Author Topic: Five Ways to Wreck a Recovery  (Read 1330 times)

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Offline Chris

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Five Ways to Wreck a Recovery
« on: August 19, 2008, 06:51:13 AM »
Five Ways to Wreck a Recovery
By Amity Shlaes
Monday, August 18, 2008; Page A11

Perverse monetary policy was the greatest cause of the Great Depression. But five non-monetary missteps were important in making the Depression great, and the same missteps damaged the global economy as well. While many are thinking about the Depression, few seem concerned about replicating these Foolish Five today:

<snip>

Today, international trade claims a sizable share of our economy. Bilateral free-trade agreements with Colombia or Panama are good insurance -- cheap steps that might prevent an expensive loss, that of the Western Hemisphere to Venezuela's Hugo Chávez.

Yet again, one party -- the Democrats, this time -- is cavalier. House Speaker Nancy Pelosi is blocking passage of these bilateral agreements. And another ambivalent politician -- Sen. Barack Obama -- has sent mixed messages to Canada about just how much he wants to roll back the North American Free Trade Agreement.

<snip>

Hoover more than doubled income tax rates, taking the top marginal rate to 63 percent from 25 percent. FDR hiked the top rate to 90 percent. Perhaps worse, Roosevelt's Treasury crafted taxes to punish business, including an undistributed profits tax and an excess profits tax, that ultimately sucked cash from a capital-starved economy.

Today, Democrats are planning tax increases that make Bill Clinton's hike look mild. The proposals start with lifting the cap on Social Security payroll taxes -- an effective increase in the top marginal tax rate of 6.2 percent, or for some 12.4 percent, all by itself. Add in the promised repeal of the Bush tax cuts and you have an additional 4.6 percent increase. Effective top rates approach 50 percent. There are also proposed increases for dividends and capital gains. Taken together, these will make the U.S. economy sluggish and more like that of Europe.

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