Wednesday 21 February 2018

Historical Hoover analogy wide of the mark

The recent unemployment figures have given Finance Minister Brian Lenihan's opponents some fresh political ammunition. Labour's Joan Burton has come up with a new charge to level at Mr Lenihan, drawn straight from her history books.

Mr Lenihan is more akin to former US President Herbert Hoover, blamed by many for stoking the Great Depression, than Franklin Roosevelt, credited by most for solving it, claims Ms Burton.

Unfortunately, the historical parallel between the Government and the Hoover administration doesn't really work and Ms Burton may have to re-shape the analogy, if it is to be convincing.

While history tells us that Mr Hoover failed to loosen the purse strings enough to deal with the drop in demand which took place in the Great Depression, there the comparisons end.

Mr Hoover borrowed from orthodox Labour Party policy by massively increasing taxes to help improve the US budgetary position. He increased the rate on top incomes from 25pc to 63pc. Increases on major corporations were also introduced.

Both measures were a disaster and the Revenue Act 1932 is regarded as precisely the kind of legislation no government should introduce during a major recession.

Mr Lenihan's recipe of spending cuts and no personal tax increases is popular with governments around the world precisely because earlier attempts to tax one's way out of a recession failed.

Irish Independent

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