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That was the qeustion asked President Warren Harding and Vice-President Calvin Coolidge in 1921. The aftermath of World War I was upon us, and many returning veterans had no jobs. Among the political class of the 1920s, the cry went up for a kind of stimulus package. This particular stimulus emphasized public works–massive road building to accommodate the new automobiles on the streets and highways.
What did Harding and Coolidge do? They rejected the public works for two reasons. First was a quaint reason–most of it was unconstitutional. For example, the Erie Canal of 100 years earlier could not be built with federal funds because President Madison had declared such public works to be unconstitutional–and a gain for New York at the expense of the nation.
The second reason, more relevant to today’s observers, is that the public works schemes would not really create jobs–they would all be an illusion. What we seemingly gained by employing veterans on building highways, we would lose elsewhere because the tax dollars could no longer be used for private, local inventment.
In fact, Harding and Coolidge argued that the proper antidote to the 11.7% unemployment was tax cuts and reduced federal spending. When those two reforms were enacted, the 1920s gave us budget surpluses each year and a top tax rate of only 25%. The result was massive entrepreneurship, including inventions from Kleenex to scotch tape, sliced bread to the zipper. Radio was the biggest of them all. Unemployment dropped quickly and was only 2% in 1923.
How to confront 11.7% unemployment. Learn from Presidents Harding and Coolidge. The principles they applied will work today as well.
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