Critics have attacked us saying that Harding cut tax rates, but that he increased taxes overall by expanding the tax base…is this true?
He cut spending by 50%. End of story.
Ok thats good but I mean…citations? Substance?
I have watched this several times, but this is what is being crituiqued by the Keynsian…I guess I will do some digging
That would be a waste of time. He is playing you with the eternal skeptic routine.
I would suggest reading Daniel Kuehn’s recent paper published in the Review of Austrian Economics.
Read The Forgotten Depression of 1920 by historian Thomas E. Woods, Jr.
Jonathan M. F. Catalán, if you are referencing his paper criticizing Thomas Woods, Robert Murpy, and Jim Powell, then I disagree. He argues the policies carried out in the 1920-1921 depression were Keynesian (price stability being the goal). However, the Great Depression was the great empirical test that showed Keynesianism was a giant failure. He does not see that.
His name does not come up in the search engine.
Gero,
You disagree with what?
It’s true that Kuehn argues with a Keynesian perspective, and I certainly would not suggest paying blind faith to his argument. However, Kuehn’s broader point is that the Depression of 1920-21 is not empirical evidence either for or against Austrian theory or for or against Keynesian theory, and I think that that’s a point we should agree with (well, Kuehn is trying to defend Keynesianism from the idea that the Depression of 1920-21 proves Keynesian theory wrong, more specifically).
I would have made the argument on different grounds (methodological), since I don’t agree with much of Kuehn’s theory, but his paper is more about historical evidence rather than theory, anyways.
I disagree with reading it because he is wrong. It can easily mislead someone who does not see why his narrative is wrong. Yes, the Keynesian and Austrian prescription for the 1920-1921 depression were the same (austerity), but they differed in response to the 1929 stock market crash. Keynesianism was applied during the Hoover administration and expanded during the Roosevelt administration. The result was suffering for over a decade.
We’re not talking about the Great Depression, we’re talking about the Depression of 1920-21. This isn’t a discussion of the validity of a theory, but a historical discussion. If Woods’, Murphy’s, and Powell’s histories of 1920-21 are incomplete, and Kuehn’s paper shows us why, then there’s absolutely no reason to marginalize Kuehn’s paper.
Can you link the paper please?
The article hasn’t been published in print yet, and is available on SpringerLink under “online first”. Here is the abstract, with a link to download if you can. There is a free working paper version, IIRC (it’s longer than the published version, and contains things that Kuehn had to edit out), but I’m not sure where it’s located. Try putting the title into Google and see what comes up.
Btw, I’m not saying Kuehn is right (this is meant more for Gero)—on many things (including things he says in the paper) I think he’s wrong, and he and I argue all the time. However, I don’t think his paper should be marginalized just because you think false conclusions can be misleading. If you’re going to isolate yourself from criticism, and instead narrow your reading to things you conceive as correct, then I’m afraid that this strategy comes terribly close to placing blind faith on a particular vision. I prefer to compare and contrast, even if I am biased towards Austrian economics. Like I said though, a large portion of the paper is meant to review empirical data, and so that should be taken on its own (and compared to the data presented by Woods, Murphy, and Powell).
Search turned up nothing for me.
Google links to his blog, which has a link to the working paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1591030
Not all advocates of price stability are Keynesian. The price stability of the 20s was what I’d call Fisherite, since the head of the Federal Reserve, Strong, was a follower of Fisher, THE big advocate of price stability.
On the other hand, the Great Depression was triggered by Strong’s death, and the subsequent control of the Fed by advocates of the Real Bills doctrine, who contracted the money supply by 30%, a devastating blow to any economy.
There’s zero reason to think it would have happened without that change in Fed policy. At the very least, the marketplace is adept at adapting to government distortions that are at least predictable and consistent, and it was the change that was most problematic.
On the other hand, the Great Depression was triggered by Strong’s death, and the subsequent control of the Fed by advocates of the Real Bills doctrine, who contracted the money supply by 30%, a devastating blow to any economy.
Between what years? There’s evidence that the Federal Reserve actually tried to expand the money supply between late 1928 and through 1931; falls in the supply of money in those years resulted from an increase in demand for money and a fall in the volume of outstanding loans (for various reasons). This is at least the narrative that Rothbard offers in America’s Great Depression.
Federal Taxes as % of GDP:
1917-2.05%
1918-5.34%
1919-7.27%
1920-8.35%
1921-8.40% (Harding Era)
1922-5.81% (Harding Era)
1923-5.01% (Harding Era)
1924-4.95%
Federal spending as % of GDP:
1917-3.86%
1918-17.22%
1919-24.13%
1920-7.67% (11.39% of GDP less in defense spending)
1921-7.49% (Harding Era)
1922-5.13% (Harding Era)
1923-4.35% (Harding Era)
1924-4.22%
From usgovernmentspending.com and usgovernmentrevenue.com data compiled from census.gov.
Harding cutting taxes and spending isn’t what cured the 1920/21 depression. That recovery is merely evidence that huge economic downfalls don’t require artificial cures. Perhaps the prospect of fiscal responsibility had something to do with it, but it wasn’t the act itself, because that was in 1922. He certainly didn’t raise taxes or expand the tax base, though.
Historical income tax rates at: http://www.taxfoundation.org/publications/show/151.html.
Very good stats. But what of the specific claim that the tax base swelled? How might we examine that specifically?