Supporting standards comprise 35% of the U. S. History Test 16 (A)

Supporting standards comprise 35% of the U. S. History Test

16 (A)

Supporting Standard (16)The student understands significant economic developments between World War I & World

War II.The Student is expected to:

(A) Analyze causes of economic growth & prosperity in the 1920s, including Warren Harding’s Return to Normalcy, reduced

taxes, & increased production efficiencies


War II.

The Student is expected to:(A) 1 Analyze causes of economic growth & prosperity in the 1920s, including Warren

Harding’s Return to Normalcy

Pro-Business PoliciesThe Republican presidents of the 1920s reversed the Progressive Era trend of corporate

regulation. Progressive trust-busting gave way to an era of big business. The Republican presidents of the 1920s—Harding, Coolidge, and Hoover—reversed the Progressive Era

trend of regulating big business and lowering tariffs. Instead, Republican policies generally gave corporations free rein, raised protective tariffs, and cut taxes for the rich. Big business and wealthy businessmen especially benefited from the following policies:

1) The Supreme Court overturned a number of measures designed to regulate the activities of big business. The Court declared boycotts by labor unconstitutional and authorized the use of

antitrust laws against unions.2) The Fordney-McCumber Tariff of 1922 and the Smoot-Hawley Tariff of 1930 were two of six

major tariffs passed that hiked importation rates to all-time highs. These tariffs protected American companies from international competition.

3) Andrew Mellon, treasury secretary from 1921 to 1932, persuaded Congress to lower income tax rates for the wealthy.

Pro-Business PoliciesThe Republican presidents of the 1920s reversed the Progressive Era trend of corporate

regulation. Progressive trust-busting gave way to an era of big business. The Republican presidents of the 1920s—Harding, Coolidge, and Hoover—reversed the Progressive Era

trend of regulating big business and lowering tariffs. Instead, Republican policies generally gave corporations free rein, raised protective tariffs, and cut taxes for the rich. Big business and wealthy businessmen especially benefited from the following policies:

1) The Supreme Court overturned a number of measures designed to regulate the activities of big business. The Court declared boycotts by labor unconstitutional and authorized the use of

antitrust laws against unions.2) The Fordney-McCumber Tariff of 1922 and the Smoot-Hawley Tariff of 1930 were two of six

major tariffs passed that hiked importation rates to all-time highs. These tariffs protected American companies from international competition.

3) Andrew Mellon, treasury secretary from 1921 to 1932, persuaded Congress to lower income tax rates for the wealthy.

“A return to normalcy” (i.e., a return to the way of life before World War I) was U. S. presidential Warren G. Harding’s campaign promise in the election of 1920. Although detractors believed that the word was

a neogolism as well as a malapropism by Harding (as opposed to the more accepted term normality), there was contemporary discussion and evidence

found that normalcy had been listed in dictionaries as far back as 1857.

In the early 1920s, weary from fighting a world war and disillusioned by the failure of Wilson’s plans to create a new world order, Americans sought stability. Republicans ceased to promise

progressive reforms and instead aimed to settle into traditional patterns of government.

“A return to normalcy” (i.e., a return to the way of life before World War I) was U. S. presidential Warren G. Harding’s campaign promise in the election of 1920. Although detractors believed that the word was

a neogolism as well as a malapropism by Harding (as opposed to the more accepted term normality), there was contemporary discussion and evidence

found that normalcy had been listed in dictionaries as far back as 1857.

In the early 1920s, weary from fighting a world war and disillusioned by the failure of Wilson’s plans to create a new world order, Americans sought stability. Republicans ceased to promise

progressive reforms and instead aimed to settle into traditional patterns of government.

Harding’s promise was to return the United States to pre-world war mentality; without the thought of war tainting the minds of the American people. He states,

“America’s present need is not heroics, but healing; not nostrums, but normalcy; not revolution, but restoration; not agitation, but adjustment; not surgery, but serenity;

not the dramatic, but the dispassionate; not experiment, but equipoise; not submergence in internationality, but sustainment in triumphant nationality,” to sum

up his points.

“ “Return to normalcy” for Return to normalcy” for Republicans in the 1920s, meant a Republicans in the 1920s, meant a

return to big business.return to big business.

