Re: [TSP_Strategy] Re: Party Like It's 1937


Apr 15, 2011

 


----------------------------

#16549 Apr 15, 2011

Party Like It's 1937by Randall Forsyth Friday, April 15, 2011tweet

Dueling deficit-cutting plans, plus end of QE2, raise risk of premature withdrawal of stimulus. St. Augustine, let us pray.

Just as the U.S. economy is emerging from a severe contraction caused by a credit crisis, there are pressures to tighten both fiscal and monetary policies in order to rein in an excessive budget deficit and stave off nascent inflation.

Sound familiar? It should, because that is precisely what happened in 1937. As students of economic history are aware, those shifts to restrictive policies on the budget and by the Federal Reserve set the stage of the second part of the Great Depression.

This is worth reminding ourselves after President Obama Wednesday laid out his plans to reduce the federaldeficit by some $4 trillion over the next 12 years. That follows a competing proposal by Republican Rep. Paul Ryan of Wisconsin that would reduce the deficit by an aggregate $4 trillion in 10 years. And last December, the bipartisan Deficit Commission put forth a plan to cut the deficit by $4 trillion by 2020.

For the first time in my lifetime, the major parties are competing on how to cut the federal budget deficit. Things have turned 180 degrees from when former Vice President Dick Cheney's asserted that "Reagan proved deficits don't matter."

Cheney was about on target as he was when he went duck hunting and pinged one of his buddies. The Gipper would disagree and even he acceded to a tax increase to rein the budget gap.

Now, from Tea Partiers on the right to Big Government liberals on the other side, nearly everybody is in favor of reducing the federal deficit. Who wants more red ink?

But as St.Augustine is famously quoted as praying, "Lord, make me chaste, but not yet."

The history of the 1930s is the best example available to us. After contracting by more than 30% in 1929 to 1933, the U.S. economy grew more than 9% per annum in the next four years. The recovery began in March of 1933 . before Franklin D. Roosevelt took office . but after the Federal Reserve embarked on large-scale purchase of U.S. government securities, which would be called quantitative easing today.

In 1936, however, sharp rises in income taxes were enacted. Beginning in August of that year, monetary policy was tightened through a doubling of bank reserve requirements to absorb excess reserves that were thought to threaten inflation.

That sounds awfully like what what's in prospect.

Now, both parties have put forth proposals to reduce the federal deficit drastically. At the same time, the Fed is winding down QE2 and thedebate on monetary policy is when . not if . the central bank should begin to sell off the assets it has acquired and begin raising short-term interest rates, which remain near zero.

There can be little argument that America's fiscal and monetary policies are unsustainable and actually untenable for the long term. Only the U.S. can get away with running trillion-dollar-plus budget deficits with T-bills paying virtually nil and 30-year bonds yielding only about 4.5%.

That's because America issues the currency the world uses for trade and financial transactions and as a store of value. Not even Coke, Marlboros or Microsoft Windows compare with greenbacks as a coveted American-made good around the globe. As a result, we Yanks get to consume more than we produce and save less than is invested here, with dollars run off the printing press making up the difference. Greece, Ireland and Portugal can't get away with that.

Things have come to a pretty pass, as the Gershwins wrote. We can't go on like this. But, as Nomura Research Institute chief economist Richard Koo warns, Japan tried to rein in fiscal deficits in 1997 and 2001, just as America did in 1937, with disastrous results. Raising tax rates and slashing spending while Japan was going through a balance-sheet contraction was counterproductive. Instead of trying to maximize profits, the private sector sought to minimize debt . despite zero interest rates.

That doesn't mean current policies are ideal; far from it. U.S. fiscal policy has provided a short-term palliative but little else to the economy. Cash for clunkers, housing purchase subsidies, temporary cuts in payroll taxes and extension of previous tax cuts don't provide permanent incentives; precisely the opposite, in fact, as the deficit swells to incomprehensible levels. While President Obama targets billionaires for taxhikes, those increases would hit the owner of the auto repair shop on Main Street hardest, who reports over $250,000 on his personal income tax return.

