Sly as a fox…or a hedgehog?

fox_hedgehogOne of the earliest posts on this blog, since trashed, was one on the famous distinction made by Sir Isaiah Berlin that divided great minds into the “camps” of foxes and hedgehogs. This was in turn based on a fragment by the Greek philosopher Archilochos, “the fox knows many things, but the hedgehog knows one big thing.” Berlin applied this nugget of wisdom to the world of writing and thinking, dividing famous poets and philosophers into two categories:
Foxes, who divide their interests among a wide variety of experiences and thoughts and who can’t be associated with a single big idea, and Hedgehogs, whose view of the world and reputation is founded on such a single big idea.

In Berlin’s view, examples of hedgehogs include Dante, Plato, Lucretius, Pascal, Hegel, Dostoevsky, Nietzsche, Ibsen, and Proust, whereas Shakespeare, Herodotus, Aristotle, Montaigne, Erasmus, Molière, Goethe, Pushkin, Balzac, and Joyce are represented as foxes.

In the field of politics, an exemplar of a fox might be Jimmy Carter – a typical micro-manager, who famously even involved himself in the scheduling of the White House tennis court, as opposed to Ronald Reagan, who focused his Presidency on a few major goals (“lower taxes”, “defeat communism”), set the agenda and then leaned back and let his staff do the work, who might be classified as a more or less typical hedgehog. As for Barack Obama, we may have to wait and see, although at the time of this writing, I fail to see the one overarching theme or goal of his Presidency, so he would seem to fall into the “fox” category. I’m certainly inviting comment and discussion when I venture that in presidents, it may be one of the signs of lasting greatness to focus on one big thing – independence, say, or the Union, or peace, or victory. Or, perhaps, normalcy and prosperity.

If we examine the life and career of Calvin Coolidge, I think we will come to the conclusion that he was of the hedgehog persuasion. While he certainly did “know many things,” the lodestar of his work as president undoubtedly was the theme of economy in government. This was his “one big thing” which occupied most of his time and was preeminent on his mind at all times. Nowhere did he wax more lyrical than when addressing the seminannual meetings of the Business Organization of the Government: he reports that he “rejoiced in keeping down the annual budget”, he avers that the real purpose of economy in government is nothing less than “the true and scientific progress of humanity”, he exults that “peace hath its victories no less than war.” The one cabinet member most influential and  closest to him was Secretary of the Treasury Andrew Mellon, and the one individual with whom he conferred longest and most often was the Budget Director General Lord, these two men being his closest allies in the fight against fiscal excesses.

Now, my literary and philosophical knowledge is not sufficient to analyse how fitting Berlin’s categorizations are. The point I want to make is that all of us human beings have to deal with getting through life successfully, given a limited set of resources. And those who single-mindedly invest those resources into a single goal or interest (the specialists or “hedgehogs”) will likely go farther in that field than those who spread their resources and interests far and wide (the generalists or “foxes”). Conversely, while they may end up more successful in their (narrower) chosen field, the hedgehogs miss out on many of the joys of dabbling in various hobbies, interests and domains.

Maybe the idea of hedgehogs being “better” or “wiser” than foxes (or vice versa) is not correct. Maybe, as is true in many things, there has to be a “goodness of fit” among the individual’s thinking style and his environment. There will be situations where the ability to juggle many things simultaneously is adaptive, whereas other situations may demand that one focuses on one or two big issues. From a lifespan perspective, it would seem foolish to focus on too few things too early in life, before you have had a chance to sample a wider selection of options and interests. Then, as life goes on, it may indeed be wise to focus on a few ideas and concepts that have turned out to make sense to you. Another possibility is that we need to be focused and goal-driven in our professional pursuits, while it will enhance our personal growth to have many interests in the private domain. Coolidge was a widely read man, with interest in philosophy, law, and the ancient languages. Detractors may say that his “one big thing” was to remain in whatever office he held, but it is true that in his case, the nation was lucky to have a “hedgehog” at the helm who was single-mindedly focused on the key goals of prosperity, solvency and peace.

 

 

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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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 (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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A champion of the people

Mellon (front row left) seated with president Coolidge (front row center) and Chief Justic Taft (front row 2nd from right) at a 1927 Smithsonian regents' meeting

Mellon (front row left) seated with Secretary of State Kellogg (2nd from left), President Coolidge (front row center) and Chief Justice Taft (front row 2nd from right) at a 1927 Smithsonian regents’ meeting. Looks like someone didn’t get the dress code memo! (thanks to reader T.S. Schurk for that observation)

 

I’m piggybacking here (and a few days late at that) on another excellent blog post by the always enjoyable Burt Folsom. Next to Calvin Coolidge, there is hardly a politician dearer to my heart than Andrew Mellon (ol’  Andy Mellon, as Coolidge is supposed to have referred to him; not to his face, one assumes). Folsom neatly and briefly encapsulates Mellon’s accomplishments; for anyone interested in the full account, the substantial biography by David Cannadine is highly recommended. Taxation to Mellon was “the people’s business” and with the full support of presidents Harding and Coolidge, he strove to reduce the tax burden on all except the very rich while reducing the onerous debt burden left over from WWI. There is some poignancy in that Mellon’s life, while outwardly a huge success story, was tinged with failure and sadness on the personal and relationship levels – and, as Folsom mentions, the final years of his life were marred by the politically motivated campaign waged against him by FDR. He deserves to be remembered with respect and admiration.

