Forgotten Man, The (5 page)

In Coolidge’s presidency both members of the cabinet continued to advance their agendas. Mellon warned that for prosperity to continue, taxes must come down: “High taxation, even if levied upon an economic basis, affects the prosperity of the country because in its ultimate analysis the burden of all taxes rests only in part upon the individual or property taxed. It is largely borne by the ultimate consumer.” He had established the charitable deduction he talked about. Tax revenues promptly behaved just as he had predicted, increasing after rate cuts, and the country moved into surplus. He too had a few standardizing projects—he made uniform the size of the various denominations of bills, a step, he estimated correctly, that would save the Treasury money. He brought the budget into balance and super
vised buildings for Coolidge. And he battled for the repeal of the estate tax, perhaps thinking of the various conflicts over Frick’s grave.

As for Hoover, he had decided that, at least for a while, he could live with John L. Lewis’s idea of higher wages. He and Lewis determined that long periods of labor peace would bring economic benefits sufficient to offset the higher wages that Lewis sought. After an agreement with labor in 1924 at Jacksonville, Florida, the coal companies found themselves cornered into committing to paying higher wages.

Hoover and Lewis now had nothing but praise for each other, with Lewis, to date a movement radical, now declaring himself a free-marketeer. “It is the survival of the fittest. Many are going to be hurt, but the rule must be the greatest good for the greatest number.” Hoover openly flattered Lewis: “Mr. Lewis is more than a successful battle leader. He has a sound conception of statesmanship.” But by the mid-1920s it became clear that they had been wrong: nonunion mines were driving the companies that had gone along with the Jacksonville agreement out of business. The union men were not better paid; they were out of work.
Cushing’s Survey,
a newsletter, reported that Lewis assailed Hoover, saying, “You got me into this mess; it’s up to you to get me out.” He even wrote his own book,
The Miner’s Fight for American Standards
, a plea to Hoover. But this time Hoover did not back him up.

There had also been far smaller projects, which Hoover relished. One was strengthening the Bureau of Foreign and Domestic Commerce, whose job it was to promote trade. He expanded the number of its offices across the country from six to twenty-three; a businessman could now go to any good-sized city and learn about the possibility of business abroad. As one of his biographers, Will Irwin, noted, this expansion generated an increase in inquiries about trade from 200,000 to 2.4 million. Irwin, a supporter of Hoover’s, reported that American businessmen would often tell Commerce that their resources obviated a tiresome research trip abroad: “You fellows have more than I could get in a dozen trips.”

Hoover had also created a Division of Simplified Practices, whose job it was to standardize and harmonize the distressingly fractious
and unresponsive manufacturing and construction sectors. In those days roads were often still paved in brick, and brick was a typical example: sixty-six different sizes were being produced by manufacturers when Hoover ordered research on the topic. This was sheer waste, as far as the utilitarian Hoover was concerned. He therefore pulled the nation’s paving-brick firms into a room and settled the matter; the range of sizes dropped from sixty-six to eleven. Emboldened, Hoover also looked into brick for homes; here he claimed victory outright, for the number of sizes went “from forty-four to one,” the praiseful Irvin reported. Then there were beds. Seventy-four different sizes were available; as a result of encouragement from Hoover, the figure went down to four. If these latter accomplishments had a comical aspect of “putting the fishes to bed,” Hoover did not notice.

Whether the public was ever conscious of the contrasts among all these probusiness leaders is hard to discern. In 1924 they gave Coolidge 382 electoral votes, far more than his Democratic and Progressive opponents, whose total together was 149. But Hoover was also popular. What was clear, however, was that Coolidge’s initial impressions of his two cabinet members had only strengthened. The supposedly cold Coolidge heartily approved of Mellon’s tax policy, saying that “the wise and correct course to follow in taxation and all other economic legislation is not to destroy those who have already secured success but to create conditions under which every one will have a better chance to be successful.” Mellon, with Coolidge’s support, reduced the national debt from $24 billion to $16 billion. He did away with the excess-profits tax—it was wrong to say that profits were excessive anyhow, when they created the work. Negotiating past the progressive George Norris, he put through the Revenue Act of 1926, a dramatic series of rate cuts, repealing gift taxes, slashing estate taxes, and taking one-third of those who had paid in the preceding year entirely off the tax rolls. Norris commented of one of the drafts of the act, “Mr. Mellon himself gets a larger personal reduction than the aggregate of practically all the taxpayers in the state of Nebraska”—Norris’s state. Still, Mellon also paid more taxes than the people of such states.