Meantime, QE2 has inflated asset prices for those sufficiently well-off to own stocks, as well as prices that ordinary folks pay at the pump and the supermarket, which are excluded from supposedly high-minded notion of core inflation.

That leaves the dilemma . that current unsound policies are unsustainable, but putting them on a sound footing just now could be destabilizing.

If I had a ready answer, I would run for president. Even if my hair is sparse, I can produce a U.S. birth certificate. The sad thing is that's what seems to matter most these days instead of who can put the nation on a solid footing.



----------------------------

#16550 Apr 15, 2011

In 1937, the tax rate on the wealthiest Americans was 79%. It is

currently 35%.





--- In TSP_Strategy@yahoogroups.com, Natalie Clark firefly_optics@...>

wrote: >

> Party Like It's 1937

> by Randall Forsyth

> Friday, April 15, 2011

> tweet

>

>

> Dueling deficit-cutting plans, plus end of QE2, raise risk of

premature withdrawal of stimulus. St. Augustine, let us pray. >

> Just as the U.S. economy is emerging from a severe contraction caused

by a credit crisis, there are pressures to tighten both fiscal and

monetary policies in order to rein in an excessive budget deficit and

stave off nascent inflation. >

>

> Sound familiar? It should, because that is precisely what happened in

1937. As students of economic history are aware, those shifts to

restrictive policies on the budget and by the Federal Reserve set the

stage of the second part of the Great Depression. >

> This is worth reminding ourselves after President Obama Wednesday laid

out his plans to reduce the federal deficit by some $4 trillion over the

next 12 years. That follows a competing proposal by Republican Rep. Paul

Ryan of Wisconsin that would reduce the deficit by an aggregate $4

trillion in 10 years. And last December, the bipartisan Deficit

Commission put forth a plan to cut the deficit by $4 trillion by 2020. >

> For the first time in my lifetime, the major parties are competing on

how to cut the federal budget deficit. Things have turned 180 degrees

from when former Vice President Dick Cheney's asserted that "Reagan

proved deficits don't matter." >

> Cheney was about on target as he was when he went duck hunting and

pinged one of his buddies. The Gipper would disagree and even he acceded

to a tax increase to rein the budget gap. >

> Now, from Tea Partiers on the right to Big Government liberals on the

other side, nearly everybody is in favor of reducing the federal

deficit. Who wants more red ink? >

> But as St. Augustine is famously quoted as praying, "Lord, make me

chaste, but not yet." >

> The history of the 1930s is the best example available to us. After

contracting by more than 30% in 1929 to 1933, the U.S. economy grew more

than 9% per annum in the next four years. The recovery began in March of

1933 .." before Franklin D. Roosevelt took office .." but

after the Federal Reserve embarked on large-scale purchase of U.S.

government securities, which would be called quantitative easing today. >

> In 1936, however, sharp rises in income taxes were enacted. Beginning

in August of that year, monetary policy was tightened through a doubling

of bank reserve requirements to absorb excess reserves that were thought

to threaten inflation. >

> That sounds awfully like what what's in prospect.

>

> Now, both parties have put forth proposals to reduce the federal

deficit drastically. At the same time, the Fed is winding down QE2 and

the debate on monetary policy is when .." not if .." the

central bank should begin to sell off the assets it has acquired and

begin raising short-term interest rates, which remain near zero. >

> There can be little argument that America's fiscal and monetary

policies are unsustainable and actually untenable for the long term.

