Why The Economic Situation In 1920 Was Grim Share Share “The economic situation in 1920 was grim. By that year unemployment had jumped from 4 percent to nearly 12 percent, and GNP declined 17 percent.”[1] Federal income tax rates were massively and oppressively increased from a maximum rate of 15 percent in 1916 to 77 percent in 1918. This plummeted the percent of overall tax revenue paid by the wealthy from 29.4 percent in 1916 to only 2.37 percent by 1921.[2] As a result, the higher rates “shifted a growing share of the burden onto the lower income bracket taxpayers.”[3] This occurred under Woodrow Wilson’s administration, and although he enacted the Federal Reserve[4] “to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes,”[5] it has never accomplished its intent.