At the height of the Depression in June, 1932, Republican President Herbert Hoover decided it was finally time to pay for the additional $1 billion of spending he had persuaded Congress to authorize earlier in the year. The economy was in a downward spiral, having shrunk 20% annually since the Crash of 1929. Unemployment was nearing 20%.
The fiscal year was just coming to an end, and it wasn’t a pretty site. Revenues had plummetted to $1.9 billion, as expenditures jumped to $4.6 billion. The resulting $2.7 billion deficit was the highest in the history of peace time America.
Hoover’s solution for the slide in revenue was to increase income taxes across the board, but especially for the “wealthy.” He persuaded Congress to pass the Revenue Act of 1932 just as the new fiscal year began, and he sat back, waiting for the extra revenues to start rolling in.
Why wouldn’t they?
After all, tax rates for those earning more than $1 million a year increased from 25% to 63%. At every level, the tax code was made “fairer” and more progressive. Estate taxes were doubled, and corporate taxes were also increased.
But a funny thing happened.
Total revenue didn’t increase a penny. The next fiscal year was a mirror of the previous pre-tax increase fiscal year–revenues remained stagnant at $1.9 billion, expenditures were kept at $4.6 billion, and an additional $2.7 billion was added to the deficit.
Barack Obama’s insistence that we increase taxes now on “the wealthy” because “it’s only fair” echoes the rhetoric Hoover used to secure Congressional passage of his ill advised and ineffective tax increase.
And Hoover’s financial recklessness–even FDR’s that followed–was mild in comparison to President Obama’s jaw-dropping profligate spending.
Debt, as a percentage of GDP was less than 20% in Hoover’s day. FDR brought it above 40% before the start of World War II. But Obama’s $5 trillion addition to the national debt in just three years has brought that figure to a peace time high. Our national debt is now 100% of GDP.
And, let’s not forget that on Friday Standard and Poor’s lowered our national credit rating from AAA to AA+, the first credit downgrade the United States has experienced since such ratings began in 1917.
And what solution do President Obama and his Democratic allies offer us to this fiscal disaster they’ve created?
Time to increase taxes on those evil owners of corporate jets.
Who knew when he was elected President three years ago that Barack Obama would become as hapless and irrelevant as Herbert Hoover was by the end of his term?
Michael Patrick Leahy is the editor of the Voices of the Tea Party e-book series and co-founder of Top Conservatives on Twitter and the Nationwide Tea Party Coalition. His new e-book, I, Light Bulb: A Death Row Testimonial, was published earlier this week. His new book, Covenant of Liberty, will be published by Broadside Books in spring, 2012. He can be reached on Twitter at @michaelpleahy .