Editor’s Note: Republican tax cuts in the early 1920s led to the greatest boom and bust (1929) up until that time, and to the Republican Great Depression. The Republican tax cuts of the Reagan and Bush eras led to the bust of 2008 and the current Republican Great Recession. Now Paul Ryan’s budget proposal is a recipe for more boom and bust cycles. How many times do we have to study this lesson before we learn it? Here it is again:
A Ghost From A Ghastly Public Policy Past
Reprinted from Too Much.
You won’t find many photos with smiles on the face of Andrew Mellon, the U.S. treasury secretary back in the 1920s. The exceedingly dour — and fabulously wealthy — Mellon may be smiling someplace now. His spirit lives.
Mellon, a Pittsburgh financier, began his dozen years atop Treasury in 1921. He rated, at the time, as one of the world’s richest men. One of the most determined, too.
Mellon came to Washington as a man on a mission. That mission: to slash federal income tax rates on his fellow rich — and himself, of course, too. He succeeded.
In 1921, America’s richest faced a 73 percent tax rate on income over $1 million. By 1925, Mellon had maneuvered that top rate all the way down to 25 percent.
Last week Rep. Paul Ryan from Wisconsin, the go-to guy on taxes for the GOP House majority, channeled his own personal Andrew Mellon. He introduced, with great fanfare, the official Republican budget for America’s next fiscal year — and decade. His budget’s maximum tax rate on top-bracket income: 25 percent.
Andrew Mellon’s 1920s handiwork would eventually pour $72 billion, in today’s dollars, into wealthy pockets and set the table for the wildest speculative bubble Wall Street had ever seen. That bubble would burst into the Great Depression — and impoverish, in the process, tens of millions of Americans.
Mellon opposed, right up until his 1932 exit from Treasury, any efforts to get the federal government to come to the aid of those millions. Hard times, he told President Hoover, didn’t have to be “altogether a bad thing.”
“People will work harder,” Mellon pronounced. “Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.”
The “Path To Prosperity” budget plan Rep. Ryan unveiled last week updates Mellon’s Uncle Scrooge approach to public policy for the 21st century.
Andrew Mellon prevented the federal government from creating programs to aid those most in need. Ryan’s budget, if ever enacted, would gut the federal aid programs that have appeared over the 80 years since Mellon left office.
Two-thirds of the $4 trillion in budget cuts the “Path for Prosperity” proposes for the next decade would come out of “programs that serve people of limited means,”reports the Center on Budsget and Policy Priorities.
That would be no accident. The “Pathway to Prosperity” budget, as the text explaining the Ryan plan proudly proclaims, will “ensure that America’s safety net does not become a hammock that lulls able-bodied citizens into lives of complacency and dependency.”
Andrew Mellon never made his insensitivity to the poor any clearer than that. But hand this to Andy Mellon. He had an excuse for his philosophy. History, in Mellon’s time, had not yet fully exposed the folly of cutting taxes on the rich as a route to economic prosperity.
Ryan and his rich people-friendly colleagues in Congress today have no such excuse. The comfort-the-comfortable, afflict-the-afflicted policies Mellon pushed, we now know, did not usher in prosperity. They ushered in the greatest depression in American history.
Our two most powerful national untax-the-rich surges since then — the first in the 1980s under Ronald Reagan, the second 20 years later under George W. Bush — also failed miserably to create prosperity for average Americans. For Rep. Ryan and his GOP congressional leadership friends, no matter.
Ryan’s new budget simply ignores the history Andrew Mellon never lived long enough to experience. Ryan’s budget predicts unprecedented prosperity, with numbers so statistically groundless that even the conservative Economistmagazine was describing Ryan’s claims last week as “laughably overoptimistic.”
But we can’t afford to laugh. No proposal that carries a stamp of approval from congressional majority leaders can ever be dismissed as a laughing matter.
Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up to receive Too Much in your email inbox.