Robert A. Taft wins election in 1940

1.

blacks were not pro new deal because the new deal excluded them and Taft had been extremely outspoken for civil rights.
I have already answered the first two assertions (that Blacks were not pro-New Deal and that the New Deal excluded Blacks) at https://www.alternatehistory.com/fo...-election-in-1940.524449/page-7#post-22835197

Here I'd like to address your final assertion--that Taft was an outspoken champion of civil rights. The problem here is that Taft in 1940 had spent less than two years in the Senate and didn't have much chance to establish a civil rights record. He could offer Blacks promises--but so did Willkie. But anyway, looking at Taft's overall record on civil rights (mostly after 1940, I would say it is more mixed than you portray it. Yes, he did support anti-lynching bills and opposed the poll tax. But he got into a serious dispute with civil rights leaders over the question of the FEPC (Fair Employment Practices Commission). Taft favored a "voluntary" FEPC--one that could investigate and publicize cases of discrimination, but had no other powers besides mediation and conciliation. The civil rights leaders wanted a "compulsory" FEPC, one "with teeth"--one that could actually punish discrimination. This divergence led civil rights leaders to accuse Taft of betraying the 1944 GOP platform calling for a permanent FEPC. Here's an editorial from the NAACP's *The Crisis* in 1945:

fepc.jpg



The controversy has been summed up as follows by David Karol, *Party Position Change in American Politics: Coalition Management,* p. 113 https://books.google.com/books?id=6sAYM1YKt-0C&pg=PA113

taft.jpg


You may ask: Did these civil rights leaders really speak for the Black community? At least judging from Taft's re-election to the Seante from OH in 1950, it seems likely they did. Taft considerably increased his vote from 1944 with the electorate as a whole, but did poorly with Blacks. As explained in the *Negro Year Book 1952* https://archive.org/details/negroyearbook52tuskrich/page/302

***

Senator Taft and the Negro Vote

On Oct. 16, 1951, Senator Robert A. Taft of Ohio announced his candidacy for the Republican nomination for the Presidency in 1952. .. The Republican leader,
who barely squeezed through in 1944 with a plurality of 17,000, piled up a commanding margin of 430,900 over his Democratic opponent in 1950, winning
57% of the total vote of more than 3,000,000.

The increase in Mr. Taft's popularity among voters of Ohio was not reflected in the Negro districts of the larger cities. Although his Democratic opponent, State
Auditor Joseph T. Ferguson, was reported to be a man of limited abilities and little renown, he carried the Negro districts in Cleveland, Cincinnati, Columbus, Toledo, Dayton, Akron, Springfield, Youngstown, Canton, and Massillon. As among Negro voters generally throughout the nation, there was a slight decline in the precentage of the Democratic vote from 1948 but not enough to place these districts in the Republican column, indicated in Table 1.
ohio-tafr.jpg


Why did Negro voters fail to go along with the majority of Ohioans in support of Senator Taft? The Senator actively campaigned for their vote and had the
support of most of the Negro press and of the Negro Republican leadership. The answer seems to lie in the Senator's avowed opposition to an FEPC law with
enforcement powers. The voters had seen a voluntary plan, such as advocated by the Senator, fail in Cleveland to be supplanted by an ordinance with the neces-
saryenforcement powers. The majority of Negro voters in the state refused to give their support to a candidate who was committed to vote against a bill which
they cherished as one of most vital of the civil rights proposals.

***

I don't think Senator Taft's opposition to a compulsory FEPC was motivated by racism. It was a reflection of his general suspicion of expanding the federal government's powers. But most Blacks evidently disagreed with him. They were aware the federal government had often treated them unfairly, but nevertheless found it essential in the struggle against the *private* discrimination they faced. This is not to deny that Seantor Taft had Black admirers, one of the most prominent being Zora Neale Hurston. But she was not paritcuarly representative of Black opinion--after all, she also opposed *Brown v. Board of Education!* https://en.wikipedia.org/wiki/Zora_Neale_Hurston
 
Last edited:
On the other hand, Taft and the isolationists were correct that President Roosevelt could not just keep the American people in the dark about the extent of their country's involvement in the war. The problem wasn't that he was trying to sell them the war, it was that his adminstration was deliberately misleading them to sell them the war.

