The depression continued in 1932 and President Herbert Hoover
actively intervened to reverse it. Congress passed and the president signed the Reconstruction Finance Act. It authorized the establishment of a Reconstruction Finance Corporation
, modeled after the War Finance Corporation of World War I, and loaned money to banks, railroads, and agricultural organizations. The RFC also extended aid to state and local governments. In 1932, it dispersed a total of $1.5 billion. By 1932 the federal governments budget balance was seriously in deficit and President Hoover pushed the Revenue Act of 1932
through Congress. It raised individual tax rates with the top rate increasing from 25 percent to 67 percent, doubled inheritance taxes, and raised corporate income taxes by 15 percent.
In the November presidential election campaign, Governor Franklin D. Roosevelt of New York criticized the incumbent President Hoover for increasing government spending, blocking trade, and putting millions of Americans on the dole. Governor Roosevelt won the election in a landslide of 42 states to 6 and a popular vote of 57 to 40 percent over President Hoover. In the Senate elections the Democrats picked up 12 seats, and in the House elections an additional 97 seats. In the new 73rd Congress the Democrats controlled the Senate with 59-36 seats, and in the House with 313-117 seats.
Raising Tax Rates in the Middle of a Depression
By the start of 1932 the Hoover administration had become very concerned about the federal governmentâ€™s solvency. Federal spending had surged from $3 billion to $7 billion and the surplus of 1929 had become a $4 billion deficit. Something had to be done. The solution was the Revenue Act of 1932
that increased federal income tax across the board, with the top rate increasing from 25 percent to 63 percent. The estate tax was doubled, and corporate income tax rates were raised by 15 percent.