The Coolidge Prosperity The Supply Side Approach

Focus Question In a short reply of one to three sentences, respond to the following prompt: Explain what role you believe that the government should have in the economy:

Harding’s Economic Goals Warren Harding had two main economic goals Reduce taxes Reduce budget deficit and debt Goals shared with his Vice President

Economic Concerns Concerns for the 1920s economy U.S. entered a recession in 1919 Result of World War I How to raise capital for business Promote investment Find ways to reduce the tax rate Highest marginal tax was 77%

Andrew Mellon Appointed Secretary of the Treasury Served for 11 years Business background Established major aluminum and steel firms Exceptional banker Never held elective office

Mellon’s Economic Plan Slash taxes for the wealthy Opens up funds for investment Allows economy to grow Improve government efficiency Import new business techniques to government Eliminate waste, fraud, and abuse Track spending Raise certain government fees

Results Did it work? Number of Millionaires tripled More money invested in business New construction boomed The Stock Market Soared. Supply-Side Economics Increased funding to produce goods and the economy will grow

Role of Demand HOWEVER Economies are fueled by Demand If Demand is low, Supply loses importance The 1920s demand was built by three industries Automobile Construction Radio

Summary In a short reply of one to two sentences, respond to the following prompt: Explain what you liked and what you did not like about today’s lesson