By Kevin C. Murphy, Copyright 2013. All Rights Reserved.
The Business of America
Progressives and the Business Culture
I. Two Brooms, Two Presidents
"Business seems to be in the saddle. Let us see what it can make of the job." -- Harper's, 19252
"Our whole business system would break down in a day if there was not a high sense of moral responsibility in our business world…You cannot extend the mastery of the government over the daily working life of a people without at the same time making it the master of the people's souls and thoughts." -- Herbert Hoover, 19283
"The early Twenties brought the American people to their knees in worship at the shrine of private business and industry. It was said and accepted without question by millions of Americans that private enterprise could do no wrong." -- George Norris, 1945.4
"More business in government and less government in business" had been a common refrain of Senator Warren Harding's during the 1920 campaign. In an article by that name for the November 1920 issue of The World's Work, the Republican candidate explained exactly what he meant by this. "Unfortunate indeed is the misapplication of the term 'progressive,'" Harding argued, "because progression may mean moving forwards as well as moving backwards or sideways." Real progressives, he suggested, would put more emphasis on deeds rather than lofty words. "I value the crusader. But I value men and women and nations who see the tasks to be done and do them. Because of this, I find idealism in building firm foundations for the economic life of our country, and some idealism in the conception of an administrative government which serves its people well, with thrift, economy, and efficiency, rather than badly by prodigiality, experimentation, and slipshoddiness." The Wilson administration, on the other hand, was an example of what not to do. It had "tinkered and bungled with American business until American business has been put into anxiety rather than expectancy, and darkness rather than light."5
"American business is not some selfish, privilege-seeking monster," Harding maintained. "The agitator who so describes it, and the statesman who treats it with abuse and suspicion, forget that American business is the daily labor of the whole people and the clothes upon their backs and three meals a day…American business is a vast fabric woven through the upgoing years by the daily tasks of a faithful, virtuous people. It is a blind idealist, indeed, who can find no thrill in that magnificent tapestry, and one blind indeed who recklessly pulls at the threads to unravel it." Thus, moving forward, candidate Harding pledged that his administration would "instead of experiments establish a close understanding between American government and American business so that one may serve and the other obey and seek cooperation…America is proud of her business methods. We have squeezed out of our method of doing business a good deal of inefficiency and waste. I think it would be pretty fine piece of idealism to squeeze inefficiency and waste out of our administrative government." If we did, Harding concluded, "[g]reat and glorious achievements may present themselves to us for the future," and, in the end, isn't that what real progressives wanted?6
Three months later, the President of the Central Trust Company of Illinois, celebrated World War veteran Charles G. Dawes gave a very highly regarded speech at the tenth annual Trust Companies banquet at the Waldorf-Astoria Hotel in New York. This followed the publication by Dawes of an article that had gotten the now-president-elect's attention, "How the President Could Save a Billion Dollars." The wartime tax rates, Dawes proclaimed, were "throttling the industries and the commerce and the labor of our country," a consequence not just of Wilson's largesse but of a "disgraceful business system" in government "which we have allowed to grow up without hindrance for over a hundred years[.]"7
This, Dawes contested, had to change. "The money is being lost in mad administration, and it is the duty of the next President of the United States to give this government, for the first time, a business head." Moreover, any "man who endeavors to make it difficult for the next President of the United States to call the very best business men he can get into the service…is just as much a traitor to the country as a man who in time of war…would rail against sending our big and large and fine soldiers to the front because it would make a little runt jealous." The March 1921 issue of Trust Companies, a publication of the American Bankers Association, thought Dawes' address "masterful" and "one of the strongest indictments ever made against Government maladministration and lack of ordinary business principles at Washington." The emcee of the event gushed that "if General Dawes is appointed to head a commission to reorganize the Business methods of the Government, it will make an epoch in the history of this Nation."8
