Coolidge Redux

THE final parallel with 1929 is a more general one; it has broadly to do with tax reduction and investment incentives. In the Coolidge years, as noted, Andrew Mellon reduced taxes on the affluent. The declared purpose was to stimulate the economy; more precise reference to saving, investment, and economic growth was for the future. The unannounced purpose was, as ever, to lessen the tax bite on the most bitten. By the summer of 1929 the economy was, nonetheless, stagnant — even in slight recession. (To this, rather than to the built-in inevitabilities of speculation, some economists looking for deeper substance later attributed the crash.) There is every likelihood that a very large part of the enhanced personal revenues from the tax reduction simply went into the stock market, rather than into real capital formation or even improved consumer demand.