Based on ideas by Will Rogers, the U. S. President appoints a Secretary of Amusement to raise the nation's spirits during the Depression.
Theatrical producer Lawrence Cromwell (Warner Baxter) goes to Washington and is made Secretary of Amusement by the President, who believes if people keep their sense of humor, they will be okay. With $100 million Cromwell organizes his department, using his expertise to declare the head of the children's division, Mary Adams (Madge Evans), beautiful. As the news goes out, soon people are laughing all across the country. However, some big businessmen led by John Harly (Arthur Byron) believe their contracts depend on the Depression continuing and aim to counter the effort with a propaganda campaign by ridiculing Cromwell. Jimmy Dugan (James Dunn) tells Cromwell that his daughter Shirley (Shirley Temple) should not be excluded because she is under seven. Dugan and Shirley sing "Baby Take a Bow."
Senators complain that Cromwell is squandering money, and they send two slapstick senators, who have been together on "every dam project." Cromwell goes on Harly's yacht for a rest, and Harly asks him to resign, offering to give him theaters in major cities. Cromwell will not be bribed. To please rural folks they sing and dance "Broadway's Gone Hillbilly." Cromwell tells the heads of his divisions that much work has produced little results, and he fires one man who says the whole program is doomed. Discouraged, Cromwell tells Mary he wants to quit; but she says running away will make him unhappy. Mary loves Cromwell, and he kisses her. He says show business and a home don't mix, but she won't give up. Mary watches and cries during the romantic love song "This Is Our Last Night Together." A penguin in clothes (with the voice of Jimmy Durante) is assisted by Shaw (Stepin Fetchit) even after it jumps into a fish tank and eats the fish.
A radio reports that Cromwell is leaving, admitting defeat. Mary gets letters that people want more children's hour radio programs. Cromwell vows new effort and tells Mary he is eliminating the children's division; but radio reports the children's success, and the President calls to congratulate him. Dugan reports that the Depression is over, and in the finale people marching sing the rousing "We're Out of the Red."
Ironically the marching scenes at the end foreshadow the march into world war that ended the Depression. This musical seeks to entertain but also indicates business and political hostility to spending money on such things.