The United States economy is on the mend—but we are nowhere near out of the woods.
We are at roughly the same point, economically, as when President Herbert Hoover intervened after the 1929 stock market crash in an attempt to “save” American jobs. Instead of saving jobs, however, the combined policies of Hoover and Franklin D. Roosevelt pushed us into the Great Depression.
Today, Joe Biden’s tax and regulatory policies would repeat Hoover’s and FDR’s worst mistakes—with the same results.
At the height of the Great Depression, in 1933, the U.S. unemployment rate reached nearly 25 percent. However, as Thomas Sowell and Milton Friedman have told us for decades, it’s a myth that the Great Depression was caused by the private sector.
Indeed, despite the stock market crash in October 1929, Sowell writes that “unemployment never reached double digits in any of the next 12 months after that crash. Unemployment peaked at 9 percent, two months after the stock market crashed—and then began drifting generally downward over the next six months, falling to 6.3 percent by June 1930.”
The federal government made three egregious errors that led to the Great Depression. Starting in June 1930, Hoover signed the Tariff Act of 1930, famously known as the Smoot–Hawley Tariffs. That legislation resulted in a trade war that reduced worldwide economic activity and, rather than saving American jobs, it cost jobs—including those of Sen. Reed Smoot (R-Utah) and Rep. Willis C. Hawley (R-Ore.), both of whom lost their seats in 1932.
Before he left office, Hoover increased spending by so much so that Roosevelt campaigned against him in the 1932 election by saying that Hoover’s spending was socialist in nature. To “pay” for the increase, Hoover’s second mistake was to raise the top income tax rates to 63 percent, from 25 percent. He also raised the estate tax and the corporate tax rate to nearly 15 percent.
The third government blunder was the Federal Reserve allowing the money supply to shrink by more than 30 percent in the early 1930s.
In response to those job-killing actions of the government, the unemployment rate shot up to more than 20 percent and stayed above 14 percent until 1940.
In other words, the real history of the Great Depression was that the private sector was recovering until Hoover, FDR, and others acted to “save” the economy. By raising taxes and tariffs, along with the blunders of the Federal Reserve, government tanked the economy, tax revenues fell, and the Great Depression ensued.
Is it possible that Biden has forgotten that history? Or that he just never knew it?
In either case, unemployment in the United States, as of this writing, is in the double digits—significantly higher than the 6.5 percent mark before Hoover intervened to save us. The world economy is also in a deep recession, much like it was in the 1930s.
To make matters worse, states, counties, and cities across the country are facing major deficits—headlined by California’s projected $54 billion deficit. That means governments across the country will be raising taxes this fall, which will create a drag on economic growth.
- An income tax hike on individuals to 39.6 percent from 36 percent
- A Social Security payroll cap increase—resulting in an effective tax rate on some individuals above 50 percent. In places such as California, the combined federal and state tax rates would match the Depression-era 63 percent.
- A minimum wage increase
- A corporate tax increase to 28 percent from 20 percent
- A capital gains tax increase to 28 percent or higher from 23.8 percent
- A doubling of the tax on foreign income
- Untold Green New Deal regulations, and
- A similarly untold war on energy
Fortunately, the Federal Reserve isn’t repeating its mistakes of the 1930s. However, the combined effects of the Biden taxes and regulations would surely be as bad, if not worse than the combined Hoover and FDR mistakes.
Indeed, Biden’s policies for the economy would be the equivalent of handling a struggling swimmer a set of weights. They make no economic sense and neither would a Biden presidency.
Biden wouldn’t save us any more than Hoover. Even if Biden hasn’t learned, hopefully, America has learned from the past mistakes and won’t elect him or any other Democrat pushing Depression-era policies.
