The Great Depression remains the central economic event in American history. Even today, politicians invoke its memory. For example, Democrats routinely accuse George W. Bush of having economic policies like those of Herbert Hoover, on whose watch the depression began. Given its horrendous effects, accusing anyone of threatening a replay is about as nasty a charge that can be made in politics.
For Democrats, the story line is pretty simple. Republican policies in the 1920s brought on the depression and those of Franklin D. Roosevelt ended it. The former promoted tax cuts and laissez-faire economic policies; the latter raised taxes and instituted broad government regulation of the economy. Therefore, any time a Republican suggests tax cuts or deregulation, we are starting down the road to another depression, in the Democratic playbook. Tax increases and increased regulation, by contrast, are proven methods of preventing and reversing economic stagnation.
Against this, Republicans have never had a good response. In part, that is because some of their policies did in fact cause a lot of the harm that made the depression so long and deep. It was Republican appointees to the Federal Reserve Board in the 1920s that caused the money supply to collapse, thereby initiating a sharp price deflation. It was a Republican Congress and a Republican president who passed the disastrous Smoot-Hawley tariff, which triggered a worldwide trade war that led to a collapse of international trade. They also responded to rising budget deficits resulting from the depression by sharply raising taxes in 1932.
Roosevelt was quite right to attack Hoover during the 1932 campaign for failing to address the problems of deflation, protectionism and high taxes. On the last point, FDR sounded like a modern-day supply-sider in an Oct. 19, 1932 speech. "Taxes are paid in the sweat of every man who labors because they are a burden on production and are paid through production," he said. "If those taxes are excessive, they are reflected in idle factories, in tax-sold farms, and in hordes of hungry people, tramping the streets and seeking jobs in vain."
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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