Which Taft supported under Cash and Carry, which was a better option compared with Lend-Lease.

This seems to have a assumption behind it both the British Empire and USSR Had the 'Cash' to purchase war winning amounts of material. I've never seen anyone able to demonstrate that. Its actually difficult to to show either had the cash to purchase much of anything by early 1942. This was the problem Germany ran into in 1939/1940. Technically they could still purchase material from the US. The blockade was still porous with the worlds oceans awash in neutral flagged ships, and the NavCerts system not yet fully effective. But, Germany lacked cash or even worthy credit to buy much. Davis Oil brokered every barrel Germany could pay for & got it onto neutral flagged ships, but nazi Germany was buying pitifully small quantities. Ditto for chemicals from DuPont, machine tools, & aluminum billet & coil from Reynolds or ALCOAs refineries, Germany was unable to put up cash.

Bottom line is the 1939 boom in European war purchases had peaked mid 1940 & was sagging badly before 1941. Lacking export driven purchases the US economy was headed for a 10%+ slump in manufacturing and raw materials demand. The surge in labor wages 1939-1940 was being spent down fast & a halt in employment gains so there is no remedy there.

Depending on Cash and Carry to sustain the US economy, win the war, or much else wont work because the cash was running out fast.
 
Last edited:
Only in the minds of Ayn Rand and similar zealots for the rentier class.

ROFLMAO Wish I'd said that.
Bear in mind that the fastest period of economic growth and rising living standards was the post-war boom, up to 1970 or so. While the period of deregulation and roll back of workers rights starting in the 1980s - say 2000 has seen sluggish growth and stagnation in real wages.

Having lived through that era & known some of the people who benefitted from it I'm unconvinced it was a accident.
 

robeson

Banned
This seems to have a assumption behind it both the British Empire and USSR Had the 'Cash' to purchase war winning amounts of material. I've never seen anyone able to demonstrate that. Its actually difficult to to show either had the cash to purchase much of anything by early 1942. This was the problem Germany ran into in 1939/1940. Technically they could still purchase material from the US. The blockade was still porous with the worlds oceans awash in neutral flagged ships, and the NavCerts system not yet fully effective. But, Germany lacked cash or even worthy credit to buy much. Davis Oil brokered every barrel Germany could pay for & got it onto neutral flagged ships, but nazi Germany was buying pitifully small quantities. Ditto for chemicals from DuPont, machine tools, & aluminum billet & coil from Reynolds or ALCOAs refineries, Germany was unable to put up cash.

Bottom line is the 1939 boom in European war purchases had peaked mid 1940 & was sagging badly before 1941. Lacking export driven purchases the US economy was headed for a 10%+ slump in manufacturing and raw materials demand. The surge in labor wages 1939-1940 was being spent down fast & a halt in employment gains so there is no remedy there.

Depending on Cash and Carry to sustain the US economy, win the war, or much else wont work because the cash was running out fast.
The Soviet Union wasn't that out of gold as is often suggested:

 
The Soviet Union wasn't that out of gold as is often suggested:


Page 22 of that document shows total Soviet Gold production 1927-1940 to be 74,000 Troy ounces or 2.6 billion US dollars at the then price of $35 per Troy ounce. Leand Lease total to the USSR is usually give as 11.3 billion US dollars. That does not include certain items sold during the LL protocols period, and cash items sold before the first LL Protocol kicked in. Pages 32-33 summarize a estimate of Soviet Gold production 1941-1948 as uncertain. Soviet sources indicate a major decline in labor in the Gold mining sector. Military conscription and redirection of skilled miners to critical mining activity reduced Gold production but the amount produced 1941-1948 is not estimated.

Page 62 shows the total known Gold reserves of the USSR in 1954 as 133,900,000 Troy Ounces or $4.7 billion US dollars. Thus estimated Soviet Gold production 1927-1954 & other acquisition pre and post war amounts to 41% of the Lend Lease. Reverse Lend lease was roughly two million Dollars US, & in 1972 a payment of 722 million Dollars US (at 1972 Dollars) was made connected to agreements on payments for certain items under LL Protocols with the USSR.

Given the severe economic disruption created in the USSR 1941-1944. It looks very unrealistic for the Soviet military & industry to be supplied at war winning levels by cash purchases. Its not even clear if half the requirement could be purchased. Based on Gold production & reserves estimated through 1940 that maybe a third of the cost of total Soviet LL imports could be paid for.

