The Rehabilitation Of President Calvin Coolidge: Is It Legitimate?

In an age of conservative talk radio and Fox News Channel, and the constant conservative attempt to transform our law, our science, our history, our politics, our economics, our educational system, the charge is on to rehabilitate a hero of conservatives, including Glenn Beck, Rush Limbaugh, Sean Hannity, Mark Levin, Michael Savage, and many others.

That “hero” is our 30th President, Calvin Coolidge, who served five and a half years in the White House, from August 1923 to March 1929, succeeding President Warren G. Harding, and winning an easy victory over Democratic nominee John W. Davis and Progressive Party nominee Robert La Follette, Sr. in the 1924 Presidential Election.

Calvin Coolidge can be given credit for several things:

His administration paid off the national debt by the time he left office, a debt built up by our involvement in the First World War.

His Presidency was a clean one, and the corruption of the Harding Administration, the greatest since Ulysses S. Grant, was fully prosecuted, leading to convictions and prison terms for some of the Harding personnel.

Coolidge picked a distinguished Vice President, Charles G. Dawes, who would have made an outstanding President.

Coolidge selected Harlan Fiske Stone as his Attorney General, and then appointed him to the Supreme Court, and Stone was later elevated to Chief Justice in 1941 by Franklin D. Roosevelt, turning out to be one of the all time, outstanding Supreme Court Justices in American history.

However, Coolidge also was responsible for:

The promotion, by his tax policies under Treasury Secretary Andrew Mellon, of the rich getting richer and the poor getting poorer, an earlier version of “Reaganomics” and “Bushonomics”.

The raising of protective tariffs to their all time high, leading to the revival of monopoly capitalism in America, harming small business, labor and consumers alike.

The refusal to regulate big business in any form, by his appointments to the Federal Trade Commission and the Interstate Commerce Commission, and his decision NOT to use the Clayton Anti Trust Act and Sherman Anti Trust Act in lawsuits against corporations.

His refusal to help depression ridden farmers, by his veto of the McNary Haugen plan, which was desired by farm state Republicans.

His criticism of organized labor set back the labor movement until the time of FDR.

A new book by Amity Shlaes, is the most detailed and strong defense of Calvin Coolidge, but it fails to recognize that the Great Crash of the stock market, eight months after Coolidge left the Presidency, and Herbert Hoover became President, is not due only to Hoover, but much more to Coolidge and his policies in office.

Herbert Hoover has taken too much blame for the Great Depression. He can be blamed for his slow reaction to the collapse of the economy, but it is clear that Coolidge, with his doctrinal belief in “Laizzez Faire”, would not have been willing to take even the belated actions that Hoover took in 1931-1932, for which conservatives condemn him, by saying Hoover was the forerunner of the New Deal of FDR!

Just because Amity Shlaes, who is connected to the George W. Bush Institute, loves Calvin Coolidge does not make Coolidge, suddenly, a great or near great President. And neither does the fact that Ronald Reagan displayed his portrait, in place of Thomas Jefferson, add to Coolidge’s appropriate rating as, at the best, a below average, or even, a mediocre President.

In fact, to put Herbert Hoover lower really is a miscarriage of justice, as Hoover became the victim of the short sighted Coolidge policies!

8 comments on “The Rehabilitation Of President Calvin Coolidge: Is It Legitimate?

  1. Paul Doyle February 19, 2013 8:42 pm

    I seem to remember his actions as Governor of Massachusetts in handling on the Boston Police strike were that he went back on his word in trying to settle the strike to show up Samuel Gompers. His actions got him elevated to the national Republican ticket as Vice President in 1920.

    Those days were very virulent–The Great War, Spanish Influenza Pandemic, runaway inflation that was one of the big causes of the strike along with working conditions.

