Obama and Hoover: Two “Smart” (Stupid) Presidents
By Jonathan Bean • Friday August 12, 2011 10:47 AM PDT • 19 Comments
For the past year, I have been researching how the housing bubble of the 1920s contributed to the Great Depression when the bubble burst. My study involves reading many articles and speeches by Herbert Hoover, first as Commerce Secretary (1921-1928) then as president (1929-1933). As the nation endures the Obama presidency, I see much in common between the two men, both seen as “smart” by their supporters.
We forget that Hoover had a “titanic intellect,” a stellar career as a mining engineer, translated medieval manuscripts into English, and wrote the textbook Principles of Mining. He helped orchestrate relief aid to save millions from hunger and starvation across post-World War I Europe. During the 1920s, he was a “progressive” busybody telling businessmen in all fields how they could make their work more efficient. His Commerce Department held 2,500 trade association meetings. One of those associations—the American Construction Council—was headed by trade lobbyist Franklin Delano Roosevelt. No, I am not making this up! FDR thought Hoover’s “smart” approach to jawboning business was an improvement upon competitive capitalism.
Barack Obama can’t boast that kind of record (he achieved very little before becoming president) but he shares the same cast of mind as Hoover: In a recent Wall Street Journal article, “Is Obama Smart?,” Bret Stephens concludes that
a) Obama (like Hoover) thinks he is smarter than those who run businesses; but
b) “stupid is as stupid does.”
As their “smart” policies failed year after year, Hoover and Obama dug in and blamed the international environment (“economic headwinds”). Note to readers: contrary to myth, historians now accept that Hoover was an extremely active president who increased spending by 50%, ran deficits and promoted what we would later call Keynesian policies: cut taxes (to stimulate purchasing power), encourage public works (infrastructure) and bail out banks (Reconstruction Finance Corporation). He also revived antitrust after it lay dormant for a decade. Sound familiar? Here is a cartoon lampooning his “stimulus” approach (then called “priming the pump”).
In both cases, many businessmen (and now businesswomen) were skeptical of candidates Hoover and Obama. Obviously, there are differences but note the similarity between the “know-it-all” attitude of these two men, particularly in areas where they knew very little. The first excerpt is from “Wall Street Looks at Hoover” in Outlook magazine (1928), with a reporter interviewing a businessman-banker as to why so many businessmen opposed Hoover’s candidacy in 1928. The second excerpt is from the Wall Street Journal article above (collecting statements by and about Obama’s “really smart” qualities).
Hoover 1928:
The Outlook reporter anonymously interviewed a prominent banker as to why business was opposed to Hoover, a “smart” candidate who mesmerized the the country with how he would engineer permanent prosperity.
Banker: My firm “has many textile manufacturers as clients . . . but nobody in the bank would presume to tell our customers how to make rayon.” Yet Hoover is “confident that he knows more about finance than financiers, more about industry than industrialists, and more about agriculture than agriculturists. He is so sure of his judgment in these fields that he wants to impress it on others. He is very seldom willing to take advice. Since he knows more than any advisers could, why should he?”
“[Hoover's] cast of mind will handicap him . . . . Because of his confidence in his own wisdom he is suspicious of those who disagree with him.”
“We object, moreover, not only to his ignoring our advice. We object to his offering us his advice on matters that are none of his business.” [Banker notes how Hoover's Commerce Department urged business to invest in certain industries or areas]. “It is not our function as bankers to tell our customers with whom they should do business.”
Obama 2008:
“‘I think I’m a better speech writer than my speech writers,’” [Obama] reportedly told an aide in 2008. ‘I know more about policies on any particular issue than my policy directors. And I’ll tell you right now that I’m . . . a better political director than my political director.’”
Stephens writes: “How many times have we heard it said that Mr. Obama is the smartest president ever? Even when he’s criticized, his failures are usually chalked up to his supposed brilliance. Liberals say he’s too cerebral for the Beltway rough-and-tumble. . . .”
“Socrates taught that wisdom begins in the recognition of how little we know. Mr. Obama is perpetually intent on telling us how much he knows. Aristotle wrote that the type of intelligence most needed in politics is prudence, which in turn requires experience. Mr. Obama came to office with no experience.”
Much is made of the president’s rhetorical gifts. This is the sort of thing that can be credited only by people who think that a command of English syntax is a mark of great intellectual distinction. Can anyone recall a memorable phrase from one of Mr. Obama’s big speeches that didn’t amount to cliché?”
We have now reached the point where many Americans, even those who voted for Obama, share the attitude of those disillusioned with Hoover: In 1931, they recalled how they felt just three years prior: Hoover seemed so wonderful! He promised to end poverty in our time! And he seemed so smart! But now he beats us down (if we are in business) and his speeches feel robotic, much like the “Hall of Presidents” with the “Audio-Anatromic” figure of Abraham Lincoln motioning stiffly to the audience.
