May 26--It was a terrible year.

The economic statistics were worse than the first year of the Great Depression. Joblessness soared to 12 percent from 4 percent. Production fell 21 percent and gross domestic product -- the dollar value of all final goods and services -- dropped 24 percent.

Dark economic clouds spread from horizon to horizon.

The year was 1920 and the president, far from responding with a stimulus package designed to "jump start" the economy, did next to nothing. Woodrow Wilson, commander in chief at the time, had suffered two strokes and was unable to rise to the challenge.

Then, in the midst of all this, a new president, Warren Harding, was elected. Far from launching a "stimulus" package, Harding cut the federal budget dramatically. Federal spending fell to $5 billion in 1921 and then to $3.2 billion in 1922 from $6.3 billion in 1920. Meanwhile, the newly established Federal Reserve was basically passive.

"This is the opposite of what the textbooks today tell us" the government should do in the face of a big economic downturn, notes historian Thomas Woods, author of "The Politically Incorrect Guide to American History," and a senior fellow at the Ludwig von Mises Institute in Auburn, Ala.

So what happened?

The downturn that started in 1920 already was showing signs of reversing itself in early 1921. The depression essentially lasted 18 months. Unemployment, which had hit 12 percent in 1921, fell to 6.7 percent in 1922 and was 2.4 percent in 1923. Real wages, which had fallen dramatically from 1920 to mid-1921, began a steady climb before the end of 1921.

"Here's a rebuke to everything the [contemporary] historians believe in," Woods said, during a recent talk titled "Why you've never heard of the Great Depression of 1920," which can be viewed in full at www.mises.org.

By comparison, the current recession, which the federal government has battled with shotgun blasts of multibillion-dollar interventions -- including massive stimulus spending, corporate bailouts and mind-boggling monetary expansion -- already has lasted 17 months with no end in sight.

Despite the quick economic recovery under his presidency, Warren Harding is someone we are taught to hate, Woods notes.

Harding's administration had its share of scandals, and his personal morals were -- as with many presidents -- questionable. But, as Ohio University economists Richard Vedder and Lowell Gallaway said in their essay, "Rating Presidential Performance," under Harding, taxes were slashed and industrial production rose more than 60 percent.