Facing a $6 million state debt and an economy ravaged by business and bank failures, McAlister immediately began trimming the state government. He slashed over 2,300 jobs from the government workforce, and cut $7 million in state spending. These cuts included the cost of the governor's mansion, which McAlister reduced from $35,000 per year to just $1,000. McAlister supported the Tennessee Valley Authority and other Depression-era federal programs. The construction of Norris Dam and Pickwick Landing Dam began during his tenure.