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Politics : American Presidential Politics and foreign affairs
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To: DuckTapeSunroof who wrote (44060)7/28/2010 2:21:10 PM
From: TimF  Read Replies (1) of 71588
 
As for the supply-siders, it should be noted that neither Herbert Hoover nor the supply side patron saint, Treasury Secretary Andrew Mellon, committed the heresy of raising the tax burden, either. In 1929 Federal revenues were 3.7% of GNP and declined to 3.2% in 1932

Smoot Hawley was a tax increase (tariffs are taxes), and there where later tax increases signed in to law by Hoover and then by FDR.

Federal revenues declining as a percentage of GDP because that's what happens in a recession (and certainly one severe enough to be called a depression). Economic activity is generally suppressed. More people are at subsidence level, with no money to pay taxes. Progressive rate income taxes bring in less revenue because people with less income pay lower rates), taxes on investment. Investment taxes bring in less because less is invested. In this particular case tariffs brought in less since the downturn was world wide and trade dropped off dramatically (partially bot not solely because of Smoot Hawley).

None of that contradicts the fact that the higher rates helped suppress economic activity.

Another point, he describes the economic decline in terms of nominal dollars which exaggerates it a bit in a deflationary environment. Adjusting for deflation the decline is more like 29% rather than 43%. Of course that's still a truely massive decline, esp. in just a few years.

And I think his case against the monetarist point isn't nearly as strong as he thinks it is.

But I certainly agree with his main point that federal spending cuts where not the cause of the economic downturn (primarily because as he points out spending increased).
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