Site menu:


December 2012 - Volume 17, Number 4


Click Here for a pdf verison.



Four Years Is Plenty of Time to See a Recovery

by Burton W. Folsom, Jr.


President Obama charged up the Democrat troops at Charlotte: “I’m asking you to rally around a set of goals for your country,” he said. “That’s what we can do in the next four years.” But why, many ask, have we not really recovered from our last recession? We have fewer people employed now than we did when President Obama took office. And many of the unemployed have simply given up looking for work. “Four years was not enough time,” President Obama and his supporters insist. “The problems were too deep.”


What about past recessions? Let’s look to history for help. In 1921, for example, the U.S. had 11.7% unemployment. We were recovering from World War I, and President Warren Harding and Vice President Calvin Coolidge were elected to restore prosperity in America — a “return to normalcy,” as Harding called it in the campaign. After the election, Harding had a President’s Conference on Unemployment to give him advice on the issue. Most of the 300 “experts” and leaders recommended that the President promote a kind of stimulus package: Put people to work building roads and infrastructure. Harding, however, took a pass. “The excess stimulation from that source is to be reckoned a cause of trouble rather than a source of cure.”


Why did Harding and Coolidge reject massive federal spending? First, because it was unconstitutional; and second, because it wouldn’t work. Federal spending would merely redistribute cash from taxpayers to bureaucrats—a mere shift of jobs from the private to the public sector. Harding’s plan was to have people create jobs for other people — a kind of private-sector stimulus package. He slashed federal spending drastically, and then cut tax rates as well. According to the Historical Statistics of the United States, published by the Census Bureau, Harding cut federal spending from $6.4 billion in 1920 to $3.1 billion in 1923. And he cut the top marginal tax rate from 73% in 1920 to 56% in 1923 — and later Coolidge cut the rate further to 25% by 1926.


In other words, the Harding-Coolidge Administration cut federal spending by more than one half in three years, and cut the tax rate as well. What was the result? Unemployment plummeted from 11.7% in 1921 to 2.4% in 1923. And we had budget surpluses during every year of the 1920s. We had a dramatic recovery and it happened in less than four years.


President Reagan was under the same pressures as Harding and Coolidge. And although President Reagan did not cut federal spending, he did cut tax rates on top incomes from 70% in 1980 to 28% in 1986. Unemployment again plummeted, while revenue poured into the Treasury — as it did under Harding and Coolidge.


Four years is plenty of time to see a recovery. But it takes the right policies — more individual liberty and less government intervention.


Burton W. Folsom, Jr., is the Charles F. Kline Chair in History and Management at Hillsdale College and is the author of The Myth of the Robber Barons, New Deal or Raw Deal, and FDR Goes to War, which was co-authored with his wife Anita Folsom.


This article appeared on September 11, 2012, on his Website,, Burt Folsom: “Where
History, Money, and Politics Collide” and is reprinted with permission.


LIMITS is one of our quarterly membership newsletters, arriving in March, June, September, and December. It consists of short articles and essays on protection of human rights by limiting the powers of government.


LIMITS is published by Public Interest Institute at Iowa Wesleyan College, a nonpartisan, nonprofit, research and educational institute, whose activities are supported by contributions from private individuals, corporations, companies, and foundations. The Institute does not accept government grants.


Contributions are tax-deductible under sections 501(c)(3) and 170 of the Internal Revenue Code.


Permission to reprint or copy in whole or part is granted, provided a version of this credit line is used: "Reprinted by permission from LIMITS, a quarterly newsletter of Public Interest Institute." The views expressed in this publication are those of the authors and not necessarily those of Public Interest Institute.


If you have an article you believe is worth sharing, please send it to us. All or a portion of your article may be used. The articles in this publication are brought to you in the interest of a better-informed citizenry, because IDEAS DO MATTER.



All of our publications are available for sponsorship.  Sponsoring a publication is an excellent way for you to show your support of our efforts to defend liberty and define the proper role of government.  For more information, please contact Public Interest Institute at 319-385-3462 or e-mail us at