H102 Lecture 19: The Great Depression and the New Deal
Most American economists and political leaders in 1929 still believed in laissez-faire and the self-regulating economy. To help the economy along in its self-adjustment, President Hoover asked businesses to voluntarily hold down production and increase employment, but businesses couldn't keep up high employment for long when they weren't selling goods. There was a widespread belief that if the federal budget were balanced, the economy would bounce back. To balance the budget demanded no further tax cuts (although Hoover lowered taxes) and no increase in government spending, which was disastrous in light of rising unemployment and falling prices.