Scientific Taxation

While Andrew Mellon and presidents Warren G. Harding and Calvin Coolidge are rightly credited with proposing and shepherding through Congress tax reform legislation in the 1920s that radically reduced marginal tax rates on wealthy individuals from WW I highs, it is less well known that a similar change very likely would have occurred even under Democratic administrations. Basically, the Mellon plan was originally authored by former and holdover Treasury officials from the Wilson administration, who fully intended to formulate a permanent peacetime taxation system that would best serve a modern industrial society.

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C. Bascom Slemp

C. Bascom Slemp teeing up

C. Bascom Slemp teeing up

Thomas Mallon, in his New Yorker review of Amity Shlaes’ new Coolidge biography, gives C. Bascom Slemp, who was Coolidge’s personal secretary between August 1923 and January 1925, a cameo appearance, noting he “seems to have been named by Nathanael West.” Slemp, whose appointment to the secretarial post following Coolidge’s ascension to the Presidency came as a surprise to the Washington establishment, the press, and himself, was actually as powerful a figure in early 20th century Republican politics as a Southerner could be; in fact, he has been called the most influential Southerner in the GOP for the period from 1907 to 1932. He first came to national prominence as the only Republican Representative from Democratic Virginia, and it was first and foremost his remarkable success in fending off prominent Democrats that enabled him to maintain command of the party in the Ninth District. At the same time that he helmed the “real” and functioning Republican group in Southwest Virginia, he also reigned over what was basically a skeleton of an organization in the rest of the state. Mr. Slemp was shrewd, calculating, resourceful, and tireless in his campaigning, a master at the details of organization and mobilization. While he was on occasion implicated in questions of patronage (not unusual for either party, and made public usually for strictly partisan reasons), he proved himself a valuable ally to high Republican officeholders or -seekers, especially as his influence transcended the borders of Virginia. During convention time, he was able to swing other Southern delegations to his favorite candidate. Between 1908 and 1928, he unfailingly backed the winning regular GOP candidate, perhaps most importantly in the contested convention of 1912, when he delivered 20 of Virginia’s 24 delegates to William Howard Taft.

When Coolidge named Slemp his personal secretary, it was a surprise announcement, as everyone had been expecting Coolidge to retain Edward T. Clark who had been his secretary while Coolidge was vice president. Among important proponents of Slemp were Speaker of the House Frederick Gillett and Secretary of War John W. Weeks, and Coolidge’s choice of Slemp was an early indication that he fully intended to be the GOP nominee in 1924. Most observers agreed that Slemp would be an asset to Coolidge in what was then thought might well be an uphill fight. The Democratic National Committee issued a statement that the appointment was “tantamount to an official announcement that President Coolidge is a candidate for the presidential nomination in 1924,” and a “first step to round up the delegates from the Southern States.”

In hindsight, Coolidge’s nomination in 1924 appears a foregone conclusion, but in AUgust 1923 his selection seemed far from automatic, and in the days and weeks following the death of president Harding, several prominent Republicans were being mentioned ahead of Coolidge, among them Sen. Hiram Johnson, and Governors Lowden and Pinchot. As it turned out, Slemp did work assiduously for the Coolidge nomination but chafed at having to report to William M. Butler, who headed the pre-convention organization and eventually was named by Coolidge as national committee chairman. Butler ruled the convention with an iron hand, bruising old guard egos right and left. Slemp, for one, had sought to prevent the humiliation of Henry Cabot Lodge, but his appeals were brushed aside by Butler, and the two differed at every turn when it came to the selection of the vice-presidential nominee. Slemp volunteered his resignation three days after the convention, but Coolidge prevailed on him to stay on until the following January. Returning to Virginia (and Virginia politics), he was instrumental once more in delivering the state to Herbert Hoover in 1928, but subsequently his interest in politics waned – perhaps because he was disappointed at not being rewarded by either Coolidge or Hoover with a cabinet appointment. In addition, his poltical antennae were finely tuned, and by 1932 he was able to discern the handwriting on the wall that the Democrats were going to be in control of national and state politics for a number of years – so it seemed like the perfect time for Slemp to tender his resignation as national committeeman. Congressman Slemp retired from the practice of law and returned to his home in Virginia to look after farm, oil and coal interests. He also set up the Slemp Foundation which benefits libraries, schools, and colleges in Southwestern Virgina to this day. Slemp died, aged 72, in 1943. The C. Bascom Slemp Student Center at the University of Virginia Wise campus is named in his honor.

