Robert K. Murray's Politics of Normalcy

Robert K. Murray. The Politics of Normalcy. New York: WW Norton, 1973. 162 pages. $18.95

Robert K. Murray is a good writer and this is a useful account of the Warren G. Harding administration. The subtitle refers to the "Harding-Coolidge Era" but the book is about the Harding administration with a brief final chapter about Coolidge. Coolidge is more vividly remembered than Harding because after Harding died in office minor scandals, the most famous of which was the Teapot Dome Scandal, were revealed and these tarnished Harding's image.

Murray suggests that Coolidge carried forward Harding's "normalcy" philosophy and so Harding was the more influentional of the two presidents. Arguably, Harding's "normalcy" philosophy has been carried forward through George Bush.

The scandals did not touch Harding; they were the product of two or three unfortunate appointments he had made. Ironically, Harding's cabinet appointments were among the better ones in history. They included Charles Evans Hughes (state), Herbert Hoover (commerce), Andrew W. Mellon (treasury) and Henry Wallace (agriculture; the father of President Roosevelt's Vice-President, Henry A. Wallace). However, there were several exceptions, namely, Harry M. Daugherty, an Ohio crony of Harding's who was later accused of corruption and resigned during the Coolidge administration (1924), although nothing was really proven about Daugherty. Another unfortunate appointment was Interior Secretary Albert Fall, who was responsible for the Teapot Dome scandal, which involved Harry Sinclair's Mammoth Oil bribing Fall for oil leases. Another was Charles R. Forbes, director of the Veterans' Bureau who had sold government supplies illegally and whom Harding had asked to resign as a result.

My key interest in reading this book was to try to grasp why Americans had supported Theodore Roosevelt, a left-wing Progressive Republican in 1904, then supported William Howard Taft, a conservative Progressive Republican in 1908, then supported Woodrow Wilson, a middle of the road Progressive Republican in 1912 and 1916, then reverted to what most people call conservatives--Harding in 1920, Coolidge in 1924 and Hoover in 1928.

Murray does not give an answer to this because the political vocabulary he uses is already steeped in post-World War II liberalism, but a bit of interpretation is all that is needed. Hoover was a Progressive and the question that needs to be interpreted is how two conservatives, Harding and Coolidge, got sandwiched between 30 years' worth of Republican and Democratic Progressives (Wilson being the one Democrat). The answer is that Harding and Coolidge were not conservative in the sense that the word is used to refer to the late 19th century Mugwumps or Barry Goldwater. The Mugwumps had much more in common with Goldwater than Goldwater did with Harding or Coolidge. Rather, Harding and Coolidge were rural Americans who retained some of the homespun feeling for individualism without having much concern with the ideas of laissez faire economics or individual liberty. It is evident from Murray's rich description of the 67th Congress that progressivism had long been established. Harding's goals as president revealed the same thing. His goals included increasing agricultural tariffs, improving the federal farm loan system, increasing farmers' representation on federal boards (p. 32), promotion of "business-government cooperation" (with Hoover turning the Department of Commerce into "a beehive of probusiness activity"), and shipbuilding subsidies (p. 64). The tariff that Congress passed in 1922, the Fordney-McCumber tariff, in Murray's words:

"was of dubious value...The tariff debates had rarely involved principle; there were no great clashes as in the past between high and low tariff advocates. It was simply a struggle between vested-interest-groups for economic advantage. As the New York Commercial described it: 'The tariff now represents the composite selfishness of the country.'"

With respect to subsidies to ship builders, on February 18, 1922 Harding proposed (p. 68):

"that a fund was to be created to aid private shippers in building new ships as well as in buying the existing wartime government fleet. Subsidies would be paid to private shippers on a sliding scale, depending on vessel speed and gross tonnage. Shippers were to be allowed a 10 percent annual profit, but any excess would be divided between the owners and the government until the amount of the subsidy was repaid. The estimated cost of the program was $30 million per year. In presenting this plan to Congress, Harding pointedly admonished:

'We have voiced our concern for the good fortunes of agriculture, and it is right that we should. We have long proclaimed our interest in manufacturing...But we have ignored our merchant marine. The World War revealed our weakness, our unpreparedness for defense in war, our unreadiness for self-reliance in peace...'"

