what principles did calvin coolidge believe would lead to economic growth for the country
Amity Shlaes
Author, Coolidge
Amity Shlaes is a syndicated columnist for Bloomberg, a director of the Four Percent Growth Project at the George W. Bush-league Presidential Center, and a member of the board of the Calvin Coolidge Memorial Foundation. She has served as a member of the editorial board of the Wall Street Journal and as a columnist for the Financial Times, and is a recipient of the Hayek Prize and the Frederic Bastiat Prize for complimentary-market place journalism. She is the author of iv books, Germany: The Empire Within, The Forgotten Man: A New History of the Great Depression, The Greedy Hand: How Taxes Bulldoze Americans Crazy and What to Do About Information technology, and Coolidge.
The following is adapted from a talk given at Hillsdale Higher on Jan 27, 2013, during a briefing on "The Federal Income Tax: A Centenary Consideration," co-sponsored by the Center for Constructive Alternatives and the Ludwig von Mises Lecture Series.
With the federal debt spiraling out of control, many Americans sense an urgent need to find a political leader who is able to say "no" to spending. Yet they fear that finding such a leader is impossible. Conservatives long for another Ronald Reagan. But is Reagan the right model? He was of course a tax cutter, reducing the top marginal charge per unit from seventy to 28 percent. But his revenue enhancement cuts—which vindicated supply-side economics by vastly increasing federal revenue—were bought partly through a bargain with Democrats who were eager to spend that revenue. Reagan was no budget cutter—indeed, the federal budget rose past over a third during his administration.
An culling model for conservatives is Calvin Coolidge. President from 1923 to 1929, Coolidge sustained a budget surplus and left part with a smaller budget than the ane he inherited. Over the same catamenia, America experienced a proliferation of jobs, a dramatic increase in the standard of living, college wages, and three to iv percent annual economical growth. And the primal to this was Coolidge'southward penchant for saying "no." If Reagan was the Swell Communicator, Coolidge was the Great Refrainer.
Enter Coolidge
Following Earth War I, the federal debt stood ten times higher than before the war, and it was widely understood that the debt brunt would go unbearable if interest rates rose. At the same time, the height income tax rate was over 70 percent, veterans were having problem finding work, prices had risen while wages lagged, and workers in Seattle, New York, and Boston were talking revolution and taking to the streets. The Woodrow Wilson administration had nationalized the railroads for a time at the end of the war, and had encouraged stock exchanges to close down for a fourth dimension, and Progressives were now pushing for state or even federal control of water power and electricity. The business outlook was grim, and one of the biggest underlying problems was the lack of an orderly budgeting procedure: Congress brought proposals to the White House willy-nilly, and they were customarily canonical.
The Republican Party's response in the 1920 election was to campaign for smaller government and for a return to what its presidential candidate, Warren Harding, dubbed "normalcy"—a curtailing of government interference in the economic system to create a predictable environs in which business could confidently operate. Calvin Coolidge, a Massachusetts governor who had gained a national reputation by facing down a Boston police strike—"There is no right to strike against the public safety by everyone, anywhere, any time," he had declared—was called to be Harding'due south running mate. And post-obit their victory, Harding's inaugural accost set up a different tone from that of the approachable Wilson assistants (and from that of the Obama administration today): "No altered organisation," Harding said, "will work a miracle. Any wild experiment will simply add together to the confusion. Our best assurance lies in efficient assistants of our proven system."
1 of Harding'south first steps was to shepherd through Congress the Budget and Accounting Act of 1921, nether which the executive co-operative gained authorisation over and took responsibleness for the budget, even to the betoken of being able to impound money afterwards information technology was budgeted. This legislation besides gave the executive branch a special budget bureau—the forerunner to today'due south Role of Management and Budget—over which Harding named a flamboyant Brigadier Full general, Charles Dawes, as director. Together they proceeded to summon department staff and their bosses to semiannual meetings at Continental Hall, where Dawes cajoled and shamed them into making spending cuts. In addition, Harding pushed through a tax cut, lowering the top charge per unit to 58 percent; and in a move toward privatization, he proposed to sell off naval petroleum reserves in Wyoming to private companies.
Unfortunately, some of the men Harding appointed to key jobs proved susceptible to favoritism or bribery, and his assistants shortly became embroiled in scandal. In one instance, the cause of privatization sustained damage when information technology became clear that secret deals had taken place in the leasing of oil reserves at Teapot Dome. Then in the summer of 1923, during a trip out W to get abroad from the scandals and prepare for a new presidential entrada, Harding died all of a sudden.
Enter Coolidge, whose personality was at first accounted a negative—his face, Alice Roosevelt Longworth said, "looked as though he had been weaned on a pickle." But canny political leaders, including Supreme Court Justice and sometime President William Howard Taft, chop-chop came to respect the new president. Secretary of State Charles Evans Hughes, subsequently visiting the White House a few times that August, noted that whereas Harding had never been alone, Coolidge often was; that whereas Harding was partial to grouping decisions, Coolidge made decisions himself; and most important, that whereas Harding'due south customary answer was "yeah," Coolidge's was "no."