  2. Juan Domingo Peron February 20, 2013 5:49 pm

    After his study of falling tax revenues revealed that the amount of money gleaned from the upper classes had declined with each new rate increase, Andrew Mellon, Harding’s and Coolidge’s Secretary of the Treasury, concluded that lowering the rates on everyone, especially the wealthiest classes, would actually result in their paying more taxes. From 1921 to 1926, Congress reduced rates from 73 percent on the top income earners and 4 percent on the lowest taxpayers to 25 percent and 1.5 percent, respectively, then down even further in 1929. Unexpectedly, to everyone except Mellon, the tax take from the wealthy almost tripled, but the poorer classes saw their share of taxes fall substantially. The nation as a whole benefited as the national debt fell by one third (from $24 billion to $18 billion) in five years. Andrew Mellon’s tax policies set the stage for the most amazing growth yet seen in America’s already impressive economy.Government expenditures plummeted under the Republicans, falling almost to 1916 levels. Outlays remained low under both Harding and Coolidge (though they soared under Herbert Hoover), and even after defense expenditures were factored in, real per capita federal expenditures dropped from $170 per year in 1920 to a low of $70 in 1924, and remained well below $100 until 1930, when they reached $101.9. Coolidge’s reluctance to involve the government in labor disputes combined with general prosperity to drive down union membership. Unemployment reached the unheard-of low mark of less than 2 percent under Coolidge, and workers, overall, had little to complain about. The AFL’s membership dropped by 4 million during the decade, and overall union membership shrank slightly faster. Union leaders shook their heads and complained that affluence and luxury produced by the economy had made unions seem irrelevant. But business had contributed to the weakening of unions as well through a strategy called welfare capitalism, preemptively providing employees with a wide range of benefits without pressure from unions.

  3. Ronald February 20, 2013 7:38 pm

    You provide statistics which are news to me about taxation. I am certainly not an expert on Coolidge, but can you explain why the Great Crash occurred, and Coolidge’s reaction was to say he could not give any advice to Hoover, and the Great Depression developed further, and Hoover had all the blame? I do not see how Coolidge economic policies can be said to be good, when eight months later, everything collapses, and there were prognosticators saying there would be a crash WHILE Coolidge was in office. And Mellon has a terrible historical image as Secretary of the Treasury. Are you saying this is all left wing bull, and that Coolidge and Mellon were great, and Hoover, who worked under Harding and Coolidge, suddenly becomes the villain overnight?

