Even though he’s become rather partisan in recent years, I still enjoy an occasional visit to Andrew Sullivan’s blog. But I was rather amused last night when I read one of his posts, in which he was discussing whether government spending helps or hurts economic performance. He took the view that a bigger public sector stimulated growth, and criticized those who wanted to reduce the burden of government spending, snarkily observing that, “The notion that Herbert Hoover was right has become quite a dogged meme on the reality-challenged right.”
Since I’m one of those “reality-challenged” people who prefer smaller government, I obviously disagreed with his analysis. But his reference to Hoover set off alarm bells. As I have noted before, Hoover increased the burden of government during his time in office.
But maybe my memory was wrong. So I went to the Historical Tables of the Budget and looked up the annual spending data. As you can see from the chart, it turns out that Hoover increased government spending by 47 percent in just four years (if you adjust for falling prices, as Russ Roberts did at Cafe Hayek, it turns out that Hoover increased government spending by more than 50 percent).
I suppose I could make my own snarky comment about being “reality-challenged,” but Sullivan’s mistake is understandable. The historical analysis and understanding of the Great Depression is woefully inadequate, and millions of people genuinely believe that Hoover was an early version of Ronald Reagan.
I will say, however, that I agree with Sullivan’s conclusion. He closed by saying it would be “bonkers” to replicate Hoover’s policies today. I might have picked a different word, but I fully subscribe to the notion that making government bigger was a mistake then, and it’s a mistake now.
[…] it the fault of capitalism that Hoover and FDR increased […]
[…] it the fault of capitalism that Hoover and FDR increased […]
[…] for an overall assessment since there was near-unanimous agreement that he was a failure, even if some people don’t understand […]
[…] for an overall assessment since there was near-unanimous agreement that he was a failure (even if some people don’t understand […]
[…] He was an interventionist. He raised tax rates dramatically. And, as I had to explain when correcting Andrew Sullivan, he was a big spender. Heck, FDR’s people privately admitted that their interventionist policies […]
[…] Dan Mitchell writes this morning about Andrew Sullivan’s reality-based economic analysis: I was rather amused last night when I read one of his posts, in which he was discussing whether government spending helps or hurts economic performance. He took the view that a bigger public sector stimulated growth, and criticized those who wanted to reduce the burden of government spending, snarkily observing that, “The notion that Herbert Hoover was right has become quite a dogged meme on the reality-challenged right.” […]
It all depends on how you spend it, doesn’t it? If your govt spends money which results in competitive advantage and employment, then probably the money was well spent.
If the money was instead spent in a way which increased the competitive advantage of imports and shipped jobs overseas, then the money spent was probably wasted.
[…] Has No Idea What He’s Talking About, but I Agree With His Conclusion”–headline, DanielJMitchell.wordpress.com, […]
[…] Has No Idea What He’s Talking About, but I Agree With His Conclusion”–headline, DanielJMitchell.wordpress.com, […]
[…] Has No Idea What He’s Talking About, but I Agree With His Conclusion”–headline, DanielJMitchell.wordpress.com, […]
[…] Has No Idea What He’s Talking About, but I Agree With His Conclusion”–headline, DanielJMitchell.wordpress.com, […]
Thanks for these figures! I knew about them but I never knew where they came from. Hoover made a 47% increase in NOMINAL terms, but as a percentage of GDP the increase must have been even bigger because GDP fell so much. And we know that destructive increases in government spending can appear as “output” in GDP figures so an additional downward GDP correction may be made, bringing an even higher spending as % of GDP figure (of course that GDP will no longer be the usual GDP)
But I repeat the same thing over and over, the monetary nature of recessions is an obvious fact, “tight” money causes recessions. Those that allowed criminally tight money in the late 1920s are responsible for triggering the 1929 recession. Criminally tight money in 1928-1932 probably brought an increase in the value of money -so government spending was even higher than what the nominal figures say- but I will never delve into this very complex matter of money value, a matter that I do not understand. Exorbitant new taxes and government spending were crucial in transforming that recession into the Great Depression: In the early 1920s there was too a deep recession caused by very bad monetary theories that brought “tight” money but then, as in the 1981-82 “Friedman-made” recession, tax cuts saved the USA from a deeper recession / depression.
So Hoover comes out as having done HUGE government spending increases! And there is too the taxation increase. Wanniski showed how the markets felt in 1929, hour by hour, as the coalition opposing the infamous Smooth Hawley protectionist tax bill collapsed in the Senate. Then as the infamous bill become law in 1930 the horrifying market decline resumed to reach incredible lows.
Actually during the campaign Roosevelt criticized Hoover as being a big taxer and big spender! Much of that history is here http://fee.org/articles/great-myths-of-the-great-depression/, that link is one of the bests account of the Great Depression that I have ever read. It is particularly interesting in the former paper to see there how politicians and bureaucrats -and not “strange unknown” forces- destroy the value of stocks with the devastating taxes and regulations that they are usually imposing on us.
[…] via Andrew Sullivan Has No Idea What He’s Talking about, but I Agree with His Conclusion « Internatio…. […]
“Reagan increased spending too.”
True, the vision of Reagan advanced by today’s republicans bears almost no resemblance to the one who actually served as president in real life.
Interestingly, most economists actually believed the post-WW II demobilization would restart the Great Depression, but of course that did not happen.
Interesting sidenote — the GDP figures from the TGD period are highly suspect due to the fact we doubled or tripled the size the size of government. Remember, GDP is ideally measured with real (market) prices, not government costs — the latter is almost definitionally distortionary. Was it really reasonable to say the economy was “growing” over a period of such high private sector unemployment? In fact what we were probably doing was making things worse with these massive public sector projects that appeared to boost GDP.
