Looking back on this day eighty-seven years ago, we find President Calvin Coolidge stood before the department heads, bureau chiefs, and various members of the administration meeting as the Business Organization of the Government for the last time. While many were seeing the end of an era, with Coolidge ending his term in just over a month, few expected how final this meeting would turn out to be. It would prove to be the last time the President and the officers of the administration came together to seriously measure the progress of constructive economy. What had been a bi-annual gathering to hold the line, encourage the work to continue, and reaffirm the case for tenacious governmental economy, would not be repeated under Cal’s successor. It would quietly go away and a regime that started with promises of building on the Coolidge record would surrender to new spending, new agencies, new regulations, the end of surpluses, and the resumption of deeper and deeper deficits. The importance of reading the score publicly for all to hear would simply get lost in the flurry of government activity.
It would turn out to be back to business as usual (as before Harding and Coolidge) and shelve the eight years of 1921-1929 as some revolutionary anomaly to how Washington is supposed to operate (wasteful, insolvent, and undisciplined) rather than as an organization strictly held to account for every recklessly-spent dollar and bureaucratic redundancy. It would also lower the curtain on eight years of truly heroic effort to come back from one of the deepest depressions anyone had known up to that time. Of course, what would become the Great Depression had not yet happened.
To those present that day, the great depression was one now forgotten, occurring in 1921. This depression followed at the end of the First World War, which left public finances in disaster, wages dropping, taxes mushroomed, falling prices halted production, and the “business of the country was prostrate,” Coolidge reminded those assembled eight years later. All across the country, wages earners and their families were slowly being crushed under the strain. “Progress had stopped,” Coolidge noted. In 1921, five million people (out of 120 million in population) were out of work. The markets for commodities languished with goods no one could move despite low prices. Even worse, the nation’s debt had skyrocketed during the war and government, seemingly oblivious, kept spending with no end in sight. The budget stood at a bloated $5 billion that summer of 1921. Confidence in the country and in the government was collapsing.
What the administration did next could either begin the march back toward restoration or speed up the ruin of the country. It resolved to carry out the former course, with a sweeping program of economy led by President Harding, who persuaded the Congress to collaborate and through the first Business Organization meeting held on June 29, 1921, initiated the eight-year success that President Coolidge had continued and strengthened.
It began with the extensive overhaul of the method of appropriations, which had not really been a method at all, but a chaotic array of procedures and customs for asking money from Congress. That forever changed with the creation of the Budget Bureau and its system of streamlining all requests, outlined in departmental budget estimations, through the President via his Budget Director. No longer would each office or department be left to itself to apply here or there for money from Congress, often multiple times during the year with little account for how the money was requested and whether the same funds were being appropriated more than once. Now, it would have to go through the Executive and only after written budgets had been submitted and approved. It forced each department to live within the means it had set in its own estimations. It forced Congress not to appropriate more than the President approved, after he had reviewed those requests and compiled the main Budget projections for the next fiscal year. Everyone in government would have to learn the responsibility of getting the most out each dollar doing more with less. If an emergency arose, exceeding the funds provided, it still had to follow the procedure of the Budget system and secure approval from the President. No longer would Congress be free to open the Treasury with a confusing and often contradictory stream of appeals, forms, and methods.
The administration did not stop there. It followed with pressure on Congress to approve the first of four income tax reductions that November. The President would not entertain the notion that money saved from expenditure would still go into some “pool” of funds to be played with later. It would start going back to the people.
As President Coolidge looked out over the gathering that January of 1929, he could hardly be prouder of what had been achieved the past eight years. First broadcast on a nationwide hookup in January 1925, Coolidge ensured the demand for accountable economy remained as much a part of the public consciousness as possible. He saw a result that did not rest with a single individual nor was it the product of some political “shell game,” easily played to deceive the country. It was very real and took genuine effort on the part of all to launch and maintain it. As the nation lifted out from the pit it occupied in 1921, the solutions were not mysterious or magical. It was correctly understand that “the distress of the country would be relieved if Government extravagance ceased.” The radical, for its time, steps to implement the Budget system and activate reductions in taxation and expenditure was the only real way forward.
A selfless spirit of teamwork between the various branches “with the backing of the people” had “inserted a golden page in our history,” he declared. “It fittingly portrays that peace hath its victories no less than war,” the President went on to say. This was in large part thanks to the diligence of the “rank and file” in each part of the department. By keeping focused on the task at hand, when it was so much easier to slip back into old habits of negligence and wastefulness, the faithful men and women who saved when they could have spent and made do when they could have demanded more in public service were owed a debt of gratitude by the people of the country. Had it not been for their devotion to “the cause of constructive economy we could have done nothing. With it we have been able to do everything. The victory has been their victory, and the praise should be their praise.”
Setting the stage for this victory was no mean feat. A strong jealousy existed between the numerous offices of the government, between bureau and agency, even between sections in the same department. This had to be overcome first before the interests of sound national service, not merely service to one’s own piece of the structure, could prevail. It “called for a revolution in the attitude of Government agencies toward each other.” By bringing representatives of these divergent functions together, meeting for the simplification and unification of procedures, the elimination of “tortuous, wasteful, and unbusinesslike” approaches, and the study of the benefits of business organization, chaos was defeated. “Harmonious cooperation…won.”
From hundreds of forms and random procedures grown up over time, the administration brought both order and substance to the way things out to work in Washington. None of it “contributed to good Government business.” Coolidge could report the number was now down to 38 basic Federal forms and 602 “standardized specifications which cover in large part the entire field of Federal requirements.” In these seemingly small successes could be found a cumulative savings in millions of dollars, a clear betterment for everyone. By that eighth year, the President would assert, “I believe that the Federal Government to-day is the best-conducted big business in the world.” The credit for it went largely to the hundreds of reliable folks committed to good government “and extravagant government is not good government,” Cal would point out. “We have demonstrated that saving results from efficiency, and efficiency comes from saving.”
