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Another Time, Another Place.



May 15, 2009 – Comments (6)

To the Congress of the United States:

No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment, harmonious relations between management and wage earner, freedom from industrial strife, and the highest record of years of prosperity. In the foreign field there is peace, the good will which comes from mutual understanding, and the knowledge that the problems which a short time ago appeared so ominous are yielding to the touch of manifest friendship. The great wealth created by our enterprise and industry, and saved by our economy, has had the widest distribution among our own people, and has gone out in a steady stream to serve the charity and the business of the world. The requirements of existence have passed beyond the standard of necessity into the region of luxury. Enlarging production is consumed by an increasing demand at hom6 and ail expanding commerce abroad. The country can regard the present with satisfaction and anticipate the future with optimism.

The main source of these unexampled blessings lies in the integrity and character of the American people. They have had great faith, which they have supplemented with inighty works. They have been able to put trust in each other and trust in their Government. Their candor in dealing with foreign governments hag commanded respect and confidence. Yet these remarkable powers would have been exerted almost in vain without the constant cooperation and careful administration of the Federal Government.

We have been coming into a period which may be fairly characterized as a conservation of our national resources. Wastefulness in public business and private enterprise has been displaced by constructive economy. This has been accomplished by bringing our domestic and foreign relations more and more under a reign of law. A rule of force has been giving way to a rule of reason. We have substituted for the vicious circle of increasing expenditures, increasing tax rates, and diminishing profits the charmed circle of diminishing expenditures, diminishing tax rates, and increasing profits.

Four times we have made a drastic revision of our internal revenue system, abolishing many taxes and substantially reducing almost all others. Each time the resulting stimulation to business has so increased taxable incomes and profits that a surplus has been ro, duced. One-third of the national debt has been paid, while much of the other two-thirds has been refunded at lower rates, and these savings of interest and constant economies have enabled us to repeat the satisfying process of more tax reductions. Under this sound and healthful encouragement the national income has increased nearly 50 per cent, until it is estimated to stand well over $90,000,000,000. It gas been a method which has performed the secining miracle of leaving a much greater percentage of earnings in the hands of the taxpayers 'with scarcely any diminution of the Government revenue. That is constructive economy in the highest degree. It is the corner stone of prosperity. It should not fail to be continued.

This action began by the application of economy to public expenditure. If it is to be permanent, it must be made so by the repeated application of economy. There is no surplus on which to base further tax revision at this time. Last June the estimates showed a threatened deficit for the current fiscal year of $94,000,000. Under my direction the departments began saving all they could out of their present appropriations. The last tax reduction brought 'an encouraging improvement in business, beginning early in October, which w1,11 also increase our revenue. The combination of economy and good times now indicates a surplus of about $37,000,000. This is a margin of less than I percent on out, expenditures and makes it obvious that the Treasury is in no condition to undertake increases in ditures to be made before June 30. It is necessary therefor"Stuing the present session to refrain from new appropriations for immediate outlay, or if such are absolutely required to provide for them by new revenue; otherwise, we shall reach the end of the year with the unthinkable result of an unbalanced budget. For the first time during my term of office we face that contingency. I am certain that the Congress would not pass and I should not feel warranted in approving legislation which would involve us in that financial disgrace.

On the whole the finances of the Government are most satisfactory. Last year the national debt was reduced about $906,000,000. The refunding and retirement of the second and third Liberty loans have just been brought to a successful conclusion, which will save about $75,000,0W a year in interest. The unpaid balance has been arranged

in maturities convenient for carrying out our permanent debt-paying Program.

The enormous savings made have not been at the expense of any legitimate public need. The Government plant has been kept up and many improvements are tinder way, while its service is fully manned and the general efficiency of operation has increased. We have been enabled to undertake many new enterprises. Among these are the adjusted compensation of the veterans of the World War, which is costing us $112,000,000 a year; amortizing our liability to the civil service retirement funds, $20,000,000; increase of expenditures for rivers and harbors including flood control, $43,000,000; public buildings, $47,000,000. In 1928 we spent $50,000,000 in the adjustment of war claims and alien property. These are examples of a large list of items.

