I had some fun at Andrew Sullivan’s expense a couple of weeks ago, mocking him for asserting that spending cuts today would be repeating the mistakes of Herbert Hoover. That was a rather odd thing for him to write since Hoover boosted the burden of government spending by 47 percent in just four years.
Since it is notoriously difficult to educate Obamaphiles, I’m guessing that he (and others) need some supplementary material.
How about the words of a key aide to Franklin Delano Roosevelt? Would that be considered a legitimate source? One would think so, which means this excerpt from a 2007 book review (the same statement was also cited by PBS) is rather revealing.
FDR aide Rexford Tugwell would claim in a 1974 interview that “practically the whole New Deal was extrapolated from programs that Hoover started.”
The fact that Hoover and Roosevelt were two peas in a big-government pod may be of interest to economic historians, but the real lesson is that interventiondidn’t work for either one of them. That’s what Andrew Sullivan and others need to learn. But since people like that probably won’t listen to me, maybe they’ll be more willing to accept the confession of Roosevelt’s Treasury Secretary.
FDR’s Treasury Secretary, Henry Morgenthau, wrote in his diary: “We have tried spending money. We are spending more than we have ever spent before and it does not work. … We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started … and an enormous debt to boot!”
History does repeat itself! This generation chooses to ignore the past mistakes of failed government strageties and pretends this time is different..
Glenn Beck: “Isn’t it kind of ironic that ‘progressive economists’ still embrace 1930s thinking.”
Even though Morgenthau wrote in his diary that the federal government was spending more than it ever spent (he ignores spending during the Civil War and WWI as a proportion of GDP at those times), it wasn’t really very much. This CHART shows that the total federal spending during the 1931 fiscal year was a whopping 4.1 billion dollars. That’s equivalent to about 54 billion in today’s fiat currency.
The problem was that the federal government did not spend anywhere near enough to jump start the economy during the 1930s. Only the massive spending during WWII was able to bring the economy back to life. And our economy at that time was mainly industrial not selling each other fruit, etc.
Practically all government attempts to redistribute wealth and income tend to smother productive incentives and lead toward general impoverishment. It is the proper sphere of government to create and enforce a framework of law that prohibits force and fraud. But it must refrain from specific economic interventions. Government’s main economic function is to encourage and preserve a free market. When Alexander the Great visited the philosopher Diogenes and asked whether he could do anything for him, Diogenes is said to have replied: “Yes, stand a little less between me and the sun.” It is what every citizen is entitled to ask of his government.
–Henry Hazlitt
[...] [...]
@Art R. As if building thousands tanks, planes, and bombs, shipping them overseas, and blowing them up improved anyone’s quality of life. Sure, it increased GDP, but GDP is almost meaningless because the increase was almost entirely in weapons and it ignores quality of life. If World War II ended the Great Depression, all Obama would have to do now is build a few aircraft carriers, load them up with brand new tanks and planes, and then sink them. Then we’d be richer than ever.
http://www.thefreemanonline.org/departments/it-just-aint-so/world-war-ii-ended-the-great-depression/
It is true about the spending that Hoover raised it, but his greatest damage was the pressuring of industry to keep wages high, which they did, by layoffing massive numbers. This lasted through 1931, the end of that caused unemployment to hit rock bottom. The tariff was another thing– that would put pressure on industry to compete and not acquiesce so easily in high wages. I also suspect it was not JUST the spending that Roosevelt did but the whole unpredictability by his changing intrusive schemes forced investment to pull back.
And I think it is equally important to debunk the idea that WWII ended the Depression, normal recovery and the pullback of military life.
should be “The tariff was another thing– NOT HAVING IT would put pressure on industry to compete and not SO EASILY acquiesce so easily in high wages.”
History means nothing to Progressives. They are arrogant and egotistical to think they they will do it the right way this time. Conservatives must stand strong to defeat these progressives once and for all.
The problem is not how much money they spent, it is how it was spent and what the results, or lack of results of that spending are. There are many parallels to the current economic crisis and The Great Depression, but it is obvious we failed to understand what worked and what didn’t back then, just as we still can’t agree in what will work or not work now.
As always, we need to follow the money. The problem is never that there is not enough money, it is a matter of where that money is being hoarded and where the cash is stagnating. How to get that money flowing again is the question, and apparently letting those with money hold onto it and letting those without it go without is not a recipe for success.
Companies do not create jobs, demand creates jobs. You can have the healthiest and wealthiest company in the world, but if no one is buying, the company must lay off its workforce until demand picks up again. They could not create jobs even if they wanted to.
