The Depression That Wasn't

In 1920-21, America's GNP plunged 24%, from $91.5 billion in 1920 to $69.6 billion in 1921, in one of the worst economic downturns in history. In response, President Warren G. Harding cut taxes on business, and held personal income tax rates steady at 8% for top earners.

Harding vetoed spending bills, including one that would give bonuses to veterans. He saved billions.

Harding also cut billions from the existing budget. The Federal budget went from $6.3 billion in 1920 to $5 billion in 1921 to $3.2 billion in 1922. Federal taxes also fell, from $6.6 billion to $5.5 billion to $4 billion, respectively. In this time, Harding paid off a significant portion of America's World War I debts.

By 1922, the GNP had rebounded to $74.1 billion and unemployment dropped to 6.7%. Unemployment continued to decline through the roaring twenties.

Without debt, by simply cutting taxes and slashing government spending, Warren G. Harding prevented a Great Depression and turned an ailing economy around in under 18 months.

Suck it Keynes.