Much of the economic debate in Washington revolves around the silly Keynesian notion that politicians can stimulate an economy by borrowing money from the private sector and using the funds to make government bigger. That didn’t work for Hoover and Roosevelt during the 1930s, Japan during the 1990s, Bush in 2008, or Obama last year and this year, but the theory is convenient for politicians seeking ways to justify their natural tendencies. There are other factors that impact economic performance, however, and Amity Shlaes explains in the Washington Post that Obama is making the same mistakes as Roosevelt in some of these other areas. Here’s a blurb from her column, comparing Obama’s class-warfare tax agenda with FDR’s disastrous “soak the rich” law.
By fixating on the debt and stimulus plans, Obama and Congress are overlooking challenges to the economy from taxes, employment and the entrepreneurial environment. President Roosevelt’s great error was to ignore such factors — and the result was that sickening double dip. …Income taxes, the dividend tax and capital gains taxes are all set to rise as the Bush tax cuts expire. The Obama administration portrays these increases as necessary for budgetary and social reasons. …The administration and congressional Democrats are also striving to ensure that businesses pony up. …Roosevelt, too, pursued the dual purposes of revenue and social good. In 1935 he signed legislation known as the “soak the rich” law. FDR, more radical than Obama in his class hostility, spoke explicitly of the need for “very high taxes.” Roosevelt’s tax trap was the undistributed-profits tax, which hit businesses that chose not to disgorge their cash as dividends or wages. The idea was to goad companies into action. The outcome was not what the New Dealers envisioned. Horrified by what they perceived as an existential threat, businesses stopped buying equipment and postponed expansion. They hired lawyers to find ways around the undistributed-profits tax. In May 1938, after months of unemployment rates in the high teens, the Democratic Congress cut back the detested tax. That bill became law without the president’s signature.
[…] the more I studied economics and public policy, I learned that Herbert Hoover and Franklin Roosevelt were two peas in a failed big-government pod and deserve membership in that Hall of […]
[…] the more I studied economics and public policy, I learned that Herbert Hoover and Franklin Roosevelt were two peas in a failed big-government pod and deserve membership in that Hall of […]
[…] the more I studied economics and public policy, I learned that Herbert Hoover and Franklin Roosevelt were two peas in a failed big-government pod and deserve membership in that Hall of […]
[…] There are very simple steps that almost all rich people can take to dramatically lower their tax liabilities. So Hillary and the rest of the class-warfare crowd should think twice before repeating FDR’s horrible tax mistakes. […]
[…] that’s precisely what we got from Presidents Hoover and Roosevelt. Thanks to protectionist policies, higher tax rates, a bigger burden of government spending, and […]
[…] that’s precisely what we got from Presidents Hoover and Roosevelt. Thanks to protectionist policies, higher tax rates, a bigger burden of government spending, and […]
[…] the more I studied economics and public policy, I learned that Herbert Hoover and Franklin Roosevelt were two peas in a failed big-government pod and deserve membership in that Hall of […]
[…] the more I studied economics and public policy, I learned that Herbert Hoover and Franklin Roosevelt were two peas in a failed big-government pod and deserve membership in that Hall of […]
[…] the more I studied economics and public policy, I learned that Herbert Hoover and Franklin Roosevelt were two peas in a failed big-government pod and deserve membership in that Hall of […]
[…] in her analysis. I would have pointed out that Keynesian stimulus didn’t work for Hoover and Roosevelt in the 1930s, Japan in the 1990s, or Bush in 2001 or […]
[…] the Great Depression with their tax-and-spend, interventionist policies (see here, here, here, here, here, here, and here). But I’ve only once waded into the deeper economic issues. But a new […]
[…] the Great Depression with their tax-and-spend, interventionist policies (see here, here, here, here, here, here, and here). But I’ve only once waded into the deeper economic issues. But a new […]
[…] the policy has not yet been unveiled. These two proposals are in addition to the other stimulus/job-creation/whatever-they’re-calling-them-now proposals that have been adopted in the past 20 months. And […]