Incredible as it may seem, procedures for government spending up until the early 1920s were mostly fairly haphazard. The Treasury Department submitted yearly estimates of expenses for all government departments, which resulted in as many as fourteen separate appropriations bills. In 1919, President Wilson had called for the establishment of a national budget system as Congress was separately working on such a proposal, but a compromise worked out between a House and Senate bill was not satisfactory and ultimately vetoed by Wilson.
Wilson’s successor Warren G. Harding had the good fortune to secure from Congress a budget measure that gave the president complete authority over all budget matters. Charles G. Dawes, who had been Harding’s first choice as Secretary of the Treasury, was named as the first ever Commissioner of the Budget. Dawes warned Harding that “you must realize that you are the first president to tackle the job of a coordinated business control over the departments. I doubt if you recognize the strength of the 150 years of archaisms which you must fight.” Nevertheless, Dawes accepted the job, on the proviso that it be for only one year.
Harding and Dawes inaugurated the Business Organization of the Government, which first met on June 29, 1921. All members of the cabinet and 1200 bureau and divison chiefs met in the auditorium of the Interior Department. Harding told the assembly that “there is not a menace in the world today like that of growing public indebtedness and mounting public expenditures…we want to reverse things.” With something close to evangelistic fervor, Dawes then spoke for an hour, indicating his specific goal as the removal of “fat” and extravagance from the government. He concluded by requesting all those in the audience upon whom he could depend in this quest to rise – the entire audience rose. Harding later commented that Dawes was the only man he had ever seen who while talking could keep “both feet and both arms in the air at once.”
With the key support of Treasury Secretary Mellon, Dawes went to work and enabled Harding to present an orderly budget by December, 1921. Dawes applied his conceptions of efficiency and unity to the reform of budgetary procedures in the United States government. His most important reform resulted from his insistence that each department of the government prepare a true budget projecting future expenditures and stay within it. It is estimated that this reform and others, notably the unification of purchasing, saved the government about two billion dollars in the first year.To give an idea of the economies enforced by Dawes, actual expenditures of over $ 5 billion in 1921 were cut to $ 3.9 billion in 1922 and $ 3.5 billion in 1923. After the first budget was passed, the business press was full of praise. Said the Commercial and Financial Chronicle: “The Government is now on the way to an orderly and healthy system of business management, thanks to the courage and ability of General Dawes, and the prompt and unqualified cooperation of the President.”
When his one-year stint was over, Dawes (subsequently a Nobel Peace Prize co-winner and Vice President under Coolidge) suggested General Herbert M. Lord as his successor, who at the time was the chief finance officer of the U.S. Army. Lord inherited an effective bureau and, albeit with somewhat less bombast and flair, continued to popularize economy in government.
The Semiannual Meetings of the Business Organization of the Government continued to be held in large Washington auditoriums each January and June, and were broadcast over national radio hookup beginning in January 1925 and continuing to the end of president Coolidge’s term. These had an aura of gala affairs, with music provided by the Marine Corps Band, and speeches by president Coolidge, who used these occasions to rally the troops, calling for rigid economy, emphasizing the need to meet budget goals, and holding out the hope of tax cuts. General Lord chimed in, urging the bureaucrats to “make every dollar sweat.” Interestingly, and demonstrative of his relentless focus on economy in government, Coolidge’s appointment books reveal that General Lord was the one individual he met with most frequently and for the longest periods while in the White House. He also never failed to praise Lord in his speeches to the Business Organization of the Government; in his last such address on Jan. 28, 1929, he introduced Lord’s speech by saying “I wish to take this last opportunity which I shall have during my administration publicly to express to him again my appreciation of the high character of his work and my increasing confidence in the Budget system. (…) No one who admires fidelity and character in the public service will ever fail to be grateful for the services of General Lord (…)”
These meetings and radio broadcasts, unique to the Coolidge presidency, provided a direct channel to the public at large in conveying the administration message of “constructive economy.” They were one central means of gaining support for the administration’s theme of restraint vis-a-vis a spendthrift Congress. It certainly was a sign of changing times that they were discontinued as Coolidge left office in 1929.