Tag: Hoover

No Matter How Hard He Tries, Obama Will Never Be as Bad as FDR

I’ve explained on many occasions that Franklin Roosevelt’s New Deal was bad news for the economy. 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 intervention.

So when I was specifically asked to take part in a symposium on Barack Obama, Franklin Roosevelt, and the New Deal, I quickly said yes.

I was asked to respond to this question: “Was that an FDR-Sized Stimulus?” Here’s some of what I wrote.

President Obama probably wants to be another FDR, and his policies share an ideological kinship with those that were imposed during the New Deal. But there’s really no comparing the 1930s and today. And that’s a good thing. As explained by Walter Williams and Thomas Sowell, President Roosevelt’s policies are increasingly understood to have had a negative impact on the American economy. …[W]hat should have been a routine or even serious recession became the Great Depression.

In other words, my assessment is that Obama is a Mini-Me version of FDR, which is a lot better (or, to be more accurate, less worse) than the real thing.

To be sure, Obama wants higher tax rates, and he has expanded government control over the economy. And the main achievement of his first year was the so-called stimulus, which was based on the same Keynesian theory that a nation can become richer by switching money from one pocket to another. …Obama did get his health plan through Congress, but its costs, fortunately, pale in comparison to Social Security and its $30 trillion long-run deficit. And the Dodd-Frank bailout bill is peanuts compared to all the intervention of Roosevelt’s New Deal. In other words, Obama’s policies have nudged the nation in the wrong direction and slowed economic growth. FDR, by contrast, dramatically expanded the burden of government and managed to keep us in a depression for a decade. So thank goodness Barack Obama is no Franklin Roosevelt.

The last sentence of the excerpt is a perfect summary of my remarks. I think Obama’s policies have been bad for the economy, but he has done far less damage than FDR because his policy mistakes have been much smaller.

Moreover, Obama has never proposed anything as crazy as FDR’s “Economic Bill of Rights.” As I pointed out in my article, this “would have created a massive entitlement state—putting America on a path to becoming a failed European welfare state a couple of decades before European governments made the same mistake.”

On the other hand, subsequent presidents did create that massive entitlement state and Obama added another straw to the camel’s back with Obamacare. And he is rigidly opposed to the entitlement reforms that would save America from becoming another Greece. So maybe I didn’t give him enough credit for being as bad as FDR.

P.S.: Here’s some 1930s economic humor, and it still applies today.

P.P.S.: The symposium also features an excellent contribution from Professor Lee Ohanian of UCLA.

And from the left, it’s interesting to see that Dean Baker of the Center for Economic and Policy Research basically agrees with me. But only in the sense that he also says Obama is a junior-sized version of FDR. Dean actually thinks Obama should have embraced his inner-FDR and wasted even more money on an even bigger so-called stimulus.

New Video Punctures Myths about Great Depression, Exposes Damaging Impact of Statist Policies by Hoover and FDR

I’ve commented many times about the misguided big-government policies of both Hoover and FDR, so I can say with considerable admiration that this new video from the Center for Freedom and Prosperity packs an amazing amount of solid info into about five minutes.

Perhaps the most surprising revelation in the video, at least to everyone other than economic historians, is that America suffered a harsh depression after World War I, with GDP falling by a staggering 24 percent.

But we don’t read much about that downturn in the history books, in large part because it ended so quickly.

The key question, though, is why did that depression end quickly while the Great Depression dragged on for a decade?

One big reason for the different results is that markets were largely left unmolested in the 1920s. This meant resources could be quickly redeployed, minimizing the downturn.

But this doesn’t mean the crowd in Washington was completely passive. They did do something to help the economy recover. As Ms. Fields explains in the video, President Harding, unlike Presidents Hoover and Roosevelt, slashed government spending.

Andrew Sullivan Has No Idea What He’s Talking about, but I Agree with His Conclusion

Even though he’s become more partisan in recent years, I still enjoy an occasional visit to Andrew Sullivan’s blog. But I was disappointed last night when I read one of his posts, in which he discussed whether government spending helps or hurts economic performance. He took the view that a bigger public sector stimulates growth, and criticized those who want 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 disagree 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 (click for larger image), 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 real 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.