A new book about Coolidge discusses how his reputation was tarnished by a suspicion, or perhaps just convenient partisan claim, that the Depression somehow derived from Coolidge’s economic policies.
Amity Shlaes, one of America’s most interesting and influential public intellectuals, has just published Coolidge, a biography of that laconic president. It is meticulously researched, and compellingly written, and of this writing residing on the New York Times nonfiction bestseller list at Number 6.
This book’s prominence appears due less to its exploration of an enigmatic historical personage than to its high relevance to the political wars that rage today. Reviewing Coolidge for the New York Times Book Review, Jacob Heilbrunn, a senior editor at The National Interest, nails the key significance of this book (while taking issue with some of its conclusions):
“What makes Coolidge a fascinating character, however, aren’t his bromidic phrases and vapid homilies, designed to reassure a public unsettled by rapid social and economic change; or his loyalty to his vivacious wife, Grace; or his taciturnity or any of his other personal qualities. Rather, it is that he represented the right’s first sweeping counterrevolution against liberal Republicans in a battle that continues down to the present. [Emphasis added.]
Heilbrunn is no fan of Coolidge, calling him “a bleak omen from the past.” He also captures — more pithily and vividly than this columnist has seen elsewhere — the essence of the clash of narratives between the mainstream GOP posture of rectitude and its progressive detractors: “the prosperity offered by Calvinism has always proved as elusive as the promise of the green light that Jay Gatsby watches at the end of Daisy’s dock.” Coolidge, of good Puritan, Congregationalist, stock (as vividly described by Shlaes) was called by another biographer A Puritan in Babylon.”
H.L. Mencken, a contemporary critic of Coolidge, famously described Puritanism as “the haunting fear that someone, somewhere, may be happy.” (A Mencken Chrestomathy, 1949, p. 624). As long as the GOP clings, bitterly, to a core identity of Puritanism it will, and should, find itself viewed with considerable disdain by an American public imbued with the Jeffersonian ethic. The GOP has only, and then very incompletely, gotten its head around two out of three of the unalienable rights enumerated in the Declaration of Independence.
Pursuit of Happiness? Not so much.
Rectitude, admittedly, is admirable. Yet it can lead as easily to genteel poverty as to prosperity. More than rectitude is needed. Keynes, in his Treatise on Money, made a compelling point: “If Enterprise is afoot, wealth accumulates whatever may be happening to Thrift; and if Enterprise is asleep, wealth decays whatever Thrift may be doing. Thus, Thrift may be the handmaiden of Enterprise. But equally she may not.”
Coolidge, no Keynesian, proved himself admirably thrifty. His much greater claim to greatness was in awakening Enterprise. Notwithstanding his taciturn public persona, Coolidge, as compellingly narrated by Shlaes, enacted, and effectively, some very good — happiness-inducing — policy, to wit: raising tax revenue by lowering tax rates. Shlaes (p. 266):
“[Treasury secretary] Mellon was imagining a great virtuous circle. The money that flowed when he cut the taxes would enable him to pay off the federal debt faster. Right now, thanks to the hard work of the Federal Reserve governor, William P.G. Harding, interest rates were low. The rates, however, might not stay that way forever; Mellon had to refinance now. Lower interest rates would of course also benefit Europe, whose nations owed so much to the United States. All of these ideas, but especially the idea of growth that threw off extra tax revenues, were relatively new to Coolidge. But, he saw, even some of the progressives agreed with some of what Mellon said. Senator Bursum, the great New Mexico pension activist, actually told The New York Times flat out that he thought a reduction in tax rates might not force a reduction in revenue, but rather the opposite.”
Rather the opposite proved, in practice, the case. As Shlaes sums up this crucial point (p. 363-4):
“Back in their offices in the coming days, the Treasury men also discovered something else. Critics like James Couzens had always said Mellon’s tax cuts were for the rich.… But the new revenues undermined the argument that Mellon’s laws benefited the rich. For a good share of the new revenue was coming from higher earners. By lowering rates on the wealthy, the Treasury had actually collected more from them. A greater portion of the income tax came from top earners than had at the beginning of the decade. In 1927, those earning over $50,000 — a tremendous sum — would pay about 80 percent of the income taxes, whereas in 1920 those top earners had paid about half. ‘The income tax in this country,’ as Mellon wrote triumphantly to one of the Treasury’s correspondents, ‘has become a class rather than a national tax.’ … The era of ‘tax tuberculosis,’ as one lawmaker had called it, seemed to be ending. That means money was flowing into companies as well as state or local government. … It was all proving so close to what Mellon had hypothesized years before in Taxation: The People’s Business. That the budget had not been cut to $3 billion did not matter because commerce had expanded so much. Mellon’s experiment might not survive forever, but it had survived long enough to prove itself a success.”
Coolidge, famously, rather than standing for re-election observed, “I do not choose to run for president in 1928. … If I take another term, I will be in the White House till 1933 … Ten years in Washington is longer than any other man has had it—too long!”
Disaster was barreling down upon the United States, and world, economy. Offstage (and thus properly excluded as a topic of Shlaes’s book) world monetary policy had gone awry. The pre-war gold standard had been replaced by its evil simulacrum, the “gold-exchange” standard, at a monetary conference as obscure as it proved epochal, held in Genoa, Italy, in 1922. It was a ticking time bomb.
Few grasped (or yet grasp) the enormity of the time bomb that had been embedded into the world economy with this policy. One of the few, Prof. Jacques Rueff, wrote of the gold-exchange standard, in The Monetary Sin of the West (The Macmillan Company, 1972, 1971, pp. 23-24):
“[T]he gold-exchange standard brought about an immense revolution and produced the secret of a deficit without tears. It allowed the countries in possession of a currency benefiting from international prestige to give without taking, to lend without borrowing, and to acquire without paying.
“The discovery of this secret profoundly modified the psychology of nations. It allowed countries lucky enough to have a boomerang currency to disregard the internal consequences that would have resulted from a balance-of-payments deficit under the gold standard.
“It was the outcome of an unbelievable collective mistake which, when people become aware of it, will be viewed by history as an object of astonishment and scandal.”
Coolidge barely escaped Genoa’s detonation and demolition of the world financial order. Yet his escape was not quite complete. His reputation was tarnished by a suspicion, or perhaps just convenient partisan claim, that the Depression somehow derived from Coolidge’s economic policies. The Coolidge administration, sandwiched between Genoa and Black Monday, had nothing to do with causing the Great Depression. Its cause derived, directly, poorly understood (both then and now), from Genoa.
Shlaes, in her lucid, informative, and entertaining way may not fully have succeeded in carving Coolidge onto Rushmore. She, however, definitively succeeds in dispelling the specter of Coolidge as “a bleak omen of the past.” The GOP still has much to learn from Coolidge about how to awaken Enterprise. Shlaes’s Coolidge lights a way for the GOP to emerge from the haunting Puritan fears that have left it in tatters and to transform itself into a party committed, elegantly, to the Pursuit of Happiness.