Beck Check: Coolidge and Harding

Glenn Beck spent a portion of his February 9 show discussing the presidencies of Warren G. Harding and Calvin Coolidge. I was interested in his talking points, so I decided to run some fact-checking. Here’s the results.

“Coolidge and Harding decreased the real per capita federal expenditures – the size of the government – from $170 per year in 1920 to $70 in 1924. These policies, along with fostering the mentality of self-reliance – the opposite of what the progressives had been preaching in the previous 20 years and the opposite of what progressives teach now. They’re not saying ‘be self-reliant’, they’re saying ‘too big to fail, you can’t make it without the government’s safety nets.’ Stand on your own two feet, America!”

This statement, like many Beck make, is a bit misleading. In the interest of time, we will limit our discussion to his comments regarding Harding, Coolidge, and their economic policies. Were they really the antithesis of the preceding years’ progressivism?

President Calvin Coolidge

We’ll start with the value of this statement ‘on its face’. Did Coolidge and Harding decrease the real per capita federal expenditures from $170 per year in 1920 to $70 in 1924? Yes and no.

Now, I’m not entirely sure what source Beck used, but one of my main sources in researching his claim was a Cato Institute publication by Randall Holcombe titled: “The Growth of the Federal Government in the 1920s.” The Cato Institute is a libertarian think-thank that describes its mission as “to increase the understanding of public policies based on the principles of limited government, free markets, individual liberty, and peace.” I assumed that because of Cato’s reputation (UPenn gave it excellent rankings in its 2010 ranking of think-tanks, including a #2 spot in the area of Domestic Economic Policy) and its advocation of limited government (a position with which Mr. Beck would likely concur), that the research of the Cato Institute would be a fairly noncontroversial in fact-checking Beck.

First, let’s define “Real Per Capita Federal Expenditures.” Federal expenditure per capita is how much money the federal government is spending per person. That is, it is the total federal government spending divided by the population. When we define this as “Real,” it simply means we’re adjusting for inflation. Because of inflation, comparing the dollar amounts of one year to another is an unequal comparison. Thus, the amounts need to be converted in order to nullify the effects of inflation and see how much the amount really increased or decreased.

As the following chart from the Holcombe paper shows, total real per capita federal expenditures in 1920 was $390.98. In 1924, that total was $194.85.

Quite a decrease.

Much of this decrease had to do with World War I. Federal expenditures increase largely during wartime in order to fund the war, and then subside once the war is over, because the military is no longer in need of large funding to sustain the war effort. In order to try to account for this, there is a second column in the table above. This one tries to subtract defense expenditures from the total. This is where Beck, it appears, is getting his numbers. According to this table, the 1920 federal expenditures per capita, minus defense, were $170.15, and those in 1924 were $70.36. Again, a nice decrease.

It would seem, then, that Beck’s statement is somewhat true. Of course, he is discounting a large part of the federal budget, but (and this is purely conjecture based on what I have seen of Beck’s opinions), he may feel that this discounting is justified as national defense is a necessary expenditure, and he would possibly want to limit his discussion to the federal government’s expenditures of which he disapproves.

Either way you look at the numbers, however, there is a nice decrease in federal expenditures. So Beck seems justified either way.

Holcombe, though, contends that the table suggests “there are war-related expenditures in the government budget even after subtracting defense, veterans, and interest expenditures. This makes it apparent that one cannot accept nonwar expenditures as unrelated to the war.” Although the table attempts to extricate total expenditures from military spending, there is still at least somewhat of a relationship between the two.

But let us overlook this for a moment and continue on with Beck’s statement. Let us assume that Coolidge and Harding were largely responsible for the decrease in real per capita federal expenditures, and not the end of World War I (a large leap). Even if this were true, Coolidge and Harding still did not reach the pre-war levels of real per capita federal expenditures — levels that occurred during the Progressive Era. In 1916, before the war began, the total was $83.60, as compared to Coolidge and Harding’s $194.85 in 1924.

