Socialism in America
"The struggle of History is not
between the bourgeoisie and the
proletariat; it is between government
and the governed."
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|Philosophy of Evil
Socialism In America
By Jerry McDaniel
The Roaring Twenties
The Roaring Twenties
History is chronicled by the media and interpreted by academia. Hence, history books written since the Civil War and the
beginning of the Progressive Era strongly favor progressives. In seventeen polls taken among historians from 1948 to
2011, Franklin D. Roosevelt and Abraham Lincoln vie for first place among America’s top ten presidents, beating out such
luminaries as George Washington and Thomas Jefferson for the top honors. Other progressive heroes in the top ten
include Theodore Roosevelt, and Woodrow Wilson; Lyndon Johnson comes in at number 14. Another favorite, predating
the progressive era, is Andrew Jackson. It is not surprising, therefore, that historians rank the two presidents that presided
over the boom years known as the “roaring twenties” at the bottom of their list.
By 1920 the electorate had grown weary of six consecutive progressive presidents. There was little difference between the
Democratic and Republican parties, since both had adopted the populists causes of the Socialist Party of Eugene Debs and
the People’s Party of 1892 and 1896. In 1920 the Republican Party nominated conservative Warren Harding for President
and Calvin Coolidge for Vice-President. They easily won over the Democratic nominees, James M. Cox and Franklin D.
Roosevelt, in the largest landslide in American history since records started being kept in 1824. (60.36% to 34.19%)
Harding promised to curb government activism and return the nation to “normalcy”. Unfortunately, normalcy also meant
corruption and Harding’s legacy was marred by scandal, particularly the infamous “teapot dome” scandal. Harding’s
Secretary of the Interior, Albert B. Hall, in 1931, became the first cabinet member in history to be sent to prison. Harding’s
attempts at reforming government policy, coupled with the scandals, account for his being placed dead last among
historian’s ranking of American Presidents.
Harding signed the Budget and Accounting Act of 1921 requiring the President to submit a budget to Congress each year.
He also established the Bureau of the Budget and the General Accounting Office to assure oversight of federal budget
expenditures. On the advice of his Treasury Secretary, Andrew Mellon, Harding pushed through several tax cuts beginning
in 1922. Top marginal rates were reduced each year from 1921 to 1925, from a high of 73% down to 25%. Corporate
taxes were cut from 60% to 50% and the World War I excess profits tax was eliminated. Unemployment dropped from a
high in 1921 of 12% to 3.3%, where it remained throughout the twenties.
Although Harding succeeded in reducing taxes and cutting government spending, bringing on a decade of prosperity with
continuing increases in personal incomes, GDP, and business profits, he did not repudiate entirely progressive policies. His
concessions to the popular progressive desire for a larger more intrusive government included massive spending on
highway projects and other internal improvements, the Sheppard-Towner Maternity Act, an extensive program for young
mothers and their children, and the largest tariff increase in American History up to that time.
During an extended speaking tour of the western U.S., President Harding died suddenly on August 2, 1923 in the midst of
a conversation with his wife. He was succeeded by his Vice President, Calvin Coolidge. Coolidge earned a reputation as a
small government conservative during his time in office. Although his legacy underwent a renaissance during the
Presidency of Ronald Reagan when some historians compared the two presidencies favorably with each other, most
historians continue to rank Coolidge near the bottom among American Presidents.
Coolidge succeeded in restoring confidence in the Office of President after the scandal ridden administration of his
predecessor, leaving the office on a high note of popularity with the people. In the 1924 election, Wisconsin Senator
Robert La Follette left the Republican Party and organized the New Progressive Party with himself as its presidential
candidate. The Democratic Party expected a repeat of the 1912 election when Roosevelt and Taft split the Republican vote
resulting in a win for Wilson. However, Coolidge got the Republican nomination on the first convention ballot and went on
to get 2.5 million more votes than the Democratic Candidate, John Davis and the Progressive’s La Follette combined.
