04/27/08 Another Great Depression?
Friday, 25 April 2008

Another Great Depression?

 Some politicians propose moves that could plunge us into another Great Depression.

            If you think I exaggerate, take some time to read about the last one.
            One of the biggest mistakes that pushed us into it was when we stifled free trade with other countries. In 1930 Congress passed the Smoot-Hawley Tariff Act. President Hoover signed it.
            The act was meant to protect us from foreign competition. Tariffs would protect American workers and industries. They would keep us from shipping American jobs abroad. They would protect us from the ravages of globalization.
            As soon as we erected tariffs, other countries retaliated. Our tariffs kept their products out. Theirs kept ours out. World trade shrunk like a prune overnight. The act was a disaster.
            Next, Hoover did away with the tax cuts of the Coolidge administration. These tax cuts put a lot of the roar in the Roarin' Twenties. The economy surged. Unemployment fell in half.                    Well, we couldn't have so many folks getting rich. Idiots called for higher taxes on the them. Hoover caved and raised the tax rates.
            Disaster.
                    These two moves pushed the country into depression. We pulled a lot of the world in with us.
            Does any of this sound familiar? It should. Politicians today call for the same sorts of measures.
            They want to smother Nafta. Curtailing Nafta is, pure and simple, curtailing international trade. They are also going out of their way to keep us from signing a trade pact with Colombia. 
            Nafta has boosted North American trade phenomenally. If you don't believe me, Google "Nafta success" and read some of the data.
            Does not matter. Trade unions hate it and want it dismantled or trimmed. They make arguments identical to the arguments against free trade in the 30's. And some politicians react the same way pols did back then.
            Meanwhile pressures build everywhere to throttle globalization on various fronts.
            Politicians also want to raise our tax rates. Just like they did in the early 30's. The country's economy was already slowing - thanks to the tariff war. The pols karate chopped it with shockingly higher taxes.
            Just what our pols suggest now. While the economy lags.
            Does no one read history?
            This is not difficult history. Academics will tell you it is. They will parse and take microscopes to nitty gritty. They will posture for their fellows with obtuse treatises.
            The important facts are big as a whale.
            Hoover and Congress threw up trade barriers. That caused other countries to follow suit. Those moves brought international trade to a standstill. That standstill threw millions out of work.
            And Hoover and Congress ended the Coolidge tax cuts. That punished the rich. The rich stopped investing in ventures. And down the toilet went the economy.
            Two things of note: First, the benefits from the tax cuts in the 20's were as plain as the dome on Congress. As plain as the benefits from the Reagan and Bush cuts. Second, over 1000 economists petitioned Hoover and Congress to scuttle the tariff bill.
            The politicians paid no attention to them. They listened to labor instead. They listened to those who envied the rich.
            One year after Smoot Halley unemployment went from 7.8 to 16 percent. Next year it rose to 25 percent.
            And today our politicians are on the verge of repeating those moves. And proud of it.
            From Tom...as in Morgan.                   
                For more columns and for Tom’s radio shows (and to write to Tom): tomasinmorgan.com
 

Tom Morgan

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