Was Roosevelt the real Hoover?
By Arnold Kling
Federal budget outlays in real dollars rose 88 percent under Hoover between 1929 and 1932, faster than the growth in the first three years under Roosevelt (although starting from a lower base). Budget deficits under Hoover look more Keynesian than Roosevelt’s deficits, although likely not by Hoover’s design.
The conventional wisdom is that Herbert Hoover sat back and did nothing, and then Roosevelt cured the Depression with the New Deal. In fact, I think that economic historians tend to see both Presidents making similar mistakes. The most common view among economists today is that going off the gold standard was President Roosevelt’s best policy move, while many of the other New Deal policies, most especially the National Recovery Administration, were a hindrance.
I was not aware of this interpretation:
Some financial legislation gave new powers to the Treasury, which were sought as a means of undermining the monetary authority of the Federal Reserve System; as a result, the Fed lost power over monetary policy after 1933 and did not regain it until 1951 (Calomiris and Wheelock 1998).
The essence of the Fishback/Wallis paper is that the American political system supported allowing discretion at the state and local level while imposing rules that limit discretion at the Federal level. They conclude:
As of early 2012, it appears that the EU is attempting to move towards changing their political union in a manner that creates rules for the member states and discretion for the center. This is exactly the opposite of the long run American experience where rules for the center and discretion within the rules for the member states have been the common pattern.
I am not sure that the case for this political interpretation of the New Deal is terribly solid. I do not have a strong reason to disagree, but I worry that along the way the authors perhaps made some rather cavalier moves in choosing how to classify various programs in terms of how they did or did not change precedents and how they were or were not rule-bound.