However, the agricultural interests fought this proposal. As preposterous as the shipbuilding proposal sounds to me, the farm lobby's opposition sounds even more preposterous. The agricultural resistance led Harding to change his philosophy of government from a belief that the president should be hands off, to a belief that the president should lead Congress toward legislation (p. 70).

It is evident that nothing in Harding's legislative or administrative agenda were conservative in an activist sense. Rather, his notion of "normalcy" was to accept the social system that the left-wing and conservative Progressives had implemented and simply "stand pat". He had no conception that assertion of markets and reassertion of individual freedom might be preferable to the Hepburn Act or the Federal Reserve Bank. He was conservative in this sense: he wished to conserve the progressives' programs, adding just a wee bit more progressivism, but not too much. What he meant by "normalcy" was just a wee bit more government spending.

In pages 3-6 Murray makes clear that there were serious economic problems facing the nation in 1920. Wilson had failed to liquidate military supplies resulting in inefficiency and waste (p. 3). Roberts indicates that prices increased 104.5% between 1914 and 1920, a compounded annual inflation rate of more than 10%. (Note that the Federal Reserve Bank was founded in 1913.) On top of the inflation, the end of the war threw many Americans into unemployment. In February 1919 an estimated 3 million Americans were unemployed. Then, the cost of living fell by about 10% in March 1921, just when Harding was inaugurated (March 4). By May 1921 farm prices had fallen by two thirds and land values fell (p. 5). The unemployment rate was 20 percent. Interestingly, Roberts is describing an inflation/recession somewhat like the one that preceded the election of Ronald Reagan in 1980. In the late 1970s the inflation and increasing unemployment occurred together, but the situation wasn't that different. But Harding did not offer to remedy the inflation/unemployment cycle by correcting Fed policies. Rather, his normalcy policy was primarily political: to end the discussion of the League of Nations and to subsidize farmers with a tariff (p. 11), tighter immigration policy, a bigger navy, subsidies to the shipbuilders and an anti-lynching law. He also favored rationalization of government, a long-time progressive theme. Most of all, Harding advocated normalcy (quoted on p. 15):

"By 'normalcy' I don't mean the old order, but a regular, steady order of things. I mean normal procedure, the natural way, without excess."

Harding defined the Republican stance for much of the twentieth century. Republicans have called for normalcy, accepting the "progressive" reforms that the Democrats concoct and then responding to by saying that they are too much. The Republicans then call for "normalcy" and win another term in office. But is it normalcy to have a Federal Reserve Bank that prints $29 billion to subsidize an incompetent and corrupt investment bank like Bear Stearns? Is it normal for the US government to spend a trillion dollars a year? What is normal about that? Perhaps in Harding's day the normalcy theme rang true, but the Democrats' schemes, the Department of Education, inflation, the Fed, political correctness, the incompetent, "progressive" education system, the failed social security system, the failed policies of "urban renewal" that destroyed American cities and subsidized real estate developers are not normal. Is accepting such programs normalcy?

The Obama Cabinet and the Teapot Dome Scandal

Rev. Jeremiah Wright and William Ayers (1968).







During recent debate about Barack Obama's associates, Mr. Obama's proponents have claimed that he should not be accountable for his friends' opinions. But presidents appoint their friends to cabinet and staff posts. In 1924 it was revealed that Warren G. Harding's cabinet appointees had illegally sold medical supplies and leased oil wells to Sinclair Oil interests in the famous Teapot Dome scandal. Let us imagine President Obama's potential cabinet:

Secretary of Education: William Ayers
Secretary of Health Education and Welfare: Rev. Jeremiah Wright
Secretary of the Treasury: George Soros
Secretary of the Interior: Rev. Michael Pfleger
Attorney General: Reverend Louis Farakhan
Secretary of State: Sami al Arian
Postmaster General: Barbara Bowen (president of CUNY's faculty union)
Secretary of Defense: Bob Avakian

Given Mr. Obama's poor judgment in his choice of associates, how many Teapot Dome scandals will ensue from an Obama cabinet?

