Thursday, April 10, 2008


Wall Street Journal recently reviewed (link) the part of the economic agenda proposed by Democratic presidential candidates compared to Herbert Hoover's destructive statist policies that played a central part in searching the origins of the Great Depression. In fact, nearly every economic history textbook chapterizes Great Depression as a consequence of market failures that turned into the economic crash of the 1930s. Going back to the factual side of analysis, Hoover's economic policies were far from being passive and resilent. In 1930, he signed the notorious Smooth-Hawley Act, raising tariffs and other barriers to international trade. In 1932, he outlawed Coolidge-Mellon tax cuts, raising top marginal income tax rate from 25 percent to 63 percent. The combination of an uncompelling macroeconomic policy prolonged the recession into economic depression.

The Democratic presidential candidates seem to emulate Hoovernomics considerably. Both, Obama and Clinton, proposed trade restrictions, claiming that NAFTA is the ground reason for an anemic job growth. Hillary Clinton proposed a significant tax increase on dividends while Barack Obama would eliminate the income cap and raise capital gains tax, getting closer to the point where he'd beat-up Hoover's disastrous statist economic policy.

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