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