At the end of the war, the country's capacity for Federal regulation was temporarily satisfied, and there was a general desire to return to the state and local management characteristic of the prewar years. The twenties were, therefore, years of interregnum when "normalcy" was one of the watchwords of the day and "taking the government out of business" was one of the most important goals.
In the first postwar election, the reaction against centralized government resulted in a decisive defeat for the Wilson administration, even though it had quietly buried the New Freedom long before and even though it seemed to share the general desire to return to peacetime "normalcy" as quickly as possible. During its last days in office, it recommended cutting expenditures, reorganizing the tax structure to stimulate business activity, and retiring the debt as quickly as possible.
The Harding and Coolidge administrations followed the same goals, but with much greater enthusiasm. They believed sincerely in minimum government interference with business. President Harding was convinced that the pressing need of the United States was "not nostrums but normalcy; not revolution but restoration," and President Coolidge believed that "the business of America is business." Under the circumstances, policies friendly to business were emphasized, while assistance to farmer and labor groups was avoided. Vigorous deflationary action was not taken. Expenditures which interfered with business were cut, while those which aided business were increased. Taxes were reduced sharply. A comfortable, rather than a ruthless, debt-retirement policy was instituted, and the monetary authorities tended to follow easy-money policies, even at the risk of encouraging speculation. The resultant philosophy was not laissez faire but neomercantilism, designed not so much to enhance the power of the state as to advance the interests of a certain group of articulate businessmen.
Economic Pattern of the Period . During the first few months after the armistice there was a transition to peacetime conditions during which prices fell slightly and business was dull. However, by the spring of 1919 reconversion had been completed, and a postwar price and credit inflation began. Possibly the most important propelling factor was the vast European demand for American goods. The American export balance, $400