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.
Hubert Work was a central, albeit inconspicuous, figure in the administrations of presidents Warren G. Harding and Calvin Coolidge, whom he served as postmaster-general and secretary of the interior between the years 1922 and 1928. Still, his activities remain largely unheralded.
Born on a farm in rural Pennsylvania on July 3, 1860, he studied medicine and went out west, settling first in Greeley, Colorado, then in Pueblo. Active in Republican party politics from early on, he was chairman of the Colorado state Republican convention in the contentious year of 1908, and he also was a regular Republican delegate to the national convention that nominated William Howard Taft. During the campaign of 1920, Republican chairman Will Hays named him to organize farmers in support of the Harding-Coolidge ticket, and after that ticket’s resounding victory, he became assistant to Hays’ postmaster-general. When Hays left that post to head the National Association of Motion Picture Producers and Distributors in 1922, Harding picked Work to succeed him, surely in part because he remembered and appreciated his efforts on behalf of the ticket. Continue reading
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.
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!
Susan Cain‘s book on introversion, “Quiet – The power of introverts in a world that can’t stop talking,” has been on the New York Times bestseller list since its publication in January, obviously striking a chord not only with the many introverts downtrodden by today’s relentless extrovert culture. If I’d been wondering whether to buy a copy in order to find out what the author had found on introverts in politics, I need wonder no more, since the Washington Times review explicitly mentions that Cain (inadvertently or by design) does not refer to any notable conservative introvert.
In case you haven’t seen it, David Greenberg -prompted by the news that Michele Bachmann suggested Calvin Coolidge’s mug as a possible addition to Mt. Rushmore– has another post on the popularity of Calvin Coolidge over at Slate. As the author of a biography on Coolidge (not the best one available, by a long shot), Greenberg appears to be Slate’s go-to guy when it comes to the 30th president. Typically for the left-wing slant at Slate, the piece is generally somewhat condescending to Coolidge and contains a number of debatable statements – Coolidge “benefited from Wilson’s wartime spending”? Puh-leeze. The economy was in a bad way when Harding took over from Wilson in 1921, and it took the policies of Harding, Coolidge, and Mellon to turn things around. And it’s somewhat disingenious to complain that wealth in the 1920s grew “unevenly” when it did provide greater incomes and a wider distribution of material goods for a greater number of people than ever before. Plus it seems a little unfair to not only misspell Amity Shlaes’ name, but also to dismiss her as a “right-wing journalist-cum-amateur-economist.” It gets worse when you go on to read the comments on Greenberg’s piece, with Slate regulars regurgitating the old Coolidge stereotypes and misrepresentations.
In what may or not become a regular feature, I’m posting a few pics I discovered on the Library of Congress photo website. They are all from August 1923, the month Coolidge ascended to the Presidency. In all pictures, he is wearing the black armband as a sign of mourning for his deceased predecessor Warren G. Harding. (Pictures below the cut)
Reacting to the momentous event of his being sworn in as president following the sudden death of Warren G. Harding, Calvin Coolidge deadpanned “I believe I can swing it.” In the minds of his contemporaries, he did indeed swing it, but in the intervening decades, most historians have frowned on the Republican. Several times over the last half-century, the father-son duo of Arthur M. Schlesinger Sr. and Jr. have asked their fellow professors to rank America’s chief executives. These academics always deem Coolidge “below average”–in other words, they think he’s about as accomplished as the dithering Millard Fillmore. Cool Cal didn’t do much better in a 1982 Chicago Tribune poll of 49 “distinguished historians”; they placed him immediately behind Jimmy Carter. In the 1997 Ridings-McIver survey of historians and former politicians, Coolidge came in at number 33, right below Richard Nixon. It may be said that he was unfairly treated by historians almost from the day he left office.
Yet Coolidge deserves better. Continue reading
In the current climate of economic turmoil, with Europe and the U.S. both trying to push back the fateful pay day when decades of governmental overreach and overspending come home to roost at the same time that economic growth appears to be stalling, so-called liberals and progressives like to argue against budget cuts with the Keynesian argument that austerity would be poison for any hopes of economic recovery, let alone renewed growth. As the economy lurches, and stock market indices tumble, you will no doubt see this argument made forcefully by proponents of unrestrained government spending.
Lucky for us, we can turn to at least one significant historical example when the U.S. government did NOT resort to hectic macroeconomic retooling, pump-priming, and deficit spending. As Professor George Selgin explains, the sharp economic reversal of 1920 did not deter the government (and this means essentially the just-elected Harding government, as the Wilson administration was hardly functioning at the end of Wilson’s 2nd term) from prioritizing cutting the bloated wartime budget and retiring the enormous wartime debt. Far from plunging the nation into ruin, these policies worked so well that within two years an unemployment rate of close to 12 percent had given way to labor shortages, and industrial production, which had fallen precipitously in 1920, rose to new record levels.Notably, government spending was tightly controlled during the Harding/Coolidge years, while the economy boomed.
As Selgin points out, Treasury Secretary Mellon was unfairly tarred as “liquidationist” by none other than Herbert Hoover, who did not in fact follow austerity measures while battling the Great Depression. Moreover, the Harding/Mellon austerity of 1920/1921, which was continued under the Coolidge administration, is rarely given credit for turning the economy around. It seems austerity just can’t win!