Forget the "Great Communicator," we need the "Great Refrainer".

• Author: Shlaes, Amity
• Position: Economics

WITH THE FEDERAL debt spiraling out of control, many Americans sense an urgent need to find a political leader who is able to say "no" to spending. Yet, they fear that finding such a leader is impossible. Conservatives long for another Ronald Reagan, but is Reagan the right model? He was, of course, a tax cutter, reducing the top marginal rate from 70% to 28%, but his tax cuts---which vindicated supply-side economics by vastly increasing Federal revenue--were bought partly through a bargain with Democrats, who were eager to spend that revenue. Moreover, Reagan was no budget cutter--indeed, the Federal budget rose by more than one-third during his Administration.

An alternative model for conservatives is Calvin Coolidge. President from 1923-29, Coolidge sustained a budget surplus and left office with a smaller budget than the one he inherited. Over the same period, the U.S. experienced a proliferation of jobs, a dramatic increase in the standard of living, higher wages, and three to four percent annual economic growth--and the key to this was Coolidge's penchant for saying "no." If Reagan was the Great Communicator, Coolidge was the Great Refrainer.

Following World War I, the Federal debt stood 10 times higher than before the war, and it widely was understood that the debt burden would become unbearable if interest rates rose. At the same time, the top income tax rate was more than 70%; veterans were having trouble finding work; prices had risen while wages lagged; and workers in Seattle, New York, and Boston were talking revolution and taking to the streets.

The Woodrow Wilson Administration had nationalized the railroads for a time at the end of the war, and had encouraged stock exchanges to shut down for a time, and Progressives now were pushing for state---or even Federal---control of water power and electricity. The business outlook was grim, and one of the biggest underlying problems was the lack of an orderly budgeting process: Congress brought proposals to the White House willy-nilly, and they customarily were approved.

The Republican Party's response in the 1920 election was to campaign for smaller government and for a return to what its presidential candidate Warren Harding dubbed "normalcy"--a curtailing of government interference in the economy to create a predictable environment in which business could operate confidently. Coolidge, a Massachusetts governor who had gained a national reputation by facing down a Boston police strike--"There is no right to strike against the public safety by anybody, anywhere, any time," he had declared--was chosen to be Harding's running mate. Following their victory, Harding's inaugural ad dress set a different tone from that of the outgoing Wilson Administration (and from that of the Obama Administration today): "No altered system," Harding said, "will work a miracle. Any wild experiment will only add to the confusion. Our best assurance lies in efficient administration of our proven system."

One of Harding's first steps was to shepherd through Congress the Budget and Accounting Act of 1921, under which the Executive Branch gained authority over--and took responsibility for---the budget, even to the point of being able to impound money after it was budgeted. This legislation also gave the Executive Branch a special budget bureau--the forerunner to today's Office of Management and Budget--over which Harding named a flamboyant brigadier general...