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Looking to President Coolidge for budgetary perspective

Calvin Coolidge, 30th President of the United States, serving from 1923 to 1929.

Kai Ryssdal: In keeping with the theme of today's broadcast -- tomorrow's economic news today -- we turn now to Congress. Lawmakers are still on spring break. But when they get back to work, I can guarantee you you'll be hearing these two words over and over and over again: debt ceiling.

At a fundamental level, the debate is about the best way to reduce what we owe. By cutting spending, or by raising taxes.

And it got commentator Amity Shlaes thinking about history.


Amity Shlaes: As presidents go, Calvin Coolidge is an unlikely hero. Conservatives focus on him far less than they do on Ronald Reagan, and after all, Coolidge served a long time ago, from 1923 to 1929. Coolidge said "no" so often that he was trashed as lazy even by his own peers. Today, Coolidge is held in such low esteem by most Americans that if they remember anything, it is his nickname: Silent Cal.

But Coolidge did three things that stand out today, especially from our budgetary perspective. The first was to monitor federal spending -- personally, with his own pencil, and intensely. As president, Coolidge met with his budget director every Friday at 10:00 a.m. Once cuts had been made, Coolidge made more. Coolidge monitored every penny spent down to the salt and pepper on the dinner table. The housekeeper at 1600 Pennsylvania Ave., Miss Riley, managed to cut her outlays from $11,667.10 one year, down to $9,116.39 the next. "Very fine improvement," the president wrote in a note to her.

The result was that Coolidge always ran surpluses. In fact when Coolidge left office in 1929, the federal budget was actually lower than when he came in six years before. No peacetime president ever achieved such a thing again. Certainly not Reagan.

Second, Coolidge cut taxes. Silent Cal's top rate was 25 percent, the lowest since World War I ended. And 3 points lower than Reagan's mythic 28 percent tax rate from the 1986 law. Unemployment? Coolidge's average was lower than Ron's.

Save. Match tax cuts with budgetary restraint. Worthy rules. Reagan himself admired Coolidge. It's time the rest of us did too.



Ryssdal: Amity Shlaes is a senior fellow in economic history at the Council on Foreign Relations. If you've got a comment for us about history or about present day, send them in.

About the author

Amity Shlaes is author of the biography “Coolidge,” and she directs the economic growth project at the Bush Presidential Center.
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During Coolidge’s administration, 1923-29, the bottom 93 percent of earners saw their real disposable income decrease, in part because industrial wages lagged despits a robust economy. Farmers did even worse; their share of US income plummeted from 15 percent to 9 percent in that decade, while the value of their land plunged 30 percent. Coolidge was sent two bills intended to boost sagging farm prices; he vetoed both bills. So consumer demand slowed. Then the construction boom ended under Coolidge, in 1928. Coolidge left office in March ’29 and three months later, US production and personal income fell off a cliff. Still, starting under Coolidge, stock prices soared 40 percent and volume doubled between May ’28 and Sept. ’29, as giddy Americans threw fortunes at promises on paper -- tacitly and ironically encouraged by the longstanding laissez-faire policies of this otherwise stoic, sensible New Englander. He simply didn't think that the level of wages and prices mattered. Coolidge didn’t cause the Great Depression; he just "didn't do nuthin,'" as Will Rogers put it, while its foundation was being built. That’s why the vast majority of historians give Coolidge fair-to-poor marks.

The best lesson in history was documented by the greatest historians in the 20th century, Will and Ariel Durant in their 11 volume series "The Story of Civilization":

"When the group or a civilization declines, it is through no mystic limitations of a corporate life, but through the failure of its political or intellectual leaders to meet the challenges of change."

The current state of America's decline makes it appear that none of America's politicians and none of America's university scholars are competent enough to put American Democracy together again.

The Durant's lesson in history shall then come true one last time because of political and environmental destruction that is occurring throughout the world today.

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Coolidge always ran surpluses. In fact when Coolidge left office in 1929, the federal budget was actually lower than when he came in six years before. No peacetime president ever achieved such a thing again
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Do tennis buffs remember Coolidge because of his son? Did son step on a nail at White House Tennis Court? Developed tetanus? Died from Tetanus? Did the death cause Silent-Cal's retirement? Had he stayed in the White House would he and Mellon have pulled us out of the slump? Who knows.

One thing for sure, "Presidential choices, preferences, personalities, etc. can make economic history." Is economic change from changing-of-the-guard preventable? Should we have longer term policy? Is there anything we can do to insure more stability in-spite of fluctuations from changing of the guard? Who knows?

One thing for sure, "Less of dependence on short term financing of government operations but more of long term financing could be a good-start." Could we finance less with current account taxation? Auction less of short term bills and notes? Auction more of long term notes and bonds? If holders of 30 year t-bonds and even longer term bonds were providing most of our prime-mover would our fluctuations of business cycle be much more boring? Nearly silent? Is it too late to ask Silent Cal?

U B Judge!

U B Thurgood
!

There have been 7 periods of in the history of US where the government has run sustained surpluses.

All 7 were followed by recessions, 6 of them were depressions.

I think Amity Shlaes points out some nice things about Calvin Coolidge, but those cuts and surpluses were achieved outside the economic crisis of the Great Depression. Rather, the lesson seems to be that budgetary discipline alone cannot avoid economic doom.

I don't often get to have belly laughs during a business news program. This was a swell story. Does she write her own stuff? Or did Market Place hire some Comedy Central staff?

This commentary was laughable for a number of reasons, as is the comment assertion that 40 years of deficits were the proximate cause of the Depression.

The primary comic irony, Coolige's enablement of the Depression, has been well stated already. What I would like to add as a critique of the piece is it embraces the idea that context-free numbers (e.g. "3 points lower than Reagan's mythic 28 percent tax rate") constitutes some type of meaningful historical analysis. Even when Marketplace "does the numbers" there's more meaningful analysis than this.

The current recession was not caused by government deficits, it was caused by the private sector behaving stupidly. The great depression was not caused by government deficits, it was caused by the private sector acting stupidly. Both followed a decade of control by a President and a Congress that believed government is a waste of money and markets are perfect. The generations that lived through the great depression dismissed Coolidge rightfully as a fellow who was to busy pinching pennies to pay attention to the market madness.

The Great Depression had nothing to do with federal spending.And the Fed was acting independently of the Treasury.

Admire Coolidge? Really? The man who set the nation up for the Great Depression? You've got to be kidding. Yes, he may have been good at pinching pennies on his white house grocery bills - while the nation's economy was headed straight for a cliff! Talk about shortsightedness. His only legacy is one of total economic disaster and misery.

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