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Date:         Sun, 8 Nov 1992 11:49:00 EST
From:         PSICILIA@DREW.BITNET
Subject:      Re: Taxes and the Depression
Comments: To: politics@ohstvma.bitnet

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>From: "Michael J. McCarthy" <YEA003@MARSHALL.MU.WVNET.EDU>
>Subject:RE: Taxes and the Depression
>Date: Sat, 7 Nov 1992 23:50:00 -0400
>Message-ID:<tfilt380298@drew.edu>

>        Paul (PSICLIA@DREW) suggests that Clinton's proposed tax increase
>will harm America's economy.  For part of his evidence, he points to Herbert
>Hoover's 1931 tax increase.  He cites 1932 as the "wors[t] year of the Great
>Depression" and claims that "the economy went down the tubes because of the
>tax increase. . . ."  I wish to point out some flaws in this contention.
>
>        First, Song Weaver responded, "What is the difference between 1931
>and 1993 and what are the similarities[?]  How does how Hoover raised taxes
>relate specifically to the possible tax consequences of Clinton. . . ?"  This
>reply correctly points out that Paul has drawn a "reckless historical
>analogy."  It looks as if we may have a usurper to the title of History Czar,
>but an astute observation nonetheless.
>
>        Second, Paul's causal link between the tax increase and the deepening
>of the Depression is drawn a bit too tightly.  My library is thin on
>Depression/New Deal books, but Arthur M. Schlesinger suggests in Volume I of
>_The Age of Roosevelt_ that Hoover's waning support for public works played a
>major role in the continued decline.  Now I realize that Schlesinger's work is
>a dated (1957), so I will welcome dissenting opinions from more recent studies.
>
>        Third, and as Song Weaver again suggests, Hoover's tax increase
>and Clinton's proposal are not substantively analogous.  Although I cannot
>answer Song Weaver's question, "Were Hoover's taxes across the board, or
>limited to specific income groups?"  I can again cite Schlesigner, who claims
>that in actual practice, the 1931 tax increase had little effect on the
>wealthiest Americans, who in many cases simply chose not to pay.  J.P. Morgan
>himself failed to pay any federal income tax in 1930, 1931 or 1932.
>Therefore, Hoover's tax increase, which appears to have affected many wealthy
>Americans to only a small degree, and Clinton's proposed increase on those
>earning over $200,000 per year cannot be compared directly.
>
        Mike:
          Although Schlesinger may have not agreed with what I said,
many economists do, including Keynesians, and supply siders.  My point
was not historical but economical, so I think an Economic Czar should
answer the question.
          The only historcial flaw, which you were unable to point
out, and by the way which was very simple that the tax increase was in
1932 (not 1931), and the worst year was in 1933 (not 1932).  If such a
simple error can go unchecked, how can I be sure of what else you say
is true.
          Now, I will discuss the economic results of Hoover's tax
increase, as stated by Keynes and re-produce in an economics text.
Hoover raised taxes in 1932 in attempt to balnce the budget, believing
that the increase would raise a third more revenue.  However, he
failed to realize that this could cause a drop in GNP (which
occurred), which led to the severity of the Depression.  Look at
economic books and not historical books for such answers

-Paul