Only the U.S. can get away with running trillion-dollar-plus budget

deficits with T-bills paying virtually nil and 30-year bonds yielding

only about 4.5%. >

> That's because America issues the currency the world uses for

trade and financial transactions and as a store of value. Not even Coke,

Marlboros or Microsoft Windows compare with greenbacks as a coveted

American-made good around the globe. As a result, we Yanks get to

consume more than we produce and save less than is invested here, with

dollars run off the printing press making up the difference. Greece,

Ireland and Portugal can't get away with that. >

> Things have come to a pretty pass, as the Gershwins wrote. We

can't go on like this. But, as Nomura Research Institute chief

economist Richard Koo warns, Japan tried to rein in fiscal deficits in

1997 and 2001, just as America did in 1937, with disastrous results.

Raising tax rates and slashing spending while Japan was going through a

balance-sheet contraction was counterproductive. Instead of trying to

maximize profits, the private sector sought to minimize debt .."

despite zero interest rates. >

> That doesn't mean current policies are ideal; far from it. U.S.

fiscal policy has provided a short-term palliative but little else to

the economy. Cash for clunkers, housing purchase subsidies, temporary

cuts in payroll taxes and extension of previous tax cuts don't

provide permanent incentives; precisely the opposite, in fact, as the

deficit swells to incomprehensible levels. While President Obama targets

billionaires for tax hikes, those increases would hit the owner of the

auto repair shop on Main Street hardest, who reports over $250,000 on

his personal income tax return. >

> Meantime, QE2 has inflated asset prices for those sufficiently

well-off to own stocks, as well as prices that ordinary folks pay at the

pump and the supermarket, which are excluded from supposedly high-minded

notion of core inflation. >

> That leaves the dilemma .." that current unsound policies are

unsustainable, but putting them on a sound footing just now could be

destabilizing. >

> If I had a ready answer, I would run for president. Even if my hair is

sparse, I can produce a U.S. birth certificate. The sad thing is

that's what seems to matter most these days instead of who can put

the nation on a solid footing. >







----------------------------

#16552 Apr 15, 2011

Natalie and SarahI don't know the facts on tax loopholes at the time, but I've heard that taxes on wealthy individuals.were even easier to circumvent then than now..What I think is interesting is the apparent correlation between significant recessions and the federal government trying to reduce the deficit. Historically it seems that deficit reduction successes were typically followed by hard times economically. In 1835 the Jackson administration eliminated the deficit for the.first (and last).time in US History. A year or two.later, the US fell into a deep and prolonged recession (land speculation being a major contributor)..Prof of Economics.L Randall Wray www.cfeps.org/people/wraylr/... writes:..With one brief exception, the federal government has been in debt every year since 1776. In January 1835, for the first and only time in U.S. history, the public debt was retired, and a budget surplus was maintained for the next two years in order to accumulate what Treasury Secretary Levi Woodbury called .a fund to meet future deficits.. In 1837 the economy collapsed into a deep depression that drove the budget into deficit, and the federal government has been in debt ever since. Since 1776 there have been exactly seven periods of substantial budget surpluses and significant reduction of the debt. From 1817 to 1821 the national debt fell by 29 percent; from 1823 to 1836 it was eliminated (Jackson.s efforts); from 1852 to 1857 it fell by 59 percent, from 1867 to 1873 by 27 percent, from 1880 to 1893 by more than 50 percent, and from 1920 to 1930 by about a third. Of course, the last time we ran a budget surplus was during the Clinton years. I do not know any household that has been able to run budget deficits for approximately 190 out of the past 230-odd years, and to accumulate debt virtually nonstop since 1837.The United States has also experienced six periods of depression. The depressions began in 1819, 1837, 1857, 1873, 1893, and 1929. (Do you see any pattern? Take a look at the dates listed above.) With the exception of the Clinton surpluses, every significant reduction of the outstanding debt has been followed by a depression, and every depression has been preceded by significant debt reduction. The Clinton surplus was followed by the Bush recession, a speculative euphoria, and then the collapse in which we now find ourselves. The jury is still out on whether we might manage to work this up to yet another great depression. While we cannot rule out coincidences, seven surpluses followed by six and a half depressions (with some possibility for making it the perfect seven) should raise some eyebrows. And, by the way, our less serious downturns have almost always been preceded by reductions of federal budget deficits. I don.t know of any case of a national depression caused by a household budget surplus..



