Frugal, laconic Calvin Coolidge instinctively applied his conservative principles. The result was just what we need today: low debt and rising prosperity.
When President Obama demanded in September that “millionaires and billionaires” “pay their fair share,” he laid a claim to justice, albeit justice wrongly understood. America’s tax code is unjust, he argued—not because everyone doesn’t pay the same rate, but because the “rich” don’t pay enough in federal taxes. Dropping his g’s, stomping his feet, seducing crowds, he was in full campaign mode. “If you love me, then you gotta help me pass this bill,” he told a swooning crowd. The campaigner-in-chief was back, still wanting to “spread the wealth around,” insisting that taxes must be raised. It was all about “living within our means.”
But if Obama is serious about living within our means, he would do well to study President Calvin Coolidge—the last Republican president to pay down the debt while simultaneously growing the economy. There’s never been a better time than now for a return to the Coolidge perspective. Often wrongly dismissed as a “do-nothing” executive by New Deal activists, Coolidge showed what true conservatism could produce. He brought Washington’s fiscal house into order. He balanced budgets, cut spending, slashed taxes, and helped expand the economy to produce prosperity. In other words, exactly what we need today.
Unfortunately, Obama’s philosophy of government couldn’t be further from Coolidge’s. “The wisest and soundest method of solving our tax problem is through economy [spending restraints],” Coolidge said in his inaugural address in 1925. His concept of our republic differed markedly from Obama’s. “The collection of any taxes which are not absolutely required,” he argued, “which do not beyond reasonable doubt contribute to the public welfare, is only a species of legalized larceny. Under this Republic the rewards of industry belong to those who earn them. Americans, he reminded us, “are politically free people and must be an economically free people.” But with President Obama, America has become less economically free, falling in the indexes of economic freedom.
This is chiefly because of the climate of economic uncertainty his policies create. In 2009, President Obama rightly opposed raising taxes in the jaws of a recession. Now, confusingly, he insists on raising them despite the economy’s continuing contraction. Obviously he hasn’t learned that taxes can’t solve Washington’s fiscal woes, because to tax is to destroy the dynamic sources of our prosperity.
Coolidge knew this well, counseling his fellow citizens against the class warfare underlying Obama’s economic philosophy: “We cannot finance the country, we cannot improve social conditions, through any system of injustice, even if we attempt to inflict it upon the rich. Those who suffer the most harm will be the poor.” And the poor have suffered dearly under President Obama: The number of Americans living in poverty increased again in 2010, rising for the fourth year in a row. Now, one in six Americans lives below the poverty line.
Americans instinctively dislike class warfare, Coolidge argued, because they “believe in prosperity. It is absurd to suppose that [Americans are] envious of those who are already prosperous.” Prudence and the lessons of history, Coolidge believed, told us “the wise and correct course” was “not to destroy those who have already secured success but to create conditions under which everyone will have a better chance to be successful.”
COOLIDGE’S APPROACH really was one of seeking the proper balance. Government and business each “ought to be sovereign in its own sphere,” he told the Chamber of Commerce of New York State in November 1925. “When government comes unduly under the influence of business, the tendency is to develop an administration which closes the door of opportunity; becomes narrow and selfish in its outlook, and results in an oligarchy.” On the other hand, “[w]hen government enters the field of business with its great resources, it has a tendency to extravagance and inefficiency, but, having the power to crush all competitors, likewise closes the door of opportunity and results in monopoly.”
With his belief in big government, Obama insists that he remains focused on creating jobs. Coolidge however, knew that government could not “create jobs” directly. Job creation was the province of private enterprise. “If business can be let alone and assured of reasonable freedom from governmental interference and increased taxes,” the retired Coolidge later wrote during the Depression as a columnist, “that will do more than all kinds of legislation to relieve depression.…It will be the part of wisdom to give business a free hand to supply its own remedies.”
Coolidge achieved as much as he did because he believed so deeply in “economy,” meaning frugality. He ranked it third, after only “order and liberty,” as “one of the highest essentials of a free government.” He put it simply: “I favor the policy of economy, not because I wish to save money, but because I wish to save people.” A dollar saved was a dollar the people could spend themselves, on their own betterment.
Unlike other politicians who espoused a phony fiscal conservatism even then, Coolidge worked to make his principles policy. And he believed wholeheartedly in budgets, confessing a “sort of obsession” to make the numbers come out right. “I regard a good budget as among the noblest monuments of virtue,” he proclaimed in 1924. Compare that with President Obama’s last budget, a monument to profligacy that failed to attract a single vote in the Senate.
Obama prefers to ramp up the rhetoric, demonizing “fat cats” and “millionaires and billionaires.” In one of his two books about himself, he described his time in corporate America as a period “behind enemy lines.” Coolidge, by contrast, once remarked that business capital is “the chief material minister to the general character of all mankind.” He famously believed that “the chief business of America is business,” but business and the wealth it produced were only a means, not an end.
By leaving business alone, Coolidge oversaw one of the lowest unemployment rates in American history. By keeping businesses free from excessive taxes, he protected consumers from having to pay for them with higher prices. “High taxes mean high prices,” Coolidge maintained. But he also added a moral dimension: “I am opposed to extremely high rates, because they produce little or no revenue, because they are bad for the country, and finally, because they are wrong.”
“Debt reduction is tax reduction,” as he often put it. The corollary was also true. Tax reduction was debt reduction. “I want taxes to be less,” he said, “that the people may have more.” By lowering taxes, Coolidge actually produced humanitarian results. Here, even progressives might find something to admire. Those making less than $5,000 a year paid 15.4 percent of total income taxes in 1920, but only .4 percent in 1929. Those who earned more than $100,000 paid 65.2 percent, up from 29.9 percent over that same period. Coolidge got more revenue, too. The economic expansion led to a 28 percent increase in the proportion of the budget paid by federal income taxes. By 1927, 98 percent of Americans paid no income tax at all.
THESE SUCCESSES were possible not only because of Coolidge’s grounding in common-sense economics and his belief in limited government, but because he surrounded himself with men of accomplishment, not agenda. There were major businessmen and real statesmen in his cabinet. Among them was Andrew Mellon, his (and Harding’s and Hoover’s) Treasury Secretary. A financial wizard, Mellon had such genius and force of personality that it was said “three Presidents served under him.” Another of Coolidge’s outstanding appointees was Vice President Charles Dawes, who had been the nation’s first director of the Bureau of the Budget in the Harding administration. Dawes, who had devised a plan to restore post-World War I Germany and stabilize its economy, would go on to win the Nobel Peace Prize in 1925.
Like many conservatives today, Coolidge was popular with the man in the street but unpopular in the Ivory Tower and in Washington. Then as now, the educated class harbored contempt for the philosophic underpinnings of our republic and for those who most seriously defended them. When attacks on Coolidge’s philosophy failed, his critics simply got personal. Socialite Alice Roosevelt Longworth, the daughter of Teddy Roosevelt, scorned Coolidge as having been “weaned on a pickle.” He was the butt of jokes and vicious rumors. Coolidge “slept more than any other President, whether by day or by night. Nero fiddled, but Coolidge only snored,” wrote H. L. Mencken in 1933. When told of Coolidge’s death, Dorothy Parker, the popular satirist, is said to have quipped, “How could they tell?”
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