A problem not yet discussed is US production of war material. Some items delivered to the USSR like fuel would be practical, however production of the bulk of the trucks, railroad equipment, tanks, radio components, aircraft of al classes depended on the massive war mobilization of US industry. French & British purchases were aimed at large quantities of some items, raw materials and aircraft were two, and neglected others. ie: They were little interested in buying tanks in the US, in part because the US effectively had no armored vehicle construction capacity in 1940. Supplying 5,000 tanks to the USSR was impossible with the capability of the US in 1941, and was possible only after the US government dictated production capacity for 60,000 tanks would be built and forced the allocation of the materials and labor. Through 1941 US industry was only interested in specific high profit war production items, fought so viciously over raw materials production schedules were chaos, and some business leaders like Henry Ford or Irene DuPont were refusing consider contracts with the USSR or Britain as they personally favored the nazi or Facist nations. Unless Taft is willing to institute centralized planning and government dictates on production priorities, much of what the USSR, Britain and others need to win their war wont be available even if they have 30 billion in US dollars to par for it all.
 
Obviously, if this results in the war lasting longer, then the holocaust is worse than in OTL. Would it make a difference in the historical memory of those crimes if the USSR ends up liberating all of the camps as a result of a weaker push from the western front?
 

LouisXX

Banned
Nope, that was the failure of banks due to bad debts and the collapse of demand and incomes. The New Deal gave people jobs and money to purchase goods.

Laissez-faire and balanced budget nonsense would have prolonged it.
literally every historian rejects that claim. The new deal 100 percent extended the depression. It lasted twice as long under FDR than Hoover. Unemployment also never fell to below 10 percent in FDR first two terms only after joining WWII did it go below 10 percent. Literally look at the recession of 1920. Harding cut taxes, balanced the budget and enacted Laissez Faire policies and the recession ended in eight months. If harding followed his predecessors example the depression would’ve ended quickly
 

LouisXX

Banned
I have already answered the first two assertions (that Blacks were not pro-New Deal and that the New Deal excluded Blacks) at https://www.alternatehistory.com/fo...-election-in-1940.524449/page-7#post-22835197

Here I'd like to address your final assertion--that Taft was an outspoken champion of civil rights. The problem here is that Taft in 1940 had spent less than two years in the Senate and didn't have much chance to establish a civil rights record. He could offer Blacks promises--but so did Willkie. But anyway, looking at Taft's overall record on civil rights (mostly after 1940, I would say it is more mixed than you portray it. Yes, he did support anti-lynching bills and opposed the poll tax. But he got into a serious dispute with civil rights leaders over the question of the FEPC (Fair Employment Practices Commission). Taft favored a "voluntary" FEPC--one that could investigate and publicize cases of discrimination, but had no other powers besides mediation and conciliation. The civil rights leaders wanted a "compulsory" FEPC, one "with teeth"--one that could actually punish discrimination. This divergence led civil rights leaders to accuse Taft of betraying the 1944 GOP platform calling for a permanent FEPC. Here's an editorial from the NAACP's *The Crisis* in 1945:

View attachment 720543


The controversy has been summed up as follows by David Karol, *Party Position Change in American Politics: Coalition Management,* p. 113 https://books.google.com/books?id=6sAYM1YKt-0C&pg=PA113

View attachment 720544

You may ask: Did these civil rights leaders really speak for the Black community? At least judging from Taft's re-election to the Seante from OH in 1950, it seems likely they did. Taft considerably increased his vote from 1944 with the electorate as a whole, but did poorly with Blacks. As explained in the *Negro Year Book 1952* https://archive.org/details/negroyearbook52tuskrich/page/302

***

Senator Taft and the Negro Vote

On Oct. 16, 1951, Senator Robert A. Taft of Ohio announced his candidacy for the Republican nomination for the Presidency in 1952. .. The Republican leader,
who barely squeezed through in 1944 with a plurality of 17,000, piled up a commanding margin of 430,900 over his Democratic opponent in 1950, winning
57% of the total vote of more than 3,000,000.