..On Fri, Apr 15, 2011 at 9:59 AM, Sarah sarah_oz@...> wrote:

.In 1937, the tax rate on the wealthiest Americans was 79%. It iscurrently 35%.

--- In TSP_Strategy@yahoogroups.com, Natalie Clark firefly_optics@...>

wrote:>> Party Like It's 1937

> by Randall Forsyth> Friday, April 15, 2011> tweet>>> Dueling deficit-cutting plans, plus end of QE2, raise risk ofpremature withdrawal of stimulus. St. Augustine, let us pray.

>> Just as the U.S. economy is emerging from a severe contraction causedby a credit crisis, there are pressures to tighten both fiscal andmonetary policies in order to rein in an excessive budget deficit and

stave off nascent inflation.>>> Sound familiar? It should, because that is precisely what happened in1937. As students of economic history are aware, those shifts torestrictive policies on the budget and by the Federal Reserve set the

stage of the second part of the Great Depression.>> This is worth reminding ourselves after President Obama Wednesday laidout his plans to reduce the federal deficit by some $4 trillion over thenext 12 years. That follows a competing proposal by Republican Rep. Paul

Ryan of Wisconsin that would reduce the deficit by an aggregate $4trillion in 10 years. And last December, the bipartisan DeficitCommission put forth a plan to cut the deficit by $4 trillion by 2020.>> For the first time in my lifetime, the major parties are competing on

how to cut the federal budget deficit. Things have turned 180 degrees

from when former Vice President Dick Cheney's asserted that "Reaganproved deficits don't matter.">> Cheney was about on target as he was when he went duck hunting andpinged one of his buddies. The Gipper would disagree and even he accededto a tax increase to rein the budget gap.

>> Now, from Tea Partiers on the right to Big Government liberals on theother side, nearly everybody is in favor of reducing the federaldeficit. Who wants more red ink?>> But as St. Augustine is famously quoted as praying, "Lord, make me

chaste, but not yet.">> The history of the 1930s is the best example available to us. Aftercontracting by more than 30% in 1929 to 1933, the U.S. economy grew morethan 9% per annum in the next four years. The recovery began in March of

1933 .." before Franklin D. Roosevelt took office .." butafter the Federal Reserve embarked on large-scale purchase of U.S.government securities, which would be called quantitative easing today.>> In 1936, however, sharp rises in income taxes were enacted. Beginning

in August of that year, monetary policy was tightened through a doublingof bank reserve requirements to absorb excess reserves that were thoughtto threaten inflation.>

> That sounds awfully like what what's in prospect.>> Now, both parties have put forth proposals to reduce the federaldeficit drastically. At the same time, the Fed is winding down QE2 and

the debate on monetary policy is when .." not if .." thecentral bank should begin to sell off the assets it has acquired andbegin raising short-term interest rates, which remain near zero.>

> There can be little argument that America's fiscal and monetarypolicies are unsustainable and actually untenable for the long term.Only the U.S. can get away with running trillion-dollar-plus budgetdeficits with T-bills paying virtually nil and 30-year bonds yielding

only about 4.5%.>

> That's because America issues the currency the world uses fortrade and financial transactions and as a store of value. Not even Coke,Marlboros or Microsoft Windows compare with greenbacks as a covetedAmerican-made good around the globe. As a result, we Yanks get to

consume more than we produce and save less than is invested here, withdollars run off the printing press making up the difference. Greece,

