Who Plays Herbert Hoover?
by Donald Devine
Issue 119 - November 5, 2008

It’s over and at least it was not quite as bad as the devastating Republican defeat in 1932 when the GOP lost the presidency by 57 to 40 percent and gave up 12 Senate and 101 House seats. But it was a terrible defeat. Of course, it was not John McCain’s fault but was a rejection of the economic and foreign policies of George W. Bush. What happens now?

When President Herbert Hoover lost by these margins in the midst of another economic crisis, the fate of the Republican Party was sealed for decades. Ever since, a majority of Americans have accepted the narrative that the Republicans caused the Great Depression and only the Democrats had the right solutions. Even when Republicans won elections thereafter, they felt constrained to run and govern mostly under New Deal principles of government control. Establishing the story line in one’s favor is enormously important for future political success.

In the face of a potential new economic depression, candidate Barack Obama’s most effective and repeated charge was that the Republicans had deregulated the New Deal-created institutions that could have prevented the financial collapse and only a Democrat could set things right once again. The fact that President Bush was highly regulatory (topping all others in the normal measure of pages added to the Federal Register during his tenure) and that it was President Bill Clinton who signed the repeal of the 30s Glass-Steagall bank regulatory act made no difference. Even Candidate McCain dared not challenge his opponent on his central argument but merely claimed he would regulate better.

President-elect Obama has already cast President Bush as the villain. The current depression did begin on his watch, after all. Mr. Bush did aggressively use every possible New Deal tool, going well beyond President Franklin D. Roosevelt and his heirs to control and even purchase bank, investment, mortgage and insurance firms. But this could not save President Bush or his reputation any more than it did President Hoover’s who actually prefigured Roosevelt and Bush by creating the Reconstruction Finance Corporation as early as 1931. History even repeated itself in that Hoover was also accused of deregulating the economy, although he was clear in his memoirs that he specifically rejected Treasury Secretary Andrew Mellon’s “leave it alone” free market solution in favor of his own “economic modernization” regulatory approach as the proper course to reverse the Depression.

So, it is likely President Bush will get to play the role of the modern Hoover and that the GOP will suffer the consequences. President Obama will get a great assist from a complaint media in love with the President-elect, and even more importantly, still enthralled by New Deal mythology. In spite of the fact the Depression continued for a dozen years after the government started regulating it and did not recover until World War II, the morality play of “evil Republicans and businessmen dispatched by virtuous Democratic government experts to restore the public interest” was so successful it has dominated the media mind until this very day. So blaming Bush will work – at least for a while. But there is one big difference today. The mainstream media no longer hold a monopoly over mass communications.

Cable and satellite TV, talk radio and the Internet have changed everything. Even more important, the American people have changed, partly by the new media but more so by the New Deal mythology itself. If the experts are so smart, why do they not just solve the problem? Get it fixed and let the good times roll! Popular deference to experts declined markedly after the failure of President John Kennedy and his “best and brightest” to win the Vietnam War and was reinforced by the inability of President Jimmy Carter and an overwhelmingly Democratic Congress to cure a disabling stagflation that proved resistant to all of the old New Deal nostrums. An endless Katrina rebuilding and continuous wars on terrorism proved the Republicans could not do better. There is no way today’s impatient America would wait even four much less a dozen years for the government experts to fix the economy. In fact, if President Obama does not have things straightened out in two years, he can probably kiss his Congressional majority goodbye.

What will President Obama do? His instinct, reinforced by an overwhelmingly Democratic Congress, will be to roll out all of the old leftist plans. Yet, by the time he takes office in January, it is likely President Bush will have used every New Deal palliative the mind of man and Henry Paulson could possibly devise. None will work. The stock market has only lost more than 20 percent of its value in a two-day period in the years 1929, 1987 and 2008. In 1929 and 2008 the government responded with all of its tools – which for Hoover included the Federal Reserve, jaw-boning business on wages and state governments on welfare, massive federal building and reclamation projects, a forced Federal repatriation of 500,000 Mexicans to open jobs for Americans, and a massive national tariff to encourage purchase of U.S. products, as well as the RFC - and the economy kept getting worse.

What about the third major crash? Following 1987s so-called Black Monday, which actually had a sharper decline than 1929, President Reagan did nothing – and the economy quickly healed. He did “nothing” under the economic logic that markets cannot go up until potential buyers think prices have hit bottom. Mellon was right in 1929, Reagan was correct in 1987 and “leave it alone” was right after Reagan’s first recession in 1981 too. It is the only other alternative. It works and fast enough to recover politically.

After Mr. Bush has exhausted all possible New Deal-like solutions and $2 trillion to pay for them, what more could President Obama do? In 1932, Hoover ran for reelection by promoting his many governmental regulatory actions to quell the Depression and Franklin Roosevelt campaigned on balancing the budget, hard money, including the gold standard, and decentralizing programs to the states. As we all know, after taking office Roosevelt switched 180 degrees and went in the exact opposite direction toward even more government control.

Might President Obama make the same diametrically opposite turn but this time following Mellon and Reagan to let the market run its course? With limited funds available to him in an economic downturn and a looming entitlement crisis - and no idea of what else to do - avoiding the Hoover fate for simple political survival might just produce a marvelous conversion! We will soon see just how much change the President-elect is really ready for. Stranger things have happened. Just ask Herbert Hoover about FDR.

What if President Obama does not change? Why, he gets to play Herbert Hoover and it will be happy days are here again for the Republicans quicker than one can bat an eye.

Donald Devine, the editor of Conservative Battleline Online, was the director of the U.S. Office of Personnel Management from 1981 to 1985 and is the director of the Federalist Leadership Center at Bellevue University.