The Business Organization of the Government

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.

Successive budget directors Charles G. Dawes (left) and Herbert M. Lord in 1922

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.

Sources for this post were primarily “Calvin Coolidge: Our First Radio President” by Jerry L. Wallace, and “The Harding Era”, by Robert K. Murray.
Please see also this more recent post.
For those who have not checket out the comments to this post, Jerry Wallace has kindly pointed out that Coolidge’s speeches to the seminannual meetings are available here: http://www.presidency.ucsb.edu/calvin_coolidge.php
A fascinating 1953 biography of Charles G. Dawes is available in full for download h e r e.

4 thoughts on “The Business Organization of the Government

  1. Thank you! I am delighted to read that Budget Director, General Lord, had a first name and even a middle initial. Who knew?

    General Herbert M. Lord figures in a delightful story told by Col. Edmund Starling in Starling of the White House. (1946) Col. Starling of the Secret Service kept his careful eye on our Presidents from 1914 into the early days of FDR. (There is no doubt that Coolidge was his favorite charge.) The story is about Coolidge, Dawes, General Lord and other administration officials; it involves an appropriation requested for research by the Smithsonian Institution. While on their official tour of the Smithsonian the group pass a caged bird that had been taught to say: “General Lord! General Lord! What about that appropriation?”

    According to Starling: “The President shook with laughter.”
    See pages 230 – 231.
    I cannot recommend Starling of the White House too highly.

    • Jim, as ever, thanks for your comment! Gee, what have I done to deserve having two eminent Coolidge scholars comment? Thank you for sharing that story! I need to find the Starling book (it may be too late to put this on my wish list, but who knows… maybe Santa finds a way)

  2. Kai– Thank you so very much for this informative posting. Also, I much appreciate you including that fine picture of Dawes and Lord, which is new to me.

    In my opinion, the story of Coolidge’s implementation of the Budget and Accounting Act of 1921 is the most important story of the Coolidge presidency, and for most part, it remains untold.

    As president, the implementation of this Act was Calvin Coolidge’s principal concern. And Providence herself could not have chosen a better man for this task that would bring budgetary discipline to the Federal establishment and so greatly strengthen the Office of the Presidency. Our hero, no doubt, was the right man, at the right place, at the right time.

    All his biannual meetings with the Business Organization of Government were broadcast nationally, beginning in Jan. 1925 and concluding in Jan 1929. By the way, the meeting of late June 1924 was to have been the first broadcast, but because the Democrat convention was still underway, the President cancelled it. Reflecting his different priorities, ones that usually involved spending money, President Hoover would drop these meetings.

    Coolidge and Lord’s mission in life was to “make every dollar sweat,” and so they did. I provided some general information on the Coolidge/Lord effort in Calvin Coolidge: Our First Radio President, pp. 18-19, and again in endnote #92 (p. 49). Surprisingly–in fact, it is almost unbelievable–none of Coolidge’s major biographers have given his work in implementing the Budget Act its proper due. In fact, the matter is just ignored. Harding has been luckier: Robert Murray did give Harding credit for his involvement in his 1969 biography.

    I also want to emphasize that the Budget and Accounting Act placed the Bureau of the Budget directly under the President’s control. That meant that it was Coolidge himself who was directly responsible for its implementation: In short, it was his baby. This explains his frequent meetings with Gen. Lord. The Congress in its wisdom did this because it realized the great difficulty involved in implementing the budget system. One particular problem was that department/agency heads would try to subvert the system by going directly to Congressional committee heads. It took Coolidge’s firm hand put a stop to this practice.

    The budget area is the one area of the Coolidge presidency, where we see the president in action–and he performs quite well. Recognition of this fact, I believe, could profoundly change historians’ perception of the man and up his ranking among the presidents.

    None of Coolidge’s addresses to the Business Organization of Government, as I recall, are included in the compilations of his printed speeches. They are available, however, on The American Presidency Project website; see: http://www.presidency.ucsb.edu/calvin_coolidge.php.

    Jerry Wallace

    • Jerry, I’m truly honored to have you comment on my modest post, not much of which can have been new to you since your excellent book on Calvin Coolidge: Our First Radio President was my primary source. I’m glad that at least the picture was new to you! I fully agree that Coolidge shines in the budget area. Like other successful presidents, I think he was a “big picture” man who focused his attention laser-like on a few things and delegated as much of the rest to the most capable persons he could find. There may be a lesson here for present-day politics, perhaps particularly so regarding the budget. Thank you for pointing out the link to the Business Organization of Government speeches which I will make sure to study. I also feel that both Dawes and Lord deserve much praise for their work. I’m currently reading the Dawes biography by Bascom Timmons I’ve linked to in the post; at that website, Dawes’ own “Notes as Vice President” is also available for download.
      Kai Verbarg

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