Class Warfare Blog

December 18, 2013

We’ve Been Here Before

The Republicans keep wanting to cut the federal budget and increase defense spending. Conservatives often point to President Warren G. Harding (1921-23) as a president who cut taxes and got a large economic boost out of it. Their basic argument is that President Harding cut taxes and government spending thereby turning a recession (the Recession of 1920-21) into the roaring 20’s.

Let’s, as they say, unpack this a bit.

Yes, Harding reduced the highest marginal income tax rates from 65% to 58% and then later to 25%, so, he did indeed cut taxe rates. And, yes, he cut government spending. But between 1920 and 1923, major national defense outlays dropped from $4 billion down to about $680 million while total government outlays dropped from $6.4 billion down to $3.1 billion. It was because of the military budget being slashed by 83% that the total budget diminished, the remaining civilian budget grew slightly.

This is hardly what today’s conservatives are recommending.

Listen, the situation was entirely different. The “Panic” of 1893 was still in memory and similar recessions (as we call them now) occurred in 1910-12, 1913-14, and 1920-21 (following the end of WWI, the demobilization allowing for the big defense cuts) and, of course, The Great Depression was coming in 1929 so, so much for the “success” of the “Roaring 20’s.”

Also, in the early 1920’s the United States was running a significant trade surplus as opposed to today’s massive trade deficit. And, Paul Krugman points out the recession that Harding “licked” was an inflationary one (unlike the current recession) which was addressed by the Federal Reserve by raising interest rates from 4.75% to 5% to 6% and then to 7% in June of 1920. When these interest rates were dropped (the standard procedure—raise rates to cool off the economy, lower them to stimulate it) shortly after Harding was elected the economy took off again. Harding also expanded the tax base, something today’s Republicans are adamantly opposed to. (Just Say “No” to Revenue Enhancement!)

So, the Repubs are right, their tactics have been tried before, but they can’t seem to come up with an example that is comparable. In fact, all of the examples one can come up with oppose what they are claiming.

So why is there so much support for their austerity tactics? Well, let me break it to you—there isn’t any real support, not from the general population, not from the majority of economists, and certainly not from the history books. The Republicans are able to do what they are doing for the simple reason that their wealthy paymasters want them to do it. The only “support” outside of the Republican Party for their policy ideas is from some in the media, primarily media companies owned lock, stock, and barrel by wealthy people or wealthy corporations, all of which are heavy donors to the Republican Party, because it is carrying their agenda for them.

The question always remains as to why ordinary Republican voters support the “all benefits for the rich” agenda of their party? Is it the sops they are thrown over social issues? Or are they old people operating on inertia (We’ve always voted the Republican ticket.), or . . . ? The shocking thing is that those ordinary Republican voters are voting against their own economic well-being and against what the Founding Fathers wanted in the way of our own self-government. They certainly didn’t want the country to be run only for the rich (although they were in favor of it being run by an elite). Possibly this is the meme still driving ordinary Republicans—cut welfare because all of those folks, the unwashed masses, are shiftless and lazy and unworthy, you know, black and brown.

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6 Comments »

  1. The question always remains as to why ordinary Republican voters support the “all benefits for the rich” agenda of their party?

    Easy: 1. They’ve bought the lie that they, too, will one day be wealthy beyond measure, and 2. They don’t understand what freedom actually means.

    Comment by john zande — December 18, 2013 @ 11:55 am | Reply

    • I don’t agree with #1 as about half of all repubs are of meagre means. I think they are being played along racial lines and distrust of guv’mint lines. #2 is debateable, too. Hey, my mother was a Republican! ;o) In the old days you were a Democrat when young, otherwsie you didn’t have a heart, but you were a Republican when old, otherwise you didn’t have a brain. But that was when we had Eisenhower and Nixon as examples of Republicans.

      Comment by stephenpruis — December 18, 2013 @ 12:06 pm | Reply

  2. Cutting the federal budget is not only common sense, it is good politics and ethically required.

    Further, national defense is the one duty of the government that is constitutionally mandated. America is unbeatable on the battlefield because of resources lavished on national defense.

    The Congress and the president have shown over a period of decades that they are maniac spenders. It is human nature to spend lavishly when using other people’s money. Significant tax cuts would limit the Washington DC crazies.

    And it is a first principle of politics first made famous by Niccolo Machiavelli that politicians act in their own best interest which is to acquire, maintain and increase political power. High tax rates mean more power and lavish wealth for politicians and a lower standard of living for everyone else.

    Tax cuts thus restrict the growth of political power and the enrichment of the ruling class at the expense of the common man.

    Most of the taxes acquired by politicians go to buy votes and secure the loyalty of interest groups. This is done through social programs.

    Social programs are financed through the redistribution of wealth from those who earned it to those who did not earn it. By definition that is stealing.

    When the government steals from its wealth producers in order to acquire, maintain and grow power that is called oppression.

    Oppression is unethical.

    Consequently, significant tax cuts are wise policy, politically healthy, and ethical.

    Comment by silenceofmind — December 18, 2013 @ 2:02 pm | Reply

    • You can’t possibly believe that. You say defense is the one duty mandated. What about the post office? What about the Congress and the Executive, those are prescribed in the Constitution. What are you talking about. The writers of the Constitution were dead set against a standing army yet you claim that “America is unbeatable on the battlefield” because of lavish spending? How much is too much? How much is too little?

      When the government steals from its wealth producers . . .” Really? “Steals” What happens when the wealth producers produce wealth by stealing, is that okay?

      Comment by stephenpruis — December 18, 2013 @ 2:19 pm | Reply

      • I said in my previous comment that national defense the one duty of the government that is constitutionally mandated.

        The government is comprised of all three branches, executive, legislative and judiciary.

        By saying, “the one duty of the government that is constitutionally mandated,” I am attempting to contrast the righteousness of federal spending on national defense with the oppression and political chicanery inherent in government spending on social programs.

        Cutting tax rates cuts government corruption and government oppression.

        Comment by silenceofmind — December 18, 2013 @ 6:23 pm | Reply

      • Wealth cannot be produced by stealing. Stealing, by definition is taking the earnings or assets or property that belongs to a person and giving it to someone else. Stealing redistributes wealth, it doesn’t create it.

        Capitalism is awesome because it is the only system in human history that presents mankind with the opportunity to produce infinite wealth.

        Capitalism has done more for poor people than any government program ever could.

        Government poverty programs are designed to enslave the poor, house them in concentration camps called urban ghettos, and make them feel so grateful for their enslavement that they always vote Democrat.

        Comment by silenceofmind — December 18, 2013 @ 6:29 pm | Reply


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