severe dust storms during a dry period in the 1930s. As high winds and choking dust swept the region from Texas to Nebraska, people and livestock were killed and crops failed across the entire region.

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Social Security Act of 1935

TITLE I- GRANTS TO STATES FOR OLD-AGE ASSISTANCE

TITLE II- FEDERAL OLD-AGE BENEFITS

TITLE III- GRANTS TO STATES FOR UNEMPLOYMENT COMPENSATION ADMINISTRATION

TITLE IV- GRANTS TO STATES FOR AID TO DEPENDENT CHILDREN

TITLE V- GRANTS TO STATES FOR MATERNAL AND CHILD WELFARE

TITLE VI- PUBLIC HEALTH WORK

TITLE VII- SOCIAL SECURITY BOARD

TITLE VIII- TAXES WITH RESPECT TO EMPLOYMENT

TITLE IX- TAX ON EMPLOYERS OF EIGHT OR MORE

TITLE X- GRANTS TO STATES FOR AID TO THE BLIND

TITLE XI- GENERAL PROVISIONS

The Social Security Act (Act of August 14, 1935) [H. R. 7260]

An act to provide for the general welfare by establishing a system of Federal old-age benefits, and by enabling the several States to make more adequate provision for aged persons, blind persons, dependent and crippled children, maternal and child welfare, public health, and the administration of their unemployment compensation laws; to establish a Social Security Board; to raise revenue; and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

TITLE I- GRANTS TO STATES FOR OLD-AGE ASSISTANCE

APPROPRIATION

SECTION 1. For the purpose of enabling each State to furnish financial assistance, as far as practicable under the conditions in such State, to aged needy individuals, there is hereby authorized to be appropriated for the fiscal year ended June 30, 1936, the sum of $49,750,000, and there is hereby authorized to be appropriated for each fiscal year thereafter a sum sufficient to carry out the purposes of this title. The sums made available under this section shall be used for making payments to States which have submitted, and had approved by the Social Security Board established by Title VII (hereinafter referred to as the Board ), State plans for old-age assistance.

STATE OLD-AGE ASSISTANCE PLANS

(b) The Board shall approve any plan which fulfills the conditions specified in subsection (a), except that it shall not approve any plan which imposes, as a condition of eligibility for old-age assistance under the plan-
(1) An age requirement of more than sixty-five years, except that the plan may impose, effective until January 1, 1940, an age requirement of as much as seventy years; or
(2) Any residence requirement which excludes any resident of the State who has resided therein five years during the nine years immediately preceding the application for old-age assistance and has resided therein continuously for one year immediately preceding the application; or (3) Any citizenship requirement which excludes any citizen of the United States.

PAYMENT TO STATES

SEC. 3. (a) From the sums appropriated therefor, the Secretary of the Treasury shall pay to each State which has an approved plan for old-age assistance, for each quarter, beginning with the quarter commencing July 1, 1935,
(1) an amount, which shall be used exclusively as old-age assistance, equal to one-half of the total of the sums expended during such quarter as old-age assistance under the State plan with respect to each individual who at the time of such expenditure is sixty-five years of age or older and is not an inmate of a public institution, not counting so much of such expenditure with respect to any individual for any month as exceeds $30, and
(2) 5 per centum of such amount, which shall be used for paying the costs of administering the State plan or for old-age assistance, or both, and for no other purpose: Provided, That the State plan, in order to be approved by the Board, need not provide for financial participation before July 1, 1937, by the State, in the case of any State which the Board, upon application by the State and after reasonable notice and opportunity for hearing to the State, finds is prevented by its constitution from providing such financial participation.

(b) The method of computing and paying such amounts shall be as follows:
(1) The Board shall, prior to the beginning of each quarter, estimate the amount to be paid to the State for such quarter under the provisions of clause (1) of subsection (a), such estimate to be based on
(A) a report filed by the State containing its estimate of the total sum to be expended in such quarter in accordance with the provisions of such clause, and stating the amount appropriated or made available by the State and its political subdivisions for such expenditures in such quarter, and if such amount is less than one-half of the total sum of such estimated expenditures, the source or sources from which the difference is expected to be derived,
(B) records showing the number of aged individuals in the State, and
(C) such other investigation as the Board may find necessary.

(2) The Board shall then certify to the Secretary of the Treasury the amount so estimated by the Board, reduced or increased, as the case may be, by any sum by which it finds that its estimate for any prior quarter was greater or less than the amount which should have been paid to the State under clause (1) of subsection (a) for such quarter, except to the extent that such sum has been applied to make the amount certified for any prior quarter greater or less than the amount estimated by the Board for such prior quarter.

(3) The Secretary of the Treasury shall thereupon, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Board, the amount so certified, increased by 5 per centum.

OPERATION OF STATE PLANS

SEC. 4. In the case of any State plan for old-age assistance which has been approved by the Board, if the Board, after reasonable notice and opportunity for hearing to the State agency administering or supervising the administration of such plan, finds-
(1) that the plan has been so changed as to impose any age, residence, or citizenship requirement prohibited by section 2 (b), or that in the administration of the plan any such prohibited requirement is imposed, with the knowledge of such State agency, in a substantial number of cases; or
(2) that in the administration of the plan there is a failure to comply substantially with any provision required by section 2 (a) to be included in the plan; the Board shall notify such State agency that further payments will not be made to the State until the Board is satisfied that such prohibited requirement is no longer so imposed, and that there is no longer any such failure to comply. Until it is so satisfied it shall make no further certification to the Secretary of the Treasury with respect to such State.

ADMINISTRATION

SEC. 5. There is hereby authorized to be appropriated for the fiscal year ending June 30, 1936, the sum of $250,000, for all necessary expenses of the Board in administering the provisions of this title.

DEFINITION

SEC. 6. When used in this title the term old age assistance means money payments to aged individuals.

OLD-AGE BENEFIT PAYMENTS

SEC. 202. (a) Every qualified individual (as defined in section 210) shall be entitled to receive, with respect to the period beginning on the date he attains the age of sixty-five, or on January 1, 1942, whichever is the later, and ending on the date of his death, an old-age benefit (payable as nearly as practicable in equal monthly installments) as follows:
(1) If the total wages (as defined in section 210) determined by the Board to have been paid to him, with respect to employment (as defined in section 210) after December 31, 1936, and before he attained the age of sixty- five, were not more than $3,000, the old-age benefit shall be at a monthly rate of one-half of 1 per centum of such total wages;
(2) If such total wages were more than $3,000, the old-age benefit shall be at a monthly rate equal to the sum of the following:
(A) One-half of 1 per centum of $3,000; plus
(B) One-twelfth of 1 per centum of the amount by which such total wages exceeded $3,000 and did not exceed $45,000; plus
(C) One-twenty-fourth of 1 per centum of the amount by which such total wages exceeded $45,000.
(b) In no case shall the monthly rate computed under subsection (a) exceed $85.
(c) If the Board finds at any time that more or less than the correct amount has theretofore been paid to any individual under this section, then, under regulations made by the Board, proper adjustments shall be made in connection with subsequent payments under this section to the same individual.
(d) Whenever the Board finds that any qualified individual has received wages with respect to regular employment after he attained the age of sixty-five, the old-age benefit payable to such individual shall be reduced, for each calendar month in any part of which such regular employment occurred, by an amount equal to one month s benefit. Such reduction shall be made, under regulations prescribed by the Board, by deductions from one or more payments of old-age benefit to such individual.

PAYMENTS UPON DEATH

SEC. 203. (a) If any individual dies before attaining the age of sixty-five, there shall be paid to his estate an amount equal to 3 " per centum of the total wages determined by the Board to have been paid to him, with respect to employment after December 31, 1936.
(b) If the Board finds that the correct amount of the old-age benefit payable to a qualified individual during his life under section 202 was less than 3 " per centum of the total wages by which such old-age benefit was measurable, then there shall be paid to his estate a sum equal to the amount, if any, by which such 3 " per centum exceeds the amount (whether more or less than the correct amount) paid to him during his life as old-age benefit.
(c) If the Board finds that the total amount paid to a qualified individual under an old-age benefit during his life was less than the correct amount to which he was entitled under section 202, and that the correct amount of such old-age benefit was 3 " per centum or more of the total wages by which such old-age benefit was measurable, then there shall be paid to his estate a sum equal to the amount, if any, by which the correct amount of the old- age benefit exceeds the amount which was so paid to him during his life.

PAYMENTS TO AGED INDIVIDUALS NOT QUALIFIED FOR BENEFITS

SEC. 204. (a) There shall be paid in a lump sum to any individual who, upon attaining the age of sixty-five, is not a qualified individual, an amount equal to 3 " per centum of the total wages determined by the Board to have been paid to him, with respect to employment after December 31, 1936, and before he attained the age of sixty-five.
(b) After any individual becomes entitled to any payment under subsection (a), no other payment shall be made under this title in any manner measured by wages paid to him, except that any part of any payment under subsection (a) which is not paid to him before his death shall be paid to his estate.

AMOUNTS OF $500 OR LESS PAYABLE TO ESTATES

SEC. 205. If any amount payable to an estate under section 203 or 204 is $500 or less, such amount may, under regulations prescribed by the Board, be paid to the persons found by the Board to be entitled thereto under the law of the State in which the deceased was domiciled, without the necessity of compliance with the requirements of law with respect to the administration of such estate.

OVERPAYMENTS DURING LIFE

SEC. 206. If the Board finds that the total amount paid to a qualified individual under an old-age benefit during his life was more than the correct amount to which he was entitled under section 202, and was 3 " per centum or more of the total wages by which such old-age benefit was measurable, then upon his death there shall be repaid to the United States by his estate the amount, if any, by which such total amount paid to him during his life exceeds whichever of the following is the greater:
(1) Such 3 " per centum, or
(2) the correct amount to which he was entitled under section 202.

METHOD OF MAKING PAYMENTS

SEC. 207. The Board shall from time to time certify to the Secretary of the Treasury the name and address of each person entitled to receive a payment under this title, the amount of such payment, and the time at which it should be made, and the Secretary of the Treasury through the Division of Disbursement of the Treasury Department, and prior to audit or settlement by the General Accounting Office, shall make payment in accordance with the certification by the Board.

ASSIGNMENT

SEC. 208. The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

PENALTIES

SEC. 209. Whoever in any application for any payment under this title makes any false statement as to any material fact, knowing such statement to be false, shall be fined not more than $1,000 or imprisoned for not more than one year, or both.

DEFINITIONS

SEC. 210. When used in this title-- (a) The term wages means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash; except that such term shall not include that part of the remuneration which, after remuneration equal to $3,000 has been paid to an individual by an employer with respect to employment during any calendar year, is paid to such employer with respect to employment during such calendar year.
(b) The term employment means any service, of whatever nature, performed within the United States by an employee for his employer, except-
(1) Agricultural labor;
(2) Domestic service in a private home;
(3) Casual labor not in the course of the employer s trade or business;
(4) Service performed as an officer or member of the crew of a vessel documented under the laws of the United States or of any foreign country;
(5) Service performed in the employ of the United States Government or of an instrumentality of the United States;
(6) Service performed in the employ of a State, a political subdivision thereof, or an instrumentality of one or more States or political subdivisions;
(7) Service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual.

(c) The term qualified individual means any individual with respect to whom it appears to the satisfaction of the Board that-
(1) He is at least sixty-five years of age; and
(2) The total amount of wages paid to him, with respect to employment after December 31, 1936, and before he attained the age of sixty-five, was not less than $2,000; and
(3) Wages were paid to him, with respect to employment on some five days after December 31, 1936, and before he attained the age of sixty-five, each day being in a different calendar year.

TITLE III-GRANTS TO STATES FOR UNEMPLOYMENT COMPENSATION ADMINISTRATION APPROPRIATION

SECTION 301. For the purpose of assisting the States in the administration of their unemployment compensation laws, there is hereby authorized to be appropriated, for the fiscal year ending June 30, 1936, the sum of $4,000,000, and for each fiscal year thereafter the sum of $49,000,000, to be used as hereinafter provided.

