This is a post in My Presidential Rankings series, linked here: Presidential Rankings
Calvin Coolidge became president upon the death of Warren Harding. Coolidge was visiting family in Vermont when he got word of Harding’s death, and was woken out of bed around 3am. Coolidge’s father, who was a justice to the peace, administered the oath of office, making Coolidge the only president to be sworn in by his father.
The “roaring twenties” under Warren Harding and Calvin Coolidge saw unprecedented economic growth. From 1921 to 1929 the economy grew at 4.7% per year, there was little to no inflation and unemployment averaged just 3.3% under Coolidge. Harding and Coolidge used a program of austerity, to keep spending under control, and tax cuts to stimulate the economy. Coolidge cut taxes across the board three times during his term with the revenue acts of 1924, 1926 & 1928, which removed most workers from the tax rolls. Less than 2% of wage earners paid any income taxes at all by 1929, as compared to 90% of wage earners paying income taxes in 1940 under Franklin Roosevelt before the wartime taxes were even passed. The tax cuts spurred so much economic growth, that the government collected more income tax revenue. In 1921, with a top rate of 73%, the government collected $700 million, by 1929, with a top rate of 24%, the government collected over a billion dollars. In 1921 people making $100,000 a year ($1.4 million in 2019 dollars) only paid 20.6% of total income taxes, by 1929 they paid 65% of all income taxes. In 1929 people making under $10,000 ($140,000 in 2019 dollars) only paid 2% of all income taxes. There were also no “payroll taxes” under Coolidge, which are a regressive form of income taxes. As can clearly be seen, during the 1920s, the tax burden was severely shifted to those making the most money, but it went back to the poor and middle class during the 1930s. Frugal spending allowed Coolidge to pay down a quarter of the debt during his six years in office, making him the last president to leave office with a lower federal debt than when he entered. The prosperity of the roaring twenties was not an illusion, as some have argued either. Regular Americans were able to enjoy items that were seen as luxuries in the previous decade. From 1920 to 1930, the percentages of households with the following items increased as follows: Electric lights 35%-68%, indoor plumbing 20%-51%, Central heating 1%-42%, washing machines 8%-24%, Automobiles 26%-60% and vacuum cleaners 9%-30%.
From 1917 to 1920 the United States had a farming boom due to World War I, as most of Europe’s farmland had been severely damaged during the war, removing it from productive use. Without European farmers as competition, American farmers fed Europe, and prices exploded. Once the European farms recovered, the bottom fell out. Farm prices dropped dramatically, but they were still better than any year before 1917, and they rose until the Great Depression. One cannot honestly claim that the factors that led to the American farming boom in the late 1910s were a normal state of affairs that could be expected to continue indefinitely. The argument many make, however, is that since the farming sector performed poorly compared to the 1917 to 1920 timeframe, that a “depressed farming sector” sunk the economy, causing the Great Depression. This theory is dishonest, as one has to carefully cherry pick their statistics to make their case. Many farmers, wanting the “good times” of World War I to keep rolling, asked Congress to help. The response was The McNary-Haugen Farm Relief Act, which would require the government to purchase all excess farm production and sell it at a loss on the world market. The bill failed to pass congress in 1924, and again in 1926, but the same scheme was brought back and finally passed in 1927 and 1928, with Coolidge vetoing the bill both times. Had Coolidge signed the Bill, it would have had several negative impacts:
- It would caused inflation by raising agriculture prices, helping farmers, but hurting everyone else through higher prices, and higher taxes to pay for the program.
- It would have a negative impact on relations with other countries, since a main component of the act was the dumping of agricultural goods into other markets, which likely would have led to retaliation from those countries. This made the act morally objectionable, as it would have hurt farming sectors across the globe, possibly with devastating affects.
- Agreeing to buy all excess production would inevitably lead to increased production due to the guaranteed subsidies. Simple economics, with unlimited demand, supply will go up.
- Once government subsidy programs are enacted, they are very hard to get rid of, as any attempt to cut the programs are met with strong opposition from the special interest groups benefiting from them.
- If passed, any other industry that was “in trouble” would certainly ask for their own version of the McNary-Haugen bill or to have it extended to them.
Even though historians are near universal in condemning Coolidge for vetoing the erroneous act, the consensus among historians is that the bill was unworkable. The problem in the farming sector was overproduction, and the act would have led to even more production. This is pretty basic economics: supply and demand: too much supply for the level of demand lowers prices. What needed to happen was that some people needed to leave the farming sector and move to other economic sectors. Unfortunately proposed farm bills encouraged farmers to “hold out” in the hopes that the government would step in and “rescue them”, exasperating the situation. Coolidge has been charged that he was unwilling to do anything to help farmers, but this is untrue. Coolidge favored the alternative programs put forth by Secretary of Commerce Herbert Hoover and Secretary of Agriculture William Jardine to modernize farming. This would be done with more efficient equipment, expanding electricity, better seeds, more education and better business practices.
