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

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Presentation on theme: "Supporting standards comprise 35% of the U. S. History Test 16 (A)"— Presentation transcript:

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

2 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 Hardings Return to Normalcy, reduced taxes, & increased production efficiencies

3 Supporting Standard (16) The student understands significant economic developments between World War I & World War II. The Student is expected to: (A) 1 Analyze causes of economic growth & prosperity in the 1920s, including Warren Hardings Return to Normalcy

4 Pro-Business Policies The 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 Hooverreversed 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 Policies The 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 Hooverreversed 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.

5 A return to normalcy (i.e., a return to the way of life before World War I) was U. S. presidential Warren G. Hardings campaign promise in the election of 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 In the early 1920s, weary from fighting a world war and disillusioned by the failure of Wilsons 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. Hardings campaign promise in the election of 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 In the early 1920s, weary from fighting a world war and disillusioned by the failure of Wilsons 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. Hardings 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, Americas 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 Republicans in the 1920s, meant a return to big business. Return to normalcy for Republicans in the 1920s, meant a return to big business.

6 Hardings vice president, Calvin Coolidge, became president upon Hardings death in 1923 and was then elected himself in Coolidge was staunchly pro-business, Coolidge opposed government regulation of, or interference with, the economy.

7 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

8 Supporting Standard (16) The student understands significant economic developments between World War I & World War II. The Student is expected to: (A) 2 Analyze causes of economic growth & prosperity in the 1920s, including reduced taxes

9 Joint Session of Congress 1921 On 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 1921 On 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.

10 The effects of the 1920s tax rate cuts engineered by Treasury Secretary Andrew Mellon under Presidents Warren Harding and Calvin Coolidge 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.

11 The Mellon Tax Cuts When 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 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 The Mellon Tax Cuts When 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 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.

12 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.

13 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).

14 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 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.

15 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. After Hardings death, Calvin Coolidge generally continued his predecessors 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.

16 Coolidge signing the Revenue Act of 1924

17 Coolidges 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 Coolidges 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 Coolidges term. In addition to these tax cuts, Coolidge proposed reductions in federal expenditures and retiring some of the federal debt. Coolidges 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. Coolidges 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 Coolidges 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 Coolidges term. In addition to these tax cuts, Coolidge proposed reductions in federal expenditures and retiring some of the federal debt. Coolidges 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.

18 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 Coolidges administration, allowing one-fourth of the federal debt to be retired, state and local governments saw considerable growth, surpassing the federal budget in 1927.

19 TARIFFS With 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 nations history. Harding became concerned when the agriculture business suffered economic hardship from the high tariffs. TARIFFS With 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 nations 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. Hardings successors, President Calvin Coolidge and President Herbert Hoover, also advocated tariff legislation.

20 Supporting Standard (16) The student understands significant economic developments between World War I & World War II. The Student is expected to: (A) 3 Analyze causes of economic growth & prosperity in the 1920s, including increased production efficiencies

21 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.

22 Efficiency engineer Frederick Speedy Taylor ( ) 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 Taylors leadership. In the 1920s, adaptations of Taylors ideas supplied the motor driving the economy to fruition in production and distribution of goods on a mass scale. During Coolidges presidency the United States experienced the period of rapid economic growth known as the Roaring Twenties. He left the administrations 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 ( ) 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 Taylors leadership. In the 1920s, adaptations of Taylors ideas supplied the motor driving the economy to fruition in production and distribution of goods on a mass scale. During Coolidges presidency the United States experienced the period of rapid economic growth known as the Roaring Twenties. He left the administrations 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 ( ), 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.

23 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 nations 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 Printing Office, 1920s

24 Among Secretary Hoovers 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 unitsas in numbers of cans or boxes packed for shipping per cartonat 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.

25 Despite labors 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.

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