Harding’s vice president, Calvin Coolidge, became president upon Harding’s death in 1923 and was then elected himself in 1924. Coolidge was staunchly pro-business, Coolidge

opposed government regulation of, or interference with, the economy.

In a demonstrable way, the domestic desire for a “return to normalcy” had its counterpart in

foreign affairs.As Americans wished to turn back the clock to their domestic world

before the Great War . . .

so, disillusioned by the losses in war & the sparse results of the Versailles Peace Treaty, they longed for a return to the isolationism

which had prevailed prior to 1917



(A) 2 Analyze causes of economic growth & prosperity in the 1920s, including reduced

taxes

Joint Session of Congress 1921On April 12, 1921 Harding called a joint session of Congress to address matters that he deemed of national and urgent importance. That speech, considered his best, contained few political platitudes and was enthusiastically received by Congress. On the economic front, Harding urged Congress to create a Bureau of the Budget, cut expenditures, and revise federal tax laws. Harding urged increased protectionist tariffs, lower taxes, and

agriculture legislation to help farmers.

Joint Session of Congress 1921On April 12, 1921 Harding called a joint session of Congress to address matters that he deemed of national and urgent importance. That speech, considered his best, contained few political platitudes and was enthusiastically received by Congress. On the economic front, Harding urged Congress to create a Bureau of the Budget, cut expenditures, and revise federal tax laws. Harding urged increased protectionist tariffs, lower taxes, and

agriculture legislation to help farmers.

The effects of the 1920s tax rate cuts engineered by Treasury Secretary Andrew Mellon under

Presidents Warren Harding and Calvin CoolidgeChanges in marginal income tax rates cause individuals and businesses

to change their behavior. As tax rates rise, taxpayers reduce taxable income by working less, retiring earlier, scaling back plans to start or

expand businesses, moving activities to the underground economy, restructuring companies, and spending more time and money on

accountants to minimize taxes.

Changes in marginal income tax rates cause individuals and businesses to change their behavior. As tax rates rise, taxpayers reduce taxable

income by working less, retiring earlier, scaling back plans to start or expand businesses, moving activities to the underground economy, restructuring companies, and spending more time and money on

accountants to minimize taxes.

Tax rate cuts reduce such distortions and cause the tax base to expand as tax avoidance falls and the economy grows. A

review of tax data for high-income earners in the 1920s shows that as top tax rates were cut, tax revenues and the share of

taxes paid by high-income taxpayers soared.

Tax rate cuts reduce such distortions and cause the tax base to expand as tax avoidance falls and the economy grows. A

review of tax data for high-income earners in the 1920s shows that as top tax rates were cut, tax revenues and the share of

taxes paid by high-income taxpayers soared.

The Mellon Tax CutsWhen the federal income tax was enacted in 1913, the top rate was just 7

percent. By the end of World War I, rates had been greatly increased at all income levels, with the top rate jacked up to 77 percent (for income over $1

million). After five years of very high tax rates, rates were cut sharply under the Revenue Acts of 1921, 1924, and 1926.

The combined top marginal normal and surtax rate fell from 73 percent to 58 percent

in 1922, and then to 50 percent in 1923 (income over $200,000). In 1924, the top tax

rate fell to 46 percent (income over $500,000). The top rate was just 25 percent (income over $100,000) from 1925 to 1928, and then fell to

24 percent in 1929.

The Mellon Tax CutsWhen the federal income tax was enacted in 1913, the top rate was just 7

percent. By the end of World War I, rates had been greatly increased at all income levels, with the top rate jacked up to 77 percent (for income over $1

million). After five years of very high tax rates, rates were cut sharply under the Revenue Acts of 1921, 1924, and 1926.

The combined top marginal normal and surtax rate fell from 73 percent to 58 percent

in 1922, and then to 50 percent in 1923 (income over $200,000). In 1924, the top tax

rate fell to 46 percent (income over $500,000). The top rate was just 25 percent (income over $100,000) from 1925 to 1928, and then fell to

24 percent in 1929.

