Dan Mitchell responded to a blog post by Andrew Sullivan in which Sullivan implies that conservatives are pining for the good old days of Herbert Hoover. I don’t recall hearing any conservatives or Republicans say anything about returning to the policies of Hoover. He was a terrible president, and lately Republicans are constantly arguing against doing anything similar to what Hoover did. You see, Hoover was a big spender just like President Obama.
But maybe my memory was wrong. So I went to the Historical Tables of the Budget and looked up the annual spending data. As you can see from the chart, it turns out that Hoover increased government spending by 47 percent in just four years (if you adjust for falling prices, as Russ Roberts did at Cafe Hayek, it turns out that Hoover increased government spending by more than 50 percent).
This reminds me of when Obama was elected and Time magazine had Obama as FDR on the cover. Boy, who knew the folks at Time were so prescient. FDR’s policies were pretty much a continuation of Hoover’s. Now we have Obama following in their footsteps. It’s a shame these things aren’t taught in schools. If they were, perhaps we would have avoided the economic mess we find ourselves in today.
And please, don’t tell me it was the Bush tax cuts that caused our fiscal woes. That’s one of the things Bush 43 got right.
At Congress’ insistence, the tax relief was initially phased in over many years, so the economy continued to lose jobs. In 2003, realizing its error, Congress made the earlier tax relief effective immediately. Congress also lowered tax rates on capital gains and dividends to encourage business investment, which had been lagging.
It was the then that the economy turned around. Within months of enactment, job growth shot up, eventually creating 8.1 million jobs through 2007. Tax revenues also increased after the Bush tax cuts, due to economic growth.
In 2003, capital gains tax rates were reduced. Rather than expand by 36% as the Congressional Budget Office projected before the tax cut, capital gains revenues more than doubled to $103 billion.
The CBO incorrectly calculated that the post-March 2003 tax cuts would lower 2006 revenues by $75 billion. Revenues for 2006 came in $47 billion above the pre-tax cut baseline.
Here’s what else happened after the 2003 tax cuts lowered the rates on income, capital gains and dividend taxes:
- GDP grew at an annual rate of just 1.7% in the six quarters before the 2003 tax cuts. In the six quarters following the tax cuts, the growth rate was 4.1%.
- The S&P 500 dropped 18% in the six quarters before the 2003 tax cuts but increased by 32% over the next six quarters.
- The economy lost 267,000 jobs in the six quarters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.
The timing of the lower tax rates coincides almost exactly with the stark acceleration in the economy. Nor was this experience unique. The famous Clinton economic boom began when Congress passed legislation cutting spending and cutting the capital gains tax rate.
Read the whole thing. If you disagree, by all means, go leave a comment on Andrew Sullivan’s site. He concluded that we shouldn’t repeat the policies of Hoover. Oh wait, I checked and couldn’t find anywhere to leave a comment over there. I suppose I’ll let you leave your comments here, telling me why it’s so very important to continue implementing the policies of Herbert Hoover. It’ll be fun. And please, by all means, do not forget to turn on your all-caps and insult me personally; otherwise I may feel I’m doing something wrong.
H/T Gay Patriot, who notes that Hoover was no Reagan. Isn’t that the truth?