By that time, demand for imports and exports had fallen to Depression levels--the tariff bill had no real impact.
He is closer to the mark on the tax increase proposition although that was responsive to economic conditions rather than causative. It made any effort to initiate a recovery more difficult.
The real cause of the first Depression in the late 1920's was the same as the cause of the current second Depression--debt service costs on existing indebtedness exceeded liquidity flow available to pay. Simple as that. And the resulting liquidation doesn't stop until the aggregate debt is reduced to a level that can be serviced from an available share of liquidity flow.
The point about taxes is applicable today. I tend to want to believe that state and local taxing authorities today recognize that increasing tax rates is likely to produce decreasing tax revenue under the circumstances of this contraction. That may well be wrong.
I’m not sure what you are driving at—Smoot-Hawley was a tax increase, and it helped torpedo U.S. exports—that’s what Laffer is saying: tax increases of all types helped us get into the mess.
“His point about Smoot Hawley is probably not correct. The bill didn’t become law until over a year after the deflationary liquidation was well established.”
Most economists would profoundly disagree with you.
Retaliation against the US happened way before the bill was enacted. As soon as it passed the House, over 40 letters of protest from trading partners were delivered to the US. 23 countries began rataliation, including our largest trading partner, who put tarriffs on over 15 products.
The bill wasn’t put into effect until a full year after it was voted on and passed in the US House.
Note the bill passed the House in May of 1929 and wasn’t enacted into law until June of 1930.