Tuesday, December 27, 2011

Think of All the Problems THIS Would Have Solved

In response to the outbreak of Korean War, we get this sane and reasonable policy response.  From the Federal Reserve's Economic Summary of 1950.
On the fiscal side, it was early and generally recognized that additional taxes were necessary in order to restrain inflationary forces and to finance the defense effort on a pay-as-you-go basis. Congress enacted a broad increase in taxes on personal and business incomes in September and a corporate excess profits tax around the turn of the year.  (from page 2 of the report).
Wow -- a recognition that war is expensive and, as such, maybe we should figure out a way to pay for it.  That's a great policy.  Think of all the problems that this would have solved if we had done this 10 years ago.....

Also note this in no way hindered economic growth, as the economy boomed in 1950 and 1951