A note on revisionism

Amity Shlaes, whose new and exhaustively researched biography of Calvin Coolidge hit bookstore shelves last week, is sometimes described by ill-meaning reviewers as a “revisionist historian.” Intended to sound vaguely negative, this is in fact no label to be ashamed of, but rather the norm in science and scholarship. Contrary to some, no science, be it physics, psychology, or history, is ever “settled,” nor should it be, as long as new data come to light, or new interpretations can provide alternative or additional perspectives. But it’s easy to see why some may feel threatened by the revision of the trite and well-trodden – the writing of history, after all, is also a question of power. He (or she) who writes history controls the interpretation of history, and the lessons drawn from history. And all those -historians, politicans, journalists- who have staked their careers on a certain version of history are entrenched and stuck in that version. The acceptance of a new paradigm takes time. And it’s never just about the “facts,” for every interpretation has one or many alternative interpretations. But anyone with a true interest in a history that is as unbiased as it can be, and that utilizes multiple sources to construct a multifaceted view should welcome “revisionist” writing.

S. Parker Gilbert (3rd of 3)

S. Parker Gilbert in 1931, as partner at J.P.Morgan

S. Parker Gilbert in 1931, as partner at J.P.Morgan

In Parts 1 and 2, we have seen S. Parker Gilbert apply his financial brilliance to tax reform and to the reconstruction of war-torn Europe. The last glimpses we now get of him are as a commentator on the intraparty struggles leading up to the 1928 Republican convention.

Part 3: In opposition to Hoover

Herbert Hoover won his party’s nomination for the Presidency in 1928 overwhelmingly on the first ballot, and to many this seemed a foregone conclusion, a mere ratification of Hoover’s foreordained role as standard bearer. But in reality his grasp of the nomination had been shaky until days before the party met in Kansas City. While he was popular with independents, progressives, and liberals, there was, in fact, widespread opposition to Hoover within the GOP. His Republican credentials were uncertain – as late as 1920 he had not unequivocally denied Democratic attempts to name him a presidential candidate and had actually won the Democratic primary in Michigan that year.
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S. Parker Gilbert (2nd of 3)

Part 2: Reparations Agent

The Dawes Plan of 1924 was the cornerstone achievement of American stabilization policy in Europe, the keystone of efforts to promote peaceful political change and renewed economic growth. It revised the Versailles Treaty by restricting France’s ability to use reparations as a club to use against Germany’s resurgence. Ostensibly the work of expert businessmen and bankers, it nonetheless had the backing of the Coolidge administration. Depsite the administrations claims of non-involvement, Secretaries Hughes and Mellon, as well as Ambassador Kellogg, mediated between bankers, delegates and diplomats while on supposedly private trips to London. Mellon in particular staked his considerable prestige as head of a private economic empire and as chief financial officer of the U.S. by recommending the crucial loan portion of the plan to Morgan partner Thomas Lamont. President Coolidge repeatedly endorsed the plan and was prepared to offer arbitration by Chief Justic Taft in case the London Conference deadlocked.

The Dawes Plan transferred reparations control from the Allies-dominated Reparations Commission to the newly created U.S.-dominated agent general’s office. Some wrangling ensued over which person was going to fill this crucial post. The House of Morgan in particular attached great importance to the selection of an agent general who would be sympathetic to their concerns, effectively vetoing the names of Owen D. Young and James A. Logan. Coolidge in turn vetoed Morgan’s initial candidate, Morgan partner (and Coolidge friend) Dwight Morrow, because he feared that appointment would fuel Robert La Follette’s progressive presidential campaign against Wall Street influence. After intensive consultations between Lamont and Mellon in London, and Morrow and Coolidge in Washington, the administration fully endorsed Morgan and Company’s eventual candidate, S. Parker Gilbert. As we have seen in Part 1, Gilbert had been undersecretary of the Treasury in 1921-22 and had developed an excellent rapport with Mellon before departing government to resume his legal practice.

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New Coolidge bio – the reviews keep coming in

Just a quick share of the Wall Street Journal’s new and glowing review of Amity Shlaes’ Coolidge biography.

And here is the review in Forbes.

Here’s Gene Healy at reason.com.

A Vermont review in the Burlington Free Press – thanks Doug Gladstone for alerting me to his fine review!

USA Today with a fine review.

The review over at The Economist.

The NYT weighs in here.

S. Parker Gilbert (1st of 3)

One of a group of businessmen and bankers who influenced, maybe even dominated, American policy in the 1920s, S. (for Seymour) Parker Gilbert left his mark on cornerstone tax policy as well as on foreign policy. I’ll devote a set of 3 posts to this little-known man who crammed a lot of service into his short life.

Part 1: Mastermind of tax reform

Born in New Jersey in 1892, Gilbert studied at Rutgers before graduating from Harvard Law School in 1915. He then joined the prestigious New York City law firm of Cravath and Henderson. With the entry of the U.S. into World War I, Gilbert joined the war loan staff at the Department of Treasury, then led by William G. McAdoo, where he served until appointed assistant secretary of the Treasury for fiscal affairs at the age of 27. A Republican, he was a close friend and associate of Russell C. Leffingwell who preceded him in the fiscal affairs position.

Library of Congress Call No.:LC-F81- 38908

Mellon and Gilbert in January 1926

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