That epoch began on June 10, 1921 when the Budget and Accounting Act was signed into law, creating for the first time a Bureau of the Budget (now the Office of Management and Budget) and a General Accounting Office (now the Government Accountability Office), and mandating that the president from now herein present a yearly budget to the Congress. In fact, that purported master of profligacy, Woodrow Wilson, had earlier called for just such a budget bill. But he vetoed the final product Congress gave him in 1919 because it also created a Comptroller General in the legislative branch with the power to audit federal spending. Wilson thought this an unconstitutional restraint on executive power, and, when the bill passed again in 1921 by a Republican Congress for a Republican President, there was no longer any such provision. To take on the job of America's first Budget Director, Harding turned to Dawes -- his original choice for Secretary of the Treasury, based on Dawes' "How to Save a Billion Dollars" article -- who agreed provided he could return to the private sector after one year.9
Three weeks into the new position, on June 29th, 1921, General Dawes brought together "the entire business administration" -- the president, the Cabinet, and 1200 other top department heads and federal higher-ups -- for the first meeting of the Business Organization of the Government. This was not a speech but "a talk…as business men, a part of the business administration to which I belong, which for the first time commences functioning under a president of a business corporation who is also the president of the United States." By creating a budget office, Dawes argued, "the President is simply putting into effect for the first time in this country a condition which exists in any business corporation." He urged every person in the room who would aid him in his quest to minimize waste and inefficiency and bring sound business principles to government to stand up and be counted. And so they did, to a man.10
The meetings of the Business Organization of the Government became a twice-yearly ritual, in January and June, throughout the Twenties. "There is no reason why, because the Government of the United States does the largest business in the world, it should be the worst conducted," Dawes told the assembled at the second such meeting in January 1922, especially given "there is no finer body of business men in this country than these underpaid men of talent confronting me." Nonetheless, to prove the extent of the problem, Dawes showed the audience two brooms - one Army-issue, one Navy-issue. "Now, the Army had 350,000 of these brooms in surplus," Dawes noted. "The Navy needed 18,000 brooms. It could have had the Army brooms for nothing but because they were wrapped with twine instead of wire, the Navy wouldn't take them as a gift." If this had happened in the private sector, Dawes argued, "the mere knowledge of it in the body of the business organization would drive the man guilty of it out of his position."11
In December 1921, General Dawes tried to ensure that any bill put forward by the executive branch that would cost the nation money ran through his department first. But he was forced to back down in the face of an angry Cabinet, who resented this encroachment by the Budget Director between themselves and the President. Nonetheless, after a year of fighting with various Cabinet members and department heads to reduce costs, Dawes put together a budget for 1923 that was $1.5 billion less than the last Wilson budget of 1921. In point of fact, the 1922 budget came in $1.4 billion less than 1921 and the 1923 budget came in a full $2 billion less - in no small part thanks to savings from disarmament. "We have got used to accepting a large measure of waste and inefficiency in government with a degree of philosophy that could scarcely be exceeded by an ancient Egyptian living under the Pharaohs," argued The Literary Digest in 1923. "Perhaps men like Dawes and Hoover are forerunners of the new race." Similarly, the Commercial and Financial Chronicle noted that "[t]he Government is now on the way to an orderly and healthy system of business management, thanks to the courage and ability of General Dawes, and the prompt and unqualified cooperation of the President."12
Choosing General Herbert M. Lord, the chief finance officer of the Army, as his hand-picked successor, Dawes returned to private life after his year was up, taking with him only the sign on his door and the two brooms. Introducing Lord at the Business Organization of the Government meeting of July 1922, Harding congratulated his government on a job well done, and insisted they continue the effort. "Our country is now one of the few in the world which is not paying is at it goes," he told the assembled, "and I must regard with disfavor any tendency to interfere with this condition or to increase taxes." General Lord, meanwhile, who would later begin to talk of the American government as a "corporate organization with 115,000,000 stockholders," promised to continue the legacy of his predecessor, who he deemed a "providential choice" for the position. As for Dawes, he published his diary of the year as a 1923 book, The First Year of the Budget of the United States. "This book is the review of a great undertaking," declared The Quarterly Journal of Economics in their otherwise-positive assessment, "but it is not a great book."13
