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The Harding-Coolidge Administrations: “The chief business of the American people is business.”
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Warren G. Harding and the “Return to Normalcy”
Harding was born in Blooming Grove, Ohio in 1865 and lived in rural Ohio all his life, with the exception of his time in Washington as Senator and President. After graduating from Ohio Central College, he settled in Marion Ohio and became the publisher of a daily newspaper, The Marion Star His political career included his election to the Ohio State Senate, Lieutenant Governor, and , finally, to the U.S. Senate. When Harding ran for the Republican nomination for president in 1920, he was considered an also-ran with little chance of success. In a deadlocked Republican convention in Chicago, he was nominated as a compromise candidate on the 10th ballot. Harding's campaign slogan, "Return to Normalcy," reflects the conservative nature of his presidency and its departure from the activist Progressive policies of his predecessors.. “America’s present need is not heroics, but healing; not nostrums, but normalcy; not revolution, but restoration; not agitation, but adjustment; not surgery, but serenity; not the dramatic, but the dispassionate; not experiment, but equipoise; not submergence in internationality, but sustainment in triumphant nationality.” He won the 1920 election in a landslide, getting 60.2% of the popular vote over Democrat James M. Cox and Socialist Party candidate Eugene Debs ,
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Presidential Election of 1920
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Inaugural Address of Warren Harding (1921)
“The forward course of the business cycle is unmistakable. … I speak for administrative efficiency, for lightened tax burdens, for sound commercial practices, for adequate credit facilities, … for the omission of unnecessary interference of Government with business, for an end to Government's experiment in business, and for more efficient business in Government administration. …”
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Harding’s Good and Bad Appointments
Harding promised to consult the "best minds" of the country on appointments, and they dutifully journeyed to Marion to offer their advice. For Secretary of State he chose Charles Evans Hughes, the former Governor of New York State and Associate Justice of the Supreme Court. For Secretary of the Treasury, he chose Andrew J. Mellon, a Pittsburgh banker who was the third richest man in the U.S. For Secretary of Commerce he chose Herbert Hoover, a mining engineer internationally known for his humanitarian relief efforts in wartime Belgium. Two Harding appointments would darken the reputation of his administration for their involvement in scandal. He named his Senate friend, Albert B. Fall of New Mexico, as Interior Secretary. He also named Harry Daugherty, his campaign manager, to be Attorney General.
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The Mellon Plan Mellon came into office with a goal of reducing the huge federal debt from World War I. To do this, he needed to increase federal receipts and decrease federal spending. Mellon believed that by reducing taxes the federal government could actually increase receipts, an idea he termed "scientific taxation." Andrew Mellon's plan had three main points: 1. Cut the top income tax rate from 77 to 24 percent – predicting that large fortunes would be put back into the economy. 2. Cut taxes on low incomes from 4 to 1/2 percent – tax policy “ must lessen, so far as possible, the burden of taxation on those least able to bear it." 3. Reduce the federal estate tax – large income taxes tempted the wealthy to shift their fortunes into tax- exempt shelters. Congress passed a tax bill that incorporated most of Mellon’s plan, but lowered the maximum personal income surtax to 40%, rather than 24%.
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The Budget Act of 1921 The Budget and Accounting Act of 1921 was landmark legislation that established the framework for the modern federal budget. The act increased the power of the president to influence the legislative process and to set national priorities. Before the Budgeting & Accounting Act of 1921, no single government entity oversaw the entire budget. Each government department submitted separate requests to Congress. . Modern budgeting debates still hinge on the powers given to the Congress and the President in this act. The restrictions keep either branch from dominating budget decisions. The act created the Bureau of the Budget, now called the Office of Management and Budget (OMB), to review funding requests from government departments and to assist the president in formulating the budget.
