LETTER: Don’t be fooled by GOP trickeryTo the Telegram: At the end of World War I, the economy invested heavily in manufacturing and throughout the “Roaring Twenties,” we saw rapid economic growth.
To the Telegram:
At the end of World War I, the economy invested heavily in manufacturing and throughout the “Roaring Twenties,” we saw rapid economic growth. However business mergers eliminated 6,000 independent companies until only 200 companies controlled half of our industries. Like today, the upper 1 percent controlled 40 percent of the wealth. When Coolidge took over in 1923, pursuing a non-interference by government philosophy, he lowered the top tax rate to 25 percent and for a time our economy boomed. When the stock market crashed in 1929, Herbert Hoover took over.
While Hoover was a humanitarian and although he authorized some interventions in the form of government programs, such as the Agriculture Marketing Act designed to help farmers, he failed to invest in large-scale relief efforts and sufficient stimulus to help the economy. In fact his failures increased the burden placed on Franklin Delano Roosevelt when he took control. However, Roosevelt quickly declared a bank holiday to stop a run on banks and introduced several federal programs to lower unemployment. These included the Civilian Conservation Corps, Farm Credit Administration, Federal Deposit Insurance Corp., Public Works Administration and Tennessee Valley Authority. Many of his programs, such as the Rural Electrification Administration, tackled infrastructure projects — such as bringing electric power to most Americans.
FDR, however, was not without fiscal prudence and several times cut spending when the economy began doing well for the sake of balancing the budget. This usually had a negative effect and delayed complete recovery. In 1937, economists attributed growth to stimulus spending at a slightly deficit level, but when FDR cut spending, the country slid back into a recession. Alternately, when he raised tax revenues to 79 percent and increased spending, the economy had a positive reaction. Roosevelt’s detractors accused him of trying to “redistribute the wealth” and many considered him a socialist, communist, or a fascist, just as critics of Obama have often characterized him. In reality, the main failure of FDR and Obama, is that, because of the severity of the economic crisis, complete recovery, had to happen slowly.
Despite those who claim that Republican policies rescued the economy just prior to World War II, the economy recovered because of the war itself as we borrowed and spent in order to build the armed forces.
Although Roosevelt lost some political power near the end of his term, our recovery was not due to some magical Republican policies. Unfortunately, the worst war in human history deserves the credit.
At the end of that war, America paid the price by ringing up a national debt 123 percent the size of the GDP. Although the top tax rate was raised to 91 percent and stayed at least 88 percent until 1963, America experienced the greatest economic boom in history up until that time. The first country to recover from the worldwide effects of the Great Depression was Sweden, which had followed a policy of deficit spending.