Government Intrusion Started with…Surprise!... Hoover!.
That means what course should the next president take to mark a clear departure from the big spending, high taxing liberalism that…face it…both parties have been responsible for—at least—since 1929, the year that Herbert Hoover first tried so unsuccessfully to cure the Depression with unprecedented governmental intrusion, big government spending, tax hikes and high tariff?
In fact, Hoover’s a good starting point. To appreciate that bad ideas can emanate from good men (as Hoover was), let’s review his story. For there are plenty of Hoovers out there bearing Republican labels.
The Golden Boy.
Unlike what most history books say about Hoover, the 31st president [1874-1964]…standing 5 feet 11 with straight brown hair parted just to the left of center with hazel eyes, a round fleshy face, ruddy complexion and husky build, an Iowa-born Quaker of Swiss-German and English heritage…was far from the stereotypical portrait of him as a celluloid-collar,laissez faire free marketer: he was in fact a supremely self-confident and well-intentioned patriot—a man of whom Calvin Coolidge (the real free marketer) called sarcastically “the golden boy,” saying ruefully “that man gave me lots of advice, all of it wrong.” But Coolidge was all but alone in his assessment, Hoover was in fact untouchably popular because in his life he never struck out on anything and always hit home runs.
Indeed, Hoover made Horatio Alger seem under-motivated. Born poor in a small Iowa town, orphaned at 9, transplanted to Oregon where he was introduced to the Quaker religion, he worked his way through Stanford (then a little known California school). A brilliant intellect, he , quickly mastered geology and shrewdly applied it to a brand new field: mining engineering. Within a few years of graduation, brimming with cockiness, faith in God and supreme self-confidence, he developed the legendary Bawdwin silver mine in Burma, lucrative zinc mines in Australia and tapped important oil deposits in Russia enabling him to retire in his 30s a multi-millionaire.
Not only was he a spectacular success in mining and business, Hoover became a political publicist’s dream. A natural linguist, he married a woman as bright as himself and a linguist, to boot—Lou Henry, the first woman geologist major at Stanford. Unable to find a Quaker registrar to record their wedding in Monterey, Calif., they were married by a Catholic priest, Fr. Ramon Mestres, OFM of the San Carlos Borremeo mission. They both went to China for Hoover’s first job and to pass the hours away learned Mandarin easily. To ensure privacy they conversed in an archaic form of Latin in China. For relaxation, they translated a classic 16th century encyclopedia on mining and geology to English which was published in 1912 and is still available.
As a cultured, well-publicized “progressive Republican,”—a reformer who had contributed big sums to Teddy Roosevelt’s Progressive party--he volunteered gratis to run American relief service for President Wilson in World War I and won an international reputation for rescuing 120,000 Americans stranded in Europe at opening of hostilities, was credited with saving Belgium from starvation and served as an economic counsel to Wilson at Versailles where he strenuously supported creation of the League of Nations. During the war he received phenomenal Super Bowl-style media coverage. After the war he was importuned by many, including the young Franklin Roosevelt, to run for president on the Democratic ticket in 1920 since Hoover had been the star performer of the Wilson administration.
Hoover declined and went on to serve Harding and Coolidge as commerce secretary where he stressed big business’ “social responsibility” to do more than earn big profits, but to be beneficent. (FDR ran for vice president in 1920 with James M. Cox: the two were crushed by a voter landslide. Then he was hit hard by polio).
Hoover Leads Fed to the Rescue at Mississippi Disaster.
It was as commerce secretary where Hoover sealed his claim on the future presidency. In 1927 the Mississippi River basin was hit with a disastrous flood that devastated Mississippi, Arkansas and Louisiana. The tradition was that states handle their own rehabs as per the Constitution and Coolidge felt that way. But Hoover adroitly put pressure on Coolidge through the media and got the mandate to launch the first federal relief effort for the states.
This he did brilliantly, serving 300,000 refugees (including 100,000 African Americans), spending $1 billion (then an unheard of sum) to salvage the more than 700,000 homes over 27,000 square miles of territory. Result: Hoover became the archangel of mercy and his media reputation sealed his claim on the 1928 Republican presidential nomination to succeed Coolidge. By the time he faced Catholic Al Smith in 1928, he had the advantage of being beloved by the Solid South Democrats for extending government services to them…and wasn’t a hated Irish Catholic like Smith whom the South distrusted.
Elected by a landslide in 1928 at age 54, Hoover’s fame was equivalent to that of Gen. Dwight Eisenhower’s after Normandy. And as with Ike then, Hoover was difficult to pin down as to what party he belonged to or what ideology he had. But everyone knew one thing: he was “progressive”—unlike the dour Coolidge whose laissez faire philosophy credited to Treasury Secretary Andrew Mellon created the nation’s highest level of prosperity as he cut to top income tax bracket (then 73%) by 25%, also cutting taxes on the poor, the lowest tax bracket falling from 4% to 1.5% plus building up surpluses every year of his presidency.
