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"That man (Herbert Hoover) has offered me unsolicited advice for six years, all of it bad," Calvin Coolidge
This day in history: In a State of the Union message, U.S. President Herbert Hoover proposed a $150 million public works program to help generate jobs and stimulate the economy on this day in 1930.
The general narrative we hear about the Great Depression is that Herbert Hoover was a laissez-faire president who did nothing to help American crawl out of the depression which made it even worse, and we must learn from this today and enact federal stimulus programs to boost life into the economy.
The problem with this all is that this is a lie.
The problem with this all is that this is a lie.
Hoover actually intervened in the economy more than any prior president. Keep this in mind when you consider that there was a Depression in 1920, the government did nothing, and the economy bounced back within 12 to 18 months.
As Hoover himself proclaimed during his presidential campaign of 1932:
. . . we might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action. . . . No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times. . . . For the first time in the history of depressions, dividends, profits and the cost of living, have been reduced before wages have suffered. . . . They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world.
Creating new jobs and giving to the whole system a new breath of life; nothing has ever been devised in our history which has done more for . . . “the common run of men and women.” Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom. . . . We determined that we would not follow the advice of the bitterend liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction.
Hoover doubled federal spending and one of his first acts as president was to prohibit business leaders from cutting wages. He also launched huge public works projects such as the San Francisco Bay Bridge, Los Angeles Aqueduct, and the Hoover Dam. Hoover signed into law the damaging Smoot-Hawley tariff in June 1930 which raised taxes on over 20,000 imported goods (to the highest levels in American history) which made it more difficult for other countries to export goods to US, so now their economies suffered, and they thus imported less American goods. Hoover ended up creating a worldwide trade war. Also, because there were less foreign imports, government revenues from tariffs actually declined, the opposite to what the government intended.
Hoover eventually raised the top income tax rate from 23 percent to 65 percent (the rich must pay their fair share after all) and the lowest income tax rate from 1.1 percent to 4 percent in 1932.
Franklin Delano Roosevelt eventually criticized Herbert Hoover of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt criticized Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions of people on the dole. Roosevelt's running mate, John Nance Garner, charged that Hoover was "leading the country down the path of socialism."
Hoover definitely did not favor laissez-faire policies. In fact, Hoover even self-identified as a progressive and denounced laissez-faire himself:
"Individualism cannot be maintained as the foundation of a society if it looks to only legalistic justice based upon contracts, property, and political equality. Such legalistic safeguards are themselves not enough. In our individualism we have long since abandoned the laissez faire of the 18th Century-the notion that it is 'everyman for himself and the devil take the hindmost.'"
Besides an aggressive expansion of all state public works programs, Hoover also instituted farm subsidies and price supports and enacted rules to discourage commodity speculators. He then set out to weaken bankruptcy laws so as to prevent them, resulting in many companies being propped up artificially. He imposed limits on immigration and deported illegal aliens and fought tirelessly to keep wage rates propped up.
. . . we might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action. . . . No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times. . . . For the first time in the history of depressions, dividends, profits and the cost of living, have been reduced before wages have suffered. . . . They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world.
Creating new jobs and giving to the whole system a new breath of life; nothing has ever been devised in our history which has done more for . . . “the common run of men and women.” Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom. . . . We determined that we would not follow the advice of the bitterend liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction.
Hoover doubled federal spending and one of his first acts as president was to prohibit business leaders from cutting wages. He also launched huge public works projects such as the San Francisco Bay Bridge, Los Angeles Aqueduct, and the Hoover Dam. Hoover signed into law the damaging Smoot-Hawley tariff in June 1930 which raised taxes on over 20,000 imported goods (to the highest levels in American history) which made it more difficult for other countries to export goods to US, so now their economies suffered, and they thus imported less American goods. Hoover ended up creating a worldwide trade war. Also, because there were less foreign imports, government revenues from tariffs actually declined, the opposite to what the government intended.
Hoover eventually raised the top income tax rate from 23 percent to 65 percent (the rich must pay their fair share after all) and the lowest income tax rate from 1.1 percent to 4 percent in 1932.
Franklin Delano Roosevelt eventually criticized Herbert Hoover of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt criticized Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions of people on the dole. Roosevelt's running mate, John Nance Garner, charged that Hoover was "leading the country down the path of socialism."
Hoover definitely did not favor laissez-faire policies. In fact, Hoover even self-identified as a progressive and denounced laissez-faire himself:
"Individualism cannot be maintained as the foundation of a society if it looks to only legalistic justice based upon contracts, property, and political equality. Such legalistic safeguards are themselves not enough. In our individualism we have long since abandoned the laissez faire of the 18th Century-the notion that it is 'everyman for himself and the devil take the hindmost.'"
Besides an aggressive expansion of all state public works programs, Hoover also instituted farm subsidies and price supports and enacted rules to discourage commodity speculators. He then set out to weaken bankruptcy laws so as to prevent them, resulting in many companies being propped up artificially. He imposed limits on immigration and deported illegal aliens and fought tirelessly to keep wage rates propped up.
"Hoover’s policies prolonged the Great Depression. His agricultural policy was a disaster. Raising tariffs an average of 59% on more than 25,000 items hurt. Lots of tax increases crippled businesses. Hoover sought prosperity through central planning, as did his successor, FDR, who also knew nothing about how wealth was created." ~Tom Woods
So the image of Hoover as an Adam Smith Physiocrat is completely inaccurate. As William Leuchtenburg, author of Franklin D. Roosevelt and the New Deal states: "Almost every historian now recognizes that the image of Hoover as a 'do-nothing' president is inaccurate."
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So the image of Hoover as an Adam Smith Physiocrat is completely inaccurate. As William Leuchtenburg, author of Franklin D. Roosevelt and the New Deal states: "Almost every historian now recognizes that the image of Hoover as a 'do-nothing' president is inaccurate."
For a list of all of my books on CDrom, click here
Join my Facebook Group
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