Return to Welfare; History, Results and Reform
(this was deleted from the original and so stands alone)
The Great Depression
But as many modern economists are now suggesting, and contrary to popular belief, Roosevelt's higher government spending on his many new programs combined with higher taxes and shrinking of state power actually prolonged and deepened the Great Depression. A good illustration of FDR's role in this can be found in Jim Powell's book, "FDR's Folly" (1). Today we are stuck with many growth retarding programs like Medicaid, Social Security, and countless others that have far outlived their useful (hurtful) purpose. These programs have and continue to drain trillions from our GDP and have fostered corruption by the powers given to the many created regulatory agencies.
But, in their eagerness to blame Roosevelt, Conservatives today often forget that Republican President Herbert Hoover is credited with triggering the Great Depression by drastically reducing the money supply, ostensibly in order to prevent it. He also responded disastrously by passing the Revenue Act of 1932 which increased the top income tax rate from 25% to 63% with the aim being to restore business confidence by reducing the deficit. The results of this tax increase was an even greater deficit, plummeting tax revenues and a greater Depression (5). If President Hoover had more gradually and reasonably tightened the money supply and cut taxes when the depression first hit, the outcome might have been far different.
Looking back it should be obvious something was amiss, as the Great Depression lasted over a decade, from 1929 to 1941(although the Great Depression had it's ups and downs too). Since the 1900s, excluding the Great Depression, 16 contractions in the economy have lasted an average of only 11 months (2). It is a shame that our public schools and political leaders of both parties portray Roosevelt as some kind of mythological economic hero. On the other hand, it has been suggested that by pursuing such erroneous economic policies Roosevelt siphoned away support from the growing Socialist/Communist party and their trademark presidential candidate Eugene Debs, which resulted in the marginalization of that party. Roosevelt supporters don't seem eager to debate the only plausible positive result of the Roosevelt prewar legacy.
Posted 8/25/06 (By Travis)
EBay online stores closing by the hundreds
8/24/06 Marketwatch
Hundreds of eBay Inc. merchandisers say they have closed their online storefronts, and some took their listings elsewhere, in the wake of a controversial [6%] fee increase eBay began charging earlier in the week.
This is of interest because the same phenomena occurs when government raises taxes. Substitute 'government' for eBay and 'businesses' for 'online storefronts' and it becomes more apparent how economic disaster occurs. What types of businesses are most hurt when government raises taxes?
A list of more than 700 eBay stores that have closed so far can be found on a Web site created by Melinda Burnett, an eBay seller living in Atlanta. The majority of eBay stores closing appear to be the smaller ones, just as eBay had hoped.
"A lot seem to be small, mom-and-pop type places." said David Yaskulka, the president of Harris Michael Inc. of Valley Stream, N.Y., and chairman of a committee of the Professional EBay Sellers Alliance, the main association of eBay sellers. "These are the less successful ones that see that eBay as no longer profitable because of the rate hikes."
Diligent readers will recall that in 'Settling the Small Business Hype', I described how vital small businesses are to job growth; they employ 41% of all US workers and are typically the fastest growing, hardest working, employers. Raising taxes hurts the poorest of these, the businesses just getting started, the ones in the most precarious situations, the risk takers, the poorer small business owners.
But wait a second, I thought the reason Liberals advocate tax increases was to help, not hurt the little guy? Generally, Liberals don't deny raising taxes hurts the bottom line of business, they just believe business will somehow magically 'absorb' and 'afford' the cost. But, as extrapolation of this ebay simulation indirectly illustrates, they do not 'absorb' and 'afford', they go under, file for bankruptcy, and lay off their workers, the result being that there are even more 'poor' and 'downtrodden' to take care of. Instead of aiding the poor, or making us more 'equal' by distributing wealth, liberals have instead created more poverty, by tearing down productive wealth creating members of society, creating incentives for folks to fall into poverty, and discouraging the impoverished from trying to improve their lot.
However, there is hope:
A number of former eBay merchandisers say they're shifting their listings to Amazon.com Inc. and its Google Base free classifieds listings, plus a host of other eBay competitors.
When states or cities raise taxes, there is always the opportunity to relocate, to 'vote with your feet', which is why cities like San Francisco and states like California and New York, Massachusetts, and New Jersey have been hemorrhaging businesses and hence population. When the Federal Government raises taxes or undertakes foolish schemes like a Nationalized, excuse me, Socialized, Healthcare system, there is nowhere to run, unless, of course, you can somehow find a freer country overseas. Good luck with that....
One last point, if such damage can be created on ebay with a 'mere' 6% hike in 'taxes', imagine what is was like when Herbert Hoover:
passed the Revenue Act of 1932 which increased the top income tax rate from 25% to 63% with the aim being to restore business confidence by reducing the deficit.
Yet, we are taught in public school that it was 'excessive capitalism' and erroneous 'laissez-faire economics', which were to blame for the Great Depression.
(Added to 'Settling the Small Business Hype' and 'The Great Depression')
Posted 3/31/08 ( by Travis)
Bernanke:
Federal Reserve Caused Great Depression
worldnetdaily.com
^ | March 19, 2008 | David Kupelian
Despite the varied theories espoused by many establishment economists, it was none other than the Federal Reserve that caused the Great Depression and the horrific suffering, deprivation and dislocation America and the world experienced in its wake. At least, that's the clearly stated view of current Fed Chairman Ben Bernanke.
In "A Monetary History of the United States," Nobel Prize-winning economist Milton Friedman along with coauthor Anna J. Schwartz lay the mega-catastrophe of the Great Depression squarely at the feet of the Federal Reserve.
Well, this is nice to see! However, does Bernanke apply this knowledge? Or does he believe that it was not the 'power of the Fed' to begin with that caused the great depression, but just how it was applied? He apparently believes he could do better:
The proposal would designate the Fed as the primary regulator of market stability, greatly expanding the central bank's ability to examine not just commercial banks but all segments of the financial services industry.
The Associated Press obtained a 22-page executive summary of the proposal. It seeks to make sense of the mishmash of overlapping oversight in which an alphabet-soup roster of agencies regulates banks, thrifts and credit unions.
Under the current hodgepodge, institutions that take deposits and are federally insured face multiple regulatory bodies. By contrast, hedge funds, private equity firms and investment banks endure substantially less regulation.
IMO, the more power given to Federal agencies to meddle in the affairs of the market, the more likely the Fed will cause another 'great depression'.
"The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy."
- Milton Friedman