… [T]he Smoot-Hawley Tariff Act of 1930 is certainly in the running for the title of worst legislation ever passed.
In the 1920s, food prices declined substantially as more and more land once used to grow fodder crops for horses and mules was turned over to growing food for humans. During the election of 1928, Republican candidate Herbert Hoover promised U.S. farmers protection from foreign competition to help raise farm prices.
The legislation was shepherded through Congress by Senator Reed Smoot (R., Utah), and Rep. Willis C. Hawley, (R., Ore.). While intended to help mostly farmers, the legislation soon became subject to a special-interest feeding frenzy. Tariffs were raised on more and more products, including even tombstones, as lobbyists persuaded members of Congress to protect local industries. The result was the highest tariff in U.S. history, except for the Tariff Act of 1828.
This was economic folly of a high order. Tariffs are taxes, and taxes are always a drag on an economy. More, when the bill passed and was sent to the president, on June 13, 1930, the U.S. economy was already in recession, with gross domestic product falling and unemployment rising.
IF ONE COUNTRY INCREASES TARIFFS SHARPLY, its trading partners usually will retaliate—even if it isn’t in their best interest. Many countries, including Canada, then our largest trading partner, didn’t even wait for Smoot-Hawley to pass before raising tariffs on U.S. goods.
More than 1,000 economists sent President Hoover a petition asking him to veto the bill. Henry Ford called it an “economic stupidity.” Thomas Lamont of J.P. Morgan & Co. wrote that “I almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley-Smoot Tariff. That Act intensified nationalism all over the world.”
Hoover, economically sophisticated and appalled at what had come out of the legislative meat grinder, denounced the bill as “vicious, extortionate, and obnoxious.” But, under intense political pressure from Republicans in Congress, he signed it into law.
The result was disaster.