Coolidge is generally blamed for the Great Depression for allowing “rampant speculation” in the stock market, but this is a misreading of history. Anytime someone buys stock it is speculative, there are no guarantees in the market. It is true investors bought on margin, but you can still buy stock on margin today, and the margin requirements were actually higher in the 1920s. The argument that the government should have stepped in to stop speculation is against the basic principles of freedom. People are free to do things that are bad for them.
The Dow Jones Industrial Average was at 300 in June of 1929, it peaked at 381 in September and bottomed out at 199 in November, but by April of 1930 it had recovered to 294. The bubble in the market happed after Coolidge left office in March of 1929, although historians act as though it had been growing for years. The market crash in 1987 was bigger as a percentage of the market than the one in 1929, and it wasn’t followed by a recession. Nobel Prize winning economist Milton Friedman has demonstrated how the stock market crash was caused by bad monetary policy at the federal reserve, which significantly raised rates in August of 1929, just two moths before the crash. Coolidge can’t be blamed for the economic mismanagement that followed after the crash, during the Hoover and Roosevelt years, which took what would have been a sharp short recession and turned it into the Great Depression.
When the Great Mississippi Flood of 1927 hit, Coolidge sent Hoover to the area to supervise flood relief. Members in congress suggested a flood relief bill that would have cost $1.4 billion, quite a large sum considering total spending was only $3 billion. A compromise Bill was passed which granted $500 million in relief. Historians have wrongly stated that Coolidge did nothing to help the flood victims, even though he did more than any previous President during a national disaster. Oddly enough, the same historians praise Grover Cleveland’s fiscally responsibility in vetoing the Texas Seed Bill that would have helped drought victims at a cost of only $10,000.
The settlement of World War I included a clause that forced Germany to pay exorbitant reparations. The total demanded of Germany was $132 billion Mark’s, which was the equivalent of $33 billion ($478 billion in 2019 dollars). The high payments were too much, and the Germany economy was forced to print marks to make payments leading to hyperinflation. Inevitably, Germany was unable to make the payments and defaulted on their reparations. France and Belgium responded by occupying the Ruhr, which held Germany’s coal deposits. At this point a multinational committee on Germany reparations was formed. Out of this came the Dawes Plan. The plan did the following:
- French troops were to be withdrawn from the Rhur.
- A new schedule of payments was set up for German reparations
- A Bank independent of the German government was set up to stabilize the German currency
- Loans of $800 million marks was to be made with the United States supplying 50% of the loan, Great Britain 25% and the rest coming from other European countries.
The plan was named for Charles Dawes, who chaired the committee. Dawes was director of the bureau of the budget under Harding and Coolidge’s Vice-President. For his work heading the committee, Dawes won the Noble Peace Prize.
The stated reason for the reparations was for the devastation caused by the war, not for the cost of the war. The allies would later try to argue that the reparations were tied to the war debt as a way of getting out of paying their debts, especially after they realized that the reparations were overly punitive and that they couldn’t be repaid without great hardships to the German People. If the reparations were not to cover the cost of the war, they couldn’t be tied to the debt, as the debt was borrowed not for rebuilding, but for waging war. If the reparations were tied to the war debts, then they should have been of an equal amount, but the reparations were significantly higher, the allies owed $10 Billion in debt, the reparations were $33 billion. It should be noted that the allies didn’t want to cancel the reparations that were in excess of the debts.
The Kellogg-Briand Pact was an international agreement originally signed by 15 countries but later by an additional 47 nations to promote peace. It had two clauses, the first was to outlaw war as a national policy and the second called upon signatories to settle their disputes by peaceful means. Encouraging peaceful means to conflict resolution is a noble cause, but the pact was impracticable. Many historians point out the “foolishness” of the agreement, but generally laud the United Nations and League of Nations. The United Nations had similar provisions built into it’s charter as the Kellogg-Briand pact, and the idealism behind United Nations and the League of Nations is basically the same as Kellogg-Briand, except Kellogg-Briand doesn’t have entangling clauses and massive costs associated with it. Secretary of State Frank Kellogg won the Nobel Peace Prize for his involvement in the agreement, making him the second member of the Coolidge administration to win the award.
Relations between Mexico and the United States had broken in 1920, but Coolidge was able to restore them in 1923. The new government of Mexico under Plutarco Calles asked the United States to lift it’s arms embargo, which Coolidge did, in an attempt to foster better relations. In 1925 Calles decided to enforce article 27 of the 1917 Mexican constitution. This article stated that everything under the soil was Mexican property. This law threatened American companies that owned oil possessions in Mexico, especially if it was applied retroactively. In 1926 Mexico started to enforce the law, which led to a spread of war fever throughout the United States. Coolidge wanted to avoid an unnecessary war, and sent Dwight Morrow to Mexico to make an agreement. The Calles-Morrow agreement of 1928 allowed firms to retain property that was acquired before 1917, which diffused the situation.
As can be seen, Coolidge was a competent president that presided over a term of peace and prosperity. He further kept the United States out of war or any entangling alliances. Historians blame him for not foreseeing the Great Depression, or the rise of Hitler, but he didn’t contribute to either development.