The former governor of Massachusetts was in his element when it came to budgeting. Inside 24 hours of arriving back in Washington afterward Harding'south death, he met with his own budget director, Herbert Lord, and together they went on law-breaking, announcing deepened cuts in ii politically sensitive areas: spending on veterans and Commune of Columbia public works. In his public statements, Coolidge made clear he would have scant patience with anyone who didn't go along: "We must have no carelessness in our dealings with public property or the expenditure of public money. Such a status is feature of undeveloped people, or of a decadent generation."
If Harding'due south budget meetings had been rough, Coolidge'due south were rougher. Lord first advertised a "Two Percent Club," for executive branch staffers who managed to save two percent in their budgets. Then a "Ane Percentage Social club," for those who had achieved 2 or more already. And finally a "Woodpecker Club," for department heads who kept chipping away. Coolidge did not even find it beneath his pay grade to look at the employ of pencils in the government: "I don't know if I e'er indicated to the conference that the cost of atomic number 82 pencils to the regime per year is about $125,000," he instructed the press in 1926. "I am for economy, and afterwards that I am for more economy," he told voters.
Coolidge in Control
"Information technology is much more than important to kill bad bills than to pass good ones," Coolidge had once advised his father. And indeed, while Harding had vetoed only six bills, Coolidge vetoed fifty—including farming subsidies, even though he came from farming country. ("Farmers never had made much money," he told a guest, and he didn't see at that place was much the government could rightly do almost information technology.) He too vetoed veterans' pensions and government entry into the utilities sector.
Mayhap reflecting his temperament, Coolidge favored the pocket veto—a fashion for the president to refuse a bill without a veto message and without affording Congress a take a chance to override a veto. Grover Cleveland, who Coolidge admired, had used this veto in his day, as had Theodore Roosevelt. But Coolidge raised its use to an art grade. The New York Times referred to it as "disapproval by inaction."
Gaining public acceptance of having a Scrooge as president required playing the role of Scrooge consistently. Coolidge took care to do so, visiting his saving habit on anybody around him. It was at the White House dinner table, for case, that Coolidge's set on on "pork" became literal: At one point the housekeeper proudly showed the President the spread for a big dinner, and instead of receiving praise she was scolded for serving "an atrocious lot of ham." She departed soon after.
The Hurricane Katrina of the Coolidge years, the swell Mississippi River inundation of 1927, wiped out many areas of the South. Yet Coolidge pointedly chose not to visit the devastated areas—sending Commerce Secretary Herbert Hoover in his identify—out of business that a presidential visit might encourage the idea of federal spending on disaster relief, for which there were already advocates in Congress. This triggered resentment, which Senator Thaddeus Caraway of Arkansas expressed in personal terms: "I venture to say that if a similar disaster had affected New England the President would accept had no hesitation in calling an actress session. Unfortunately he was unable to visualize the state of affairs." But soon thereafter floods tore beyond Vermont, the country where Coolidge had spent his childhood, and calls for him to visit grew loud—to no avail. "He can't do for his own, you see, more he did for the others," equally i Vermonter explained. Vermont, like Arkansas, would have to recover without federal intervention.
In doing research for my new biography of Coolidge, I reviewed his presidential date books and found a clue equally to why he was able to be so consistent: sheer discipline. Coolidge and his budget director met every Friday morning before cabinet meetings to identify upkeep cuts and hash out how to say "no" to the requests of chiffonier members. Most presidents give in after a time—Eisenhower being a good instance—but Coolidge did not, despite the budget surpluses during his presidency. He held 14 meetings with his upkeep manager after coming to office in late 1923, 55 meetings in 1924, 52 in 1925, 63 in 1926, and 51 in 1927.
In a conference call with Jewish philanthropists, Coolidge explained his consistency this way: "I believe in budgets. I want other people to believe in them. I accept had a pocket-sized one to run my own home; and besides that, I am the head of the organization that makes the greatest of all budgets, that of the Us government. Practise you wonder then that at times I dream of balance sheets and sinking funds, and deficits and tax rates and all the balance?"
The Purpose of Tax Cuts
Speaking of tax rates, in Dec 1923, Coolidge and Treasury Secretary Andrew Mellon launched a campaign to lower top rates from the fifties to the twenties. Mellon believed, and informed Coolidge, that these cuts might result in boosted revenue. This was referred to as "scientific tax"—an early conception of the Laffer Curve. And Coolidge passed the word on: "Experience does not show that the college charge per unit produces the larger acquirement. Experience is all the other way," he said in a speech in early on 1924. "When the surtax on incomes of $300,000 and over was but 10 per centum, the revenue was virtually the same equally information technology was at 65 per centum."
