Coolidge

by Amity Shlaes

There have been times when the American people, like Oliver Coolidge, lost heart, feeling themselves locked in a prison of their own making. There have been times when debt pinned down the United States as it once pinned down Oliver. One such moment came after World War I, when the national debt hit $27 billion, a level nine times higher than what it had been just a few years before. Income tax rates were high. Jobs were becoming scarce. Angry veterans roamed the streets of cities, furious that they could not pay prices for food or clothing that were double what they had been before the war. The country did seem lost, if not cursed. Yet within a few years the panic passed and the trouble eased. The curse became blessing. The reversal was in good measure due to the perseverance of one man. That man was in fact the heir to the contentious limekiln lot, the great-grandson of Oliver’s brother Calvin: Calvin Coolidge, the thirtieth president of the United States.

Young Coolidge himself was always so sickly that both his father and he worried that he might never complete his education. He was deeply shy and found it agonizing to meet even the adults who entered his parents’ front rooms.

Students of Coolidge so associate Coolidge with perseverance that they often attribute to him a paragraph that he did not write: “Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination are omnipotent.” Those words in fact were printed as filler in newspapers from as early as 1910, often without an author, but they sound so much like Coolidge that people assume he wrote them.

Coolidge hacked away at the federal budget with a discipline tragically missing in his well-intentioned predecessor, Warren G. Harding. Coolidge vetoed fifty bills and turned down new spending, even for projects such as farm subsidies and construction of rural postal roads that would have immensely benefited the region from which he hailed.

Under Coolidge, the federal debt fell. Under Coolidge, the top income tax rate came down by half, to 25 percent. Under Coolidge, the federal budget was always in surplus. Under Coolidge, unemployment was 5 percent or even 3 percent. Under Coolidge, Americans wired their homes for electricity and bought their first cars or household appliances on credit. Under Coolidge, the economy grew strongly, even as the federal government shrank. Under Coolidge, the rates of patent applications and patents granted increased dramatically. Under Coolidge, there came no federal antilynching law, but lynchings themselves became less frequent and Ku Klux Klan membership dropped by millions. Under Coolidge, a man from a town without a railroad station, Americans moved from the road into the air.

Coolidge kept government out of the way of commerce. When in 1929 the thirtieth president climbed onto a train at Union Station to head back home to Massachusetts after his sixty-seven months in office, the federal government was smaller than when he had become president in 1923.

Coolidge was a rare kind of hero: a minimalist president, an economic general of budgeting and tax cuts. Economic heroism is subtler than other forms of heroism, harder to appreciate.

His intuitive sympathy for free markets notwithstanding, Coolidge never fully grasped the damage of his party’s pro-tariff plank. He spoke out against intolerance and bigotry, but did too little to stop them. He thought so well of other statesmen that he never foresaw the extent to which Benito Mussolini, Adolf Hitler, or Japanese leaders would take advantage of international disarmament agreements and use those agreements as cover to arm for war. He likewise never entirely foresaw the extent to which succeeding presidents and Congress would diverge from precedent when it came to economic policy. The thirtieth president therefore never imagined the consequences of such a divergence: a depression as lengthy and severe as the one the United States experienced over the ensuing decade.

Most presidents place faith in action; the modern presidency is perpetual motion. Coolidge made virtue of inaction. “Give administration a chance to catch up with legislation,” he told his colleagues in the Massachusetts Senate. “It is much more important to kill bad bills than to pass good ones,” he wrote to his father as early as 1910. Congress always says, “Do.” Coolidge replied, “Do not do,” or, at least, “Do less.” Whereas other presidents made themselves omnipresent, Coolidge held back. At the time, and subsequently, many have deemed the Coolidge method laziness. Upon examination, however, the inaction reflects strength. In politics as in business, it is often harder, after all, not to do, to delegate, than to do. Coolidge is our great refrainer.

It is hard for modern students of economics to know what to make of a government that treated economic weakness by raising interest rates 300 basis points, cutting tax rates, and halving the federal government, so much at odds is that prescription with the antidotes to recession our own experts tend to recommend. It is harder still for modern economists to concede that that recipe, the policy recipe for the early 1920s advocated by Coolidge and Harding, yielded growth on a scale to which we can aspire today. As early as the 1930s, Coolidge’s reputation and way of thinking began their decline.

Before industrialization, there had been no one unemployed in the modern sense: a farmer could be underemployed, and he could be broke, but he was not out of work in the definitive way that a factory hand is when the gates of a factory close. But now people were not finding work.

