Calvin Coolidge’s business-friendly presidential administration helped to trigger the Roaring Twenties.
Calvin Coolidge’s famous statement “The chief business of the American people is business” and Warren G. Harding’s “Less government in business, more business in government” captured the spirit of the United States after World War I. A nation weary of Woodrow Wilson’s idealistic crusade to “make the world safe for democracy” and of Progressive attempts to regulate business and individual life elected three consecutive Republican administrations in the 1920’s and continued Republican dominance of the Oval Office for all but sixteen years of the period 1860 to 1932. During the decade of the 1920’s, the United States reached unparalleled levels of prosperity and sustained a decade without a war.
Calvin Coolidge (left), with his wife and Senator Charles Curtis, rides to the Capitol to be sworn in as president of the United States.
Technological changes, including the automobile, radio, and widespread use of electrical energy, gave U.S. industry the capability to produce goods and provide employment at unprecedented levels. More than technology accounted for the Roaring Twenties, however: Secretary of the Treasury Andrew Mellon created dramatic tax cuts that unleashed productivity, paid off one-third of the national debt, and resulted in federal budget surpluses for most years in the decade. During the 1920’s, unemployment levels dropped to the unequaled level of 1 percent, and confidence in business drove stock prices to new heights.
Harding had won the presidency with the promise to Americans of a “return to normalcy,” by which he meant an end to wartime constraints and high levels of taxation. Railroads, telephone, and telegraph systems were returned to private ownership, and government-built and -owned merchant vessels to the private maritime industry. Harding’s administration suffered, however, from scandals such as Teapot Dome and accusations that the president had a mistress. When Harding died in office in June, 1923, his vice president, New Englander Calvin Coolidge, assumed the presidency. In November, 1924, Coolidge was elected to the office, defeating Democratic candidate John W. Davis and Progressive candidate Robert La Follette.
Coolidge aptly characterized wealth as the product of industry, ambition, character, and untiring effort. He put people before industry, as when he observed that the country needed a business government, by which he meant not “a government by business, not government for business, but . . . a government that will understand business.” Critics, however, maintained that Coolidge merely granted easier access to government for business, and that he ignored antitrust laws and other regulatory efforts that business disliked. Although Coolidge had no control over the Federal Reserve Board,
Coolidge may have represented the era, but it began with the election of Warren G. Harding in 1920 and was characterized by Harding’s appointment of Andrew Mellon as treasury secretary. Mellon observed that the rich had avoided paying taxes under the high rates, mainly by finding tax shelters. To boost government revenue, Mellon reduced tax rates, especially on the rich, making it less profitable for them to engage in accounting or investment manipulations to avoid taxation. As a result, the rich paid more in taxes than at any previous time in history, both in total dollar amounts and as a share of all taxes paid. Revenues rose as well, with the amount collected from those earning more than $100,000 per year rising from $194 million to $361 million. Mellon’s tax cuts benefited the poorest groups the most, as their share of total taxes paid declined from $155 million to $32 million in 1926. Mellon’s cuts increased government revenues to such an extent that the government reduced the national debt—not annual deficits—by one-third.
“Coolidge prosperity” bathed the nation. Families bought radios, electrical appliances, and other conveniences. Henry Ford’s automobile company, manufacturing Model T’s
Some did not participate in the Coolidge prosperity, however. Wealth inequality increased during the 1920’s, largely because the number of millionaires grew rapidly. Stock manipulations during the “great bull market”
The fantastic rise in stock prices, however, may have only reflected the real growth of new industries, and, not surprisingly, utility, radio, automobile, and steel stocks witnessed some of the most rapid gains. The manufacturing boom also stimulated the stock market, even without assistance from the Federal Reserve or margin buying. Securities pioneers such as Charles E. Merrill
Coolidge was eligible to run for reelection in 1928, but he stepped down. In his place came Secretary of Commerce Herbert Hoover, who had a reputation as a planner who would merge the best parts of government and business. Rather than continuing the Coolidge policies, however, Hoover was a throwback to Wilson—a Progressive who sought to encourage the formation of voluntary trade associations in various industries that would establish quality standards, develop joint advertising campaigns, and force businesses into a net of cooperative efforts at a time when competition had led to the highest standard of living in the world. Nevertheless, business had few reservations about such a policy and welcomed an administration that would return to the World War I era of restricted competition. For example, the large population of small, unit banks supported passage of the McFadden Act of 1927,
Hoover had experience in agriculture and hoped to help the struggling farm economy recover. His administration established the Federal Farm Board
In other ways, Hoover—who has been criticized as “probusiness”—represented a break from Coolidge and Harding by championing planning as the solution to save the economy, especially after the 1929 stock market crash.
Hoover instituted other policies that represented sharp breaks with the Harding-Coolidge approach to the economy, especially his creation of the Reconstruction Finance Corporation
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Atack, Jeremy, and Peter Passell. A New Economic View of American History. 2d ed. Boston: W. W. Norton, 1994. Historiographic look at economists’ findings regarding the key economic events of U.S. history. In regard to the Great Depression, suggests that the monetarist views of Milton Friedman and the case against the gold standard have risen to high levels of acceptability among scholars. -
Ferrell, Robert H. The Presidency of Calvin Coolidge. Lawrence: University Press of Kansas, 1998. Comprehensive account of Coolidge’s years in office draws on materials unavailable previously. Includes bibliographic essay and index. -
Folsom, Burton, Jr. The Myth of the Robber Barons. Herndon, Va.: Young America’s Foundation, 1991. Contains an insightful chapter on Mellon and the effects of his tax policies in the 1920’s. Includes a criticism of contentions that significant wealth disparities existed during the decade. -
Schlesinger, Arthur M., Jr. The Crisis of the Old Order. 1957. Reprint. Boston: Houghton Mifflin, 2003. Influential book details the 1920’s from a liberal perspective. Relies heavily on descriptions of Coolidge supplied by William White, whose accounts have not stood the test of time. White, for example, ignored substantial evidence that Coolidge viewed the economy as an integrated force of employees, capitalists, and consumers. -
Silver, Thomas B. Coolidge and the Historians. Durham, N.C.: Carolina Academic Press, 1982. Well-balanced book addresses historical misinformation about Coolidge’s policies and words. Provides full texts of Coolidge’s speeches, unlike many other volumes. -
Sobel, Robert. Coolidge: An American Enigma. Washington, D.C.: Regnery, 1998. Biography attempts to balance previous views of Coolidge as uninteresting and cold. Addresses Coolidge’s views on big business and emphasizes his personal and political integrity. Includes selected bibliography and index. -
White, William Allen. Calvin Coolidge: The Man Who Is President. New York: Macmillan, 1925. The earliest, and most flawed, interpretation of Coolidge, followed by White’s 1938 book, A Puritan in Babylon: The Story of Calvin Coolidge (New York: Macmillan). -
Wilson, Joan Hoff. Herbert Hoover: Forgotten Progressive. 1975. Reprint. Prospect Heights, Ill.: Waveland Press, 1992. A liberal revisionist portrays Hoover as consistent with the Progressive movement earlier in the century and argues that Hoover had sharp differences with Coolidge and Harding.
Republican Resurgence Ends America’s Progressive Era
Scandals of the Harding Administration
Teapot Dome Scandal
Oil Pollution Act Sets Penalties for Polluters
Hoover Becomes the Director of the U.S. Bureau of Investigation