What’s really fascinating to me is that even though everyone agrees productivity is the long-run source of real per capita economic growth, so few seem to realize that TGD didn’t need a “fix,” especially after a decade of stagnation — people had been finding ways to be more productive during that time, so it was just a matter of the economy finally catching up to the natural trendlines.
Richard Johnson: Real GDP in 1947 (the postwar minimum) was about 75% higher than in 1929 (highest pre-depression GDP). While pent-up demand and lack of overseas competition did help fuel the postwar boom, but the US most definitely did NOT crash back to Great Depression levels after the war. Instead, GDP returned to its long term trend, having dropped below it in the 30s and above during the war.
Ben Samuel: Unfortunately, from what I can tell, both the political left and right, not to mention mainstream historians, have bought into the idea that Herbert Hoover did nothing about the Depression and FDR then rescued us. The political right often doesn’t realize the truth, while it’s in the interest of the left to promote the myth, both because Mr. Hoover was a Republican and because it provides the “evidence” for Keynesian economics.
Krugman is as ignorant on this as Sullivan.
[…] DAN MITCHELL: Andrew Sullivan Has No Idea What He’s Talking about, but I Agree with His Conclusion. […]
[…] conservative (at least as conservative as the presidents and would-be presidents he admires), longs for those Keynesian days. Filed under: Bobos In Paradise, Capitalism, the Unknown Ideal, Liberal Fascism, The Future and its […]
Sullivan is a ignorant assed piece of shit faggot, who should not be taken seriously about ANYTHING!
My name is Charles Patrick Adkins and I am the owner of the politicalbyline.com and I approve this message. Just because I fucking can. NEXT!
“The notion that Herbert Hoover was right has become quite a dogged meme on the reality-challenged right.”
Not only is he wrong on the facts, but he’s talking about a “dogged” meme that I have never read to date, and that sounds ridiculous on its face. A quick search for it turns up FAIR and Think Progress talking about how conservatives are embracing “neo-Hooverism,” with no links I can see in either of them, and a story by a journo Aaron Claverie who doesn’t express any ideology.
So there is a meme on the left that there is a meme on the right embracing Hoover, and it’s being advanced by Andy Sullivan who is a self-identified conservative who hasn’t taken a conservative position or supported a conservative figure in years.
I see what he means by the “reality-challenged right”!
Isn’t true that Hoover and FDR both tried to match their increased spending with increased taxes in an attempt to avoid a runaway deficit? That would have negated any fiscal stimulus effect. So we got the worst of all worlds: (1) bigger, inefficient government swallowed up more of the economy; (2) no fiscal stimulus through deficit spending; (3) hostile business environment through higher taxes and increased regulation!
Also, according to Liaquat’s book, an accurate assessment of the Great Depression must also take into account the failure of the Gold Standard, which artificially stimulated the money supply in the 20’s and then tied the hands of The Fed from reinflating it after the crash.
[…] of my favorite think tanks (which I heartily encourage you to support) takes Andrew Sullivan to the woodshed today for suggesting that Herbert Hoover wanted to reduce the burden of government spending: I went to the Historical Tables of the Budget and looked up the annual spending data. As you can […]
The real analog for the present day repub/Tea Party policies was the response to the 1920 recession by Harding and Coolidge. They cut gov spending and taxes by 50%. The initial trough of the 1920 recession was just as step as 1929-1930, and could have easily turned into an early version of the great depression, but the small gov policy response of Coolidge led to a prompt and lasting recovery, called the roaring 20’s.
The great depression was not a failure of capitalism, but a crisis created by gov. Bad gov policy turned a normal recession into a lasting depression.
Hoover raised federal spending creating a 4% of GDP deficit, he signed off on the 1930 Smoot-Hawley Tarriffs (trade taxes) he signed on to the biggest income tax increase in history in 1932. We got the Great depression. FDR compounded those mistakes and made them worse with federal regulation. Does this sound familiar? Obama is Hoover/FDR 2.0. The results are the same.
Higher spending raised the nominal GDP in the US during WWII, but sending people to be killed and goods to be destroyed overseas obviously reduced the real wealth of the United States. Rationing and other restrictions left people worse off in the US than they had been during the Depression. As soon as the war was over, the huge boost to nominal GDP went away, and we crashed right back to Great Depression levels.
What happened after that is perfectly predictable. Every other country having been trashed by the war and the US having multiple years of pent-up consumer demand, US industry had a period of high demand and no competitors. It’s easy to grow when you have no competition and high demand for your products, so of course the US had high growth after WWII.
It would be pretty easy to duplicate the effect, too. Instead of bailing out GM, we could have blown up all the auto plants of non-American automakers and half the cars in the world. GM would have subsequently made a fortune selling cars. But only an idiot (or Paul Krugman, but I repeat myself) would attribute GM’s subsequent profits to the stimulative effect of the government buying bombs.
“Common knowledge” of the depression has swallowed FDR’s 1932 campaign rhetoric, which called Mr. Hoover a “do nothing” president if I remember correctly.
The fact that spending increased dramatically (and the government went from a 1% of GDP surplus to a deficit of about 4%) at the very least calls into question the “wisdom” of Keynesian economics. Since those who argue that high WWII government spending finally brought us out of the Depression, perhaps a more proper question is whether it was the higher spending or the conscription of a large percentage of the working population that did the trick?
So perhaps politicians should not argue for a larger stimulus program but instead use historical precedent and start a world war 🙂
Beat me to it, Jack.
…and don’t forget that FDR ran AGAINST Hoover’s big interventionist ideas.
Reagan increased spending too.
I also noticed this last night and sent him an email to similar effect. Rather ironic that he accuses the right of being “reality-challenged” when he mangles some basic facts.