Ireland and Portugal can't get away with that.>> Things have come to a pretty pass, as the Gershwins wrote. We

can't go on like this. But, as Nomura Research Institute chiefeconomist Richard Koo warns, Japan tried to rein in fiscal deficits in1997 and 2001, just as America did in 1937, with disastrous results.Raising tax rates and slashing spending while Japan was going through a

balance-sheet contraction was counterproductive. Instead of trying to

maximize profits, the private sector sought to minimize debt .."despite zero interest rates.>> That doesn't mean current policies are ideal; far from it. U.S.fiscal policy has provided a short-term palliative but little else tothe economy. Cash for clunkers, housing purchase subsidies, temporary

cuts in payroll taxes and extension of previous tax cuts don'tprovide permanent incentives; precisely the opposite, in fact, as thedeficit swells to incomprehensible levels. While President Obama targetsbillionaires for tax hikes, those increases would hit the owner of the

auto repair shop on Main Street hardest, who reports over $250,000 onhis personal income tax return.>> Meantime, QE2 has inflated asset prices for those sufficientlywell-off to own stocks, as well as prices that ordinary folks pay at the

pump and the supermarket, which are excluded from supposedly high-mindednotion of core inflation.>

> That leaves the dilemma .." that current unsound policies areunsustainable, but putting them on a sound footing just now could bedestabilizing.>> If I had a ready answer, I would run for president. Even if my hair issparse, I can produce a U.S. birth certificate. The sad thing is

that's what seems to matter most these days instead of who can putthe nation on a solid footing.>







----------------------------

#16554 Apr 15, 2011

--- In TSP_Strategy@yahoogroups.com, Sara Wetherbee sara.saracuda@...> wrote: >> Natalie and Sarah> I don't know the facts on tax loopholes at the time, but I've heard that> taxes on wealthy individuals were even easier to circumvent then than now. ��No, the wealth distribution was not as vast at that time as it is today.See www.slate.com/id/2266025/entry/2266026



> > Prof of Economics L Randall Wray www.cfeps.org/people/wraylr/> writes:> > I do not know any household that has been able to run budget deficits for> approximately 190 out of the past 230-odd years, and to accumulate debt> virtually nonstop since 1837.

Because households aren't permitted to print their own money.



----------------------------

#16555 Apr 15, 2011

Sarah writes"Because households aren't permitted to print their own money. "That is, of course,.correct..The Secret Service takes a dim view of such activities..However, ......When.households have.legal tender.in their accounts.(savings,investments, etc), or more accurately, when the private sector has the.capital on their balance sheets, rather than the public sector (government), the economy tends to do better. Why is this?.Because.when the Fed doesn't attempt to hold back stimulus, or to accumulate capital through taxation, but rather spends it prudently,.more money is in the hands of private enterprise and consumers. That is clearly a good thing for us as investors..Why tax at all?. Taxation is required as a regulator on the money supply. Taxes prevent too much money chasing too few goods..It turn out that.for there to be capital to tax there must be an originator of capital...The originator of capital in our economy is the Fed. The Fed doesn't need taxes. Why not?..Because it is the source of the money supply. Taxes are only needed to regulate the money supply..Now,.one could easily argue that there is not enough.capital.in the.hands of.the middle class. Thus.one could argue that the Fed needs to continue to spend (effectively).while also minimizing taxation, particularly on the middle class. When there is too much money chasing too few goods (inflation) it's time for the Fed to reduce the money supply..This.notion is mostly Keynesian, but it also emphasizes.lower taxation; especially.for the middle class..Spending.focused on domestic issues to stimulate employment and demand for middle class goods and services makes sense..The spending power of wealthier folks.in this economy is surging. Do they need a tax cut too? ....not unless.one argues that they.NEED another Mercedes. I suppose that luxury goods spending.is stimulative, but.is it really doing.much for the economy overall?.Probably not enough..The idea that our economy will start improving.because we.take draconian measures to bring our deficit under control has no apparent historical precedence. Understandably, this.is.counter-intuitive to families on a simple budget, who are not monetary policy experts..It is.apparently.incomprehensible to.the.current.cadre of revisionist moron half-baked legislators who couldn't even pass Go in a game of Monopoly, and clearly.need to get a clue as to.how.our economy.functions..The difference is that The Fed IS.permitted to "print money", although that is.simply.a matter of changing the numbers on a spreadsheet,which it has been doing for many years..Raise the debt ceiling and reduce taxes on the middle class. The ecomomy grows, and revenue flows. The alternative.could be.a lengthy.recession or worse....On Fri, Apr 15, 2011 at 10:40 AM, Sarah sarah_oz@...> wrote:.

