Posted on 02/05/2009 11:36:21 AM PST by frithguild
The Republican Party of the 1920's swept into power during a financial crisis. Errors in the Fed’s monetary policy in 1919 in kept rates too low to benefit the sale of Victory bonds. The Fed then tightened excessively due to inflation, creating a financial shock and depression from 1920 to 1921.
At that time, the Republican Party viewed increasing tariffs as good policy. Thus, during the sixty seventh Congress, the Emergency Tariff Act of 1921 was passed as a temporary measure until a more comprehensive measure could be drafted. Ultimately, Fordney-McCumber passed in 1922, imposing an ad valorem rate of 34%, higher than the previous high water mark of the Payne-Aldrich Tariff of 1909. Notwithstanding, the United States trade balance continued to decline until 1924, the same year marginal tax rates were decreased.
The recovery from the 1920-1921 depression had proceeded smoothly with moderate price increases. Ad valorem tariff rates stayed basically stable during the 1920’s . Much can be said about what in this day we would call the “conservative” leadership of Coolidge during this time. Coolidge succeeded to the Presidency upon the August 2, 1923 death of Warren Harding. He kept the Harding administration intact, including his Commerce Department Secretary, Herbert Hoover.
Coolidge's taxation policy was that taxes should be lower and that fewer people should have to pay them. Just before the 1924 Republican Convention began, Coolidge signed into law the Revenue Act of 1924, which decreased personal income tax rates. In addition to tax cuts, Coolidge proposed reductions in federal expenditures and retiring some of the federal debt. He declined to sign several Congressional spending bills. He vetoed the proposed McNary-Haugen Farm Relief Bill of 1926, designed to allow the federal government to purchase agricultural surpluses and sell them abroad at lowered prices, declaring that agriculture must stand "on an independent business basis," and said that "government control cannot be divorced from political control." When Congress re-passed the McNary-Haugen bill in 1927, Coolidge vetoed it again.
Coolidge declined to run for reelection in 1928, leaving the door open for Commerce Secretary Hoover. Hoover was already a national figure and former Presidential candidate, with Woodrow Wilson having privately preferred to him as his successor and a possible Democratic Party presidential candidate in 1920. Although he was registered as a Republican, he had already bolted the party once in 1912 to support Theodore Roosevelt's "Bull Moose" Progressive Party. Hoover chose not to run, believing that 1920 would be a Republican year. During the Harding administration, Hoover promoted the Commerce Department as the hub of the nation's growth and stability through European “associationalism.” Coolidge called him, “Wonder boy” and also quipped that, "for six years that man has given me unsolicited advice—all of it bad."
Reed Smoot was a banker and wool manufacturer. He became Senator from Utah in 1903 while the nation was operating under the Dingley Tariff of 1897, at the time the highest in the nation's history. Smoot obtained an appointment to the Senate Finance Committee in 1908. When Democrats took the presidency and both houses of Congress in 1912, tariffs were sharply reduced. Following the return of the republicans in 1920, the 1923 the Fordney-McCumber Tariff raised tariff rates again, including those on Cuban sugar, a direct competitor with Utah's beet sugar industry, and wool, another Utah industry.
Willis Hawley came to Congress from Oregon in 1907. Willis Hawley ascended to Chairman of the Committee on Ways and Means during the uneventful Seventieth Congress, which met during the last two years of the second Coolidge term.
Some dates and Events:
1927 The Fiat Company, Italy's leading automobile manufacturer, begins pushing Italian government to increase duties on American automobiles and automobile parts, out of frustration for losing to American competition.
1928 Republicans and Democrats both campaign on protectionist platforms. Herbert Hoover is the Republican candidate for President; the Democratic Party nominates Al Smith.
Nov. 6, 1928 Hoover is elected president, carrying 40 of 48 states. Republicans do well in the congressional elections: +30 in House for 267-167 majority, +7 in Senate for 56-39 majority.