PAYMENTS TO STATES

PROVISIONS OF STATE LAWS

SEC. 303. (a) The Board shall make no certification for payment to any State unless it finds that the law of such State, approved by the Board under Title IX, includes provisions for-
(1) Such methods of administration (other than those relating to selection, tenure of office, and compensation of personnel) as are found by the Board to be reasonably calculated to insure full payment of unemployment compensation when due; and
(2) Payment of unemployment compensation solely through public employment offices in the State or such other agencies as the Board may approve; and
(3) Opportunity for a fair hearing, before an impartial tribunal, for all individuals whose claims for unemployment compensation are denied; and
(4) The payment of all money received in the unemployment fund of such State, immediately upon such receipt, to the Secretary of the Treasury to the credit of the Unemployment Trust Fund established by section 904; and
(5) Expenditure of all money requisitioned by the State agency from the Unemployment Trust Fund, in the payment of unemployment compensation, exclusive of expenses of admin- istration; and
(6) The making of such reports, in such form and containing such information, as the Board may from time to time require, and compliance with such provisions as the Board may from time to time find necessary to assure the correctness and verification of such reports; and
(7) Making available upon request to any agency of the United States charged with the administration of public works or assistance through public employment, the name, address, ordinary occupation, and employment status of each recipient of unemployment compensation, and a statement of such recipient s rights to further compensation under such law.
(b) Whenever the Board, after reasonable notice and opportunity for hearing to the State agency charged with the administration of the State law finds that in the administration of the law there is--
(1) a denial, in a substantial number of cases, of unemployment compensation to individuals entitled thereto under such law; or
(2) a failure to comply substantially with any provision specified in subsection (a); the Board shall notify such State agency that further payments will not be made to the State until the Board is satisfied that there is no longer any such denial or failure to comply. Until it is so satisfied it shall make no further certification to the Secretary of the Treasury with respect to such State.

TITLE IV-GRANTS TO STATES FOR AID TO DEPENDENT CHILDREN APPROPRIATION

SECTION 401. For the purpose of enabling each State to furnish financial assistance, as far as practicable under the conditions in such State, to needy dependent children, there is hereby authorized to be appropriated for the fiscal year ending June 30, 1936, the sum of $24,750,000, and there is hereby authorized to be appropriated for each fiscal year thereafter a sum sufficient to carry out the purposes of this title. The sums made available under this section shall be used for making payments to States which have submitted, and had approved by the Board, State plans for aid to dependent children.

STATE PLANS FOR AID TO DEPENDENT CHILDREN

PAYMENT TO STATES

SEC. 403. (a) From the sums appropriated therefor, the Secretary of the Treasury shall pay to each State which has an approved plan for aid to dependent children, for each quarter, beginning with the quarter commencing July 1, 1935, an amount, which shall be used exclusively for carrying out the State plan, equal to one-third of the total of the sums expended during such quarter under such plan, not counting so much of such expenditure with respect to any dependent child for any month as exceeds $18, or if there is more than one dependent child in the same home, as exceeds $18 for any month with respect to one such dependent child and $12 for such month with respect to each of the other dependent children.
(b) The method of computing and paying such amounts shall be as follows:
(1) The Board shall, prior to the beginning of each quarter, estimate the amount to be paid to the State for such quarter under the provisions of subsection
(a), such estimate to be based on
(A) a report filed by the State containing its estimate of the total sum to be expended in such quarter in accordance with the provisions of such subsection and stating the amount appropriated or made available by the State and its political subdivisions for such expenditures in such quarter, and if such amount is less than two-thirds of the total sum of such estimated expenditures, the source or sources from which the difference is expected to be derived,
(B) records showing the number of dependent children in the State, and
(C) such other investigation as the Board may find necessary.
(2) The Board shall then certify to the Secretary of the Treasury the amount so estimated by the Board, reduced or increased, as the case may be, by any sum by which it finds that its estimate for any prior quarter was greater or less than the amount which should have been paid to the State for such quarter, except to the extent that such sum has been applied to make the amount certified for any prior quarter greater or less than the amount estimated by the Board for such prior quarter.
(3) The Secretary of the Treasury shall thereupon, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Board, the amount so certified.

OPERATION OF STATE PLANS

SEC. 404. In the case of any State plan for aid to dependent children which has been approved by the Board, if the Board, after reasonable notice and opportunity for hearing to the State agency administering or supervising the administration of such plan, finds-
(1) that the plan has been so changed as to impose any residence requirement prohibited by section 402 (b), or that in the administration of the plan any such prohibited requirement is imposed, with the knowledge of such State agency, in a substantial number of cases; or
(2) that in the administration of the plan there is a failure to comply substantially with any provision required by section 402 (a) to be included in the plan; the Board shall notify such State agency that further payments will not be made to the State until the Board is satisfied that such prohibited requirement is no longer so imposed, and that there is no longer any such failure to comply. Until it is so satisfied it shall make no further certification to the Secretary of the Treasury with respect to such State.

ADMINISTRATION

SEC. 405. There is hereby authorized to be appropriated for the fiscal year ending June 30, 1936, the sum of $250,000 for all necessary expenses of the Board in administering the provisions of this title.

DEFINITIONS

SEC. 406. When used in this title-
(a) The term dependent child means a child under the age of sixteen who has been deprived of parental support or care by reason of the death, continued absence from the home, or physical or mental incapacity of a parent, and who is living with his father, mother, grandfather, grandmother, brother, sister, stepfather, stepmother, stepbrother, stepsister, uncle, or aunt, in a place of residence maintained by one or more of such relatives as his or their own home;
(b) The term aid to dependent children means money payments with respect to a dependent child or dependent children.

PART 1-MATERNAL AND CHILD HEALTH SERVICES

APPROPRIATION

SECTION 501. For the purpose of enabling each State to extend and improve, as far as practicable under the conditions in such State, services for promoting the health of mothers and children, especially in rural areas and in areas suffering from severe economic distress, there is hereby authorized to be appropriated for each fiscal year, beginning with the fiscal year ending June 30, 1936, the sum of $3,800,000. The sums made available under this section shall be used for making payments to States which have submitted, and had approved by the Chief of the Children s Bureau, State plans for such services.

ALLOTMENTS TO STATES

SEC. 502. (a) Out of the sums appropriated pursuant to section 501 for each fiscal year the Secretary of Labor shall allot to each State $20,000, and such part of $1,800,000 as he finds that the number of live births in such State bore to the total number of live births in the United States, in the latest calendar year for which the Bureau of the Census has available statistics.
(b) Out of the sums appropriated pursuant to section 501 for each fiscal year the Secretary of Labor shall allot to the States $980,000 (in addition to the allotments made under subsection (a)), according to the financial need of each State for assistance in carrying out its State plan, as determined by him after taking into consideration the number of live births in such State.
(c) The amount of any allotment to a State under subsection (a) for any fiscal year remaining unpaid to such State at the end of such fiscal year shall be available for payment to such State under section 504 until the end of the second succeeding fiscal year. No payment to a State under section 504 shall be made out of its allotment for any fiscal year until its allotment for the preceding fiscal year has been exhausted or has ceased to be available.

APPROVAL OF STATE PLANS

SEC. 503. (a) A State plan for maternal and child-health services must (1) provide for financial participation by the State;
(2) provide for the administration of the plan by the State health agency or the supervision of the administration of the plan by the State health agency;
(3) provide such methods of administration (other than those relating to selection, tenure of office, and compensation of personnel) as are necessary for the efficient operation of the plan;
(4) provide that the State health agency will make such reports, in such form and containing such information, as the Secretary of Labor may from time to time require, and comply with such provisions as he may from time to time find necessary to assure the correctness and verification of such reports;
(5) provide for the extension and improvement of local maternal and child-health services administered by local child health units;
(6) provide for cooperation with medical, nursing, and welfare groups and organizations; and
(7) provide for the development of demonstration services in needy areas and among groups in special need.
(b) The Chief of the Children s Bureau shall approve any plan which fulfills the conditions specified in subsection (a) and shall thereupon notify the Secretary of Labor and the State health agency of his approval.

PAYMENT TO STATES

OPERATION OF STATE PLANS

SEC. 505. In the case of any State plan for maternal and child-health services which has been approved by the Chief of the Children s Bureau, if the Secretary of Labor, after reasonable notice and opportunity for hearing to the State agency administering or supervising the administration of such plan, finds that in the administration of the plan there is a failure to comply substantially with any provision required by section 503 to be included in the plan, he shall notify such State agency that further payments will not be made to the State until he is satisfied that there is no longer any such failure to comply. Until he is so satisfied he shall make no further certification to the Secretary of the Treasury with respect to such State.

PART 2-SERVICES FOR CRIPPLED CHILDREN

APPROPRIATION

SEC. 511. For the purpose of enabling each State to extend and improve (especially in rural areas and in areas suffering from severe economic distress), as far as practicable under the conditions in such State, services for locating crippled children and for providing medical, surgical, corrective, and other services and care, and facilities for diagnosis, hospitalization, and aftercare, for children who are crippled or who are suffering from conditions which lead to crippling, there is hereby authorized to be appropriated for each fiscal year beginning with the fiscal year ending June 30, 1936, the sum of $2,850,000. The sums made available under this section shall be used for making payments to States which have submitted, and had approved by the Chief of the Children s Bureau, State plans for such services.

ALLOTMENTS TO STATES

SEC. 512. (a) Out of the sums appropriated pursuant to section 511 for each fiscal year the Secretary of Labor shall allot to each State $20,000, and the remainder to the States according to the need of each State as determined by him after taking into consideration the number of crippled children in such State in need of the services referred to section 511 and the cost of furnishing such service to them
(b) The amount of any allotment to a State under subsection (a) for any fiscal year remaining unpaid to such State at the end of such fiscal year shall be available for payment to such State under section 514 until the end of the second succeeding fiscal year. No payment to a State under section 514 shall be made out of its allotment for any fiscal year until its allotment for the preceding fiscal year has been exhausted or has ceased to be available.

APPROVAL OF STATE PLANS

SEC. 513. (a) A State plan for services for crippled children must
(1) provide for financial participation by the State;
(2) provide for the administration of the plan by a State agency or the supervision of the administration of the plan by a State agency;
(3) provide such methods of administration (other than those relating to selection, tenure of office, and compensation of personnel) as are necessary for the efficient operation of the plan;
(4) provide that the State agency will make such reports, in such form and containing such information, as the Secretary of Labor may from time to time require, and comply with such provisions as he may from time to time find necessary to assure the correctness and verification of such reports;
(5) provide for carrying out the purposes specified in section 511; and
(6) provide for cooperation with medical, health, nursing, and welfare groups and organizations and with any agency in such State charged with administering State laws providing for vocational rehabilitation of physically handicapped children.

(b) The Chief of the Children s Bureau shall approve any plan which fulfills the conditions specified in subsection (a) and shall thereupon notify the Secretary of Labor and the State agency of his approval.

PAYMENT TO STATES

SEC. 514. (a) From the sums appropriated therefor and the allotments available under section 512, the Secretary of the Treasury shall pay to each State which has an approved plan for services for crippled children, for each quarter, beginning the quarter commencing July 1, 1935, an amount which shall be used exclusively for carrying out the State plan, equal to one-half of the total sum expended during such quarter for carrying out such plan.
(b) The method of computing and paying such amounts shall be as follows:
(1) The Secretary of Labor shall, prior the beginning of each quarter, estimate the amount to be paid to the State for such quarter under the provisions of subsection (a), such estimate to be based on
(A) a report filed by the State containing its estimate of the total sum to be expended in such quarter in accordance with the provisions of such subsection and stating the amount appropriated or made available by the State and its political subdivisions for such expenditures in such quarter and if such amount is less than one-half of the total sum of such estimated expenditures the source or sources from which the difference is expected to be derived, and
(B) such investigation as he may find necessary.
(2) The Secretary of Labor shall then certify the amount so estimated by him to the Secretary of the Treasury, reduced or increased as the case may be, by any sum by which the Secretary of Labor finds that his estimate for any prior quarter was greater or less than the amount which should have been paid to the State for such quarter, except to the extent that such sum has been applied to make the amount certified for any prior quarter greater or less than the amount estimated by the Secretary of Labor for such prior quarter.
(3) The Secretary of the Treasury shall thereupon, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Secretary of Labor, the amount so certified.

OPERATION OF STATE PLANS

SEC. 515. In the case of any State plan for services for crippled children which has been approved by the Chief of the Children s Bureau, if the Secretary of Labor, after reasonable notice and opportunity for hearing to the State agency administering or supervising the administration of such plan finds that in the administration of the plan there a failure to comply substantially with any provision required by section 513 to be included in the plan, he shall notify such State agency that further payments will not be made to the State until he is satisfied that there is no longer any such failure to comply. Until he is so satisfied he shall make no further certification to the Secretary of the Treasury with respect to such State.

