Seven myths about Herbert Hoover the do-nothing president

If you want to hear a political lie told with total confidence, ask a stranger what Herbert Hoover did about the Great Depression. Nine times out of ten you'll hear that he sat in the White House and did nothing, that he believed in leaving the economy alone, and that Franklin Roosevelt rode in on a white horse and fixed it all. It is a tidy story. It has a villain and a hero. It's also wrong in almost every particular.

The truth is stranger, and for conservatives it is far more useful. Hoover was no do-nothing. He was a restless, hard-working, brilliant engineer who tried more things to fight a depression than any President before him, and a surprising number of those things were mistakes. The lesson of Hoover is not that Washington should have stood still. The lesson is that activity is not the same as wisdom, and that the wrong intervention at the wrong moment can turn a bad time into a catastrophe.

I'll take seven common claims, one at a time. For each, I'll state the myth, test it against the record, and give you a verdict. Fair warning: some of these verdicts will annoy people on your side, and some will annoy people on the other.

Who he was before the White House

Start with the résumé, because it kills Myth One before we reach it. Hoover was born in Iowa in 1874, graduated from Stanford, and became a mining engineer who worked around the world. When the First World War broke out, he led the Commission for Relief in Belgium, which fed millions of civilians in occupied territory. In 1917 President Wilson made him head of the Food Administration. After the war he ran the American Relief Administration, which fed hungry Europeans, and in 1921 it extended help to famine-stricken Russia. President Harding named him Secretary of Commerce, and he kept the job under Coolidge, expanding the department's reach into everything from radio to aviation. In 1927 he took charge of federal help after the great Mississippi flood. He won the presidency in November 1928 over Al Smith and took office on March 4, 1929.

That is a man who believed that disasters could be managed by smart people acting quickly. Hold that thought.

Myth one: Hoover did nothing

The claim: When the market crashed in October 1929, Hoover stood by while Americans starved.

The record: Almost the reverse. In November 1929, within weeks of the crash, Hoover called business leaders and labor leaders to the White House and asked them to hold wages and keep investing and building. He asked Congress for a tax cut, and Congress passed a one-point reduction in the rates on 1929 income. He expanded federal public works. His Federal Farm Board, created by the Agricultural Marketing Act of June 1929, was given a revolving fund of $500 million to buy and hold surplus crops and prop up farm prices. In January 1932 he signed the law creating the Reconstruction Finance Corporation, a federal lender of last resort for banks, railroads and other firms. In February 1932 he signed the Glass-Steagall Act of that year, loosening rules on the credit the Federal Reserve could extend. In July 1932 he signed the Federal Home Loan Bank Act and the Emergency Relief and Construction Act, which let the RFC lend to states for relief and public works.

The federal budget tells the same story. Federal spending was about $3.1 billion in fiscal 1929 and about $4.7 billion in fiscal 1932. Divide the second by the first and you get about 1.5, so spending rose by roughly half in three years.

Verdict: False. Hoover did a great deal. Whether it was wise is the real question, and we'll get to that.

Myth two: Hoover was a laissez-faire purist

The claim: Hoover believed the government should leave the economy alone, and his rigid philosophy caused the Depression to deepen.

The record: The first half of the sentence is wrong and the second half is a different argument. Hoover was an organizer by temperament, a believer in "associationalism," meaning cooperation among business, labor and government to solve problems. He did not want to pass the whole problem to the market. In his memoirs, written long afterward, he said that some advisers wanted him to let the whole structure liquidate, that he rejected this, and that he attributed the "liquidationist" advice to his Treasury Secretary Andrew Mellon. Historians have debated how closely that account matches what Mellon actually said, but the point stands: Hoover's own telling casts himself as the man who said no to doing nothing.

Where Hoover did draw a line was on direct federal relief to individuals. He worried that a federal dole would corrode the habits of self-reliance and drain local charities, and he preferred loans to businesses, banks and state governments to checks to families. You can argue that this was a failure of imagination. You can also argue, as many conservatives do, that it was a defensible instinct about the limits of the federal government. Either way, it is not laissez-faire.

