The current economic turmoil has produced frequent invocations of the word ?sacrifice.? For many, ?sacrifice? is a code word for ?tax increase.? But market historian John Steele Gordon reminds us in the current Money magazine how a tax increase is likely to affect a struggling economy:
[A]fter the 1929 stock market crash, the government didn’t do much of anything – and what they did do just made the situation worse. For instance, the Fed kept interest rates high and the government implemented the largest tariff in American history, which was effectively a big tax increase in a declining economy. These things converted a perfectly ordinary recession and market crash into the greatest economic calamity in American history.
Notice the use of the word ?effectively.? Perhaps politicians will remember that word when they consider not only straightforward tax hikes, but also the ?effective? tax hikes associated with policies linked to fighting global warming.