PART 3- CHILD WELFARE SERVICES

SEC. 521. (a) For the purpose of enabling the United States, through the Children s Bureau, to cooperate with State public-welfare agencies establishing, extending, and strengthening, especially in predominantly rural areas, public-welfare services (hereinafter in this section referred to as child-welfare services ) for the protection and care of homeless, dependent, and neglected children, and children in danger of becoming delinquent, there is hereby authorized to be appropriated for each fiscal year, beginning with the year ending June 30, 1936, the sum of $1,500,000. Such amount shall be allotted by the Secretary of Labor for use by cooperating State public- welfare agencies on the basis of plans developed jointly by the State agency and the Children s Bureau, to each State, $10,000, and the remainder to each State on the basis of such plans, not to exceed such part of the remainder as the rural population of such State bears to the total rural population of the United States. The amount so allotted shall be expended for payment of part of the cost of district, county or other local child- welfare services in areas predominantly rural, and for developing State services for the encouragement and assist- ance of adequate methods of community child-welfare organization in areas predominantly rural and other areas of special need. The amount of any allotment to a State under this section for any fiscal year remaining unpaid to such State at the end of such fiscal year shall be available for payment to such State under this section until the end of the second succeeding fiscal year. No payment to a State under this section shall be made out of its allotment for any fiscal year until its allotment for the preceding fiscal year has been exhausted or has ceased to be available.
(b) From the sums appropriated therefor and the allotments available under subsection (a) the Secretary of Labor shall from time to time certify to the Secretary of the Treasury the amounts to be paid to the States, and the Secretary of the Treasury shall, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting Office, make payments of such amounts from such allotments at the time or times specified by the Secretary of Labor.

PART 4- VOCATIONAL REHABILITATION

SEC. 531. (a) In order to enable the United States to cooperate with the States and Hawaii in extending and strengthening their programs of vocational rehabilitation of the physically disabled, and to continue to carry out the provisions and purposes of the Act entitled An Act to provide for the promotion of vocational rehabilitation of persons disabled in industry or otherwise and their return to civil employment , approved June 2, 1920, as amended (U.S.C., title 29, ch. 4; U.S.C., Supp. VII title 29, secs. 31, 32, 34, 35, 37, 39, and 40), there is hereby authorized to be appropriated for the fiscal years ending June 30, 1936, and June 30, 1937, the sum of $841,000 for each such fiscal year in addition to the amount of the existing authorization, and for each fiscal year thereafter the sum of $1,938,000. Of the sums appropriated pursuant to such authorization for each fiscal year, $5,000 shall be apportioned to the Territory of Hawaii and the remainder shall be apportioned among the several States in the manner provided in such Act of June 2, 1920, as amended.
(b) For the administration of such Act of June 2, 1920, as amended, by the Federal agency authorized to administer it, there is hereby authorized to be appropriated for the fiscal years ending June 30, 1936, and June 30, 1937, the sum of $22,000 for each such fiscal year in addition to the amount of the existing authorization, and for each fiscal year thereafter the sum of $102,000.

PART 5- ADMINISTRATION

SEC. 541. (a) There is hereby authorized to be appropriated for the fiscal year ending June 30, 1936, the sum of $425,000, for all necessary expenses of the Children s Bureau in administering the provisions of this title, except section 531.
(b) The Children s Bureau shall make such studies and investigations as will promote the efficient administration of this title, except section 531.
(c) The Secretary of Labor shall include in his annual report to Congress a full account of the administration of this title, except section 531.

SECTION 601. For the purpose of assisting States, counties, health districts, and other political subdivisions of the States in establishing and maintaining adequate public-health services, including the training of personnel for State and local health work, there is hereby authorized to be appropriated for each fiscal year, beginning with the fiscal year ending June 30,1936, the sum of $8,000,000 to be used as hereinafter provided.

STATE AND LOCAL PUBLIC HEALTH SERVICES

SEC. 602. (a) The Surgeon General of the Public Health Service, with the approval of the Secretary of the Treasury, shall, at the beginning of each fiscal year, allot to the States the total of (1) the amount appropriated for such year pursuant to section 601; and (2) the amounts of the allotments under this section for the preceding fiscal year remaining unpaid to the States at the end of such fiscal year. The amounts of such allotments shall be determined on the basis of (1) the population; (2) the special health problems; and (3) the financial needs; of the respective States. Upon making such allotments the Surgeon General of the Public Health Service shall certify the amounts thereof to the Secretary of the Treasury.
(b) The amount of an allotment to any State under subsection (a) for any fiscal year, remaining unpaid at the end of such fiscal year, shall be available for allotment to States under subsection (a) for the succeeding fiscal year, in addition to the amount appropriated for such year.
(c) Prior to the beginning of each quarter of the fiscal year, the Surgeon General of the Public Health Service shall, with the approval of the Secretary of the Treasury, determine in accordance with rules and regulations previously prescribed by such Surgeon General after consultation with a conference of the State and Territorial health authorities, the amount to be paid to each State for such quarter from the allotment to such State, and shall certify the amount so determined to the Secretary of the Treasury. Upon receipt of such certification, the Secretary of the Treasury shall, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting Office, pay in accordance with such certification.
(d) The moneys so paid to any State shall be expended solely in carrying out the purposes specified in section 601, and in accordance with plans presented by the health authority of such State and approved by the Surgeon General of the Public Health Service.

INVESTIGATIONS

SEC. 603. (a) There is hereby authorized to be appropriated for each fiscal year, beginning with the fiscal year ending June 30, 1936, the sum of $2,000,000 for expenditure by the Public Health Service for investigation of disease and problems of sanitation (including the printing and binding of the findings of such investigations), and f or the pay and allowances and traveling expenses of personnel of the Public Health Service, including commissioned officers, engaged in such investigations or detailed to cooperate with the health authorities of any State in carrying out the purposes specified in section 601: Provided, That no personnel of the Public Health Service shall be detailed to cooperate with the health authorities of any State except at the request of the proper authorities of such State.
(b) The personnel of the Public Health Service paid from any appropriation not made pursuant to subsection (a) may be detailed to assist in carrying out the purposes of this title. The appropriation from which they are paid shall be reimbursed from the appropriation made pursuant to subsection (a) to the extent of their salaries and allowances for services performed while so detailed.
(c) The Secretary of the Treasury shall include in his annual report to Congress a full account of the administration of this title.

SECTION 701. There is hereby established a Social Security Board (in this Act referred to as the Board ) to be composed of three members to be appointed by the President, by and with the advice and consent of the Senate. During his term of membership on the Board , no member shall engage in any other business, vocation, or employment. Not more than two of the members of the Board shall be members of the same political party. Each member shall receive a salary at the rate of $10,000 a year and shall hold office for a term of six years, except that
(1) any member appointed to fill a vacancy occurring prior to the expiration of the term for which his predecessor was appointed, shall be appointed for the remainder of such term; and
(2) the terms of office of the members first taking office after the date of the enactment of this Act shall expire, as designated by the President at the time of appointment, one at the end of two years, one at the end of four years, and one at the end of six years, after the date of the enactment of this Act. The President shall designate one of the members as the chairman of the Board.

DUTIES OF THE SOCIAL SECURITY BOARD

SEC. 702. The Board shall perform the duties imposed upon it by this Act and shall also have the duty of studying and making recommendations as to the most effective methods of providing economic security through social insurance, and as to legislation and matters of administrative policy concerning old-age pensions, unemployment compensation, accident compensation, and related subjects.

EXPENSES OF THE BOARD

SEC. 703. The Board is authorized to appoint and fix the compensation of such officers and employees, and to make such expenditures, as may be necessary for carrying out its functions under this Act. Appointments of attorneys and experts may be made without regard to the civil-service laws.

REPORTS

SEC. 704. The Board shall make a full report to Congress, at the beginning of each regular session, of the administration of the functions with which it is charged.

INCOME TAX ON EMPLOYEES

DEDUCTION OF TAX FROM WAGES

SEC. 802. (a) The tax imposed by section 801 shall be collected by the employer of the taxpayer by deducting the amount of the tax from the wages as and when paid. Every employer required so to deduct the tax is hereby made liable for the payment of such tax, and is hereby indemnified against the claims and demands of any person for the amount of any such payment made by such employer.
(b) If more or less than the correct amount of tax imposed by section 801 is paid with respect to any wage payment, then, under regulations made under this title, proper adjustments, with respect both to the tax and the amount to be deducted, shall be made, without interest, in connection with subsequent wage payments to the same individual by the same employer.

DEDUCTIBILITY FROM INCOME TAX

SEC. 803. For the purposes of the income tax imposed by Title I of the Revenue Act of 1934 or by any Act of Congress in substitution therefor, the tax imposed by section 801 shall not be allowed as a deduction to the taxpayer in computing his net income for the year in which such tax is deducted from his wages.

EXCISE TAX ON EMPLOYERS

ADJUSTMENT OF EMPLOYERS TAX

SEC. 805. If more or less than the correct amount of tax imposed by section 804 is paid with respect to any wage payment, then, under regulations made under this title, proper adjustments with respect the tax shall be made, without interest, in connection with subsequent wage payments to the same individual by the same employer.

REFUNDS AND DEFICIENCIES

SEC. 806. If more or less than the correct amount of tax imposed by section 801 or 804 is paid or deducted with respect to any wage payment and the overpayment or underpayment of tax cannot be adjusted under section 802 (b) or 805 the amount of the overpayment shall be refunded and the amount of the underpayment shall be collected in such manner and at such times (subject to the statutes of limitations properly applicable thereto) as may be prescribed by regulations made under this title.

COLLECTION AND PAYMENT OF TAXES

SEC. 807. (a) The taxes imposed by this title shall be collected by the Bureau of Internal Revenue under the direction of the Secretary of the Treasury and shall be paid into the Treasury of the United States as internal- revenue collections. If the tax is not paid when due, there shall be added as part of the tax interest (except in the case of adjustments made in accordance with the provisions of sections 802 (b) and 805) at the rate of one-half of 1 per centum per month from the date the tax became due until paid.
(b) Such taxes shall be collected and paid in such manner, at such times, and under such conditions, not inconsistent with this title (either by making and filing returns, or by stamps, coupons, tickets, books, or other reasonable devices or methods necessary or helpful in securing a complete and proper collection and payment of the tax or in securing proper identification of the taxpayer), as may be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury.
(c) All provisions of law, including penalties, applicable with respect to any tax imposed by section 600 or section 800 of the Revenue Act of 1926 and the provisions of section 607 of the Revenue Act of 1934, shall, insofar as applicable and not inconsistent with the provisions of this title, be applicable with respect to the taxes imposed by this title.
(d) In the payment of any tax under this title a fractional part of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be increased to 1 cent.

RULES AND REGULATIONS

SEC. 808. The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall make and publish rules and regulations for the enforcement of this title.

SALE OF STAMPS BY POSTMASTERS

SEC. 809. The Commissioner of Internal Revenue shall furnish to the Postmaster General without prepayment a suitable quantity of stamps, coupons, tickets, books, or other devices prescribed by the Commissioner under section 807 for the collection or payment of any tax imposed by this title, to be distributed to, and kept on sale by, all post offices of the first and second classes, and such post offices of the third and fourth classes as
(1) are located in county seats, or
(2) are certified by the Secretary of the Treasury to the Postmaster General as necessary to the proper administration of this title. The Postmaster General may require each such postmaster to furnish bond in such increased amount as he may from time to time determine, and each such postmaster shall deposit the receipts from the sale of such stamps, coupons, tickets, books, or other devices, to the credit of, and render accounts to, the Postmaster General at such times and in such form as the Postmaster General may by regulations prescribe. The Postmaster General shall at least once a month transfer to the Treasury, as internal- revenue collections all receipts so deposited together with a statement of the additional expenditures in the District of Columbia and elsewhere incurred by the Post Office Department in performing the duties imposed upon said Department by this Act, and the Secretary of the Treasury is hereby authorized and directed to advance from time to time to the credit of the Post Office Department from appropriations made for the collection of the taxes imposed by this title, such sums as may be required for such additional expenditures incurred by the Post Office Department.