Calvin Coolidge was a fan nonetheless. "I am for economy," he had said during the Business Organization meeting that coincided with the 1924 election campaign. "After that, I am for more economy." At the end of the year, after he had been overwhelmingly returned to office, Coolidge told Congress that "the government can do more to remedy the economic ills of the people by a system of rigid economy in public expenditure than can be accomplished through any other action." To this task, and perhaps no other, Coolidge devoted himself.14
As president, he turned the twice-yearly meetings of the "Business Organization of the Government" from a staid business conference in the Interior Department into a festive gala-type experience, with the Marine Corps band playing songs to enliven the mood. From January 1925 until the final meeting in January 1929, they were also broadcast nationwide on the radio, to be heard "by the invisible audience in whose interests we are gathered." (Coolidge had wanted to start this practice in June 1924, but at the time the Democrats had been self-immolating in New York.) "Every dollar that is saved by careful administration," Coolidge told the Business Organization and a radio audience in January 1925, the first meeting after the election, "adds to the amount by which taxes may be reduced in the future….I had rather talk of saving pennies and save them than theorize to millions and save nothing."15
To The New Republic, this "Coolidge Gospel of Parsimony" -- later generations would use the term "austerity" -- was admirably sincere, at least. But "is scrupulous parsimony in public expenditure," the journal asked, really "the most effective contribution which the government can make to the welfare of the American people?" In fact, TNR argued, it was "private capitalism run mad…The logical result of Mr. Coolidge's policy of parsimony in governmental expenditure would be its abandonment of regulative and social activities which both federal and state governments are now conducting at a very heavy expense." Coolidge was not calling for better service from the government, but rather "diminished expenditures, irrespective of deserts, or diminished activities" - His position "implicitly denounces any attempt by the government to remedy economic and social evils which involves public expenditure…When he declares that the best way for the government to cure economic evils is to cut down its expenditures, what he really means is that the best way for the government to cure economic ills is to let them alone."16
Perhaps in response to this line of argument, Coolidge would sometimes temper his remarks with nods to the important functions of government. "To conduct the business of Government so as to bring the greatest possible benefit to the people is to honor our constitutional obligations," Coolidge told the Business Organization in June 1925. "Constructive economy in the business of Government is for the benefit of the people." Six months later, at the next gathering, Coolidge conceded that "[m]erely to reduce the expenses of the Government might not in itself be beneficial…No civilized community would close its schools, abolish its courts, disband its police force, or discontinue its fire department. Such action could not be counted as gain, but as irreparable loss." The goal, Coolidge insisted, was "national efficiency….It is not through selfishness or wastefulness or arrogance, but through self-denial, conservation, and service that we shall build up the American spirit."17
Self-denial is not usually considered a virtue that was in abundance during the Coolidge prosperity, which is why the president so well exemplified the moniker given to him by William Allen White -- "A Puritan in Babylon," the still, calm center of the storm during an age of transformation and Ballyhoo. And, while seeming so lackadaisical about many of his presidential responsibilities, Coolidge would succeed in this, the one endeavor he thought so fundamental. Over the course of his presidency, the federal budget would continue in the self-abnegating trajectory originated by Harding, remaining the same size at relatively $4 billion a year, while taxes were reduced and national debt would decrease from $22.3 billion to $16.9 billion. In addition, Coolidge would enact the early reform that Dawes had called for in December 1921, establishing the Budget office as a central clearinghouse for executive legislation.18
In this as is in many other ways, much as the agenda put forward by John F. Kennedy in the 1960's only came into fruition under Lyndon Johnson, Calvin Coolidge consummated the business-minded trends initiated by Warren Harding. Under his administration, less government in business and more business in government would reach its apotheosis.
Return to the Table of Contents.
