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The Truth About Hoover and the Great Depression

September 12, 2012 by Matthew Denhart

Does austerity lead to economic depression? One often hears that cutting government spending now would derail our nation's fragile economic recovery, and perhaps even throw the economy into deep recession. Advocates of this view sometimes point to the Great Depression as evidence that dramatic cuts to government spending lead to economic disaster. If only Herbert Hoover had been more like Franklin Roosevelt, we hear, there might have never been a Great Depression. However, as the Bush Institute's Amity Shlaes points out in a recent column for Bloomberg, the problem with the "Hoover austerity" explanation for the Great Depression is that Hoover did not actually practice austerity. Rather, under Hoover's watch, the size of government increased substantially. Federal spending grew to $4.8 billion in 1932 from $2.9 billion in 1929. Under Hoover there were severe policy errors — credit markets were too tight, wages were not flexible, and tariffs were downright disastrous. But austerity was not one of them, and that is a lesson today's policy leaders would be wise to remember.


Author

Matthew Denhart
Matthew Denhart

Matthew Denhart is an expert on immigration policy and is the author of the Bush Institute’s America's Advantage: A Handbook of Vital Immigration and Economic Growth Statistics, now in its third edition. He currently serves as executive director of the Calvin Coolidge Presidential Foundation and is a founder of the Coolidge Scholars Program which provides full-ride merit scholarships to America's most promising college students. A summa cum laude graduate of Ohio University, Denhart has written and spoken widely on a variety of policy topics including the economics of higher education, labor, and taxes. He has contributed articles to numerous national publications including The Wall Street Journal, Forbes.com, CNN Opinion, and Bloomberg View. 

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