Perhaps, someday, that Hall of Presidents will have a new figure—President Obama’s teleprompter, now the butt of jokes and running commentary on the president’s day-to-day failings.
We all know how well Hoover did in practice. It’s starting to look like “deja vu all over again.”
*****
Recommended Reading:
Joan Hoff Wilson, Herbert Hoover: The Forgotten Progressive (1975)
“The American Presidency Project”: splendid site to compare the reactions of Hoover and Obama to stock market crashes, bailouts, the international environment and much more.
Remember that Calvin Coolidge had no great love for Hoover, saying he had given him nothing but unsolicited advice, all of it bad. He also snidely referred to Hoover as “Wonder Boy” or “Superman.” I think you hit the nail on the head- it’s the mindset of being smarter than the average person or businessman, a statist view that has remained en vogue in Washington ever since Hoover, Obama being merely the latest specimen.
Kai | Aug 12, 2011 | Reply
Absolutely right. Coolidge did not like Hoover’s urge to engineer every corner of the economy and society. In those days, though, “progressives” used “social engineering” as a positive term. Who better to engineer America than someone who was a “Great Engineer” (Hoover)?
Fallacy of false transference of expertise and all that!
Jonathan Bean | Aug 12, 2011 | Reply
Silent Cal was one of our better prezs.
ralph | Aug 12, 2011 | Reply
Looks to me like the Tea Party folks are the new Hooverits. Balance budget and pray for sunshine.
Ed Perkins | Aug 12, 2011 | Reply
Ed, you know better. My next blog deals with the “Tea Partiers” of the 1930s but they didn’t appear until 1938 and FDR’s overreaching.
And what Democratic candidate in 1932 blasted Hoover for NOT balancing the budget? Oh, that would be FDR. It all reads like a “giant misprint,” Merriner Eccles later said, but FDR was the tea partier (as you define) in ’32. Purely opportunistic, but that was FDR’s magic. At least FDR changed his policies (all too often). Hoover, er, Obama just plunges ahead again and again with “jobs of the future” (read: green jobs subsidized by government).
Unrelated: I hope you are still playing tennis and to see you in Philadelphia (BHC)?
Jonathan Bean | Aug 12, 2011 | Reply
Good grief. Isn’t a more valid comparison Hoover to George W? Both mismanaged an overstimulated economy into the ground. I’m having real trouble believing that any President would have done very well in this term.
The fundamental problems remain in America. Entitled population, overspending by governments at every level, fat, fat, fat. We can get into the power of special interests in government, right after the Iowa straw poll?
In the end, I don’t think you miss the mark often, but I think your comparison is Apples to Oranges and should be rejected.
PtG | Aug 13, 2011 | Reply
PIG,
The long list of parallels could be extended, PIG. Example: Hoover had plans ready to become the first president to “fight a war on depression” (his words) with an infrastructure bank. Sound familiar?? Harding ignored his advice in the 1920-1921 recession and he longed to react this way.
The post is really about their cast of mind when it comes to business. Sure, GW left the economy in shambles but Hoover thought Coolidge had done the same thing! (And Coolidge famously refused to endorse Hoover because he fear massive spending on public works, deficits, jawboning of business, etc.). I keep listening to speeches by Obama (and I’ve read the speeches of Hoover): When does O ever say anything about businesses other than that damn “clean energy” battery factory in Holland, Michigan, made possible with government “investment”?? Go to that Americanpresidency.org site and search. He, like Hoover, just thinks he knows WHICH jobs ought to be created and how. FDR was far more “pragmatic” (or political). Hoover and Obama were/are just stubborn.
Jonathan Bean | Aug 13, 2011 | Reply
GW slept on the job (economy wise). His presidency was defined by war, not the economy. Same was true of Coolidge. Hoover became president March 1929 and the recession began June 1929 (the crash followed, then the rest). Obviously, there was a massive misallocation (I argue into housing) in the 1920s and Coolidge ignored it. But there was little he could do. The housing bubble/bust is really fascinating and I’m glad that some economists are now going so far (perhaps too far) to say “The Housing Cycle IS the Business Cycle!” — Leamer).
Jonathan Bean | Aug 13, 2011 | Reply
These comparisons all have validity, but I think of Hoover/Bush and FDR/Obama, or, on foreign policy, mabye Nixon/Bush and LBJ/Obama. Hoover among all these men was at least relatively antiwar.
Anthony Gregory | Aug 14, 2011 | Reply
A little bit of nuance with reference to “business” should probably be established to differentiate between small and medium sized “national” business in the US and the nation smashing trans-national business class hell bent on destroying free markets and competition in order to understand the “failings” of our current or past Presidents.