PENALTIES

SEC. 810. (a) Whoever buys, sells, offers for sale, uses, transfers, takes or gives in exchange, or pledges or gives in pledge, except as authorized in this title or in regulations made pursuant thereto, any stamp, coupon, ticket, book, or other device, prescribed by the Commissioner of Internal Revenue under section 807 for the collection or payment of any tax imposed by this title, shall be fined not more than $1,000 or imprisoned for not more than six months, or both.
(b) Whoever, with intent to defraud, alters, forges, makes, or counterfeits any stamp, coupon, ticket, book, or other device prescribed by the Commissioner of Internal Revenue under section 807 for the collection or payment of any tax imposed by this title, or uses, sells, lends, or has in his possession any such altered, forged, or counterfeited stamp, coupon, ticket, book, or other device, or makes, uses, sells, or has in his possession any ma- terial in imitation of the material used in the manufacture of such stamp, coupon, ticket, book, or other device, shall be fined not more than $5,000 or imprisoned not more than five years, or both.

DEFINITIONS

IMPOSITION OF TAX

SECTION 901. On and after January 1, 1936, every employer (as defined in section 907) shall pay for each calendar year an excise tax, with respect to having individuals in his employ, equal to the following percentages of the total wages (as defined in section 907) payable by him (regardless of the time of payment) with respect to employment (as defined in section 907) during such calendar year:
(1) With respect to employment during the calendar year 1936 the rate shall be 1 per centum;
(2) With respect to employment during the calendar year 1937 the rate shall be 2 per centum;
(3) With respect to employment after December 31, 1937, the rate shall be 3 per centum.

CREDIT AGAINST TAX

SEC. 902. The taxpayer may credit against the tax imposed by section 901 the amount of contributions, with respect to employment during the taxable year, paid by him (before the date of filing of his return for the taxable year) into an unemployment fund under a State law. The total credit allowed to a taxpayer under this section for all contributions paid into unemployment funds with respect to employment during such taxable year shall not exceed 90 per centum of the tax against which it is credited, and credit shall be allowed only for contributions made under the laws of States certified for the taxable year as provided in section 903.

CERTIFICATION OF STATE LAWS

SEC. 903 (a) The Social Security Board shall approve any State law submitted to it, within thirty days of such submission, which it finds provides that-
(1) All compensation is to be paid through public employment offices in the State or such other agencies as the Board may approve;
(2) No compensation shall be payable with respect to any day of unemployment occurring within two years after the first day of the first period with respect to which contributions are required;
(3) All money received in the unemployment fund shall immediately upon such receipt be paid over to the Secretary of the Treasury to the credit of the Unemployment Trust Fund established by section 904;
(4) All money withdrawn from the Unemployment Trust Fund by the State agency shall be used solely in the payment of compensation, exclusive of expenses of administration;
(5) Compensation shall not be denied in such State to any otherwise eligible individual for refusing to accept new work under any of the following conditions:
(A) If the position offered is vacant due directly to a strike, lockout, or other labor dispute;
(B) if the wages, hours, or other conditions of the work offered are substantially less favorable to the individual than those prevailing for similar work in the locality;
(C) if as a condition of being employed the individual would be required to join a company union or to resign from or refrain from joining any bona-fide labor organization;
(6) All the rights, privileges, or immunities conferred by such law or by acts done pursuant thereto shall exist subject to the power of the legislature to amend or repeal such law at any time. The Board shall, upon approving such law, notify the Governor of the State of its approval.
(b) On December 31 in each taxable year the Board shall certify to the Secretary of the Treasury each State whose law it has previously approved, except that it shall not certify any State which, after reasonable notice and opportunity for hearing to the State agency, the Board finds has changed its law so that it no longer contains the provisions specified in subsection (a) or has with respect to such taxable year failed to comply substantially with any such provision.
(c) If, at any time during the taxable year, the Board has reason to believe that a State whose law it has previously approved, may not be certified under subsection (b), it shall promptly so notify the Governor of such State.

UNEMPLOYMENT TRUST FUND

ADMINISTRATION, REFUNDS, AND PENALTIES

INTERSTATE COMMERCE

SEC. 906. No person required under a State law to make payments to an unemployment fund shall be relieved from compliance therewith on the ground that he is engaged in interstate commerce, or that the State law does not distinguish between employees engaged in interstate commerce and those engaged in intrastate commerce.

DEFINITIONS

SEC. 907. When used in this title -- (a) The term employer does not include any person unless on each of some twenty days during the taxable year, each day being in a different calendar week, the total number of individuals who were in his employ for some portion of the day (whether or not at the same moment of time) was eight or more.
(b) The term wages means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash.
(c) The term employment means any service, of whatever nature, performed within the United States by an employee for his employer, except-
(1) Agricultural labor;
(2) Domestic service in a private home;
(3) Service performed as an officer or member of a crew of a vessel on the navigable waters of the United States;
(4) Service performed by an individual in the employ of his son, daughter, or spouse, and service performed by a child under the age of twenty-one in the employ of his father or mother;
(5) Service performed in the employ of the United States Government or of an instrumentality of the United States;
(6) Service performed in the employ of a State, a political subdivision thereof, or an instrumentality of one or more States or political subdivisions;
(7) Service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual.
(d) The term State agency means any State officer, board, or other authority, designated under a State law to administer the unemployment fund in such State.
(e) The term unemployment fund means a special fund, established under a State law and administered by a State agency, for the payment of compensation.
(f) The term contributions means payments required by a State law to be made by an employer into an unemployment fund, to the extent that such payments are made by him without any part thereof being deducted or deductible from the wages of individuals in his employ.
(g) The term compensation means cash benefits payable to individuals with respect to their unemployment.

RULES AND REGULATIONS

SEC. 908. The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall make and publish rules and regulations for the enforcement of this title, except sections 903, 904, and 910.

ALLOWANCE OF ADDITIONAL CREDIT

SEC. 909. (a) In addition to the credit allowed under section 902, a taxpayer may, subject to the conditions imposed by section 910, credit against the tax imposed by section 901 for any taxable year after the taxable year 1937, an amount, with respect to each State law, equal to the amount, if any, by which the contributions, with respect to employment in such taxable year, actually paid by the taxpayer under such law before the date of filing his return for such taxable year, is exceeded by whichever of the following is the lesser- (1) The amount of contributions which he would have been required to pay under such law for such taxable year if he had been subject to the highest rate applicable from time to time throughout such year to any employer under such law; or (2) Two and seven-tenths per centum of the wages payable by him with respect to employment with respect to which contributions for such year were required under such law.
(b) If the amount of the contributions actually so paid by the taxpayer is less than the amount which he should have paid under the State law, the additional credit under subsection (a) shall be reduced proportionately.
(c) The total credits allowed to a taxpayer under this title shall not exceed 90 per centum of the tax against which such credits are taken.

CONDITIONS OF ADDITIONAL CREDIT ALLOWANCE

SEC. 910. (a) A taxpayer shall be allowed the additional credit under section 909, with respect to his contribution rate under a State law being lower, for any taxable year, than that of another employer subject to such law, only if the Board finds that under such law--
(1) Such lower rate, with respect to contributions to a pooled fund, is permitted on the basis of not less than three years of compensation experience;
(2) Such lower rate, with respect to contributions to a guaranteed employment account, is permitted only when his guaranty of employment was fulfilled in the preceding calendar year, and such guaranteed employment account amounts to not less than 7 " per centum of the total wages payable by him, in accordance with such guaranty, with respect to employment in such State in the preceding calendar year;
(3) Such lower rate, with respect to contributions to a separate reserve account, is permitted only when
(A) compensation has been payable from such account throughout the preceding calendar year, and
(B) such account amounts to not less than five times the largest amount of compensation paid from such account within any one of the three preceding calendar years, and
(C) such account amounts to not less than 7 " per centum of the total wages payable by him (plus the total wages payable by any other employers who may be contributing to such account) with respect to employment in such State in the preceding calendar year.
(b) Such additional credit shall be reduced, if any contributions under such law are made by such taxpayer at a lower rate under conditions not fulfilling the requirements of subsection (a), by the amount bearing the same ratio to such additional credit as the amount of contributions made at such lower rate bears to the total of his contributions paid for such year under such law.
(c) As used in this section-
(1) The term reserve account means a separate account in an unemployment fund, with respect to an employer or group of employers, from which compensation is payable only with respect to the unemployment of individuals who were in the employ of such employer, or of one of the employers comprising the group.
(2) The term pooled fund means an unemployment fund or any part thereof in which all contributions are mingled and undivided, and from which compensation is payable to all eligible individuals, except that to individuals last employed by employers with respect to whom reserve accounts are maintained by the State agency, it is payable only when such accounts are exhausted.
(3) The term guaranteed employment account means a separate account, in an unemployment fund, of contributions paid by an employer (or group of employers) who
(A) guarantees in advance thirty hours of wages for each of forty calendar weeks (or more, with one weekly hour deducted for each added week guaranteed) in twelve months, to all the individuals in his employ in one or more distinct establishments, except that any such individual s guaranty may commence after a probationary period (included within twelve or less consecutive calendar weeks), and
(B) gives security or assurance, satisfactory to the State agency, for the fulfillment of such guaranties, from which account compensation shall be payable with respect to the unemployment of any such individual whose guaranty is not fulfilled or renewed and who is otherwise eligible for compensation under the State law.
(4) The term year of compensation experience , as applied to an employer, means any calendar year throughout which compensation was payable with respect to any individual in his employ who became unemployed and was eligible for compensation.

SECTION 1001. For the purpose of enabling each State to furnish financial assistance, as far as practicable under the conditions in such State, to needy individuals who are blind, there is hereby authorized to be appropriated for the fiscal year ending June 30, 1936, the sum of $3,000,000, and there is hereby authorized to be appropriated for each fiscal year thereafter a sum sufficient to carry out the purposes of this title. The sums made available under this section shall be used for making payments to States which have submitted, and had approved by the Social Security Board, State plans for aid to the blind.

STATE PLANS FOR AID TO THE BLIND

SEC. 1002. (a) A State plan for aid to the blind must
(1) provide that it shall be in effect in all political subdivisions of the State, and, if administered by them, be mandatory upon them;
(2) provide for financial participation by the State;
(3) either provide for the establishment or designation of a single State agency to administer the plan, or provide for the establishment or designation of a single State agency to supervise the administration of the plan;
(4) provide for granting to any individual, whose claim for aid is denied, an oppor- tunity for a fair hearing before such State agency;
(5) provide such methods of administration (other than those relating to selection, tenure of office, and compensation of personnel) as are found by the Board to be necessary for the efficient operation of the plan;
(6) provide that the State agency will make such reports, in such form and containing such information, as the Board may from time to time require, and comply with such provisions as the Board may from time to time find necessary to assure the correctness and verification of such reports; and
(7) provide that no aid will be furnished any individual under the plan with respect to any period with respect to which he is receiving old-age assistance under the State plan approved under section 2 of this Act.
(b) The Board shall approve any plan which fulfills the conditions specified in subsection (a), except that it shall not approve any plan which imposes, as a condition of eligibility for aid to the blind under the plan-
(1) Any residence requirement which excludes any resident of the State who has resided therein five years during the nine years immediately preceding the application for aid and has resided therein continuously for one year immediately preceding the application or
(2) Any citizenship requirement which excludes any citizen of the United States.

PAYMENT TO STATES

OPERATION OF STATE PLANS

SEC. 1004. In the case of any State plan for aid to the blind which has been approved by the Board, if the Board, after reasonable notice and opportunity for hearing to the State agency administering or supervising the administration of such a plan, finds--
(1) that the plan has been so changed as to impose any residence or citizenship requirement prohibited by section 1002 (b), or that in the administration of the plan any such prohibited requirement is imposed, with the knowledge of such State agency, in a substantial number of cases; or
(2) that in the administration of the plan there is a failure to comply substantially with any provision required by section 1002 (a) be included in the plan; the Board shall notify such State agency that further payments will not be made to the State until the Board is satisfied that such prohibited requirement is no longer so imposed, and that there is no longer any such failure to comply. Until it is satisfied it shall make no further certification to the Secretary of the Treasury with respect to such State.

ADMINISTRATION

SEC. 1005. There is hereby authorized to be appropriated for the fiscal year ending June 30, 1936 the sum of $30,000, for all necessary expenses of the Board in administering the provisions of this title.

