Hoover’s 1931 tax hike to balance the budget drove US unemployment to 23 percent

Evidence

Hoover’s contractionary policies were given a further negative boost by Britain’s decision to abandon the gold standard in 1931. Confidence in the dollar fell as investors thought that the United States would follow Britain off gold. Capital began to flow out of the United States, interest rates rose, and bank failures soared. It was in these circumstances that Hoover authorized a tax increase, thereby producing a massive recession in the name of maintaining “sound finance.” In December 1931, Hoover raised taxes by $900 million to eliminate the deficit. As Hoover put it in classic austerity-speak, “We cannot squander ourselves into prosperity.” The price of this parsimony was to throw the US economy into depression. By 1932 unemployment had reached 23 percent of the labor force, up from 8 percent in 1930. — Mark Blyth, Austerity, 508

Categorization

• XREF: Directly engages Mattei’s account of austerity as a self-defeating political project, and echoes the book’s earlier chapter on Hoover’s sound-finance ideology. — connects to: Hoover turned to austerity after his public-works response proved fiscally trivial — Mark Blyth, Austerity: The History of a Dangerous…, 507; Hoover raised taxes in the 1931 recession to signal fiscal resolve, deepening the depression — Mark Blyth, Austerity: The History of a Dangerous…, 326
• CANDY: The line ‘We cannot squander ourselves into prosperity’ is a compact, quotable example of austerity-speak.

Broader Connections

• Hoover raised taxes in the 1931 recession to signal fiscal resolve, deepening the depression #corroborates (0.95) — Mark Blyth, Austerity, 326