Thursday, February 18, 2010

Lower taxes & less regulation - not always the answer

Here is a little historical evidence regarding the wisdom of lowering taxes and reducing regulation as the solution to all government problems.

During the the last 100 years Republicans have controlled both houses of Congress and the Presidency for 6 to 8 years twice. During both periods their primary economic policy goal was lowering taxes and reducing government regulation. The first time was 1919 through 1932. The second time was from 2000 to 2006.

The first time after 10 years of Republican tax cuts and cutting regulation the 1929 stockmarket crash sent us into the great depression. Republicans tried to fix the great depression using "market" mechanisms between the 1929 crash and their loss of power in 1933. By that point we were mired in the worst depression of modern times, with unemployment reaching 25%.

The second time Republicans controlled both houses of Congress from 1995 through 2006, and the Presidency from 2000 to 2008. In the first 5 years the dot com bubble expanded until it burst. Over the next 5 years bubbles in commodities and housing expanded and burst as we rolled into 2007.

The two worst economic downtowns in the last 100 years happened at the end of lengthy periods of almost unfettered Republican control of public policy. Hmmmmm.

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