Tuesday, October 4, 2011

More Herbert Hoover: Father of the New Deal

Last week I pointed out in Herbert Hoover, Deficit Spender that, contrary to a widespread belief, Hoover didn't cut spending or seek to balance the budget. Instead, Franklin Roosevelt ran in 1932 on promise to balance the budget, a promise which he abandoned a few months after taking office. The next day Steven Horwitz published a Cato Briefing Paper called "Herbert Hoover: Father of the New Deal,"  with a broader treatment of the actual Herbert Hoover. Here are some tastes of the Horwitz argument (footnotes and citations omitted):

"The version of Hoover presented in the media’s narrative of Hoover as champion of laissez faire bears little resemblance to the details of Hoover’s life, the ideas he held, and the policies he adopted as president. ..."

"Hoover had long believed that it was necessary to `transform the structure of the U.S. economy from one of laissez-faire to one of voluntary cooperation.' In her biography Herbert Hoover: Forgotten Progressive Joan Hoff Wilson summarizes Hoover’s economic views this way:

Where the classical economists like Adam Smith had argued for uncontrolled competition between independent  economic units guided only by the invisible hand of supply and demand, he talked about voluntary national economic planning arising from cooperation between business interests and the government. . . . Instead of negative government action in times of depression, he advocated the expansion of public works, avoidance of wage cuts, increased rather than decreased production—measures that would expand rather than contract purchasing power.

Hoover was also a long-time critic of international free trade, and favored `increased inheritance taxes, public dams, and, significantly, government regulation of the stock market.'”

Horwitz provides chapter and verse on how Hoover, as president, increased spending and intervened in the economy. Here's an editorial cartoon from 1930 criticizing Hoover for his flood of increased spending. 
As Horwitz points out, leading intellectuals of the Roosevelt administration recognized that Hoover had set the stage for their policies:

"Rexford G. Tugwell, one of the academics at the center of FDR’s `brains trust' said: `When it was all over, I once made a list of New Deal ventures begun during Hoover’s years as Secretary of Commerce and then as president. . . . The New Deal owed much to what he had begun.' Another member of the brains trust, Raymond Moley, wrote of that period: 
When we all burst into Washington . . . we found every essential idea [of the New Deal] enacted in the 100-day Congress in the Hoover administration itself. The essentials of the NRA [National Recovery Administration], the PWA [Public Works Administration], the emergency relief setup were all there. Even the AAA [Agricultural Adjustment Act] was known to the Department of Agriculture. Only the TVA and the Securities Act was drawn from other sources. The RFC [Reconstruction Finance Corporation], probably the greatest recovery agency, was of course a Hoover measure, passed long before the inauguration.
Late in both of their lives, Tugwell wrote to Moley and said of Hoover, “we were too hard on a man who really invented most of the devices we used."

Horwitz argues that Hoover's economic policies were deeply misguided. My point here is not to endorse his evaluation of Hoover's policies (I think some were more justifiable than others), but just to point out that as a matter of historical fact, it is incorrect to think of Hoover as a radical free market and budget balancer whose policies were overturned by FDR. Indeed, as Horwitz points out, FDR and others saw Hoover during the 1920s as a possible presidential candidate for the Democrats!

Thanks to Arnold Kling at the EconLog website for the pointer.