Coolidge (44 page)

One by one, Coolidge’s old teachers and antagonists again came through: Gompers again, Lodge, Senator William Borah of Idaho, Alice Longworth. Hoover was in—people were mentioning him as a possible name for a 1924 candidate instead of Coolidge. Frank Kellogg, the secretary of state, also came. All discovered what Treadway had discovered: Coolidge bore no grudges but would not be intimidated. Borah wanted Coolidge to lead the country leftward on labor. Indeed the senator’s first demand when he met with Coolidge was that he “get rid of Daugherty,” the nemesis of the United Mine Workers—Coolidge refused. Borah decided to tell the press he thought that Coolidge might well be nominated in 1924 as the GOP candidate “if he makes good,” a veiled threat but also something of a vote of confidence.

Secretary Hughes visited several times and wrote down his impressions: whereas he had never found Harding alone, Coolidge was often by himself with his papers and cigar. Hughes was so struck by the difference that he would write down what others had merely discussed: Harding tended to say yes when you went to his office; with Coolidge by contrast the answer was almost always no. Coolidge’s nos, Hughes guessed, would stick; unlike Harding, he had the temperament for it.

“The atmosphere was as different as a New England front parlor is from a back room in a speakeasy,” Alice Longworth, who was coming to like Grace, would later recall. Longworth mattered; Longworth’s husband would shortly be the House minority leader, a key figure in the tax debate. Tentatively, the Coolidges began to establish their own traditions. They planned to bring a great Christmas tree for the people, a fir to stand at the Ellipse. Middlebury College from their own Vermont would send the fir. The tree would be illuminated in a new way, with electric lights.

Will Rogers mocked the remaining complainers in a column headlined “Will Rogers Wants to Know Why Coolidge Hasn’t Settled Everything—Has Been a Month.” Then Rogers listed all the areas in which Coolidge had done nothing: “France and England are about to go to War over how much they owe each other. Why don’t he come out at once for the League of Nations and stop this coming war? Babe Ruth was changing the style of bat he used. Yet the president had done nothing. Congress wanted an extra session.” Rogers’s plan for Coolidge was the same as Coolidge’s own: “About the only way I know of for him to make himself solid, after all these colossal failures, is to not only not call Congress now, but not call them at all. I tell you if he did that he would go down in History as another Lincoln.”

Once again, Coolidge had somehow won by causing others to underestimate him, to believe that someone else—a party leader, a fortuitously placed friend—had engineered his rise. At the
Boston Herald
, a writer named Frank Buxton penned an editorial titled “Who Made Calvin Coolidge?” It mocked the skeptics by tracing all their claims over the years, going all the way back to the Massachusetts Senate debate, through the police strike and the debate over whether Mr. Lucey, Frank Stearns, Murray Crane, or even Coolidge’s mother was responsible. “Who made Calvin Coolidge?” Buxton asked again at the end and finally concluded, “Calvin Coolidge, of course! Give another man those same foes and friends and he might still be as far away from the White House as most sons of Vermont.”

The president was set to speak in December, when Congress returned. That would be the moment to launch a tax bill. The recession was over, and revenues were pouring into the Treasury; $300 million, Mellon was reckoning, would be the annual surplus for fiscal year 1924, more than he had imagined. Instead of 58 percent, the top income tax rate would have to go down to 31 percent, a combination of a lowered 6 percent base rate and a lower “supertax,” or surtax, of 25 percent. A good share of the rate cuts came at the top of the tax schedule. This was not merely to favor the rich, as many said. The tax rate cuts at the top were designed to favor enterprise. If people got to keep more of their money, they would hire others, Mellon said.

Unlike Lord and Coolidge, Mellon and Coolidge did not meet often; sometimes they communicated by correspondence. When they did meet, they scarcely spoke. Coolidge smoked his fat cigars; Mellon smoked his small black cigarettes. Many affairs preoccupied the Treasury secretary: refinancing U.S. debt; foreign loans; his two children, Ailsa and Paul; and the recent and painful fact of his ex-wife Nora’s remarriage. Still, soon both men began to feel the bond. In Mellon, Coolidge was finding the cabinet member who shared his moral outrage at expenditure. In Coolidge, Mellon was finding a skilled legislator who might help him realize an old dream. Others observed the strength of the connection. People said of the pair that they conversed in pauses.

