Interesting History of the Economy: Warren G. Harding

I didn’t pay a lot of attention in history class. Between the ages of 5-15, I didn’t understand why I should care about dead people. Presidents are cool and all, but how is knowing about Warren G. Harding going to help me now?

I now realize that history often repeats itself. It’s a cliche quote that holds true.

Because of this, I’m going to dig up some interesting economic facts from the Presidency of Warren G. Harding.

Disclaimer: Remember, I have no agenda. I’m still unsure as to whether I’ll vote for Mitt Romney, President Obama (or neither). I wasn’t sure what I would find when I asked if Republicans or Democrats Were Better at Reducing Unemployment. I’m simply looking for trends.

Warren G. Harding

Warren G. Harding became President during the depression of 1920-1921 (post World War 1 economic decline). Some of his better achievements were setting up the Bureau of the Budget and the Veterans Bureau.

“Our most dangerous tendency is to expect too much from the government and at the same time do too little for it.”

With the campaign slogan of “Less Government in Business and More Business in Government,” he thought the government should be fiscally managed like the private sector.

With that in mind, he cut government spending by 25% in his first  year and another 25% in his second year. Government spending dropped from $6.3 billion to $3.3 billion.

If you’ve stuck with me this far, you’re probably thinking “Cool dude. So he cut spending? Big deal!”

The Interesting Stuff

Warren G. Harding and his Treasury Secretary found:

As income taxes increase, money is driven underground and abroad.

This thought led them to cut top tax rates from 73% to 25%. Read that again. 73% to 25%!!!!!!

What would you think happened after cutting taxes so drastically? Government revenues must have declined sharply, right?

WRONG!

Revenues of the Treasury actually increased substantially!

The tax cuts also led to INCREASED WAGES, INCREASED PROFITS, AND REDUCED UNEMPLOYMENT!

Score 1 for the Republicans.