James Grant, editor of Grant’s Interest Rate Observer, is writing a history of modern American business cycles. His most recent book is “Mr. Speaker! The Life and Times of Thomas B. Reed, the Man Who Broke the Filibuster.”
Our Great Recession ended 2½ years ago, according to the official cyclical timekeepers, but you wouldn’t know it by a glance at the news. Zero percent interest rates and $1 trillion in “stimulus” notwithstanding, the U.S. economy can hardly seem to heave itself out of bed in the morning. Now compare this with the first full year of recovery from the ugly depression of 1920-21. In 1922, under the unsung stewardship of the president best remembered for his underlings’ scandals and his own early death in office, the unemployment rate fell from 15.6 percent to 9 percent (on its way to 3.2 percent in 1923), while constant-dollar output leapt by 16 percent. After which the 1920s proverbially roared.
And how did the administration of Warren G. Harding, in conjunction with the Federal Reserve, produce these astonishing results? Why, by raising interest rates, reducing the public debt and balancing the federal budget. Let 21st-century economists rub their eyes in disbelief. Eighteen months after the depression started, it ended.
When he wasn’t presiding over a macroeconomic miracle cure, Harding convened a world disarmament conference and overhauled the creaky machinery of federal budget-making. For his trouble, historians customarily place him last, or next to last, in their rankings of U.S. presidents. Incredibly, they consign him near the bottom even in the subcategory of economic management, about 40 places behind Franklin D. Roosevelt, who inherited a depression that he didn’t actually fix. This year’s GOP aspirants are tussling over the mantle of “Reagan Republican.” A forward-thinking politician might lay claim to the Harding legacy instead.
You couldn’t dislike the handsome and amiable alumnus of Ohio Central College. He was one of three members of the Class of 1882 who, with some partners, bought control of the decrepit Marion, Ohio, Star newspaper in 1884 and turned it into a moneymaker. Gentle and accommodating to a fault, editor Harding would gladly withhold a fact or a name from a delicate story lest his newspaper cause unnecessary hurt to a neighbor. He was elected a state senator in 1899, lieutenant governor in 1903 and a U.S. senator in 1914.
Harding’s style of politicking was as easygoing as his personality. What his constituents were for, he liked, too. Peace, harmony and party loyalty were his watchwords. You’d never hear him sniping at a fellow Republican (except once, at Teddy Roosevelt) or even at a Democrat. In Washington, his cigar box, liquor cabinet and poker table were open to good fellows of any political stripe. Present for only slightly more than half of the recorded floor votes during his single Senate term, Harding made time for the little pleasures in life.
Possibly no political figure in Washington bore less resemblance to the austere occupant of the White House than the convivial senator from Ohio. President Woodrow Wilson — moralist, reformer and intellectual — read books and wrote them. Harding made no pretense to living the life of the mind. He liked people better than books, anyway.
And when, at the 1920 National Republican Convention, the hot and exhausted delegates looked for someone who could win the presidency and unite a deadlocked party, they picked Harding. “Everyone’s second choice,” the pundits sneered.
“I guess you have nominated the wrong candidate, if this is the plan,” Harding told the handlers who urged him to attack the, by then, hugely unpopular incumbent, “for I will never go to the White House over the broken body of Woodrow Wilson.” Campaigning from his front porch in Marion, Harding had hardly a cross word for anyone. Rather, he called for lower taxes, economy in government, restricted immigration, an anti-lynching law and responsible enforcement of the Volstead Act, by which America had voted to enforce Prohibition. “Most of all,” wrote Harding’s best 