Back in the depression the biggest problem was deflation of food prices and the bankruptcies of farmers which sent them into an endless search for work that did not exist for them. It was not until the government employed them to fight in the war or work producing food and materials for the war effort that the depression ended in the hearts of the American people, and victory in the war brought back consumer confidence and willingness to invest.
Herbert Hoover did too little, and what he did do was in the wrong direction.
Just think of how much of what was produced by the US was consumed by the war, imagine if the US could have kept that production and innovation at home. We have the same situation now, much of what the US produces is consumed by war, imagine if we could keep that production and innovation at home.
Demand is created by consumers, who demand things because they have the cash to demand them, because a company hired them and paid them to do something, so the company created the demand. If the company isn’t there to hire people, then the money people have is the phoney money printed by the government, which may have some small impact but not near as much as when companies hire people. The WPA and its fellows couldn’t get us out of the depression because the money went from the gov’t printing press into people’s hands; when the gov’t started paying companies to manufacture products some of the demand returned. I don’t know how you can say Hoover didn’t do enough, with the implication that FDR did, when the fact is that all the programs FDR created did zilch to get us out of the Depression.
The leftists do not acknowledge their faults when they face consequences contrary to their fixed vision. This is a rare instance of honesty, “We have tried spending money. We are spending more than we have ever spent before and it does not work. … We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started … and an enormous debt to boot!”
But the solution is not trying to make them understand but just to keep working in right direction.
Never let truth get in the way of a good argument…
“The problem was that the federal government did not spend anywhere near enough to jump start the economy during the 1930s. Only the massive spending during WWII was able to bring the economy back to life.”
Wow. Really? The problem was the state didn’t spend ENOUGH pre-WWII? You don’t possibly think the massive manufacturing AFTER WWII where the US was pretty much the only supplier had anything to do with the economy coming back to life? You want to recreate the booming economy of the post war years, the solutions isn’t to recreate the great society, or to jack taxes up to 90% or to start a huge war, but to somehow talk the rest of the planet into buying all their manufactured items from just us. Good luck with that.
[...] Great Depression, we could use a man like Warren Harding again. Hoover, he reminded up, citing Dan Mitchell and others . . . increased government spending 47 percent in his one term, raised taxes, and [...]
Quotes don’t make proof.
Morgenthau was simply wrong, flat wrong.
You may be right, I’m not here to dispute the entire Great Depression with you, but I will say that Morgenthau was dead wrong, so quoting him you end up looking a bit foolish.
See Figure 2:
http://eh.net/encyclopedia/article/Steindl.GD.Recovery
That chart makes me think that if they hadn’t have tried to roll back the spending in 1937 (impacting 1938) we’d have recovered a couple years earlier.
@joshuasimeon: Morgenthau isn’t just some guy who happened to say something; he was FDR’s treasury secretary. He was part of the brain trust. He was there. What qualified you to say he was wrong?
@Paul Schieifer
I know who Morgenthau was. What I also know is that what he said was factually incorrect. What did he say, quoted by the author above?
“I say after eight years of this Administration we have just as much unemployment as when we started[.]”
Is that true? No, it is not. It is not even close to true. To prove Morgenthau was simply incorrect I linked to a published economics paper which graphed unemployment rates for the 8 years in question. Clearly, Morgenthau was wrong:
http://eh.net/files/graphics/encyclopedia/Steindl.GD.Recovery_files/image002.gif
For those who can’t be bothered to follow the link to the graph and paper which shows that Morgenthau was factually incorrect in his statement, it looks as if the official unemployment rate went from 24 to 14% during FDR’s first 8 years and the adjusted rate went from 23 to 10%.
For someone, even the Treasury Secretary of the United States, like Morgenthau, who helped draft the New Deal legislation, to say that 23% unemployment is just as much as 10% is factually wrong.
Well, you missed the spike in 1938 when the rate jumped back up to 19% official, leaving it only 5 points or so from its peak. You also are taking him quite literally. You can do that if you want, but I think it misses the point. The emotional impact, the spiritualy impact, of all that unemployment would have been devestating, especially as it rose again in 1938.
All that federal spending was supposed to eliminate the massive unemployment, but it didn’t. Furthermore, WPA employed 8.5 million people at its peak in 1938, and while I suppose the families of those 8.5 million felt like it was a job, it was a job derived from the borrowing of the federal government, not from production.
