The ghosts of Presidents past: A dialog on financial crisis between Herbert Hoover, Richard Nixon, Ronald Reagan, and Barack Obama
It was January of 2008 and President Obama was unable to sleep. He had been puzzling over the latest economic reports that he had been sent by the Department of the Treasury. Secretary Paulson had told him that afternoon that if something was not done to slow the current economic crisis that had begun after the recent housing market crash that the United States could enter a recession, or worse a second Great Depression. As the President sat there worrying about how to solve this problem he began to wonder how past President’s had dealt with economic crisis during their Presidencies. He knew that Herbert Hoover, Richard Nixon and Ronald Reagan had dealt with substantial financial and economic problems when they were in office and he only wished that he could ask some of them for advice.
“Sir “ said his secretary; “You have several appointments that were scheduled for overnight tonight? This is highly unusual. Would you like me to cancel them? Wait, this cannot be possible… these appointments are with Herbert Hoover, Richard Nixon, and Ronald Reagan… these men are all dead. What shall I do sir?”
The President puzzled for a few minutes wondering why his simple day of paperwork and meetings had suddenly turned complicated with the arrival of three ghosts in the White House. Than he answered “Send them in Mildred. I need their input on something.”
“Alright sir, your first appointment of the evening is with President Hoover. He wishes to address the Stock Market Crash of 1929.” The secretary hung up as an older looking man with grey hair wearing a pinstripe suit entered the room followed by Secret Service Agents (as is the law since all former U.S. Presidents receive Secret Service protection).
Herbert C. Hoover: President of the United States 1929-1933
As President Hoover entered the Oval Office he grinned as he politely shook hands with President Obama. “Well I never thought I would be in this office on the other side of the desk. I hear you are interested in pursuing a poverty reform platform as well.”
“Yes, though my main goal is focused more on healthcare reform. Since your time in office the insurance companies have gained even greater economic and political power and millions of Americans are currently uninsured or underinsured. Many of the policies created by your and President Roosevelt have fallen apart and the economy is in crisis due to a recession that began during the previous presidency. People have invested to heavily in the banking and real estate industries. Banks are overextended and have granted loans and mortgages to people who cannot afford to pay them. The automotive industry is also facing a crisis as many American automotive companies have not kept up with the demand for cheaper more fuel efficient vehicles.” President Obama took a sip of his coffee and waited for President Hoover to answer.
President Hoover also took a sip of coffee. “ In October 1929 I was faced with a similar economic crisis. This was a period of transition for my administration. I was pursuing a platform of economic reform and moving the economy from an older unstable system to a system that was more feasible in the long-term. The main problem was changes in several areas of the economy. The gold standard was a problem because the price of gold had fallen significantly in the early 1920s due to an abundance of gold. We also had problems with debt deflation due to the flagging gold standard and as the result of the Smooth Hawley Act of 1930. When this act was signed into law the main complaint was that tariff increased decreased foreign buying power. This was a big problem because in order to solve these problems we had to spend more money in order to implement economic reforms, relief programs, and changes to interest rates. I was faced with having to find a way to support the millions that were unemployed as well as finding a means of restoring economic stability at the same time.”
President Obama continued drinking his coffee as he mulled over what President Hoover had told him. “Mr. President did you consider financial bailouts for banks and manufacturers at the time?”
President Hoover took a drag off his cigar and answered as honestly as he could “ Yes, we considered a wide variety of options including bailouts. However, you should remember that large corporations did not have the power that they do now since our anti-trust laws were more strictly enforced. We mainly focused on alleviating the suffering of the unemployed. Industry did not really begin to do well again until we were confronted with the possibility that we would be drawn into another global war. Bailing out some of the larger corporations may be effective in the short-term however; you also need to look at economic reforms to limit certain aspects of the banking and real estate industries, and to ensure that corporations operate under strictly defined terms. It may be the only way to save your economy.”
President Hoover stood up and shook hands with President Obama “Excuse me I have another appointment I have to keep this evening with the Premier of Greece. I would advise you to be stead in your decision making and to stick to your guns about policy.” With that President Hoover headed out the door.
“Sir do you need a break before your next appointment with President Nixon?” said Mildred as she cleared away that coffee things.
“No Mildred I can handle it.” Said President Obama as he buried his head in his hands. A major migraine was beginning and his migraine medicine was up in his private quarters. There just was not enough time before President Nixon arrived for his appointment.
Richard Nixon: President 1969-1974
As President Obama raised his head he saw a tall Midwesterner walk into the room. He stood up and reached out his hand. “You must be President Nixon. Can you tell me a little big about the causes of the 1973 recession?”