Dec. 5, 1928 House Ways & Means Committee authorizes notice of public hearings on tariff. Fourteen subcommittees will take testimony, and hearings will cover all commodities.
1929 Italian media launches campaign against purchasers of American automobiles and automobile parts. Representatives from various Swiss industries begin circulating flyers encouraging the support of European automobiles and other products, while avoiding the support of American industries.
Jan. 7, 1929 House Ways & Means Committee begins hearings. Rep. Willis Hawley (R-OR) is chair.
Feb. 27, 1929 House Committee hearings conclude, after nearly 20,000 pages of testimony and 1100 witnesses.
Mar. 4, 1929 Hoover is inaugurated. Inaugural address calls for limited tariff revisions.
March 8, 1929 Canada proclaims its Canada First policy, that in the interests of Canadian industries, Canada will not seek to continue trading with the United States if the United States continues to show resentment and antagonism with regards to trade with Canada.
Apr. 15, 1929 Extra congressional session convenes (71st Cong., 1st session), called by Hoover to help farmers and make limited tariff changes.
May 7, 1929 Bill is reported to House by the Ways & Means Committee, having been written entirely by Republican members of the committee. Some Republicans are unhappy: agricultural states want higher rates on butter/casein/flaxseed, lower rates on brick/cement/lumber/shingles; California wants duties on figs/dates/hides/long staple cotton; the Northeast wants duties on boots/shoes/leather; etc. At this time, no official protests have been received from foreign nations.
May 23, 1929 Republican committee members come up with ninety-one compromise amendments designed to guarantee Republican unity.
May 28, 1929 Tariff bill is passed by House 264-147. Only 12 Rs vote against; 20 Ds vote for.
May 29, 1929 Bill is referred by Senate to Finance Committee. Sen. Smoot (R-UT) is chair.
June 13, 1929 Senate Finance Committee begins hearings.
June 17, 1929 Sen. Borah (R-ID) moves for “sense of the Senate” resolution to have tariff revision limited to agriculture; fails 39-38. Hoover notes that he convened Congress in order to pass limited changes, but “in considering the tariff for other industries than agriculture, we find that there have been economic shifts necessitating a readjustment of some of the tariff schedules.”
June 19, 1929 Congress takes recess for summer. Senate Finance Committee continues working on tariff bill.
July 18, 1929 Senate Finance Committee hearings conclude. To date, a total of 38 nations have sent formal protests against the Tariff to the Department of State
July 22, 1929 Senate Finance Committee begins meeting in executive session to redraft bill.
Sept. 4, 1929 Senate ends summer recess; redrafted bill reported to Senate.
Sept. 12, 1929 Debate begins in Senate.
Oct. 2, 1929 Senate passes amendment removing President’s ability to set flexible tariff schedules; instead, Tariff Commission’s recommendations will be acted on by Congress. Thirteen insurgent Rs join 34 Ds in passing amendment, 47-42.
Oct. 19, 1929 Senate passes amendment adding farm debenture rider to tariff bill. Debentures will provide export subsidies for farmers. Fourteen insurgent Rs join 28 Ds in passing amendment, 42-34.
Oct. 22, 1929 Senate finishes debating administrative provisions, moves on to rates. Coalition of Ds + insurgent Rs is in control, forces (mostly) lower rates. Passage appears to be a virtual certainty
Oct. 29, 1929 Stock market crashes on Black Tuesday. The Dow-Jones Industrial Average drops 12% as 16.4 million shares are traded.
Nov. 22, 1929 Despite Hoover’s urgings, Senate adjourns without passing tariff bill. >p> Dec. 2, 1929 Regular congressional session convenes (71st Cong., 2d session). Dec. 11, 1929 Former tariff lobbyist Joseph Grundy is appointed as Pennsylvania's junior Senator.
Jan. 17, 1930 After six days of debate, Senate votes to reject House’s proposed tariff raises on sugar. Vote is 48-38; eighteen insurgent Rs join 29 Ds.
