This Austrian strain in American thinking about the inevitability of cycles, the centrality of the entrepreneur, and the importance of failure, coexisted with and was boosted by another line of American economic thought that stressed the need for a policy of “sound finance.” Favored by the banking community, these ideas reinforced the Austrian flank by insisting that business confidence, the key to supply-side growth, would only be restored if the government credibly signaled that it would allow the emetic process to unfold as it had to via austerity. While temporary relief of the symptoms of unemployment could be countenanced, the state’s role in such moments devolved to balancing the budget, even raising taxes in a recession if this was deemed necessary, to restore the investor confidence. During 1931, the last year of his administration, Hoover did exactly this to signal resolve in the face of financial difficulties. The result was the worst depression in American history.

Mark Blyth, Austerity, loc. 326