The increase in Mr. Taft's popularity among voters of Ohio was not reflected in the Negro districts of the larger cities. Although his Democratic opponent, State
Auditor Joseph T. Ferguson, was reported to be a man of limited abilities and little renown, he carried the Negro districts in Cleveland, Cincinnati, Columbus, Toledo, Dayton, Akron, Springfield, Youngstown, Canton, and Massillon. As among Negro voters generally throughout the nation, there was a slight decline in the precentage of the Democratic vote from 1948 but not enough to place these districts in the Republican column, indicated in Table 1.
View attachment 720546

Why did Negro voters fail to go along with the majority of Ohioans in support of Senator Taft? The Senator actively campaigned for their vote and had the
support of most of the Negro press and of the Negro Republican leadership. The answer seems to lie in the Senator's avowed opposition to an FEPC law with
enforcement powers. The voters had seen a voluntary plan, such as advocated by the Senator, fail in Cleveland to be supplanted by an ordinance with the neces-
saryenforcement powers. The majority of Negro voters in the state refused to give their support to a candidate who was committed to vote against a bill which
they cherished as one of most vital of the civil rights proposals.

***

I don't think Senator Taft's opposition to a compulsory FEPC was motivated by racism. It was a reflection of his general suspicion of expanding the federal government's powers. But most Blacks evidently disagreed with him. They were aware the federal government had often treated them unfairly, but nevertheless found it essential in the struggle against the *private* discrimination they faced. This is not to deny that Seantor Taft had Black admirers, one of the most prominent being Zora Neale Hurston. But she was not paritcuarly representative of Black opinion--after all, she also opposed *Brown v. Board of Education!* https://en.wikipedia.org/wiki/Zora_Neale_Hurston
except the new deal wasn’t as popular with african americans as you say and by 1945 most black people were voting for Democrats. But Taft was absolutely outspoken for protecting black liberties.
 
Unemployment also never fell to below 10 percent in FDR first two terms

As Michael Darby has long since explained, the statistics used to "prove" extremely high unemployment throughout the 1930's are misleading because they count WPA, CCC, and other work-relief workers as "unemployed." See
Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941
Michael R. Darby
Journal of Political Economy
Vol. 84, No. 1 (Feb., 1976), pp. 1-16 https://www.jstor.org/stable/1830168?seq=1

For an earlier version, see https://deliverypdf.ssrn.com/delive...01122106119083127092078031&EXT=pdf&INDEX=TRUE

If you're going to argue that what WPA workers did wasn't "real" work, at least one distinguished conservative would disagree with you: "Now, a lot of people remember it as boondoggles and... raking leaves,” he noted. But that was not right, Reagan said. “Maybe in some places it was. Maybe in the big city machines or something. But I can take you to our town and show you things, like a river front that I used to hike through once that was swamp and is now a beautiful park-like place built by WPA." There were other good things that the WPA had done for Dixon, Reagan added, his voice vibrant, such as the improvements in the town's airport..." https://books.google.com/books?id=k0Y9BwAAQBAJ&pg=PT305
 

LouisXX

Banned
As Michael Darby has long since explained, the statistics used to "prove" extremely high unemployment throughout the 1930's are misleading because they count WPA, CCC, and other work-relief workers as "unemployed." See
Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941
Michael R. Darby
Journal of Political Economy
Vol. 84, No. 1 (Feb., 1976), pp. 1-16 https://www.jstor.org/stable/1830168?seq=1

For an earlier version, see https://deliverypdf.ssrn.com/delive...01122106119083127092078031&EXT=pdf&INDEX=TRUE

If you're going to argue that what WPA workers did wasn't "real" work, at least one distinguished conservative would disagree with you: "Now, a lot of people remember it as boondoggles and... raking leaves,” he noted. But that was not right, Reagan said. “Maybe in some places it was. Maybe in the big city machines or something. But I can take you to our town and show you things, like a river front that I used to hike through once that was swamp and is now a beautiful park-like place built by WPA." There were other good things that the WPA had done for Dixon, Reagan added, his voice vibrant, such as the improvements in the town's airport..." https://books.google.com/books?id=k0Y9BwAAQBAJ&pg=PT305
except 3 million isn’t going to make a huge dent in that number and even then unemployment spiked in 1936. By 1939 unemployment was 20 percent again. Economic growth was also painfully slow and even though wages went up so did prices for everything and gallup polls were showing people were tired of the New Deal. This was because Hoover privately mandated higher wages with companies and Fdr took this further by deliberately cutting on supplies by destroying things like cotton and even murdering a bunch of pigs. Fdr’s secretary of the treasure Henry Morgenthau Jr. said it best. “We tried everything. We have tried spending money and now we aren’t in a better spot than when we took office. In fact we are in a worse spot because of the debt we have now.”
Some New Deal policies were good. Fdr certainly threw a lot of crap at the wall to see what would stick and some did but that doesn’t excuse the floor being covered in crap now.
 