--- In TSP_Strategy@yahoogroups.com, Sara Wetherbee sara.saracuda@...> wrote:>> Natalie and Sarah> I don't know the facts on tax loopholes at the time, but I've heard that

> taxes on wealthy individuals were even easier to circumvent then than now..

No, the wealth distribution was not as vast at that time as it is today.See www.slate.com/id/2266025/entry/2266026



> > Prof of Economics L Randall Wray www.cfeps.org/people/wraylr/> writes:>

> I do not know any household that has been able to run budget deficits for> approximately 190 out of the past 230-odd years, and to accumulate debt> virtually nonstop since 1837.

Because households aren't permitted to print their own money.



----------------------------

#16556 Apr 15, 2011

Paul Samuelson: On economics, Obama would be wise to steer a middle courseIt will be massive doses of deficit spending that will pull America, Europe and Asia out of the slump

Monday, 19 January 2009It is an old story when an up bubble in real estate isfollowed by a down bubble. Maybe soon after humans left their caves,that cyclical process began.However, what caused chaotic meltdown in Wall Streetand around the globe this time was an utterly new factor . namely thatthis bust in home construction and mortgage borrowing impinged on thenew Frankenstein inventions of mathematical financial engineers.Virtuallyno pundits in Wall Street understood the strange things that werehappening from week to week. Investment banks like Goldman Sachs andMorgan Stanley, as well as huge ordinary banks like Bank of America,suddenly discovered that their debts had soared way above theiravailable assets.Oddly, actions on Main Street, where people lookfor jobs and hope to earn enough income to save for both rainy days andeventual retirement, were slow to fall much in 2007 and 2008. But bynow, as sure as the sun sets at night, Main Streets all over the worldare hurting a lot. Their hurts are directly traceable to the Wall Streetshenanigans. According to forecasters at the International MonetaryFund and the World Bank, the worst is still to come; and it may lastlonger than anything since the 1929-1939 years of the Great Depression.Asa macroeconomist, I try to keep an eye on financial markets and on howcentral banks . the US Federal Reserve and the European Central Bank, aswell as the centuries-old Bank of England . react to try to leanagainst the adverse winds of speculative markets. That occupies mymathematical mind. But more importantly, what occupies my heart as ascholarly economist is what's likely to happen to families in the firstyears of Barack Obama's presidency. How will he repair the damage fromeight years of George Bush's bungling?I must agree thatgovernment bailouts were necessary to forestall a complete economiccollapse. President Franklin Roosevelt discovered that in his first 1933post-inauguration week. But as the New Deal leader who saved thecapitalistic system, Roosevelt learned that those bankers, after beingsaved, firmly refused to venture into making loans to risky businessesand families.How then did the New Deal succeed in wiping out mostunemployment by 1939? Today's economists under 60 years of age haveforgotten the answer to that question . if indeed they ever did know thetrue answer. Even Fed Chief