What Is Hoover's Response To In The Great Depression

Evidence proves that the Great depression took a huge economic toll on the lives American citizens. . On October 29, 1929 the stock market crashed leaving many bankrupt and others to go as far as to committing suicide. During the following months over 9,000 banks failed eventually leading to a depression. The great depression left many homeless and in extreme poverty; African-Americans were doing the worst. Similarly on September 16, 2008 the stock market crashed owing to the exposure of subprime mortgages and credit default swaps.

The 2008 crisis left many people homeless and in extreme poverty. Although the two events that left many in poverty were very similar; the responses towards poverty between these two time periods were very different. It is important to understand the differences in reactions

In December 1929, as a means of demonstrating the administration’s faith in the economy, Hoover reduced income tax rates by 1 percent because of the continuing budget surpluses. By 1930 the surplus had turned into a deficit that grew rapidly as the economy contracted. Smiley says that Hoover had decided to recommend a large tax increase in an attempt to balance the budget; Congress approved the tax increase in 1932. Personal exemptions were reduced sharply to increase the number of taxpayers, and rates were sharply increased. The lowest marginal rate rose from 1.125 percent to 4.0 percent, and the top marginal rate rose from 25 percent on taxable income in excess of $100,000 to 63 percent on taxable income in excess of $1 million as the rates were made much more progressive. We now understand that such a huge tax increase does not promote recovery during a contraction. By reducing households’ disposable income, it led to a reduction in household spending and a further contraction in economic