The Impact of Economic Policy, a Historical Perspective

Discussion in 'Freedom and Liberty' started by Rockfish Dave, Oct 19, 2008.

  1. Rockfish Dave

    Rockfish Dave Monkey+++

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    Presidential Economic Policy and its Impact

    And much like the Great Depression politicians may make this worse. Finally, on top of the survey in uncertainty and collapse in credit we also have the specter of a damaging political response. One of the major factors compounding the Great Depression was that politicians moved to hinder free trade and encourage anti-competitive practices. The infamous Smoot-Hawley Tariff Act of 1930 was introduced by desperate US policy-makers as a way of blocking imports to protect domestic jobs, but helped worsen the recession by freezing world trade. At the same time policy-makers were encouraging firms to collude to keep prices up and encouraging workers to unionize to protect wages, exacerbating the situation by strangling free markets. The current backlash against capitalism could lead to a repeat, with politicians swinging towards the left away from free-markets. This happened after the Great Depression, it happened after the major recession of 1974/75 and I think it will happen again now. This will lock in the short-run economic damage from the current credit crunch into longer run systematic damage from anti-growth policies.

    So the current situation is a perfect storm – a huge surge in uncertainty that is generating a rapid slow-down in activity, a collapse of banking preventing many of the few remaining firms and consumers that want to invest from doing so, and a shift in the political landscape locking in the damage through protectionism and anti-competitive policies.

    Full article can be found here:

    Taxing Timing

    Under the political thinking of the day (and since nothing else was working) the federal government decided it was morally prudent to pursue a balanced budget. As tax revenue was plummeting along with economic activity in the period from 1929 to 1932 it was only natural to raise taxes to cover the mushrooming deficit.

    In 1932, Republican president, Herbert Hoover, with the support of the newly elected Democratic majority in the House of Representatives, passed the largest peacetime tax increase in the history of the United States. Marginal income tax rates were raised from 1.5% to 4% at the low end and from 25% to 63% at the top of the scale. A huge tax increase by any measure.

    Some people say the timing for this couldn't have been worse because tax increases are generally associated with decreases in aggregate demand for goods and services and the incentive to earn. But the low tax rates prior to 1932 had not prevented the drop in demand to date. At that point the situation was becoming so severe that anybody that still had a job had every incentive to earn, if only to keep it. The main obstacle to demand then was probably fear of spending! If you earned money, you saved as much as you possibly could and with bank failures everywhere, you probably hid your savings under the mattress. So maybe it was just as well to pay more out in taxes because then the government could spend it for you and stimulate the economy that way. But the tax increase did take money out of people's hands that could have been spent more "efficiently" if not equitably, so it is considered to be a factor, which prolonged the downturn. Under the circumstances the government should have simply borrowed and engaged in generous deficit spending

    Found here in it's entirety:

    Here is the good stuff:

    Bad Economic Policy has Happened Before

    (As a side note was the following mud slinging or visionary?)

    Did Hoover really subscribe to a “hands off the economy,” free-market philosophy? His opponent in the 1932 election, Franklin Roosevelt, didn’t think so. During the campaign, Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions of people on the dole. He accused the president of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt’s running mate, John Nance Garner, charged that Hoover was “leading the country down the path of socialism.”[4] Contrary to the modern myth about Hoover, Roosevelt and Garner were absolutely right.

    The crowning folly of the Hoover administration was the Smoot-Hawley Tariff, passed in June 1930. It came on top of the Fordney-McCumber Tariff of 1922, which had already put American agriculture in a tailspin during the preceding decade. The most protectionist legislation in U.S. history, Smoot-Hawley virtually closed the borders to foreign goods and ignited a vicious international trade war. Professor Barry Poulson notes that not only were 887 tariffs sharply increased, but the act broadened the list of dutiable commodities to 3,218 items as well.[5]

    Here is the source:

    Any one seeing parallels???????????

    Although I think it would be wonderful if no one ever went hungry, no one ever had to go without, everyone made a good living, etc...

    For Gov't to make this happen one would have to overlook the obvious moral hazards of taking the actions needed to ensure the preceding.

    "Moral hazard arises when people behave in ways to satisfy themselves, but because they don't bear the full cost, their behavior comes at the detriment of others."

    History has repeatedly shown that it is: at best counter productive and worst disastrous.

    Perhaps charity should be voluntary and not mandated and administered by government? Just a thought.

    Just in case you are wondering what the point is: Senator Obama's economic policy is: a page taken directly out of Herbert Hoover's play book, and look what happened.

    So is his charisma worth you and your family loosing their jobs, homes, etc.?

    Not convinced, just google (remember google is your friend)
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