America heading toward another Great Depression? The answer may not be a definite “yes” or “no,“ but rather an eerie ”maybe.”In yesterday’s Wall Street Journal, Donald Luskin laid out an argument for why, should we continue on our path, America might be poised to repeat the mistakes it made that lead up to and perpetuated the Great Depression. In other words, if history is a great teacher, we could be its worst students. What may allow the “history repeats itself” cliche to ring true, he says, is the expiration of the Bush-era tax cuts and a renewed aggression toward trade via a recent amendment to the Smoot-Hawley Act — a union favor: both “doomsday clocks” with a deafening tick-tock, tick-tock.First, where we find ourselves. Explaining a chart showing the stock market in the early part of the century and now (seen above), Luskin paints a fork-in-the-road picture:
“This week corresponds on the chart to mid-August 1937, when the cumulative effects of massive hikes in personal and corporate tax rates, severe monetary tightening, and aggressive business-bashing by the Roosevelt administration tipped the economy into the ‘depression inside the Depression.’”
We are at that tipping point. And while “we’re not repeating all the mistakes of 1937,” Luskin says, the impending tax increases and trade act are bad enough.