Harding cut taxes, balanced the budget and enacted Laissez Faire policies and the recession ended in eight months. If harding followed his predecessors example the depression would’ve ended quickly
Harding's role has IMO been much exaggerated and the nature of the 1920-21 depression misunderstood. To quote an old post of mine at https://www.alternatehistory.com/fo...-the-20th-century.339057/page-2#post-10126561:

***
In the past when I discussed Harding online, it was to defend him against his detractors, and especially against the absurd rating of him by some historians as the worst president in history (which is obvious nonsense when one considers that Pierce and Buchanan made either disunion or a bloody civil war all but inevitable) and to call attention to his real accomplishments.

However, more recently I have had to dissent from what has become a popular theme among conservatives and libertarians--the idea that Harding was an economic genius who cured the 1920-21 depression through wisely applying laissez-faire economics, cutting spending and taxes, and declining to use "interventionist" measures like those used by Hoover and FDR in the Great Depression.

For a critique of this Austrian-school Hardingolatry, see Daniel Kuehn, "A critique of Powell, Woods, and Murphy on the 1920-1921 depression" in *The Review of Austrian Economics*, Volume 24, Number 3, 273-291. To oversimplify, Kuehn's main point is that in order to curb inflation the Federal Reserve steeply raised interest rates before the Depression--and then helped end the Depression by lowering them. Under those circumstances, Kuehn argues, fiscal stimulus would not, even by Keynesian standards, be appropriate. Kuehn also notes that the budget-balancing and spending cuts began with Wilson, not Harding, and that while federal income tax *rates* were cut in 1921-2 this was offset by an expansion of the income subject to taxation at any given rate:

"As Woods (2009) points out, President Harding agreed with the Federal Reserve on the need for 'intelligent and courageous deflation' (Harding 1920). However, the Harding administration's role in the facilitation of price deflation was marginal at best. By the time Harding called for 'intelligent and courageous deflation,' the New York branch of the Federal Reserve had already raised the discount rate to the 7% plateau that would be maintained for the ensuing year. Harding's election in November of 1920 roughly coincided with the halfway point in Strong's high discount rate policy. The trough in industrial production was in March 1921, the month that Harding was inaugurated. Thus, despite his forceful campaign rhetoric, Harding did not play a significant role in the painful, but necessary, deflation of 1920-1921. The emphasis that Powell (2009) and Woods (2009) place on Harding's role in liquidating malinvestments with a contractionary fiscal policy is therefore consistent with Harding's personal outlook on economic policy, but it is historically inaccurate. Instead, the impact of the Harding administration during this time period must be assessed by examining his fiscal policy during the recovery, rather than the initial deflation.

"While active monetary policy seems to have had the most decisive influence on the 1920-1921 deflation, the fiscal policy of the Wilson administration should also be taken into account. Wilson's most important contribution to the deflation was to balance the federal budget. The 3-month moving average of the difference between federal expenditures and federal tax receipts turned and remained positive (indicating a budget surplus) in November 1919. Thus, net federal borrowing ceased 7 months before Harding vowed to 'strike at government borrowing,' 12 months before he was elected to office, and 24 months before Harding passed his first budget.

"Although modern Keynesians place greater emphasis on the federal deficit than on federal spending, an almost identical narrative is provided by spending data; the Wilson administration cut expenditures dramatically before the 1920-1921 depression and before Harding took office. The claim of Woods (2009) that 'instead of 'fiscal stimulus,' Harding cut the government's budget nearly in half between 1920 and 1922' obscures the fact that federal spending was falling precipitously over the course of 1919 and 1920. When Harding took office in March of 1921, the Wilson administration had already reduced monthly federal spending to 17% of its war-time high. The bulk of this reduction was achieved by the end of 1919. While it is certainly true that the Harding administration would reduce spending further, the cuts were not as substantial as the cuts made by the Wilson administration immediately prior to the downturn. The use of annual data of Woods (2009) instead of monthly data is misleading because spending was still being winnowed down over the course of the 1920 fiscal year. It gives the false impression that most of the adjustment to federal spending occurred during the depression, when in fact most occurred well before the downturn began...

