Coolidge: When Balanced Budgets Mattered

Coolidge brought his common sense to the nation’s economic conversation. He spoke of “credit” instead of “money supply.” “To Coolidge the national household resembled the family household, and to her displeasure he monitored the White House housekeeper with the same vigilance that he monitored the departments of the federal government.” 

As America’s leaders confront—or try to avoid—the looming twin towers of annual trillion-dollar budget deficits and mounting national debt, the nation nears the centennial mark of a presidency that showed the way out of such profligacy. The president who would become known as “Silent Cal” Coolidge speaks to us anew, and at an important juncture in our history, in an outstanding new biography by Amity Shlaes.

Calvin Coolidge was literally born on the Fourth of July in 1872, in the downstairs bedroom of a small house next to his father’s general store in Plymouth Notch, Vermont. From his father, the uber-practical John Calvin Coolidge, Sr., he learned what he called the “fundamental idea of both private and public business.” His father successfully worked as merchant, town tax collector, sheriff, and member of both of Vermont’s legislative bodies as state representative and senator.

Coolidge attended Amherst College in Massachusetts, where, over time, the naturally shy young man improved his public speaking to the point of impressing his peers with his forensic skills. After graduating, he and his wife, Grace, settled in Northampton, Massachusetts. Instead of buying a home, the common practice then as now, they rented half a two-family house and purchased their linens secondhand from a local hotel (the name of the hotel written permanently on the linen).

After a few years of practicing law, Coolidge began a slow and ineluctable political rise in which he never lost a bid for public office. His was the climb of someone seemingly determined to step on every rung of the ladder that he might better appreciate the ascent. He was elected, in order, city councilman, city solicitor, state representative, mayor, state senator (and eventually president of the Massachusetts Senate), lieutenant governor, governor, and vice president of the United States. He would become president upon the death of President Warren G. Harding, and later win election to the presidency in his own right.

Coolidge attributed his coming to “national prominence” to his fortitude in the face of a Boston police strike in 1919 while governor of Massachusetts. Police officers, in coordination with the American Federation of Labor, struck to protest low pay and poor working conditions. The mayor of Boston tried to negotiate a compromise; meanwhile, the police commissioner fired the officers. As Bostonians perceived their city as sliding into lawlessness, Coolidge defended the discharge. “There is no right to strike against the public safety by anybody, anywhere, anytime,” Coolidge insisted. He called out state troopers to reestablish security and refused to rehire the officers.

The contrast with President Woodrow Wilson, who avoided taking a firm stand against labor unrest as postwar strikes and radicalism spread, was not lost on the American people. Coolidge, Shlaes noted, “had upstaged a sitting president. The governor had stood firm on strikers where Wilson had vacillated, indeed was still vacillating.” The following year, after a perfunctory and unsuccessful pursuit of the presidency, Coolidge earned the vice-presidential nomination on the Republican ticket beneath Ohio Senator Warren G. Harding. Together they campaigned successfully on a “return to normalcy” platform following the First World War. Harding died while Coolidge was vacationing at his childhood Vermont home. In the middle of the night on August 3, 1923, Coolidge’s father, a notary public, swore the new president into office by the light of a kerosene lamp.

Though he came to public attention as a law-and-order governor, Coolidge would make his name for the history books as a president who believed, as he famously put it, “the chief business of the American people is business.” His “crowning achievement” as Massachusetts Senate president, Shlaes noted, had been killing a tax on stocks at the last minute by masterfully exercising the Senate president’s privilege to create a tie vote. He would carry this focus on fiscal issues into the White House at a time when war debts and heightened federal debt were of great concern.

Shlaes’ background as a former member of the Wall Street Journal’s editorial board shows in her superb analysis of Coolidge’s tax and fiscal policies. Herbert Lord, director of the Bureau of the Budget, would meet with Coolidge at 9:30 a.m. every Friday an hour before Cabinet meetings, conferring over how to trim the federal budget. Coolidge and his advisers decided the debt had to be reduced below $20 billion from $22.35 billion. The budget itself should come down from $3.2 billion to $3 billion—and budget surpluses should become the norm. Eventually, this austerity would allow for tax reductions. His New England frugality was applied writ large to the nation: “The cutting differed only in scale from the cutting John Coolidge had labored over so long by kerosene lamp, trying to match outlays with meager revenues from the school tax or the snow tax.”

For broader fiscal policy, Coolidge turned to Treasury Secretary Andrew Mellon. The common joke was that Coolidge and Mellon, both reserved men, conversed in pauses. America’s “fruitfulness,” as Coolidge called it, “might be greater if it were less taxed.” For his part, Mellon envisioned “a great virtuous circle. The money that flowed when he cut the taxes would enable him to pay off the federal debt faster.” Mellon also wanted to improve the efficiency of the tax code. He advocated allowing deductions for only a portion of business losses, not full deductions, and the taxing of dividends. The Mellon Plan, as it came to be called, was termed “scientific taxation,” so named because it sought to find just the right level of taxes and spending to pay the nation’s bills while begetting prosperity.