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Protective Tariffs A protective tariff is a tax on imported goods to make the them less competitive with American-made goods. The Fordney-McCumber Act of raised tariff rates to the high, late 19th century levels. The act proved particularly harmful to American farmers due to less demand for their products in foreign markets. The act increased the power of the president by giving him the authority to reduce duties by as much as 50% The tariffs made it difficult for Europe to pay war debts and eventually slowed international trade by provoking other countries to enact high tariffs on U.S. exports.
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Foreign Policy of the Harding Administration
Harding gave his secretary of state, Charles Evans Hughes, a free hand in foreign affairs. Mellon designed a foreign policy enabling the U.S. to participate in the world's economic life while retaining a free hand in international relations. He resisted efforts to forgive European indebtedness to America, which stood at about $12 billion in 1920. Charles G. Dawes, a midwestern Republican banker, was named to head a commission to revise the amount owned by Germany for reparations. In March 1923, the Dawes Plan scaled down Germany's payments to 2.5 billion marks over the following fifty years. The Europeans, in turn, used part of the reparation payments to fund debts to the U.S. that were drastically reduced by the Dawes Plan. Committed to reducing spending, Hughes and Andrew Mellon did not want to continue expensive naval development. Hughes called for a naval conference in Washington to 1921 negotiate freezing the number of battleships. The resulting Five Power Treaty in 1922 was, according to Parrish, “the first time in modern history that great nations agreed to curb their military arsenals.”
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Civil Rights and Immigration
In a speech to a segregated audience in Birmingham , Alabama in 1921, President Harding denounced lynching and the exclusion of African Americans from political participation. Hoover supported the anti-lynching bill that passed the House of Representatives in January, 1922. Passage of the bill in the Senate was blocked by a filibuster by Southern Democrats. Harding has been criticized for letting the bill drop so that he could get other legislation through Congress. Reflecting the anti-immigrant sentiment in the nation, Congress passed the Per Centum Act of 1921. The act reduced the numbers of immigrants to 3% of those from a given country living in the U.S., based on the 1910 census. This would, in practice, not restrict immigration from Ireland and Germany, but would bar many Italians and eastern European Jews.
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The Ohio Gang and the Teapot Dome scandal
Harding appointed a number of his Ohio friends to federal positions. Some of these associates proved corrupt and were later dubbed the "Ohio Gang”. Most of the scandals that have marred the reputation of Harding's administration did not emerge until after his death. The Teapot Dome scandal involved an oil reserve in Wyoming which was one of three set aside for the use of the Navy in a national emergency. Interior Secretary Albert Fall convinced Harding to sign an executive order in May 1921 transferring the reserves from the Navy Department to Interior. Fall secretly leased the land to two oil companies and received a “loan” of $100,000 in cash, while $200,000 in Liberty Bonds were transferred to his son-in-law. He was convicted in federal court, fined $100,000, and sentenced to a year in jail.
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Silent Cal and the Business of America
In August, 1923, Harding died of a cerebral hemorrhage caused by heart disease in San Francisco while on a western speaking tour His vice- president, the famously laconic Calvin Coolidge assumed the presidency. Coolidge's laissez-faire policy - cutting taxes, reducing government spending, and imposing high tariffs on foreign goods. He and Andrew Mellon were intensely focused on managing the government and its budget in an organized, business-like manner. The chief business of the American people is business the man who builds a factory builds a temple – the man who works there worships there” (address to the Society of American Newspaper Editors, Jan. 17, 1925) This famous remark by Coolidge characterized the pro-business, mentality of the 1920s. Coolidge, Mellon, and Hoover
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A True Conservative Born in Plymouth, Vermont, on July 4, 1872, Coolidge was the son of a village storekeeper. He was graduated from Amherst College with honors, and entered law and politics in Northampton, Massachusetts. Slowly, methodically, he went up the political ladder from councilman in Northampton to Governor of Massachusetts. As President, Coolidge demonstrated his determination to preserve the old moral and economic precepts amid the material prosperity which many Americans were enjoying. He refused to use Federal economic power to check the growing boom or to ameliorate the depressed condition of agriculture and certain industries. In his first message to Congress in December he called for isolation in foreign policy, and for tax cuts and limited government.
