Anything Peaceful: The Official Blog of The Freeman
by Sheldon Richman

Krugman Watch

Posted January 26, 2009
Print This Post • 5 comments

Because someone has to do it.

Remember, Herbert Hoover didn’t have a problem making unpleasant decisions: he had the courage and toughness to slash spending and raise taxes in the face of the Great Depression. Unfortunately, that just made things worse.

–“Stuck in the Middle”

Federal spending rose in 1930 and1931.From Murray Rothbard’s America’s Great Depression (1972, 233):

Federal expenditures rose from $4.2 billion in 1930 [up from $4.0 billion in 1929] to $5.5 billion in 1931–excluding government enterprises it rose from $3.1 billion to $4.4 billion, an enormous 42 per cent increase! …From a modest surplus in 1930, the Federal government thus ran up a huge $2.2 billion deficit in 1931. And so President Hoover, often considered to be a staunch exponent of laissez-faire, had amassed by far the largest peacetime deficit yet known in American history. In one year, the fiscal burden of the Federal government had increased from 5.1 per cent to 7.8 per cent, or from 5.7 per cent to 8.8 per cent of the net private product.

The following year, Hoover oversaw a huge tax increase, which led to lower revenues and a decline in federal spending. Yet “While the absolute amount of Federal depredations fell from $5.4 to $4.4 billion in 1932 … GNP, and gross private product, declined far more drastically. …Hence, the percentage of Federal depredation on the gross private product rose from 7.8 per cent in 1931 to 8.3 per cent in 1932…” (256).Franklin Roosevelt condemned Hoover as a spendthrift in the 1932 campaign and promised fiscal responsibility.

There Are 5 Responses So Far. »

  1. Comment by BillySixString on 26 January 2009:

    Mr. Richman,This should be a weekly, if not daily, feature of every free-market economics blog. Krugman’s arguments need to be countered at every possible moment.Thanks and keep it up!
    Bill

  2. Comment by Sheldon Richman on 26 January 2009:

    That would be a full-time job. :)

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