Coolidge left his administration’s industrial policies in the hands of his Secretary of Commerce, Herbert Hoover. The
economic boom begun during the Harding administration continued throughout the remainder of Coolidge’s time in the
White House. Coolidge was a strong believer in federalism. During his tenure as Governor of Massachusetts, he supported
wages and hours legislation, opposed child labor, promoted safety legislation in manufacturing, and worker representation
on corporate boards. As Governor, he also imposed economic controls during World War I. As President, He rejected
these same measures at the federal level, believing they were the responsibility of state and local governments and not the
Coolidge continued to work with Treasury Secretary, Mellon to cut taxes and reduce government spending. The Revenue
Acts of 1924, 1926 and 1928 reduced taxes to the point where only the top 2% of America’s taxpayers paid any federal
income tax at all. While keeping taxes low and government spending flat during his administration he simultaneously
reduced the federal debt by twenty-five percent. As the founder’s would have expected, the decrease in the size of the
federal government led to an increase in the size of state and local governments as they took on more responsibilities that
progressives had placed at the federal level. Combined state and local expenditures surpassed those of the federal
government’s for the first time in 1927.
Falling farm prices in 1926 led to attempts by Congress to provide relief. The McNary-Haugen Farm Relief Bill called for
the federal government to buy farm surpluses during good years and hold them for resale during lean years. (Hey! It
worked for Joseph. Of course it also led to enslavement of the Jews by the Egyptians.) The bill did not pass Congress on
the first try, but was later revived and presented to Coolidge on two different occasions for his signature. He vetoed it each
time. In vetoing the Bill he stated that agriculture must “stand on an independent business basis”. He also gave as a reason
for his vetoes, his belief that “government control cannot be divorced from political control”.
Coolidge did not like government regulation of industry and during his administration he appointed commissioners of the
Federal Trade Commission and the Interstate Commerce Commission who did little to restrict business or manufacturing
activities. The regulatory state under Coolidge was practically non-existent. However, he did support high tariffs even
though he was concerned about their long term effects. He continued the tariffs imposed during Harding’s administration
and allowed them to increase during his own. His successor, Hoover would increase them even more leading to the Stock
Market crash of 1929. The use of protective tariffs preceded the American Revolution. Like government spending,
protective tariffs increase domestic manufacturing for a short time, but quickly become counter-productive as they reduce
the productivity and hence the buying power of our trade partners in other countries. At the same time they reduce
domestic buying power by increasing the price of imported products.
The Crash of 1929
As the 1928 elections approached Coolidge unexpectedly announce that he would not seek an additional term. "The
Presidential office takes a heavy toll of those who occupy it and those who are dear to them. While we should not refuse
to spend and be spent in the service of our country, it is hazardous to attempt what we feel is beyond our strength to
accomplish", he said in explaining his decision not to run. The booming economy and the popularity of Herbert Hoover as
Secretary of Commerce under Harding and Coolidge made him the logical successor to Coolidge as President. However,
there is some evidence that the booming economy was not so much due to the policies of Hoover as it was to the tax-
cutting, budget-cutting and laissez-fair regulatory policies of Coolidge.
Coolidge did not support Hoover as his replacement, saying, at one time, "for six years that man has given me unsolicited
advice—all of it bad.” However, to avoid splitting the Republican Party, he did not openly oppose him. Prior to joining the
Harding administration as Secretary of Commerce, Hoover’s experience was limited to mining and humanitarian relief work
during and following World War I.
Before the War, Hoover had worked in Australia and Europe as a mining engineer and consultant. He was part owner of a
mining company in Australia for a time. During the War, Hoover helped organize the return of Americans from Europe. He
also served as Chairman of the Commission for Relief in Belgium. In 1917, President Wilson appointed him as head of U.S.
Food Administration. After the War Hoover served on the Supreme Economic Council and as head of the American Relief
Administration. As an engineer, Hoover was an avid supporter of the efficiency movement in government championed by
Richard Fry and Herbert Croly. As President, He promoted partnerships between business and government often referred
to as "associationalism”. In his previous war relief work, he had successfully applied this concept by using the American
Friends (Quaker) Service Committee to carry out logistic work in European relief efforts.
In his inauguration speech Hoover predicted; “Given the chance to go forward with the policies of the last eight years, we
shall soon with the help of God, be in sight of the day when poverty will be banished from this nation”. His tenure in
office did not live up to his expectations. As a self-described reformer and progressive, Hoover entered the office of
President with the expectation of reforming the nation’s regulatory system. He believed that he could create a cooperative
relationship between business and government without coercion or government intervention. His plan depended on the
voluntary cooperation of business. He also proposed federal loans for slum clearance, a department of education, and a $50
per month stipend for seniors, all of which were turned down by Congress.
