Brad DeLong points out that Hoover vetoed increased spending on veterans in 1931, then Congress overrode the veto. So Brad asks:
If Congress in 1931 passes a large benefit program for war veterans, and if Hoover vetoes it, and if Congress overrides the veto, and if the money is spent, does Hoover increase spending?
The title of DeLong’s post is “Fiscal Policy During the Great Depression.” Which is what I’m interested in. I’m interested in what happened to overall spending, not in cherry-picking one episode where Hoover vetoed one particular spending increase. Brad is right in that Hoover is not completely responsible for what happened to spending during his watch. It would be interesting to see how eager he was to increase spending. But there is the independent question of what happened to spending at the onset of the Great Depression. The myth is that spending went down. What actually happened is that spending went up between 1929 and 1933. As I wrote before:
Here are the levels of federal government spending (from here, Series Y 457-465) between 1924 and 1934 in billions of dollars
Hoover took office in March of 1929. FDR took office in March of 1933. The data on spending are fiscal years, that ended in June 30 for this period. So Hoover’s budgets are roughly 1930 through 1933. Of course you have to correct for inflation. Or deflation as the case may be. In those years it was deflation. Prices of government purchases of goods and services (from here, Table 41) fell between 1930 and 1933 by roughly 10%. So Hoover actually increased spending by over 50% in real terms.
I wrote loosely. I should have said government spending increased 50% in real terms during the Hoover Administration. He did not single-handedly raise spending. He needed Congress to do that, and as DeLong points out, sometimes he opposed spending increases.
Brad uses this chart to look at Hoover and fiscal policy:
The implication of the chart is that there was fiscal stimulus in 1931 despite Hoover–the red line shows what happened and the blue line what would of happened if Hoover’s initial veto had not been overridden. There are two problems with the chart. The first is that no source is given for the data so I cannot uncover why the numbers conflict with the numbers I give above. Second, the numbers are in nominal terms, they are uncorrected for changes in the price level. As I pointed out above, there was serious deflation.
I cannot help but note this wise observation about bloggers who don’t correct nominal numbers for inflation (or deflation).
And as I have written in the past, I am happy to find out that the numbers I cite aren’t the right ones for some reason and will post any corrections that show, corrected for changes in the price level, that fiscal policy was contractionary (according to the standard interpretations of government spending) during Hoover’s Administration. But the numbers I see show the opposite.