The continuing relevance of the 1920s

In an interesting episode of The DMZ on bloggingheads.tv, the astute Kristen Soltis argues that Democrats won the presidential election in part because of their ability to communicate the benefits of voting their ticket. Republicans offered their standard program of lower taxes, less government, and less regulation, and voters were left to translate that into what it might mean for their own personal well-being and prosperity, while Democrats were able to offer specifics as to how their policies benefitted individuals. In a sense (although Kristen takes pains to disavow Romney’s “gifts” statement) and in a nod to public choice theory this does mean that Democrats offered more immediately tangible benefits (free contraception, anyone?) and access to the public trough, while Republicans stood for the longer-term benefits of growing the economy.

In this context the experience of the 1920s does take on some relevance. Distant to and different from our time as they may seem, the 1920s  are a prime example of an administration standing by a program of lowered taxes, debt reduction and governmental austerity, which led to an unprecedented burst of productivity and prosperity. Progressives counter this by claiming that these policies and this prosperity somehow was responsible for or at least resulted in the Crash of ’29 – a causal link that has, to my knowledge, not been scientifically proven and even Jill Lepore, in her paean to the income tax in this week’s New Yorker, is careful to state this claim as a fact. Going forward, Republicans might do well to remind people of the “chicken in every pot” prosperity that ensued when Republican administrations and congressional majorities enacted tax rate reductions. In the tug of war for the GOP’s soul that is unfolding now, some are saying that the bold tax-cutting message of yore has had its day. But maybe the way forward is to educate a new generation about the historical facts.

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!

Wealth and the presidency

A Romney supporter

The media, helped by his friendly rivals, have made Mitt Romney’s wealth an issue in the campaign for the GOP nomination – and doubtless president Obama will continue to bring it up if and when he faces Romney in the fall. There is some entertainment value in ranking the presidents for their personal wealth although it seems a stretch to even compare the land and slaveholding-based wealth of a George Washington, a Thomas Jefferson or an Andrew Jackson with the entrepeneurial wealth of a Herbert Hoover or the inherited wealth of the Kennedys and Roosevelts.The varying degrees of success in the presidency that these varied men experienced testifies that wealth is not a prerequisite for a successful presidency – nor is it a hindrance.

One thing is for certain – Calvin Coolidge will never be ranked among the rich presidents; ironically, perhaps, for a man still erroneously tarred with the image of crass materialism. I’ve always found it particularly endearing that Coolidge lived modestly though comfortably, and after his tenure in the White House returned at first to the old duplex in a residential street in Northampton where his family had lived before the move to Washington. Coolidge had respect, though not undue awe, for wealth – he noted that

“Wealth is the product of industry, ambition, character and untiring effort. In all experience, the accumulation of wealth means the multiplication of schools, the increase of knowledge, the dissemination of intelligence, the encouragement of science, the broadening of outlook, the expansion of liberty, the widening of culture.”

He dealt as easily with very wealthy men like Andrew Mellon, Henry Ford, or William Randolph Hearst as he did with the man or woman in the street. It is sheer conjecture, but I assume he would converse easily with Gov. Romney (after all, they both served as Governors of the Commonwealth of Massachusetts) and would respect his accomplishments in the private sector.

Calvin Coolidge in his political life rose above class antagonisms. He did not pit banker against working man, having sympathy and respect for both. It is to be hoped that tired clichés of class warfare will not play a part in the election campaigns of this year – but that may be an unrealistic hope. Conversely, I hope that Gov. Romney, if he is the nominee, will forcefully stand for an economic approach that lifts all boats by a rising tide of prosperity – just as the roaring 20s did.

Image by Charles Ommanney, for Newsweek.

Romney’s Mellon moment?

Once in a while I ask the Coolidge-minded reader of this blog to forgive me for commenting on contemporary politics. While the current race (slog is more like it) for the Republican nomination has been a topic before, it was mostly me cheerleading for my dream candidate Mitch Daniels, who turned out to be a non-candidate. His current book, Keeping the Republic, is still highly recommended.

At present, while flavor-of-the-day favorites come and go, Mitt Romney marches on solidly yet somewhat stolidly. And while his penchant for flip-flopping has not endeared him to many, every once in a while he says something that makes me like him (and I really do want to like him – above all, he seems like a decent guy, which is not a bad basic for a candidate or indeed any human being). One such occasion was when he faced down a leftist heckler by stating, correctly and forcefully, “Corporations are people.” And now, he’s done it again – telling the truth about home ownership and foreclosures, even if this is unpopular – or perhaps, as the article suggests in jest, he wanted to give his candidacy some legitimacy by taking just one single unpopular position. Predictably, he immediately got slammed by a Democatic Party ad.

It is a bit of a stretch, but statements like Romney’s “let it run its course” bring to mind the statement attributed to Andrew Mellon, long-serving Treasury Secretary under presidents Harding, Coolidge, and Hoover (some say they served under him) re the Great Depression: “Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system.” This quote is from Hoover’s memoirs, so they probably and self-servingly overstate Mellon’s point, but it probably does describe Mellon’s view correctly, namely, to let the slump run its course without statist meddling. Hoover, and FDR, veered far from that and today some economists are coming around to the idea that all their meddling and all their cajoling and bashing of business not only did not help end the Depression but may well have needlessly prolonged it. In my view, Romney is likewise correct in implying that there will ultimately be less pain for “underwater” homeowners if corrections run their course rather than being meddled with by the state for populist reasons.