Guy Pacot: FDR’s folly a lesson for today
Here’s what’s missing from the letters proclaiming the New Deal to be a success. Raising taxes, plain and simple. The reason there was a huge economical collapse was not only due the government trying to dictate the rules of business (sound a little familiar with TARP?), but also in raising taxes on the wealthy and business. It was Hoover’s huge mistake to raise the taxes on the wealthy to 63 percent that caused the even greater financial meltdown that got FDR elected. FDR trumped Hoover’s tax by taking the tax on the wealthy to 75 percent and then to 91 percent ” neither of which worked. He also supported legislation making it virtually impossible for corporations to hold any kind of meaningful reserves (Undistributed Profits Tax).
In his book, “FDR’s Folly,” (endorsed by Nobel Prize winning economists Milton Friedman and James Buchanan) Jim Powell of the Cato Institute points out the big flaws of FDR. He closed the big bank chains in favor of single-branch banks (that actually started the problem), he expropriated private gold holdings, he marked up gold prices in dollars in an effort to raise agricultural prices that ended up devaluing the dollar. The New Deal also fostered industrial collusion to keep prices up and these were challenged in antitrust suits which eventually lead to this practice encouraged by government intervention to be ruled unconstitutional.
All these reasons make much greater sense for a prolonged period of Depression than the absence of WPA participants on the employed rolls. President Obama and Congress will be telling the American people this week that they will be raising taxes on small business. They will also be announcing that they will either immediately repeal the Bush tax cuts for the wealthy or letting them expire in 2010.
It’s plain to see the association between the current stimulus plan and the New Deal. We can only hope that we will not experience the same outcome now.
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