Thursday, April 03, 2008

Hoover <> Laissez Faire

The WSJ observes a common refrain from many of today's politicians is to hold, or imply, that Hoover caused the Great Depression by his hands-off approach. They then go on to argue that to avoid a similar situation, the government must do something (anything!). But in actuality, the facts belie their argument:
To hear Mr. Schumer and his fellow-traveling columnists tell it, Hoover's great policy blunder was to do nothing, all the while insisting that everything was fine. But the problem with Hoover's economic policy isn't that it was passive but that it was actively destructive.

In 1930, he signed the Smoot-Hawley Tariff Act, setting off a wave of protectionist retaliation that undid the globalization of the preceding decades and did far more harm to the world economy than the stock-market crash ever did. Two years later, amid a bad recession, he undid the Calvin Coolidge-Andrew Mellon tax cuts, raising the top marginal income-tax rate to 63% from 25%. The recession became a Depression.

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