As Nobel Laureate Robert Mundell explained in his 2000 article, “A Reconsideration of the Twentieth Century” published by the prestigious academic journal, American Economic Review:
“Monetary deflation was transformed into depression by fiscal shocks. The Smoot-Hawley tariff, which led to retaliation abroad, was the first: between 1929 and 1933, imports fell by 30 percent and, significantly, exports fell even more, by almost 40 percent. On June 6, 1932, the Democratic Congress passed, and President Herbert Hoover signed, in a fit of balanced-budget mania, one of its most ill-advised acts, the Revenue Act of 1932, a bill which provided the largest percentage tax increase ever enacted in American peacetime history. Unemployment rose to a high of 25.9 percent of the labor force in 1933, and GDP fell by 57 percent at current prices and 22 percent in real terms.”
