Monday, April 12, 2010
No New New Deals!
Burt and Anita Folsom sketch a bit of history in a WSJ article today. It's a truism among neoclassical economists that FDR's New Deal extended, rather than alleviating, the Great Depression. The Folsom's cast further light on how the Depression did end - World War II is commonly credited, but even FDR understood that war jobs were temporary and of little benefit to the country. He (and Truman) had one idea - to increase the New Deal alphabet-soup socialism even more after the war. A Democratic Congress had different ideas: cut taxes. With top tax rates at 94% for income tax and 90% for corporate taxes, it's not a stretch to say the U.S. was borderline socialist; nor is it a stretch to conclude that expansionary business had been strangled by the astronomical taxes and the complicated cost of avoiding them.