In 1920 Warren G. Harding was elected President amid a small recession. To fire up the economy, he signed into law a big tax cut, and became almost instantly popular.
Thus, he was the first President ever to consider the benefits of cutting taxes. The benefits of his doing so were HUGE, and ultimately lead to the Roaring 20s.
The economy during the 1920s grew faster than any time in American history up to that time, and America became the richest country in the world. The stock market and land values soared, and there were more rich people than ever before.
This booming economy benefited most Americans, and they were very happy. They loved President Harding. Up to the day he died they loved him.
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 a heart attack. There are two stories I’ve read about this. One is that he was so stressed that his friends let him down, that he had a heart attack and died. The other, and this one is merely suspicion, is that he killed himself. He couldn't’t bare face his public and tell them that he let them down.
Either way, while he died a popular president, people were angered when they learned about the scandals after his death. Historians, therefore, judge Harding as one of the worst Presidents because he failed to hire good enough people to posts in his administration.
Overlooked by historians in their view of him as a failure are his tax cuts. Not only were people happy during the 1920s, they had superfluous money to spend. They obtained this money as a bi-product of the soaring economy secondary to the Industrial Revolution secondary to tax cuts. It was because the upper classes were not burdened with high taxes that they had excess cash to invest into the economy.
The excellent free market conditions that resulted from this lead to the Industrial Revolution. Here investors, lead by the great Henry Ford, found ways to mass produce goods and services and make them abundantly available to the public at a cheaper price. Factories were becoming a common site, and were hiring unskilled workers at a record pace.
The rich got richer, and the middle class got richer too.
As a result, the radio and telephone became common household objects, and a Ford Model T became a must have for most Americans. In essence, it was the first time in American history where average Americans, and not just the rich people, could purchase material items for selfish reasons.
People were having fun. No! They were having a blast in the Roaring 20s.
Most Americans were so indulged in their own happiness at this time that they failed to notice inflation was increasing, and so was unemployment, and there were few rules and regulations to monitor businesses, nobody monitoring to assure workers were getting fair pay and treatment, and there was little insurance on invested monies to assure this money would not become lost in case of an economic collapse.
While the economy was booming during the 1920s, Calvin Coolidge’s popularity continued to soar, as he too cut taxes so people would have more money to spend and invest. Then, after Herbert Hoover became President, the stock market crashed on Thursday, October 24, 1929. A recession ensued.
You have to realize that Woodrow Wilson had proclaimed that WWI was the War to end all wars. Then, as alcohol was believed to be the cause of all crime, Prohibition was passed. With the Roaring 20s in full bloom, people believed they had created a euphoric nation. They figured it would last forever.
They were wrong. Americans were completely caught off guard, and that is one of the main reasons people were so gloomy as the roaring 20s came to a screeching halt. People simply stopped investing in the American economy because they figured it could not be trusted, and instead placed all their money in safe places within their homes, like under their pillows. This made the economy worse.
Newspapers used for blankets in the parks of New York by people who had no jobs were thus dubbed Hoover blankets. Since he was the one in charge, he was blamed. While history still views Hoover as the reason for the Great Depression, it should also point the finger at Calvin Coolidge, who failed to see a need to monitor the greedy people who were eager to milk more money out of the cow, and didn’t always use fair tactics.
Hoover, however, did have a chance to stop the downward spiral, he just didn’t know about it. After all, this was the first recession of a new kind of economy in a modern, global world. He figured that since taxes were cut many times during the Roaring 20s, that this was to blame for the stock market crash. So, instead of cutting taxes, he raised taxes from 24 to 63 percent by signing the 1932 Revenue Act.
This was coupled with a rise in tariffs. Thus, he took more money out of the pockets of people who already didn’t have any, and the recession turned into the Great Depression.
We poked our heads into the land of Euphoria just briefly during the 1920s, and, unfortunately, we had to come back. It was too good to be true.