2. Murray, The 103rd Ballot, 259.
3. Dumenil, 38.
4. Norris, Fighting Liberal, 245.
5. Warren Harding, "Less Government in Business and More Business in Government," The World's Work, November, 1920 (Vol. 41, No. 1), 25-26. As it happens, Franklin Roosevelt was arguing similarly on the 1920 campaign trail. "[U]nless we set our own house in order and, by American constitutional means, make our government as efficient as we would conduct our own private individual businesses…it will mean simply the spread of doctrines which seek to effect a change by unconstitutional means." A year earlier, in 1919, Roosevelt had argued that "Competitive genius…is the key to the manufacturing world; stifled by over-regulation, or confiscated by law, industry dies…In Heaven's name, do not brain industry with the club of politics." Schlesinger, Crisis of the Old Order, 358-359.
6. Ibid, 27.
7. Bascom N Timmons, Portrait of an American: Charles G. Dawes (New York: Henry Holt & Company 1953), 200. Charles G. Dawes, "Lift the Dead Hand of Taxation," February 17th, 1921, in Banking: Journal of the American Bankers Association, March, 1921 (Vol. 8, No. 9), 604, 614. Sobel, 290.
8. Ibid. "Business Methods in Government Administration," Trust Companies, March 1921 (Vol. 32, No. 3), 245.
9. Kenneth R. Mayer, With the Stroke of a Pen: Executive Orders and Presidential Power (Princeton: Princeton University Press, 2001), 119. Murray, The Harding Era, 174. Timmons, 200.
10. Murray, The Harding Era, 175. Michael Schudson, The Good Citizen: A History of American Civic Life (New York: Free Press, 1998), 210.
11. Charles G. Dawes, "Business Organization of the Government," in Basil Gordon Byron and Frederic Rene Coudert, ed., America Speaks: A Library of the Best Spoken Thought in Business and the Professions (New York: J.J. Little & Ives, 1928), 117-118, 128. Dean, 106-107. Timmons, 206.
12. Murray, The Harding Era, 177. Ronald Allen Goldberg, America in the Twenties (Syracuse: Syracuse University Press, 2001), 31. "The First Year of the Budget of the United States, by Charles G. Dawes," The North American Review, June 1923, 857. Charles G. Dawes, The First Year of the Budget (New York: Harper & Brothers, 1923), 239. Fred Rogers Fairchild, "Dawes' Budget of the United States," The Quarterly Journal of Economics, Feb. 1924 (Vol. 38, No. 2), 338. Timmons. 209.
13. Ibid. "Harding Demands Pay As You Go Policy," New York Times, July 12, 1922. "Coolidge Asks Cut of Federal Costs to $3,000,000,000," The New York Times, January 27, 1925. Fred Rogers Fairchild, "Dawes' Budget of the United States," The Quarterly Journal of Economics, Feb. 1924 (Vol. 38, No. 2), 338.
14. "Hard Yankee Fact," The New York Times, July 2nd, 1924. "The Coolidge Gospel of Parsimony," The New Republic, December 17th, 1924 (Vol. 41, No. 524), 79-81.
15. Jerry Wallace, Calvin Coolidge: Our First Radio President (Calvin Coolidge Memorial Foundation, 2008), 18-19. Kaiology, "The Business Organization of the Government," Kai's Coolidge Blog, December 19, 2010 (http://kaiology.wordpress.com/2010/12/19/the-business-organization-of-the-government/) "Coolidge Asks Cut of Federal Costs to $3,000,000,000," The New York Times, January 27, 1925.
16. "The Coolidge Gospel of Parsimony," The New Republic, December 17th, 1924 (Vol. 41, No. 524), 79-81.
17. Calvin Coolidge, "Address at a Meeting of the Business Organization of Government," June 22nd, 1925, The American Presidency Project (http://www.presidency.ucsb.edu/ws/index.php?pid=406) "Text of the President's Budget Speech," New York Times, January 31, 1926.
18. Goldberg, America in the Twenties, 60. Soule, 323. Mayer, 120.
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