There is probably no president as derided as Herbert Hoover. The man who had the bad luck to serve as president of the United States when the stock market crashed in 1929 and the Great Depression took hold is held up as the model of what not to do during an economic crisis. His name is more or less synonymous with financial mismanagement by a political leader.
Whether Hoover deserves this reputation is another matter. He’s often characterized as stubbornly clinging to a laissez faire attitude by those who think that tough economic times call for swift and expansive government action. If only Hoover had been willing to spend more to stimulate the economy, the Depression might have ended earlier, modern-day critics say.
But the reality is far more complex. Hoover did not sit idly by while the Depression took hold. He cut taxes and grew spending, increasing it 42 percent after the stock market crashed in 1929. Even falling tax receipts didn’t slow the spending, so Hoover ran up unprecedented deficits. By 1932, the federal government—which had run a surplus for much of the previous decade—had a budget deficit of $2.6 billion. That was four percent of GDP.
Hoover’s huge deficits weren’t very popular politically. Franklin Delano Roosevelt actually campaigned against the deficits. Eventually, FDR would come around to the view that deficit spending was necessary. He became, in essence, the first neo-Hooverite.
Today’s neo-Keynesians should probably stop deriding Hoover. He was the first politician to adopt the program of deficits and stimulus spending they favor. In a very real sense, we’re all Hooverites now.
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mai 10, 2009