But the real point is that when you compare the Great Depression with other depressions (1920, for instance), you see that these other depressions last 2 years or less without government intervention, whereas even when the economy was recovering in the 1930s, it was recovering at historically slow rates, somewhat like our current “recovery.”
As for Hoover, part of what exacerbated the unemployment problem in the Great Depression was Hoover’s insistence on high wages. In past recessions and depressions, employers lowered wages but kept employees. In 1929, 1930, 1931, employers kept wages high but shed employees. Wage rates didn’t begin to decline until well into 1931.
Finally, the number of unemployed workers declined by 7,050,000 between 1940 and 1943, but the number in military service rose by 8,590,000. One could almost argue that we didn’t really recover from the Depression until after the death of FDR. Unfortunately, his policies live with us, and as they are being embellished by our current president, we can probably expect the current 9% unemployment to be the “new normal” for at least a couple more years.
[...] whose evil had to be undone by the New Deal, Hoover was a big-government interventionist whose work laid the foundations for FDR’s programs, and those programs lengthened the Great Depression by seven years. [...]
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[...] that being right required any keen insight. Keynesian policies failed for Hoover and Roosevelt in the 1930s. So-called stimulus policies also failed for Japan in 1990s. And Keynesian proposals failed for [...]
[...] that being right required any keen insight. Keynesian policies failed for Hoover and Roosevelt in the 1930s. So-called stimulus policies also failed for Japan in 1990s. And Keynesian proposals failed for [...]
[...] that being right required any keen insight. Keynesian policies failed for Hoover and Roosevelt in the 1930s. So-called stimulus policies also failed for Japan in 1990s. And Keynesian proposals failed for [...]
[...] ago … the Democrats should have paid attention to his video posted way back in Jan 2009 (: Keynesian policies failed for Hoover and Roosevelt in the 1930s. So-called stimulus policies also failed for Japan in 1990s. And Keynesian proposals failed for [...]
[...] historical record. Nations that have tried this type of “stimulus” have not fared well. Big spending increase under Hoover and Roosevelt failed in the 1930s. Japan tried several Keynesian packages and failed in the 1990s. Bush failed in 2008 and Obama [...]
[...] historical record. Nations that have tried this type of “stimulus” have not fared well. Big spending increase under Hoover and Roosevelt failed in the 1930s. Japan tried several Keynesian packages and failed in the 1990s. Bush failed in 2008 and Obama [...]
[...] the historical record. Nations that have tried this type of “stimulus” have not fared well. Big spending increase under Hoover and Roosevelt failed in the 1930s. Japan tried several Keynesian packages and failed in the 1990s. Bush failed in 2008 and Obama [...]
[...] the historical record. Nations that have tried this type of “stimulus” have not fared well. Big spending increase under Hoover and Roosevelt failed in the 1930s. Japan tried several Keynesian packages and failed in the 1990s. Bush failed in 2008 and Obama [...]
[...] that being right required any keen insight. Keynesian policies failed for Hoover and Roosevelt in the 1930s. So-called stimulus policies also failed for Japan in 1990s. And Keynesian proposals failed for [...]
[...] the historical record. Nations that have tried this type of “stimulus” have not fared well. Big spending increase under Hoover and Roosevelt failed in the 1930s. Japan tried several Keynesian packages and failed in the 1990s. Bush failed in 2008 and Obama [...]
[...] that Franklin Roosevelt’s New Deal was bad news for the economy. And the same can be said of Herbert Hoover’s policies, since he also expanded the burden of federal spending, raised tax rates, and increased government [...]
[...] Yes, Obama has imposed a class-warfare tax hike, pushed through Obamacare, and squandered $billions on a faux stimulus (perfectly captured by this cartoon). But that’s trivial compared to the damage caused by FDR (and Hoover). [...]
[...] back further in time, Presidents Hoover and Roosevelt dramatically increased the burden of government spending, mostly financed with [...]
[…] the more I studied economics and public policy, I learned that Herbert Hoover and Franklin Roosevelt were two peas in a failed big-government pod and deserve membership in that […]
[…] the more I studied economics and public policy, I learned that Herbert Hoover and Franklin Roosevelt were two peas in a failed big-government pod and deserve membership in that […]
[…] and the net effect is economic stagnation and record debt. Going back further in time, Presidents Hoover and Roosevelt dramatically increased the burden of government spending, mostly financed with […]
[…] and the net effect is economic stagnation and record debt. Going back further in time, Presidents Hoover and Roosevelt dramatically increased the burden of government spending, mostly financed with […]