Presidents and Crisis: Herbert Hoover and the Great Depression
Herbert Hoover became President in 1929 and brought with him a reputation for being a man of great accomplishment. He had been a professional mining engineer and had achieved international prominence in humanitarian relief efforts in Belgium and served as head of the U.S. Food Administration during World War I. He also served as Secretary of Commerce under Presidents Warren G. Harding and Calvin Coolidge. He also inherited a healthy economy from his two predecessors. Hoover believed that public-private cooperation was the way to achieve long-term growth. He feared that too much government intervention would undermine long-term individual self-reliance,. His ideals were put to the test with the coming of the Great Depression.
There is a misconception that Hoover took a hands-off approach to the Depression, but in fact it was Hoover who rejected Treasury Secretary Andrew Mellon's suggested "let the market fix itself" approach. When the market crashed in October of 1929, Hoover called many of the nation's leading business leaders to Washington to urge them not to lay off workers or cut wages. He also engaged in a number of unprecedented public works programs, including an increase in the Federal Buildings program of over $400 million and the establishment of the Division of Public Construction to spur public works planning. He also provided for subsidies for ship construction through the Federal Shipping Board and he asked Congress for a further $175 million appropriation for public works, which he received, along with a $915 million public works program. This program included the construction of the Hoover Dam on the Colorado River. In the spring of 1930, Hoover got Congress to approve an additional $100 million to continue the Federal Farm Board lending and purchasing policies. A total of $31.5 million in loans for wool were made by the Farm Board. These massive agricultural subsidies were a precedent for the later Agricultural Adjustment Act.
Hoover also advocated strong labor regulation law, including the enactment of the Bacon-Davis Act, which called for a maximum eight-hour day on construction of public buildings as well as some wage controls. In the Banking sector, Hoover got Congress to pass The Federal Home Loan Bank Act in July, 1932, establishing 12 district banks ruled by a Federal Home Loan Bank Board in a manner similar to the Federal Reserve System.
In spite of these programs, Hoover was also a firm believer in balanced budgets and was unwilling to run a budget deficit to fund welfare programs. In June 1930, over the objection of many economists, Congress approved and Hoover reluctantly signed into law the Smoot–Hawley Tariff Act. The legislation raised tariffs on thousands of imported items. The intent of the Act was to encourage the purchase of American-made products by increasing the cost of imported goods, while raising revenue for the federal government and protecting farmers. However, economic depression had spread worldwide, and Canada, France and other nations retaliated by raising tariffs on imports from the U.S. The measure ended up worsening the Depression.
By 1932 unemployment in the US had reached 24.9%. Businesses defaulted on a record number of loans and more than 5,000 banks had failed. Hundreds of thousands of Americans found themselves homeless and began congregating in the numerous shanty towns that sprang up in major cities, which were pejoratively called Hoovervilles.
Congress was anxious to increase federal revenue. It passed the Revenue Act of 1932, which was the largest peacetime tax increase in history. The Act increased taxes across the board, so that top earners were taxed at 63% on their net income. Several previous tax cuts that had been enacted on upper incomes were rolled back. The estate tax was doubled and corporate taxes were raised by almost 15%. Also, a "check tax" was included that placed a 2-cent taxon all bank checks.
The last attempt of the Hoover Administration to rescue the economy occurred in 1932 with the passage of the Emergency Relief and Construction Act, which authorized funds for public works programs and the creation of the Reconstruction Finance Corporation (RFC). The RFC's had minimal impact at the time, but was adopted by President Franklin D. Roosevelt and greatly expanded as part of his New Deal.
In June of 1932, thousands of World War I veterans and their families demonstrated and camped out in Washington, DC. They were demanding immediate payment of a bonus that had been promised by the World War Adjusted Compensation Act in 1924, which was supposed to be paid in 1945. The men were offered money by Congress to return home, but some members of the "Bonus army" remained. Washington police attempted to remove the demonstrators from their camp, but they were outnumbered and unsuccessful. Shots were fired by the police in an attempt to attain order, and two protesters were killed while many officers were injured. Hoover sent U.S. Army forces led by General Douglas MacArthur to stop a march. Although Hoover had asked for restraint on the part of the army, MacArthur, believed he was fighting a communist revolution, and chose to clear out the camp with military force. In the ensuing clash, hundreds of civilians were injured. Hoover had sent orders that the Army was not to move on the encampment, but MacArthur chose to ignore them. Hoover was incensed, but refused to reprimand MacArthur. The incident was devastating for Hoover's already poor re-election chances in the 1932 election. New York governor and Democratic presidential candidate Franklin Delano Roosevelt said of Hoover: "There is nothing inside the man but jelly!"
In the election, Roosevelt blasted Hoover for spending and taxing too much, increasing national debt, raising tariffs and blocking trade. It is ironic in light of what would subsequently take place, that Roosevelt attacked Hoover for "reckless and extravagant" spending, and for big government. Roosevelt's running mate, John Nance Garner said that Hoover was "leading the country down the path of socialism".
