Remembering Hoover

Hoover was a major interventionist compared to past presidents. The criticism of Hoover at the time wasn't that he did nothing, but he didn't do enough. It turned out more was too much and FDR sank the United States into a decade long depression. There was a brief recovery though, following the 42 percent devaluation of the U.S. dollar.

Alhambra: Always More

For decades the slander against Herbert Hoover went unchallenged. He was branded a “do nothing” in the 1932 campaign, a charge which looks sillier the more time passes. The proper slander of Hoover is that he was Roosevelt before FDR was, only in miniature. From this view we can appreciate the intentional change in perspective; Hoover’s interventions failed to stop the depression while FDR’s larger versions failed on the recovery.

It was Hoover not Roosevelt who carried out the first wide-scale fiscal tactics that are commonly associated with Keynesianism. His Reconstruction Finance Corporation in 1932 gave us the phrase “pump priming” (then it was called priming the pump) that John Maynard Keynes so thoroughly embraced. The mission of the RFC was to make funds available for industry to supplement what was already being done in the realm of public works (shovel ready with actual shovels).

The difference from one administration to the next was not the method but the size. In June 1934, Dr. Keynes advised the Roosevelt administration that it needed to finance $400 million per month in order to restore full economic capacity. Ever receptive to the idea of always more, the FDR government still fell far short of that. Keynes, always confidently brooding, told economist Alvin H. Hansen that, “I don’t think your President Roosevelt knows anything about economics.”

If that didn’t birth the idea of always more in these kinds of “pump priming” activities, it was very near to it. Fiscal and monetary stimulus thus never fail, they are just never enough.

From America's Great Depression:

THE PUBLIC WORKS AGITATION

While a few economists gave sound advice to little avail, scores of others helped make matters worse by agitating for a broad public works program. The Employment Stabilization Act had first been introduced into the Senate by Senator Robert Wagner of New York in 1928, under the inspiration of the veteran public works agitator Otto Tod Mallery as part of a comprehensive plan of government intervention to combat unemployment.14

The act provided for an Employment Stabilization Board, consisting of several Cabinet officers, to increase public works in order to stabilize industry and relieve unemployment in a depression. In early 1930, Senator Wagner seized the opportunity to introduce his program again. He asserted, with due consistency, that since we now had a Federal tariff and a Federal Reserve System, why not also accept the responsibility for unemployment? No one thought to answer Wagner that his logic could be turned around to indicate repeal of both the protective tariff and the Federal Reserve. Wagner’s bill authorized $150 million per annum for his program.

...The Senate passed the Wagner Bill by an unrecorded vote. The bill ran into delays in the House despite the almost complete lack of opposition in the hearings and the pressure for the bill exerted by Andrews, Green, Perkins, Emery, Douglas, Foster and Catchings. Representative George S. Graham (R., Penn.), Chairman of the Judiciary Committee, managed to amend the substance out of the bill, and thus to deadlock the Senate–House Conference and block the bill.16 In the meanwhile, Congress approved the various Hoover requests for additional public works appropriations, although one $150 million request was cut to $116 million.

In December, 1930, the Emergency Committee for Federal Public Works, headed by Harold S. Butenheim, editor of American City, appealed for large-scale borrowing of one billion dollars for public works, and the plea was endorsed by 93 leading economists. Among these were Thomas S. Adams, Thomas Nixon Carver, Edgar S. Furniss, Edwin R.A. Seligman, Leo Wolman, and many of the names on the Wagner Bill petitions.17 Finally, in February, 1931, Congress passed the Employment Stabilization Act in original form and Hoover gladly signed the measure. He quickly designated the Secretary of Commerce as chairman of the Federal Employment Stabilization Board.18 The Senate also did something in the same month destined to have far-reaching effects in the future: it passed the Wagner resolution to study the establishment of Federal unemployment insurance.

Behind the scenes, Gerard Swope, president of General Electric, urged a much larger public works plan upon Hoover. In September, 1930, Swope proposed to Hoover an immediate one billion dollar bond issue for Federal public works, to be matched by another one billion dollars similarly raised by state and local governments, under Federal guarantee. Swope’s favorite argument was to point to wartime, with its bold national planning, as the ideal to be emulated. Fortunately, Hoover’s own leanings in this direction were much too cautious to allow the adoption of Swope’s proposal.19 Also urging Hoover further than he would go was Colonel Arthur Woods, head of the President’s Emergency Committee for Employment, who suggested a $750 million federal–state publicworks program, including a Federal Reconstruction Board for loans to states for public works.