Tariffs Deepened the Great Depression--> Buy American Will Deepen THIS Recession

WSJ/Yidwithlid ^ | 2/5/09 | Yidwithlid

[Shellybenoit]

"Compare and contrast, what international trade mistakes made by Presidents Herbert Hoover and Barack Obama helped lead the US into great depressions?"

If President Obama is not careful that may very well be a question on future Social Studies Tests.

Back in 1930 The Smoot-Hawley Tariff Act was signed into law. It raised US tariffs on over 20,000 imported goods to record levels. The Smoot-Hawley Act almost completly halted U.S.-European trade the start of the Great Depression. Although the tariff act was passed after the stock-market crash of 1929, historians consider the political rhetoric leading up to the passing of the act a factor in causing the crash and the recession that began in late 1929, and its passage a factor in deepening the Great Depression. Unemployment was at 7.8% in 1930 when the Smoot-Hawley tariff was passed, but it jumped to 16.3% in 1931, 24.9% in 1932, and 25.1% in 1933.

As it stands today, the "stimulus" bill before the Senate has a Buy American protectionist provision that has the potential of launching an international trade war and deepen the recession we are facing today:

[Tempest]

Strange I kind of thought that the tarrifs currently placed against American goods helped cause this current depression... Wait I’m not supposed to say that right?

[BGHater]

We borrow money from foreign nations and then use that money to spend on foreign supplies and material.

Sounds fine.

[Daveinyork]

I thought it was the mortgage crisis caused by lending to people who couldn’t afford to pay it back. You can say what you want. It’s a free republic.com

[Daveinyork]

Watch out. Batten down the hatches. The Buchananites and Perotistas are coming for you.

[truthingod]

Our trade deficit is going to change. How that change occurs will depend on how quickly we start buying stuff we may not actually need.

One could argue that we should “stimulate” the economy with spending, however, the last round of checks may have held off this reality a little longer, but it did not stop it.

The answer: some chips are going to fall on difficult ground. Yet, if we act responsibly by first submitting ourselves back to our Creator and then live in a way that is appropriate, then maybe we could see a return to true prosperity. The last 15 years has been built on a false sense of prosperity in the form of credit. Now, when people are spending, hopefully they are spending what they have actually earned. This is what counts.

I think we will see a little improvement over the next few months as people get their tax refunds. The question is what will they be buying? Needs vs. Wants-—this is what Wal-Mart and other retailers need to focus on. What is real?

[DesertRhino]

Funny, foreign trade was about 7 percent of the economy back then. Smoot cut it in half. So the unemployment spike, etc,,was all because of the three percent of the economy affected by smoot?

The Smoot mythology is part of the Roosevelt “campaign to get elected” propaganda, and not much more. Sorry. The new dealers had an OBVIOUS reason to blame the depression on Smoot.

[DesertRhino]

Back then we imported/exported very little. Mostly the things that just couldnt be made here or there. Foreign trade was a negligible pary of our economy.

We imported no oil, no cars, no airplanes, no electronics, almost no steel, very few machine tools, and only agricultural products that made no sense to try to grow here,,such as bananas,,,

Smoot caused depression is new-dealer mythology.

[DesertRhino]

And as an aside,,I bet Mr Hawley sure was happy his name didnt come first on that bill! lol

[Tempest]

Obviously you’re one of the people fooled into think that the banks were forced into making bad loans?

I have to ask then if that were true why is it that with only 1 exception the banks that were included in the bailout program never applied for CRA credits?

[hedgetrimmer]

An international trade war will only hurt the American in name only multinational corporations who get their poison products in foreign countries.

Tariffs are constitutional and can help lower income tax on
American wages. If the rest of the world doesn’t like it, great! We can restore American independence from the globalists.

Smoot Hawley did not cause the Great Depression, you’re a victim of globalist propaganda if you believe this tripe. Ben Bernanke who runs the Fed, says the Fed did it, just as they are doing it now.

[Daveinyork]

Oh my. My mistake. there were obviously no foreclosures, and there was no real estate bubble bursting. what was I thinking?

[Uncle Miltie]

Ping!

For your refutation.

[oldbill]

There is an equally valid argument that the recent tsunami of “Buying Foreign” got us into this mess in the first place.

Do you think that a trade deficit of TRILLIONS of dollars and export of most of our manufacturing capacity and millions of jobs overseas had no effect on our economic environment?

Conservatives have to be a little more open-minded on this before they shout out the standard dogma without facts to back it up.

[Uncle Miltie]

Standing by for their refutation of this gentleman’s article.

Burton Malkiel: professor of economics at Princeton University, and is a two-time chairman of the economics department there. He served as a member of the Council of Economic Advisers (1975-1977), president of the American Finance Association (1978), and dean of the Yale School of Management (1981-1988).

[Uncle Miltie]

"Smoot Hawley did not cause the Great Depression"

Again today, nobody is arguing the Straw Man you keep putting up.

[Uncle Miltie]

Okay, they veer perilously close to saying “caused.” But their language is arguable, and mainly they mean “extend.”

You are right that there was a crash before Smoot. Smoot helped extend (with federal marxism and keynesianism) the recession into a depression.

[chopperman]

Funny, foreign trade was about 7 percent of the economy back then. Smoot cut it in half. So the unemployment spike, etc,,was all because of the three percent of the economy affected by Smoot?

As I see it, if you want to compare our economy with what ours was like during the Depression, you really should first compare our position in the world's economy. Back then, the US was a major exporter, like today's China. Back then, the world's major importer was the UK. It was the UK's rise in tariffs that triggered the Depression. It was devastating to our economy while theirs didn't deteriorate that badly. Smoot, which was a reaction to the UK policy, was really not a major factor back then but a bill like it could be this time.

[1rudeboy]

I think the primary reason for trying to divert attention from a discussion of Smoot-Hawley is because the comparison is so dangerous to those favoring government intervention in the private sector. Witness the 200+ comment thread from yesterday, where I learned many things:

1. Ronald Reagan was a protectionist,
2. trade was an insignificant part of GDP in the 1930's,
3. the U.S. steel industry is out of business,
4. the U.S. can win a trade war,
5. government transfer payments create but do not destroy jobs,
6. the list goes on.

[hedgetrimmer]

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.

--Ben Bernanke,Federal Reserve Chairman, At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois November 8, 2002

Except they HAVE done it again! Tariffs and Smoot Hawley never mentioned in his analysis