DEFINITION

SEC. 1006. When used in this title the term aid to the blind means money payments to blind individuals.

RULES AND REGULATIONS

SEC. 1102. The Secretary of the Treasury, the Secretary of Labor, and the Social Security Board respectively, shall make and publish such rules and regulations, not inconsistent with this Act, as may be necessary to the efficient administration of the functions with which each is charged under this Act.

SEPARABILITY

SEC. 1103. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the remainder of the Act, and the application of such provision to other persons or circumstances shall not be affected thereby.

RESERVATION OF POWER

SEC. 1104. The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.

SHORT TITLE

SEC. 1105. This Act may be cited as the Social Security Act.

Approved, August 14, 1935.

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Section 201. (a) There is hereby created an account in the Treasury of the United States to be known as the Old-Age Reserve Account hereinafter in this title called the Account. There is hereby authorized to be appropriated to the Account for each fiscal year,…

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National Youth Administration facts, information, pictures | Encyclopedia.com articles about National Youth Administration

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Get information, facts, and pictures about National Youth Administration at Encyclopedia.com. Make research projects and school reports about National Youth Administration easy with credible articles from our FREE, online encyclopedia and dictionary.

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From bottles to bags to boots, plastic is a menace in the Tennessee River system. This year, Earth Day is devoted to ending plastic pollution. Join us for one of our annual cleanup events and do your part to keep our waters clean!

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Agricultural Adjustment Administration (AAA), former U.S. government agency established (1933) in the Dept. of Agriculture under the Agricultural Adjustment Act of 1933 as part of Franklin Delano Roosevelt's New Deal program. Its purpose was to help farmers by reducing production of staple crops, thus raising farm prices and encouraging more diversified farming. Farmers were given benefit payments in return for limiting acreage given to staple crops in the case of cotton and tobacco coercive taxes forced (1934-35) farmers to cut the amounts that they marketed. In 1936 the Supreme Court declared important sections of the act invalid, but Congress promptly adopted (1936) the Soil Conservation and Domestic Allotment Act, which encouraged conservation by paying benefits for planting soil-building crops instead of staple crops. The Agricultural Adjustment Act of 1938 empowered the AAA in years of good crops to make loans to farmers on staple crop yields and to store the surplus produce, which it could then release in years of low yield. Soil conservation was continued, and farmers could by two-thirds vote adopt compulsory marketing quotas (as they did for cotton and tobacco). In World War II the AAA turned its attention to increasing food production to meet war needs. It was renamed (1942) the Agricultural Adjustment Agency, and in 1945 its functions were taken over by the Production and Marketing Administration.
See E. G. Nourse et al., Three Years of the Agricultural Adjustment Administration (1937, repr. 1971) G. V. L. Perkins, Crisis in Agriculture (1969).

The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.

See more Encyclopedia articles on: U.S. History

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Agricultural Adjustment Administration (AAA), former U.S. government agency established (1933) in the Dept. of Agriculture under the Agricultural Adjustment Act of 1933 as part of Franklin Delano Roosevelt's New Deal program. Its purpose was to help farmers by reducing production of staple crops, thus raising farm prices and encouraging more diversified farming.

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National Industrial Recovery Act | Definition & Purpose

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National Industrial Recovery Act, U.S. labour legislation (1933) that was one of several measures passed by Congress and supported by Pres. Franklin D. Roosevelt in an effort to help the nation recover from the Great Depression. The National Industrial Recovery Act (NIRA) was an unusual experiment…

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Civilian Conservation Corps - Facts & Summary - HISTORY.com

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Find out more about the history of Civilian Conservation Corps, including videos, interesting articles, pictures, historical features and more. Get all the facts on HISTORY.com

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Consumers

The FDIC provides tools, education, and news updates to help consumers make informed decisions and protect their assets.

Consumer Resources

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The FDIC provides extensive resources for bankers, including guidance on regulations, information on examinations, legislation insights, and training programs.

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The FDIC is proud to be a pre-eminent source of U.S. banking industry research for analysts, including quarterly banking profiles, working papers, and state banking performance data.

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FDIC: Federal Deposit Insurance Corporation

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The FDIC is an independent agency created by the U.S. Congress to maintain stability and public confidence in the nation's financial system.

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New Deal - Facts & Summary - HISTORY.com

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Find out more about the history of New Deal, including videos, interesting articles, pictures, historical features and more. Get all the facts on HISTORY.com

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Contents

1. Franklin D. Roosevelt's Early Life and Career

2. FDR's Polio and Election as Governor

3. Roosevelt Enters the White House

4. Roosevelt and the New Deal

5. Roosevelt's Reelection and "Court-Packing"

6. FDR and World War II

7. Yalta Conference and Franklin D. Roosevelt's Death

Franklin D. Roosevelt was in his second term as governor of New York when he was elected as the nation's 32nd president in 1932. With the country mired in the depths of the Great Depression, Roosevelt immediately acted to restore public confidence, proclaiming a bank holiday and speaking directly to the public in a series of radio broadcasts or "fireside chats." His ambitious slate of New Deal programs and reforms redefined the role of the federal government in the lives of Americans.

Reelected by comfortable margins in 1936, 1940 and 1944, FDR led the United States from isolationism to victory over Nazi Germany and its allies in World War II. He spearheaded the successful wartime alliance between Britain, the Soviet Union and the United States and helped lay the groundwork for the post-war peace organization that would become the United Nations. The only American president in history to be elected four times, Roosevelt died in office in April 1945.

Franklin D. Roosevelt's Early Life and Career

Born on January 30, 1882, on a large estate near the village of Hyde Park, New York, Franklin Delano Roosevelt was the only child of his wealthy parents, James and Sara Delano Roosevelt. He was educated by private tutors and elite schools (Groton and Harvard), and early on began to admire and emulate his fifth cousin, Theodore Roosevelt, elected president in 1901. While in college, Franklin fell in love with Theodore's niece (and his own distant cousin), Anna Eleanor Roosevelt, and they married in 1905. The couple had a daughter, Anna Roosevelt, and four sons who survived into adulthood: James Roosevelt, Franklin D. Roosevelt Jr., Elliott Roosevelt, and Jr., John A. Roosevelt. A fifth son named Franklin D. Roosevelt, Jr. died in infancy.

Did you know? Encouraged by his wife, Eleanor, FDR appointed more women to federal posts than any previous president; he also included Black Americans in federal job programs (though they remained largely segregated).

Roosevelt attended law school at Columbia University and worked for several years as a clerk in a Wall Street law firm. In 1910, he entered politics, winning a state senate seat as a Democrat in the heavily Republican Dutchess County. In 1913, President Woodrow Wilson named Roosevelt assistant secretary of the U.S. Navy. He would hold that post for the next seven years, traveling to Europe in 1918 to tour naval bases and battlefields after the U.S. entrance into World War I.

FDR's Polio and Election as Governor

In 1921, Roosevelt was diagnosed with polio when he was 39 years old. Unable to walk, he temporarily removed himself from public life and focused on rehabilitation at his home in Hyde Park, where he'd swim three times a week in the Astor pool, slowly regaining strength. By the spring of 1922, he was able to stand again with braces. In 1924, he traveled to Warm Springs, Georgia, hoping to be healed by the spring's mineral waters. He ended up purchasing the resort and turning it into a rehabilitation center for Polio patients.

With the support of his wife and his longtime supporter, the journalist Louis Howe, Roosevelt began to return to public life, issuing statements on issues of the day and keeping up a correspondence with Democratic leaders. Eleanor Roosevelt spoke publicly throughout New York State, keeping her husband's reputation strong despite his illness; she also organized the women's division of the Democratic Party. In 1924, Franklin made a triumphant public appearance at the Democratic National Convention to nominate New York's Governor Alfred E. Smith for president (though Smith lost the nomination and the Democrats lost the general election).

He nominated Smith again in 1928, this time successfully, and at Smith's urgings agreed to run for governor of New York. Smith lost to Herbert Hoover, but Roosevelt won. Governor Roosevelt grew more liberal in his policies as New York (and the nation) sank deeper into economic depression after the stock market crash of 1929. In particular, he set up the Temporary Emergency Relief Administration (TERA), which aimed at finding jobs for the unemployed, and by 1932 TERA was helping nearly one out of every 10 families in New York.

Roosevelt Enters the White House

Re-elected as governor in 1930, Roosevelt emerged as a front-runner for the Democratic presidential nomination two years later. He broke tradition and appeared in person in Chicago to accept the nomination, famously pledging himself to "a new deal for the American people." In the general election, a confident and exuberant Roosevelt triumphed by an overwhelming margin over the incumbent Hoover, who had become a symbol for many people of the ongoing Great Depression.

In addition, Democrats won sizeable majorities in both the House of Representatives and the Senate. By the time Roosevelt was inaugurated on March 4, 1933, the Depression had reached desperate levels, including 13 million unemployed. In the first inaugural address to be widely broadcast on the radio, Roosevelt boldly declared that "This great nation will endure as it has endured, will revive and prosper...[T]he only thing we have to fear is fear itself."

Roosevelt began the momentous first 100 days of his presidency by closing all banks for several days until Congress could pass reform legislation. He also began holding open press conferences and giving regular national radio addresses in which he spoke directly to the American people. The first of these "fireside chats," about the banking crisis, was broadcast to a radio audience of some 60 million, and would go a long way toward restoring public confidence and preventing harmful bank runs. After passage of the Emergency Banking Relief Act, three out of every four banks were open within a week.

Roosevelt and the New Deal

Other key pieces of legislation during FDR's first "Hundred Days" created some of the most important programs and institutions of Roosevelt's New Deal, including the Agricultural Adjustment Administration (AAA), the Public Works Administration (PWA), the Civilian Conservations Corps (CCC) and the Tennessee Valley Authority (TVA). In addition to programs aimed at providing economic relief for workers and farmers and creating jobs for the unemployed, Roosevelt also initiated a slate of reforms of the financial system, notably the creation of the Federal Deposit Insurance Corporation (FDIC) to protect depositors' accounts and the Securities and Exchange Commission (SEC) to regulate the stock market and prevent abuses of the kind that led to the 1929 crash.

In 1935, after the economy had begun to show signs of recovery, Roosevelt asked Congress to pass a new wave of reforms, known as "Second New Deal." These included the Social Security Act (which for the first time provided Americans with unemployment, disability, and pensions for old age) and the Works Progress Administration. The Democratic-led Congress also raised taxes on large corporations and wealthy individuals, a hike that was derisively known as the "soak-the-rich" tax.

Roosevelt's Reelection and "Court-Packing"

Controversial but extremely popular with voters, Roosevelt won re-election by a huge margin in 1936 over Governor Alfred M. Landon of Kansas. He faced opposition from the Supreme Court over his New Deal programs, and proposed an expansion of the court that would allow him to appoint one new justice for every sitting justice 70 or older. After heated debate, Congress rejected this "court-packing" scheme, handing FDR the biggest setback of his career. Nonetheless, the Court abruptly changed direction, upholding both the Social Security Act and the Wagner Act (officially the National Labor Relations Act).

Labor unrest and another economic downturn in 1937 hurt Roosevelt's approval ratings, but the crisis had largely passed by the following year. Republicans gained ground in the midterm congressional elections, however, and soon formed an alliance with conservative Democrats that would block further reform legislation. By the end of 1938, as support for the New Deal was waning, Roosevelt faced a new looming challenge, this time on the international stage.

FDR and World War II

As early as 1937, FDR warned the American public about the dangers posed by hard-line regimes in Germany, Italy and Japan, though he stopped short of suggesting America should abandon its isolationist policy. After World War II broke out in September 1939, however, Roosevelt called a special session of Congress in order to revise the country's existing neutrality acts and allow Britain and France to purchase American arms on a "cash-and-carry" basis. Germany captured France by the end of June 1940, and Roosevelt persuaded Congress to provide more support for Britain, now left to combat the Nazi menace on its own. Despite the two-term tradition for presidents in place since the time of George Washington, Roosevelt decided to run for reelection again in 1940; he defeated Wendell L. Wilkie by nearly 5 million votes.

Roosevelt increased his support of Great Britain with passage of the Lend-Lease Act in March 1941 and met with Prime Minister Winston Churchill in August aboard a battleship anchored off Canada. In the resulting Atlantic Charter, the two leaders declared the " Four Freedoms " on which the post-war world should be founded: freedom of speech and expression, freedom of religion, freedom from want and freedom from fear.