This was not, for Coolidge, a quest of making government waste palatable to the public. It was not “efficiency” to preserve failed government projects and enable the increase of bureaucratic power while calling it “fixed” or “working again.” Elimination of waste and undoing the spend-thrift mentality were what made saving and efficiency possible. In this way, governmental finance could succeed with basic business principles.
It took less than two years to correct the course that had brought America so low by 1921. It would experience short and temporary downturns in the remainder of the decade, Coolidge observed, but none of these approached disaster because the nation and its Government held fast to the policy of constructive economy. Had it not done so, Coolidge knew, recovery would have been delayed and implosion hastened.
The President, a lifelong lover of facts and figures, could cite abundant proof that keeping to economy had yielded enormous good. Forty percent of government’s annual expenditures had been cut away since 1921. Seven and a half years had paid $6.6 billion off the public debt, saving $963 million in interest payments. After four income tax reductions, $2 billion every year had been given back to the people of the country. Two and a half million Americans were now “entirely relieved of all Federal taxation,” helping the lowest earners not the most wealthy. It was the wealthiest who paid the lion’s share. The economic engine, refueled by government economy, soared. Industrial production had grown sixty, and (in some cases) one hundred percent since 1921. Mining had increased fifty percent from where it stood seven years before. Building construction had doubled. Travel by rail had improved by one-third. Automobile ownership had grown to three times the number in 1921. Electric power had also doubled and was connecting the country together. Radio production surpassed 13 million sets from virtually nothing in 1921. An accumulating range of household appliances coming out each year were improving the lives and work of families. The capital of Americans everywhere was rising as well with $12 billion more in savings deposits in 1928 than had been set aside in 1921. In a decade known for its large quantity of bank failures, this was impressive. Life insurance policies had almost doubled and the resources of building and loan associations had blossomed from $2.9 to $7.1 billion in six, short years.
Record enrollments were being seen in schools everywhere in 1926. Reading for instruction and leisure were dominating the decade. The expansion of the marketplace into service industries that hitherto had not existed or not been able to stand independent from manufacturing exploded during those eight years. As a consequence total employment grew even with the displacement of mechanization and urbanization. The improvement of public building, the provision for veterans, the care of employees, historic site preservation and beautification, mail delivery, and even the fight against diseases were all possible by first practicing drastic economy. These were substantial measures that a full reversal after so pervasive a depression was far more than theoretically possible. Even more important, it was really only possible through a determined adherence to strict economy.
Coolidge then explained, he did not claim the National Government merited the full credit for restoring the country from “the great depression of 1921” but “wise governmental policies…particularly wise economy” in expenditures had been a “dominant influence” toward the outcome. Having gained confidence in themselves because of returning confidence in their Government, the American people had rebuilt what was lost by waste and furnished new capital and productive capacity thanks to those policies. Had there not been a strictly kept economy, the peacetime triumph of the Coolidge Era would never have happened. Any quantity of tax reduction would not have been possible out of that and the nation would still be drowning in debt and languishing for want of “careful and orderly management of the business of government.”
All that said, President Coolidge did not indulge a sense of nostalgia for so incredible a record. There was still much work to do. The debt, standing at the close of his tenure at $17 billion, was still too large. Indications were showing that an always narrow margin between “prosperity and depression” or surplus and deficit was about to shrink further. Numerous bills, including one at the cost of $1 billion then pending before Congress, had been blocked over these years. “Had there not been a constant insistence upon a policy of rigid economy, many of these bills would have become law.”
Coolidge made plain what would have to happen for the advancement experienced by this policy to continue. “It would be a great mistake to suppose that we can continue our national prosperity, with the attendant blessings which it confers upon the people, unless we continue to insist upon constructive economy in government.” This was not solely a Federal obligation, the decisions among state and local governments across the 1920s disclosed a dangerous trend of rapidly adding costs. Assuming the proverbial “rainy day” was being deferred, state and local spending threatened to unravel, at the opposite end, the very endurance of economy. It was “the greatest menace” to the fruits of that policy. Coolidge cautioned, “It is a red flag warning us of the danger of depression and a repetition of the disaster which overtook the country in the closing days of 1920.” The state and local governments, ignoring the President’s warning here, continued to spend freely, largely with money they did not have. When “rainy days” returned, those who had abandoned strict economy would have to relearn, often at a high price, the lessons of 1920-21.
Coolidge ended this final meeting of this organization’s policy with a glowing appreciation for the Budget Bureau Director, General Herbert M. Lord. All through the Coolidge years, the President and Lord had relentlessly kept the hammer blows of economy falling where needed. When others had tired of the program and begged for the return of massive spending, Coolidge and his Budget General kept the flame of economy alive. The case, never easily made, got harder as the decade wound down. Its importance never dimmed in their eyes, however. It took a special kind of strength and leadership to do what Cal and his administration did. By explaining why this had to continue and convincing again those who may doubt through each of these Business Organization meetings, Coolidge demonstrated the hard work economy requires is not only worth every minute but remains non-negotiable for any government to be good.
We could have had our worst depression throughout the 1920s instead of a decade later. That we did not is hardly accidental or mere coincidence. Without the resolute will of a President, the faithfulness of a Budget Director, the cooperative assistance of Congress, the unflagging support of the people, and, perhaps most of all, the day-to-day persistence of the hundreds of “rank and file” men and women in public service (who gave economy its life and breath), America might not have survived to our day. It would have been gravely handicapped for the challenges of the twentieth century, far weaker, and far less an example of that good government needed in every generation.