Thursday, April 10, 2014

'Bring Back Silent Cal!'

'I bet I can make you say 3 words'
'You. Lose'
Amity Schlaes has written a very good, comprehensive book on one of the most obscure Presidents of the United States that many people have never heard of: Calvin Coolidge.

Quick: A) Name the years he served; B) how he got there and C) what his record was as President. (no cheating or Googling)

See? It is almost as if he has disappeared from the US history books. (*answers at bottom of post)

A man of few words, President Coolidge was sitting next to a young lady at a dinner one time who wanted to challenge his reputation as 'Silent Cal'.

'I made a bet that I could get you to say at least 3 words to me tonight' the young lady said to the President.

Without looking at her, he said. 'You lose' and went on about eating his dinner.

We are only just beginning the book but let's take a quick look at some of the major achievements of 'Silent Cal' Calvin Coolidge from the introduction by Ms. Schlaes:
'It is hard for modern students of economics to know what to make of a government that treated economic weakness by raising interest rates 300 basis points, cutting tax rates and halving the federal government...
It is harder still for modern economists to concede that that recipe, the policy recipe for the early 1920's advocated by many men of both political parties, yielded growth on a scale to which we can only aspire today...
  • 'Under Coolidge, the federal debt fell.
  • 'Under Coolidge, the top income tax rate came down by 1/2, to 25%'. 
  • 'Under Coolidge, the federal budget was always in surplus.
  • Under Coolidge, the economy grew strongly even though the federal government shrank. 
  • When Coolidge retired in 1929, the federal government was smaller than when he had become president in 1923. 
  • The federal budget under Coolidge had military, veterans and interest on the national debt accounting for 50% of it
The robust economy of the 'The Roaring '20's' might have rivaled the Internet Boom of the 1990's when another President, William Jefferson Clinton figured out after his first 2 years he could not get much done tacking to the left-wing of the Democratic Party after HillaryCare was ignominiously and roundly defeated in 1993-94. (Obamacare is just HillaryCare on performance-enhancing steroids)

He made his best hire of his presidency when he appointed Erskine Bowles of North Carolina to be his chief of staff. Treasury Secretary Robert Rubin brought confidence to Wall Street and interest rates plummeted.

The 'peace dividend' from the wind-down of the First Iraq War led to lower deficits.

The Budget Act of 1990, signed by President George Bush 41 after arduous negotiations with House Democrats at Andrews AF Base, flattened the growth in federal expenditures to about 2%/year from 1995 on to produce the only budget surpluses most of us will ever see in our lifetimes.

We don't even think President Obama knows that Andrews AFB can be used for anything else short of a convenient disembarkation site for his many vacations taken over the past 6 years.

The federal debt was paid down by close to $700 billion by the end of 2000. It stood at only $5.6 trillion when Bill Clinton left office on January 20, 2001. (although perhaps 1/3 of that amount was intragovernmental debt such as for Social Security 'trust fund' (sic) allocations meaning the 'real debt' we had to pay actual interest on a monthly basis at about $3 trillion)

Today, the federal debt is at $17 trillion+...and climbing daily. There is no way we won't hit $20 trillion in debt before 2020. None whatsoever under current policies advocating by President Obama.

The point of all of this?

Other than strongly encouraging you to get and read Ms. Schlaes' book 'Coolidge' today, the point is to show you how restraining or reducing the spending by the federal government coupled with the major cutting of marginal tax rates has led to economic prosperity in a big way in our nation's past.

It is not 'impossible'; 'crazy' or 'insane' as many defenders of Big Government Spending would have you to believe. Tell them they are wrong the next time they try to shout you down.

We remain of the very strong opinion that the next president can and should follow the lead of 'Silent Cal' Calvin Coolidge.We are pretty sure President Obama will never change his ways so the next president will have to lead to help systematically reduce spending in every federal program on a line-item-by-line-item basis.

Even the Defense Department was not spared the knife under 'Silent Cal'; the Navy was slashed 20% in one year alone.

We think that the first thing that needs to be done is to separate the entitlement programs from the rest of the discretionary budget.

Call it the 'decoupling' or the 'disestablishment' of entitlement spending on individual support from the rest of spending that goes more for the 'common good' in terms of transportation, defense and other annual discretionary programs.

Social Security should have been converted to personal savings/retirement accounts long ago. People retiring today could be sitting on nest eggs of $300,000 or more with monthly annuity payments far in excess of the meager $1700/month average most seniors will receive from the current outdated SS model.

Medicare should also be modernized where your payments into the Medicare system actually go into an account that can be used to pay your medical expenses not just in your golden age when you start to really break down but for your entire life!

Check this out: Under both of those plans described above, you would own the contracts and accounts, not anyone else.  Right now, you kick the bucket at age 65 years, 364 days, 23 hours and 59 minutes and you lose all of your potential Social Security benefits. (full retirement age is 66)

Do the same at age 64 years, 364 days, 23 hours and 59 minutes and you don't qualify for Medicare either! (full retirement age is 65)

How unfair is that?

We have written extensively about these in the past and published a myriad of ways other experts have figured out how to achieve both ends.

But read about Calvin Coolidge first. He may inspire you to be as frugal as he was which, at the same time, led to prosperity for all of our great-and great-great grandparents...and, for some of us, our very own parents.

* A) 1923-1929.  B) Coolidge was VP and replaced Warren G. Harding who died in office. C) Excellent...on all accounts.
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