Secretary Mellon believed that high tax rates caused the tax base to contract and that lower rates would boost economic growth. In 1924, Mellon noted: “The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business.” He received strong support from President Coolidge, who argued that “the wise and correct course to follow in taxation

and all other economic legislation is not to destroy those who have already secured success but to create conditions under which everyone will have a better chance to be successful.”

Secretary Mellon believed that high tax rates caused the tax base to contract and that lower rates would boost economic growth. In 1924, Mellon noted: “The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business.” He received strong support from President Coolidge, who argued that “the wise and correct course to follow in taxation

and all other economic legislation is not to destroy those who have already secured success but to create conditions under which everyone will have a better chance to be successful.”

The Effects of the Mellon Tax Cuts

Detailed Internal Revenue Service data show that the across-the-board rate cuts of the early 1920s-including large cuts at the top end-resulted in greater tax payments and a larger tax share paid by

those with high incomes. Figure 1 focuses on those earning more than $100,000. As the marginal tax rate on those high-income earners was cut sharply from 60 percent or more (to a maximum of 73

percent) to just 25 percent, taxes paid by that group soared from roughly $300 million to $700 million per year. The share of overall income taxes paid by the group rose from about one-third in

the early 1920s to almost two-thirds by the late 1920s. (Note that inflation was virtually zero between 1922 and 1930, thus the tax amounts shown for that period are essentially real changes).

Detailed Internal Revenue Service data show that the across-the-board rate cuts of the early 1920s-including large cuts at the top end-resulted in greater tax payments and a larger tax share paid by

those with high incomes. Figure 1 focuses on those earning more than $100,000. As the marginal tax rate on those high-income earners was cut sharply from 60 percent or more (to a maximum of 73

percent) to just 25 percent, taxes paid by that group soared from roughly $300 million to $700 million per year. The share of overall income taxes paid by the group rose from about one-third in

the early 1920s to almost two-thirds by the late 1920s. (Note that inflation was virtually zero between 1922 and 1930, thus the tax amounts shown for that period are essentially real changes).

The tax cuts allowed the U.S. economy to grow rapidly during the mid- and late-1920s. Between 1922 and 1929, real gross national product

grew at an annual average rate of 4.7 percent and the unemployment rate fell from 6.7 percent to 3.2 percent. The Mellon tax cuts restored

incentives to work, save, and invest, and discouraged the use of tax shelters.

The decade of the 1920s had started with very high tax rates and an economic recession. Tax rates were massively increased in 1917 at all income levels. Rates were increased again in 1918. Real GNP fell in

1919, 1920, and 1921 with a total three-year fall of 16 percent. (Deflation between 1920 and 1922 may also help explain the drop in tax

revenues in those years, evident in Table 1).

The tax cuts allowed the U.S. economy to grow rapidly during the mid- and late-1920s. Between 1922 and 1929, real gross national product

grew at an annual average rate of 4.7 percent and the unemployment rate fell from 6.7 percent to 3.2 percent. The Mellon tax cuts restored

incentives to work, save, and invest, and discouraged the use of tax shelters.

As tax rates were cut in the mid-1920s, total tax revenues initially fell. But as the economy responded and began growing quickly,

revenues soared as incomes rose. By 1928, revenues had surpassed the 1920 level even though tax rates had been dramatically cut.

The tax cuts of the 1920s were the first federal experiment with supply-side income tax rate cuts. Data for the period show an initial decline in

federal revenues as tax rates were cut, but revenues grew strongly during the subsequent economic expansion. After the cuts, total tax

payments and the share of total taxes paid by the top income earners soared.

The tax cuts of the 1920s were the first federal experiment with supply-side income tax rate cuts. Data for the period show an initial decline in

federal revenues as tax rates were cut, but revenues grew strongly during the subsequent economic expansion. After the cuts, total tax

payments and the share of total taxes paid by the top income earners soared.

After Harding’s death, Calvin Coolidge generally continued his predecessor’s policies. Just before the Republican Convention of

1924 began, Coolidge signed into law the Revenue Act of 1924, which decreased personal income tax rates while increasing the estate tax,

and creating a gift tax to reinforce the transfer tax system.