Mar. 5, 1930 Amid charges of vote trading, Senate reverses position on sugar; 38 Rs and 9 Ds vote to raise sugar tariffs.
Early Mar. 1930 Coalition of sugar, oil, lumber, and cement interests gain control in Senate; they start raising rates on numerous commodities, including items already voted on previously.
Mar. 22, 1930 Revision completed in Senate.
Mar. 24, 1930 Senate passes bill, 53-31. Five Rs vote against; 7 Ds vote for.
Apr. 2, 1930 Bill sent to conference committee.
May 5, 1930 1028 American economists send letter to President Hoover asking him to veto tariff bill.
May 13, 1930 Conferees deadlock: Senate has instructed its conferees to keep debenture plan and strike down flexible provision, but House has voted to strike out debenture plan and keep flexible provision. To date, 33 nations have sent formal protests to Congress in opposition of the Tariff.
May 19, 1930 Senate agrees to recede: debenture plan is struck down by 43-41 vote, and VP Curtis casts deciding vote after 42-42 vote on flexible provision.
June 9, 1930 After some back-and-forth between conference and Senate, completed conference report is filed. To date, 59 nations have sent formal protests to Congress in opposition of the Tariff.
June 13, 1930 Senators Reed and Grundy criticize conference report but decide to accept. Senate adopts conference report, 44-42.
June 14, 1930 House adopts conference agreement, 222-153. Vote is largely along party lines: only 14 Ds vote for, only 20 Rs vote against.
June 16, 1930 VP Curtis signs bill; bill is forwarded to Pres. Hoover.
June 17, 1930 Pres. Hoover signs bill and issues signing statement.
June 18, 1930 Tariff goes into effect at 12:01 a.m. Word begins to travel through Switzerland to boycott American products.
June 30, 1930 Italy sharply increases its automobile tariffs.
July 22, 1930 Spain passes Wais Tariff of 1930, effective the next day.
Nov. 1930 France signs concession treaty with Spain, thereby negating the effects of the Wais Tariff on France.
Sept. 17, 1930 Canada enacts Canadian Emergency Tariff, increasing tariffs virtually across the board by 50%.
Summer 1931 France adopts quota system.
Nov. 30, 1931 Great Britain enacts Abnormal Importations Act, allowing the Board of Trade the ability to adjust duties up to 100% on any product it wishes.
Feb. 1932 Great Britain enacts Import Duties Act, imposing a general tariff of 10%.
Mar. 1932 Italy signs concession treaty with Spain, thereby negating the effects of the Wais Tariff on Italy.
Collecting more taxes than is absolutely necessary is legalized robbery. Calvin Coolidge
Don’t expect to build up the weak by pulling down the strong. Calvin Coolidge
Duty is not collective; it is personal. Calvin Coolidge
Economy is the method by which we prepare today to afford the improvements of tomorrow. Calvin Coolidge
I have found it advisable not to give too much heed to what people say when I am trying to accomplish something of consequence. Invariably they proclaim it can’t be done. I deem that the very best time to make the effort. Calvin Coolidge
If you see ten troubles coming down the road, you can be sure that nine will run into the ditch before they reach you. Calvin Coolidge
Industry, thrift and self-control are not sought because they create wealth, but because they create character. Calvin Coolidge
It is only when men begin to worship that they begin to grow. Calvin Coolidge
Knowledge comes, but wisdom lingers. It may not be difficult to store up in the mind a vast quantity of face within a comparatively short time, but the ability to form judgments requires the severe discipline of hard work and the tempering heat of experience and maturity. Calvin Coolidge
Little progress can be made by merely attempting to repress what is evil. Our great hope lies in developing what is good. Calvin Coolidge
No enterprise can exist for itself alone. It ministers to some great need, it performs some great service, not for itself, but for others; or failing therein, it ceases to be profitable and ceases to exist. Calvin Coolidge
No man ever listened himself out of a job. Calvin Coolidge
Perhaps one of the most important accomplishments of my administration has been minding my own business. Calvin Coolidge
Prosperity is only an instrument to be used, not a deity to be worshipped. Calvin Coolidge
The business of America is business. Calvin Coolidge
The government of the United States is a device for maintaining in perpetuity the rights of the people, with the ultimate extinction of all privileged classes. Calvin Coolidge