Wall Street gave Obama multiples of amounts of campaign cash compared to McCain in ’08, and has since reaped rewards (billions in bonuses and elimination of competition esp. in banking) similar to those they claimed while supporting Bush II. Sometimes I think we focus to much on perceived differences between Presidents (especially in the last century) while ignoring continuities in their agendas. While Bush may have stressed his war making more than Obama, war has continued to escalate. This is simply a PR judgment to try and contain a political base through rhetorical emphasis and an attempt to maintain the allusion of political choice.
The complete destruction of America economically, socially and constitutionally is an extension of a program that has targeted the destruction of the nation-state as a player in the global system. The attack comes from a very specific part of the “business” community...the trans-national element that is bigger than most governments and encourages political consolidation as a more efficient way to bring nations into debt servitude. The tale of nations signing on to derivatives through political corruption has to be understood to understand the process. These are the yokes around the necks of nations and barely a peep is spoken of them by establishment politicians or the MSM. Lumping all businesses in to a “business community” is a critical error in these times. Their interests are entirely divergent.
Jack | Aug 15, 2011 | Reply
About the diversity within business, including small business, etc. — TOTALLY agree and wrote two books on that topic. This blog is really about the intellectual self-pride (and initial acceptance of it) with Hoover and Obama. This has shaped their attitude toward business (in general). What is most remarkable about Obama is that, unlike past Democratic candidates or presidents, he rarely talks about “small business.” That was the standard Democratic fare – to note the differences between small and large companies, focus on areas of agreement, etc. But with Obama we get this obsession with Green jobs that are heavily dependent on government “investment.”
You raise a large topic that I have addressed elsewhere (start with my _Beyond the Broker State_ and _Big Government and Affirmative Action_ books). But a blog has to be about one thing and this one is about the intellectual hubris that results in policies sidelining (or jawboning) much of “business.” There was lots of business cash on hand in the 1930s and “capital went on strike” (as FDR put it). Looks the same now too. “Business” generally isn’t taking big bets, re-investing in American enterprises, etc. because of the current regime. I’ll develop this more in a forthcoming article.
Jonathan Bean | Aug 15, 2011 | Reply
Prof. Bean: Your brief note opens with the statement that you have been doing research about how the housing bubble (just as the Florida housing bubble was the first to burst in the current Great Recession) in Florida contributed to the Great Depression. That the Florida housing bubble bursting was one of the causal components of the 1929 economic downturn has been written about by historians and economists for over 60+ years. I am therefore surprised as your tone suggests you have newly discovered that topic.
Also, your comparison of President Hoover with President Obama will turn out to be a bit of a stretch. President Hoover was a progressive in the mold of President Teddy Roosevelt; an anti-Gilded Age belief, with a state centered, rugged individualism view (its interesting how the beliefs of the Gilded Age has become the prevalent political and economic ideology of the Republican Party over the past 10 years or so). Hoover was definitely not an FDR progressive, while President Obama is a moderately conservative Democrat.
You state that historians now accept that Hoover was an “extremely active president”. This statement is incorrect. Hoover did cut taxes (a Kenysian economic approach) somewhat to try and generate citizen and business spending, and he did raise to a small degree public spending on infrastructure projects (again a Kenysian approach), but it was all much too little much too late.
President Hoover’s initial focus was the verbal encouragement to engage in public works projects. This did nothing, as private spending on construction fell over $2 Billion in 1930, while public spending rose by only $400 Million, hardly enough to off-set such a steep decline. In 1931, private spending fell another $2 Billion, so that by 1932, private construction dollars were about ¼ of 1926 spending. This was somewhat off-set by federal dollars which reached almost $500 Million in 1932, but the total of public construction continued to decline as local and state governments ran out of money, so that total public construction dollars in 1932 were almost $1 Billion less than in 1930.
Hoover may have talked a lot about public works (his “construction reserve” first spoken about in 1922) but his Department of Commerce did nothing to create this reserve nor to create a list of projects. When President in 1930, in the face of pressure to immediately expand federal public works projects, President Hoover’s response was that the tide was turning as unemployment was declining and business was expanding. The President stated that the depression was over. Besides, Hoover was more concerned about balancing the budget in the face of falling federal revenues.
President Hoover also did nothing to help the average citizen who was unemployed or underemployed. In the winter of 1929-1930, no other industrialized modern nation had such a poor national system to deal with joblessness and poverty. Hoover viewed this as a state and local issue. The state and local governments quickly ran out of money, as did the private welfare and charity agencies. With rampant poverty prevalent throughout the country, there was sharply diminished spending on everything. Demand drives an economy. Continually falling demand caused further retraction in business spending and hiring, and so the vicious cycle spun ever downward.
