Presidential Character: Week Thirty-One, the Peter Principle Applied to Presidents

While this year-long attempt at documenting Presidents relies on James David Barber's seminal work Presidential Character, I do rely on the occasional outside reference to highlight a point.

For example, bringing up the Peter Principle.  To wit:

...in a hierarchy every employee tends to rise to their level of incompetence.

Now, an elective office like the Presidency doesn't work as a hierarchy.  As a rule, people are not hired and promoted upward into the Oval Office (well, outside of the Vice Presidents on those rare painful exceptions).  Thing is, people vote for experience: they vote for political figures, military leaders, governors and captains of industry because such candidates have proven themselves in some fashion.  So in a way, a President can be a man who's done wonders at a lower level of prestige and excites the populace into thinking they can do just as well as Leader Of the Free World.

Herbert Hoover was just such a man by 1928.  One of the self-made success stories of the early 20th Century: became a mining engineer in youth, then a mining consultant and leading business figure on the global stage, organized American evacuation from Europe on the outbreak of World War I and turned right around to lead relief effort and food aid for war-stricken Belguim, when the United States entered the war he was put in charge of food administration and effectively managed homeland rationing to ensure priority food supplies got overseas, and he oversaw relief efforts for post-war Germany and war-torn Russia (during the Bolshevik takeover) which were suffering massive famines.  By 1920 Hoover was considered one of the greatest humanitarians the world had seen.

Actively becoming a Republican when politics proved the next challenge in his life, Hoover was placed in Harding's Cabinet as Secretary of Commerce.  Taking control of what was a minor office at the time, Hoover used his initiative to establish a department dedicated to business growth and control of economic affairs.  When confronted with a problem that was lapsing in someone else's Cabinet, Hoover worked it so that Commerce became responsible for its oversight and fixes.  Where previous Presidents Roosevelt, Taft and Wilson were adversarial to corporations, Hoover - being a businessman himself - preferred the "soft power" approach of making business leaders allies instead of enemies.  He worked with banks and savings and loans to rework home mortgaging to promote home ownership to Americans, increasing home construction.  It all culminated in one massive economic boom of the Roaring Twenties.

Hoover was one of the incorruptible men under Harding's administration, and became one of the indispensable men under Coolidge's.  When 1928 rolled around and Coolidge refused to run for another term (well within the unofficial two-term limit), Hoover was practically the only choice the Republicans had for the Presidential nomination.  Despite personal concerns from Coolidge - they apparently didn't get along, the Passive-Negative Coolidge finding Hoover's aggressive personality abrasive at best - Hoover got the nom, easily won against the Democratic challenger Al Smith, and settled into the White House in 1929 under the belief that "no one can rightly deny the fundamental correctness of our economic system."

1929 is traditionally the year the Great Depression started.

There's still an argument about what caused it.  Considering the size and scope of what that Depression was, there had to be a variety of factors culminating in one perfect storm of an economic disaster.  Also, put a hundred economists into a debate room and you'll get a hundred different answers to the simple question "what caused it?"

It could have been any of these things.  The failure of Midwestern farms leading to foreclosures, and then bank failures in the wake of that.  The U.S. government commitment to the gold standard, which kept interest rates too high and limited monetary policy.  Wealth disparity during the 1920s which fed money into investments for the rich rather than spending income for the poor and middle classes.  Massive personal and financial debt across the board, another reason for the bank failures.  Land speculation, especially in Florida (hi again!), and a housing bubble related to that.  Growing unemployment caused by a decline in population numbers due to fewer families and fewer immigrants, which paradoxically made it harder for the flesh-and-blood unemployed to find jobs (it has something to do with the lack of demand in a growing consumer economy).

The infamous Stock Market Crash of October 1929 isn't viewed by the experts as a cause, but a symptom exposing to the world just how bad the economy was getting and turning the economic mood from positive to negative.  (Also, anyone else notice how a good number of those causes are similar to the problems we're facing today...?)

Almost one thing most of the economists would agree on was that the Great Depression wouldn't have been as bad as it had gotten (to some economists, in 1929 it was just a regular recession or panic) if the response to it had not been so badly bungled.

This is where Hoover's personality traits become part of the problem.  This is where being an Active-Negative at heart turned Hoover from one of the 20th Century's greatest men into one of history's greatest failed Presidents.

The defining trait of an Active-Negative President is Uncompromising.  The A-N operates by certain principles or beliefs that cannot bend in the face of "enemies" or those opposed to his work.  To quote Barber about A-Ns:

But the most pervasive feeling in the Active-Negative makeup is "I must."  He is a man under strict orders, required to concentrate, to produce, to follow out his destiny as he sees it.  At any given moment, he feels bound by what he has already undertaken, already promised, already committed...  He finds it hard even to see alternatives to the course he "must" follow, much less change that course when it proves unproductive...  From the inside... the Active-Negative type generates tremendous energies for political domination.  From the outside, he seems at first extraordinarily capable and then extraordinarily rigid, become more and more closed to experience, including the advice of his ardent allies... (p. 82)

Hoover's "I must" moment was the handling of the Depression.  Previous experience as a businessman and Commerce Secretary told him how to react (not act) to the economic crises of 1929: Let the market correct themselves.  Let the businesses fail that are going to fail, and the industries will recover on their own.    Hoover's Treasury Secretary Andrew Mellon infamously deemed that to "liquidate labor, liquidate stocks, liquidate the farmer, liquidate real estate..." and that it would make people "work harder and live a more moral life."  However, that meant one thing: liquidate everything in the economy because too many factors were failing all at once.  It also failed to consider the possibility that there was nothing in the economy people could work harder for, as unemployment went up and kept going up during Hoover's tenure.

