Another History Rhyme
Vol: 29 Issue: 19 Monday, December 19, 2016
In 1932, New Deal Democrat Franklin Delano Roosevelt ran largely on the record of his opponent, the inestimable Herbert Hoover.
Most people don’t know that much about Hoover, and what they do know isn’t good. But in light of the current economic and political climate, it is certainly interesting.
See what Mark Twain’s observation that ‘history doesn’t repeat itself but it rhymes’ says to you as we move along. I’m not going to draw any parallels myself — I need a reality check.
I want to read your interpretations in the comments forum and find out if you see the historical parallels that I see.
Herbert Hoover was a registered Republican who turned progressive when he supported Teddy Roosevelt’s 1912 run for the White House under the “Bull Moose” Progressive Party.
In the 1920’s Hoover served as Secretary of Commerce in the Harding administration. His progressive Big Government approach during that time earned him the nickname, “Secretary of Commerce — and Under Secretary of Everything Else.”
As Commerce Secretary, Hoover was the founder of the “Own Your Own Home” campaign. It was a collaboration of bankers and industry that gave birth to the long-term home mortgage industry.
Hoover came to office in January, 1929 on the promise that America was “nearer to the final triumph over poverty than ever before in the history of any land.”
Ten months into his presidency, the Stock Market crashed, bringing Wall Street to its knees and throwing the nation into panic. Banks began to fail, factories closed, loan money dried up and with it new investment.
In 1931 Hoover organized a ‘stimulus plan’ partnering with a consortium of banks, creating the National Credit Corporation. The NCC’s mission was to bail out smaller banks by loaning them money.
The big banks who made up the NCC withheld the bail-out money and then quietly bought up the distressed smaller banks for pennies on the dollar.
In one great, last act of desperation, Hoover dissolved the private NCC and replaced it with an independent agency of the US government dubbed, the Reconstruction Finance Corporation.
The RFC was endowed with $2 billion in taxpayer money which it used to bailout failing banks, farm mortgage associations, savings and loans, etc.
The Revenue Act of 1932 was another last ditch, desperate measure that imposed sharp income tax increases across the board — and guaranteed Hoover’s defeat to FDR that November.
During the 1932 campaign, FDR attacked Hoover for “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of leading “the greatest spending administration in peacetime in all of history.”
Of course, once he came to office, FDR enacted policies that made Hoover look like a fiscal conservative.
In his first 100 days in office, FDR’s administration introduced the Beer-Wine Revenue Act, the Liquor Taxing Act, gasoline taxes, tobacco taxes, processed food taxes, deflecting criticism by blaming his predecessor.
He increased income taxes selectively on “the rich” (those making more than $9000 per year) and on farms producing crops in excess of quotas set by the government.
When selling his progressive “New Deal” which fundamentally transformed the US economy, he promised to pay for it all by selectively taxing “the rich”.
So he raised the top income tax rate to 75%. The rich moved their money into investment accounts. So FDR imposed an “undistributed profits tax” that penalized companies for maintaining savings to use for invesment.
They moved it offshore.
IRS Commissioner Guy Helvering explained the tax this way at the time: “the Federal government shall not be unreasonably and inequitably deprived of necessary revenues.”
FDR demonized investors and employers as “economic royalists” and “privileged princes.” Opinion surveys of private sector employers suggested widespread fear of the federal government because of FDR’s policies.
In a November 1941 Fortune poll, 93 percent of employers said they expected their property rights to be undermined, and agreed that “there could be a dictatorship.”
Had the war not intervened the following month, there very well could have been. It was the war that, in the final analysis, was the event that ultimately saved the economy from collapse and (possibly) the country from a national socialist dictatorship.
This isn’t just a rhyme. To me, it’s a whole darned poem. And I don’t like where the next verse seems to be leading.
Or maybe it is just me?
Featured Commentary: The Wise Men ~Pete Garcia