On December 8, 1941, the day after Japan bombed the U.S. naval base at Pearl Harbor, Roosevelt appeared before a joint session of Congress, which declared war on Japan. The first president to leave the country during wartime, Roosevelt spearheaded the alliance between countries combating the Axis, meeting frequently with Churchill and seeking to establish friendly relations with the Soviet Union and its leader, Joseph Stalin. Meanwhile, he spoke constantly on the radio, reporting war events and rallying the American people in support of the war effort (as he had for the New Deal).

Yalta Conference and Franklin D. Roosevelt's Death

In 1944, as the tide of war turned toward the Allies, a weary and ailing Roosevelt managed to win election to a fourth term in the White House. The following February, he met with Churchill and Stalin in the Yalta Conference, where Roosevelt got Stalin's commitment to enter the war against Japan after Germany's impending surrender. (The Soviet leader kept that promise, but failed to honor his pledge to establish democratic governments in the eastern European nations then under Soviet control.) The "Big Three" also worked to build foundations for the post-war international peace organization that would become the United Nations.

After Roosevelt returned from Yalta, he was so weak that he was forced to sit down while addressing Congress for the first time in his presidency. In early April 1945, he left Washington and traveled to his cottage in Warm Springs, Georgia, where he had long before established a nonprofit foundation to aid polio patients. Roosevelt suffered a massive cerebral hemorrhage and died on April 12, 1945. He was succeeded in office by his vice president, Harry S. Truman.

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Franklin D. Roosevelt was elected as the nation's 32nd president in 1932. With the country mired in the Great Depression, Roosevelt immediately acted to restore public confidence, speaking directly to the public in a series of radio broadcasts or "fireside chats," and implementing his New Deal programs and reforms. The only American president in history to be elected four times, Roosevelt died in office in April 1945.

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a usually poor town or section of a town consisting mostly of shanties... See the full definition

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Herbert Hoover (1874-1964), America's 31st president, took office in 1929, the year the U.S. economy plummeted into the Great Depression. Although his predecessors' policies undoubtedly contributed to the crisis, which lasted over a decade, Hoover bore much of the blame in the minds of the American people.

As the Depression deepened, Hoover failed to recognize the severity of the situation or leverage the power of the federal government to squarely address it. A successful mining engineer before entering politics, the Iowa-born president was widely viewed as callous and insensitive toward the suffering of millions of desperate Americans. As a result, Hoover was soundly defeated in the 1932 presidential election by Democrat Franklin D. Roosevelt (1882-1945).

Early Years

Herbert Clark Hoover was born on August 10, 1874, in West Branch, Iowa-the first U.S. president to be born west of the Mississippi River. He was the second of three children in a family of Quakers, who valued honesty, industriousness and simplicity. His father, Jesse Clark Hoover (1846-80), worked as a blacksmith, and his mother, Hulda Minthorn Hoover (1848-84), was a teacher. Orphaned at age nine, Hoover was raised primarily by an uncle in Oregon.

Did you know? On March 3, 1931, President Herbert Hoover signed a law that made "The Star-Spangled Banner," based on an 1814 poem by Francis Scott Key (1779-1843), America's national anthem.

After attending Quaker schools, Hoover became part of the first class to enter Stanford University when it opened in 1891. He graduated four years later with a degree in geology and launched a lucrative career as a mining engineer. Intelligent and hardworking, Hoover traveled all over the world to find valuable mineral deposits and establish business enterprises to extract the resources. His work made him a multimillionaire. On February 10, 1899, Hoover married his college sweetheart, Lou Henry (1874-1944), and the couple had two sons, Herbert (1903-69) and Allan Henry (1907-93).

Humanitarian Work

At the start of World War I (1914-18), Hoover dedicated his talents to humanitarian work. He helped 120,000 stranded American tourists return home from Europe when the hostilities broke out and coordinated the delivery of food and supplies to citizens of Belgium after that country was overrun by Germany.

When the U.S. entered the war in 1917, President Woodrow Wilson (1856-1924) appointed Hoover head of the Food Administration. Hoover encouraged Americans to reduce their consumption of meat and other commodities in order to ensure a steady supply of food and clothing for the Allied troops.

Once the war ended, Hoover, as head of the American Relief Administration, arranged shipments of food and aid to war-ravaged Europe. He earned worldwide acclaim for his humanitarian efforts, as well as thousands of appreciative letters from people across Europe who benefited from the free meals known as "Hoover lunches."

Hoover's success earned him an appointment as secretary of commerce under President Warren Harding (1865-1923), and he continued in this position under President Calvin Coolidge (1872-1933). During the fast-paced modernization of the 1920s, Hoover played an active role in organizing the fledgling radio broadcasting and civilian aviation industries, and also laid the groundwork for the construction of a huge dam on the Colorado River between Arizona and Nevada. (Named after Hoover, the dam opened in 1936.)

The Great Depression

In the U.S. presidential election of 1928, Hoover ran as the Republican Party's nominee. Promising to bring continued peace and prosperity to the nation, he carried 40 states and defeated Democratic candidate Alfred E. Smith (1873-1944), the governor of New York, by a record margin of 444-87 electoral votes. "I have no fears for the future of our country," Hoover declared in his inaugural address. "It is bright with hope."

On October 24, 1929-only seven months after Hoover took office-a precipitous drop in the value of the U.S. stock market sent the economy spiraling downward and signaled the start of the Great Depression. Banks and businesses failed across the country. Nationwide unemployment rates rose from 3 percent in 1929 to 23 percent in 1932. Millions of Americans lost their jobs, homes and savings. Many people were forced to wait in bread lines for food and to live in squalid shantytowns known derisively as Hoovervilles.

Hoover undertook various measures designed to stimulate the economy, and a few of the programs he introduced became key components of later relief efforts. However, Hoover's response to the crisis was constrained by his conservative political philosophy. He believed in a limited role for government and worried that excessive federal intervention posed a threat to capitalism and individualism. He felt that assistance should be handled on a local, voluntary basis. Accordingly, Hoover vetoed several bills that would have provided direct relief to struggling Americans. "Prosperity cannot be restored by raids upon the public Treasury," he explained in his 1930 State of the Union address.

Post-Presidential Years

The Depression worsened throughout Hoover's term in office, and critics increasingly portrayed him as indifferent to the suffering of the American people. By the time of the 1932 presidential election, Hoover had become a deeply unpopular-even reviled-figure across much of the country. Carrying only six states, he was soundly defeated by Democratic candidate Franklin D. Roosevelt, the governor of New York, who promised to enact a slate of progressive reforms and economic relief programs that he described as a New Deal for the American people.

After leaving office, Hoover emerged as a prominent critic of Roosevelt's New Deal programs. He wrote articles and books outlining his conservative political views and warning about the dangers of investing too much power in the federal government. Hoover returned to public service in the 1950s, serving on commissions aimed at increasing government efficiency for presidents Harry Truman (1884-1972) and Dwight Eisenhower (1890-1969).

By the time Hoover died at age 90 on October 20, 1964, in New York City, assessments of his legacy had grown more favorable. Noting that after Hoover left the White House the Great Depression continued for eight more years despite Roosevelt's active intervention, some historians have argued for a more sympathetic appraisal of Hoover's presidency.

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Herbert Hoover (1874-1964), America's 31st president, took office in 1929, the year the U.S. stock market crashed, plunging the country into the Great Depression. Although his predecessors' policies undoubtedly contributed to the crisis, which lasted over a decade, Hoover bore much of the blame in the minds of the American people.

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What Is a Business Cycle?

Business cycles are a type of fluctuation found in the aggregate economic activity of a nation -- a cycle that consists of expansions occurring at about the same time in many economic activities, followed by similarly general contractions (recessions). This sequence of changes is recurrent but not periodic.

The business cycle is an example of an economic cycle.

Understanding the Business Cycle

In essence, business cycles are marked by the alternation of the phases of expansion and contraction in aggregate economic activity, and the comovement among economic variables in each phase of the cycle. Aggregate economic activity is represented by not only real (i.e., inflation-adjusted) GDP-a measure of aggregate output-but also the aggregate measures of industrial production, employment, income, and sales, which are the key coincident economic indicators used for the official determination of U.S. business cycle peak and trough dates.

A popular misconception is that a recession is defined simply as two consecutive quarters of decline in real GDP. Notably, the 1960-61 and 2001 recessions did not include two successive quarterly declines in real GDP.

A recession is actually a specific sort of vicious cycle, with cascading declines in output, employment, income, and sales that feed back into a further drop in output, spreading rapidly from industry to industry and region to region. This domino effect is key to the diffusion of recessionary weakness across the economy, driving the comovement among these coincident economic indicators and the persistence of the recession.

On the flip side, a business cycle recovery begins when that recessionary vicious cycle reverses and becomes a virtuous cycle, with rising output triggering job gains, rising incomes, and increasing sales that feed back into a further rise in output. The recovery can persist and result in a sustained economic expansion only if it becomes self-feeding, which is ensured by this domino effect driving the diffusion of the revival across the economy.

Of course, the stock market is not the economy. Therefore, the business cycle should not be confused with market cycles, which are measured using broad stock price indices.

Measuring and Dating Business Cycles

The severity of a recession is measured by the three D's: depth, diffusion, and duration. A recession's depth is determined by the magnitude of the peak-to-trough decline in the broad measures of output, employment, income, and sales. Its diffusion is measured by the extent of its spread across economic activities, industries, and geographical regions. Its duration is determined by the time interval between the peak and the trough.

In analogous fashion, the strength of an expansion is determined by how pronounced, pervasive, and persistent it turns out to be. These three P's correspond to the three D's of recession.

An expansion begins at the trough (or bottom) of a business cycle and continues until the next peak, while a recession starts at that peak and continues until the following trough.

The National Bureau of Economic Research (NBER) determines the business cycle chronology-the start and end dates of recessions and expansions for the United States. Accordingly, its Business Cycle Dating Committee considers a recession to be "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

The Dating Committee typically determines recession start and end dates long after the fact. For instance, after the end of the 2007-09 recession, it "waited to make its decision until revisions in the National Income and Product Accounts [were] released on July 30 and Aug. 27, 2010," and announced the June 2009 recession end date on Sept. 20, 2010. Since the Committee's formation in 1979, the average lags in the announcement of recession start and end dates have been eight months for peaks and 15 months for troughs.

Prior to the formation of the Committee, from 1949 to 1978, recession start and end dates were determined on behalf of the NBER by Dr. Geoffrey H. Moore. He then served as the Committee's senior member from 1979 until his death in 2000. In 1996, Moore co-founded the Economic Cycle Research Institute (ECRI) which, based on the same approach used to determine the official U.S. business cycle chronology, determines business cycle chronologies for 21 other economies, including the G7 and the BRICS. In analyses requiring international recession dates as benchmarks, the most widely used procedure is to reference NBER dates for the U.S. and the ECRI dates for other economies.

U.S. expansions have typically lasted longer than U.S. recessions. From 1854-1899, they were almost equal in length, with recessions lasting 24 months and expansions lasting 27 months, on average. The average recession duration then fell to 18 months in the 1900-1945 period and to 11 months in the post-World War II period. Meanwhile, the average duration of expansions increased progressively, from 27 months in 1854-1899, to 32 months in 1900-1945, to 45 months in 1945-1982, and to 103 months in the 1982-2009 period.

The depth of recessions has changed over time. They were typically very deep in the pre-World War II (WWII) period, going back to the 19th century. With cyclical volatility drastically downshifting after WWII, the depth of recessions decreased greatly. From the mid-1980s to the eve of the 2007-09 Great Recession-a period sometimes dubbed the great moderation-there was a further reduction in cyclical volatility. Also, since about the start of the great moderation, the average longevity of expansions appears to have roughly doubled.

The Varieties of Cyclical Experience

The pre-WWII experience of most market-oriented economies included deep recessions and strong recoveries. However, the post-WWII recoveries from the devastation wreaked on many major economies by the war resulted in strong trend growth spanning decades.

