America’s Greatest Depression Fighter
(No, it wasn’t Franklin Delano Roosevelt)
by Jim Powell
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?
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%.
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.
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.
Yesterday (1931), historian Frederick Lewis Allen described
Harding as "superbly handsome. His face and carriage had a
Washington nobility and dignity, his eyes were benign; he photographed
well and the pictures of him in the rotogravure sections won him
affection and respect. And he was the friendliest man who ever had
entered the White House."
was much more open than his predecessor. Biographer Francis Russell
wrote in Warren
G. Harding and His Times (1968), "One of Harding’s
early friendly gestures had been to restore the twice-a-week White
House meetings with the press that Wilson had given up. Wilson had
detested subjecting himself to the overt criticism of such meetings.
Harding, the old newspaperman, liked the reporters, and they liked
him. Press conferences in the Oval Room had the happy atmosphere
of reunions. Harding was open with reporters, answering all questions."
to FDR, Harding had a much better understanding of how an economy
works. Harding, wrote historian Robert K. Murray, in The
Harding Era (1969), "always decried high taxes, government
waste, and excessive governmental interference in the private sector
of the economy. In February 1920, shortly after announcing his candidacy,
he advocated a cut in government expenditures and stated that government
ought to ‘strike the shackles from industry.’ ‘We need vastly more
freedom than we do regulation,’ he said. Surprisingly, big business
took very little notice of him at the time."
added, "To Harding, a profession, a newspaper, a grocery store,
even a farm, was as much a ‘business’ as was a steel corporation.
In a typical small-town manner Harding used the term ‘business’
to indicate a state of independence rather than to delimit a specific
enterprise. This is quite different from saying that Harding was
oriented toward big business and Wall Street as was sometimes charged."
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. Harding recognized the crucial importance of encouraging
investment essential for growth and jobs, something that FDR never
senators, however, favored giving bonuses to veterans, as 38 states
had done. But such spending increases would have put upward pressure
on taxes. On July 12, Harding went to the Senate and urged tax and
spending cuts. He noted that a half-billion dollars in compensation
and insurance claims were already being paid to 813,442 veterans,
and 107,824 veterans were enrolled in government-sponsored vocational
training programs, the total cost of which was estimated to involve
another half-billion dollars.
senators were determined to push through this spending bill, and
Senator Pat Harrison of Mississippi accused Harding of having "attacked
the soldiers of America who fought and won the recent war."
Meanwhile, a tax cut bill emerged from the Senate Finance Committee
and was passed, while debate on the veterans’ bonus bill continued.
Budget and Accounting Act of 1921 provided a unified federal budget
for the first time in American history. The act established (1)
the Bureau of the Budget with a budget director responsible to the
president, and (2) the General Accounting Office to help cut wasteful
the fall of 1921, Harding’s Secretary of Commerce Herbert Hoover
prompted him to call a Conference on Unemployment. Hoover wanted
government intervention in the economy, which as president he was
to pursue when he faced the Great Depression a decade later, but
Harding would have none of it. Good thing, since Hoover’s policies
were to prolong the Great Depression. Harding said, "There
will be depression after inflation, just as surely as the tides
ebb and flow." Harding insisted that relief measures were a
1922, the House passed a veterans’ bonus bill 33370, without
saying how the bonuses would be funded. Harding let senators know
that if they passed the bill, he would veto it. The senate passed
it 3517. Despite intense lobbying from the American Legion,
Harding vetoed the bill on September 19 – just six weeks before
congressional elections, when presidents generally throw goodies
at voters. Harding said it was unfair to add to the burdens of 110
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.
absent was business-bashing that became a hallmark of FDR’s speeches.
Absent, too, were New Dealtype big government programs to
make it more expensive for employers to hire people, to force prices
above market levels, to promote cartels and monopolies. Frederick
Lewis Allen wrote, "Business itself was regarded with a new
veneration. Once it had been considered less dignified and distinguished
than the learned professions, but now people thought they praised
a clergyman highly when they called him a good business man."
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.
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.’"
Harding made additional contributions to liberty. In 1922, he nominated
George Sutherland to the Supreme Court – and Sutherland went on
to become one of the greatest champions of liberty who ever served
there. The next year, Harding nominated Pierce Butler. These were
to be two of the "Four Horsemen of Reaction" who, during
the 1930s, courageously struck down FDR’s early New Deal legislation
that had been suppressing recovery.
denounced lynching and liberated the socialist Eugene Debs who had
been imprisoned by Woodrow Wilson during the war. With Debs, Harding
defied opposition from the American Legion and the New York Times
that editorialized, "He is where he belongs. He should stay
there." Harding was supported by socialists like George Bernard
Shaw, H.G. Wells, Clarence Darrow and Upton Sinclair, who certainly
didn’t vote for him. Harding insisted that Debs be free by Christmas,
and Harding graciously invited him to the White House.