“Pleased to meet you Barack. Yes the main reason for the economic recession in 1973 was a global energy crisis. The cost of oil and gas products imported from the Middle East increased beyond what we could afford to pay for it. 1973 was also the year that I made the decision to eliminate the Gold Standard in the United States. This precipitated an economic recession as banking, business, and industry sought to reconcile the changes. It was a mess. I hear you are experiencing a similar crisis. I can tell you it will take some time to stabilize.” President Nixon took a seat and pulled out his notes. “I brought some notes about how myself and the president who followed me Gerald Ford dealt with the economic recession. It just might give you some ideas on how to fix things.”
“Receiving visits from all of you is what has helped the most. While it is interesting to understand how you confronted economic crisis in your time, it is more important understanding that I am not alone since Congress is mostly against anything I have to say.” Obama waved Mildred over to pour more coffee. It was getting to be late and coffee was the only thing keeping him going. “One question Mr. President did you consider economic bailouts during your time as President?”
“Hell yes. It was one of many options we considered. I knew it would take some time for new economic standards to stabilize. In the meantime several banks including Citibank were experiencing problems at the time. We had to bail out Citibank. There were a lot of arguments against a federal bailout at the time. The company had taken a lot of financial risks including investing heavily in junk bonds. It was bail them out financially and enforce some new financial limitations on the company in order to avoid thousands of people across the United States becoming unemployed, not to mention the millions of dollars that would be lost if this companies investments went bad. It was a hard decision to make, I faced opposition from Congress and from people who did not understand the ramifications if I did not do something.”
“Given I am being confronted with massive economic bailouts for the automotive and banking industries what advice would you give me Mr. President?” said President Obama knowing that President Nixon’s experience was most similar to his own.
“First, listen to your economic advisors and political advisors. I am guessing you hired people based on knowledge and experience. Remember they have been doing this longer than you. I did not listen to my advisors and that is one of the reasons why I was impeached in 1974. Second, do not expect the economy to stabilize immediately. A lot of people including your constituents will expect immediate change and that is not going to happen. Third, do not give up hope. Being President is not a job you ran for expecting things to be easy. Finally, always try to put yourself in the shoes of the people that you serve. The economy will ultimately straighten out but it is probable that it will not happen during your presidency. Well I have to get going. I have lunch with President Ford in an hour.”
President Obama began to feel a glimmer of hope. The advice he had received so far was very useful. He had a half an hour before his meeting with President Reagan so he went upstairs to get his migraine medicine. He checked on his daughters and tucked them in again noticing that Sasha had fallen asleep reading the latest American Girl magazine. He put the magazine on her bedside table and headed back downstairs.
Ronald Reagan: President 1980-1988
As he reached his office President Obama noticed Mildred escorting a tall dark haired Californian into the Oval Office. President Obama shook President Reagans hand as they both settled down in a pair of armchairs. “Mr. President could you tell me about the 1981 Recession?”
“Well Barack I can. First, let me tell you that much like yourself I had little professional training in economics or in managing a state or national budget. While I had been governor of California, the state had not been faced with many major financial crises during my time in office at least not in terms of state economic crisis. The oil crisis you talked about with President Nixon came back to bite my first administration right on the ass. We found ourselves in the middle of another damned energy crisis. To top that all off the housing industry, automotive industry, and steel industries were in the middle of an economic downturn.
“What did you do about it sir?” asked Obama wearily. He really was tired at this point.
“ We implemented an economic program that involved cuts to all major government departments except the Department of Defense. We also implemented changes to the tax code that would grant significant tax cuts to certain sectors in business and industry in order to encourage hiring, and production in these sectors. Eventually this reduced inflation and interest rates and the economy stabilized. I also encouraged the development of oil drilling in the U.S. so that we would not continue paying high foreign prices.
“Is there any advice that you could give me about straightening out the economy today?” said President Obama with a sigh. He was very glad that this evening was over.
“Keep your options open. Remember there is not one single option that is going to straighten the economy out 100%. Also do not be afraid to try new things. The tax cuts I implemented were effective because they had not been used as a primary solution to economic crisis before. Finally, just as the other two said-listen to your advisors.
“Thank you sir for your time. I had better get some sleep or I will hear it from Michelle in the morning. I will take your advice into consideration.” President Obama got up and shook hands with President Reagan.
Obama's State of the Union Speech 2010
President Obama took the words of his ghostly advisors seriously. In 2010 he stated “When I ran for President, I promised I wouldn't just do what was popular I would do what was necessary. And if we had allowed the meltdown of the financial system, unemployment might be double what it is today. More businesses would certainly have closed. More homes would have surely been lost.” This was the pinnacle of an economic policy that had included tax cuts, economic bailouts of troubled businesses, and relief programs for those hardest hit by the economic crisis. The advice had been helpful and despite having a long road left to travel President Obama understood that he was not the only president to have faced economic crisis and survived.
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