![]() ![]() Real direct federal purchases increased a cumulative 45% between 19.īecause the price index for federal government purchases fell a lot less than the price index for private sector purchases ( the federal purchase deflator dropped by 8.7%, while the GDP deflator dropped by 25.3%), even this number significantly underestimates how large the increase in government spending was. Nor was it the case that the increase in the share of GDP going to government spending reflected merely a drop in private output. While he did raise taxes (which non-Keynesians can agree was bad for non-Keynesian reasons), he increased spending even more, resulting in an increase in the deficit from 4.0% of GDP in FY 1932 to 4.5% in FY 1933. ![]() Some might think that while he pursued "stimulus" policies during most of his term, he did tighten policy during the last year. This reflected in part a drop in revenues from 4.2% of GDP in FY 1930 to 3.5% in FY 1933, but mainly an unprecedented (at the time) increase in spending from 3.4% in FY 1930 to 8.0% in FY 1933. In fact, he increased the deficit more than any other President in peace time (except for Bush, if you count his terms as peace time, the wars in Iraq and Afghanistan notwithstanding.) If you don't believe me, look at the official statistics on the subject.īetween Hoover's first budget, for fiscal year 1930, and his last, for fiscal year 1933, the budget balance went from a surplus of 0.8% of GDP to a deficit of 4.5%. Again and again you hear the myth that we shouldn't reduce the deficit because that's what Herbert Hoover did and we all know how that ended.
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