"Powell (2009) and Woods (2009) suggest that the Harding administration's decision to cut income taxes was instrumental to the recovery which began in 1921 and continued in earnest the following year. This is a misleading account of the Harding administration's tax policy. The Harding administration did cut tax rates for higher income families in 1922 the highest bracket's rates were reduced from 73% to 58%) and implemented an across the board rate reduction in 1923 (from 58% to 43.5% for the highest bracket and from 4% to 3% for the lowest bracket). However, these rate cuts were accompanied by a considerable expansion of the income taxable at any given rate (Internal Revenue Service 2010). For example, while the top bracket's rate was reduced by 15% points from 1921 to 1922 in Harding's Revenue Act of 1921, the income taxable at that rate was expanded from all income over $1,000,000 to all income over $200,000. Therefore, while the tax rates were lowered, the amount of income that these tax rates were assessed against was considerably increased by the Harding administration. The net effect was that from 1921 to 1922, the period of the initial Harding tax 'cut,' the percent of individual income collected as revenue through the income tax actually increased from 3.67% to 3.95% (Internal Revenue Service 2010). While this expansion of the tax burden under Harding is not particularly large, it belies claims by Powell (2009) about a tax cut during the economic recovery. After 1922, further rate cuts assessed on the same income brackets did result in a decline in the tax burden from 1922 to 1923. The early Harding administration saw increasing income tax burdens for a variety of reasons, not the least of which being the restored economic growth, which pushed more families into higher tax brackets. However, the statutory expansion of these tax brackets in Harding's Revenue Act of 1921 represented a deliberate, though modest, tax increase in the interest of maintaining a balanced federal budget...[The] brief decline in the tax burden that occurred in 1923 came too late to be considered as a factor in the recovery from the 1920-1921 downturn.." p://www.springerlink.com/content/5683j4v650187261/fulltext.html
 

LouisXX

Banned
Harding's role has IMO been much exaggerated and the nature of the 1920-21 depression misunderstood. To quote an old post of mine at https://www.alternatehistory.com/fo...-the-20th-century.339057/page-2#post-10126561:

***
In the past when I discussed Harding online, it was to defend him against his detractors, and especially against the absurd rating of him by some historians as the worst president in history (which is obvious nonsense when one considers that Pierce and Buchanan made either disunion or a bloody civil war all but inevitable) and to call attention to his real accomplishments.

However, more recently I have had to dissent from what has become a popular theme among conservatives and libertarians--the idea that Harding was an economic genius who cured the 1920-21 depression through wisely applying laissez-faire economics, cutting spending and taxes, and declining to use "interventionist" measures like those used by Hoover and FDR in the Great Depression.

For a critique of this Austrian-school Hardingolatry, see Daniel Kuehn, "A critique of Powell, Woods, and Murphy on the 1920-1921 depression" in *The Review of Austrian Economics*, Volume 24, Number 3, 273-291. To oversimplify, Kuehn's main point is that in order to curb inflation the Federal Reserve steeply raised interest rates before the Depression--and then helped end the Depression by lowering them. Under those circumstances, Kuehn argues, fiscal stimulus would not, even by Keynesian standards, be appropriate. Kuehn also notes that the budget-balancing and spending cuts began with Wilson, not Harding, and that while federal income tax *rates* were cut in 1921-2 this was offset by an expansion of the income subject to taxation at any given rate:

"As Woods (2009) points out, President Harding agreed with the Federal Reserve on the need for 'intelligent and courageous deflation' (Harding 1920). However, the Harding administration's role in the facilitation of price deflation was marginal at best. By the time Harding called for 'intelligent and courageous deflation,' the New York branch of the Federal Reserve had already raised the discount rate to the 7% plateau that would be maintained for the ensuing year. Harding's election in November of 1920 roughly coincided with the halfway point in Strong's high discount rate policy. The trough in industrial production was in March 1921, the month that Harding was inaugurated. Thus, despite his forceful campaign rhetoric, Harding did not play a significant role in the painful, but necessary, deflation of 1920-1921. The emphasis that Powell (2009) and Woods (2009) place on Harding's role in liquidating malinvestments with a contractionary fiscal policy is therefore consistent with Harding's personal outlook on economic policy, but it is historically inaccurate. Instead, the impact of the Harding administration during this time period must be assessed by examining his fiscal policy during the recovery, rather than the initial deflation.