After Harding’s death, Calvin Coolidge generally continued his predecessor’s policies. Just before the Republican Convention of

1924 began, Coolidge signed into law the Revenue Act of 1924, which decreased personal income tax rates while increasing the estate tax,

and creating a gift tax to reinforce the transfer tax system.

Coolidge signing the Coolidge signing the Revenue Act of 1924 Revenue Act of 1924

Coolidge’s address to the American Society of Newspaper Editors, Washington D.C., January 25, 1925: “It is probable that a press which maintains an

intimate touch with the business currents of the nation is likely to be more reliable than it would be if it were a stranger to these influences. After all, the

chief business of the American people is business. They are profoundly concerned with buying, selling, investing and prospering in the world

Coolidge’s taxation policy was that of his Secretary of the Treasury, Andrew Mellon: taxes should be lower and fewer people should have to pay them. Congress agreed, and

the taxes were reduced in Coolidge’s term. In addition to these tax cuts, Coolidge proposed reductions in federal expenditures and retiring some of the federal

debt. Coolidge’s ideas were shared by the Republicans in Congress, and in 1924 Congress passed the Revenue Act of 1924, which reduced income tax rates and

eliminated all income taxation for some two million people.

Coolidge’s address to the American Society of Newspaper Editors, Washington D.C., January 25, 1925: “It is probable that a press which maintains an

intimate touch with the business currents of the nation is likely to be more reliable than it would be if it were a stranger to these influences. After all, the

chief business of the American people is business. They are profoundly concerned with buying, selling, investing and prospering in the world

Coolidge’s taxation policy was that of his Secretary of the Treasury, Andrew Mellon: taxes should be lower and fewer people should have to pay them. Congress agreed, and

the taxes were reduced in Coolidge’s term. In addition to these tax cuts, Coolidge proposed reductions in federal expenditures and retiring some of the federal

debt. Coolidge’s ideas were shared by the Republicans in Congress, and in 1924 Congress passed the Revenue Act of 1924, which reduced income tax rates and

eliminated all income taxation for some two million people.

Harding & Coolidge reduced taxes again by passing the Revenue Acts of 1926 and 1928, all the while continuing to keep spending down so as to reduce

the overall federal debt. By 1927, only the richest 2% of taxpayers paid any federal income tax. Although federal spending remained flat during Coolidge’s administration, allowing one-fourth of the federal debt to be retired, state and

local governments saw considerable growth, surpassing the federal budget in 1927.

Harding & Coolidge reduced taxes again by passing the Revenue Acts of 1926 and 1928, all the while continuing to keep spending down so as to reduce

the overall federal debt. By 1927, only the richest 2% of taxpayers paid any federal income tax. Although federal spending remained flat during Coolidge’s administration, allowing one-fourth of the federal debt to be retired, state and

local governments saw considerable growth, surpassing the federal budget in 1927.

TARIFFSWith the exception of favoring increased tariffs, Coolidge disdained regulation, and

carried about this belief by appointing commissioners to the Federal Trade Commission and the Interstate Commerce Commission who did little to restrict the activities of businesses under their jurisdiction. The regulatory state under Coolidge

was, as one biographer described it, “thin to the point of invisibility.”

On September 21, 1922, Harding enthusiastically signed the Fordney–McCumber Tariff Act. The protectionist legislation was sponsored by Representative Joseph

W. Fordney and Senator Porter J. McCumber. It increased the tariff rates contained in the previous Underwood-Simmons Tariff Act of 1913, to the highest

level in the nation’s history. Harding became concerned when the agriculture business suffered economic hardship from the high tariffs.

TARIFFSWith the exception of favoring increased tariffs, Coolidge disdained regulation, and

carried about this belief by appointing commissioners to the Federal Trade Commission and the Interstate Commerce Commission who did little to restrict the activities of businesses under their jurisdiction. The regulatory state under Coolidge

was, as one biographer described it, “thin to the point of invisibility.”

On September 21, 1922, Harding enthusiastically signed the Fordney–McCumber Tariff Act. The protectionist legislation was sponsored by Representative Joseph

W. Fordney and Senator Porter J. McCumber. It increased the tariff rates contained in the previous Underwood-Simmons Tariff Act of 1913, to the highest

level in the nation’s history. Harding became concerned when the agriculture business suffered economic hardship from the high tariffs.