Ben Bernanke, a prize scholar at Harvardand MIT, was unduly influenced by the late Milton Friedman's crudemonetarism when he wrote his PhD dissertation on the Great Depression in1979.Actually, neither the Federal Reserve nor the Bank ofEngland did the heavy lifting that restored high employment and healthygrowth in real Gross National Product by 1939. Why not? Early on and formuch of the 1930s, central bank interest rates had dropped to nearlyzero.Obama starts out in a "liquidity trap" much like that whichhas been keeping Japan in a 1991-2008 slowdown. During a liquidity trap,the smart thing to do is hoard money and not spend it on labour orconsumer goods. Go back and read the 1987-2006 speeches of AlanGreenspan or Mervyn King at the Bank of England. Maybe they were awayfrom school the day that concept was taught?To hone in on my mainpoint, current evidence and past economic history suggests stronglythat during the Obama presidency it will be massive doses of deficitfiscal spending that will pull Europe, America and Asia out of thepost-meltdown slump. Only after that will the Federal Reserve's normaltools begin to be restored to potency.The new president will be splashed with contradictory advice. Here is my suggestion:Seekthe middle way by being a centrist. That's not because you can't makeup your mind. On the left are the failed notions of Marx, Lenin, Stalin,Castro and Mao. All of these were like idiotic Keystone cops when itcame to organising any large economy. On the right are the extremistlibertarian views of the post-Reagan crowd. Yes, market systems alonecan preserve this millennium's affluence and progress.However, unregulated markets will generate their own demise, as we have seen.Centristsare doomed to have to make compromises. In good times, it can be follyto keep bumbling Detroit auto companies in business. (Harvard's JosephSchumpeter called this "capitalism in an oxygen tent.") When rates ofunemployment swell to 10 per cent or above, a different decision mightbe justifiable.Dropping newly printed greenbacks from helicopterscan be one way to generate growth. Such new currency will get spentrather than being hoarded or saved.However, spending that new currency on roads to somewhere will be better than roads to nowhere.InJapan, construction-industry lobbyists determined where public spendingshould be directed. In America we can do better, provided that the oldBush gang has become only an unpleasant memory.Moral: Be centristin your decisions about helping the poor as well as the middle classes.Females and Hispanics and others who come late to the feast deservejustice in the centrist court.Those who presume to give advicebecome boring fast. Still, I will offer a final important caveat. Acentrist must, of necessity, be a "limited" centrist. A centrist can besuccessful only in a limited degree to lessen the inequalities that areinevitable in a market system. That's far from abolishing mostinequality.To pursue that unobtainable, quixotic goal would be asure way to plunge the modern world back into the past stages ofstagnation.The author, former professor of economics at theMassachusetts Institute of Technology, won the Nobel Prize in Economicsin 1970.. 2008 Paul SamuelsonDistributed by Tribune Media Services, Inc.







