Hoover's Economic Policies In The 1920s

Economic policies

The 1920s were a decade of increased consumer spending and economic pen growth fed by supply side economic policy. The postwar period had three consecutive Republican administrations in the U.S. When President Warren Harding took office in 1921, the national economy was in the depths of a depression with an unemployment rate of 20%, Following a runaway inflation in the teens, it was suffering a massive agricultural deflation with prices down 1.55% in 1920 and over 11% in 1921. Harding signed the Emergency Tariff of 1921 and the Fordney–McCumber Tariff of 1922. Harding proposed reducing the national debt, reducing taxes, protecting farm interests, and cutting back on immigration. Harding did not live to see it, but most

of his agenda was passed by Congress.
One of the main initiatives of both the Harding and Coolidge administrations was the rolling back of income taxes on the wealthy which had been raised during World War I.

It was believed that a heavy tax burden on the rich would slow the economy, and actually reduce tax revenues. This tax cut was achieved under President Calvin Coolidge's administration. Furthermore, Coolidge consistently blocked any attempts at government intrusion into private business. Harding and Coolidge's managerial approach sustained economic growth throughout most of the decade. The government's role as an arbiter rather than an active entity continued under President Herbert Hoover. Hoover worked to get businessmen to respond to the crisis by calling them into conferences and urging them to cooperate. Hoover's vigorous attempts to get business to end the depression failed.

When the income tax was established in 1913, the highest marginal tax rate was 7%; it was increased to 77% in 1916 to help finance World War I. The top rate was reduced to as low as 25% in 1925. The "normalcy" of the 1920s incorporated considerably higher levels of federal spending and taxes than the Progressive era before World War I. From 1929 to 1933, under President Hoover's administration, real per capita federal expenditures increased by

88%.
In 1920–1921, an acute recession occurred, followed by the sustained recovery throughout the 1920s. The Federal Reserve expanded credit, by setting below-market interest rates and low reserve requirements that favored big banks, and the money supply actually increased by about 60% during the time following the recession. By the latter part of the decade, "buying on margin" entered the American vocabulary as more and more Americans over-extended themselves to speculate on the soaring stock market and expanding credit. Very few expected the crash that began in 1929, and none suspected it would be so drastic or so prolonged.