The Model for Cutting America’s Debt
By William Beach
This article appears in the Summer 2024 issue of the Coolidge Review. Request a free copy of a future print issue.
“Perhaps one of the greatest satisfactions of my administration lies in the very marked reduction of the national debt since I have been president.”
—Calvin Coolidge, October 4, 1927
In an age when the federal deficit runs into the trillions of dollars annually, it can be difficult even to conceive of a balanced budget in Washington. Nearly a quarter century has passed since the federal government avoided a deficit. Small surpluses popped up for a few years at the end of the twentieth century, but they proved to be short-lived. In fact, the federal budget has gone into the red in all but fourteen years since 1929.
Why choose 1929 as the demarcation point? That was the year President Calvin Coolidge left office.
DEBT REDUCTION
As Representative French Hill has shown, Alexander Hamilton established the norm that allowed American leadership to skirt debt disasters.
Hamilton recognized that to survive after 1789, the new Republic needed to swiftly assure its major creditors that it would pay its debts and be a good credit risk. The treasury secretary made tough decisions and established the new federal government’s credit system.
The “Hamiltonian norm” held that the United States would always work to repay its debts first. To accomplish this goal required a stable monetary system—keeping inflation low by supporting the value of U.S. bonds. It also required stable fiscal policy—responsible federal spending. By these measures, the debt would be paid, the value of the debt would not be inflated away, and Congress would act to support the high quality of America’s financial promises.
Emergencies do arise. In cases of wars and financial panics, the U.S. government reacted by taking on more debt. But Congress and presidents generally worked to restore balance and resume adherence to the norm once the emergencies passed.
Perhaps the most heroic and overlooked effort to restore the Hamiltonian norm occurred during the administrations of Warren Harding and Calvin Coolidge. Coolidge, in particular, worked diligently to reduce massive spending and debt increases stemming from World War I.
And he succeeded. In his sixty-seven months in office, President Coolidge cut the budget substantially. This is not to say that he reduced the rate of growth in the federal budget, which is often what today’s politicians call “budget cuts.” No, Coolidge slashed the federal government’s total outlays. When he became president in 1923, the federal budget stood at $3.14 billion. By 1927, outlays had fallen to $2.86 billion. That amounts to a 9 percent reduction in spending.
Even as spending increased (slightly) in 1928 and 1929, the budget stayed lower than it had been when he assumed the Oval Office. Coolidge remains the last president to have cut the size of government.
And in those last two years of the Coolidge presidency, federal revenues still exceeded costs, by far. The U.S. government ran a surplus every year of the Coolidge administration. The result? The federal government paid off roughly one-third of its total debt.
A BUDGET OBSESSION
In May 1923, as vice president, Coolidge declared, “After order and liberty, economy is one of the highest essentials of a free government.” He lived by that principle when he became president little more than two months later.
In a 1924 speech, President Coolidge said, “The budget idea, I may admit, is a sort of obsession with me.” He wasn’t exaggerating. The president met practically every week with the director of the Budget Bureau, General Herbert Lord. So committed to economizing was Coolidge that he scrutinized the budget of the White House housekeeper—and praised her when she reduced her annual spending from $11,667.10 to $9,116.39.
If we want solutions to our seemingly intractable debt crisis, we must examine how America overcame its debt problems in the past. There is no better model than Calvin Coolidge. He is the rare example of a peacetime president who curtailed government’s growth.
In the same 1924 address, President Coolidge said: “I believe in budgets. I want other people to believe in them.” We need new leaders who share his belief in budgets.
William Beach, the former head of the Bureau of Labor Statistics, is the Coffin Family Fellow at the Coolidge Foundation.