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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: TigerPaw who wrote (5189)	11/10/2005 4:48:31 PM
From: TimF	Respond to of 541518

Call it what you want but it has the benefit of being true. Your right that the tax and tariff increases where not the initial cause of the downturn. The normal economic cycle resulted in the downturn beginning. But it wouldn't have been nearly as long or server without the government's reaction to it. The initial cause of the downturn was the pullback from the boom years in the 20s but then you push through a big tariff increase, and a big income tax increase, while the fed is strongly tightening the midst of a downturn and you are going to make it longer and more serve. Its not just a bad idea by the standards and beliefs of the Austrian school of economics that argues for less government intervention, its even a bad idea by the standards of schools (like the Keynesians) who advocate for intervention, because it was intervention in precisely the wrong direction. People can argue about whether wiser intervention would have helped more than laissez-faire, but either would have been better than what actually happened. Then FDR came along, raising taxes on the rich even more, while at the same time putting in place all sorts of economic regulations. So you get a depression of about a decade rather then something more like 1 to 4 years. The problems persisted until there was real coordination between business, labor, and the government. There was all sorts of force coordination by FDR starting at the beginning of his term. All it did was make things worse. The war effort stimulated demand and reduced unemployment (people were employed fighting the Axis) but it didn't make for a wealthy country. You finally had a complete recovery after the soldiers came back to a country that had removed much of FDR's regulation and government enforced "coordination". The coordination enforced by the most extreme parts of the new deal had been lifted, as had all the rationing and controls of the war effort. It might not have been as laissez-faire as the 20s but there was a lot more economic freedom, and all the resources that had been tied up in the war effort were free to produce goods and services for American consumers and businesses and to export to the rest of the world. Tim