“Of all services which the Congress can render to the country I have no hesitation in declaring this one to be paramount,” Coolidge said of his tax plan. As for his treasury secretary, Shlaes noted: “Coolidge was not sure he liked all of Mellon’s ideas. But he knew he liked Mellon, who differed little, after all, from Andrew Carnegie or Judge Forbes in the way he thought about capital. Coolidge also liked the way Mellon’s mind worked. Mellon, in turn, appreciated that Coolidge did not waste his time, as President Harding had.”

Coolidge brought his common sense to the nation’s economic conversation. He spoke of “credit” instead of “money supply.” “To Coolidge the national household resembled the family household, and to her displeasure he monitored the White House housekeeper with the same vigilance that he monitored the departments of the federal government” (though not to the extreme of scheduling time on the White House tennis court a la Jimmy Carter.) The Boston Globe had written a story about the Coolidge household in 1920 that extolled their thrift. The Coolidges paid $32 in rent, the article noted, and his telephone was a party line; they lit the area around their hearth with a small tube of a gas heater. The new president ran the nation as he ran his household, to good effect.

His laconic tendencies became at first the stuff of jokes, and later of legend. While he was vice president, journalists mocked Coolidge for being so quiet (and presumably for giving them such little material for their columns). Journalist Edward Lowry said the 1920 elections had brought to Washington “perhaps the oddest and most singular apparition” the city had known: “a politician who does not, who will not, who seemingly cannot talk.” Eventually his opponents would claim his career was proof that if a man keeps his mouth shut long enough, something fortunate is likely to happen to him.

He differed from his predecessor in other ways as well. One Cabinet member noted that while Harding was never by himself, Coolidge was often alone save for his papers and cigar. Harding tended to say yes when you went to his office; with Coolidge by contrast the answer was almost always no. Coolidge appointed a special prosecutor to handle the scandals of the Harding years, then pursued an agenda that was largely consistent with that of his late, business-friendly successor.

Coolidge lived by the maxim, “It is much more important to kill bad bills than to pass good ones.” He opposed the popular proposal to give bonuses to soldiers. This meant a redistribution of income to special interests, which he found unfair and unwise in the long run. Coolidge supported immigration restrictions, which were advocated by labor leaders, but opposed the exclusion provision for the Japanese. Like Republican chief executives before him, he sought to use federal power to quell racial violence in the South, supporting federal anti-lynching laws.

His leadership and record gained him a resounding victory in the 1924 election. Coolidge received 54 percent of the vote, with Democrat John W. Davis and Progressive Robert La Follette splitting the remainder. His popularity would only grow in step with the nation’s economy over the next four years.

New tax data after the election confirmed the scientific-taxation hypothesis endorsed by Coolidge and Mellon. Though tax rates had dropped 25 percent, revenue had declined less than 5 percent. A budget surplus of over $100 million was projected. Income tax receipts continued to be down but not by much, and Coolidge’s cutting had made up the difference. Coolidge called the latter “cheeseparing.” The new tax bill he signed in 1926 was essentially the Mellon Plan written into law. The new tax schedule would have a surtax rate at 20 percent; the top rate of surtax plus base became 25 percent; tax returns were made private once again; estate taxes came down; about one in three Americans who had paid taxes no longer did.

“Silent Cal” could not evade controversy. The catastrophic Mississippi River Valley flood of 1927 directly challenged his principles. Coolidge thought it basic federalism to allow governors to handle the disaster, and he stuck to raising money through private charities. By endorsing the Red Cross and speaking publicly, he doubled the amount of donations received from $5 million to $10 million. Democrats, however, urged greater federal action. Coolidge appointed Commerce Secretary Herbert Hoover to oversee the limited federal relief efforts. Hoover, ironically in view of his later reputation, advocated strong federal intervention and infrastructure spending.

Nor could Coolidge escape tragedy. His son, Calvin Junior, developed a blister on his toe from playing tennis on the White House court. He died a week later of sepsis. Reserved about the death of his son while president, Coolidge wrote after leaving office that the loss devastated him (“When he went, the glory of the presidency went with him”).

Coolidge announced his political plans in the same economical way in which he had always used words. During a trip to the Black Hills of South Dakota in 1927, he shocked many Republican leaders and political observers by handing out to stunned reporters a brief, handwritten note: “I do not choose to run for president in nineteen twenty eight.” Coolidge thought it unwise to serve more than the two terms that Washington had set by example.

He died on January 5, 1933, and was buried among his people in Plymouth Notch. The record Coolidge left behind is arguably the finest economic tutorial any chief executive has provided the American people. Shlaes’ biography is an exceptional account of that record whose timing could not have been better.

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