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The current economy is routinely and universally referred to as the worst
recession since the Great Depression.

It makes sense, therefore, to look back at government tax and spending
policies during the Depression and what the results were.

1932 -- Hoover raises the top tax rate from to 25 to 63 percent.

1933 -- Roosevelt comes into office. He begins spending at the same time that new tax hike comes into effect. The Depression bottoms out.

1934 -- Recovery begins. The GNP rises 7.7 percent, unemployment falls to 21.7 percent.

935 -- New government spending on public works and rural electrification. A push to strengthen labor and raise wages. New taxes through the creation of Social Security.

 The GNP grows another 8.1 percent, and unemployment continues to fall.

1936 -- The top tax rate is raised again. This time to 79 percent.
GNP grows a record 14.1 percent; unemployment falls even further.
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1937 -- Roosevelt is afraid of deficits! He cuts spending for 1937.
There's a new recession. It continues for a year.

1939 -- The U.S. borrows, resumes deficit spending, this time on a military build-up. The recession ends.

1941 -- America enters World War II.

In economic terms, it's the New Deal on steroids. The top tax rate goes up to 91 percent. Nonetheless, government spending is so high that by 1945 the deficit is 123 percent of GDP. Unemployment is ended by employing 16 million people directly in the armed forces and millions more are employed producing war material and supporting the military.

The Great Depression is finally over.
When taxes were raised the economy improved. Every time. Deficits had no negative effect on the economy. Indeed, when deficits were at their highest, the economy boomed.
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After spending was cut -- to balance the budget -- a recession immediately followed. When taxes were raised and government spending resumed -- with deficits -- that recession ended.
When taxes were raised again, and government spending went sky high, the Great Depression finally ended.

So ere we are. We refused to raise taxes. The recession continues. Now, we're going to cut spending.

LARRY BEINHART is the author of SALVATION BOULEVARD, soon to be released as a major motion picture with Pierce Brosnan, Greg Kinnear, Jennifer Connelly, Marissa Tomei, Ed Harris, and Jim Gaffigan, WAG THE DOG, The Librarian, Fog Facts: Searching for Truth in the Land of Spin and HOW TO (more...)

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Tax hikes allowed government to spend more, yes, w... by John Peebles on Tuesday, Mar 1, 2011 at 11:36:29 AM
Moderate, intelligently applied power is what keep... by Donald on Tuesday, Mar 1, 2011 at 8:53:39 PM
The article correlates the 5-year WWII economy of ... by Jeff Morton on Tuesday, Mar 1, 2011 at 3:44:14 PM
Basically just take the opposite viewpoint of the ... by David Vicks on Tuesday, Mar 1, 2011 at 4:26:19 PM
you are... And almost as if to accent the point, n... by Gary Williams on Tuesday, Mar 1, 2011 at 11:29:16 PM
The phrases "the recovery begins" and "unemploymen... by Phil Weingart on Tuesday, Mar 1, 2011 at 4:32:06 PM
That we need to differentiate between "good for ec... by BFalcon on Tuesday, Mar 1, 2011 at 10:14:58 PM
Is this what the revisionist are now teaching as h... by liberalsrock on Wednesday, Mar 2, 2011 at 3:13:55 PM
Reading this comment triggers the idea that things... by John Peebles on Wednesday, Mar 2, 2011 at 4:58:04 PM
Nothing substantiates a statement like facts. My q... by Donald on Tuesday, Mar 1, 2011 at 4:59:50 PM
Great Pun, Don! I doubt they are smart enough to d... by Nancy S on Tuesday, Mar 1, 2011 at 7:02:13 PM
Yep, I'm a punny guy!... by Donald on Tuesday, Mar 1, 2011 at 8:59:32 PM
Both parties have intentionally sabotaged our econ... by Matthew Peters on Wednesday, Mar 2, 2011 at 1:25:42 PM
I think they know what is good for the economy and... by michael grieb on Wednesday, Mar 2, 2011 at 4:19:33 PM