The Fiscal Cliff – what would Coolidge do?

With the 2012 election out of the way, Democrats in the White House and the Senate, and Republicans in the House of Representatives will need to come to terms with the dire fiscal situation facing the U.S.  Predictably, the posturing about areas that play at best a peripheral role, such as higher taxes for “the rich” has already begun. But the fact is, that for the past four fiscal years, from 2009 forward, federal spending has hovered at around $3.5 trillion, some $800 billion higher than in the last pre-recession fiscal year of 2007. What was intended as a one-shot fiscal stimulus back in 2008 appears to have become a permanent part of the federal budget. Despite the anemic economy, Washington is squeezing ever higher tax revenues from citizens and corporations, with tax receipts at near-record heights of $2.45 trillion. Again predictably, the president’s only recipe to counter the resulting $1 trillion+ deficits is to insist on “a little more in taxes,” but even if he got his way and all the tax-rate increases he dreams of become reality, that will mean no more than an $160 billion drop in the  deficit bucket – leaving an annual shortfall of some $850 billion.

At the outset of the 1920s, the U.S. also was saddled by gigantic deficits. Legendary Treasury Secretary Andrew Mellon and two of the presidents who “served under him” in the 1920s, Warren Harding and Calvin Coolidge, realized full well that the fastest way to raise revenue is by way of faster economic growth. He also realized that higher taxes generally reduce economic activity, thereby slowing exonomic grwoth and actually reducing fedral revenue. This prompted the tax reforms of the early 1920s which resulted in unprecedented economic growth – accompanied by a very restrictive budgetary policy. Those long-ago lessons of the 1920s should be on everyone’s mind as they ponder the glib talk from Washington insiders proposing a “balanced” approach. The question remains if those favoring a such an approach really want to bring down the deficit, or if their hidden agenda is to ratchet taxes up to finance permanently high new spending levels.

Mellon and Coolidge would get out of the way of economic growth, selectively reduce tax rates, severely cut federal spending, and reduce regime uncertainty in the system. Little if any of this may be expected from the messy process that will now ensue in Washington.

Tarring the Twenties?

In the third and final presidential debate, president Obama had a good laugh at Mitt Romney’s expense when he pointed out that while it may be true that the U.S. Navy is poised to have the smallest fleet size since 1914, the U.S. “also has less horses and bajonets.” Never mind that the U.S. has to project its power globally today, relying on the Navy for much of that job. In another scripted quip, the president stated that many of Romney’s foreign policy concepts recalled the 1980s, just as his social policy concepts were a throwback to the 1950s and his economic policies to the 1920s.

Fans of Calvin Coolidge are justly proud of his (as well as his predecessor Warren Harding’s, and Treasury Secretary Andrew Mellon’s) economic record during the 1920s, and I’m pleased to direct readers’ attention to a fine retort by Amity Shlaes in her Bloomberg column, where she gives a point-by-point rebuttal to the president’s attempt to tar the Twenties. I suppose the 1950s and 1980s will have to find their own defenders!

“Conventional” wisdom over the years

The Wall Street Journal Online has an interesting timeline that links to the American Presidency Project and its documentation of major party platforms.

As the 2012 conventions approach, it’s worthwhile looking at some of the older platforms, some of them containing planks that were controversial at the time. By all means have a look at the Harding/Coolidge and Coolidge/Dawes Republican platforms of 1920 and 1924 – one item that was new to me was that the GOP in 1924 proposed the establishment of a cabinet-level department of education, perhaps ironically, one of the departments that today’s conservative Republicans would like to abolish.

The Ryan pick

“The beginning of good government is in good nominations.” — Calvin Coolidge, August 15, 1930

As I write this, the political scene as well as the web have already been abuzz for a while with the now-confirmed selection of Rep. Paul Ryan as Mitt Romney’s running mate. As recently as yesterday, I had read about the choice being between “mild” (read safe) and “spicy” (read transformative yet risky) candidates. Paul Ryan definitely falls into the latter camp. Still, I feel that conservatives, or anyone who believes that the fiscal imbalance is the most pressing issue today and tomorrow, this is an excellent choice. While it will undoubtedly invite low blows and personal attacks from the other side (remember that Ryan has already been shown pushing an elderly lady in a wheelchair off a cliff in a political ad), it will also focus the debate on the alternative paths into the nation’s future. To my mind, there is an echo of Calvin Coolidge in Ryan’s single-minded focus on the budget even though most, if not all, the entitlement programs in Ryan’s crosshairs were not even in existence in Coolidge’s day. Another, perhaps a little fainter, echo is in the earnest yet friendly demeanor and personality of Paul Ryan, his integrity and fair-mindedness. Mitt Romney’s pronouncements on the budget have perhaps not always been as clear as some conservatives would have wished; the Ryan pick is his most unequivocal and ringing statement yet that he intends to put the task of taming the budget at front and center of his administration.