----------------------------

#16557 Apr 15, 2011

The 78% rate in 1937 was for income over $5,000,000 it is interesting to see how the tax rates vary from 1913 to the present in the table from the web site below

www.truthandpolitics.org/top-rates.php









From:

Sarah sarah_oz@...>;

To:

TSP_Strategy@yahoogroups.com>;

Subject:

[TSP_Strategy] Re: Party Like It's 1937

Sent:

Fri, Apr 15, 2011 4:59:44 PM



��In 1937, the tax rate on the wealthiest Americans was 79%. It is

currently 35%.



--- In TSP_Strategy@yahoogroups.com, Natalie Clark firefly_optics@...>

wrote:

>

> Party Like It's 1937

> by Randall Forsyth

> Friday, April 15, 2011

> tweet

>

>

> Dueling deficit-cutting plans, plus end of QE2, raise risk of

premature withdrawal of stimulus. St. Augustine, let us pray. >

> Just as the U.S. economy is emerging from a severe contraction caused

by a credit crisis, there are pressures to tighten both fiscal and

monetary policies in order to rein in an excessive budget deficit and

stave off nascent inflation. >

>

> Sound familiar? It should, because that is precisely what happened in

1937. As students of economic history are aware, those shifts to

restrictive policies on the budget and by the Federal Reserve set the

stage of the second part of the Great Depression. >

> This is worth reminding ourselves after President Obama Wednesday laid

out his plans to reduce the federal deficit by some $4 trillion over the

next 12 years. That follows a competing proposal by Republican Rep. Paul

Ryan of Wisconsin that would reduce the deficit by an aggregate $4

trillion in 10 years. And last December, the bipartisan Deficit

Commission put forth a plan to cut the deficit by $4 trillion by 2020. >

> For the first time in my lifetime, the major parties are competing on

how to cut the federal budget deficit. Things have turned 180 degrees

from when former Vice President Dick Cheney's asserted that "Reagan

proved deficits don't matter." >

> Cheney was about on target as he was when he went duck hunting and

pinged one of his buddies. The Gipper would disagree and even he acceded

to a tax increase to rein the budget gap. >

> Now, from Tea Partiers on the right to Big Government liberals on the

other side, nearly everybody is in favor of reducing the federal

deficit. Who wants more red ink? >

> But as St. Augustine is famously quoted as praying, "Lord, make me

chaste, but not yet." >

> The history of the 1930s is the best example available to us. After

contracting by more than 30% in 1929 to 1933, the U.S. economy grew more

than 9% per annum in the next four years. The recovery began in March of

1933 .." before Franklin D. Roosevelt took office .." but

after the Federal Reserve embarked on large-scale purchase of U.S.

government securities, which would be called quantitative easing today. >

> In 1936, however, sharp rises in income taxes were enacted. Beginning

in August of that year, monetary policy was tightened through a doubling

of bank reserve requirements to absorb excess reserves that were thought

to threaten inflation. >

> That sounds awfully like what what's in prospect.

>

> Now, both parties have put forth proposals to reduce the federal

deficit drastically. At the same time, the Fed is winding down QE2 and

the debate on monetary policy is when .." not if .." the

central bank should begin to sell off the assets it has acquired and

begin raising short-term interest rates, which remain near zero. >

> There can be little argument that America's fiscal and monetary

policies are unsustainable and actually untenable for the long term.

Only the U.S. can get away with running trillion-dollar-plus budget

deficits with T-bills paying virtually nil and 30-year bonds yielding

only about 4.5%. >

> That's because America issues the currency the world uses for

trade and financial transactions and as a store of value. Not even Coke,

Marlboros or Microsoft Windows compare with greenbacks as a coveted

American-made good around the globe. As a result, we Yanks get to

consume more than we produce and save less than is invested here, with

dollars run off the printing press making up the difference. Greece,

Ireland and Portugal can't get away with that. >

> Things have come to a pretty pass, as the Gershwins wrote. We

can't go on like this. But, as Nomura Research Institute chief

economist Richard Koo warns, Japan tried to rein in fiscal deficits in

1997 and 2001, just as America did in 1937, with disastrous results.

Raising tax rates and slashing spending while Japan was going through a

balance-sheet contraction was counterproductive. Instead of trying to

maximize profits, the private sector sought to minimize debt .."

despite zero interest rates. >

> That doesn't mean current policies are ideal; far from it. U.S.

fiscal policy has provided a short-term palliative but little else to

the economy. Cash for clunkers, housing purchase subsidies, temporary

cuts in payroll taxes and extension of previous tax cuts don't

provide permanent incentives; precisely the opposite, in fact, as the

deficit swells to incomprehensible levels. While President Obama targets

billionaires for tax hikes, those increases would hit the owner of the

auto repair shop on Main Street hardest, who reports over $250,000 on

his personal income tax return. >

> Meantime, QE2 has inflated asset prices for those sufficiently

well-off to own stocks, as well as prices that ordinary folks pay at the

pump and the supermarket, which are excluded from supposedly high-minded

notion of core inflation. >

> That leaves the dilemma .." that current unsound policies are

unsustainable, but putting them on a sound footing just now could be

destabilizing. >

> If I had a ready answer, I would run for president. Even if my hair is

sparse, I can produce a U.S. birth certificate. The sad thing is

that's what seems to matter most these days instead of who can put

the nation on a solid footing. >







Contact Us
This Site's Privacy Policy
Google's privacy policies

S
e
n
i
o
r
T
u
b
e
.
o
r
g