Monday, April 13, 2015

Warren G. Harding creates the roaring 20s

Warren G. Harding (1865-1923)
U.S. President (1921-1923)
In 1920 Warren Gamaliel. Harding was elected President amid a sharp depression. To fire up the economy, he signed into law a big tax cut, and became almost instantly popular.

He appeared to be the perfect fit to be president, as he was very good at making friends, keeping the peace, and speaking in public.  He was a very successful newspaper man and senator, and so it was only fitting that he would be an equally successful president.

He was a conservative, meaning he was a proponent of preserving traditional American values, and limiting the size and scope of government in order to allow businesses the freedom to grow and prosper. Nominated in an era where voters were tired of progressives who kept passing bills in an effort to perfect the world, Harding seemed the perfect fit to be president.

Prior to the progressive movement presidents admired and respected the Constitution, and believed it did not give the executive the power to solve the problems of individuals and businesses.  Yet this changed with the Woodrow Wilson administration when he signed into law regulations to improve conditions for laborers, to make sure products sold were safe for consumers, and to assure fair market conditions.

Such regulations were needed for a long time.  The problem was that once the dam broke, once Congressmen realized they could impede upon constitutional restraint in order to move forth their agenda, they went overboard by creating a bunch of laws that impeded upon personal liberties, such as the 16th amendment  that allowed Congress to levy taxes on individuals and corporations, and the 18th amendment prohibiting the sale of alcohol in 1920.

These amendments now made it possible for a progressive Congress to push forth their, which was to create a complete euphoric society where there were no poor, no war, no crime. Yet there was a price to pay for all these new regulations, and it was that they had to pay fore them.  S

So nearly as as soon as the 16th amendment was signed in 1913 by Woodrow Wilson Congress swiftly acted by passing the Revenue Act of 1913, which lowered the basic tariff from 40-25%, and, to make up for lost revenue, re-instated the federal income tax.

By 1920 the top marginal income tax had risen 73 percent, and this was done mainly to pay off the war debt.  Following the Great War the economy spun into a sharp decline, resulting in the depression of 1920 and 1921.  During this time the gross domestic product plunged 24 percent, from $91.5 billion in 1920 to $69.6 billion in 1921.  Unemployment jumped from 2.1 percent in 1920 to 4.9 percent in 1921.

Yet this depression is often forgotten mainly because it was so short lived, and because of the Great Depression.  It was short lived because Warren G. Harding, lead by his brilliant secretary of treasury, former banker Andrew Mellon, had a vision that the tax rate was so high, and spending so out of control, that it was preventing the economy from growing.

Mellon and Harding wanted to return America to pre-progressive times when the president did not impede upon individual and business freedom.  They believed doing so greatly benefit the American economic system and American morale. 

The first thing they succeeded at doing was cutting spending by 50 percent. This made it so that government did not need to take as much money from individuals and corporations to pay for government run programs.  The next task for Harding and Mellon was to get a significant tax cut through Congress.  

On April 11, 1921, Harding called for an extraordinary session of Congress to revise the federal revenue and tariff laws. There were some who called for significant tax cuts, although others noted the ongoing expenses of paying off debt accrued during WW1. Ultimately, a bill was signed by Harding to cut the top marginal tax rate from 74 to 58 percent.

Unfortunately for Harding, he had hired some of his best friends to posts in his administration, and, as it turned out, they were wheeling and dealing behind his back. One of the great scandals that brought down the Harding Administration was the Teapot Dome Scandal, where his “friends” got rich selling oil that was supposed to be set aside for public use.

Half way through his second year in office he died of what was initially recorded as a stroke, although historians later determined that he probably had a heart attack.  He had been suffering from high blood pressure and chest pain for quite some time, and he failed to heed the advice of his physicians. However, there were also rumors swirling that he killed himself  because he couldn't face the fact that he had let the public down. There were also rumors that he may have been murdered.  Yet no evidence of foul play ever appears. 

Either way, he was still a very popular president at the time of his death.  Yet once word got out about all the scandals the populace became angered and his popularity plummeted.   Most historians, therefore, judge Harding as one of the worst presidents because he failed to hire good enough people to posts in his administration.  

Still, because of his economic vision to reboot the American economy, as he lay dying on August 2, 1923, voters were very happy with him.  In fact, the people loved Warren G. Harding.