Oh, well. Another myth blown to dust. But see below for the rest of the story.
...FDR did not get us out of the Great Depression—not during the 1930s, and only in a limited sense during World War II.
...Roosevelt died before the war ended and before he could implement his New Deal revival. His successor, Harry Truman, in a 16,000 word message on Sept. 6, 1945, urged Congress to enact FDR's ideas as the best way to achieve full employment after the war. Congress—both chambers with Democratic majorities—responded by just saying "no."
Instead, Congress reduced taxes.
...By the late 1940s, a revived economy was generating more annual federal revenue than the U.S. had received during the war years, when tax rates were higher. Price controls from the war were also eliminated by the end of 1946. The U.S. began running budget surpluses.
Well, at least that's PART of the story. The rest?
During WWII, industry and commerce in Europe was .....ahhhh..... severely damaged, particularly in Germany and France, but also in Italy and England. The US financed the rebuilding of Europe--and US factory production met a good hunk of that demand.
So yes, it's counterproductive to hike taxes (ye gods! 94%!!!) when trying to prime the 'demand' side.
It's also handy to have the only fully-functioning industrial sector when industrial output is required worldwide.
Where does the WSJ find these people? Hillsdale College this week I guess:
ReplyDeleteAnyway, a few things real quick since the Folsom duo that wrote this gem doesn’t really deserve much of my time. Notice how the authors of this op-ed use the 20% unemployment figure from 1939. Naturally, they fail to mention the unemployment rate and GDP growth rates during FDR’s first term (1932-1937) when the unemployment rate went from 25%+ down to approx. 14% and GDP growth averaged around 7% per year with some years almost hitting a blistering 10% GDP growth rate. Notice how this article fails to talk about the time period from 1936-38 where the Republican controlled Congress forced FDR into balancing the budget which promptly threw the economy into a tailspin and unwinding almost all of the progress made in employment and GDP growth during the previous 6 years. The authors must have forgotten that part of course.
Secondly, it’s bad enough that the authors simply fail to mention that the 95%+ income tax rate was enacted to raise revenues for that little thing called World War II in 1944-45. There was a WAR going on! What’s worse is that they also fail to point out that top income tax rates remained above 90% for most of the 1950’s and 1960’s too! You know, the “golden age” of American economic expansion. If these tax rates were the main reason for remaining in depression during the 30’s, how did we manage to stay out of Depression for the next 20 years with tax rates only marginally less than during the 30’s? You can’t use Europe’s destruction forever you know. Most of Europe was back up and running within about 5 years.
Finally, the authors seem to be trying to make the argument that government spending on armaments and military personnel did, in fact, bring about full employment during the early 40’s but it would have been better for us if we had not done so because these jobs were simply temporary in nature. In short, government spending got us out of the Great Depression, albeit, temporarily……
Huh?
Well that would make sense if they didn’t just spend the first half of their article saying that FDR’s government spending DIDN’T get us out of the Great Depression. So did it or didn’t it?
The problem here is that the WSJ op-ed page is laced with hacks who don’t know their history from there ass. I’d hold off on changing up the history books Dadster………
top income tax rates remained above 90% for most of the 1950’s and 1960’s too! You know, the “golden age” of American economic expansion. If these tax rates were the main reason for remaining in depression during the 30’s, how did we manage to stay out of Depression for the next 20 years with tax rates only marginally less than during the 30’s?
ReplyDeleteKinda depends on what the marginal rate was on the BULK of US earners.
You and I both know that the middle class is 'where the money is' for tax purposes--proven by yesterday's JS article discussing Wisconsin's "tax-hell" status.
So yah, Carnegie, Ford, Mellon, and Rocky paid the 90% marginal (I doubt that Joe Kennedy reported his rum-running earnings); and they only paid that IF they weren't taking advantage of their extra-special 'gen-skipping' trusts, etc., yadayada, bought and paid for...
At the same time, it's clear that there is another problem that underlaid both the Depression and this recession: a bubble, un-managed, and un-poked.
Sort of agree.
ReplyDeleteIt's clear that there is another problem that underlaid both the Depression and this recession: the era of finanical deregulation PRECEEDING the bubble.
There is no asset bubble without the invention and implimentation of the CDS, modern day MBS, the ballon mortgage, 100% financing, etc.