The Warren G. Harding years ushered in a new era of prosperity for the American electorate. After a brief recession in 1920, prosperity returned with a burst of buying by Americans eager to make up for their wartime deprivations. The gross national product (GNP) increased by 16 percent between 1921 and 1922. By 1923, unemployment had dropped to a low of 2 percent. Most workers in manufacturing were fully employed, and their average paycheck reached $22 per week—an all-time high.

Prosperity, Bootlegging, and Nativism

It was a time of fundamental change, a time when American business leaders launched a new wave of advertising aimed at getting Americans to consume new products. Listerine was plugged as the way to increase one's romance with the opposite sex by fighting halitosis (bad breath). General Foods put the image of Betty Crocker on its baking products. An average of 883,000 new homes were built each year of the 1920s beginning in 1922. And some cities, like Los Angeles, had one automobile for every three residents. Radios became a household word, and young men and women began to "date," a new term in the American vocabulary.

Most Americans simply ignored the new prohibition laws against drinking, following the example set by President Harding. In 1923, a federal agent reported that it took a newcomer only thirty-five seconds to get an illegal drink in New Orleans, three minutes in Detroit, and three minutes and ten seconds in New York City. And Al Capone, the Chicago bootlegger, was just getting started during the Harding years. By 1926, his gang numbered one thousand members.

The war, prosperity, and the new morality—symbolized in part by the country's easy acceptance of "the Ohio gang" in the White House and the talk about Harding's "girlfriends"—produced the early signs of a reactionary upheaval in response to the changes all around. A wave of nativism swept the land, producing a new immigration quota (the Johnson Act) and bloody race riots. The new Ku Klux Klan, revived by its glorification in the film Birth of a Nation and a recruiting scheme that profited local organizers, grew from five thousand members in 1918 to over 1 million by 1923. Klan members hailed themselves as "Puritans" doing battle with "a corrupt and jazz-mad age." In Oregon, the Klan pushed legislation that would eliminate Catholic schools because they were perceived as "un-American." It took a Supreme Court case decided in 1925, Pierce v. Society of Sisters, to uphold the Klan's continued existence.

The Harding years also witnessed the introduction of the so-called "American Plan," whereby American businessmen launched antiunion drives by offering workers something known as "Welfare Capitalism." The plan provided workers with benefit programs such as insurance, pensions, cheap lunches in company cafeterias, paid vacations, and stock purchase options in return for leaving—or not joining—labor unions.