Mellon’s goal had been to get the top tax rate down to 25 percent, a full 50 percent below where it had stood at Frick’s death, and he achieved this. Mellon had also lowered the base or “normal” rate at the bottom of the schedule. Growth was up, but so, more importantly, was the average real wage, solid evidence that a tax cut for the rich was also good for Henry Ford’s worker. The after-inflation earnings of employees grew 16 percent from 1923 to 1929. Revenues continued to flow in just as the treasury secretary had so pointedly predicted. Mellon was managing to balance the budget and to reduce the staff of tax officials at the Bureau of Internal Revenue. The policy was so well regarded that even Democrats, the party of the income tax, argued for lower taxes. John Nance Garner, a representative from Texas and a leader in the House, had a plan for a corporate tax lower than Mellon’s, at least in some brackets. Between Coolidge and Mellon there was also a personal bond. Later it would be said of them that they conversed entirely in pauses.

Matters were different when it came to Hoover. Coolidge understood the political success of the beneficent hand, but he did not believe in it. Man himself, he would write toward the end of the 1920s, was after all “but an instrument in the hands of God.” More and more Coolidge was thinking of God—in 1924, his son Calvin got a blister on his toe playing tennis on the South Lawn of the White House, and in those prepenicillin days, the blister brought on an infection that killed him. This tragedy made Coolidge brittle, impatient, and irritable, and one of the people who irritated him was the persistent Hoover, so different from Mellon. Where the president eschewed technology, Hoover was always playing with it. Coolidge also hated Hoover’s tendency to react to news with grand, intrusive plans. Could not Hoover see where some of his rescues had led? At one point later on, the minimalist president Calvin Coolidge concluded quite simply that “that man has offered me unsolicited advice for six years, all of it bad.” He had a nickname for Hoover: “Wonder Boy.”

Beyond grief lay Coolidge’s accurate perception that in the 1920s Mellon’s and his own policies were yielding the good that the men
had predicted. Today we estimate that the highest level of unemployment under President Coolidge had been 5 percent in the year he was elected. From there it dropped to 3.2 percent in 1925 and then into the twos and ones. Citizens could afford all the new products. There was nothing bubbly about the potential for productivity gains. By the end of 1925 Ford’s peak production was 8,500 a day, up substantially from the 6,000 from a few years before. Overall in the years from 1923 to 1929 car production would double. Another emblem of the new progress was the price of Henry Ford’s cars. The Model T, $600 before the war, sold for $240 in the mid-1920s. Right after the war it seemed that the United States had become the greatest power through might. With the growth of the 1920s, the country was showing that it deserved to be that power. Coolidge began his December 6, 1927, yearly message to Congress by announcing that “It is gratifying to report that for the fourth consecutive year the state of the union in general is good.” There was a sense among political leaders that industrial America would do even better than agricultural America had done.

The progressives, who once had hoped to take the country, now seemed to be fading. The name of Bob La Follette, the great reformer of Wisconsin, simply did not mean as much as it had even as recently as 1924, when La Follette had won 16.6 percent of the vote in the presidential election, promising to end “an orgy of corruption” and quick and easy access to the White House. Among citizens, it was increases in the standard of living that seemed to be raising hope. In Indiana two social scientists, Robert and Helen Lynd, undertook a study of a single town, Muncie, which they called Middletown. In Middletown, the Lynds found that new inventions were remaking home, work, and leisure: the radio, the automobile, and the telephone, a new medium that created a “semi-private, partly depersonalized means of approach to a person of the other sex.” This was the decade in which Americans began traveling the country in automobiles, and the decade they began to prefer the telephone to the post-church visit.