In this regard, Hoover was a lot like other A-N Presidents - Van Buren, Cleveland, and Buchanan are good examples - when faced with a financial panic.  They too preferred to let the markets correct themselves.  And under normal circumstances, Hoover wouldn't have been far wrong: a brief recession in 1921 corrected itself by letting liquidation do its thing and redistribute capital.  Hoover's failing was thinking that all this economic panic was came from the financial markets re-adjusting itself.  It never occurred to him that parts of the economy were literally disappearing and never coming back.

Hoover instead focused on keeping the federal government solvent: he abhorred the trending Keynesian theories of government spending to "buy out" the economic crisis, and focused instead on keeping the budget balanced (again, sounds a bit familiar don't it).  The Depression cut into those attempts to budget, however, making Hoover even more reluctant to create massive spending projects to fix the Depression first.

This is partly where the Peter Principle comes into play as well.  Hoover, once one of the most competent men on the planet - great organizer, driven, focused on tasks and finishing them - became as President one of the most incompetent leaders at a time of need.  It wasn't so much that Hoover failed to respond - he actually did respond, a good number of government programs started between 1930 to 1932 formed the basis of much of the New Deal of the 1930s, famously with the Hoover Dam construction project - it was that he failed to organize on the scale that the crisis demanded, and for a man once driven to succeed he suddenly looked like he was just sitting there.

His previous jobs - engineer, mine owner, businessman, relief organizer, Commerce Secretary - were ones that did not necessarily require him to "think outside the box" as it were.  Respond to a problem and fix it with the tools at hand (not considering new tools may need to be invented).  Manage something already working and making sure it stays working (keeping the engine going while ignoring the fact the train is charging off a cliff).  Reforming government and adding regulations where needed (but drawing the line at where the private sector must remain free of the public sector).

Being President means making decisions, something that Hoover had done often before and usually successful at it.  But being President also means creating compromise solutions when the situation demands it, making decisions that a President will be uncomfortable making yet would recognize as necessary (an Active-Positive, for example, making a deal he knows will suck for himself or his personal allies but will make life easier for 100 million others).  And in Hoover's case, it meant making decisions (making the public sector more aggressive in job creation, for example) he wouldn't - and didn't - make.

As President, he was faced with a situation - the Great Depression - the size and scope of which was larger than anything seen before, especially in terms of job losses and mass unemployment.  Hoover was being asked by the desperation of the times - the Bonus Army marching on Washington for financial relief, the failure of businesses and banks to reinvest capital to spark a stalled economy - to make the hard decisions and compromises that could have relieved the crisis.  Asking an A-N President like himself to "think outside the box" and consider other economic models as possible fixes would have been akin to asking a whale to try walking on land instead of swimming in water.

Basically, Hoover had gotten promoted to a job he wasn't suited for.  The Presidency was something outside of his temperament.  If he had been Treasury Secretary or still Commerce Secretary in 1929, and the President was an Active-Positive sort calling on Hoover to solve some of the economic woes within his range of influence, I wouldn't doubt that Hoover would have resolved the matter within that term: doing so on the orders and direction of a man more capable of making the decisions Hoover couldn't make.

And we wouldn't have called homeless towns "Hoovervilles".  Hoover's reputation as a humanitarian would have remained intact: the image of him feeding children replacing the images of starving families in the history textbooks.

Remember the evil banker character from John Ford's Stagecoach?  At one point, he rails against the federal government and insists everything would work if there was a businessman in charge of government.  It was Ford's (and Hollywood's) rude judgment on the Hoover administration.  Which wasn't entirely unfair, but harsher than it deserved to be.

(P.S.: I wouldn't put the Smoot-Hawley Tariff Act on Hoover's shoulders.  That was more a protectionist effort by Congress... which essentially started a trade war/boycott with the rest of the planet that made the Great Depression worse, thanks a bunch Smoot and Hawley)

Next: For this President, I might have to make two separate entries for two thematically different historical eras.

Balanced Budget Amendment Is a Bad Idea

As an amendment-suggesting blog, sooner or later I gotta write about this.  Especially since the House Republicans are obsessed with pushing this amendment idea during the recent "Let's Kill The Government And Blame It On Obama" negotiations.

The amendment is their old ideological card, The Balanced Budget Amendment.  The title makes it sound so sweet and simple, that the objective is to make the government balance their books every fiscal year.  Problem is in the details.