The liberal rap on Coolidge is that he declined to run for reelection in 1928 because he sensed the house of cards was going to tumble from lack of government regulation over the markets. No, Coolidge never recovered from the freak death of his 16-year-old son Calvin, Jr. in 1924 who, playing tennis in sneakers with no socks, incurred an infection and in that era without antibiotics, died of blood poisoning. “When he [Calvin Jr.] died,” Coolidge wrote later, “the power and glory of the presidency went with him.” Sensing his own death, Coolidge made 1928 his last year. He was right about his own mortality: he died in 1933 at only 61—died of a broken heart, his wife said.
What caused the tumble was in fact government regulation and the reckless operation of the Federal Reserve.. In 1927 the Fed opened the spigot to pour out cheap money to counteract the gold out flows from the Bank of England. That triggered an unsustainable boom. By the time Hoover was in, the Fed slammed on the brakes causing the stock market to falter, then crash.
Now the Great Engineer, who saved the starving Belgians and rescued refugees from the Mississippi Basin flood, was poised to save America from a Depression. What would he do? Would he stick with the laissez faire of Coolidge or employ a new, “progressive” remedy?
Unfortunately the Great Engineer who had never experienced a failure, rejected advice from Mellon who said (a) it represented a mild downturn and (b) counseled that Hoover leave the crisis to work itself out. But a governmental interventionist by habit, Hoover struck the pose of an action president; thus he turned the mild downturn into a major Depression. He publicized his as “the New Economics,” and forcefully jaw-boned employers to prop up wages which business did but of course to balance the losses it laid off workers.
Turning to foreign competition, he pushed Congress to pass the Smoot-Hawley tariff. The tariff on tungsten hurt steel; the tariff on linseed oil hurt the paint industry; hiked duty on 800 items used in manufacturing cars smacked GM and Ford with a double hit: having to pay higher prices for the 800 items and selling fewer cars overseas because Europeans slugged back with retaliatory tariffs on our products. Wheeling round to consider the rising federal budget deficit, he raised taxes in the midst of the Depression, including personal income taxes, estate taxes, sales taxes and postal rates.
Obviously it made things much worse.
Worrying about declining farm income, he became the first president to implement what is now known as a “subsidized farm policy”—having the government provide low-interest loans to farm cooperatives, then buying surplus farm products from the market to prop up farm prices (which stimulated higher farm production). He then initiated a massive public works spending program. Finally he started a new government program, the Reconstruction Finance Corporation, to shovel out government loans with the government picking the winners and losers.
Hoover Comes Out as the “Do Nothing” Goat.
The bitter irony is that Hoover not only lost the 1932 election to FDR but comes out in the history books which today are written by liberals like John Kenneth Galbraith as a cold, uncompassionate do-nothing and that the Depression was a backlash for the 1920s boom. Not so. Not so. In fact, Hoover was emphatically a do-something—but what he did was all wrong! He had fashioned a baby New Deal which bombed.
And when the real thing came in…the ultra-liberal New Deal… it was Hoover Squared! Result: Under FDR government intervention caused the bank panics of the 1930s; paid farmers to burn food while in the cities men and women went hungry; the WPA put men to work building highways and parks but few private sector jobs appeared. Roosevelt passed the NRA (National Recovery Administration) which jacked up prices businesses could charge (the NRA code mandated a cleaners must charge 40 cents per garment; charge 35 cents and you had to pay a $100 fine or go to jail).
FDR didn’t launch Social Security until two years after inauguration. In the beginning, it seemed ingenious: In each year at the outset workers’ contributions exceeded the outgo. The difference was spent by government to cut the amount it had to borrow from the banks to finance its deficit. But now, as we know,Baby Boomers are reaching retirement and the outgo far exceeds what comes in. FDR’s legacy is in a crisis mode. So is Medicare.
Under Hoover, the Fed increased the money supply. Only now are we realizing that it wasn’t a tight-wad Fed in the `20s and `30s but a Fed that slashed rates to historic lows so that when it stopped pumping dough in, the stock market would fall to its natural level, worsening the market seriously.
Then-- under FDR-- came the worst of all…a step which anticipated the current economic malaise and did something even Hoover hadn’t contemplated.
Forcing Americans to Surrender Gold. FDR took the country off the gold standard which spurred dislocations in trade and production that lasted through the 1930s. In world history the greatest economic dislocations came after countries abandoned gold. Up to then Americans used greenbacks because Uncle Sam said the dollar was “as good as gold.”
For centuries, nations have relied on precious medals because they restrained opportunistic politicians from wild-fire inflation: gold cannot be infinitely reproduced like paper money. Rapacious governments have long preferred paper money in lieu of gold—paper money which can’t be redeemed into anything, allowing governments to print all the money it wants. Result: it was the gold standard that kept the central banks stable and honest, allowing falling prices to tell everybody that assets were overpriced. By abandoning the gold standard, the banks were flooded with paper: problems weren’t solved but only masked.