The stock market rose faster toward the end of the decade. A
new generation of Americans turned to it. One was Bill Wilson, the Vermonter who had won Edison’s contest. Wilson, like so many men, came to Wall Street after serving in Europe to see if he could play the equities game. An uneven fellow, Wilson drank too much and found himself subsidized by his wife’s family in Brooklyn Heights. But he was a tinkerer, an Edison if only in temperament, and when it came to the financial world, he spotted a genuine flaw. Everyone traded stocks, but even the experts knew relatively little about the companies they came from. He himself, the Edison enthusiast, had bought a few shares of General Electric at $180 a share; now they were worth $4,000 or more. But why? Wilson bought a Harley-Davidson with a sidecar for his wife, Lois; they would ride around the country investigating companies. It was an early version of modern stock analysis. Companies shouldn’t merely be reported on, as in the papers; they ought to be studied. He began to make money.

Wilson’s attempts to shed light on the mystery of markets were the humblest version of what his colleagues on Wall Street and at universities were trying to do. One was Irving Fisher, a professor at Yale who had been a student of the great philosopher William Graham Sumner.

Sumner and Fisher had disagreed on many things. Sumner had told Fisher that if life came down to a choice between socialism and anarchy, he would take anarchy. Fisher, reporting this to the Yale Socialist Club, told his audience that given the same choice, he would take socialism. But Sumner had imparted to Fisher, and generations of other students, a deep understanding of the degree to which tariffs could slow the economy. And he also started Fisher off on his career by suggesting that he look into the mathematical side of the economy, then a new approach. Fisher, an erratic but brilliant man, proceeded to create indexes to measure the rise of commodity prices, then a new concept. He also looked at prices and money generally in a new way. He believed that the gold standard slowed growth. One of its problems was that gold was too unpredictable, and that a stabler currency might be arrived at by linking the dollar to a group of
commodities, instead of to gold. Fisher, like Wilson, was investing even as he philosophized. Wilson bought a used Dodge. Fisher’s son noted that he moved up from Dodge (1916–1920) to Buick to the luxury of a Lincoln and a chauffeur.

As the productivity gains sank in, the Dow marched upward still more aggressively, from 155 in February of 1927 to 200 by the end of that year. Many investors were now wilder than Wilson. New investors had discovered that they could buy shares without the cash to pay for those shares—they simply borrowed on margin and hoped that the rise in the stock prices would cover their loans. The margin rule was not new, but the investors were. Whole households with very small resources speculated, the women as well as the men, though the women’s wagers were usually smaller. Stock pickers were borrowing so much from brokers to buy stocks that the amount—quantified later by the economist David Hale—was equivalent to a full 18 percent of gross domestic product (GDP). The excitement over stocks was so high that stock exchange management—the children of Victorians, after all—decided, like Hoover, that it was time to forestall inappropriate behavior. Stock exchanges therefore created separate rooms for men and women investors.

There was even hope for farms, which had done much less well than the rest of the economy over the decade. Perhaps the same productivity gains that Henry Ford had achieved in industry might also be achieved in agriculture. In Montana a giant farming experiment, funded by J. P. Morgan, was under way. The idea was to bring to the farm all the economies of a Ford assembly line. The “farming factory,” as it was called, covered 95,000 acres; its head farmer, Thomas Campbell, was written up in
Time.

The Gilded Age was generally proving to be gilded for the average, even the poor, man. Groups hoping to rise out of poverty also did well. Their general conviction was that individual effort was the key to advancement. In Muncie, a Russian Jew gave a speech that explained the immigrants’ hope and excitement: there was not gold paving the streets in the United States, he found, but the gold of
opportunity in the small towns, and gold “in the hearts of your citizens, the gold which, too, makes each of us able to go all over the world with respect and safety as American citizens.”

In New York, Italian Americans became symbols of success; one of these, the half-Jewish Fiorello LaGuardia, represented the state as a Republican in Congress. Another proud group were his cousins, the Jews, both the older German Jews and the newer East European Jews. Jews at the time had a general belief in charity and taking care of one another: “All Israel is responsible for one another.” In addition, they were aware of a specific history in New York; Peter Stuyvesant had asked the Dutch West India Company to ban Jewish settlement, but the company had allowed Jews to stay as long as the Jewish poor “be supported by their own nation.” The colonial Jews had pledged that they would, and the commitment was still alive. As late as the 1910s, philanthropist Jacob Schiff said that “a Jew would rather cut his hand off than apply for relief from non-Jewish sources.”