US History^2 Lecture #8

1920s

  • governing outlook similar between Harding and Coolidge (presidents in the 1920s)
  • American economy–1920-1921 sharp declines in productions and employment
  • Harding in office until 1921 and took a fairly hands off approach
  • 1920-1922 federal budget cut in half (3.3 billion in 1922)
  • 1921 all interest rates were falling
  • one of the driving factors behind this was the high rate of investment in capitol equipment (equipment to make business or yourself more productive)
  • unemployment remained under 4% except for peaks of 5% in 1924 (1927 got down to 1%)
  • GDP 595 billion in 1921 to 865 billion in 1929 (45% increase in 8 years)
  • share of world production in 1929 was held by the US at 34.4%
  • income tax reductions occurred gradually throughout Harding administration to the Coolidge admin (1925-6)
  • top marginal rate 73% (WWI) getting down by middle of Coolidge’s office to 25% (after 1 term)
  • tax rates were so high that they were encouraging people to hide their income so public service projects boomed but American businesses starved for capitol
  • more revenue and less tax avoidance therefore federal gov could pay down more¬† of the national debt
  • at a marginal (tax) rate of 100% the gov actually earns 0% revenue because no one in their right minds would work under those conditions
  • 1920s lifestyle–automobile production rose from 1.7 mil 1917 to 4.6 mil 1929. household electrification increased dramatically
  • 1920 47.4% urban household, 1.6% farms, 34.7% all dwellings had electricity
  • 1930 years later 84.8%, 10.4%, 68.2%
  • production of wide variety of appliances. increased leisure and transportation and therefore more demand for entertainment
  • 1920 economic boom especially apparent in higher order industries (capitol goods)– pig iron and steel production tripled, construction activity and machine tool output tripled, industrial production more than double consumer goods, stock market rose 50% by 1928 and by another 27% in 19

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