A depression not only harms millions of people. It leads to intense political pressure for more government spending, higher taxes and other assaults on economic liberty. So it’s important to get through a depression as quickly as possible. Which U.S. president ranks as the best depression fighter?
Not the fabled Franklin Delano Roosevelt, who came to power in 1933, since the Great Depression persisted until the federal government conscripted some 12 million men into the armed forces. Biographers and political historians hail FDR’s charismatic personality, his "Fireside Chats" and his political genius, but his tripling of taxes, his laws making it more expensive for employers to hire people, his anti-discounting laws, his large-scale destruction of food, the 700 industrial cartels he enforced, the monopolies he established, the frivolous antitrust lawsuits he authorized against big employers – these and other measures throttled recovery and prolonged unemployment averaging 17%.
America’s greatest depression fighter was Warren Gamaliel Harding. An Ohio senator when he was elected president in 1920, he followed Woodrow Wilson who got America into World War I, contributed to the deaths of 116,708 Americans, built up huge federal bureaucracies, imprisoned dissenters and incurred $25 billion of debt, for which he has been much praised by historians.
Harding inherited the mess, in particular the post-World War I depression – almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933, that FDR inherited and prolonged. Richard K. Vedder and Lowell E. Gallaway, in their book Out of Work (1993), noted that the magnitude of the 1920 depression "exceeded that for the Great Depression of the following decade for several quarters." The estimated gross national product plunged 24% from $91.5 billion in 1920 to $69.6 billion in 1921. The number of unemployed people jumped from 2.1 million in 1920 to 4.9 million in 1921...
One of Harding’s campaign slogans was "less government in business," and it served him well. Harding embraced the advice of Treasury Secretary Andrew Mellon and called for tax cuts in his first message to Congress, April 12, 1921. The highest taxes, on corporate revenues and "excess" profits, were to be cut. Personal income taxes were to be left as is, with a top rate of 8% of incomes above $4,000... Federal spending was cut from $6.3 billion in 1920 to $5 billion in 1921 and $3.2 billion in 1922. Federal taxes were cut from $6.6 billion in 1920 to $5.5 billion in 1921 and $4 billion in 1922. Harding’s policies started a trend. The low point for federal taxes was reached in 1924. For federal spending, in 1925. The federal government paid off debt, which had been $24.2 billion in 1920, and it continued to decline until 1930...
With Harding’s tax cuts, spending cuts and relatively non-interventionist economic policy, the gross national product rebounded to $74.1 billion in 1922. The number of unemployed fell to 2.8 million – a reported 6.7% of the labor force – in 1922. So, just a year and a half after Harding became president, the Roaring 20s were underway! The unemployment rate continued to decline, reaching a low of 1.8% in 1926 – an extraordinary feat. Since then, the unemployment rate has been lower only once in wartime (1944), and never in peacetime.
"The seven years from the autumn of 1922 to the autumn of 1929," wrote Vedder and Gallaway, "were arguably the brightest period in the economic history of the United States. Virtually all the measures of economic well-being suggested that the economy had reached new heights in terms of prosperity and the achievement of improvements in human welfare. Real gross national product increased every year, consumer prices were stable (as measured by the consumer price index), real wages rose as a consequence of productivity advance, stock prices tripled. Automobile production in 1929 was almost precisely double the level of 1922. It was in the twenties that Americans bought their first car, their first radio, made their first long-distance telephone call, took their first out-of-state vacation. This was the decade when America entered ‘the age of mass consumption.’"..