Lessons from Hoover and Harding
From 1929 to 1932 federal spending increased by 50% in nominal terms, doubled in real terms, tripled relative to national income. Judged by that measure, Herbert Hoover makes Barack Obama look like a fiscal conservative.
….. we do have an example of a Republican president who responded to a surge in unemployment in the way [many people] think Hoover did. From 1920 to 1921, unemployment rose from 5.2% to 11.7%, almost as sharp an increase as from 1930 to 1931.
[Warren] Harding responded by sharply cutting spending. By 1922, federal expenditure relative to national income had dropped almost fifty percent.
And the unemployment rate was back down to 2.4%.
Good post. This should be read by everyone interested in Keynesian fiscal policy and why it doesn’t work.
I also like this post. It’s a great annecdote to the typical Keynesian line.
So history is the opposite of what we have always been told.
In the 60s we would have called this revisionist history.
There is a whole literature on how Hoover made everything worse becase he tried statist interventions. This literature is largely unknown to the general public, however.
It can also be argued that the reduction of government intervention caused a double dip resulting in the great depression.
We can see by current events that “Supply Side” economics is an utter failure brought to us by a high tax republican – Reagan. Where are the Jobs?
This is very interessting. I have also always heard that the protectionist trade policies that were put into place on account of the Depression actually made it worse.