Dateline Northampton, Feb. 18, 1931

In his daily column of Feb. 18, 1931, a scant 80 years ago today, Calvin Coolidge reiterated his belief that the repayment of debt must take precedence over other other considerations, such as further reducing taxes. It is a message that Republicans might do well to heed today.

We still have a small body of thought that considers the national debt has been reduced too fast. It is claimed that the surplus should have been applied to a reduction of taxes. By the same reasoning it would be proven that taxes should be kept down and money borrowed to meet running expenses. It was a great saving to the taxpayers to reduce the debt when the value of the dollar was low. It takes about twice as much cotton, corn, wheat, copper and other materials now to make the same payments as it did two or three years ago.

If it is argued that liquidation of the debt disturbed financial conditions one answer to that is that for every dollar the national debt was reduced state and local governments increased their debts over a dollar.

Besides these reasons any one who knows the enormous pressure on the Congress by organized minorities knows that if the revenues had not been used to reduce the debt they would have gone into additional expenditures rather than tax reduction. Great interest charges have been eliminated. Sound finance calls for payment of debt and makes the revenues of each year meet the expenditures.

On a contemporary note, Nick Gillespie and Veronique de Rugy detail in their very worthwhile article, The 19 Percent Solution, that the main driver of a veritable spending explosion projected by the CBO over the next decades is interest spending, which will grow from 1.4 percent of GDP (or $204 billion in 2010 dollars) to an astonishing 41.4 percent of GDP (or $27.2 trillion in 2010 dollars) over the next 70 years. Even in the short run, it will balloon to 7 percent of GDP by 2030. As every businessperson knows, deficit spending today triggers an avalanche of interest down the road. Coolidge was right that debt reduction is the best strategy to save taxpayers money in the long run.

 

5 thoughts on “Dateline Northampton, Feb. 18, 1931

  1. Kai, as the fiscal conservative that President Coolidge was, I agree that he would want us to work on reducing the deficit first and then start to reduce the national debt. So it seems at this point in our current economic funk, Coolidge would have gone after a reduction in expenditures first and then gone after a reduction of taxes only after the deficit and national debt issues had been resolved. Again, only after eliminating the deficit and national debt issues would Coolidge have tried to reduce taxes.

    Correct me if I’m wrong but President Coolidge reduced taxes during his administration by 20% overall and he reduced expenditures by 35%. You can see by these figures that he was more of an expenditures reduction hawk than he was a tax cutter, although what a great job he was able to do on cutting taxes.

    • JB, you’ve got your facts straight. Ably assisted by the folks at the Bureau of the Budget, Coolidge kept a tight lid on expenditures – and even then, that was a constant fight against a spendthrift Congress. Coolidge made it his number one priority to bring the debt down even faster than required by law, and he did. As you point out, he achieved that while still considerably easing the tax burden. If you haven’t done so, I recommend reading the linked article “The 19 percent solution” from the folks at reason.com – they make a good case that the budget can be balanced in time by focusing on the spending side.

  2. Coolidge was trained in the liberal arts at Amherst. He wasn’t a trained accountant. But what a great accountant he was. His accounting skills were probably acquired- self taught and learned in his various jobs in local government in Northampton and later on when he was President of the Massachusetts State Senate, Lieutenant Governor and then Governor of Massachusetts.

    • There are some nuggets among Coolidge’s daily columns of 80 years ago… some things remain true, even if fashions change and economic theories become popular, then unpopular. Let’s hope his way of thinking comes back into fashion, as I have a hunch it may be doing.

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