The Corner

‘Hoover Economics’

It has been amusing to watch Senate Budget Chairman Kent Conrad (D., N.D.), who for years decried what can now be viewed as relatively tiny Bush-era deficits, defend President Obama’s plan to triple the national debt in ten years. It’s even more ridiculous to see him deride those who object to the idea as “going back to Hoover economics” — you can watch it here if you like.

That’s going back to Hoover economics. The notion that the government doesn’t have much of a role, that the market will correct itself on its own. It didn’t work in the Great Depression, it wouldn’t work here, and even the previous administration recognized that.

Hoover, a progressive Republican, believed in no such notion. A ready believer in government intervention in the marketplace, he created the Federal Farm Board and began the virtual nationalization of agriculture in the United States before the stock market crash of 1929. He started the Reconstruction Finance Corporation, which one could think of as the TARP of its own era and which later played a role in FDR’s New Deal. In his August 11, 1932 speech accepting nomination for re-election, Hoover summarized his own economic record thus:

Two courses were open to us. We might have done nothing. That would have been utter ruin. Instead, we met the situation with proposals to private business and to the Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put that program in action.

Our measures have repelled these attacks of fear and panic . . . We have used the credit of the Government to aid and protect our institutions, both public and private. We have provided methods and assurances that none suffer from hunger or cold amongst our people. We have instituted measures to assist our farmers and our homeowners. We have created vast agencies for employment.

These or similar lines could easily be delivered today by President Obama or Secretary Geithner. Hoover did promise balanced budgets instead of large deficits during the 1932 election, but his opponent, FDR, promised the same thing. Hoover was by no means a laissez-faire president. Only historical ignorance, which is sadly pervasive, could allow Conrad to use him as the straw man as he defends the reckless levels of spending that this administration proposes.

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