The Real Lessons of the Great Depression

Since late 2007, more and more commentators have drawn parallels between our current financial crisis and the Great Depression. Nobel laureates and presidential advisors confidently proclaim that it was Herbert Hoover’s laissez-faire penny pinching that exacerbated the Depression, and that the American economy was saved only when FDR boldly ran up enormous deficits to fight the Nazis. But as I document in my new book, The Politically Incorrect Guide to the Great Depression and the New Deal, this official history is utterly false.

Let’s first set the record straight on Herbert Hoover’s fiscal policies. Contrary to what you have heard and read over the last year, Hoover behaved as a textbook Keynesian after the stock market crash. He immediately cut income tax rates by one percentage point (applicable to the 1929 tax year) and began ratcheting up federal spending, increasing it 42 percent from fiscal year (FY) 1930 to FY 1932.

Your post is meant to indicate that Hoover increased spending significantly and it didn't work, and therefore history provides a precedent for Obama's policies not working? Correct?

The argument is disingenuous. It was only in the last year of Hoover's term did the deficit rise appreciably. From this book

Amazon.com: Anatomy of the Bear: Lessons from Wall Street's Four Great Bottoms: Russell Napier: Books

The deficit never rose above 1% of GDP until 1932. It wasn't until 1932, the bottom of the Depression, did the deficit rise over 4% of GDP.

I briefly looked on the Internet to find something visual, and this is all I could find for the moment.



EH.Net Encyclopedia: The United States Public Debt, 1861 to 1975

As you can see, total public debt barely moved from 1927 to 1932. It wasn't until 1932 when the debt began to rise.

Edit: Here is some more







As you can see, it was only in 1932 when the government began heavily financing the deficit. Before that, after the economy had collapsed, the government hardly did anything at all.

The author's own facts could be used against him in his argument.

There is a lot of ideological revisionism going on.

Let’s first set the record straight on Herbert Hoover’s fiscal policies. Contrary to what you have heard and read over the last year, Hoover behaved as a textbook Keynesian after the stock market crash. He immediately cut income tax rates by one percentage point (applicable to the 1929 tax year) and began ratcheting up federal spending, increasing it 42 percent from fiscal year (FY) 1930 to FY 1932.

This gets so tiring.

Summary
Timeline of the Great Depression
The Great Depression, to 1935
The Main Causes of the Great Depression
Stiff upper lip.

Amazon.com: The Great Depression and the New Deal: A Very Short Introduction (Very Short Introductions): Eric Rauchway: Books

Your post is meant to indicate that Hoover increased spending significantly and it didn't work, and therefore history provides a precedent for Obama's policies not working? Correct?

Agreed. Did you intend to surrender to the fact that the New Deal prolonged the Great Depression, and that Hoover was, indeed, the first New Dealer?

You're correct about Hoover being a part of their administrations, but no "deregulation" caused the Great Depression. During the recession of 1920 - 1921 Hoover actually tried to get Warren Harding to intervene the way he would during the Great Depression, luckily Harding ignored this senseless advice and the recession only lasted about a year.