Saturday, November 12, 2011

Defending Coolidge

Calvin Coolidge is perhaps the most underrated president of the 20th century. Among the features of his time in office:
  • Healthy economic growth (it wasn't called the Roaring Twenties for nothing).
  • Taxes were cut so deeply that, as wikipedia notes, "by 1927, only the richest 2% of taxpayers paid any federal income tax."
  • Government surpluses and declining national debt during his entire time in office.
  • Government spending was almost perfectly flat.
  • Twice vetoed bills establishing agriculture subsidy programs.
  • Only once delivered a state of the union speech orally (his first), delivering all the rest in writing, thus sparing citizens from the modern day circus it have become (the lack of television obviously also helped).
It is therefore unsurprising that Coolidge has become a target of the left, as his presidential record of low taxes, spending and regulation -- and resulting economic boom -- repudiates everything they stand for. His presidency stands as a direct challenge to left-wing theory. 

The latest to challenge Coolidge's record is David Greenberg of Rutgers University and -- appropriately -- the Woodrow Wilson Center.  Writing in Slate, Greenberg offers up a nonsensical alternative explanation for the booming economy of the 1920s:
For the right, the fact that Coolidge presided over sustained growth—and without accumulating massive debt, as Reagan did—seems to ratify the wisdom of the low taxes, loose regulation, and limited government that they still champion. As for the Depression, they find it easier to scapegoat Herbert Hoover—almost certainly the worst president of the 20th century next to Richard Nixon—than to admit to blots on Coolidge’s legacy. 
This view is problematic for many reasons, not least because it assumes that presidents neither benefit from the achievements of their predecessors nor bear responsibility for the long-term consequences of their own policies. Coolidge in fact benefited from the wartime spending under Wilson, which buoyed the economy into the 1920s.
To attribute the growth of the 1920s to Wilson's wartime spending is simply bizarre. Does it make any sense whatsoever to attribute a boom that lasted the better part of a decade to a two-year spike in government spending from 1918-19? More importantly, far from leaving his successor a growing economy, in 1921 -- the year Wilson left office -- it was actually in the midst of a sharp recession/depression. But why let minor details get in the way of a good yarn?

Greenberg continues:
Although the economy boomed in the 1920s, wealth grew unevenly. According to a 1928 Brookings Institution report, more than one-half of American families remained near or below subsistence at the time—despite an economic boom that was dubbed the “Coolidge Prosperity.”This maldistribution of wealth—in some ways similar to today’s—meant that while business was able to produce record numbers of cars, radios, and appliances, many citizens were hard-pressed to buy them. In 1927, the popular economists William Foster and Waddill Catchings published Business Without a Buyer, arguing that supply did not in fact create its own demand, and that overproduction could be dangerous. Coolidge’s fiscal policy failed to correct these imbalances.
When confronted with the prosperity of the 1920s the left predictably chooses to focus on inequality rather than prosperity from an absolute perspective. This attempt to portray prosperity as limited to a relative handful of American families, however, simply does not mesh with the facts. Some stats from the 1920s (sources here and here):
  • From 1923 until 1929 (Coolidge's tenture in office), the percentage of households with a telephone rose from 36 percent to 42 percent
  • The number of local telephone conversations grew 46.8 percent between 1920 and 1930, while the number of long distance conversations grew 71.8 percent over the same period. There were 5 times as many long distance telephone calls as telegraph messages handled in 1920, and 5.7 times as many in 1930.
  • The percentage of homes with a radio rose from roughly 2 percent in 1923 to 35 percent in 1929. 
  • While automobiles were relatively rare before the beginning of World War I, by the end of the 1920s about 60 percent of American families owned one. 
  • The percentage of dwellings with electricity increased from 45 percent in 1923 to 69 percent in 1929. 
  • The number of hours spent preparing meals and doing dishes declined from 44 in 1900 to 30 in 1925 (guessing this is per household -- source is lefty economist J. Bradford DeLong).
All of this is indicative of broad-based prosperity, rather than benefits accruing only to a few. 

Greenberg then turns his attention to the stock market:
What was more, despite warnings from economists such as William Z. Ripley, Coolidge declined to restrain the Wall Street speculation that flourished in the late 1920s. One problem was margin trading—buying stocks with a tiny down payment and a loan from your broker for the rest, then selling them at a profit soon after. Like Charles Ponzi’s notorious scheme, margin trading depended on the buyer not getting caught short when the bill came due. 
Some urged the Federal Reserve to stop lending brokers money to enable these deals, but Coolidge kept mum. Even in January 1928, when brokers’ loans reached an untenable volume, the president denied they were out of control. His administration also declined to regulate the market in other ways, permitting, for example, the sale of stocks back and forth between brokers to drive up shares and fool unwitting lay investors.
Actions of the Federal Reserve, of course, are beyond the purview of the president, which is perhaps why Greenberg accuses Coolidge of silence rather than a failure to act. It is also unclear if a prohibition on the type of financial transactions described would have had any appreciable impact on the size of the stock market bubble. 

The Rutgers academic then concludes:
One can also call into question Coolidge’s policies regarding agriculture, global trade and credit, anti-trust enforcement, and other issues. To what degree different policies could have averted the catastrophe of the 1930s is unknowable. But Coolidge’s naive faith in the gospel of productivity and the benevolence of business deterred him from even asking the questions that might have mitigated the misfortune. 
The Depression buried Coolidge’s economics. The success of the New Deal sealed the coffin, seemingly forever. But Reagan’s legions have labored hard to bring them back from the dead, and as memories have faded and historical knowledge atrophied, their arguments have gained adherents—to the point where they now go unquestioned in many precincts of the right.
In other words, he suggests a number of criticisms about Coolidge's stance in various areas without engaging in specifics, then implies that the Depression was due to faulty economics on his part (the Depression of course was a world-wide phenomenon) successfully remedied by the New Deal (despite the fact that the US did not return to prosperity until after World War II). 

If this is the best effort that a leftist historian such as Greenberg can mount against Coolidge, the political right should feel entirely comfortable with its embrace of this man. Indeed, given his fiscal record he should regarded as at least on par with Saint Ron. 

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