Attacking the proposed Balanced Budget Amendment, Congressman Jerrold Nadler (D-NY), the top Democrat on a House subcommittee, recently issued a press release peddling the falsehood that Herbert Hoover cut spending during the Great Depression, when in reality, Hoover more than doubled government spending as a percentage of GDP:
“Did Herbert Hoover win the last election?” asked Nadler. “If, in the middle of a recession, when tax revenues are down, and unemployment is up, we begin to slash the budget in ways my Republican colleagues are now suggesting, much less the far more draconian measures that this amendment would require, we will go from the Great Recession, right into another Great Depression. It’s been tried before, and if we want the Constitution to enshrine Hooverism for all time, we will get what we deserve.”
Nadler is wrong about the facts of the Depression, just as he is wrong about many other basic economic facts. As I noted earlier in the Edmonton Journal:
Former U.S. president Herbert Hoover did not practice austerity, so it is incorrect for politicians to claim that he “helped plunge his country into the Great Depression through austerity measures.”
Hoover’s administration increased federal government spending from three percent of the U.S. economy in 1929, the year he took office, to eight percent in 1933, the year he left office.
The U.S. budget deficit became so large as a result that by 1932, the country’s government was spending more than $2 for every dollar it took in.
It was not austerity that caused the Great Depression, but misguided government meddling in the economy, such as the Smoot-Hawley Tariff of 1930.
That increased tariff backed by Hoover ignited devastating trade wars between the U.S. and other countries that wiped out countless jobs.
White House budget data shows that Hoover increased, rather than cut, spending in the Great Depression, and ran up deficits that were huge by historical standards.
That is illustrated in Table 1.1 on page 21 of a document on the White House’s website, a document entitled, “Historical Tables: Budget of the United States Government, Fiscal Year 2009.” It shows that Hoover increased the federal budget from $3.1 billion in 1929, the year he took office (and the Great Depression began), to $4.7 billion in 1932, his last full year in office, and $4.6 billion in 1933, the year he left office. The budget deficit went from a surplus in 1928 to a deficit of $2.7 billion in 1932. Table 1.2 on page 24 of that document shows that government spending and deficits rose considerably as a percentage of the economy under Hoover. (See Table 1.2, “Summary of Receipts, Outlays, and Surpluses or Deficits (–) As Percentages of GDP: 1930-2013)” and Table 1.1, “Summary of Receipts, Outlays, and Surpluses or Deficits (–): 1789–2013)”). This data is also available from the federal Office of Management and Budget.
Newspapers like the Richmond Times-Dispatch and Washington Times also have noted that Hoover actually increased spending during the Depression. Financial writer Megan McArdle of The Atlantic noted that Hoover increased spending from 3.4 percent of GDP to 8 percent, increasing spending even as the economy shrank and deflation occurred. (Thus, government spending rose more rapidly as a percentage of the economy than in absolute terms.)
Recent massive spending by the Obama administration has similarly failed to stem rising unemployment. Some economists have argued that the $800 billion stimulus package was so poorly designed that it actually wiped out hundreds of thousands of jobs.