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Inaugural Address of Calvin Coolidge (1925)
“… unless we wish to hamper the people in their right to earn a living, we must have tax reform. The method of raising revenue ought not to impede the transaction of business; it ought to encourage it. I am opposed to extremely high rates, because they produce little or no revenue, because they are bad for the country, and, finally, because they are wrong. … This country believes in prosperity. It is absurd to suppose that it is envious of those who are already prosperous.”
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Coolidge Domestic Policy
The centerpiece of Coolidge's domestic agenda was his tax cutting. He championed the Revenue Acts of 1924 and 1926, a pet issue of his Secretary of the Treasury Andrew Mellon. The Revenue Acts sharply reduced income taxes, especially surtaxes on the wealthy, and cut gift, excise, and inheritance taxes. At the time, many observers credited the cuts for what was widely called the "Coolidge Prosperity": robust growth, rising wages, declining unemployment and inflation, and a bull market. it was later that his policies contributed to the stock market crash of 1929 and the Great Depression that followed. His fiscal policy encouraged speculation and ignored inequality, as the flow of dollars into the pockets of the wealthy helped tip the healthy investment of the mid-1920s into the gambling that followed. His hands-off regulatory policy took its toll especially in the financial arena, where the dangerous practice of margin trading was allowed to flourish unrestrained. In retrospect, we can see that his policies exacerbated the uneven distribution of income and buying power, which led to the overproduction of goods for which there were not enough affluent consumers. In the Presidential Election of 1924, Coolidge’s popularity was demonstrated by a landslide victory,
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The Presidential Election of 1924
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Coolidge Encourages the Advertising Industry
While embodying the small-town values of thrift, Coolidge celebrated the economic boom over which he presided, and he embraced the new media of the modern culture. This can be seen in his embrace of the rapidly growing Advertising industry Advertising techniques refined as the mutually supportive phenomena of mass production and mass media exploded into the American consciousness. Modern advertising, using popular culture and celebrities to fuel consumption, began to take shape. The array of new appliances and consumer goods available at a lower cost due fueled consumption. Businesses conquered the challenge of efficiently producing enough goods; now the focus was creating desire. This ad uses a celebrity endorsement to glamorize smoking and exploits the image of the “new woman” of the 1920’s.
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Coolidge on Advertising (1926)
“It makes new thoughts, new desires, and new actions. ... It is the most potent influence in adopting and changing the habits and modes of life, affecting what we eat, what we wear, and the work and play of the whole Nation. …” “Mass production is only possible where there is mass demand. Mass demand has been created almost entirely through the development of advertising. …” “Advertising ministers to the spiritual side of trade. … It is all part of the greater work of regeneration and redemption of mankind.” (Address to the American Association of Advertising Agencies, October 27, 1926)
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Foreign Affairs Achievements
Coolidge himself was not versed or deeply interested in world affairs. To handle international issues, Coolidge looked to Treasury Secretary Andrew Mellon, Commerce Secretary Herbert Hoover, and his Secretaries of State, Charles Evans Hughes and, in the second term, Frank B. Kellogg. Coolidge's primary initiative was the Kellogg–Briand Pact of 1928, named for Coolidge's Secretary of State, Frank B. Kellogg, and French foreign minister Aristide Briand. The treaty, ratified in 1929, committed signatories—the United States, the United Kingdom, France, Germany, Italy, and Japan—to "renounce war, as an instrument of national policy in their relations with one another.“ The treaty did not achieve its intended result—the outlawry of war—but it did provide the founding principle for international law after World War II. The United States' occupation of Nicaragua and Haiti continued under his administration, but Coolidge withdrew American troops from the Dominican Republic in 1924 In 1927: Augusto César Sandino, Commander of the Army to Defend the National Sovereignty, launched a guerrilla war against U.S. forces in Nicaragua that continued until 1934.
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