The Smoot-Hawley Tariff Scare
So, what was the Smoot-Hawley Tariff?
A tariff, named after Reed Smoot and Willis C. Hawley,
that was to be imposed on every agricultural product that came into the
United States.
The individuals who lobbied for this bill to be passed
wanted protection from the foreign competitors in the agricultural industry.
It was a measure that was initially pushed by Herbert Hoover
during his time as Secretary of Commerce under the Warren G. Harding and Calvin
Coolidge administration. So, you know that as President of the United States,
he was rooting for this bill to be made into a law.
Not too many others saw things his way and agreed with
getting the bill approved.
According to the New York Times, thousands of economists contacted President Herbert Hoover asking not to let the bill become a law because it would hurt the American economy.
Women were advised to oppose the bill which would not just place
a tariff on items commonly known in the agricultural industry such as livestock
and farm produce only. Overtime the lobbyist had added several other industries
for inclusion in the tariff.
Nevertheless, it was looking like the bill was going to go
through and the stock market collapsed around the last quarter of 1929 because
of it. The value of every stock in the market went down. The decline in the
stock market was in the 30 percentiles by the end of that year. At its peak it
had reached over ninety percent.
The Smoot-Hawley Tariff was passed first by Congress in the
beginning of 1930. Then it was signed into law by President Herbert Hoover in
June 1930. People began to stock up on imported goods before the law went into
effect.
First there was the Smoot-Hawley Tariff of 1930. Then
came the Revenue Act of 1932. It seemed as if anything that could be
taxed was tax. Hoover imposed a tax on income, death, and there was a corporate
tax and property taxes to pay also. The income tax rate, which was not even a
thing before 1913, was first imposed on the rich.
During the time of the Great Depression, income earners did
not have enough real disposable income because of the raises in tariffs and
taxes. When Franklin D. Roosevelt took over as president, Roosevelt did nothing
to adjust the tax system that the Hoover administration had enforced on the
American people. By 1945, the tax rate had reached its highest at ninety-four
percent. This means that for every dollar that was earned, the take home pay
was six cent ($.06) for the American worker. There was no visible prosperity
for the American worker during the time of the Great Depression.
With the majority of the monies earned going to the
government through taxes, there was no real motivation to work if you did not
have a career that was driven by passion. The unemployment rate had reached its
highest in American history. This was before the creation of unemployment compensation.
In fact, that department was developed in response to this economic
catastrophe.
The Great Depression officially ended in the 1940s. It took
decades for the American economy to recover from the impact of failed government
decisions, in addition to the casualties of the war. The presidents who
succeeded Roosevelt did not rush to lower tax rates either. There was a war
effort being carried out. President Truman vetoed three proposed tax reductions
before Congress intervened and overrode the last veto to reduce the tax rate.
In the aftermath, the Smoot-Hawley Tariff remains the precursor to disaster to the generations that have followed. When a similar tariff bill was introduced during the Nixon administration, the protesting economist quadrupled the number of petitions sent to the President Hoover.
One lesson learned from the Great Depression is that if you
want to see the American economy thrive, you have to lower tax rates and reduce
government spending. When the net income or take-home pay that is brought into
the American households is increased, the wage earner has more flexibility to
spend on what they want which drives them to continue to do what they need to
maintain the cash flow.
Edwin L Dale Jr,"4,390 Economists Urge Nixon to Veto
Trade Bill: Petition Assails Import-Restricting Plan Now before House Move
Parallels Smoot-Hawley Protest of 1930 Economists Urge Veto of Trade
Bill." New York Times, (Sep 19, 1970). 1, https://go.openathens.net/redirector/liberty.edu?url=https://www.proquest.com/historical-newspapers/4-390-economists-urge-nixon-veto-trade-bill/docview/117902638/se-2
Accessed
February 8, 2023
“Fights Tariff Measure.: Dr. Duncan Asks Women to Oppose Smoot-Hawley
Bill” New York Times (Nov 09,1929) https://go.openathens.net/redirector/liberty.edu?url=https://www.proquest.com/historical-newspapers/fights-tariff-measure/docview/104863529/se-2
Accessed
February 8, 2023
Wannisky, Jude,"Smoot-Hawley's Role in the Depression:
[Letter]." New York Times, (Dec 23, 1990) , https://go.openathens.net/redirector/liberty.edu?url=https://www.proquest.com/newspapers/smoot-hawleys-role-depression/docview/427894695/se-2.
Accessed February 8, 2023
"1,028 Economists Ask Hoover to Veto Pending Tariff
Bill: Professors in 179 Colleges and Other Leaders Assail Rise in Rates as Harmful
to Country and Sure to Bring Reprisals. Economists of all Sections Oppose
Tariff Bill." New York Times, (May 05, 1930). 1, https://go.openathens.net/redirector/liberty.edu?url=https://www.proquest.com/historical-newspapers/1-028-economists-ask-hoover-veto-pending-tariff/docview/98745560/se-2.
Accessed
February 8, 2023
