Harding had a plan:
- Cut government spending,
- Reduce the national debt,
- Reduce taxes,
- Utilize a tariff to protect our industry,
- Create a program to reduce farm bankruptcies,
- Limit immigration to protect American jobs.
By 1922, after implementing his plan, the economy was already improving. Although Harding’s premature death did not allow him to see the results, Calvin Coolidge elected to continue Harding’s policies. The result was the “roaring twenties”. Unemployment fell to 3%, unemployment and inflation declined, while Gross National Product rose an average of 7% from 1924 to 1929. Productivity, wages and profits also grew rapidly during the 1920’s.
Harding slashed federal spending by two billion dollars from Wilson’s final budget (that was a lot in the 1920s) and Coolidge limited spending to 3.3 billion dollars for the rest of the decade, while the tax cuts resulted in increased revenues. The net result was that Wilson’s debt was reduced by a third. Lower taxes and increasing growth made the middle class prosper. More people were able to afford luxury goods as well as have more time to enjoy life. The technology of the time also boomed with the development of affordable household appliances appearing in middle class homes.
The policies of Harding and Coolidge created and era of prosperity we would not experience again until the Reagan tax cuts in the 1980’s. The one significant difference between Harding and Coolidge, and the Reagan years is they were able to slash spending while Reagan was never able to get that done. While some blame the stock market crash of 1929 and the depression that followed on the policies of Harding and Coolidge, those charges are simple not true. Good times do lead to over confidence and over confidence leads people to take excessive risks and speculate. This was true in the twenties as well as recent years. These excessive risks can cause markets to fall. However, then as now, it is the errors of policy makers during those speculative corrections that cause depressions. If governments were to act to curb excessive speculation as it grew, rather than using its aftermath as an excuse to expand government, recessions might still occur but they would prove to be short and shallow events which would serve to curb excesses and realign resources, rather than result in traumatic events like the one we are currently experiencing.
Today our government is patterning its response to the current recession after Roosevelt’s ten years of pain in the thirties. Those lost years resulted from government expansion, increased regulation and make work spending programs like the Administration is proposing today. If it were not for the Second World War, no one knows how long the depression would have lasted. The Obama Administration is predicting a long, slow recovery. Some are talking about a “new normal” of minimal growth and high unemployment. Based upon the policies they are currently implementing they are probably right. However, if we followed a course similar to Harding’s, we could create a new era of prosperity and growth for our country. Tax cuts are great but only if paired with spending restraint.
While many are proud to proclaim themselves to be "Reagan Conservatives" perhaps we should all become "Harding Conservatives."