top of page

US History: The Roaring 20's (Vol. 134)

Updated: Dec 20, 2023

 Two Frugal Presidents Led the Way


The 1920’s were known as the Roaring 20’s; the 1930’s were known as The Great Depression. What were the differences and what can we learn from that? This week we discuss the Roaring 20’s, next week we will discuss the Great Depression.


1920 was a very difficult time for this country. We were in the midst of a serious economic depression. That was a time when the Federal government was much smaller than it is today, but the new income tax (it was passed in 1913) had very high rates of 73% maximum tax rate.

 

In 1921 President Harding took office and 2 years later, when he died unexpectedly, President Coolidge took office and was re-elected for a second term thru early 1929. 

 

It was a decade of economic growth and prosperity. The country averaged almost 4% growth per year and there wasn't a single year that the country ran a deficit, every year the country had a surplus. So what policies were followed that had such success?

 

First let’s look at government spending. In 1920 the government spent around $6 billion dollars. This was cut every year and by 1924, government spending was cut in half to just under $3 billion dollars. These were real cuts in spending, not just a decrease in the rate of increases which today is hailed as something to behold (aren't politicians of today wonderful, a slowdown in the rate of increase is hailed as a decrease).

 

The second major policy change was the tax rates. From 73% max rate in 1920, it was cut to 58% in 1922, and to 25% in 1924. What was the impact of that? There was a slight dip in US revenue in 1923, rising slowly until 1925, and then soaring after the lower 25% max rate kicked in, going from $700 million revenue in 1925 to $1.17 billion in 1928 (FYI, most of the federal revenue back then came from tariffs and excise taxes, not income taxes).

 

These presidents understood that big government and punitive tax rates discouraged productive work and freeing up the human spirit was highly productive. The results speak volumes. 

 

 

BOTTOM LINE

 

What does all this mean, what is our takeaway from this real-world laboratory experience?

 

It confirms everything we have been saying. Limited government and prudent fiscal policies are the key to growth and a rising standard of living for all citizens in this country.

 

So, are you going to just sit there and watch the country burn with outrageous spending, deficits, and monumental debt? Or are you going to do something? Speak up, speak out. Go to our website and Contact Congress. Send them a message they cannot ignore.               

 

Fixing this mess in DC is critical to our very survival.  I know you have heard that before, but look at the facts today, Chicken Little is right this time.

 

LEARN ECONOMICS, THEN VOTE SMART

19 views0 comments
bottom of page