  4. Juan Domingo Peron February 20, 2013 9:52 pm

    Without a doubt, Harding’s most astute appointment was Andrew Mellon at Treasury. Mellon, whose Pittsburgh family had generated a fortune from oil and banking, understood business better than any Treasury secretary since Hamilton. It was a period that easily compared with any other eight-year period at any time, anywhere, including during the Industrial Revolution. During the 1920s, the story goes, the wild speculation in the stock market led to a maladjustment of wealth on the one hand and too much investment on the other. Average Americans could not buy enough durable goods—autos, radios, and other big ticket items—and as a consequence, sales in automobiles and other manufactured items tailed off. The Federal Reserve Board, in thrall to the Republican pro-business clique, did not curtail bank lending to securities affiliates, as the banks’ securities arms were called, until it was too late. Instead, throughout much of the 1920s the Fed actually expanded the money supply, allowing stock prices to soar in a wild orgy of speculation. But I don’t think this is at all accurate. Consider the notion that the stock market was one gigantic speculative bubble: there is virtually no evidence for that in numerous studies by economic historians. The most any economists come up with is a tiny layer of speculation at the top, one incapable of affecting either stock prices or attitudes toward buying securities. See for example Robert Sobel, The Great Bull Market: Wall Street in the 1920s (New York: W. W. Norton, 1968). If anything, the market accurately reflected the fantastic growth in American industry. The most rapidly rising stocks in the 1920s had been electric utilities, radios, and autos. Since 1899 industrial use of electricity had zoomed upward by nearly 300 percent. American businesses did more than simply turn out more goods, as is implied by critics of the Roaring Twenties. They fostered an environment that enabled the invention of breakthrough devices and products that fundamentally changed the structure of society, perhaps more than the Industrial Revolution itself. Consider the automobile. Auto registration rose from just over 9 million in 1921 to 23 million by 1929, whereas automobile production soared 225 percent during the decade. So to make the case for speculation, as John Kenneth Galbraith attempted to do, it has to be shown that the maldistribution of wealth resulted in most of the trading’s being conducted by the wealthy. Yet analyses of bond issues of the day showed that a broad cross section of Americans snapped up the latest bonds, with the most prominent occupations of the purchasers being schoolteachers, cabbies, and maids. Also, improved productivity in the brokerage and investment firms expanded their ability to provide capital for the growing number of auto factories, glassworks, cement plants, tire manufacturers, and dozens of other complementary enterprises. Moreover, both traditional manufacturing and the new industries of radio, movies, finance, and telephones all required electricity. With electric power applied as never before, the utilities industries also witnessed a boom. In 1899, for example, electrical motors accounted for only 5 percent of all the installed horsepower in the United States, but thirty years later electrical power accounted for 80 percent of the installed horsepower. All this growth, energy, and American industrial success alarmed the Europeans. In 1927 at the International Economic Conference in Geneva, which met at the behest of the French, proposals were put forward for “an economic League of Nations whose long-term goal…is the creation of a United States of Europe.” This was, according to the chairman, “the sole economic formula which can effectively fight against the United States of America.” See Mark Mazower, Dark Continent: Europe’s Twentieth Century (New York: Alfred A. Knopf,1999), 109. Reactions like these underscored the fact that the U.S. economy was robust and reinforced evidence that the stock market boom was not an illusion. Rather than a frenzy of speculation, the Great Bull Market reflected the fantastic growth in genuine production, which did not fall; consequently, stocks did not fall either. Using an index of common stock prices for the year 1900 equaling 100, the index topped 130 in 1922, 140 in 1924, 320 in 1928, and 423 in October 1929. Individual stocks refused to go down. Radio Corporation of America (RCA) never paid a single dividend, yet its stock went from $85 a share to $289 in 1928
    alone. General Motors stock that was worth $25,000 in 1921 was valued at $1 million in 1929. Was that all speculation? It is doubtful: GM produced $200 million in profits in 1929 alone; and electricity, which was ubiquitous by 1925, promised only steady gains in utilities securities. Of course securities firms gave the market a push whenever possible, mostly through margin sales in which an individual could put down as little as 10% early in the decade to purchase stock, using the stock itself as collateral for the 90 percent borrowed from the broker. By the middle of the decade, most firms had raised their margins to 15 percent, yet margin buying continued to accelerate, going from $1 billion in 1921 to $8 billion in 1929. But it wasn’t only the rich investing in the market. In 1900, 15% of American families owned stock; by 1929, 28% of American families held stock. One analysis of those buying at least fifty shares of stock in one large utility issue showed that the most numerous purchasers, in order, were housekeepers, clerks, factory workers, merchants, chauffeurs and drivers, electricians, mechanics, and foremen—in other words, hardly the wealthy speculators that critics of the twenties would suggest. Some viewed the prosperity of the 1920s as a materialist binge that required a disciplinary correction. But the facts of the consumer-durables revolution reflected both
    the width and depth of the wealth explosion: by 1928, American homes had 15 million irons, 6.8 million vacuum cleaners, 5 million washers, 4.5 million toasters, and 750,000 electric refrigerators. Housing construction reached record levels, beginning in 1920, when the United States embarked on the longest building boom in history. By the middle of the decade, more than 11 million families had acquired homes, three fourths of which had electrical power by 1930. During the 1920s, total electrical-product sales had increased to $2.4 billion. Per capita income had increased from $522 to $716 between 1921 and 1929 in real terms, and such a rising tide of affluence allowed people to save and invest as never before, acquiring such instruments of savings as life insurance policies. John Maynard Keynes in his General Theory of Employment, Interest, and Money (1936) and then John Kenneth Galbraith in The Great Crash (1955)— propose that consumer purchasing fell behind the productivity increases, causing a glut of goods