Then the Bretton Woods monetary agreement set up a new “gold exchange standard” by which other countries could redeem dollars but gold but Americans could not. Bretton Woods failed ultimately and in 1971 Richard Nixon cut the dollar’s link with gold, ushering in an era where inflation loomed as an ever-present threat which triggered wage-and-price controls, Nixon saying “we’re all Keynesians now!” The economy of the United States hasn’t been the same since.
All these interventions in the free market came to naught. We’re told FDR put men back to work. Huh?: Unemployment, the way the average guy feels the sting, ranged this way during the hyper-active FDR years: 1932 (Hoover’s last year) 23.6. 1933, 24.9; 1934, 21.7; 1935, 20.1; 1936, 17.0; 1937 14.3; 1938, 19.0; 1939, 17.2; 1940, 14.6; 1941, 9.9. World War II solved unemployment by sending young men to war and women to the factories as Rosie the Riveters.
The Issues in 2010 and Beyond.
Now, here we are again. Serious disruptions in the free market have hit a high point in the past few years. In 2008 the collapse of the housing market and increase in mortgage foreclosures precipitated a financial crisis as banks and financial institutions held trillions of dollars in mortgage-backed securities. After a bailout of American International Group (AIG), George W. Bush, a genuinely good man and a patriot but panicky, followed the old Hoover plan and drew up a multi-billion-dollar bailout program saying “I’m a strong believer in free enterprise so my natural instinct is to oppose government intervention—but these are not normal circumstances. The market is not functioning properly. There has been a widespread loss of confidence.” Lack of confidence is still out there.
And now we have Barack Obama with an even more ambitious spending programs including a $787 billion “stimulus” program which hasn’t stimulated—on top of which is a hugely expensive health “reform” package and proposals for Cap and Trade and education expansion.
This bipartisan record should warrant that an entire new set of economic issues be brought up by Republicans for the next election.
Many were brought up by candidate Ron Paul in 2008 but were overshadowed by the puny arguments both Obama and John McCain were making. In the next presidential, Paul will be 77, going on 78. Pretty old. Republicans must field a crop of congressional and presidential candidates who bring up vigorous new issues including these: The need to aggressively audit the Fed which has been getting away with murder from a Congress blindfolded and unaware of its machinations…the need to re-legalize gold and silver backed currencies as legal tender to compete with Federal Reserve notes.
A valid question: Before replacing the Fed or allowing direct competition with the Fed to make it more responsible, shouldn’t there be an alternate legal framework in place so an asset-based sound money currency can develop in the free market? Eventually this currency would replace federal reserve notes as a much more reliable store of value.
Who Can Lead Back to Smaller Government?
Who’s able to discuss these issues clearly, cogently in 2012 so voters can make sound decisions? One thing is sure: McCain and Palin didn’t in 2008. Are we going to hear these issues from Mitt Romney? Maybe. He seems now like the only one in the GOP equipped intellectually to do so but his track record with health care in Massachusetts has been statist and Obama-Lite. Mike Huckabee? Tim Pawlenty? Palin? Newt Gingrich: yes but Henry Hyde’s judgment about him that he’s 50% genius and 50% nuts still hangs over my mind.
My guess is that there is a new breed of Republicans equipped to handle this—but they’re all relatively new faces, not the old. Indiana Gov. Mitch Daniels (former U.S. budget director and a star as his state’s chief executive), Cong. Paul Ryan of Wisconsin; Cong. Eric Cantor of Virginia; Cong. Mike Pence of Indiana; Gov. Bobby Jindal of Louisiana; Sen. John Thune of South Dakota; former Sen. Rick Santorum of Pennsylvania are some. Bright, very bright: but will they be ready by 2012?
Some things to mull over, huh?
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*: Feast of St. Prisca. Prisca [died AD 270] also known as Priscilla was a habitué of the catacombs in Rome and was martyred, her tomb still existent on the Via Salaria. One variant of legend has her married to one Aquila and it was at their home that members of the earliest church met. In Romans xvi 5 Paul sent greetings from “the church which as at the house of Prisca and Aquila.” This ties in to the coordinate Feast of…
St. Peter’s Chair at Rome. Peter who once trembled with fear at a servant-maid’s accusation and abandoned Christ during His trial, now, emboldened by the Holy Spirit, went to Rome at the height of the persecution and claimed its residence for the Church, founding the Church there with St. Paul, where both were crowned with martyrdom. The ruins of a portable chair is encased in bronze by Bernini over the apsidal altar at St. Peter’s. From that ruined chair the church’s primacy is based in Rome, attested by St. Dionysius, bishop of Corinth who wrote of “the greatest and most ancient church, founded by the two glorious apostles, Peter and Paul.”
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