Mellon and Coolidge did non win all they sought. The top rate of the final police force was in the forties. Only even this reduction yielded results—more coin flowing into the Treasury—suggesting that "scientific revenue enhancement" worked. Past 1926, Coolidge was able to sign legislation that brought the top marginal charge per unit downwards to 25 pct, and to do so retroactively.
Today's Republicans tend to accept pleasance when the Laffer Curve is vindicated and more money flows into government as a consequence of tax cuts. Indeed, this idea of "scientific revenue enhancement" is often used to endeavour to get Democrats to continue with taxation cuts, every bit if those cuts are an end in themselves. By contrast, the specter of increased federal revenue rendered Coolidge broken-hearted, personally and politically—then much so that he considered foregoing the charge per unit cuts: "While I am exceedingly interested in having taxation reduction . . . it can only be brought about as a effect of economy," he said at one betoken. He would non put tax cuts before budget reduction, insisting on twinning the two goals. To underscore the point, twin king of beasts cubs given to Coolidge by the mayor of Johannesburg were named "Budget Bureau" and "Tax Reduction."
In short, Coolidge didn't favor tax cuts equally a means to increase revenue or to purchase off Democrats. He favored them because they took regime, the people's servant, out of the fashion of the people. And this sense of authorities as retainer extended to his own part. Senator Selden Spencer once took a walk with Coolidge effectually the White Business firm grounds. To cheer the President up, Spencer pointed to the White Business firm and asked playfully, "Who lives there?" "Nobody," Coolidge replied. "They simply come and go."
This view of government and his bellboy insistence on economy fabricated Coolidge few friends in Washington—a fact illustrated by notes kept by White House usher Ike Hoover. These notes record the excuses given past lawmakers for not attending breakfasts hosted by Coolidge at the White House: "Senator Heflin: Regrets, sick. Senator Norris: Unable to Locate. Senator Pittman: Regrets, sick. Senator Reed, of Missouri: Regrets, sick friend." Merely as unpopular as he was in Washington, Coolidge proved enormously pop with voters. In 1924, the Progressive Political party ran on a platform of government ownership of public power and a return to authorities buying of railroads. Many thought the Progressive Party might split the Republican vote every bit it had in 1912, handing the presidency to the Democrats. As information technology happened, Progressive candidate Robert LaFollette indeed claimed more than xvi percentage of the vote. All the same Coolidge won with an absolute bulk, gaining more votes than the Progressive and the Democrat combined. And in 1928, when Coolidge decided not to run for reelection despite the urging of party leaders who looked on his reelection as a certain bet, Herbert Hoover successfully ran on a pledge to go along Coolidge's policies.
Unfortunately, Hoover didn't live up to his pledge. Critics often confuse Hoover'south policies with Coolidge's and complain that the latter did not prevent the Great Low. That is an argument I take upwardly at length in my previous book, The Forgotten Human, and is a topic for another day. Here let me just say that the Swell Depression was as great and equally long in elapsing as it was considering, as economist Benjamin Anderson put it, the government nether both Hoover and Franklin Roosevelt, different under Coolidge, chose to "play God."
* * *
Beyond the inspiration of Coolidge's example of principle and consistency, what are the lessons of his story that are relevant to our current situation? I certainly has to do with the machinery of budgeting: The Budget and Accounting Act of 1921 provided a means for Harding and Coolidge to command the upkeep and the nation's debt, and at the aforementioned time gave the people the ability to agree someone responsible. That police force was gutted in the 1970s, when it became collateral impairment in the anti-executive fervor following Watergate. The constabulary that replaced information technology tilted budget authority dorsum to Congress and has led to over-spending and lack of responsibility.
A second lesson concerns how we look at tax rates. When tax rates are set and judged according to how much revenue they bring in due to the Laffer Curve—which is how most of today's taxation cutters present them, thereby agreeing with revenue enhancement hikers that the goal of tax policy is to increment revenue—revenue enhancement policy can become a mechanism to expand government. The goals of legitimate regime—American freedom and prosperity—are left by the wayside. Thus the best example for lower taxes is the moral case—and as Coolidge well understood, a moral taxation policy demands tough budgeting.
Finally, a lesson about politics. The popularity of Harding and Coolidge, and the success of their policies—especially Coolidge's—post-obit a long period of Progressive ascendancy, should give today's conservatives hope. Coolidge in the 1920s, like Grover Cleveland in the previous century, distinguished government austerity from individual-sector austerity, combined a policy of deficit cuts with i of tax cuts, and made a moral example for maxim "no." A political leader who does the aforementioned today is likely to find an electorate more than inclined to respond "yes" than he or she expects.
Source: https://imprimis.hillsdale.edu/calvin-coolidge-and-the-moral-case-for-economy/
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