America's Money Machine

136 PART II / THE GREAT REVERSAL
cratic and regulatory agencies. Under the system of forced savings instituted
under the Keynesian Theory, that individuals should be relieved
ofconcern for old age in order to be encouraged to spend all they earned,
social security taxes alone were destined to take more from the wage
earner than formerly his total income tax bill.
Whether the post-war prosperity reached its climax in 1926 or 1927
depends upon which series of statistics is used to measure prosperity;
those who gained their livelihood in the stockmarket were swimming in
profits until toward the middle of 1929; the year 1929 was to record more
income tax payers with incomes in excess of$1 million (513) than in any
year of the next thirty-six.* Nevertheless, by 1926, signs were beginning
to indicate that the bloom was off the boom, and that a tiredness was
overtaking the economy. Chief of these was the divergence that had
appeared in the two main branches of the economy-production and
financing, and their parallels, raw materials prices and prices ofsecurities.
We can give only fragmentary indications, and their value as direction
pointers is highly relative. Still, they possess some historical interest.
Thus, production of steel ingots and castings, the primary substance of
industrial civilization, had climbed steadily, with only one pause, from
19.8 million tons in 1921 to surpass in 1925 the wartime peak of 45
million tons and to reach 48.3 million tons in 1926. Here there was a
pause and a sharp fall off in 1927 to 44.9 million tons, though followed
by a recovery to 51.5 million tons in 1928 and 56.4 million tons in 1929
-a figure not again to be reached until World War II. Meantime there
had been an actual decline going on in new investment in blast furnace
capacity, that had reached a wartime peak of 53.7 million tons, and had
steadily increased to 59 million tons in 1925, but that thereafter began
to fall off and did not again pass the 59 million ton figure until 1942.
Investment in residential construction, and consumer purchases ofnew
automobiles and other "durable" goods, had also begun to fall off, reflecting
an exhaustion of individual purchasing power. Construction of
urban dwellings reached a peak in 1925, and began to drop sharply, to
less than halfby Ig2g.t Production ofmotor vehicles dropped from $2.5
billion value in 1926 to $1.97 billion in 1927, but recovered to reach
$2.57 billion in 1929.
*In 1965,646 taxpayers reported adjusted gross income in excess Of$1 million. Between
1967 and 1976, the number hovered between 800 and 1,300.
tThe David M. Blank index dropped from 208.1 in 1925 to 100 in 1929 (1929= 100).