As he got to know the Treasury secretary, Coolidge could see that he and Mellon came at the question of the budget and money differently. Coolidge believed higher taxes were wrong because they took away from men money that was their property; he believed lower rates were good precisely because they encouraged enterprise, but also because they brought less money. Low rates starved the government beast.

Mellon thought there was more to it all. He believed in what he and a few others referred to as “scientific taxation.” Scientific taxation was simple, Mellon’s team explained. Most people simply stuck with their arithmetic. They took the new tax rate, multiplied it by the old number of sales, and reckoned their loss. Their arithmetic did not allow for the possibility of more sales. Mellon thought lower rates could yield more revenues. The government was like any business—railroading, for example. Coolidge was well familiar with freight rate schedules, and could compare the cost of transporting hay and grain from the trans-Missouri country to the Great Lakes with the rates that covered similar products when shipped in New England. How did a business decide what price to charge for freight?

The answer was a shipping company always aimed to charge, as the railmen put it, “what the traffic will bear.” If the company raised fees too high, people would not use your company or your railroad to ship their goods. And sometimes a big cut in rates brought many more customers. Such a large rate cut would therefore cost only a little revenue. Sometimes you could lower a freight rate and even get more revenue than you had at the higher freight charge. Then you not only made up what’d you lost on paper but gained extra revenue. In any case, what mattered in all such readjustments was the change on the margin. You wanted the price, the freight rate, to be just low enough that someone would ship an additional box or an additional container, rather than choosing to wait another day.

Some Americans already thought more in terms of cars than trains. So Mellon showed how the theory underlying scientific taxation applied to cars as well. Ford Motor Company had reduced the price of Model T’s, yet was earning more money than it had before; it was making up on volume what it lost on price. Having laid out his examples, Mellon moved on to taxes: one might cut tax rates and get more revenue, not less. Top rates, the surtax on top of the base, or normal tax, mattered especially. Another way to envision it all was in terms of harvests and Thanksgiving, for which Coolidge was preparing a 1923 proclamation. Commerce was like plants or trees; America’s “fruitfulness,” as Coolidge called it, might be greater if it were less taxed.

Mellon was imagining a great virtuous circle. The money that flowed when he cut the taxes would enable him to pay off the federal debt faster. Right now, thanks to the hard work of the Federal Reserve governor, William P. G. Harding, interest rates were low. The rates, however, might not stay that way forever; Mellon had to refinance now. Lower interest rates would of course also benefit Europe, whose nations owed so much to the United States. All of these ideas, but especially the idea of growth that threw off extra tax revenues, were relatively new to Coolidge. But, he saw, even some of the progressives agreed with some of what Mellon said. Senator Bursum, the great New Mexico pension activist, actually told
The New York Times
flat out that he thought a reduction in tax rates might not force a reduction in revenue, but rather the opposite.

There was yet more to Mellon’s story. Efficiency, Mellon taught, could be improved elsewhere in the tax code. Currently the code allowed full deductions for business losses; Mellon thought only a portion of the losses should be deductible; the traffic of business could bear that, in his judgment. Dividends went untaxed; Mellon wanted to treat them and some other forms of unearned income as taxable, and at a higher rate than wages. States were borrowing at rates that alarmed Mellon, enjoying the advantage of the tax protection for municipal bonds. Money that could be invested in private companies was going to those states. That protection ought to be reduced.

One way was to pass an amendment to the Constitution ending the special tax status of all new municipal bonds, so that cash in the future might flow to private-sector companies. It was important to protect the old bonds because they were contracts, but by doing this prospectively, one could divert capital back to companies. Another way to narrow the spread on bonds was to lower the income tax rate so that the value of the tax break for holders of municipal bonds or old Liberty bonds would be less. All you had to do to start that process was to signal you were serious about income tax cuts, more serious than Harding. Here Mellon was accurate and clever: ending the special municipal bond status was a goal of many of the progressives, including Bursum.

