President George W. Hoover is More Like It

Conservative Hugh Hewitt has a column over at Townhall entitled President Barack Hoover. Hewitt labels Senator Obama as being Hoover-like based on his claim that Obama has suggested a tax increase during a severe downturn in the economy. Comparing Obama's proposed net decrease in taxes to Hoover's oppressive tax increases is, of course, a silly exaggeration.

The Revenue Act of 1932, signed into law by Republican President Herbert Hoover, is generally credited with worsening the impact of the great depression. This Act increased income tax rates punitively across the board on corporations, estates, and individuals in most tax brackets. The chart below shows the tax increases on individuals included in the Revenue Act of 1932. I've added a column converting 1932 dollars to 2007 dollars for illustrative purposes:

As shown in the chart above, the tax increase enacted in 1932 was extremely progressive in nature. That is to say, the more money you earned the greater the tax rate paid. For instance, someone earning $10,000 in 1932 (the equivalent of $151,345 in 2007 dollars) saw their tax bill increase by 25%. Someone earning $16,000 in 1932 ($242,151 in 2007 dollars) saw their tax burden increase by a whopping 62.5%.

Let's compare for a moment Hoover's 1932 tax increase to the overall net tax cut proposed by Barack Obama. Whereas Hoover increased taxes dramatically on everybody making more than the equivalent of around $90,000 in 2007 dollars, Obama is actually proposing rates that would see 95% of Americans paying the same amount or less in income taxes. Whereas Hoover increased taxes on those making $242,151 in 2007 dollars by 62.5%, Obama is merely suggesting that tax rates on people making more than $250,000 per year return to pre-Bush tax cut levels. Obama's tax proposal will result in a tax cut for most Americans with those making the most money seeing a small increase. Let me repeat my point in my best Joe Biden voice: Obama's plan on the whole is actually a tax cut.

Hewitt's ideology appears to be that of your typical trickle-down economist. These folks like to believe that putting more money in the hands of the wealthy is more productive for the economy than putting that same amount of money in the hands of the middle and working classes. This is, of course, malarkey. I've long argued that if you want to stimulate our consumption-based economy the way to do it is by putting more money in the hands of people who have the least. This is because people who are struggling will spend every cent you return to them in tax cuts on paying bills and/or purchasing items they have deferred buying. The wealthy, on the other hand, are less likely to spend every cent and much more likely to simply put the money in the bank.

History, to the chagrin of conservatives like Hugh Hewitt, will much more likely see George W. Bush as being the apt parallel to Herbert Hoover. Hoover, a Republican like Bush, was at the switch during the market crash of 1929. Hoover, as Bush is now in trying to fix our broken economy, flailed about quite impotently in an attempt to stem the ill effects of the Great Depression. Interestingly, Hoover's first instinct a month after the crash was actually to enact a Bush-like cutting of taxes. A brief glance at history points to George W. Bush as being our generation's Herbert Hoover. Barack Obama, in a thought which is undoubtedly horrifying to conservatives, is actually much more likely to be our generation's Franklin Roosevelt. Ironically, it is Republican George W. Bush who has already kicked off a sort of neo-FDR-ism with his unprecedented government interventions in the economy in recent months. Couple that with voters embracing Obama's "health care is a right" mantra and you have the makings of a New New Deal.