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Krugman’s Forgotten History

Here’s a letter to the New York Times:

Paul Krugman writes that “In early 2009, John Boehner, now the speaker of the House, was widely and rightly mocked for declaring that since families were suffering, the government should tighten its own belt.  That’s Herbert Hoover economics, and it’s as wrong now as it was in the 1930s” (“The Forgotten Millions,” March 2011).  Whether this economics is wrong or right, Mr. Krugman is wrong to repeat the myth that Herbert Hoover reduced – or even reined in the growth of – government spending.

From 1924 to 1928 Uncle Sam’s real per-capita spending fell by 4.3 percent.  But this spending rose significantly during Hoover’s term in the White House.  From 1928 to 1929 real per-capita spending rose by 4.7 percent; from 1929-30 by 8.0 percent; from 1930-31 by 17.2 percent; and from 1931-32 by 15.8 percent.  (This spending rose by another 28.4 percent from 1932-33.)  The overall increase in real per-capita spending from 1928 to 1932 was a whopping 53.5 percent.  Real per-capita spending excluding outlays for defense and interest on government debt increased during Hoover’s years in office even more dramatically, skyrocketing by 130 percent.*

Belt-tightening indeed! – of a sort. By bloating Uncle Sam’s girth, Herbert Hoover’s policies caused Uncle Sam’s belly to press more tightly against his belt.  Before long, that belt’s buckle broke.

Donald J. Boudreaux

* Randall G. Holcombe, “The Growth of the Federal Government in the 1920s,” Cato Journal, Vol. 16, Fall 1996.