Verdict: False. Hoover was an activist with limits, not a purist.

Myth three: Smoot-Hawley caused the Depression

The claim: Hoover signed the tariff in June 1930, and that is what turned a downturn into the Great Depression.

The record: Here the myth is half true, and the half that is true is damning. The crash came in October 1929, the economy was already contracting, and the Smoot-Hawley Tariff was not signed until June 17, 1930. So it didn't start the Depression. It was also not the largest force making it worse; the collapse of banks and the shrinking of the money supply did more damage, as we will see in a moment.

But the tariff raised duties on a long list of imported goods, and it was signed over the objections of more than a thousand economists who signed a public petition in May 1930 urging Hoover to veto it. He signed anyway. Other countries raised their own barriers in response, and the volume of world trade fell sharply in the early 1930s. American farmers, who depended on export markets, were among those hurt.

For a fair, detailed account of what the law did and did not do, read Smoot-Hawley, 1930, what the tariff did and what it did not do, and for the broader lesson, Smoot-Hawley in 1930 and the Tariff Lesson Republicans Should Know Well. And if you want to know who actually pays when a tariff goes up, see who really pays a tariff, following the dollar from dock to shelf.

Verdict: Mostly false as a cause of the Depression; true as one of Hoover's worst decisions. A President who signs a trade war into law in the middle of a contraction has made things worse.

Myth four: Hoover was the low-tax, small-government candidate

The claim: Hoover is the Republican who tried to cut his way out of the Depression with low taxes and low spending.

The record: Spending went up by roughly half, as shown above. And taxes went up too. By 1932 the federal budget was in deep deficit, and Hoover, like most politicians of both parties then, believed in balancing it. The Revenue Act of 1932, signed June 6, 1932, raised the top individual income tax rate from 25 percent to 63 percent, raised the corporate rate, doubled the estate tax and added new excise taxes, among them a two-cent tax on bank checks.

Work out what the top-rate increase means. Under the old 25 percent rate, a top earner who made another $1,000 paid $250 and kept $750. At 63 percent, he pays $630 and keeps $370. Divide $370 by $750 and you get about 0.49. The top earner kept less than half of what he had kept before. Raising a tax like that, in the middle of the worst downturn in American history, is the opposite of anything a supply-side conservative would recommend.

It's worth knowing that Roosevelt, in the 1932 campaign, attacked Hoover for spending too much. In an October 1932 speech in Pittsburgh, he promised to cut federal spending by 25 percent and balance the budget. That is on the record, and it is one of the great ironies of the period.

Verdict: False. Hoover raised taxes in a depression, and that is the part of his record conservatives should learn from.

Myth five: the Federal Reserve was a bystander

The claim: The Fed had nothing to do with it, or the President controlled it.

The record: The Federal Reserve was independent then, as it is now, and its performance in these years is the central part of the story. According to the monetary history by Milton Friedman and Anna Schwartz, the nation's money supply fell by roughly a third between 1929 and 1933, as waves of bank failures swept through and the central bank failed to act as a lender of last resort. In the fall of 1931, after Britain left the gold standard, the Fed raised interest rates to defend the dollar, tightening credit in the middle of a banking crisis. Many economists regard this as among the worst policy mistakes in the history of the institution.

Hoover's role was indirect. He did push for the Glass-Steagall Act of 1932 and the creation of the RFC to loosen credit. You could argue that those efforts were too little and too late, and that he should have leaned on the Fed harder. But the great contraction in the money supply was not something he decided.

For an introduction to the levers the Fed holds and why a central bank error can swamp everything a President does, read The Federal Reserve in plain English and the levers it really holds. For contrast, look at the much shorter downturn of 1920 and 1921 in Warren Harding ended a deep depression in 1921 without a stimulus bill.

Verdict: The Fed was no bystander. It was a major actor, and its mistakes mattered more than any one law Hoover signed.