Hoover was defeated in the election, getting 39.7 percent of the popular vote to Roosevelt's 57.4 percent. In the electoral college he carried only Pennsylvania, Delaware, and four other Northeastern states to lose 59–472. The Democrats extended their control over the U.S. House and gained control of the U.S. Senate. Notwithstanding his criticisms, Roosevelt would continue many of Hoover's programs.
There is a misconception that Hoover took a hands-off approach to the Depression, but in fact it was Hoover who rejected Treasury Secretary Andrew Mellon's suggested "let the market fix itself" approach. When the market crashed in October of 1929, Hoover called many of the nation's leading business leaders to Washington to urge them not to lay off workers or cut wages. He also engaged in a number of unprecedented public works programs, including an increase in the Federal Buildings program of over $400 million and the establishment of the Division of Public Construction to spur public works planning. He also provided for subsidies for ship construction through the Federal Shipping Board and he asked Congress for a further $175 million appropriation for public works, which he received, along with a $915 million public works program. This program included the construction of the Hoover Dam on the Colorado River. In the spring of 1930, Hoover got Congress to approve an additional $100 million to continue the Federal Farm Board lending and purchasing policies. A total of $31.5 million in loans for wool were made by the Farm Board. These massive agricultural subsidies were a precedent for the later Agricultural Adjustment Act.
Hoover also advocated strong labor regulation law, including the enactment of the Bacon-Davis Act, which called for a maximum eight-hour day on construction of public buildings as well as some wage controls. In the Banking sector, Hoover got Congress to pass The Federal Home Loan Bank Act in July, 1932, establishing 12 district banks ruled by a Federal Home Loan Bank Board in a manner similar to the Federal Reserve System.
In spite of these programs, Hoover was also a firm believer in balanced budgets and was unwilling to run a budget deficit to fund welfare programs. In June 1930, over the objection of many economists, Congress approved and Hoover reluctantly signed into law the Smoot–Hawley Tariff Act. The legislation raised tariffs on thousands of imported items. The intent of the Act was to encourage the purchase of American-made products by increasing the cost of imported goods, while raising revenue for the federal government and protecting farmers. However, economic depression had spread worldwide, and Canada, France and other nations retaliated by raising tariffs on imports from the U.S. The measure ended up worsening the Depression.
By 1932 unemployment in the US had reached 24.9%. Businesses defaulted on a record number of loans and more than 5,000 banks had failed. Hundreds of thousands of Americans found themselves homeless and began congregating in the numerous shanty towns that sprang up in major cities, which were pejoratively called Hoovervilles.
Congress was anxious to increase federal revenue. It passed the Revenue Act of 1932, which was the largest peacetime tax increase in history. The Act increased taxes across the board, so that top earners were taxed at 63% on their net income. Several previous tax cuts that had been enacted on upper incomes were rolled back. The estate tax was doubled and corporate taxes were raised by almost 15%. Also, a "check tax" was included that placed a 2-cent taxon all bank checks.
The last attempt of the Hoover Administration to rescue the economy occurred in 1932 with the passage of the Emergency Relief and Construction Act, which authorized funds for public works programs and the creation of the Reconstruction Finance Corporation (RFC). The RFC's had minimal impact at the time, but was adopted by President Franklin D. Roosevelt and greatly expanded as part of his New Deal.
In June of 1932, thousands of World War I veterans and their families demonstrated and camped out in Washington, DC. They were demanding immediate payment of a bonus that had been promised by the World War Adjusted Compensation Act in 1924, which was supposed to be paid in 1945. The men were offered money by Congress to return home, but some members of the "Bonus army" remained. Washington police attempted to remove the demonstrators from their camp, but they were outnumbered and unsuccessful. Shots were fired by the police in an attempt to attain order, and two protesters were killed while many officers were injured. Hoover sent U.S. Army forces led by General Douglas MacArthur to stop a march. Although Hoover had asked for restraint on the part of the army, MacArthur, believed he was fighting a communist revolution, and chose to clear out the camp with military force. In the ensuing clash, hundreds of civilians were injured. Hoover had sent orders that the Army was not to move on the encampment, but MacArthur chose to ignore them. Hoover was incensed, but refused to reprimand MacArthur. The incident was devastating for Hoover's already poor re-election chances in the 1932 election. New York governor and Democratic presidential candidate Franklin Delano Roosevelt said of Hoover: "There is nothing inside the man but jelly!"
In the election, Roosevelt blasted Hoover for spending and taxing too much, increasing national debt, raising tariffs and blocking trade. It is ironic in light of what would subsequently take place, that Roosevelt attacked Hoover for "reckless and extravagant" spending, and for big government. Roosevelt's running mate, John Nance Garner said that Hoover was "leading the country down the path of socialism".
Hoover was defeated in the election, getting 39.7 percent of the popular vote to Roosevelt's 57.4 percent. In the electoral college he carried only Pennsylvania, Delaware, and four other Northeastern states to lose 59–472. The Democrats extended their control over the U.S. House and gained control of the U.S. Senate. Notwithstanding his criticisms, Roosevelt would continue many of Hoover's programs.