...President Calvin Coolidge 6th Annual Message, Dec 4, 1928

6 Comments – Post Your Own

#1) On May 16, 2009 at 12:14 AM, neumann101 (88.57) wrote:

To quote Archie Bunker, we could use a man  like Calvin Coolidge again.

I have always heard that the depression was some kind of divine retribution for the profligate economy of the '20s, but could a president be more conservative than Coolidge?

I remember that I resented Bill Clinton for saying  in 1992 we had to pay for the "Party of the '80s". In the '80s, as I remember it, businesses could not raise prices and they had to increase productivity to remain viable. They had to manufacture products that customers wanted at a fair price, and it was pure hell.  In the 90's life was easy. Everything was this and that.  

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#2) On May 16, 2009 at 8:25 AM, devoish (63.46) wrote:

In the Archie Bunker theme song the quote is "we could use a man like Herbert Hoover again".

What I took from the speech, was the eight years of lowering income taxes, then as now, contributed to an investing party followed by a crash.



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#3) On May 16, 2009 at 11:35 AM, whereaminow (< 20) wrote:

Now that's some first-rate, rigorous economic analysis right there.  So tell me, why did the foolish Austrians Hayek and Mises warn against a pending crash in 1928-1929, while Keynesian Irving Fisher ridiculed them and claimed that the stock market would be fine? (Fisher lost his whole life savings in the 1929 crash btw.)

David in Qatar

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#4) On May 17, 2009 at 12:23 AM, devoish (63.46) wrote:

Ralph Nader warned of this one. That means we should have healthcare, strong environmental laws, oppressive restrictions on the FIRE industry, and seatbelts.

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#5) On May 17, 2009 at 1:04 AM, whereaminow (< 20) wrote:


It's really starting to unwind on you.

I've never claimed that Ralph Nader was foolish nor have I tried to marginalize and ridicule him. I respect him, even though the mainstream does not, and even though I don't agree with his solutions. He knows history better than you and if you ever sat down to read his work on Company Law you'd be enlightened.

But the half-assed rhetoric you have consistently bombarded us with doesn't come from Nader. It's the same partisan shill statements that pepper the major news networks. In other words, they are as useless as your superficial analysis of the 1928 American economy.

David in Qatar 

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#6) On May 23, 2009 at 2:28 AM, neumann101 (88.57) wrote:

Since your blog, I read FDR' Folly by some Cato Institute flack, Jim Powell. I know there is another writer, Amity Schaes who's day job is at the Council for Foreign Relations, wrote another book on the economics of the 20's and the Great Depression, The Forgotten Man. Perhaps we can expect future books from the Bilderburgers, the Carlysle Group, and the Illuminati.

A repeated them of the Powell book is that the Roosevelt administration was more interested in reform than in recovery, and that the enactment of progressive measures during a economic recession made the recession far worse.

There was a severe recession in 1920, wholesale prices fell 50%. This was perhaps inevitable because there had been a recession following all wars in the history of the republic. The feckless President Harding did nothing, other than cut federal expenditures, and the economy recovered. During the expansion that followed, the automobile industry expanded, agriculture shifted from the mule to the tractor, and the vaudeville circuit transformed to network radio.

As much as you can isolate a cause for a monetary contraction, the great crash of 1929 was caused by an effort by Coolidge's treasury secretary late in 1927 to prop up the English pound by lowering the discount rate while the US economy was already overheated. 

In '28 and '29 they raised the discount rate sharply and history would show they overcompensated.

The steps that the  Hoover Administration took, the Smoot-Hawley tarriffs, and increase of income taxes  may have seemed to be the worst that could be taken, but Roosevelt outdid him.

Under Roosevelt taxes on undistributed corporate income tax were raised to 60%. There was no loss carryover. Imagine investing in a business if you were expected to incur 100% of the losses, but you would get at most 40% of the gains. The NRA fixed wages and prices. Since the wage level dictated by the government was higher than market rates, the companies which came under NRA regulation chose not invest their dollars in expanding their business, but rather in machinery which would eliminate workers. Imagine a government that would create an economic incentive for employers to eliminate jobs when the unemployment rate was something like 30%.

Is this a political question, or an economical question, or a historical question? I am conservatively biased, of course, but I want to now the historical truth.

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