Myth six: Hoover ordered the Army to attack the Bonus Army

The claim: Hoover sent troops with tanks and bayonets against starving war veterans.

The record: This is the most tangled of the seven, and the one where I would urge you to read primary sources before repeating anything. In the summer of 1932, thousands of First World War veterans and their families came to Washington to demand early payment of a bonus certificate Congress had promised them. The House passed a bill to pay early on June 15, 1932; the Senate defeated it on June 17. Many veterans left. Several thousand stayed, camped in a shantytown on the Anacostia Flats and in empty government buildings.

On July 28, 1932, police tried to clear some of the buildings, a confrontation turned violent, and two veterans were shot dead by police. Hoover then ordered the Army to help clear the area. General Douglas MacArthur led cavalry, infantry with fixed bayonets and tear gas, and the troops drove the veterans out and burned much of the camp across the river. According to accounts, Hoover's orders had been to clear the downtown buildings and not to cross the bridge to the main camp, and MacArthur went further, but the details are contested. What is not contested is that Hoover defended the operation afterward and that his reputation never recovered.

Verdict: Partly true, but the myth flattens a messy story. Hoover did order the Army in. Whether he ordered the final assault on the main camp is disputed. Either way he owned the result, and it was a political disaster.

Myth seven: Roosevelt reversed Hoover and that is why things got better

The claim: The New Deal was the opposite of Hoover's policies, and the contrast explains the recovery.

The record: There was more continuity than the legend admits. The Reconstruction Finance Corporation, created under Hoover, was kept by Roosevelt and expanded and became a central tool of the New Deal. The home loan banks and the idea of a federal role in credit continued. On the other side, Roosevelt did break sharply with Hoover in several ways, above all by taking the dollar off the gold standard in 1933, a move many economists now see as the turning point for monetary conditions.

The campaign of 1932 is worth a final note. Roosevelt won forty-two of the forty-eight states. Hoover carried six. It was a landslide, and it was a verdict on the Depression, not on a specific policy. Voters who were out of work wanted someone different. They did not necessarily know what that meant.

For what happened to the Republican Party in the wake, read The New Deal Coalition and the Twenty Years the GOP Spent in the Wilderness.

Verdict: Half true. Roosevelt did differ from Hoover in important ways, but the story of a clean reversal is a myth.

What conservatives should learn from the real Hoover

So what do we make of all this? I'd offer four takeaways, each one a lesson for the next time the economy turns.

1. Do not raise trade barriers in a downturn. Smoot-Hawley is the cleanest case study in American history. A tariff increase gives you a trade war and a higher price at the store.
2. Do not raise taxes in a downturn. The 1932 tax hike made a bad moment worse. Whatever you think about the optimal tax system, the timing matters.
3. Watch the money. The deepest damage came from a shrinking money supply and failing banks. A Congress that argues about spending while the central bank starves the economy of credit is looking at the wrong problem.
4. Be wary of price supports. The Farm Board bought crops to hold up prices and ended up sitting on surpluses it could not sell, while prices kept falling. The story of what farm policy became is told in From the 1933 Farm Act to Freedom to Farm, How the Safety Net Got Built.

Notice what is not on the list: "Do nothing." That's the myth. Hoover tried plenty. A better rule is: act where the problem is, with tools that work, and avoid the tools that have a record of failure.

The bottom line

• Hoover was an activist who tried more to fight a depression than any earlier President. "He did nothing" is false and lets everyone off the hook for the real mistakes.
• His worst decisions were the Smoot-Hawley tariff of June 1930 and the Revenue Act of 1932, which raised the top rate from 25 percent to 63 percent. Work the arithmetic yourself: $750 kept on the last thousand dollars became $370.
• The largest force behind the Depression was a collapsing money supply, not a single presidential signature. Learn how the Federal Reserve works before you assign blame.
• Be honest about the contested parts, especially the Bonus Army, and read primary sources before you share a post about it.
• When a politician promises to "do something" about the next downturn, ask three questions: what, who pays, and what happened the last time it was tried?