GDP dropped 24% in one year. Unemployment more than doubled. Great Depression? No. The depression of 1921. Never heard of it? That’s because it only lasted about 18 months. More interesting is what the government did to combat this nasty economic downturn. President Warren G. Harding cut taxes and reduced tax revenue by a third over two years. He cut government spending by half in two years. And he paid down the national debt. Unemployment fell back to pre-depression levels in just a year and a half. And that’s why you’ve never heard of the depression of 1921. Read all of Jim Powell’s article at NRO.
So, within a decade we had two depressions. In the first instance, the government cut taxes and spending and the depression was over in 18 months. In the second instance, the government intervened in every aspect of the economy, raised taxes and spent on innumerable jobs programs. It took more than a decade and a world war for the economy to recover. Why are we following the second model?