In September, 1922, Harding signed the Fordney–McCumber Tariff bill raising tariffs to an average of 38.5%. The tariff
helped to boost farm prices but also increased the price of farm production. Tools and other items necessary for the
farming industry almost doubled in some instances. For example, the cost of a 14-inch plow doubled from $24 in 1918 to
$48 in 1926, and the cost of a farm wagon increased from $85 to $150. The reason for the big increases in price were due
to the retaliatory actions of other countries. France raised its tariffs on Automobiles from 45% to 100%. Spain raised its
tariffs on American goods by 40%. Other nations followed suit. While farm prices increased, farm income plummeted.
During the 1928 presidential campaign, Hoover promised to raise the tariff on farm goods but decrease the tariff on all
other imports. This campaign promise was instrumental in helping him win the White House. On taking office Hoover
asked Congress to increase tariffs on agricultural products and decrease the rates for industrial goods, as he had promised.
Instead, the house began debating a bill that would raise the tariffs on both agricultural and industrial products. The bill
known as the Smoot-Hawley Tariff, sponsored by Senator Reed Smoot and Representative Willis Hawley, passed the
House in May of 1929. The Senate continued debate on its version until March 1930. The conference committee would
align the two bills incorporating most of the higher rates in the House bill. Between House passage of the bill in May of
1929 and Senate Passage in March 1930, the Smoot-Hawley Tariff was hotly debated throughout America and just as hotly
discussed in foreign capitols around the world.
By September, 1929 the Hoover administration had received 23 protest notes from trading partners around the world,
threatening retaliation if the bill was passed. They were all ignored by Congress and the administration. This was the
political and economic atmosphere on October 24, 1929 when the New York Stock Exchange collapsed. Almost since the
Smoot-Hawley Tariff was proposed the stock market had been unstable. As the likelihood of its passage became more
evident investors lost confidence and the market crashed.
When the Tariff passed the Senate a group of 1,028 economists petitioned Hoover, urging him to veto the Bill. Although
Hoover himself opposed the Bill he signed it anyway, giving in to the Republican leadership. High protective tariffs are
similar to trade boycotts as to their effects on economies. Foreign made products become too expensive for the American
consumer affecting the manufacturing segment of foreign economies. The Fordney-McCumber Tariff and the Smoot-
Hawley Tariff had the same effect on industrialized nations around the world that the colonial boycott of English goods had
in England, leading to repeal of the Townshend Acts in the eighteenth century. As Americans stopped buying imported
goods because of price, unemployment in Europe rose. Soon the entire industrialized world was thrown into a recession.
Retaliatory tariffs imposed by other nations only added to the effect. Russia escaped much of the negative effects because
it lagged about fifty years behind other nations in the industrial revolution.
From 1929 to 1932 American imports decreased by 66% and exports decreased by 61%. GDP was cut in half. When the
Smoot-Hawley Tariff was signed into law in 1930 the unemployment rate stood at 7.8%. It more than doubled to 16.3% in
1931 and by 1933 it stood at 25.1%. Other nations scrambled to realign world trading patterns thereby shortening the
effects of the Great Depression on their economies. Hoover’s initial response to the recession was an attempt to talk it to
death relying on his faith in volunteerism and “associationalism”. His first act was to call business leaders to Washington
and attempt to convince them not to lay off workers or cut wages. Another attempt at encouraging volunteerism was the
National Credit Corporation (NCC). The NCC was not a government agency, but rather an attempt to encourage large
banks to form a consortium offering loans to smaller banks to prevent them from failing.
Both of these efforts failed and the NCC idea was replaced by the Emergency Relief and Construction Act enacted in July
1932, creating the Reconstruction Finance Corporation. The RFC was an independent agency of the federal government
chartered in 1932. Patterned after the World War I War Finance Corporation, its purpose was to provide aid to state and
local governments and provide loans to banks, railroads, mortgage associations and other businesses. The RFC provided
funds for public works projects and was the first major relief legislation in the United States. The Federal Home Loan Bank
Act, also passed in 1932, established the Federal Home Loan Bank Board to charter and supervise Savings and Loan
Associations. The Act also created Federal Home Loan Banks to make loans to S&Ls for home mortgages to encourage
construction and prevent foreclosures.
The one option that always eludes politicians in times of economic stress is to increase the money supply in the private
sector through tax cuts. The Hoover administration was no exception. As business activity declined and payrolls shrunk,
revenue to the federal government also plummeted. In order to finance the expansion of government while staving off
deficit spending the Revenue Act of 1932 was enacted, raising the top marginal rate from 24% to 63% and the corporate
tax rate from 12% to 13.75%.
|The Illinois Conservative