Mr. Merry, editor of the National Interest, is the author of “Where They Stand: The American Presidents in the Eyes of Voters and Historians.
n 1920, Coolidge emerged as the running mate to Republican presidential candidate Warren Harding, an intellectually lethargic man who nonetheless understood the need to remake the GOP into a more conservative party and move the country in a new direction. President Woodrow Wilson’s postwar economy was in free fall, and the country needed a new economic philosophy to get beyond the Wilson mess.
Harding’s watchword was “normalcy”—meaning, as Ms. Shlaes describes it, “low taxes, tariffs, less central government, and stability.” He won in a landslide, a clear repudiation of Wilson’s progressive policies, and quickly moved, at the counsel of Treasury Secretary Andrew Mellon, to cut taxes and restore the economy. The aim, says Ms. Shlaes: “to retire debt, not to expand it.”
The new direction was well-established by August 1923, when Harding died unexpectedly at age 57, most likely from congestive heart failure. But Mellon believed the new president could generate continuing economic growth through greater application of a “scientific taxation” concept—”supply side” economics, in today’s parlance—designed to generate economic activity, and federal revenue, by reducing top marginal tax rates. In Coolidge’s time, as today, the concept stirred widespread skepticism.
Coolidge sent to Congress a “scientific taxation” bill that he hoped to get passed before he faced the voters in 1924—proposing to lower the top tax rate to 30% or even 25% from 50% (it had been 77% when Harding took office). The party establishment in Congress watered it down, leaving the top tax rate at 43.5% and directing most of the tax relief to middle-income Americans. Though disappointed, Coolidge signed the bill with a resolve to revisit the matter after his election, in which he defeated Democratic candidate John W. Davis by a decisive margin.
He eventually got the top rate down to 25%. The GDP soared, increasing by 25% during the Harding-Coolidge years. The result, coupled with fiscal austerity, was a nation flush with tax receipts—surpluses of $100 million in 1925, $375 million in 1926 and nearly $600 million the next year.
The Coolidge years represent the country’s most distilled experiment in supply-side economics—and the doctrine’s most conspicuous success. That success is the central Coolidge legacy, brought home with telling authority in Ms. Shlaes’s work. This book’s time is propitious. As the nation faces a looming economic crisis wrought in large measure by mounting public debt, the Coolidge experiment offers insights into what an alternative course might look like. Ms. Shlaes has given us a detailed examination of that alternative course