Since the economy is reasonably healthy (lowish unemployment, inflation under control, etc)
OMG… The economy ISN’T reasonably healthy…
Inflation is headed back up.
Houselessness in the US hit records highs, and still climbing.
Real income is still flat from 1980.
It turns out, when you flood the market with competent workers and your economy is otherwise healthy, they tend to get snapped up.
That… Not at all how it works. It ignores all sorts of things, like labor mobility. Remember the Great Depression? Loads of people, and loads of jobs out there… Labor was frozen, and immobile.
Right now, we have low unemployment, because people are holding 2 and 3 jobs just to meet basic needs… And are still falling behind.
Source? Jan inflation was 3.0% annualized, slightly up from 2.9% in December. We hit a low of 2.4% back in Sep, but it’s been pretty steady around 2.5-3% over the past year. The fed started cutting rates late last year, and now they’re pausing. There’s always some uncertainty around election season, and this one was especially spicy, so that’s honestly a good call.
Houselessness in the US hit records highs, and still climbing.
Yes, that’s certainly concerning. But that doesn’t really indicate issues in the broader economy, it indicates issues in the low-end of housing affordability. That’s certainly a problem and should be addressed, but it’s not indicative IMO of a recession looming, unless we get a round of defaults or something like we had in 2007/2008.
Prices are high because new construction was severely limited during COVID, and it does seem to be getting better, just slower than most would like.
people hoarding dollars due to #1, dramatically reducing money circulation (i.e. demand falls off)
tariffs, which caused things to get even more expensive, fueling #2
If Hoover just didn’t create tariffs to try to address the recession, the Great Depression likely never would’ve happened. But no, we chased reduced demand with higher prices, further pushing demand down. Instead, we should have increased the money supply, encouraging businesses to expand instead of consumption to contract.
I am concerned about Trump’s tariffs for much the same reason that tariffs were problematic in the 1920s, but we’re not in a deflationary environment, on the flipside, inflation seems to be largely under control. Ideally, if we do tariffs, we should wait until inflation is too low and the fed wants to drop rates, because that means the market is a bit overheated and tariffs could help cool it a bit.
Additionally, slashing federal spending does… Reduce the GDP. Every federal dollar spent usually leads to 3-7 USD once it gets to the streets.
If we go back to the Great Depression, just creating jobs didn’t fix the economy, my understanding is that gold inflows (we were still on the gold standard) largely did, because it increased money supply, encouraging more investment. The rampant deflation started ending in 1933 (same link as above), which is when the economy started showing signs of recovery.
That’s the same general idea for the recovery in the 2008 recession, we slashed fed rates, which increased the money supply and encouraged investment.
Every federal dollar spent usually leads to 3-7 USD once it gets to the streets.
If we go back to the Great Depression, just creating jobs didn’t fix the economy, my understanding is that gold inflows (we were still on the gold standard) largely did, because it increased money supply, encouraging more investment
That’s… not really true, though it is a popular take. After WW2, there were concerns that we’d go right back into recession/depression, because the fundamentals of the economy didn’t really change. The main thing that seemed to fix that was slashing taxes to encourage more private sector investment, which helped take advantage of dominating trade while the rest of the world was rebuilding.
There were a ton of policies enacted leading up to and during WW2 that restricted free enterprise, and I’m using “tax rates” as sort of a catch all here. This is an interesting article about it:
In 1944, government spending at all levels accounted for 55 percent of gross domestic product (GDP). By 1947, government spending had dropped 75 percent in real terms, or from 55 percent of GDP to just over 16 percent of GDP. Over roughly the same period, federal tax revenues fell by only around 11 percent. Yet this “destimulation” did not result in a collapse of consumption spending or private investment. Real consumption rose by 22 percent between 1944 and 1947, and spending on durable goods more than doubled in real terms. Gross private investment rose by 223 percent in real terms, with a whopping six-fold real increase in residential- housing expenditures.
…
On paper, measured GDP did drop after the war: It was 13 percent lower in 1947 than in 1944. But this was a GDP accounting quirk, not an indication of a stalled private economy or of economic hardship. A prewar appliance factory converted to munitions production, when sold to the government for $10 million in 1944, added $10 million to measured GDP. The same factory converted back to civilian production might make a million toasters in 1947 that sold for $8 million—adding only $8 million to GDP. Americans surely saw the necessity for making bombs in 1944, but just as surely are better off when those resources are used to make toasters.
How did that sudden shift happen?
When the war ended, however, the command economy was dismantled. By the end of 1946, direct government allocation of resources—by edict, price controls, and rationing schemes—was essentially eliminated. Tax rates were cut as well, although they remained high by contemporary standards. By any measure, the economy became less subject to government direction.
And in the conclusion:
Central to this, however, is one important factor: The price mechanism must be free to efficiently direct resources to their best valued uses. This, in turn, implies that regulations that impede this market process must be eliminated as government spending declines. Ironically, it seems that the postwar prosperity that America enjoyed after World War II was less the result of a carefully crafted political agenda than a by-product of what government stopped doing.
Basically, the government stopped directing the economy (i.e. taking taxes and spending as it saw fit) and allowed the market to dictate how money would flow. The result was a (relatively) smooth transition to a peacetime economy, which was capable of taking advantage of ravaged economies elsewhere in the world.
Not slashing taxes… taxes were at their highest in the 60s.
That’s irrelevant. What matters is the relative change and the signal that sends to the market. Top tax rates were 94%, and dropped substantially (to around 86%-ish top marginal rate, corporate taxes also cut) after the war. But then we had the Korean war, and taxes increased again. But again, it’s the signal that matters here, not the absolute numbers.