    late in the decade. But other studies indicate the contrary. In 1921 the consumer share of GNP was $54 billion, and it quickly rose to $73 billion, adding 5 percent at a time when consumer prices were falling. It gave consumers the available cash to own not only stocks and bonds, but also to control five sixths of the world’s production of autos—one car for every five people in America—and allowed a growing number of people to engage in travel by air. In 1920 there were only 40,000 air passengers, but by 1930 the number had leaped to 417,000, and it shot up again, to 3.1 million, by 1940. So after all this, what caused the crash of 1929? Well several sectors of the economy had experienced slow growth or even stagnation in the 1920s. Then there was the Federal Reserve, which failed to expand the money supply at a pace that would support the growth over the long haul. The slow drain caused by the weakened agricultural sector had started to afflict the financial structure and manufacturing indices started a natural slowdown by mid-1928.
    These rather hidden factors were greatly exacerbated by the Smoot-Hawley Tariff; then, once the crash occurred, the Hoover administration made almost every poor policy decision possible. Farming had never recovered from the end of World War I. By 1927, farm bankruptcies stood at about 1.8 per 100, a rate lower than all American businesses. And farm income averaged $7 billion from 1923 to 1929, after averaging only $4.6 billion during the boom of World War I. See: James Bovard, The Farm Fiasco (San Francisco, California: Institute for Contemporary Studies Press, 1989), 16. Only later, in the midst of the Depression, did economist Joseph S. Davis observe that “in retrospect, in the light of revised data and a truer perspective, [the mid-to late-1920s] should properly be regarded as moderately prosperous and relatively normal for agriculture. See: Joseph S. David, On Agricultural Policy (Palo Alto, California: Stanford University, 1938), 435.The drop in agricultural prices gave the impression that farms in general were in trouble when that was not true, but added to the price decline came several natural shocks that destroyed the livestock and farm economies of several specific regions, like Wyoming and the Deep South. Pockets where farming was collapsing, especially in the Midwest, certainly weakened the banking system by saddling banks with a mountain of bad debts. Bank distress then contributed to the second problem that developed in the 1920s, namely, the slow growth of the money supply. Although no nationally known banks failed before 1930, state banks in the West and South had failed in droves in the decade. Many of those institutions had small, even minuscule, capital, and they passed away without notice. But just as banks “create” money through fractional reserve banking when people make deposits, the banking system “destroys” money when banks fail. The Federal Reserve should have deliberately offset those failures—and the contraction of the money supply caused by them—by reducing the interest rate it charged member banks and making it easier for banks to borrow money. Yet it did not: quite the opposite, the Fed had not even been keeping up with the growth indicators of industry, regardless of the drain posed by the agricultural sector. The nation’s money supply, contrary to the claims of many economists and historians, simply failed to keep up with output. See Milton Friedman & Anna Schwartz A Monetary History of the United States, 1867–1960. Thus securities provided only one snapshot of the economy,whereas the money supply touched everyone from the dockworker to the dentist, and from the typist to the tycoon. As the availability of loans shrank, business had less cash with which to continue to grow.Contrary to demand-side economists like John Kenneth Galbraith and the renowned John Maynard Keynes, demand did not disappear in the late 1920s, and wages remained high enough to purchase most of the vast number of new conveniences or entertainments. But firms could not add new production facilities without bank loans, which, instead of increasing, tightened when the Fed grew concerned about speculation. Members of the Fed’s board of governors mistakenly thought banks were funneling depositors’ money into the stock market, and further dried up credit, instigating a shrinkage of the money supply that would not stop until 1932, when it had squeezed one dollar in three out of the system. Evidence suggests that corporations sensed the tightening money supply, and cut back in anticipation of further credit contraction. See : Gene Smiley, The American Economy in the Twentieth Century (Cincinnati, Ohio: South-Western Publishing Co., 1994), chap. 6. Finally we have the the Smoot-Hawley Tariff Act. Even though it was passed in 1930 and this discredits assertions that it shaped perceptions in late 1929, things change if one takes into account the legislative process. Former Wall Street Journal writer Jude Wanniski raised the argument in 1978 with his book The Way the World Works that uncertainties over the effects of the tariff may have triggered the stock market sell-off. See Jude Wanniski, The Way the World Works: How Economics Fail—and Succeed (New York:Basic Books, 1978). In the 1990s a new generation of scholars interested in trade revisited Wanniski’s views, with Robert Archibald and David Feldman finding that the politics of the tariff generated significant business uncertainty, and that the uncertainty began in 1928 (when manufacturing turned down) and grew worse in late 1929. See: Robert B. Archibald and David H. Feldman, “Investment During the Great Depression:Uncertainty and the Role of the Smoot-Hawley Tariff,” Southern Economic Journal, 64 (1998):4, 857–79. Other research has shown that changes in trade had a ripple effect throughout the economy, and the tariff alone could have reduced the U.S. GNP by 2 percent in the 1930s. Moreover, “had such tariffs been introduced in any other time period they could have brought about a recession all by themselves.” See: Mario J. Crucini and James Kahn, “Tariffs and Aggregate Economic Activity: Lessons from the Great Depression,” Journal of Monetary Economics, 38 (1996), 427–67, quotation on 458. Thus we are left with some fairly obvious conclusions: (1) the Smoot-Hawley Tariff had important disruptive effects; (2) few people knew exactly what form those disruptive effects would take; and (3) unknown to anyone at the time, the Fed made the harmful effects even worse through its policy of deflation.Thus,the combination of concerns about Smoot-Hawley; the need for a real, but not necessarily large, correction; and the rapid sell-off by speculators triggered a sharp decline. And we come to Herbert Hoover, who now turned a bad, but cyclical, recession into the nation’s worst depression. Sorry if my post was to long.