When trend growth is strong-as China has demonstrated in recent decades-it is difficult for cyclical downswings to take economic growth below zero, and into recession. For the same reason, Germany and Italy did not see their first post-WII recession until the mid-1960s, and thus experienced two-decade expansions. From the 1950s to the 1970s, France experienced a 15-year expansion, the U.K. saw a 22-year expansion, and Japan enjoyed a 19-year expansion. Canada saw a 23-year expansion from the late 1950s to the early 1980s. Even the U.S. enjoyed its longest expansion until that time in its history, spanning nearly nine years from early 1961 to the end of 1969.

With business cycle recessions having apparently become less frequent, economists focused on growth cycles, which consist of alternating periods of above-trend and below-trend growth. But monitoring growth cycles requires a determination of the current trend, which is problematic for real-time economic cycle forecasting. As a result, Geoffrey H. Moore, at the ECRI, went on to a different cyclical concept-the growth rate cycle.

Growth rate cycles-also called acceleration-deceleration cycles-are comprised of alternating periods of cyclical upswings and downswings in the growth rate of an economy, as measured by the growth rates of the same key coincident economic indicators used to determine business cycle peak and trough dates. In that sense, the growth rate cycle (GRC) is the first derivative of the classical business cycle (BC). But importantly, GRC analysis does not require trend estimation.

Using an approach analogous to that used to determine business cycle chronologies, the ECRI also determines GRC chronologies for 22 economies, including the U.S. Because GRCs are based on the inflection points in economic cycles, they are especially useful for investors, who are sensitive to the linkages between equity markets and economic cycles.

Stock Prices and the Business Cycle

In the post-WWII period, the biggest stock price downturns usually-but not always-occurred around business cycle downturns (i.e., recessions). Exceptions include the crash of 1987, which was part of a 35%-plus plunge in the S&P 500 that year, its 23%-plus pullback in 1966, and its 28%-plus drop in the first half of 1962.

However, each of those major stock price declines occurred during GRC downturns. Indeed, while stock prices generally see major downturns around business cycle recessions and upturns around business cycle recoveries, a better one-to-one relationship existed between stock price downturns and GRC downturns-and between stock price upturns and GRC upturns-in the post-WWII period, in the decades leading up to the Great Recession.

Following the Great Recession of 2007-09-while full-fledged stock price downturns, featuring over-20% declines in the major averages, did not occur until the 2020 COVID-19 pandemic-smaller 10%-20% "corrections" clustered around the four intervening GRC downturns, from May 2010 to May 2011, March 2012 to Jan. 2013, March to Aug. 2014, and April 2014 to May 2016. The 20% plunge in the S&P 500 in late 2018 also occurred within the fifth GRC downturn that began in April 2017 and culminated in the 2020 recession.

In essence, the prospect of recession usually, but not always, brings about a major stock price downturn. But the prospect of an economic slowdown-and specifically, a GRC downturn-can also trigger smaller corrections and, on occasion, much larger downdrafts in stock prices.

For investors, therefore, it is vital to be on the lookout for not only business cycle recessions, but also the economic slowdowns designated as GRC downturns. Those interested in learning more about business cycles, stock prices, and other financial concepts may want to consider enrolling in one of the best investing courses currently available.

What Are the Stages of the Business Cycle?

How Long Does the Business Cycle Last?

What Was the Longest Economic Expansion?

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Business Cycle: What It Is, How to Measure It, the 4 Phases

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The business cycle depicts the increase and decrease in production output of goods and services in an economy.

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Great Depression: Causes, Definition & Dates | HISTORY

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The Great Depression was the worst economic downturn in world history. Learn about the Dust Bowl, New Deal, causes of the Great Depression, a Great Depression timeline more.

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Black Tuesday was the fourth and last day of the stock market crash of 1929. It took place on October 29, 1929.﻿ Investors traded a record 16.4 million shares. They lost $14 billion on the New York Stock Exchange, worth $206 billion in 2019 dollars.﻿ ﻿﻿

On Black Tuesday, the Dow Jones Industrial Average dropped almost 12% closing at 230.﻿﻿

After the crash, the Dow continued sliding for three more years. It finally bottomed on July 8, 1932, closing at 41.22.﻿﻿ All told, it lost almost 90% of its value since its high on September 3, 1929. In fact, it didn't reach that high again for 25 years until November 23, 1954. Losses from the stock market crash helped create the Great Depression.

What Happened

Panicked sellers were shouting, "Sell! Sell!" so loudly that no one heard the bell ring. In a half hour, they sold three million shares and lost $2 million.

As the day wore on, the Dow fell to 212.33. The ticker tape that announced stock prices was hours behind. That meant investors didn't know how much they were losing. They frantically called their brokers. When they couldn't get through, they sent telegrams. Western Union said its volume of telegrams tripled that day.

Back then, traders physically wrote orders on pieces of paper. There were so many trades that the orders backed up. Traders just stuffed them into trash cans. Fistfights broke out, and one trader collapsed. Once revived, he was put back to work. Members of the NYSE board were afraid to close the market because it might make the panic even worse.

The prominent banks of the day tried to stop the crash. Morgan Bank, Chase National Bank, and National City Bank of New York bought shares of stocks. They wanted to restore confidence in the stock market. Instead, the intervention signaled the exact opposite. Investors saw it as a sign that the banks had panicked.

Part of the panic that caused Black Tuesday resulted from how investors played the stock market in the 1920s. They didn't have instant access to information via the internet. Stock prices were printed by a ticker tape machine onto a strip of paper. As share prices dropped the ticker tapes literally could not keep up with the pace. Panic ensued because no one knew how bad it was.

There was pandemonium on the floor of the stock exchange. Buyers roared and screamed. Some collapsed onto the ground when they got bad news about a stock price. Crowds formed outside of the NYSE. The police were called to keep order.

The other reason for the panic was the new method for buying stocks, called buying on margin. Investors could place huge stock orders with only 10% to 20% down. They used the money they borrowed from their brokers. When stock prices fell, the brokers called in the loans. Many people found paying off the loans wiped out their entire life savings.

How It Helped Cause the Great Depression

Black Tuesday's losses destroyed confidence in the economy. That loss of confidence led to the Great Depression. In those days, people believed the stock market was the economy. What was good for Wall Street was thought to be good for Main Street.

The stock market crash created bank runs. People withdrew all their savings at once. Many banks didn't have enough cash on hand and were forced to close. There was no Federal Deposit Insurance Corporation to insure savings.

Investors abandoned the stock market and started putting their money in commodities. As a result, gold prices soared. At that time, the United States was on the gold standard and promised to honor each dollar with its value in gold. As people began turning in dollars for gold, the U.S. government began to worry that it would run out of gold.

The Federal Reserve tried to come to the rescue by increasing the value of the dollar. It did this by raising interest rates, which reduced liquidity to businesses. However, without funds to grow, companies started laying off employees. That created a vicious downward economic spiral that became the Great Depression.

Statistics

In Depth: Effects of the Great Depression | Timeline of the Great Depression

Frequently Asked Questions (FAQs)

What day was Black Tuesday?

Black Tuesday occurred on October 29, 1929. Some 16 million shares were traded that day as the stock market lost billions of dollars in value.

What's the difference between Black Thursday and Black Tuesday?

Black Thursday occurred on the Thursday before Black Tuesday. It marked the start of the stock market crash that ended with Black Tuesday.

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

1. Iowa.gov. " Crowds Outside of the New York Stock Exchange, 1929."

2. DaveManuel.com. " Inflation Calculator 2019."

3. Virginia Commonwealth University. " Stock Market Crash of October 1929."

4. Federal Reserve History. " Stock Market Crash of 1929."

5. Michele Cagan. " Stock Market 101: From Bull and Bear Markets to Dividends, Shares and Margin - Your Essential Guide to the Stock Market," Page 64. Adams Media, 2016.

6. Peter Eisenstadt, Laura-Eve Ross. " The Encyclopedia of New York State," Page 374. Syracuse University Press, 1995.

7. The University of Connecticut. " The Stock Market Crash - The Roaring 20s."

8. Federal Deposit Insurance Corporation. " Learning Bank - Deposit Insurance."

9. Federal Reserve Bank of St. Louis. " The Gold Standard and Price Inflation."

10. Federal Reserve Bank of St. Louis. " Here's Why the U.S. No Longer Follows a Gold Standard."

11. Federal Reserve Board. " Remarks by Governor Ben S. Bernanke, Money, Gold, and the Great Depression."

12. Federal Deposit Insurance Corporation. " Historical Timeline."

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Black Tuesday was the fourth and last day of the stock market crash of 1929. It took place on October 29, 1929.﻿ Investors traded a record 16.4 million shares. They lost $14 billion on the New York Stock Exchange, worth $206 billion in 2019 dollars.﻿ ﻿﻿ On Black Tuesday, the Dow Jones Industrial Average dropped almost 12% closing at 230.﻿﻿ After the crash, the Dow continued sliding for three more years.

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What Is Black Thursday?

Black Thursday is the name given to an infamous day in stock market history: Thursday, Oct. 24, 1929, when the market opened 11% lower than the previous day's close, and panicked selling ensued throughout a day of heavy trading. Black Thursday is considered the first day of the Great Stock Market Crash of 1929, which continued until Oct. 29.

Black Thursday also refers to shopping and sales that begin on Thanksgiving Day, a preview of Black Friday, the beginning of the holiday shopping season.

Key Takeaways

Understanding Black Thursday

Black Thursday marked the beginning of the end of one of the longest-running bull markets in U.S. history. For nearly the entire decade of the 1920s, stock prices had been steadily climbing, rising to unprecedented heights. The Dow Jones Industrial Average (DJIA) increased sixfold from 63 in Aug. 1921 to 381 in Sept. 1929.

However, even before the New York Stock Exchange (NYSE) opened on that fateful Thursday in 1929, the elevated equity prices were making investors and financial experts uneasy. On Sept. 5, at the annual National Business Conference, economist Roger Babson predicted that "sooner or later a crash is coming, and it may be terrific." Throughout September, stock prices gyrated, with sudden declines and rapid recoveries.

The jitters continued into October. In fact, on Oct. 23, the Dow fell 4.6%. A Washington Post headline exclaimed, "Huge Selling Wave Creates Near-Panic as Stocks Collapse."

By this time, the stock market had already fallen nearly 20% since its record close of 381 on Sept. 3. When trading opened on Thursday, Oct. 24, the Dow fell 11% in the first few hours. Even more ominous was the heavy trading volume: It was to hit a record 12.9 million shares-three times the normal amount-by day's end.

The three leading banks at that time were Morgan Bank, Chase National Bank, and National City Bank of New York. Putting together a $750 million fund, they bought stocks to attempt to restore confidence in the markets. By the end of the trading day, the Dow actually recovered a bit, closing 2% down, at 299.47.

Aftermath of Black Thursday

The financiers' and banks' propping-up efforts worked for a time. On Friday, the Dow closed higher, at 301.22.

However, on Black Monday, Oct. 28, it fell almost 13% in light trading, to 260.64. And that triggered an all-out panic the next day. By the end of trading on Tuesday, Oct. 29- Black Tuesday -the Dow had fallen to 230.07, a 12% loss.

After the crash, the Dow continued sliding for three more years, bottoming out on July 8, 1932, at 41.22. It had lost almost 90% of its value since its high on Sept. 3, 1929. In fact, it didn't reach that high again for 25 years, until Nov. 23, 1954.

Many investors-both institutional and individual-had borrowed or leveraged heavily to buy stocks, and the crash that began on Black Thursday wiped them out financially, leading to widespread bank failures. That, in turn, became the catalyst that sent the United States into the Great Depression of the 1930s.

Significance of Black Thursday

While the panicked trading on Black Thursday fueled more panic on subsequent days, the Stock Market Crash of 1929 was actually caused by several factors. They include excess production in several industries, an agricultural recession, rampant speculation (or fear of it), the widespread use of margin to buy stocks, dubious accounting and leveraging practices by investment trusts, the incipient regulation of public utility companies, and a tightening of the money supply by the Federal Reserve (Fed).

The Stock Market Crash of 1929 did have one constructive result: It triggered a complete overhaul of the U.S. securities industry. The U.S. Securities and Exchange Commission (SEC) was established, and substantial new regulations were introduced by legislation such as the Securities Act of 1933 and the Securities Exchange Act of 1934.

Black Thursday Shopping

In recent years, Black Thursday has had a more positive connotation attached to it.

It's an affectionate shoppers' nickname for the Thanksgiving holiday in the United States. Many retailers are open on Thanksgiving in a bid to get an early start on the frenzied shopping of Black Friday-and to compete with increasingly popular online stores and e-commerce sites.

