History of the United States
US Presidents
Calvin Coolidge

Who was generally favored by the economic policies under Presidents Harding and Coolidge?

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2010-12-02 22:56:17

Harding's economic policies are actually a good example of how a

laissez-faire approach addresses economic downturns, the downturn

here being the depression of 1920-21. According to the Department

of Commerce, GNP fell 18% and unemployment had reached 12%. As a

point of comparison, there was no point during the depression a

decade later when deflation shot so high so quickly.

Contrary to the pleadings of Herbert Hoover, Harding opted not

to use his office in the more progressive manner associated

currently with Keynesians and prior to Harding's administration

with Wilson (aggressive centralized fiscal policies boosting

government spending to "prime the pump"). Harding, realizing that

the expansion of credit Wilson and the Federal Reserve (actually

created during Wilson's administration) had espoused had led to

nearly 20% inflation by 1919 only to be followed by equally vicious

deflation a year later, actually cut the federal budget from its

wartime levels by 72% from 1919 to 1921 and lowered taxes across

the board. The national debt consequently fell by $300 million due

to the surplus.

It is sometimes thought that Harding favored big business and

opposed labor, though there are those who view this as a "cum hoc,

ergo propter hoc" fallacy. Labor unions historically keep a low

profile during economic downturns and it is unwise for a government

looking to foster growth to make it more difficult for the entities

doing the hiring to afford their employees. Similarly, tax cuts

necessarily result in greater dollar-for-dollar savings for high

earners, as they pay the bulk of the taxes anyway.

Coolidge continued along the same lines as Harding, with equally

impressive results. It was under his administration that income

taxes that had been as high as 65% under Wilson and that Harding

had worked to reduce were brought down to 20%. Government spending

remained low, and under Coolidge the national debt went from $22.3

billion to $16.9 billion. By his own admission of a decidedly

pro-business mindset, his policies' benefits extended to all

Americans; so much so that by the end of his administration 98% of

the American people paid no income tax at all, yet the government

still showed surpluses in excess of $700 million that same

year.


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