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.
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.
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.
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.