Hoover Increased Spending During The Depression, Both In Real Terms And In Size Relative To The Economy

Repeating the Hoover Mistake: Paul Krugman and The New Republic by Nick Schulz of AEI.

"Paul Krugman once wrote a column called “Fifty Herbert Hoovers,” in which he blasted state governors for cutting spending during a recession. “No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to balance its budget in the face of a severe recession,” Krugman wrote. John Judis, in his cover story for The New Republic, recounts what he believes is a gotcha moment on the campaign trail with Mitt Romney in which he said to the candidate:

I want to ask you something about history. You know, when Herbert Hoover had to face a financial crisis and then unemployment, his strategy was to balance the budget and cut spending, and that made things worse. When Roosevelt came in, unemployment was twenty-five and went to fourteen percent by 1937. With deficits. Aren’t you repeating the Hoover mistake?

But as Tim Taylor points out, the only “Hoover mistake” being repeated is by folks like Krugman and Judis who apparently aren’t aware of what Hoover did while in office:

Hoover’s budget strategy over his term of office was not to balance the budget. The budget ran a small deficit of 0.6 percent of GDP in 1931, followed by a much larger deficits of 4.0 percent of GDP in 1932 and 4.5 percent of GDP in fiscal year 1933 (which, as Judis points out at a different point in his discussion, started in June 1932 and was thus mostly completed before Roosevelt took office in 1933).

Taylor puts the matter plainly:

Hoover did not cut spending. In nominal terms, federal spending went from $3.3 billion (!) in 1930 to $4.6 billion in 1933. Given price deflation during that time, the real increase in government spending would have been larger. With the economy declining in size, federal outlays more than doubled from 3.4 percent of GDP in 1930 to 8.0 percent of GDP in fiscal year 1933…

Because of this pattern, it would be hard to find an economic historian to argue that fiscal tightness was a significant factor in worsening the Great Depression from 1929 to 1932.