|
|
Executive Times |
|||
|
|
|
|||
|
|
|
|||
|
|
2007 Book Reviews |
|||
|
|
Mellon:
An American Life by David Cannadine |
|||
|
Rating: |
*** |
|||
|
|
(Recommended) |
|||
|
|
|
|||
|
|
Click on
title or picture to buy from amazon.com |
|||
|
|
|
|||
|
|
Pictures I first “met”
Andrew Mellon in 1965 when I entered the National Gallery of Art in I had never failed in
anything on which I had set my mind so far, and why might I not succeed in
this also? Thomas Mellon and His Times, p. 154 I.
TREASURY, CONGRESS, AND PRESIDENCY By the beginning of 1927,
Andrew Mellon’s work at the Treasury was largely done. Taxes had been cut,
government spending had been halved, and the debt had been reduced by $6
billion. The surplus for fiscal year 1927, at first estimated at $18o
million, had been revised to $300 million; but it eventually attained the
record level of $636 million, which speaks better of the government’s
capacity to generate revenue than its ability to make projections.1 Fewer
poor people were paying taxes; more rich people were doing so; the national
economy was full speed ahead. “I see nothing to indicate that business will
not be good throughout the country,” Mellon observed in late March 1927,
before embarking on a brief trip to The stock market seems to be going on
in very orderly fashion, and I see no evidence of over-speculation. There is
an abundant supply of easy money throughout the country which should take
care of any emergencies which should arise. I do not look for any change in
the Federal Reserve Rate for some time to come, because I can see no reason
for changing it. . . Our
government will have about $500,000,000 surplus on hand as of June 30. . . All signs and indications at the moment
point to the country enjoying a successful business year.2 Until the time of the
presidential election early in November 1928, Mellon remained generally
pleased with the economy, and thus relatively relaxed about it.3 But
while the boom continued, its nature was changing. Previously, it had been
largely based on productive investment in the growth of resources and output.
But with unprecedented deposits and accumulating surpluses, banks and
businesses now began to lend to brokers and speculators, who promised high
returns based on buying and selling shares, encouraged by Wall Street’s and
Main Street’s belief that prices could only go up. One select group of
stocks, averaging 186 on March 23, 1927, reached 196 on April 5, 200 on April
12, and 217 on June 2, a gain of 31 points in ten weeks.4
Mellon did not generally approve of stock speculation, and scarcely
understood the greedy, gambling mentality behind it. But he did not
wish to take any corrective fiscal action that might cause the economy to
stumble before an election, and the Federal Reserve Board likewise showed no
inclination to raise interest rates, which fluctuated between 3.5 percent and
4 percent from the beginning of 1925 until the end of 1927. Yet for the
board, for Mellon, and for Benjamin Strong, the reason for holding rates
down was increasingly international rather than domestic: the need to
encourage gold to flow to Much of Mellon’s business
at the Treasury during 1927 and early 1928 thus seemed predictable and
routine. Having only recently succeeded in having his tax reforms included in
the Revenue Act of 1926, he wanted to wait to see how they worked out.
Arguing that the massive federal surplus of 1927 would not reappear the
following year, and with his best estimates putting it at only $252 million,
he proposed only minor tax reductions, to the extent of $225 million, in the
next revenue bill he sent to the House.6 He sought a reduction in
corporate income tax from 13.5 percent to 12 percent, the first notable
relief for business since the repeal of the excess profits tax in 1922. He
proposed that surtaxes on those earning between $10,000 and $70,000 be
adjusted downward, and he urged that the federal estate tax be repealed
altogether, leaving it to states to tax inheritance if they wished. In the
autumn of 1927, these proposals were discussed by the But once again, Mellon (and
Mills) met with resistance, for with elections pending in 1928, the
Democrats now took up the very cause of tax reduction they had previously so
derided. The House minority leader, John Nance Garner, wanted the corporation
tax rate lowered to i i
percent and the automobile tax repealed, along with all wartime excise
taxes. Meanwhile, the Ways and Means Committee came up with its own proposals:
there should be no repeal of the estate tax or adjustment of surtaxes, but a
reduction in corporation tax greater than Mellon wanted but less than Garner
proposed. The resulting bill got bogged down in the House, and Mellon became
increasingly worried that, with the surplus dwindling and additional tax cuts
likely, the balanced budget was in jeopardy. It was, he maintained, in a
public letter to President Coolidge, “an essential element of any sound
fiscal system, and as long as I am Secretary, the Treasury Department will
resist the undermining of the principle.” He also took issue with the
Chamber of Commerce’s advocacy of $400 million in tax cuts.7 That
a Republican organization should be supporting the Democrats seemed to
Mellon both reckless and opportunistic, and in letters and speeches he made
it plain the business community could expect no special favors from him. By spring of 1928, the
revenue bill had finally reached the Senate, where it was batted back and
forth between the Finance Committee and the floor. Eventually, the corporate
income tax rate was set at 12 percent, the surtaxes remained unchanged, the
estate tax was preserved at current levels, and an attempt to make tax
returns public again was successfully beaten off. Meanwhile, Democrats in
both chambers complained that the Treasury estimates of the surplus were
being constantly manipulated in order to make the case against further tax
cuts. The eventual legislation was a tepid compromise. The Democrats had
failed to make political hay by reducing taxes as sharply as they wanted,
while the Republicans could claim that they had reduced taxes for the fourth
time since they had taken power, although this cut was relatively small.
