The Magazine

Time for Another Harding?

How a much-derided Republican president actually succeeded in cutting the budget and fixing the economy.

Oct 24, 2011, Vol. 17, No. 06 • By ALLIS RADOSH and RONALD RADOSH
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Harding was inaugurated on March 4, 1921, and he immediately tackled the crisis. He called for a special joint session of Congress, to take place before the legislators were officially scheduled to convene. At the session, Harding laid out his agenda and priorities. His ambitious program included: tax reform, continued tariff protection, legislation to help farmers, creation of a national budget system to help get government spending under control, construction of a great merchant marine, a system of national highways for interstate commerce and the “motor car” (financed with local and state bond issues), encouragement of aviation technology for civilian and military purposes, increased federal participation in international cable and radio transmissions, a Veterans’ Bureau, and a Department of Public Welfare to help women and children. 

Harding also called for a federal antilynching law, to “rid the stain of barbaric lynching from the banner of a free and orderly representative democracy.” And he proposed creation of an interracial commission to promote better relations between the races. Woodrow Wilson had introduced segregation into the federal government; Harding urged his cabinet to appoint qualified blacks to their departments, and in speeches he attacked the Ku Klux Klan. The legislation he championed, however, came to naught. When the Republican majority in the Senate was ready to pass the antilynching law Harding favored (the Dyer Bill), Southern Democrats killed it with a filibuster. The proposal for an interracial commission died in committee.

But at the top of the president’s list was setting the country’s economic house in order. During the war, he told his former colleagues, “our expenditures were so little questioned, the emergency was so impelling, appropriation was so unimpeded that we little noted millions and counted the Treasury inexhaustible. .  .  . A continuation of such a course means inevitable disaster.” A way must be found, he continued, “to restrict our national expenditures within the limits of our national income, and at the same time .  .  . lift the burdens of war taxation from the shoulders of the American people.” 

To help achieve his goals, Harding was determined to put together a stellar cabinet, and for the most part he did. To instill confidence in the business community he chose Andrew Mellon as secretary of the Treasury. He picked Herbert Hoover to be his secretary of commerce. He admired Hoover’s work as head of the American Relief Committee during the war and believed he could help the country gain access to new world markets. Charles Evans Hughes, former governor of New York, was tapped to be secretary of state and Henry C. Wallace secretary of agriculture. 

Harding had originally wanted Charles G. Dawes to be his Treasury secretary. Dawes, a banker and successful businessman, had served as President McKinley’s comptroller of the Treasury and had a reputation for efficiency and for getting results. Harding had been intrigued by a magazine article Dawes had written entitled “How a Presi-dent Can Save a Billion Dollars.” After the election, he asked Dawes to come to Marion and offered him his first cabinet appointment, secretary of the Treasury. But Dawes rejected the offer. If Harding was truly interested in balancing the budget and reducing the debt, he told him, the secretary of the Treasury was not the man to do it. It would have to be done through legislation providing for an executive budget. If such an act were passed, then Dawes wanted to head the Budget Bureau.

There was general agreement in Washington that the federal budget process was a mess. For over a hundred years each department had submitted its own budget with little coordination or control. Wilson had tried to get a bill passed dealing with the budget process, but had failed. Now Harding stepped up. The Budget and Accounting Act passed on June 10. It placed the new Budget Bureau—predecessor to today’s Office of Management and Budget—in the Department of the Treasury, but made it accountable to the president. Harding appointed Dawes its director. Dawes agreed to take the job on two conditions: that he would have the president’s complete support and that he would serve for only one year, allowing him to set up effective operating procedures so that the bureau could carry on without him. 

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