For many Americans, a $39 trillion national debt and trillion-dollar deficits have started to feel like an unavoidable aspect of modern government. But a century ago, the United States also faced a fiscal crossroads, and leaders in Washington responded very differently than they do today. At a time when federal spending had exploded after World War I, Presidents Warren Harding and Calvin Coolidge made balancing budgets, reducing debt, and limiting the growth of government national priorities. Their record offers a reminder that fiscal restraint was something policymakers once pursued and actively achieved.
As part of honoring the 250th anniversary of the Declaration of Independence, Florida Governor Ron DeSantis dedicated a new statue of President Calvin Coolidge. “Today, I unveiled a statue honoring President Calvin Coolidge, who dedicated Bok Tower Gardens on Lake Wales in one of his last public appearances as President. As America marks its 250th anniversary, I was proud to honor President Coolidge with this new statue,” stated Governor DeSantis.
“Coolidge governed as a constitutionalist, eliminated debt, balanced the budget, reduced taxes, and promoted a unified American civic tradition and culture,” noted Governor DeSantis. Amity Shlaes, Chair of the Calvin Coolidge Presidential Foundation and biographer of Coolidge, remarked that “the state of Florida’s decision to showcase Coolidge and his values is an example for the nation.”
“In these challenging times, the Coolidge values of thrift, respect for enterprise, and government restraint are more important than ever,” argues Shlaes.
For decades, the federal government has been unable to limit spending, even when Republicans who described themselves as fiscal conservatives have been in control. It’s hard to believe, but at one time the federal government served as an example of fiscal restraint.
Even more surprising, Washington was not just slowing the growth of spending, but actually making spending cuts. This fiscal conservatism formed the foundation of the Harding and Coolidge administrations. Congress passed the Budget and Accounting Act of 1921, which established the Bureau of the Budget. President Harding considered the selection of the first Budget Director, Charles G. Dawes, as “the most important appointment” that he was called to make. “In view of the many duties imposed I do not suppose there will be so important an office in the administration,” wrote Harding.
In fulfilling Harding’s goal of reducing expenditures, Dawes understood the difficulty of cutting government spending, describing the task as similar to “having a toothpick with which to tunnel Pike’s Peak.”
Not only was Harding successful in this first endeavor to reduce government expenditures, but his efforts resulted in “over $1.5 billion less than actual expenditures for the year 1921.” Dawes stated: “One cannot successfully preach economy without practicing it. Of the appropriation of $225,000, we spent only $120,313.54 in the year’s work. We took our own medicine.”
Harding understood that reducing government spending would not be politically easy. Calls for restraint were often met with resistance, especially when popular programs or constituencies were involved. One of the clearest examples came when Harding vetoed a widely supported veterans bonus bill, not because he opposed helping veterans, but because he believed the country could not afford the added spending. Even knowing the decision would generate political backlash, Harding continued to press for spending restraint because he believed growing debt and unchecked government expenditures posed a long-term threat to the country’s fiscal health.
President Harding would not survive his first term in office as a result of a heart attack, but the fiscal conservatism continued under Coolidge. Coolidge emphasized the need to continue reducing expenditures and tax rates. He regarded “a good budget as among the most noblest monuments of virtue.”
When President Harding and Coolidge (as Vice President), assumed office in 1921, the federal budget was $5.063 billion and by 1929 when Coolidge left office, the budget was $2.96 billion. The national debt was reduced from $24 billion down to $16.9 billion. In addition, Harding and Coolidge were able to lower the income tax from an over 70% top rate to 25%. As a result, the budget was in surplus, and the economy went into one of the largest expansions in American history.
Today, many policymakers argue that it is impossible to seriously address government spending and that the only solution is to simply “grow” our way out of the problem. Yet economic growth has consistently failed to keep pace with the expansion of government spending. Fiscal conservatism has never been easy; it was a political battle for Harding and Coolidge as well. Despite those challenges, they made it a priority. More than a century later, their example still demonstrates that fiscal restraint is not only possible, but that it can also lead to strong economic outcomes.
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