The 1920s marked the end of Progressive presidents, as Harding, Coolidge, and Hoover (all Republicans) sought what Harding called a return to "normalcy" after World War I. To this end, the government was largely pro-business and took a laissez-faire attitude toward regulating business and the stock market, which in part led to the stock market crash of October 1929. Harding lowered taxes and instituted the process of having the president submit a budget for congressional approval, in an effort to lower federal spending and the federal debt after World War I. He also favored high tariffs to protect American industry.

Coolidge and Hoover also believed that the scope of the federal government should be limited in nature; they did little to police Wall Street, leading to practices that in part caused the Great Depression. When Hoover tried to deal with the Great Depression, his idea that the federal government should be limited in nature hampered his attempts to ameliorate economic and social conditions in the country.

During the Harding and Coolidge Administrations, the Secretary of the Treasury was Andrew W. Mellon, often considered the greatest person to hold that office since Hamilton. A dedicated disciple of supply-side economics, Mellon believed that taxes on the wealthy should be lowered, as they would spend money and create jobs. This he believed should be accompanied by reduced government spending. His policies worked to a point: During the Harding and Coolidge Administrations, the federal budget was balanced, taxes reduced, and government spending cut. The result was increased prosperity and increased consumer spending, which the government encouraged.

Calvin Coolidge also worked to reduce government regulation of business and promote industry. His most famous statement was:

The business of America is business. The man who builds a factory builds a temple. The man who works there worships there.

Social stability followed almost as a matter of course. Many Americans were tired of the moralistic idealism that had characterized the Wilson years, and longed for "normalcy," a term which Warren G. Harding made famous.

As stated above, Mellon's policies worked only to a point. Many of the wealthy chose to invest their money rather than spend it; and in an attempt to encourage spending, banks reduced credit requirements while factories continued to manufacture even in fhe face of dwindling demand. The end result was over-investment in stocks and bonds, large losses to banks, and factory closures because supply had outstripped demand. These were the opening salvos of the Great Depression.