The Obama ‘Stimulus’ and the ‘Do Nothing’ Hoover

Some establishment myths never die.

One of the more common ones involves the U.S. government's reaction to the 1929 stock market crash (which preceded the Great Depression), and how it compares to federal reactions to today's economic crises.

Save for perhaps the New York Times, no other media entity contributes more to the fraud than The Associated Press. A prime example arrives in the February 12 report, “Stimulus bill produces lots of winners and losers”:

Adrift after back-to-back electoral losses, [House Republicans] found their voice against a Democratic speaker and an expanded majority. They held to the GOP's cornerstone of fiscal conservatism as they led the effort to define the package as too costly and too quick. As the economy turns around, however, they run the risk of being cast as modern-day Herbert Hoovers who wanted to do nothing.

There are several things in that paragraph worth debunking; lets start with the most scandalous and bald-faced one: the “do nothing” approach of Herbert Hoover.*

“First,” writes Thomas Woods, “it's not true that Hoover sat idly by during the Depression. He did plenty—more than any peacetime president had ever done.”

He goes on:

Rexford Tugwell, an important figure in FDR's New Deal programs, later acknowledged, “We didn't admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.” In fact, Hoover's incessant meddling with the economy made the situation worse. He managed to turn the recession in 1929 into the Great Depression. While the economic picture was poor in 1929 and 1930, it was only in 1931, after a year of government intervention, that the situation seriously deteriorated. [1]

Sound familiar? It gets better.

Hoover also vastly increased spending on public works projects. More money was spent on such projects in four years than in the previous thirty. . . . Hoover's Reconstruction Finance Corporation (RFC) supplied failing businesses, mainly railroads and banks, with emergency low-interest loans. By the latter half of 1932 the RFC was no longer simply bailing out businesses in trouble but was also lending money to the states for unemployment relief to fund public works projects. . . .

The president's attempts to prop up failing businesses were of dubious effect. “The businesses he hoped to save,” writes one historian, “either went bankrupt in the end, after fearful agonies, or were burdened throughout the 1930s by a crushing load of debt.” . . .

Looking back upon his tenure, Hoover congratulated himself for his bold action. “We might have done nothing,” the president said in 1932. “That would have been utter ruin. Instead, we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic.” [2]

But according to AP, Hoover “wanted to do nothing.”

(The real “do nothing” president was Warren G. Harding. During the recession of 1920–21, the federal government actually cut taxes and spending. The result? A full economic recovery by 1922.)

A sickening irony is that not only did ex-president Bush's “stimulus” programs attempt to do what Hoover's did for failing businesses and banks, but President Obama's current stimulus package, like Hoover's latter moves, will ostensibly benefit the states' unemployment relief and public works projects. According to the AP report, one of the “winners” resulting from Obama's so-called stimulus package are “the jobless and the poor.”

And how does AP qualify that assessment? Simple. As with Hoover's “do nothing” approach, under Obama's package, “[u]nemployment benefits will be temporarily extended and increased. Food stamps will be boosted. Billions of dollars will flow for job training and temporary welfare payments.”

I guess that makes Obama another “do nothing” president.

Lets hope His Highness doesn't make AP's list of “losers” four years from now. (On second thought, that's about as likely as Harding's success making its way into an AP report at all.)

To any self-respecting news editor, the fallacies and contradictions in the AP report are embarrassing as they are numerous. For example, how can AP's claim of “the GOP's cornerstone of fiscal conservatism” be reconciled with the hyper-interventionist, big-spending actions of the Bush administration and congressional Republicans these past eight years? Fiscal conservatism is best defined by the refusal to loot taxpayers at all — not by simply “lead[ing] the effort to define the package as too costly and too quick,” as AP puts it. (If that's a victory for fiscal conservatism, show us what a spendthrift and politically-driven group of losers looks like.)

And finally, what gives the AP editor such supreme confidence to begin the “do nothing” Hoover anecdote thus: “As the economy turns around . . .”? Judging from the effects of previous “stimulus” packages, such an outlook inverts reality and defines shoddy journalism.


* For more reading on the legacy of Hoover, see “The First New Dealer,” by Murray Rothbard, and “Dispelling the Herbert Hoover Myth,” by Jonah Goldberg.

Notes

1. Thomas E. Woods, Jr., Ph.D. The Politically Incorrect Guide to American History (Washington DC: Regnery, 2004), 140.

2. Ibid., 144.