From: pjm@anegada.sps.mot.com (Patrick J. McGuinness)
Subject: Re: What kind of recession we're in
Organization: Motorola Inc., Austin TX
Distribution: usa
Date: Sun, 26 Jul 1992 16:50:19 GMT

In article <1992Jul22.175313.21429@sco.COM> geoffg@sco.COM (geoff galitz) writes:
>fusco@ucsu.Colorado.EDU (Andrew Fusco) writes:
>>I agree that no one knows how to prevent recessions, but I definitely
>>believe we know how to get out of them. That is why Reagan wasn't blamed
>>for the 1982 recession. Bush knows what needs to be done for this one, too,
>>but the media created a panic last fall, which created the "double dip"
>>that we're in right now. 
>>
>>On the other hand, certain policies prolong a recession - or depression.
>>Roosevelt's policies actually worsened the depression, to the point where
>>it was so bad that only World War II could get us out of it. With Clinton's
>>messianic "New Covenant," we may slip into the same sort of depression
>>that Roosevelt presided over.
>>
>	I'm not trying to attack, but actually see this issue from another 
>viewpoint.  Can you explain why Roosevelt's policies made the recession
>worse?

"Roosevelt surely could not have succeeded politically with his
New Deal program of "Tax and tax, spend and spend, elect and elect"
had the Republicans admitted their tariff errors of 1929-1930.
[ Hoover also engaged in the error of massive tax increases
in 1932, with Democratic support.]
....
The GOP was still pushing domestic and international wedge increases,
so the voters looked upon Rossevelt as being at least half right.
In 1935, needing revenues for his spending programs and still unhappy about
deficit finances, Roosevelt pushed through a major tax increase that
lifted income-tax rates to a new high, 79% on incomes above $5 million.
In 1936, he was back again for taxes and revenues, now hitting not only
people with high incomes, but also sucessful business enterprises.
Congress gave him what he wanted, the economy slid into the 1937 recession,
and the new Congress ... finally took matters into their own hands
in 1938:
	Despite the President's objection, the Congress passed in May
	[1938] a Revenue Act which reduced the capital gains tax and
	the undistributed profits tax and provided for the latter to
	expire in 1939. The President crticized this action, but ...
	allowed it to become law. In June 1938, Congress enacted the 
	appropriations for the spending program.
		June [1938] was the bottom of the recession. Thereafter
	the economy improved gradually but visibly. However, in August
	1939, just before the economic effects of the European War began
	to be felt, production and employment were still a few percentage
	points below their mid-1937 peaks.
	(Herbert Stein, "The Fiscal Revolution in America".) "

Excerpted from Jude Wanniski, " The Way the World Works" p. 156.
	
In short: Hoover's errors, in passing the Smoot-Hawley  tariffs
and increasing taxes, were not reversed by Roosevelt. Cordell Hull
'chipped away' at the high tariffs, but Roosevelt increased taxes
to pay for his increased spending. The economy 'muddled through'
the 1930's, not really improving much from the low level of activity of
1932 (which was about a *third* les than economic activity in 1929.)
The continuation of poor economic performance up to 1939
shows that Roosevelt didn't end the depression or help the economy,
but just applied salve to the victims of the Government's own misguided
policies.

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P. McGuinness