Herbert Hoover, Forgotten Progressive: the 31st President Was a Big Govt. Market Interventionist

- Franklin Delano Roosevelt, Herbert Hoover's Democratic opponent in the 1932 election, focused much of his campaign on blasting Hoover for the unprecedented amount of government intervention that Hoover and his administration had enacted. He blasted Hoover for "reckless and extravagant" government spending, excessive taxing, driving up the national debt, stifling free trade, and for "presiding over "the greatest spending administration in peacetime in all of history. [1] John Nance Garner, Roosevelt's running mate, charged that Hoover was "leading the country down the path of socialism." [2] It turns out that though Roosevelt would later champion the policies he so fervently critiqued in 1932, both he and Garner were completely right: Herbert Hoover had proven himself to be a big government market interventionist, and thus an enemy of laissez-faire. - In June 1930, President Hoover signed the Smoot-Hawley tariff into law. It was the most protectionist legislation in American history, and as a result the average tariff rate soared to 59.1 percent. [3] As Professor Barry Poulson describes: "The act raised the rates on the entire range of dutiable commodities; for example, the average rate increased from 20 percent to 34 percent on agricultural products; from 36 percent to 47 percent on wines, spirits, and beverages; from 50 to 60 percent on wool and woolen manufactures. In all, 887 tariffs were sharply increased and the act broadened the list of dutiable commodities to 3,218 items." [4] Hoover signed it into law despite the protest of over 1000 economists, [3] and even with international trade in collapse, he defended the protectionist legislation against Roosevelt's critiques, saying in 1932 that Roosevelt would have Americans compete with "peasant and sweated labor abroad." [5] - Smoot-Hawley by itself should lay to rest the myth that Hoover was a champion of free market economics, but it doesn't even come close to capturing the extent of Hoover's interventionist policies. Within a month of the 1929 stock market crash, Hoover refused to accept the natural economic cycle in which a market crash is followed by cuts in business investment, production and wages. He convened multiple conferences of the nation's business leaders in order to urge them to keep wages artificially high, even though profits and prices were both falling. [6] Leaders of industry and finance were corralled into private White House conferences in which Hoover told them they had to act "voluntarily" to keep up wage rates even if profits should collapse, warning that if they failed to obey he would get Congress to force compliance. Referring to counteracting the natural business cycle and propping up wages - some of the characteristics that would become forever associated with the Roosevelt administration - Hoover said "No president before has ever believed that there was a government responsibility in such cases... We had to pioneer a new field." [7] Indeed, though he didn't coin the phrase, Hoover championed many of the basic ideas that came to form the New Deal. - Following the crash, the Hoover administration went into spending overdrive. Federal expenditures climbed by 4.7 percent between 1928 and 1929, and over the next three years they rose 8 percent, 17.2 percent, and 15 percent, respectively. Excluding military expenditures, spending under Hoover exploded by an enormous 259 percent. [8] By the end of his term, federal expenditures had climbed more than 50 percent in dollar terms - the biggest increase in federal spending ever recorded during peacetime. In percentage terms, federal expenditures grew more during Hoover's one term than they did during the first seven years of FDR's presidency. [9] - Public works projects undertaken by Hoover include the San Francisco Bay Bridge, the Los Angeles Aqueduct, and Hoover Dam. In late 1929, Hoover ordered federal departments to speed up construction projects. He contacted all forty-eight state governors to make a similar appeal for expanded public works. He went to Congress with a $160 million tax cut, but it was coupled with a doubling of resources for public buildings and dams, highways, and harbors. [10] Even after this massive, unprecedented increase in public works, Hoover proposed in 1932 to set up a Public Works Administration to coordinate and expand even more Federal public works. [11] As libertarian economist Murray Rothbard says of Hoover's economic policies, "Led by President Hoover, the government embarked on what Anderson has accurately called the "Hoover New Deal." For if we define "New Deal" as an antidepression program marked by extensive governmental economic planning and intervention-including bolstering of wage rates and prices, expansion of credit, propping up of weak firms, and increased government spending (e.g., subsidies to unemployment and public works)- Herbert Clark Hoover must be considered the founder of the New Deal in America." And though the true nature of Hoover's attitude toward big government market intervention has become shrouded in myth and mystery in the decades since his Presidency, it was quite clear at the time that Hoover was no friend of the "natural business cycle" and that he did everything he could to expand the size of the federal government - and its role in the economy, in just about every single way he could. As the New York Times concluded in the spring of 1930, "no one in his place could have done more." Indeed, no one could have, and Hoover proudly touted this fact during his campaign for re-election and throughout the rest of his life. During his Presidential campaign in the fall of 1932, Hoover summed up his interventionist efforts to cure the depression: "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 depression, 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." [13] And as if he could not denounce the largely hands-off, laissez-faire economic policies of most of his predecessors enough, he specifically calls out the economists who advised him to take a laissez-faire course, saying "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 bitter-end 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 was a champion of big government, anti-laissez faire market intervention. [1] http://www.fee.org... [2] http://www.time.com... [3] http://www.lewrockwell.com... [4] Barry W. Poulson, Economic History of the United States (New York: Macmillan Publishing Co., Inc., 1981), p. 508. [5] http://www.time.com... [6] http://www.econlib.org... [7] http://mises.org... [8] http://www.cato.org... [9] http://www.jeffjacoby.com... [10] http://www.archives.gov... [11] http://mises.org... [12] http://mises.org... [13] http://mises.org...