Free Trade Fact of the Day

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The Wall Street Journal editorial page looks at recent liberal efforts to attack conservative economic policy as a Herbert Hoover “Let the economy sink” approach and responds:

Hoover's Heirs

April 3, 2008; Page A14

Democrats may not be able to agree on a Presidential nominee, but at least they're united on one thing: The ghost of Herbert Hoover now stalks the land.

Senator Chuck Schumer – you had already guessed that – kicked off the revival last month on the Senate floor, claiming that the Bush Administration's policy was "Let the economy sink" and "We heard that from Herbert Hoover."

A week later, Mr. Schumer returned to his history lesson in a press release claiming that "this President is beginning to resemble Herbert Hoover in his hands-off approach."

Hillary Clinton joined the seance next, tentatively at first. On March 18, she said that "nobody likes to make comparisons" to the Great Depression, while noting that her colleague Mr. Schumer was doing it anyway. Five days later, Mr. Schumer was back at it on the Sunday talk circuit, echoing Representative Marcy Kaptur's (D., Ohio) claim that "we have the most anemic job growth since Herbert Hoover."

By last week, Mrs. Clinton was in full Ghostbusters mode, claiming that John McCain's speech on the housing problem "sounds remarkably like Herbert Hoover, and I don't think that's good economic policy."

No, Senator, it surely isn't. Around our offices, we're still recovering from the fact that Hoover was the last Presidential candidate we've endorsed. We've been trashing Hoovernomics ever since. The issue this year, however, is who is really pursuing the Hoover model.

To hear Mr. Schumer and his fellow-traveling columnists tell it, Hoover's great policy blunder was to do nothing, all the while insisting that everything was fine. But the problem with Hoover's economic policy isn't that it was passive but that it was actively destructive.

In 1930, he signed the Smoot-Hawley Tariff Act, setting off a wave of protectionist retaliation that undid the globalization of the preceding decades and did far more harm to the world economy than the stock-market crash ever did. Two years later, amid a bad recession, he undid the Calvin Coolidge-Andrew Mellon tax cuts, raising the top marginal income-tax rate to 63% from 25%. The recession became a Depression.

Now, since we're talking Hoover, which Presidential candidate has a similar agenda of protectionism and tax increases? Hmmm.

Oh, that's right. Just the other day, one of the candidates for President was saying she'd withdraw from Nafta if the Mexicans didn't do what she demanded, and she wants "a pause" in free trade. She also wants to repeal the Bush tax cuts, more than doubling the rate on dividends back to 39.6% from 15%.

Her Democratic opponent (Obama) agrees with her, except that he'd raise taxes even more, including by eliminating the $102,000 cap on income subject to the 6.2% payroll tax (12.4% when you include employers), and raising the capital gains tax to at least 25%, and maybe even 28%, from 15%. Add up all of Barack Obama's tax increases and his proposals would get entirely too close to Hoover's top marginal rate of 63%.

Maybe we should be afraid of Hoover's ghost.

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