Sept. 12 (Bloomberg) — Herbert Hoover will spook Mitt Romney yet. That's the hope of Democrats and worry of Republicans in the 50-odd days left in this presidential campaign.

At a time when everyone hopes the economy will finally be changing for the better, the very mention of the businessman who was president when the economy turned so bad has the capacity to unnerve. The specter of the 31st president may haunt the Romney campaign, but not necessarily for the reasons usually mentioned.

The common reference is to the "businessman's curse." Hoover first came to politics because of a spectacular record in business. As a mining engineer in the gold-standard years, he increased world growth by literally increasing the supply of gold on which growth was based. Like Romney today, Hoover derived satisfaction from large comprehensive projects, and like Romney he often served as a consultant and dealmaker.

Bain & Co. and Bain Capital, with their penchant for hiring Stanford graduates, might have hired the energetic Hoover, had he graduated in the Class of 1995 instead of the Class of 1895, which happened to be the new university's first class. Yet somehow under the businessman Hoover, business died: The stock market fell 90 percent and unemployment rose to 20 percent. Electing businessman Romney, the contention goes, would risk a repeat.

Embrace Austerity

This argument, comparing resume to resume, seems contrived. But there is other history related to Hoover that does haunt this election. Many voters today who have no idea when Hoover served as president, let alone where he went to school, believe that in coming years the federal budget should be cut, recession or not. That is why the Republicans dared to pick Representative Paul Ryan as their vice-presidential nominee. The voters know Ryan's middle name is Budget. They liked it when he said "we have to stop spending money we don't have." In other words, it's time for government austerity.

But since Ronald Reagan's time, austerity has been a pejorative. Every Republican consultant worth his salt has counseled party candidates to avoid the phrase "austerity" and to speak about "growth." Part of this practice has to do with political reality: "Austerity" sounds negative, and in the past candidates who have spoken more positively have won. This is the "Morning in America" insight. The basis for Republican skittishness about austerity is the evidence that Hoover's austerity made the 1930s Depression great.

As it happens, however, that evidence does not exist. Hoover failed to practice austerity in the most literal sense, cutting government size. Federal expenditures had been dropping before he came to office, even during recessions. But they rose vigorously during his presidency, from $2.9 billion in fiscal 1929 to $4.8 billion for fiscal 1932.

Many government policies, including those advocated by Hoover, contributed to the deepening of the Great Depression. Those policies included procyclical tightening at the Federal Reserve, tight credit, federal pressure on businesses to keep wages up despite declines in profits, and tariff increases. But federal austerity in budgeting wasn't one of them. Franklin Roosevelt, Hoover's opponent in 1932, assailed the Republican incumbent as a big spender who conducted an "orgy of inflation."

Hoover spent decades underscoring his aversion to stark austerity and pure laissez-faire policy. His contempt for laissez-faire came out well before the Great Depression, in a 1922 book, "American Individualism." Hoover, then commerce secretary, announced that the U.S. had already abandoned this policy, and he deemed private property a fetish. After his defeat in 1932, Hoover took pains to note that as president he had sought the opposite of austerity, as Robert P. Murphy at the Ludwig von Mises Institute has pointed out.

Hoover's Curse

Andrew Mellon at Treasury, he allowed, might advocate fire sales and liquidation, he wrote, but "other members of the administration, also having economic responsibilities" — Treasury Undersecretary Ogden Mills, Roy Young of the Federal Reserve Board, Commerce Secretary Robert Lamont and Agriculture Secretary Arthur Hyde — "believed with me that we should use the powers of government to cushion the situation."

As long as Republican leaders suggest — out of assumed knowledge, political expedience or intellectual laziness — that "Hoover austerity" and "Hoover laissez-faire" were real, and as long as they suggest that those policies caused the Great Depression, the same leaders will have a hard time bringing themselves to showcase Ryan's cutbacks. You can bet your copy of "American Individualism" that Romney speechwriters are calibrating the candidate's words to be sure they don't sound too austere.

Ryan, however, does see some virtue in government austerity, and understands that austerity isn't always an alternative to growth, but may rather be a cause of growth. There the rift between Romney and Ryan that Democrats pray for may emerge. That, in turn, will confuse and put off voters. They hesitate to get behind a party that hasn't made up its mind on the basics of the business cycle.

But it's also possible that with Ryan comes revision. The Republican strategists may finally widen their horizons beyond Reagan, and abandon some superstitions and confusions. With enough courage on Ryan's part, that shift in historical outlook may happen even in the next 50 days. In that case, Hoover won't have spooked the Republicans after all.

And Ryan will have freed the party from an old ghost.

(Amity Shlaes, a Bloomberg View columnist, is the director of the Four Percent Growth Project at the Bush Institute and the author of the forthcoming "Coolidge." The opinions expressed are her own.)

© Copyright 2012 Bloomberg