Harding championed peace through a non-interventionist foreign policy,
as with these words from his Inaugural Address, March 4, 1921: "The
recorded progress of our Republic, materially and spiritually, in
itself proves the wisdom of the inherited policy of noninvolvement
in Old World affairs. Confident of our ability to work out our own
destiny, and jealously guarding our right to do so, we seek no part
in directing the destinies of the Old World. We do not mean to be
entangled…the America builded on the foundation laid by the inspired
fathers, can be a party to no permanent military alliance. It can
enter into no political commitments, nor assume any economic obligations
which will subject our decisions to any other than our own authority."
suffered a stroke and died in San Francisco on August 2, 1923. "At
the time of his death, no president was more popular and admired,"
John W. Dean wrote in his biography of Harding. Harding’s body was
returned to Washington on a funeral train. According to Dean, "This
trip, reported in every newspaper in the land, resulted in a public
outpouring of sentiment the likes of which had not been experienced
by the nation since the death of Abraham Lincoln, and would not
occur again until the death of Franklin Roosevelt. An estimated
9 million people from factories and farms, schools and shops, in
the cities and in the fields, spontaneously appeared along the railroad
tracks to silently – and often in tears – pay last respects to a
president they admired, a friend they’d lost."
Harding’s stunning success as a depression fighter was overshadowed
by the Teapot Dome scandal that engulfed his administration after
he died. This resulted from "progressive" era conservation
policies in which the government owned land known to have petroleum
reserves, at Teapot Dome, Wyoming and Elk Hills, California. Since
the beginnings of recorded history, government involvement in the
economy has always led to corruption, and Secretary of the Interior
Albert Fall accepted bribes for leases enabling private companies
to extract the oil. If the reserves had been privately owned, there
wouldn’t have been a scandal.
were astonishingly blind to Harding’s achievements. Newspaperman
William Allen White called Harding "almost unbelievably ill-informed."
Historian Allen wrote that Harding’s "mind was vague and fuzzy.
Its quality was revealed in the clogged style of his public addresses,
in his choice of turgid and maladroit language (‘non-involvement’
in European affairs)." Ironically, Allen wrote this in 1931,
when the Great Depression had been going for two years. Harding
had the depression of 1920 licked in a year and a half, but under
the "progressive" FDR, the Great Depression would persisted
throughout the 1930s, until FDR began conscripting millions of young
men for the armed forces.
William E. Leuchtenburg, an ardent admirer of FDR, was just as superficial
when assessing Harding. Leuchtenburg wrote The
Perils of Prosperity (1958) – a bizarre title that makes
one wonder why he didn’t do a sequel, The Perils of Health.
Leuchtenburg remarked that Harding "was mentally slovenly."
He paid not the slightest attention to Harding’s deeds and focused
on Harding’s sometimes jumbled words. Leuchtenburg attacked Harding
for not being a great speechmaker. Leuchtenburg went on to say that
Harding had "an almost pathetic understanding of his own inability
to measure up" to the presidency, as if it weren’t enough to
get America out of a severe depression fast and launch a decade
of phenomenal prosperity! Leuchtenburg dismissed Harding’s administration
as "government by crony," as opposed to the cronies FDR
brought to Washington, like Louis Howe, Harry Hopkins and Henry
most intriguing turn in the Harding saga is the new biography, Warren
Harding, by Richard Nixon’s former counsel John W. Dean,
in the American Presidents series edited by FDR chronicler Arthur
M. Schlesinger, Jr. Dean, who comes from Harding’s hometown, Marion,
Ohio, doesn’t focus on Harding’s success as a depression fighter,
but he does acknowledge it and Harding’s other contributions to
greater awareness of Harding’s success might help give policymakers
more confidence that the best thing they can do for an economy is
to get out of the way.
Powell [send him mail]
is a senior fellow at the Cato Institute and editor of Laissez
Faire Books. He is the author of The
Triumph of Liberty and FDR's
Folly: How Roosevelt and His New Deal Prolonged the Great Depression.
© 2003 LewRockwell.com