In the case of Black Friday, the term "black" refers to the black ink traditionally used to record a profit by accountants, while red ink was used to record losses.

The shopping version of Black Thursday has led to growing resistance among employees of retailers, who complain that they are forced to leave Thanksgiving family dinners early to report to work on time.

What Was the Decrease in Stock Value on Black Thursday?

As measured by the Dow Jones Industrial Average (DJIA), the leading index of the day, stocks declined 2% in value on Black Thursday.

What's the Difference Between Black Thursday and Black Tuesday?

Both are part of the Great Stock Market Crash of 1929, but at opposite ends. Black Thursday, Oct. 24, 1929, is seen as the beginning of the crash. Some 12 million shares changed hands, and the Dow fell sharply in the opening hours of trading, though it recovered somewhat to close six points down from the previous day-about a 2% decline in value.

Black Tuesday occurred five days later, on Oct. 29, and marked the final-and worst-day of the crash. In a record trading volume of 16 million shares, stock prices collapsed, and the Dow dropped more than 30 points, losing 12% of its value in that one day.

Why Did Stock Prices Fall So Sharply on Black Tuesday?

Confidence in the stock market had been badly shaken by the significant declines in the Dow on the previous Thursday (Black Thursday) and Monday (Black Monday). Though a consortium of banks tried to restore investors' faith via heavy buying, panic built upon the previous panic. As prices slid, many investors faced margin calls: They had borrowed money to buy stocks, and now they had to come up with more funds to maintain their positions; if they were unable to, then they had to sell their shares-which, of course, caused prices to fall further.

Trading became so fast and furious that stock tickers (physical telegraph machines that reported share prices) couldn't keep up, lagging behind by hours; confusion over the lack of up-to-date information encouraged the stampede to sell.

The Bottom Line

Black Thursday was the start of the Stock Market Crash of 1929 when panicked selling resulted in the Dow significantly dropping in value, and led the way for the Great Depression to follow. Black Thursday also resulted in a complete overhaul of the U.S. financial system, creating regulatory agencies such as the SEC and the implementation of other regulatory acts to protect investors.

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What Is Black Thursday? History, Significance, and Aftermath

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Black Thursday refers to Thursday, Oct. 24, 1929, when panicked selling sparked the first day of the Stock Market Crash of 1929.

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What Is Buying on Margin?

Buying on margin occurs when an investor buys an asset by borrowing the balance from a bank or broker. Buying on margin refers to the initial payment made to the broker for the asset-for example, 10% down and 90% financed. The investor uses the marginable securities in their broker account as collateral.

The buying power an investor has in their brokerage account reflects the total dollar amount of purchases they can make with any margin capacity. Short sellers of stock use margin to trade shares.

Understanding Buying on Margin

The Federal Reserve Board sets the margins securities. As of 2019, the board requires an investor to fund at least 50% of a security's purchase price with cash. The investor may borrow the remaining 50% from a broker or a dealer.

As with any loan, when an investor buys securities on margin, they must eventually pay back the money borrowed, plus interest, which varies by brokerage firm on a given loan amount. Monthly interest on the principal is charged to an investor's brokerage account.

Essentially, buying on margin implies that an individual is investing with borrowed money. Although there are benefits, the practice is thus risky for the investor with limited funds.

How Buying on Margin Works

To see how buying on margin works, we are going to simplify the process by taking out the monthly interest costs. Although interest does impact returns and losses, it is not as significant as the margin principal itself.

Consider an an investor who purchases 100 shares of Company XYZ stock at $100 per share. The investor funds half the purchase price with their own money and buys the other half on margin, bringing the initial cash outlay to $5,000. One year later, the share price rises to $200. The investor sells their shares for $20,000 and pays back the broker the $5,000 borrowed for the initial purchase.

Ultimately, in this case, the investor triples their money, making $15,000 on a $5,000 investment. If the investor had purchased the same number of shares using their own money, they would only have doubled their investment from $5,000 to $10,000.

Now, consider that instead of doubling after a year, the share price falls by half to $50. The investor sells at a loss and receives $5,000. Since this equals the amount owed to the broker, the investor loses 100% of their investment. If the investor had not used margin for their initial investment, the investor would still have lost money, but they would only have lost 50% of their investment-$2,500 instead of $5,000.

How to Buy on Margin

The broker sets the minimum or initial margin and the maintenance margin that must exist in the account before the investor can begin buying on margin. The amount is based largely on the investor's creditworthiness. A maintenance margin is required of the broker, which is a minimum balance that must be retained in the investor's brokerage account.

Suppose an investor deposits $15,000 and the maintenance margin is 50%, or $7,500. If the investor's equity dips below $7,500, the investor may receive a margin call. At this point, the investor is required by the broker to deposit funds to bring the balance in the account to the required maintenance margin. The investor can depositing cash or sell securities purchased with borrowed money. If the investor does not comply, the broker may sell off the investments held by the investor to restore the maintenance margin.

Who Should Buy on Margin?

Generally speaking, buying on margin is not for beginners. It requires a certain amount of risk tolerance and any trade using margin needs to be closely monitored. Seeing a stock portfolio lose and gain value over time is often stressful enough for people without the added leverage. Furthermore, the high potential for loss during a stock market crash makes buying on margin particularly risky for even the most experienced investors.

However, some types of trading, such as commodity futures trading, are almost always purchased using margin while other securities, such as options contracts, and must be purchased using all cash. For most individual investors primarily focused on stocks and bonds, buying on margin introduces an unnecessary level of risk.

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Buying on margin occurs when an investor buys an asset by borrowing the balance from a bank or broker. Buying on margin refers to the initial payment made to the broker for the asset-for example, 10% down and 90% financed. The investor uses the marginable securities in their broker account as collateral.

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What is a 'Bull Market'

A bull market is a financial market of a group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, currencies and commodities.

BREAKING DOWN 'Bull Market'

Bull markets are characterized by optimism, investor confidence and expectations that strong results should continue, usually for months or years. It is difficult to predict consistently when the trends in the market might change. Part of the difficulty is that psychological effects and speculation may sometimes play a large role in the markets.

Generally speaking, a bull market happens when (stock) prices rise by 20 percent, usually after a drop of 20 percent and before a 20 percent decline. Since they are difficult to predict, bull markets can typically only be recognized once they've happened.

Characteristics of a Bull Market

Bull markets generally take place when the economy is strengthening or when it is already strong. It happens in line with strong gross domestic product (GDP) and a drop in unemployment and will often coincide with a rise in corporate profits. Investor confidence will also be on the rise. The overall demand for stocks will be positive, along with the overall tone of the market. In addition, there will be a general increase in the amount of IPO activity during bull markets.

Supply and demand for securities will seesaw: supply will be weak while demand will be strong. Investors will be eager to buy securities, while few will be willing to sell. In a bull market, investors are more willing to take part in the (stock) market in order to gain profits. Investors who want to benefit from a bull market should buy early in order to take advantage of rising prices and sell them when they've reached their peak. Although it is hard to determine when the bottom and peak will take place, most losses will be minimal and are usually temporary.

Bull vs. Bear Markets

The opposite of a bull market is a bear market, which is characterized by falling prices and typically shrouded in pessimism. The use of "bull" and "bear" to describe markets comes from the way the animals attack their opponents. A bull thrusts its horns up into the air, while a bear swipes its paws downward. These actions are metaphors for the movement of a market. If the trend is up, it's a bull market. If the trend is down, it's a bear market.

Bull and bear markets often coincide with the economic cycle, which consists of four phases: expansion, peak, contraction and trough. The onset of a bull market is often a leading indicator of economic expansion. Because public sentiment about future economic conditions drives stock prices, the market frequently rises even before broader economic measures, such as gross domestic product (GDP) growth, begin to tick up. Likewise, bear markets usually set in before economic contraction takes hold. A look back at a typical U.S. recession reveals a falling stock market several months ahead of GDP decline.

Bull Market Example

The most prolific bull market in modern American history started at the end of the stagflation era in 1982 and concluded during the dotcom bust in 2000. During this secular bull market - a term that denotes a bull market lasting many years - the Dow Jones Industrial Average (DJIA) averaged 16.8% annual returns. The NASDAQ, a tech-heavy exchange, increased its value fivefold between 1995 and 2000, rising from 1,000 to over 5,000.

A protracted bear market followed the 1982-2000 bull market. From 2000 to 2009, the market struggled to establish footing and delivered average annual returns of -6.2%.

Learn how you can profit in a bull market by reading Banking Profits in Bull and Bear Markets and also How to Adjust Your Portfolio in a Bull or Bear Market.

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A bull market is a financial market of a group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, currencies and commodities.

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What is a 'Bear Market'

A bear market is a condition in which securities prices fall and widespread pessimism causes the stock market's downward spiral to be self-sustaining. Investors anticipate losses as pessimism and selling increases. Although figures vary, a downturn of 20 percent or more from a peak in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over a two-month period is considered an entry into a bear market.

BREAKING DOWN 'Bear Market'

The term "bear market" is the opposite of a " bull market," or a market in which prices for securities are rising or will expect to rise. It is named for the way in which a bear attacks its prey - swiping its paws downward. This is why markets with falling stock prices are called bear markets. Just like the bear market, the bull market is named after the way in which the bull attacks by thrusting its horns up into the air.

While there is no agreed upon definition of what makes a bear market, it's generally accepted that a bear market is characterized by a drop of 20 percent or more over a two-month period.

What Causes a Bear Market?

The causes of a bear market often vary, but, in general, a weak or slowing or sluggish economy will bring with it a bear market. The signs of a weak or slowing economy are typically low employment, low disposable income and a drop in business profits. In addition, any intervention by the government in the economy can also trigger a bear market. For example. changes in the tax rate or in the federal funds rate can lead to a bear market. Similarly, a drop in investor confidence may also signal the onset of a bear market. When investors believe something is about to happen, they will take action - in this case, selling off shares to avoid losses.

Phases of a Bear Market

Bear markets usually have four different phases. The first shows high prices and high investor sentiment. But in this phase, investors are beginning to drop out of the markets and take in profits. In the second phase, stock prices begin to fall sharply, trading activity and corporate profits begin to drop, and economic indicators that may have once been positive start to become below average. Some investors begin to panic as sentiment starts to fall. The third phase shows speculators start to enter the market, therefore raising some prices and trading volume. In the fourth and last phase, stock prices continue to drop, but slowly. As low prices and good news starts to attract investors again, bear markets start to lead to bull markets.

Bear Market vs. Correction

A bear market should not be confused with a correction, which is a short-term trend that has a duration of fewer than two months. While corrections offer a good time for value investors to find an entry point into stock markets, bear markets rarely provide suitable points of entry. This is because it is almost impossible to determine a bear market's bottom. Trying to recoup losses can be an uphill battle, unless investors are short sellers or use other strategies to make gains in falling markets. Between 1900 and 2015, there were 32 bear markets, averaging one every 3.5 years. The last bear market coincided with the global financial crisis occurring between October 2007 and March 2009, duirng which time the DJIA declined 54 percent during the period.

Short Selling in Bear Markets

Investors can make gains in a bear market by short selling. This technique involves selling borrowed shares and buying them back at lower prices. A short seller must borrow the shares from a broker before a short sell order is placed. The short seller's profit and loss amount is the difference between the price at which the shares were sold and the price at which they were bought back, referred to as "covered." For example, an investor shorts 100 shares of a stock at $94.00. The price falls and the shares are covered at $84.00. The investor pockets a profit of $10 x 100 = $1,000.

Put Options and Inverse ETFs in Bear Markets

A put option gives the owner the right, but not the obligation to sell a stock at a specific price on, or before, a certain date. Put options can be used to speculate on falling stock prices, and to hedge against falling prices to protect long-only portfolios. Investors must have options privileges in their accounts to make such trades. Inverse ETFs are designed to change values in the opposite direction of the index they are tracking. For example, the inverse ETF for the S&P 500 would increase by 1% if the S&P 500 index decreased by 1%. There are many leveraged inverse ETFs that magnify the returns of the index they track by two and three times. Like options, inverse ETFs can be used to speculate or protect portfolios.

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A bear market is a condition in which securities prices fall and widespread pessimism causes the stock market's downward spiral to be self-sustaining. Investors anticipate losses as pessimism and selling increases.