Debts and Deficits; J. Chamberlain

Now Professor Sennholz has come out with a new book called Debts and Deficits (Liber tarian Press, Spring Mills, PA 16875, 189 pp., $7.95 paper). It makes the point that deficits do matter. The time must come when bad invest ments have to be written down or written off. So we face a coming storm at some indeter minate future. The economists will be quick to say that credit contraction is the cause of the depression, or recession, or whatever. But Sennholz tells us that most economists are poor historians. The credit contraction is a symptom of the readjustment process, not the cause. The depression of the 1930s was, says Senn holz, the inevitable consequence of the credit expansion that preceded the contraction. (Here he follows his Austrian mentor, Ludwig von .Mises.) The difficulties were compounded in 1929 and after by stupid political policies every where. Economic nationalism eroded the world division of labor. The Hawley-Smoot tariff, passed in 1930, raised American tariffs to levels that practically closed our borders to foreign goods. Other countries were quick to retaliate. Our export industries fell into deeper and deeper depression, and our farmers, who had been struggling anyway, could no longer make ends meet.

The obvious cure in 1932 would have been to take government off peoples' backs. But in the midst of depression which had an unem ployment rate of 20 per cent, Congress doubled the income tax. Estate taxes were boosted, gift taxes were levied with rates going as high as some 33 per cent. Hoover stood for all of this, b~t Roosevelt did no better. His National In dustrial Recovery Act increased payrolls, which momentarily added to the purchasing power of a few but took investment money away from non-monopolistic businesses. Peoples' gold holdings were confiscated. The Agricultural Adjustment Act destroyed little pigs and cut the planting of crops, which raised the price of food in the cities. The National Labor Relations Act, which created the Na tional Labor Relations Board, led to thousands of strikes. As Sennholz says, individual enterprise at this point "just did not have a chance. ' , No two periods are ever precisely alike, but Sennholz doesn't think our politicians have learned much from the Thirties that would be applicable today. We still talk of raising taxes.

We still believe in the spread of redistributive entitlements. The interesting thing about Sennholz' s pro posals is that he doesn't blame our politicians for the fix we are in. He blames the moral con dition of the country. In a final chapter called Debts and Deficits by Hans F. Sennholz lOWE YOU Debts and Deficits is pub lished by Libertarian Press and is also available from The Foun dation for Economic Education. 189 pages, paperback $7.95 "Eternal Hope: A Moral Standard" Sennholz, following Leonard Read, says that reform, like charity, must begin with the individual. "Once accomplished at home," he writes, reform "will radiate outward, kindle new light, and spread in geometric proportion. The true re former is a seminal reformer, not a radical. He does not pass laws that mandate the reforma tion of others. He himself makes a beginning 119 and does not think of himself as a reformer.