Previously, on May 21, 1921 Harding had signed emergency legislation that put tariffs on select foreign inputs. By 1922, Harding began to realize that the long-term effects of tariffs could be

detrimental to national economy, despite the short-term benefits. Harding’s successors, President Calvin Coolidge and President Herbert Hoover, also advocated tariff legislation.

Previously, on May 21, 1921 Harding had signed emergency legislation that put tariffs on select foreign inputs. By 1922, Harding began to realize that the long-term effects of tariffs could be

detrimental to national economy, despite the short-term benefits. Harding’s successors, President Calvin Coolidge and President Herbert Hoover, also advocated tariff legislation.



(A) 3 Analyze causes of economic growth & prosperity in the 1920s, including increased

production efficiencies

The Efficiency Movement was a major movement in the United States, Britain and other industrial nations in the early 20th century that sought to identify and eliminate waste in all areas of the economy and society, and to develop and

implement best practices. The concept covered mechanical, economic, social, and personal improvement. The quest for efficiency promised effective, dynamic

management rewarded by growth. As a result of the influence of an early proponent, it is more often known as Taylorism.

The Efficiency Movement played a central role in the Progressive Era in the United States, where it flourished 1890–1932. Adherents argued that all aspects of the

economy, society and government were riddled with waste and inefficiency. Everything would be better if experts identified the problems and fixed them. Perhaps the best known leaders were engineers Frederick Winslow Taylor (1856–1915), who used a

stopwatch to identify the smallest inefficiencies, and Frank Bunker Gilbreth, Sr. (1868–1924) who proclaimed there was always “one best way” to fix a problem.

The Efficiency Movement was a major movement in the United States, Britain and other industrial nations in the early 20th century that sought to identify and eliminate waste in all areas of the economy and society, and to develop and

implement best practices. The concept covered mechanical, economic, social, and personal improvement. The quest for efficiency promised effective, dynamic

management rewarded by growth. As a result of the influence of an early proponent, it is more often known as Taylorism.

The Efficiency Movement played a central role in the Progressive Era in the United States, where it flourished 1890–1932. Adherents argued that all aspects of the

economy, society and government were riddled with waste and inefficiency. Everything would be better if experts identified the problems and fixed them. Perhaps the best known leaders were engineers Frederick Winslow Taylor (1856–1915), who used a

stopwatch to identify the smallest inefficiencies, and Frank Bunker Gilbreth, Sr. (1868–1924) who proclaimed there was always “one best way” to fix a problem.

Efficiency engineer Frederick “Speedy” Taylor (1856-1915) is considered the founder of “the theory of scientific management.” Many ideas about the

scientific management of work and the work place current during the twenties had evolved in the three preceding decades under Taylor’s leadership. In the 1920s, adaptations of Taylor’s ideas supplied the motor driving the economy

to fruition in production and distribution of goods on a mass scale.

During Coolidge’s presidency the United States experienced the period of rapid economic growth known as the “Roaring Twenties.”

He left the administration’s industrial policy in the hands of his activist Secretary of Commerce, Herbert Hoover, who energetically

used government auspices to promote business efficiency.

Efficiency engineer Frederick “Speedy” Taylor (1856-1915) is considered the founder of “the theory of scientific management.” Many ideas about the

scientific management of work and the work place current during the twenties had evolved in the three preceding decades under Taylor’s leadership. In the 1920s, adaptations of Taylor’s ideas supplied the motor driving the economy

to fruition in production and distribution of goods on a mass scale.

During Coolidge’s presidency the United States experienced the period of rapid economic growth known as the “Roaring Twenties.”

He left the administration’s industrial policy in the hands of his activist Secretary of Commerce, Herbert Hoover, who energetically

used government auspices to promote business efficiency.

A mining engineer by training, Commerce Secretary Hoover was much influenced by the ideas of Frederick "Speedy" W. Taylor (1856-1915), an efficiency engineer regarded as the father of “scientific management.” Under Hoover's leadership, initiatives undertaken within the Department of Commerce by the Bureau of

Standards and the Division of Simplified Practice reflected the impact of Frederick W. Taylor on the business world, and set the tone for a nationwide effort to

maximize worker, managerial and industrial productivity.