Hoover did recognize, and repeatedly stated in 1929 and 1930, that the Great Depression was chiefly caused by uncontrolled speculation in the securities market. With the passage of the Glass-Steagall Act, FDR and the Democrats in Congress acted to prevent such a disaster from occurring again. Unfortunately the policies of President Reagan in deregulating the savings & loan industry and of the conservative economist Larry Summers (President Clinton’s Secretary of the Treasury) in overturning Glass-Steagall Act which drastically deregulated the financial industry and placed the US into the 1920s again. What regulations were in place were specifically not enforced by the Bush Administration, rather rampant speculation was encouraged by the Bush Administration.
So to compare Hoover with Obama will simply be an unfortunate attempt to re-write history, not engage in the time-honored activity of historians to engage in historical revisionism. The Republican (Hoover being one of them) policies of the 1920s caused the Great Depression and the Republican policies of the 1980s and 2000s, with some conservative economic policies of President Clinton (which he has, to some degree, now admitted were mistakes) caused the Great Recession. President Obama inherited a mess and has had to deal with Congressional Republicans who have stated and demonstrated they are not concerned about dealing with the country’s economic problems but rather with (in the words of Rep. Senator Mitch McConnell) ensuring that President Obama is a one-term president.
Tom Bartlett-Svehla | Aug 18, 2011 | Reply
Dear Tom,
First, I never mentioned Florida at all — and that is on purpose. People mistake the far larger housing (and construction) bubble of 1921 onward for the Florida episode. In fact, the business press was constantly talking about how more mundane building was booming with low rates, new “mortgage real estate bonds” packaged for sale as securities, etc.
You mix up what Hoover did as Commerce Secretary with what he did as POTUS. Granted, his many recommendations for a massive countercyclical approach in the 1920-1921 depression were ignored by Harding but he pledged to act on them if he ever became President. Go to that americanpresidency.org site and read his speeches in 1930 onward: he keeps bringing up that he and the Fed would be the FIRST EVER to use an aggressive countercyclical approach to depression.
On the importance of housing to the general business cycle, including the Great Depression, see works like Leamer, “Housing IS the Business Cycle” (Jackson Hole paper). Economists are turning to what the business press saw and wrote about in the late 1920s and early 1930s: “It’s housing, stupid!” That is new and it’s not in the historical literature. They have focused singlemindedly on the stock market. What they fail to understand is how deeply many financial institutions were invested in real estate and construction — and that started to crest in 1925 and then plummet in 1928. MANY observers saw it as the precipitating cause of the stock market crash.
Your other claims about Hoover doing little are easily refuted by the numbers (total government spending is what matters–SEE POST TO FOLLOW) and initial jawboning to maintain wages (classical economic critics slammed him for not letting wages and prices drop). Did the drop in private construction offset this crude Keynesian approach? Absolutely. But that just goes to show that the “stimulus” approach of Hoover, et al. doesn’t work.
PS: “more mundane building was booming with low rates, new “mortgage real estate bonds” packaged for sale as securities, etc.”
In other words, forget Florida, it was a blip. What happened in the 1920s was very similar to what happened in the 2000s. Find me a textbook that draws that parallel or does anything but talk about the stock market, a free market run amok, etc., etc. There is talk of durable goods (cars) downturn and Leamer and coauthor show how housing and cars move together. In short, there is a lot of exciting new literature by economists on the importance of residential housing cycle but historians are stuck in the old textbook script that you recount toward the end of your post.
***************
From Peter Fearon’s _War, Prosperity and Depression_ synthesis of the literature on those years:
“E. Cary Brown’s study of fiscal policy during the thirties found that if the spending of all branches of government was aggregated, the stimulating effect of fiscal policy was larger in 1931 than in any other year during the decade. If the federal budget alone is considered, the two-year period 1929-1931 was one of greater fiscal stimulus than any similar term during the entire 1930s.”!!! (Fearon, 125). You can find Brown’s study in _American Economic Review_
Jonathan Bean | Aug 18, 2011 | Reply
A snide and insulting article comparing a man who devoted so much of his life to peace and saving lives, to a war criminal who murders whole families.
As for financial matters, Hoover’s world-view was informed by his own belief in Individualism and the “American Dream”, and by what he helped achieve after WWI through largely private efforts.
It’s strange, I’ve read articles by liberals who attack him for being unconcerned and “laissez faire”, and by conservatives who portray him as a proto-FDR “socialist”.
You really can’t win with some people.
Dar | Jun 27, 2012 | Reply
“a man who devoted so much of his life to peace and saving lives”
When I lecture about Hoover I stress the above but this article deals with the economic policies of both men, not other issues. Criticize what I wrote about that issue but don’t assume I am making a wholesale comparison of the two men on all counts.
Jonathan Bean | Jun 28, 2012 | Reply