Herbert Hoover ran up big budget deficits in response to the 1929 stock market crash, in an unsuccessful effort to stave off the Great Depression. That’s incontrovertible history. Even the web site maintained by the Obama White House, which has proposed record-setting budget deficits over the next decade, says Hoover ran up deficits.
But when someone points out that Hoover was a deficit-spender, liberal ideologues falsely claim in response that Hoover pushed for a balanced budget. Nothing supports those claims. But they are necessary to argue that deficit-spending is a miracle cure for the recession — and to defend Obama’s unprecedentedly-large deficits from criticism by economists and financial experts.
“‘President Herbert Hoover’s response” to the 1929 stock market crash ‘was to balance the federal budget.’ Hoover actually ran up massive deficits, as the federal Office of Management and Budget notes. Hoover inherited a large budget surplus, which he quickly turned into a deficit. By 1932, when he lost his bid for reelection, the deficit had reached $2.7 billion — the third-largest budget deficit America had ever experienced. Hoover increased government spending from $3.1 billion to $4.7 billion in a failed effort to stimulate the economy. And he increased marginal tax rates to 63 percent.”
When I cited to the federal Office of Management and Budget, it was to a document on the White House’s own web site, “Historical Tables: Budget of the United States Government, Fiscal Year 2009.” Most of my figures came from Table 1.1 on page 21 of that document.
But all this evidence was to no avail. A hostile commenter on the Post’s web site asserted just the opposite, based on — nothing. He wrote, “Check out the ‘Competitive Enterprise Institute’ website . . . It’s a right-wing organization whose kookiness is akin to the Flat Earth Society. Hoover DID try to balance the budget in the middle of a recession and, consequently, trigered [sic] the Great Depression.”
Needless to say, the hostile commenter didn’t cite any evidence or any sources for his claims about Hoover, because there aren’t any. And the evidence I cited was from the White House’s own web site. (By the way, I have an economics degree, a law degree from Harvard, and graduate level econometrics coursework, not signs of belonging to the “Flat Earth Society”).
“In the Great Depression, President Herbert Hoover raised marginal tax rates to 63%, and went on a deficit spending binge. He also signed the Smoot-Hawley tariff, which helped turn a recession into the Great Depression by triggering a trade war with other countries.
“Obama is on the same path. His deficit-exploding $800 billion stimulus package blocked 97 Mexican truckers from U.S. roads. That NAFTA violation “caused Mexico to retaliate with tariffs on 90 goods affecting $2.4 billion in U.S. trade.” The CBO admits that the stimulus package will actually shrink the economy in the long run.”
Confronted with these incontestable facts, found in newspapers and government reports, an Obama-phile simply asserted that everything I said was false, and that Hoover caused the Great Depression by cutting government spending. After regurgitating Obama Administration talking points, he claimed that “Hoover’s downfall was largely that he CUT spending rather than making sound investment in STIMULATING the already reeling U.S. economy.”
Keep in mind that Hoover increased spending by roughly 50% from $3.1 billion to $4.7 billion from the year he took office in 1929 to his last year in office, 1932. (That increase actually understates Hoover’s big-spending proclivities, for two reasons. First, deflation occurred during the Great Depression, so the increase in the budget after inflation was actually bigger than 50%. Second, Hoover’s influence on the budget wasn’t really felt until well after he took office. When it finally was, spending rose at a much more rapid rate.)
The commenter also claimed that Obama’s $800 billion stimulus package was “much-needed.” The Congressional Budget Office says that package, despite its enormous cost, will actually shrink the economy over the long run, by exploding the national debt and crowding out private investment. That contradicts Obama’s apocalyptic claims that the stimulus package was necessary to avert “irreversible decline” and economic “disaster.” (Note that the Congressional Budget Office’s figures cannot be dismissed as “radical” or right-wing “garbage,” since it is generally non-partisan, but subject to oversight by liberal Congressional leaders).