Coolidge was not sure he liked all of Mellon’s ideas. But he knew he liked Mellon, who differed little, after all, from Andrew Carnegie or Judge Forbes in the way he thought about capital. Coolidge also liked the way Mellon’s mind worked. Mellon, in turn, appreciated that Coolidge did not waste his time, as President Harding had. Coolidge decided he would present the Mellon Plan, as the Treasury called scientific taxation, on December 6, in the president’s annual message. Rather than simply transmitting the president’s message, as presidents had in the past, Coolidge would deliver the message himself. He and Mellon really would get the law next spring if the speech was good.

But to give a good speech, one had to find time to write it in the first place. That too was proving difficult, for besides senators and congressmen, or cabinet men, representatives of foreign governments also called. Coolidge deemed it the president’s job to receive them but found that ambassadors especially ate up time, whether they were his own ministers or emissaries from other countries. October brought the Italian ambassador, his own ambassador to Ecuador or Bolivia, and the Hungarian ambassador. David Lloyd George, the former prime minister of Great Britain, passed through; Coolidge escaped a dinner but did have to meet him. Every session with a dignitary was a session that he could not have with Mellon or Lord. Beyond the reception of the diplomats, there were other obligations to receive people, some of which had not changed much since the days of James Garfield.

On a regular working day, the president shook hands with four hundred people at lunch and sometimes many more. On special occasions such as New Year’s Day, the hands numbered in the thousands. The regular meetings with the budget director took hours; Coolidge had also committed to another set of regular meetings, press conferences. His old instinct not to join institutions, he saw, could still help him. Every group he joined promptly exploited the presidential connection in ways that were alarming and sometimes just plain corrupt. Even old friends could not resist exploiting the advantage of knowing a president. After he joined the Congregational Church in Washington, his family minister, Kenneth Welles, at the Edwards Church, could not conceal his glee at the power derived from being able to claim a president in the fold. In a letter to the president, Welles got specific on the power Coolidge’s step would give him to get support from congregants: “It is going to give me a grip on some men like Fred Farrar and Judge Field which I never otherwise would have had.” A group visiting in early October requested that the president come to New York to speak on November 2 at a memorial for Harding. Half testy, half amused, Coolidge challenged them: “You shall decide for me. Shall I honor President Harding by carrying on his work or shall I speak in Manhattan?”

One of the topics that would have to be addressed in the speech was immigration. Gompers and several other union leaders enthusiastically backed congressional plans to restrict immigration. Domestic workers would confront less competition and enjoy greater leverage with employers. The late Senator William Dillingham of Vermont had been shaping a new immigration law into a system of quotas for regions when he died. Coolidge was willing to go along with restrictionists. “I am convinced that our present economic and social conditions warrant a limitation of those to be admitted,” he wrote. But he was not hostile to immigrants already in the United States. And he was especially concerned at the widely supported Japanese exclusion provision that many congressmen hoped to make law. The Japanese government already restricted emigration, and he felt that the Japanese would think that a U.S. ban would cause them to lose face. The Japanese government was miffed at the naval agreement; Coolidge saw no need to add insult to injury. Japan was a growing power.

Coolidge also had to convince voters that no soldiers’ bonus was necessary. Even as he drafted his speech, though, Coolidge could see the case for the veterans’ bonus getting stronger. The Senate was holding hearings on Charles Forbes’s Veterans Bureau, and the reports of impropriety were extensive. At one hospital in Washington, Mount Alto Veterans, a dental aide was even caught stealing gold allocated for veterans’ teeth. That was the same hospital where Emmett Rogers, son of one of the White House staff, was being treated. One man, the new director of the Veterans Bureau, General Frank Hines, had been paid $4,800 a year for two hours of work. As evidence of not just thousands but tens of thousands of dollars taken grew, the senators were taken aback. On October 22, Senator Ashurst noted in his diary, “A man with disheveled hair, loose lips troubled eyes and trembling hands appeared before the Committee,” shouting that he was there to defend himself. It was Charles Forbes himself. Every dollar that Charles Forbes had embezzled at his Veterans Bureau was another argument for a bonus, which bypassed suspect officials.