"You Don't Raise Taxes During A Recession" (Reagan, gasoline, highway)
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We spent $4 trillion in deficits, if we would have eliminated, or greatly reduced all taxes for small and medium businesses for two years, we would have seen a jobs explosion. Instead we saw thousands of pages of new costly, and confusing regulations, and we still see more regulations popping up each and every day, and a president lashing out all doctors, hospitals, corporations, and every company or family grossing $250,000 a year.
The gov't didn't spend $4T on stimulus. We spend $4T on the entire gov't in two years. Are you suggesting we should have shut-down the gov't for two years? (i.e. no military, no SSA payments, no Medicare payments, closed the airports, etc.)
It's laughable that you you suggest that Krugman doesn't rely upon fundamentals of economics. That's just absurd.
Let's be up front, Shlaes set out to marginalize FDR's success. It's hard to do that when history tells a different story. Except in the 1937-38 recession, unemployment fell every year of the New Deal. Also, real GDP grew at an annual rate of around 9 percent during Roosevelt's first term and, after the 1937-38 dip, around 11 percent.
So when the price of something is raised, less gets demanded. FDR worked to raise the price of goods and services; economic activity suffered. FDR worked to raise the price of labor; employment suffered. Shlaes details the effects of nonsensical regulation that had a terrible effect on jobs, employment and incomes.
Can we separate out "the New Deal" as we think of it today, Social Security etc., from the broader economic policy decisions made by Roosevelt? A criticism of Roosevelt's economic policy is not a criticism of everything he did.
Then as now, people who acquired assets by meeting the needs of the rest of us for goods and services had a tough time with the rhetoric--Obama is the first president since FDR to voice such an antagonistic view of capital. And let's stipulate that capital at work is good for everybody--FedEx employees would not have much value or pay without the terminals and airplanes and trucks; Caterpillar employees would have a tough time putting those machines together out in a field somewhere. The apparent presence now of a capital strike, as it was known in the 30's, is evidence that the policy environment is not conducive to a thriving economy.
I recommend that you read the book instead of relying on leftwing appraisals of it. There is ample support for the first paragraph of this post, and it represents mistakes that are being made again by Obama.
So when the price of something is raised, less gets demanded. FDR worked to raise the price of goods and services; economic activity suffered. FDR worked to raise the price of labor; employment suffered.
Oye vey. That period, for which we are describing, was a deflationary period -- prices and labor rates were falling. Encouraging inflation (e.g. rising prices and wages) was a good thing to combat deflation.
This is just another example of how Shlaes is being misleading.
Oye vey. That period, for which we are describing, was a deflationary period -- prices and labor rates were falling. Encouraging inflation (e.g. rising prices and wages) was a good thing to combat deflation.
This is just another example of how Shlaes is being misleading.
I appreciate your comment, but the byproduct of the battle against deflation was higher unemployment and lower economic activity. I don't think it is a matter of being misleading.
While you are technically correct, ("tax rates were raised during the depression.") you need to get your timeline right. Top rates prior to the Depression were lowered from 73% to 24% and it wasn't until 1932 -- when the Depression's toll already devastated the economy (GNP dropped 50%), that Congress enacted the Revenue Act of 1932. Thus, if you trying to prove that raising upper income tax-rates caused or contributed to the Depression, that fact doesn't do it, since the Depression was it's worst before 1932.
You also should understand the old line, "those who fail to learn history are doomed to repeat it." Hoover's policies sound like today's GOP proposals.
Hoover was a firm believer in balanced budgets, and was unwilling to run a budget deficit to fund relief programs. Hoover started the Mexican Repatriation program -- thinking that Mexicans were taking American jobs and forced 500,000 Mexicans in the U.S. back to Mexico.
Thus, what do we learn from the Depression? Balancing the budget makes things worse and taxes on the rich have no effect and blaming immigrants doesn't help either. The theory that raising upper-income tax-rates diminishes economic activity is merely a canard.
What we also learn is that government spending and not worrying about short-term debt coupled with jobs programs reverses economic decline.
I think you misunderstood me; my point was the lower tax rates contributed to the cause of the depression by causing massive spreads in wealth between the top and bottom of the spectrum.
Raising the top income tax rates was an attempt to level that inequality. We are facing the same paradox today.
While I differ with you on the thought that balanced budgets make things worse, the most important single issue to improve the economy is to put money back into the pockets of working people.
You do that by putting people back to work, and lessening the inflation that is the result of the wealthy driving prices due to their disproportionate income levels. Repatriating illegal immigrants would decrease the surplus labor force and put upward pressure on wages contributing to the process.
Economies turn very slowly and cause and effect are measured in decades not just a few years. The mess we are in now came from policies enacted decades ago.
Policies we implement now will affect the economy decades from now.
I keep hearing that you shouldn't raise taxes during a recession or economic downturn because it will make the economy worse. Is this really true? Which U.S recessions were taxes raised and what were the results?
Watch them. We're running a $1.4 trillion dollar deficit per year.
BJ, where is your evidence for any of what you say? What you write is just endless assertions.
Low taxes are the only thing keeping those people there. Why put pressure on them when they're already considering moving to the point of use and demand? It's not really that hard of a concept.
You need to study your history, the tax rates were raised during the depression.
In addition, we have always been in a global economy; it is not a new thing. The difference is before we used tariffs to protect our domestic workers and limit access to our markets, which are our biggest asset.
Yes but now it moves at the speed of light, literally. A banking transaction in Korea can be done with a bank in Colorado, near instantly.
If the amount of money saved in opening a plant closer to the resources it needs to make whatever it makes exceeds keeping it where it is, it's gone.
That's why, just like an economy of scale, you should be pushing "human rights" and "cell phone, Direct T.V., Netflix, food, housing, Medicare, Medicaid, etc rights," it will increase the burden on their economy just as fast, if not faster, than they could grow. Imagine 1.4 billion people wanting cheap housing, or anything for that matter.
The gov't didn't spend $4T on stimulus. We spend $4T on the entire gov't in two years. Are you suggesting we should have shut-down the gov't for two years? (i.e. no military, no SSA payments, no Medicare payments, closed the airports, etc.)
i think what is being suggested is that we cannot continue to spend 4 trillion at a pop and get away with it indefinitely.
if you don't reverse big government now, then when?
the government keeps growing and the private sector is shrinking.
just how many people can this economy handle unemployed and on food stamps?
“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” he said. “It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.”
- Senator Barack Obama, March 2006
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