6 - The unraveling of the first official model in 1931

Summary

The year 1931 was to mark a turning point in the way the Hoover administration thought about the problems of the economy and about the forms of intervention it was prepared to use in addressing them. Even though there had been slippages and disappointments in the programs pursued in 1930, there were still some grounds for satisfaction. The cooperation of the big capital spenders, of the large employers, and of the monetary authorities had, on the whole, been gratifying. It thus appeared that the worst damage had been contained. On balance, there seemed to be no reason to depart substantially from the course of policy already charted. Accordingly, the president called again for a continuation in 1931 of the same efforts to accelerate capital outlays and to sustain wages. And he asked for still further appropriations for federal spending on public works projects that could be set in motion without delay. This implied that the Treasury would have to increase its borrowings to cover the deficit anticipated for fiscal year 1931. In his budget message to the Congress, Hoover observed that he did not regard this as a matter of great concern, though he believed it prudent to contain the magnitude of the deficit by suspending the modest tax concession that had been awarded in the preceding year.

By the early spring of 1931, there were also some heartening signs that the worst of the crisis had passed.