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This weeks post is going to be short and sweet. With our current recession showing more negative signs each week, I thought Chapter 15 had some useful advice for today’s leaders. In this chapter, Mr. Folsom looks at some of the things FDR should have done to get the United States out of the Great Depression. Two of those things stand out above the rest as useful for today.
Mr. Folsom spends Chapter 16 arguing when the Depression really ended. From my own personal reading, I would have to argue that it ended sometime after the end of World War II. However, that is a debate for another time. Mr. Folsom argues pretty successfully that the Depression was still in full swing during FDR’s first two terms. FDR radically changed our government, spent an incredible amount of money, and wasn’t able to get the United States out of the Depression. So what should he have done, and what can this teach us about our own modern day recession?
First, a 79 percent top tax rate was never going to spur growth. Much like today, if we want business to expand we must let people keep more of their own pay checks. In both cases, lower tax rates were (and are) required to get the economy going again. FDR new this. He even campaigned on it in saying,
“Taxes are paid in the sweat of every man who labors because they are a burden on production and are paid through production. If those taxes are excessive, they are reflected in idle factories, in tax-sold farms, and in hordes of hungry people, tramping the streets and seeking jobs in vain.”
While things aren’t as bleak today, I think lowering taxes today will do as much for our economy as lowering them in FDR’s day. When people keep more of their own money, they are able to spend it in wiser ways than the government can.
Secondly, FDR pledged to cut or “reduce the cost of current Federal Government operations by 25 percent”. He also stated that anyone entering his cabinet must take a pledge to support the Democratic Parties attempt to reduce federal spending. Obviously, once he entered office he ignored this. However, he made excuses for it every year as we read early in the book. That shows that FDR knew when he was running for election the first time, and when he was campaigning every year after that, that what voters wanted was a smaller federal government.
This holds true today. We need to reduce our spending. For every dollar the government spends, many dollars are pulled out of the private sector. These two steps, reducing taxes and reducing the federal government, would greatly improve our economy today. FDR knew it then, and we know it now.
For Next Week: Finish the book!