The following is adapted from a talk given at Hillsdale College on January 27, 2013, during a conference on “The Federal Income Tax: A Centenary Consideration,” co-sponsored by the Center for Constructive Alternatives and the Ludwig von Mises Lecture Series.
Beyond the inspiration of Coolidge’s example of principle and consistency, what are the lessons of his story that are relevant to our current situation? One certainly has to do with the mechanism of budgeting: The Budget and Accounting Act of 1921 provided a means for Harding and Coolidge to control the budget and the nation’s debt, and at the same time gave the people the ability to hold someone responsible. That law was gutted in the 1970s, when it became collateral damage in the anti-executive fervor following Watergate. The law that replaced it tilted budget authority back to Congress and has led to over-spending and lack of responsibility.
A second lesson concerns how we look at tax rates. When tax rates are set and judged according to how much revenue they bring in due to the Laffer Curve—which is how most of today’s tax cutters present them, thereby agreeing with tax hikers that the goal of tax policy is to increase revenue—tax policy can become a mechanism to expand government. The goals of legitimate government—American freedom and prosperity—are left by the wayside. Thus the best case for lower taxes is the moral case—and as Coolidge well understood, a moral tax policy demands tough budgeting.
Finally, a lesson about politics. The popularity of Harding and Coolidge, and the success of their policies—especially Coolidge’s—following a long period of Progressive ascendancy, should give today’s conservatives hope. Coolidge in the 1920s, like Grover Cleveland in the previous century, distinguished government austerity from private-sector austerity, combined a policy of deficit cuts with one of tax cuts, and made a moral case for saying “no.” A political leader who does the same today is likely to find an electorate more inclined to respond “yes” than he or she expects.