"While active monetary policy seems to have had the most decisive influence on the 1920-1921 deflation, the fiscal policy of the Wilson administration should also be taken into account. Wilson's most important contribution to the deflation was to balance the federal budget. The 3-month moving average of the difference between federal expenditures and federal tax receipts turned and remained positive (indicating a budget surplus) in November 1919. Thus, net federal borrowing ceased 7 months before Harding vowed to 'strike at government borrowing,' 12 months before he was elected to office, and 24 months before Harding passed his first budget.

"Although modern Keynesians place greater emphasis on the federal deficit than on federal spending, an almost identical narrative is provided by spending data; the Wilson administration cut expenditures dramatically before the 1920-1921 depression and before Harding took office. The claim of Woods (2009) that 'instead of 'fiscal stimulus,' Harding cut the government's budget nearly in half between 1920 and 1922' obscures the fact that federal spending was falling precipitously over the course of 1919 and 1920. When Harding took office in March of 1921, the Wilson administration had already reduced monthly federal spending to 17% of its war-time high. The bulk of this reduction was achieved by the end of 1919. While it is certainly true that the Harding administration would reduce spending further, the cuts were not as substantial as the cuts made by the Wilson administration immediately prior to the downturn. The use of annual data of Woods (2009) instead of monthly data is misleading because spending was still being winnowed down over the course of the 1920 fiscal year. It gives the false impression that most of the adjustment to federal spending occurred during the depression, when in fact most occurred well before the downturn began...

"Powell (2009) and Woods (2009) suggest that the Harding administration's decision to cut income taxes was instrumental to the recovery which began in 1921 and continued in earnest the following year. This is a misleading account of the Harding administration's tax policy. The Harding administration did cut tax rates for higher income families in 1922 the highest bracket's rates were reduced from 73% to 58%) and implemented an across the board rate reduction in 1923 (from 58% to 43.5% for the highest bracket and from 4% to 3% for the lowest bracket). However, these rate cuts were accompanied by a considerable expansion of the income taxable at any given rate (Internal Revenue Service 2010). For example, while the top bracket's rate was reduced by 15% points from 1921 to 1922 in Harding's Revenue Act of 1921, the income taxable at that rate was expanded from all income over $1,000,000 to all income over $200,000. Therefore, while the tax rates were lowered, the amount of income that these tax rates were assessed against was considerably increased by the Harding administration. The net effect was that from 1921 to 1922, the period of the initial Harding tax 'cut,' the percent of individual income collected as revenue through the income tax actually increased from 3.67% to 3.95% (Internal Revenue Service 2010). While this expansion of the tax burden under Harding is not particularly large, it belies claims by Powell (2009) about a tax cut during the economic recovery. After 1922, further rate cuts assessed on the same income brackets did result in a decline in the tax burden from 1922 to 1923. The early Harding administration saw increasing income tax burdens for a variety of reasons, not the least of which being the restored economic growth, which pushed more families into higher tax brackets. However, the statutory expansion of these tax brackets in Harding's Revenue Act of 1921 represented a deliberate, though modest, tax increase in the interest of maintaining a balanced federal budget...[The] brief decline in the tax burden that occurred in 1923 came too late to be considered as a factor in the recovery from the 1920-1921 downturn.." p://www.springerlink.com/content/5683j4v650187261/fulltext.html
Wilson was forced to reduce the budget because Republicans controlled the congress and he believed it was the best chance to save the democratic party’s image and more important his image for a third term. The fact was Harding still ended the recession, which in many ways was worse than the recession of 1929 in just a few months. So yes i do give harding a lot of credit for ending the recession and again had Hoover done the same thing the stock market crash would’ve been a footnote like the 1920 crash https://mises.org/library/forgotten-depression-1920
 
Top