Let us begin with the admission your writer was into President Calvin Coolidge before the 30th president was rendered “cool.” But that hardly diminishes the accolades heaped upon Amity Shlaes’ latest tome, “Coolidge.”
Suffice to say it’s easy to praise a president who guarded the public fisc as prudently as he protected his own. The 1920s, after all, presented Silent Cal with a tremendous deficit as a result of World War I. But the public at large at the time was accustomed to a government that hadn’t yet grown to the Leviathan-like proportions that followed in subsequent administrations, and a majority actually supported financial restraint.
However, the United States was scrambling to retain economic “normalcy” in the 1920s — the name given the programs initiated by President Warren Harding, the president preceding President Coolidge and for whom the latter served as vice president. Normalcy, described briefly by Shlaes, was “doing what was best for the country.” This included reducing the country’s debt below $22.35 billion and lowering the budget from $3.2 billion to $3 billion.
President Harding, of course, died before realizing normalcy, and left behind such scandals as Teapot Dome and a run amuck Veterans Bureau, which saddled U.S. taxpayers with $461 million in expenditures — a full seventh of the annual budget at the time. The VB was rife with improprieties from paying its director, General Frank Hines, a $4,800 annual salary for a mere two hours of actual work to employees stealing gold needed for veterans’ fillings.
A man of few words, President Coolidge told adviser Frank Stearns his expectations for his presidency: “I am going to try to do what seems best for the country, and get what satisfaction I can out of that.” At his disposal — unlike his predecessors — was radio, which enabled President Coolidge to speak directly to the American public. The new technology enabled the president to sit tight in the Oval Office while handling affairs of state. Seldom did he travel outside Washington to seek public support for his efforts.
After his first month in office, naysayers began nitpicking President Coolidge’s administration to such a degree that noted humorist Will Rogers felt compelled to respond in his newspaper column. “France and England are about to go to War over how much they owe each other,” Rogers wrote, tongue in cheek. “Why don’t he [Coolidge] come out at once for the League of Nations and stop this coming war? Babe Ruth was changing the style of bat he used. Yet the president had done nothing. Congress wanted an extra session.”
Rogers concluded: “About the only way I know of for him to make himself solid, after all these colossal failures, is to not only not call Congress now, but not call them at all. I tell you if he did that he would go down in History as another Lincoln.” As Shlaes notes, President Coolidge followed the advice to a tee.
Tax cutting during the Coolidge administration played no small part in the end of the postwar recession, a feat even more impressive due to a decline in revenues brought about by Prohibition. Writes Shlaes:
The recession was over, and revenues were pouring into the Treasury; $300 million, [Treasury Secretary Andrew] Mellon was reckoning, would be the annual surplus for fiscal year 1924, more than he imagined. Instead of 58 percent, the top income tax rate would have to go down to 31 percent, a combination of a lowered 6 percent base rate and a lower ‘supertax,’ or surtax, of 25 percent. A good share of the rate cuts came at the top of the tax schedule. This was not merely to favor the rich, as many said. The tax rate cuts at the top were designed to favor enterprise. If people got to keep more of their money, they would hire others, Mellon said.
Shlaes follows this up: “Coolidge believed higher taxes were wrong because they took away from men money that was their property; he believed lower rates were good precisely because they encouraged enterprise, but also because they brought less money. Low rates starved the government beast.”
Mellon, on the other hand, was able to convince the president he was wrong. “Most people simply stuck with their arithmetic. They took the new tax rate, multiplied it by the old number of sales, and reckoned their loss,” writes Shlaes. “Their arithmetic did not allow for the possibility of more sales. Mellon thought lower rates could yield more revenues.”
One can almost hear a Jon Stewart or Rachel Maddow of the day maligning Coolidge and Mellon. Mellon, after all, was the third-highest taxpayer in the country, according to Mackinac Center President Emeritus Lawrence Reed.
During the debate over the 1926 tax cuts, Senator George Norris of Nebraska charged that if the administration had its way, Mellon himself would reap “a larger personal reduction [in taxes] than the aggregate of practically all the taxpayers in the state of Nebraska.” Norris never mentioned the other side of the coin: Mellon was paying more in taxes than all the people of Nebraska combined.
An even bigger thorn in Mellon’s side was a fellow Republican, Senator James Couzens of Michigan. Couzens was a charlatan and a maverick who fought the tax-cutting, penny-pinching ways of the Harding and Coolidge administrations at almost every turn. He conducted witch-hunting investigations in an attempt to embarrass Coolidge and Mellon. He publicly charged that the Treasury Department was secretly giving refunds to rich, politically favored businessmen. (However, the senator was embarrassed when it became evident that the refunds were the results of clerical errors and Supreme Court decisions.)
Shlaes details the tax battles waged between President Coolidge and Mellon on one side and Sens. Norris and Couzens on the other, and arrives at the same conclusion as Reed.
“Coolidge” should be a must-read for all contemporary politicians, economists, historians, public policy wonks, bureaucrats and journalists. Don’t wait for the paperback version (although the folks listed above may want to purchase additional copies for students, relatives, friends and offspring). All should read immediately before weighing in on today’s economic crises.
Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.
Permission to reprint any comments below is granted only for those comments written by Mackinac Center policy staff.