The current form, aka Cut Cap And Balance Act, requires that there be an amendment that spells out requirement of a balanced budget; imposes a spending cap of 18 percent percentage of Gross Domestic Product; and requires a two-thirds majority vote in both houses of Congress to pass any tax hike.

The first part requiring the balanced budget seems simple but it's not.  One of the rules of government spending that was set centuries ago by Alexander Hamilton himself was that government needed to run on a certain level of debt that can be structured to force government to function towards collecting revenue and paying off portions of debt.  As long as the government operated with full faith and credit (that at some level it can pay off debts as needed), the system should work.  And the deal is, for roughly 200 years that system did work.  The problem came when the anti-tax proponents got in charge and started cutting off regular methods of revenue-gathering (i.e., taxes), forcing the government to borrow more than it had ever done before.  Under these anti-taxers, who promised that cutting taxes would magically generate more revenue because lesser taxation would create more income (it didn't by the by.  It just generated more income that was taxed less if at all), the national debt and massive annual deficits got worse.  But the problem still exists: without other revenue, the government is going to have to borrow and operate with unbalanced budgets.  Suddenly forcing the government to balance the books is going to create more havoc and chaos than ever before, and force future generations to pay for the damage done by this generation that would pass this amendment and then run for cover.

The second part of the amendment idea is even worse: it places a specific cap number percentage on how much government can work with.  GDP is Gross Domestic Product, the market value of all final goods and services produced by a nation... basically how much that nation is worth.  The United States is roughly $14.7 TRILLION as of 2010.  This amendment would cap government spending to 18 percent of that, which is... (breaks out calculator) ...I get $2.6 Trillion based on the 2010 numbers.  Now, the U.S. budget spending for 2010 was... $3.5 Trillion.  You get about $900 Billion you gotta shave off the 2010 numbers.  That's not something you can sneeze at in one year's budget.  And that's the problem you get with a specific cap number like 18 percent.  That gets to be a harsh cap, especially when it depends on an outside value (GDP) that doesn't remain constant, and in times of recession does not constantly go up in value.

The third part is the most unfair: it forces a supermajority to vote for any tax increase.  Ever.  We're talking about government voting habits now.  When you make something next to impossible to vote for, you essentially make it meaningless to even try for it.  The opposite has its own problem.  The amendment does not to make it harder to vote for tax cuts, meaning that in a system where Path Of Least Resistance is the norm you're making it more likely that elected officials will vote for tax cuts more than anything else.  This part of the amendment makes it next to impossible for government to create ANY kind of revenue system to keep its coffers even half-full.  Considering that government pays for, oh, our national defense, our parks, our national highway and rail and airway networks that businesses use to ship goods and perform services, our farm subsidies, a ton of corporate tax credits and subsidies, money that goes to the STATES to pay for such things as schools, clean water and air, state roads and bridges, and a few other things... well, this is going to force the federal government to borrow even more debt to pay the bills. 

Lemme link to Ezra Klein on this one (snippage for space, go read the whole thing):

This isn’t just a Balanced Budget Amendment. It also includes a provision saying that tax increases would require a two-thirds majority in both houses of Congress — so, it includes a provision making it harder to balance the budget — and another saying that total spending couldn’t exceed 18 percent of GDP. No allowances are made for recessions, though allowances are made for wars. Not a single year of the Bush administration would qualify as constitutional under this amendment. Nor would a single year of the Reagan administration. The Clinton administration would’ve had exactly two years in which it wasn’t in violation.
Read that again: Every single Senate Republican has endorsed a constitutional amendment that would’ve made Ronald Reagan’s fiscal policy unconstitutional. That’s how far to the right the modern GOP has swung. But the problem isn’t simply that the proposed amendment is extreme. It’s also unworkable.  ...This amendment includes no provisions for recessions, meaning that when the economy contracted, the government would have to contract as well. That is to say, we’re still not out of one of the deepest recessions in American history, and every Senate Republican has co-sponsored a constitutional amendment to make future recessions worse. It’s just breathtaking.  A world in which this amendment is added to the Constitution is a world in which America effectively becomes California. It’s a world where the procedural impediments to passing budgets and raising revenues are so immense that effective fiscal management is essentially impossible; it’s a world where we can’t make public investments or sustain the safety net; it’s a world where recessions are much worse than they currently are and the government has to do more of its work off-budget through regulation and gimmickry. I would like to say something positive about this proposal, say there’s some silver lining here. But there isn’t. This is economic demagoguery, and nothing more. It’s so unrealistic that it would’ve ruled all but two of the last 30 years unconstitutional, which means it’s so unrealistic that there has not yet been a Republican president who has proven it can be done.

One more caveat: the Republicans who push this balanced budget proposal never really seem to push for it very hard when their party has control of the White House.  And when they've also got Congress under their belt, they spend like drunken teenagers with their parents' credit cards.  But when there's a Democrat like Clinton or Obama running the executive branch, all of a sudden a BALANCED BUDGET IS A DAMN NECESSITY.

The Balanced Budget Amendment does nothing but force the federal government to either borrow like mad or drown itself in Grover Norquist's bathtub.  Either way, the nation is screwed.

There are better amendment ideas out there.  This one is a disaster.