A mining engineer by training, Commerce Secretary Hoover was much influenced by the ideas of Frederick "Speedy" W. Taylor (1856-1915), an efficiency engineer regarded as the father of “scientific management.” Under Hoover's leadership, initiatives undertaken within the Department of Commerce by the Bureau of

Standards and the Division of Simplified Practice reflected the impact of Frederick W. Taylor on the business world, and set the tone for a nationwide effort to

maximize worker, managerial and industrial productivity.

Armed with an immense faith in the power of scientific data and data-gathering and the ability of techniques of scientific efficiency to foster stability in the nation’s work life, Hoover promoted

research into business and industrial topics by enlisting the cooperation of business, government, organized philanthropy, and social science research agencies. The fact-finding investigations were

aimed at promoting business and worker prosperity under the umbrella, though not the direct intervention, of the federal government. The resulting survey data, made available at minimal cost in the form of Government Printing Office pamphlets and brochures, constituted a kind of early

data bank of enormous value to businesses.

Armed with an immense faith in the power of scientific data and data-gathering and the ability of techniques of scientific efficiency to foster stability in the nation’s work life, Hoover promoted

research into business and industrial topics by enlisting the cooperation of business, government, organized philanthropy, and social science research agencies. The fact-finding investigations were

aimed at promoting business and worker prosperity under the umbrella, though not the direct intervention, of the federal government. The resulting survey data, made available at minimal cost in the form of Government Printing Office pamphlets and brochures, constituted a kind of early

data bank of enormous value to businesses.

Government Government Printing Office, Printing Office,

1920s1920s

Among Secretary Hoover’s most significant initiatives in this “war on waste” in both government and the private sector was standardization and simplification of industrial parts and

procedures. For example, the formulation of standard weights for loaves of bread, standard sizes for cans, and uniform rating of canned goods for quality, as well as standardization of packaging units—as in numbers of cans or boxes packed for shipping per carton—at a time when there was

little conformity, greatly facilitated distribution, retailing and accounting. Standardization became a prime subject of surveys and statistics, too, as is evident in Progress in Elimination of Waste, an

extract from the Fourteenth Annual Report of the Secretary of Commerce .

Among Secretary Hoover’s most significant initiatives in this “war on waste” in both government and the private sector was standardization and simplification of industrial parts and

procedures. For example, the formulation of standard weights for loaves of bread, standard sizes for cans, and uniform rating of canned goods for quality, as well as standardization of packaging units—as in numbers of cans or boxes packed for shipping per carton—at a time when there was

little conformity, greatly facilitated distribution, retailing and accounting. Standardization became a prime subject of surveys and statistics, too, as is evident in Progress in Elimination of Waste, an

extract from the Fourteenth Annual Report of the Secretary of Commerce .

Despite labor’s abhorrence of the “speeding up” practices associated with Taylor's efficiency revolution in production and the keying of wages to measurable standards of efficiency as

determined by time and motion studies, some version of these ideas gradually became standard and even generally accepted, even among workers. In a 1926 Encyclopedia Britannica entry for

“Mass Production,” the author, "HF," presumed to be Henry Ford, brilliantly analyzes the impact of the tenets of the early twentieth century “efficiency movement” on mass production on the assembly line in the automobile industry. Even workers cooperatives, such as those formed by

farmers, were operated on Tayloresque assumptions.

Despite labor’s abhorrence of the “speeding up” practices associated with Taylor's efficiency revolution in production and the keying of wages to measurable standards of efficiency as

determined by time and motion studies, some version of these ideas gradually became standard and even generally accepted, even among workers. In a 1926 Encyclopedia Britannica entry for

“Mass Production,” the author, "HF," presumed to be Henry Ford, brilliantly analyzes the impact of the tenets of the early twentieth century “efficiency movement” on mass production on the assembly line in the automobile industry. Even workers cooperatives, such as those formed by

farmers, were operated on Tayloresque assumptions.

Supporting standards comprise 35% of the U. S. History Test 16 (A)

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