  5. Ronald February 20, 2013 10:38 pm

    My goodness, Juan, you have floored me with your citations and details, which have made me dizzy! LOL But I wonder about the validity of what you are saying, without being an economics expert, as you sound like Amity Shlaes, the author of the Coolidge biography which just came out. And to praise Andrew Mellon, when he has such a bad reputation in everything I have read about the 1920s, makes me very skeptical.

    I also have to say I wonder what your work field is, and your education, and even your general age, as you have become impossible to figure out on these matters! LOL

    I do not expect you to put this in print on the blog, but you can write me at or, and inform me, of course only if you wish to do so, about your expertise and your credentials. You certainly sound very self confident about your assertions, and that intrigues me!

  6. Juan Domingo Peron February 20, 2013 11:18 pm

    Ron: I have no problem in informing you that I have a Law degree from the University of Buenos Aires, Argentina. I specialized in Constitutional Economics Law and International Business Law. I was an assistant professor for over 10 yrs at the University of Buenos Aires teaching Constitutional Law and Constitutional Economics Law. While at the same time I had my private practice. Then 9 yrs ago I was hired to work here in Miami and set up the legal department of an international cargo airliner here at MIA and thus worked in the corporate field. I have in the meantime, thanks to my job letting me telecommute from home, managed to earn my JD from the University of Miami, and an LLM in International Law. I’m 45 yrs old and I love to read and exchange ideas about politics, economics (political economics as they say in Argentina) history and of course political science.

  7. Juan Domingo Peron February 20, 2013 11:21 pm

    As for Amity Shlaes book I haven’t had the pleasure of reading it. I will try to read it as soon as possible.

  8. Ronald February 20, 2013 11:27 pm

    Juan, I am extremely impressed with your credentials, and I fully realize, as I have already indicated before, that you are quite a challenge with your views. While I do not agree with your world view, just as you do not with my world view, I fully respect you as a man of competence and ability! 🙂

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