Also, Beck comments only on 1920 to 1924, which should seem odd considering the Harding-Coolidge years actually stretched to 1929. Beck fails to mention that real per capita federal expenditures minus defense (the numbers from the second column that he cites during his show) actually rose after 1924. In 1929, at the end of the Harding-Coolidge run, the total expenditures minus defense had risen to  $89.30. Not a large increase, but much bigger than the total minus defense for 1916, which was $22.75. The total expenditures until 1929 actually continued to decline until 1927, as the table shows, and then increased, reaching $195.41 in 1929.

Holcombe says that:

“From 1924 to 1929, before Depression-related expenditures would have found their way into the budget, nonmilitary expenditures increased by 27 percent, all during the Coolidge administration. If we take the decline in expenditures up through 1924 as a winding down of the war effort, there appears to be a considerable underlying growth in federal expenditures through the 1920s–growth worth examining more closely. What at first appears to be a relatively stable level of federal expenditures in the 1920s actually is substantial underlying growth, masked by a decline in war-related expenditures.”

Yet, Holcombe says, “It would be misleading to try to judge the growth of the federal government in the 1920s only by looking at aggregate expenditures.” With this, we go beyond Beck, who leaves the discussion simply at expenditures. Holcombe notes several areas in which the government grew under Coolidge and Harding –

  • the creation of government-owned corporations (which began prior to Coolidge and Harding, but did not stop during their terms)
  • the expansion of federal aid to states
  • expansion in the role of the post office and the salaries of its workers (“postal deficits in the 1920s were caused by the expansion of postal services and the provision of many services without charge or considerably below cost.”)
  • expanding the enforcement of prohibition (for instance, Coolidge created the Bureau of Prohibition)
  • aid to the agriculture industry (“Whether evaluated financially or with regard to programs, the 1920s saw considerable government growth in the agricultural industry, and laid the foundation for more federal involvement that was to follow in the New Deal.”)
  • antitrust action

Below is an excerpt regarding antitrust action during the Harding-Coolidge years:

Expenditures are the easiest measure of the size of government, but tell only a part of the story of government growth. Government regulation also has a substantial impact, but is harder to measure.[23] Starting with the Sherman Act in 1890, the federal government began its antitrust activity to try to limit the economic power of businesses. Only 22 cases were brought before 1905, but the pace started picking up later in that decade, which saw 39 cases brought between 1905 and 1909. From 1910 to 1919, a total of 134 cases were brought, showing increasing antitrust enforcement. But there was little slowdown in the 1920s, which saw a total of 125 cases. [24] As Thomas McCraw (1984: 145) notes, “By the 1920s antitrust had become a permanent part of American economic and political life.” One might anticipate, after an increase in cases, that firms would be more cautious in their activities to avoid antitrust cases being brought against them. But McCraw (1984: 146) further notes that in the 1920s a large proportion of antitrust cases were brought against firms that were not normally regarded as being highly concentrated. Antitrust enforcement in the 1920s was vigorous and increasingly broad in scope.

I highly suggest you read the entire Holcombe paper, but those are essentially the points in the paper that I found related to Beck’s statement. I was also surprised by how well Holcombe seems to sum up the refutation of Beck’s claims. I’ll let Holcombe’s words speak for themselves:

Normalcy, in the Harding-Coolidge sense, meant peace and prosperity, but it also meant a continuation of the principles of Progressivism, which enabled the Republican party to retain the support of its Progressive element. Despite the popular view of the 1920s as a retreat from Progressivism, by any measure government was more firmly entrenched as a part of the American economy in 1925 than in 1915, and was continuing to grow. Harding and Coolidge were viewed as pro-business, [10] and there may be a tendency to equate this pro-business sentiment as anti-Progressivism. [11] The advance of Progressivism may have been slower than before the war or during the New Deal, but a slower advance is not a retreat. [12]

