For all the comparisons of Obama to FDR, the latest budget proposal contains at least one really important analogy to a Depression-era President. It's not FDR though, it's Hoover. In 1932, Hoover pushed for and Congress passed the Revenue Act of 1932 that raised taxes significantly as part of Hoover's push to balance the budget. Obama is proposing over a trillion dollars in new taxes over the next decade as part of his budget proposal recently released.
Hoover's Revenue Act of 1932 was, at that point, the largest peacetime tax increase in US history. It revived a number of excise taxes that were in place in World War I, it imposed a variety of sales taxes, and it raised/added a number of taxes on financial market dealings. Of course it raised income taxes significantly: almost doubling the basic income tax rate, reducing personal exemptions, and raising the maximum rate (surtax) from 25% to 63%. It also increased the corporate tax rate as well as estate and gift tax rates.
There's no need to discuss what followed and it was hardly recovery. How much those tax increases contributed to the deepening/lengthening of the Great Depression remains a matter of debate, but there's no doubt that they did not help and the real debate is over how much they undermined the private sector's attempts to recover.
Raising taxes during a recession is, shall we say, a dangerous business. And even if the first of Obama's new taxes don't kick in until 2011, the reaction of investors today is what matters and they know those higher taxes mean trouble and that will mean a recovery sooner is that much less likely.
So the next time someone invokes the ghost of Hoover to explain why we must, as the President said the other night, do "whatever proves necessary. Because we cannot consign our nation to an open-ended recession," you can feel free to point to ol' Herbert Clark Hoover as your example of "doing whatever proves necessary" and how the President is imitating that example at his and our peril as he raises taxes $1.3 trillion over the next decade. The ghost of Hoover is alive and well, but not among those of us saying that the economy needs to heal itself. It's walking the halls of the White House and Congress as the new Administration repeats the errors of the past.