There are a ton of other factors. My general thrust is that there was a huge drop in government spending and therefore a lower need for revenue, and that opened up that money to be used for other purposes.
Yeah, I’m not going to bother with a source from a capitalist… Sorry. I’ll just go with the facts: The US was pretty much the only ones who could rebuild Europe… Eveyrone else had their entire industries flattened.
It wasn’t about cutting taxes. It was about “Unleashing the market”… Those are oligarch talking points, to try and convince us to let them be Robber Barons again.
The US was pretty much the only ones who could rebuild Europe…
Europe could also rebuild Europe, it would just take a lot longer. The US spent a ton of money rebuilding both Europe and Japan, and being able to do that while also transitioning back to a peacetime economy really is something IMO. Not to mention getting embroiled in the Korean war just a few short years later, while still rebuilding after the war.
I don’t really like Truman, but I think he did a decent job after the war.
OMG… The economy ISN’T reasonably healthy…
Inflation is headed back up.
Houselessness in the US hit records highs, and still climbing.
Real income is still flat from 1980.
That… Not at all how it works. It ignores all sorts of things, like labor mobility. Remember the Great Depression? Loads of people, and loads of jobs out there… Labor was frozen, and immobile.
Right now, we have low unemployment, because people are holding 2 and 3 jobs just to meet basic needs… And are still falling behind.
https://www.politico.com/news/magazine/2025/02/11/democrats-tricked-strong-economy-00203464
The economy is only doing “reasonably well” for oligarchs.
Additionally, slashing federal spending does… Reduce the GDP. Every federal dollar spent usually leads to 3-7 USD once it gets to the streets.
Source? Jan inflation was 3.0% annualized, slightly up from 2.9% in December. We hit a low of 2.4% back in Sep, but it’s been pretty steady around 2.5-3% over the past year. The fed started cutting rates late last year, and now they’re pausing. There’s always some uncertainty around election season, and this one was especially spicy, so that’s honestly a good call.
Yes, that’s certainly concerning. But that doesn’t really indicate issues in the broader economy, it indicates issues in the low-end of housing affordability. That’s certainly a problem and should be addressed, but it’s not indicative IMO of a recession looming, unless we get a round of defaults or something like we had in 2007/2008.
Prices are high because new construction was severely limited during COVID, and it does seem to be getting better, just slower than most would like.
That’s just not true.
Those were very different times. The Great Depression seems to have been caused by:
If Hoover just didn’t create tariffs to try to address the recession, the Great Depression likely never would’ve happened. But no, we chased reduced demand with higher prices, further pushing demand down. Instead, we should have increased the money supply, encouraging businesses to expand instead of consumption to contract.
I am concerned about Trump’s tariffs for much the same reason that tariffs were problematic in the 1920s, but we’re not in a deflationary environment, on the flipside, inflation seems to be largely under control. Ideally, if we do tariffs, we should wait until inflation is too low and the fed wants to drop rates, because that means the market is a bit overheated and tariffs could help cool it a bit.
If we go back to the Great Depression, just creating jobs didn’t fix the economy, my understanding is that gold inflows (we were still on the gold standard) largely did, because it increased money supply, encouraging more investment. The rampant deflation started ending in 1933 (same link as above), which is when the economy started showing signs of recovery.
That’s the same general idea for the recovery in the 2008 recession, we slashed fed rates, which increased the money supply and encouraged investment.
That really depends on what it’s spent on.
WW2 fixed the Great Depression…
That’s… not really true, though it is a popular take. After WW2, there were concerns that we’d go right back into recession/depression, because the fundamentals of the economy didn’t really change. The main thing that seemed to fix that was slashing taxes to encourage more private sector investment, which helped take advantage of dominating trade while the rest of the world was rebuilding.
Pretty sure all of Europe needing to be rebuilt, and the US having the only working industrial sector had a huge thing to with it…
Not slashing taxes… taxes were at their highest in the 60s.
There were a ton of policies enacted leading up to and during WW2 that restricted free enterprise, and I’m using “tax rates” as sort of a catch all here. This is an interesting article about it:
How did that sudden shift happen?
And in the conclusion:
Basically, the government stopped directing the economy (i.e. taking taxes and spending as it saw fit) and allowed the market to dictate how money would flow. The result was a (relatively) smooth transition to a peacetime economy, which was capable of taking advantage of ravaged economies elsewhere in the world.
That’s irrelevant. What matters is the relative change and the signal that sends to the market. Top tax rates were 94%, and dropped substantially (to around 86%-ish top marginal rate, corporate taxes also cut) after the war. But then we had the Korean war, and taxes increased again. But again, it’s the signal that matters here, not the absolute numbers.
There are a ton of other factors. My general thrust is that there was a huge drop in government spending and therefore a lower need for revenue, and that opened up that money to be used for other purposes.
Yeah, I’m not going to bother with a source from a capitalist… Sorry. I’ll just go with the facts: The US was pretty much the only ones who could rebuild Europe… Eveyrone else had their entire industries flattened.
It wasn’t about cutting taxes. It was about “Unleashing the market”… Those are oligarch talking points, to try and convince us to let them be Robber Barons again.
Europe could also rebuild Europe, it would just take a lot longer. The US spent a ton of money rebuilding both Europe and Japan, and being able to do that while also transitioning back to a peacetime economy really is something IMO. Not to mention getting embroiled in the Korean war just a few short years later, while still rebuilding after the war.
I don’t really like Truman, but I think he did a decent job after the war.