Assisted by Senator David A. Reed on the Finance Committee, Mellon had
successfully fended off calls for greater cuts which would have depressed
federal revenue by as much as $500 million, thereby making it impossible to
balance the budget. The secretary who had wielded the tax ax with increasing
determination in 1921, 1924, and 1926 was now more concerned with trying to
hold the line. During the same period, the
enforcement of Prohibition remained an intractable problem. Since mid-1925,
the reorganization of the Prohibition Unit had been in the hands of
Brigadier General Andrews, who was by now an assistant secretary of the
Treasury.8 He was eager to dismiss all Haynes-era political
appointees, and Mellon generally approved; but he was not eager to wrangle
with Congress over political appointments, or to reactivate his (temporarily
quiescent) “dry” critics. In March 1927, Congress finally passed the
Mellon-Andrews Reorganization Act, establishing a new Prohibition Bureau
within the Treasury but putting it under the authority of Haynes, the very
figure Mellon and Andrews had tried to sideline. Relations between Haynes and
Andrews were predictably uneasy, and so amid continuing criticism of the
Treasury’s lack of zeal, Mellon eventually had to sack both men. In their
places, he promoted chief chemist James Doran to commissioner and brought in By early 1928, the stock
market “began to rise, not by slow, steady steps, but by great vaulting
leaps,” and the volume of shares traded broke one record after another. With
Mellon’s approval, the Federal Reserve Board—recently unburdened of Harding
crony Donald Crissinger, who had been replaced by
Roy A. Young, for eight years governor of the Minneapolis Federal Reserve
Bank—now reversed its low-interest policy and sanctioned three separate
increases of 0.5 percent in the first half of the year, bringing the rate to
5 percent by the summer of 1928, the highest since 1921. 10 These
measures proved ineffectual: stock speculation intensified, and gold began
returning to the As Calvin Coolidge’s term
of office drew to a close, there was wide-spread political speculation about
whether he would run for re-election. Mellon had no doubt that he would, or
that he would win. But on August 2, 1927, with Mellon away in Europe on his
summer holiday, the president stunned In the wake of Coolidge’s
announcement, there was a brief bubble of support for Mellon himself, which
lasted until the spring of 1928. The
Hearst press and the Pittsburgh Republican machine both boosted his
presidential prospects, and so did such independent journals as the Denver Post, the New York American, and the Los
Angeles Examiner News of this possibility even reached There are successful business leaders
who will think twice about government service after reading this book. A life
of integrity ends with litigation and public humiliation as Mellon is blamed
for the Great Depression. Mellon
is a well written biography that will leave readers thinking long after the
final page is turned. Steve Hopkins,
April 25, 2007 |
|||
|
|
|
|||
|
Go to Executive Times
Archives |
||||
|
|
||||
|
|
|
|||
|
|
The recommendation rating for
this book appeared in the May 2007
issue of Executive Times URL for this review: http://www.hopkinsandcompany.com/Books/Mellon
An American Life.htm For Reprint Permission,
Contact: Hopkins & Company, LLC • E-mail: books@hopkinsandcompany.com |
|||
|
|
|
|||
|
|
|
|||
