Herbert Hoover had been U.S. president for less than eight months when the stock market crashed. Like most of the economic experts, Hoover believed that the nation was in a passing recession. Within a year, it became obvious that the economic crisis was a major depression caused by speculation and a worldwide economic slowdown. Hoover took action to try to end the crisis. He focused on indirect relief from individual states and the private sector. His steps included founding new government agencies, working with industry leaders to develop good labor relations, supporting local aid for public works, stabilizing prices through cooperation between government and business, and working to balance the federal budget.
As the Depression deepened, the public called for increased federal intervention and spending. Hoover refused to involve the federal government in steps that he thought would lead toward socialism: forcing fixed prices, controlling businesses, or manipulating the value of the currency. He preferred to give indirect aid to banks or local public works projects, while refusing to use federal money for direct aid to citizens.
Even though Hoover had been a philanthropist and a progressive before his election, his opponents viewed him as uncaring toward the common citizen. Hoover tried to convince Americans that direct aid would have negative consequences in the long run. He lost his re-election campaign in 1932 to Franklin D. Roosevelt.
President Roosevelt’s aides admitted that most New Deal agencies established early in his term had been modeled on those that Hoover had attempted. Roosevelt’s plans, however, were much broader in financing and scope. New Deal bills were aimed at building consumer confidence and fixing the economy through direct federal aid, tightened government control over many industries, and deficit spending.
Hoover disapproved of New Deal legislation because it created fundamental changes in government and allowed deficit spending. His prediction that the role of American government would fundamentally change because of the New Deal turned out to be correct.
Source: Herbert Hoover on the Great Depression and New Deal, 1931–1933
© Gilder Lehrman Institute of American History