A look at Mellonomics

In the wake of our recession, and the Tea Parties, and the continuing economic stimuli, supporters of Obama's policies ask, "what's your solution, then?" Fellow libertarians are undoubtedly quick to claim that we need to reduce spending, particularly deficit spending, but also to cut taxes, eradicated social security, privatize roadways and health insurance... the list goes on and on with lovely ideas that we have, but that no one else is buying.

But there once was a time when the Secretary of the Treasury followed his own rules, and proposed monumental tax cuts, and saw unemployment rates as low as 1.8%. That time was in the 20s. And that man was Andrew Mellon.

Mellon served in the Cabinet from 1921 to 1932, under three presidents. When the crash hit in 1929, and the Depression spread, his policies and ideals seemed significantly less unfavorable. Many who began to hate on Hoover thought that he shared Mellon's lassez-faire attitude (though he didn't). Mellon's proposals of liquidation rubbed the common masses the wrong way, and he was out of the Cabinet before Roosevelt took office.

The main thought behind Mellon's theories was quite simple- if the taxes are lowered, then people will object less to paying them, and they will pay them, instead of trying to find ways around them. With more people paying taxes, the revenue increases. Genius. His plan had some highlights:

Cut the top income tax rate from 73% to 24%.

Cut taxes on low incomes from 4% to 0.5%.

Reduce the Federal Estate tax.

Efficiency in government.

Some of these measures seem dramatic. The last one seems impossible. But under Mellon, the country saw economic growth. The national debt fell from $26 billion in 1921 to $16 billion in 1930. Mellon was an advocate of supply-side economics before it had a name, and was a forebear of Reagonomics (though without the increase of administrative spending).

In short, here is a model for us. Here is a potential answer. Tax cuts so the revenue can increase. Can we dig ourselves out of a projected $20 trillion debt? It may take some time. And responsibility. (Ok, a lot of responsibility.) But the very least we can do, I think, is to remember Andrew Mellon, perhaps with a bit of nostalgia.