Picture this: It is midnight on Nov. 4, 2009. The previous day's elections in Virginia, New York's 23rd congressional district, and New Jersey have all been won by Republicans. Health reform is stalled. The latest employment numbers are still dismaying. President Obama cannot sleep. He paces the halls of the White House and comes upon a portrait of Warren Harding. Since President Obama is nothing if not a receptacle of received understanding, he would probably snort "Harding! What a disaster he was! Cronyism. Laissez-faire economics. Corruption. Incompetence."
Well, it's true that Teapot Dome and other scandals engulfed the Harding administration in 1923. And that's pretty much all that popular histories remember about the 29th president. Harding died in office before he could restore his reputation. But if his portrait could talk, it might remind President Obama of a few things he could take to heart.
When Harding took office in 1921, the U.S. economy was in a far worse depression than President Obama inherited. A savage inflation had eroded buying power and unemployment stood at 20 percent. The U.S. had suffered more than 116,000 dead and 205,000 wounded in the war. Additionally, 650,000 mostly young and productive Americans had been killed by the Spanish flu. Between 1920 and 1921, GDP had declined 24 percent from $91.5 billion to $69.6 billion. Civil liberties had been trampled under the Wilson administration. Wilson had jailed socialist leader Eugene V. Debs, for example, for opposing the U.S. role in World War I. "With the exception of Lincoln," wrote The Nation magazine, "probably no president in our national history has taken office with as pressing a burden of unresolved questions."
With advice from Treasury Secretary Andrew Mellon, President Harding set about reducing the government's role in the economy. He cut federal spending from the bloated Wilsonian level of $6.3 billion in 1920 to $5 billion in 1921, and then to $3.2 billion in 1922. Federal taxes were cut from $6.6 billion in 1920 to $5.5 billion in 1921 and $4 billion in 1922. Unlike his Commerce Secretary, Herbert Hoover, an enthusiast of government intervention in the economy who pushed for a Conference on Unemployment, Harding believed that "we need vastly more freedom than we do regulation."
Harding, a Republican, not only pardoned and freed the socialist Eugene Debs, who had been prosecuted by the Democrat Wilson; he invited Debs to the White House.