Paul Ryan is a fantastic pick from the perspective of governing. I fully expect him to also be an asset in the campaign, as he will energize the conservatives in the party while offering a reason to Independents and Libertarians to vote Republican. As Rich Lowry wrote in the National Review, Ryan is an explainer and persuader. I am particularly heartened by his long association with the late Jack Kemp, a happy warrior if ever there was one. I believe Ryan has some of Kemp’s (and Reagan’s) inclusiveness, of being able to reach out to the other side while appealing to the core of the faithful. To the many millions of Americans who are uneasy about the economic future and direction of the country, he will make a convincing appeal that Washington can make a difference – by living within its means and getting out of the way of entrepeneurs and small business. Someone said that elections are either a referendum on the job performance of the incumbent, or a choice. This election will be both, now that Mitt Romney and Paul Ryan offer a clear choice for the future.

What’s in a gaffe?

Two days into his European tour, GOP candidate-in-waiting Mitt Romney is probably wishing he’d remembered Calvin Coolidge’s adage that “I have never been hurt by anything I didn’t say.” The trip, intended to shore up Romney’s foreign affairs credentials, was quickly overshadowed, first by comments by an unnamed Romney campaign staffer about the specialness of the Anglo-Saxon bond between the United States and the United Kingdom, and second, by undiplomatic remarks Romney himself made with regard to London and its preparations and preparedness for the Olympic Games. The first statement was quickly disavowed by Romney, even though it did not contain anything untoward or incendiary, unless you accept the outlandish claim that the term “Anglo-Saxon” itself is in some way tainted or politically incorrect. The second statement was a gaffe only in the Michael Kinsley sense that “a gaffe is when a politician tells the truth – some obvious truth he isn’t supposed to say.” And in fact, nothing that Romney said was wrong, it merely was undiplomatic – but then, he is no diplomat.

Clearly, the media are quick to pounce on anything remotely maladroit out of Romney’s mouth, attempting to repeat what happened in 1968 when the elder Romney was brought down by a careless albeit honest statement about having been “brainwashed” on the Vietnam War. As John Avlon points out in a post at The Daily Beast, it was the buttoned-down campaign of Richard Nixon that prevailed that year. Today, contrary to Nixon’s instincts and Coolidge’s tenet, there is an insatiable hunger for statements, for one-liners, for quips, anything to feed the social media frenzy. I’m not convinced that Avlon’s advice to Romney – to be more accessible, and less distrustful of the media – is the right conclusion to draw. My own take-home message for Mitt Romney would be to write down Coolidge’s little nugget of wisdom and keep it in his pocket for easy reference at all times for today, far more than in Coolidge’s or Nixon’s day, any public utterance will be instantly fed into the web and be around for years and years, with no control over misinterpretation or outright fabrication. Better be buttoned-down than sorry.

Dinner politics

Harlan Fiske Stone

 

In a fascinating though biased piece at http://www.dailybeast.com, Jonathan Alter speculates that a conversation over dinner in 1934 may have played a part as a precursor to last week’s momentous Supreme Court turnaround on Obamacare. Apparently, FDR’s Labor Secretary Frances Perkins, was worried (as was her boss), that the Court might invalidate many of the previous decade’s New Deal schemes, such as the NRA. President Coolidge’s only Supreme Court appointee and fellow Amherst alumnus Harlan F. Stone assuaged Perkins’ fears over dinner, stating in effect that anything framed as a tax fell under the broad taxing powers of the government and would be upheld.