In that period the party platform was completed; Coolidge and his colleagues threw in just about every progressive item they could think of, except the vote for women, which, Coolidge had discovered, didn’t seem to have much support that year among the party’s constituents.

Warren Harding of Ohio, a U.S. senator as loquacious as Coolidge was quiet, had jumped into the race. Harding had his own way of talking long-windedly, using a funny verb to describe his own circumlocutions: he bloviated, he said.

The federal war debt was $21 billion alone and the entire federal debt more like $25 billion; ten times the debt before the war. State and federal taxes both had escalated in recent years. Senator Borah had once said he could not imagine the top rate on the income tax going over 20 percent; now the top rate was over 70 percent.

The world,” Harding said, “needs to be reminded that all human ills are not curable by legislation.”

One word from the speech hung in the air: “normalcy.” By normalcy, Harding did not mean that people should all be normal. He meant that the environment should be normal and relatively predictable. The old progressive swings in policy disrupted too much. A currency that changed value was a problem. Extreme Red-baiting was wrong; now that the war was over, it was time for compassion. Harding had taken a sentiment felt by everyone—that there had been too much upheaval—and broadened it into a plan. Sometimes the country felt normal now; but if it could get all the way back to normalcy then commerce could do the rest of the work. Then the knotty issues of money, prices, and even tariffs could be sorted out.

Before a crowd of 100,000 Harding then gave his speech, far grander and more ambitious than Coolidge’s and of high quality. America must not expect too much or experiment too much, he said. He warned against change for its own sake. It was time to retrench and give up perpetual progressivism.

The Harding White House featured “the general atmosphere of a convivial gambling saloon,” all in the era of Prohibition, she noticed.

The magic they had seen in Harding in those early days had been illusion. Though Harding had seemed to succeed by making “no” sound like “yes,” the reality was that he had succeeded with the Washington crowd because he did say “yes,” and too often. That was his temperament, to say “yes” no matter what his mind or his party told him. Harding, winningly rueful as always, even quoted his own father at a press conference to explain his troubles. It was good that Warren had not been a girl, his father had said. He would always be in the family way—because he couldn’t say no. Among the senators, especially, there began to be more discussion about Harding. What was their former colleague doing at the White House? Why were there so many contracts given out?

Lincoln had not given up when his son had passed away; indeed, it had been after Willie’s death that he had made the decisive move that had won the Civil War, replacing the ineffectual General McClellan and eventually settling on General Grant to lead his armies.

Even with its imperfections, the tax rate cut had done what Mellon had predicted: the tax rates had dropped 25 percent, yet the decrease in the amount received was less than 5 percent. It was wondrous: there might be a federal budget surplus despite the bonus costs imposed by the new bonus law, just as Senator Bursum, just defeated, had predicted long before. The stock market increase was the market’s way of telling the administration that it already counted on the tax cut and counted on the economy thriving in coming years.

At the White House, Coolidge exploded. To give intellectual credence to the idea that a government could permit a deficit, he deemed folly. Intentionally lowering interest rates to ease European recovery was one thing. That was what the Federal Reserve, with Mellon’s blessing, was doing. But a deficit of the federal government was a signal to the market that the United States was not a good investment. And countries that were not good investments lost control of their money; if the United States looked as though it was heading toward insolvency, dollars and gold would go to Europe, whatever Coolidge, Mellon, and the Federal Reserve intended.

The national debt of $28 billion, nearly all war costs, was finally down to $17.65 billion. As Coolidge would say of the debt, “It is one-third paid.”

The December splurge on diplomats notwithstanding, Miss Riley’s books now showed that she had managed well that year. In 1926, the feeding of the White House had cost $11,667.10, versus $9,116.39 for 1927, a total saving of $2,550.71. “To Miss Riley,” wrote Coolidge in pencil, “Very fine improvement.”

Coolidge’s thoughts ran along the same frustrating lines as they had the year before. The downturn was coming. But bad policy, especially Hoover’s spending policy, would make any downturn worse; the deficit Hoover ran might cause investors to lose confidence in the United States and gold to go to Europe. Then the recession would worsen. Yet it would be wrong to intervene.

A second concern was the Dow Jones Average. The average had climbed impressively in one week following Hoover’s election. It had risen 50 percent since the day Coolidge had announced he would not run again, an enormous amount. A crash was coming, he knew, and the higher the market went, the worse the disruption would be. The Federal Reserve was attempting to impose a new sense of caution by raising interest rates, but the market was not responding.

Coolidge simply was not sure that the federal government ought to regulate financial markets, or that ex-presidents should work in finance.