Late economist Herbert Stein (Former Chairman of the Council of Economic Advisors under Presidents Nixon and Ford and a member of the board of contributors for the Wall Street Journal) also wrote of Coolidge’s economic policies in his excellent book “Presidential Economics: The Making of Economic Policy from Roosevelt to Clinton.” His conclusions regarding the Coolidge years (on page 28) also run contrary to Beck’s claims:

But if we use as a test of conservatism the degree of government intervention in the economy, the Coolidge administration was not conservative compared to its predecessors. Coolidge presided over a New Era, and the era was new not only in the height of the stock market; it was also new in the economic role of the government, and part of the confidence in the future of the American economy was so strong in the Coolidge days was confidence in the cooperative policy of government. When Coolidge said that the business of America is business he did not mean that the business of government is to leave business alone. He meant that it is the business of government to help business. That was even more positively the idea of his activist Secretary of Commerce, Herbert Hoover. Coolidge did not undo the interventionist measures of the Theodore Roosevelt and Woodrow Wilson regimes. At the end of his term the federal budget was larger than in the time of, say, William Howard Taft. He reduced income tax rates, but we still had an income tax, which we hadn’t fifteen years earlier. Perhaps most important, his term was a period of increasing acceptance of the responsibility of the Federal Reserve to help stabilize the economy.

The Coolidge and Harding years, it seems, were not the years of limited government and abandonment of progressivism that Beck says they were. He may have had a few numbers correct (though he failed to properly identify them), but his implications are not entirely borne out by the facts.

(Beck goes on to describe the “Roaring Twenties,” and describes them as “arguably the most prosperous 8 years this country has ever seen.” A discussion of Beck’s “Roaring Twenties” description and how that decade compares to other economic expansions in American history (post-WWII boom and the 80s/90s, for instance) is the topic for a blog entry found here.)

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4 Responses to “Beck Check: Coolidge and Harding”

  1. 1 Slackmo April 2, 2011 at 5:22 am

    Your argument amounts to, because Harding/Coolidge did not roll back the federal government all the way to the Taft days, they were actually closet government expansionists. Therefore “[Beck's] implications are not entirely borne out by the facts.”

    That’s a pretty flimsy argument.

  2. 2 Michael June 9, 2011 at 6:32 am

    Ronald Reagan also didn’t roll the Federal government back to the pre-FDR (or even pre-Johnson) eras of government expansion. Yet he reduced the interventionist aspect of the government in important ways. These included banking deregulation that enabled the growth of innovative high risk capital markets, deregulated transportation, and perhaps most importantly in light of what followed, the telecommunications industry. He also started the roll-back of labor union strangleholds over large parts of the private sector. That in addition to the reduction in taxes were hallmarks of the Reagan era that carried over through the prosperous Clinton years.

    Harding and Coolidge played a similar roll relative to the Wilson era. Both heralded periods of robust economic growth and technological innovation (1920s for Coolidge / Harding, 1980s-90s for Reagan).

    There were other similar reductions in government intrusion during the 20th C that had similar results. The Truman era ended many FDR regulations related to WWII and the new deal, successfully transitioning the US from wartime to a prosperous peacetime economy. Kennedy’s tax rate reductions and restraint of union activism created the strong economic growth of the 1960s. It was Johnson and Nixon whose disinterest in economic policy and intrusive regulations (worse of all were Nixon’s wage-price controls) which created the stagflation malaise of the 1970s.

    Note that it isn’t the party, its the policy. While Republicans tend to be more pro-business, Nixon was probably the most anti-business president since FDR, while Truman and Kennedy created pro-business environments. Clinton was also a good care-taker of the Reagan era reforms. After an abortive activist start from 1992-94 he adjusted after the 1994 Congressional mid-term where Republicans took control of Congress to steward a remarkable period of prosperity and innovation during the late 1990s.

  1. 1 The Roaring Twenties « Diniverse Major Trackback on July 28, 2010 at 7:40 pm
  2. 2 Beck Check: The Roaring Twenties | Diniverse Major Trackback on April 8, 2012 at 12:58 am

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