The man who builds a factory builds a temple, that the man who works there worships there, and to each is due, not scorn and blame, but reverence and praise. Calvin Coolidge
The nation which forgets its defenders will be itself forgotten. Calvin Coolidge
The right thing to do never requires any subterfuge, it is always simple and direct. Calvin Coolidge
There is no dignity quite so impressive, and no independence quite so important, as living within your means. Calvin Coolidge
They criticize me for harping on the obvious; if all the folks in the United States would do the few simple things they know they ought to do, most of our big problems would take care of themselves. Calvin Coolidge
Those who trust to chance must abide by the results of chance. Calvin Coolidge
To live under the American Constitution is the greatest political privilege that was ever accorded to the human race. Calvin Coolidge
Ultimately property rights and personal rights are the same thing. Calvin Coolidge
It is probable that a press which maintains an intimate touch with the business currents of the nation is likely to be more reliable than it would be if it were a stranger to these influences. After all, the chief business of the American people is business. They are profoundly concerned with buying, selling, investing and prospering in the world. Calvin Coolidge
ping
This can’t be reproducted often enough right now. Thanks for posting it.
A very timely post-—and a good one too.
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Ping!
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Ol' Silent Cal was brilliant ... it's a shame today's GOP can't find someone like him.
Very good quotes... There’s some wisdom there.
Economic growth is stimulated by removing government hands from around the neck of the private sector. This only tightens the current grip.
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"In an effort to alleviate the effects of... anyone? The Great Depression... Congress passed the... anyone? The Hawley-Smoot Act. Did it work? Anyone? It did not work."
All of Sowell's books are so helpful because they allow everyone to understand an extremely complex matter because it is presented in such simplistic, easy-to-grasp manner.
Politics and economics are two totally different animals. The Porkulus Bill is almost all politics and entitlements and should be understood as such.
More to the timeline
The Dow Jones Industrial Average sank a full 8%, from 250 to 230, over just two trading days in June 1930, in direct response to the Senate’s passage of Smoot-Hawley and Hoover’s announcement that he would sign it.
Please comment if you will on the following:
From Professor Morici:
President Obama must get behind a policy to reverse the trade imbalance with China, or preside over the wholesale destruction of many more U.S. manufacturing jobs. These losses have little to do with free trade based on comparative advantage. Instead, they derive primarily from currency practices that make Chinese products artificially cheap in U.S. and other markets and Chinese restrictions on imports. These Chinese policies deprive Americans of jobs in industries where they are truly internationally competitive.
There is no universal agreement about the effect of the tariff. According to the U.S. Statistical Abstract, the effective tariff rate was 13.5% in 1929 and 19.8% in 1933 with 63% of all imports being duty-free. From 1821 through 1900 the United States averaged 29.7% effective tariff rates and peaked in 1830 at 57.3% with only 8% of all imports being duty-free, dwarfing the Smoot-Hawley rate. In addition, imports in 1929 were only 4.2% of the United States’ GNP and exports were only 5.0%. Smoot-Hawley’s effect on the entire U.S. economy may have been small, compared to the monetary policy of the Federal Reserve System. By 1937 the effective tariff rate was reduced to 15.6% when the reaction of 1937-1938 occurred, demonstrating no statistical correlation between this economic downturn and tariff levels. Senator Robert L. Owen testified at the hearings on HR 7230, the bill to make the Federal Reserve banks a national property, that; “In 1937, when the Federal Reserve Board called upon the banks to raise their reserves to twice what they had been before, there was a contraction of credit of two billion dollars.- org.whodat
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