Although Frances Perkins went to FDR and swore him to secrecy on the advance opinion from the court, the president and his administration were heartened by Stone’s view as it moved forward with what would become the most sweeping social program in American history. Obamacare (aka the Affordable Care Act)  is the completion of the all-encompassing insurance coverage that Roosevelt envisioned when he launched Social Security. By reaffirming its constitutionality in terms of the government’s taxing power, the 5-4 majority opinion of the Roberts court follows in the footsteps of Justice Stone, who was rewarded by FDR with the post of Chief Justice when it opened up in 1941.

The pain in Spain may lead to gain

There is an element of the bizarre in the backlash against “austerity” in Socialist-led countries of Europe and among mainstream (read: Keynesian) economists – because true austerity hasn’t even remotely been tried in most European countries. Most have taken what is known as a “balanced” approach – big words and little action on cutting expenditures, and some all-too-real tax increases through the back door. Not surprisingly, this hasn’t worked anywhere, while those few countries that took a dose of pain, such as Estonia, are doing remarkably well. Generally, the problem with austerity is that it is not a short-term panacea – the painful cure needs time to work its magic on the ailing patient who may in fact feel worse for a while before getting better.

Now Spain, where socialist as well as nominally conservative administrations have produced a vast welfare state, has produced a regional governor with the audacity of pushing through fairly draconian real cuts. Maria Dolores de Cospedal talks the talk, too, with no-nonsense language that could come straight out of Calvin Coolidge: “We cannot be drowning in debt if we want growth,” she says. “I, too, want to invest, but right now, with this deficit we inherited, it’s impossible.” Like Coolidge (who was in the more enviable situation of presiding over a booming rather than a stagnating economy), she correctly identifies crippling debt and government overspending as the worst enemies of growth. Not surprisingly, Ms. de Cospedal is being pilloried by the Left. If she sticks to her guns, there may be hope among the pain for Spain.

The enduring values (and value) of Calvin Coolidge

The Acton Institute blog has a nice and timely post on Calvin Coolidge and the foundational truths of government. Of all the Coolidge quotes author Ray Nothstine marshals, I like none better than the 30th president’s assessment of the progressive movement: “Their ideas are not more modern, but more ancient, than those of the Revolutionary fathers.” I think Coolidge would be heartened by social science findings that the collective intelligence of many often results in superior outcomes than when supposedly elite circles make top-down decisions that somehow always get sidetracked by unintended consequences.

Would Mitt Romney be a president in the Coolidge mold? And if so, would that be a bad thing?

In a recent American Prospect piece, Jamelle Bouie makes the case that Mitt Romney, far from returning to any moderate-leaning instincts he may once have possessed, will, if elected, turn out to be a willing tool of a resurgent ultra-conservative Republican Party. While he makes it clear that he sees this as a dire scenario, some of us are downright hopeful when he quotes Romney saying, as he did in an April 13 speech at the NRA, that “instead of expanding the government, I will shrink it. Instead of raising taxes, I will cut them. Instead of adding regulations, I will scale them back.”

Echoing president Obama’s skewed depiction of the Republican agenda as “social darwinism,” Bouie contends: “The modern Republican Party isn’t trying to build a fairer or more equitable society, and it doesn’t care for the interests of low- or middle-income Americans. To borrow from Paul Ryan, it stands for the “makers” against the “takers.” It aims to gut government and give the spoils to the rich. In a sense, it seeks to revive the age of Calvin Coolidge, when government was small, inequality high, and the economy an exclusive playground for the wealthiest and most powerful Americans. If Mitt Romney is elected, the GOP will have a president who shares that vision.”

Besides the overblown and ridiculous claim that the GOP is merely a tool for “the rich,” I submit this also is a remarkably one-sided characterization of the Coolidge years. By most unbiased accounts, the Coolidge 20s were a period of rapid and, more importantly, broad-based economic growth, while the Mellon-Coolidge taxation regime lowered taxes for all, and disproportionately for the lower rungs of society. It is true that in Coolidge‘s day there were fewer “takers,” or recipients of redistributed wealth, and I for one would argue that the nation was better for it.We can only hope that Mitt Romney, once he is duly nominated and hopefully elected -if possible in tandem with a Republican House and Senate- will return Calvin Coolidge‘s picture to its rightful place on the White House wall and to Coolidge‘s nostrums in dealing with the “prairie fire of debt” he has already identified as the nation’s number one problem.