Hey Hey, Ho, Ho, Maurice Hinchey's Gotta Go!

It is time to defeat Congressman Maurice Hinchey. He has been riding high in a gerrymandered district that goes as far west as Ithaca and includes Ulster and Sullivan Counties. According to Heather Yakin in the Times Herald Record Congressman Hinchey yesterday called for a price control ("cap") on gasoline prices to be set at $2.59 a gallon. Those of us who remember the 1970s gas lines (see photo above) caused by government rationing know that Hinchey is out of his mind. As a Congressman, Hinchey himself likely would have a special deal on gasoline or just tell an aide wait in the two-hour lines. Those who need gasoline the most will not be able to get it, while the politically connected, like Congressman Hinchey, would enjoy an ample supply. Congressman Hinchey need not need be concerned if oil exploration firms do not seek new sources of oil and poor people cannot get gas because of the "cap", or if people who have access to the gasoline do not economize. Hinchey's proposal is selfish, vicious and anti-environmentalist since those who have access to the gas will squander it due to the artificially low price.

A glance at the map of the 22nd Congressional district delineates the extent to which Congressman Hinchey has benefited from unethical and anti-democratic gerrymandering by New York State's corrupt political establishment. The district includes eight counties (Broome, Delaware, Dutchess, Orange, Sullivan, Tioga, Tompkins and Ulster). Only Sullivan and Ulster are completely in Hinchey's district. The twenty-second district's absurd shape illustrates how Congressman Hinchey has enjoyed the fruits of New York State's political corruption. He has run unopposed for years.

Republican Antecedent to Regulatory Attacks on Commodity Speculation

The notion that regulators or public deliberation can better anticipate the valuation of commodities than can speculators is wrong for several reasons. First, there is no reason to believe that the public at large, professional economists, politicians or appointed officials are better equipped to value an asset like commodities than are private traders. The information required to do so is specific to time and place and requires the judgment and expertise appropriate to an individual with specific knowledge about commodity markets. This can only be obtained through professional experience.

Second, commodity speculators take considerable risk in investing in commodities and therefore are motivated to make the most accurate predication of future price. In contrast, politicians, appointees and the general public are unaware of the risk associated with a given price prediction. If the commodity speculator is wrong he loses his investment. If the politician is wrong, someone else goes hungry. That is, regulation of commodity prices potentially creates shortages. Such shortages can cause starvation and other forms of deprivation. The economists, experts, politicians and public advocates who clamor for regulation are not the ones who will suffer. Theirs is a special sort of greed and viciousness.

The ability of markets to assess value is unparalleled. Shortages induce increases in price. If speculators irrationally bid up prices, then public demand for the commodity will marginally decline. Depending on the responsiveness or elasticity of the commodity price, a small decline in demand potentially can have a large effect on price. It is not unusual for speculators to lose large fortunes in the commodity field. This would be associated with a price correction.

The power of markets to reassess erroneous price determinations was unknown in the days of the Progressives. Today's social democrats are likewise economically illiterate. It is not surprising that many Republicans, schooled in the Progressive tradition, are, like social democrats, eager to greedily cause shortages that harm the poor.

When Warren G. Harding won the presidency in 1921 he was the first non-progressive president in almost twenty years, since William McKinley. The public had been frustrated by an inflation that occurred following World War I and, as well, by Woodrow Wilson's obsession with the League of Nations. Progressivism was primarily a Republican, not a Democratic, movement. Not all Republicans were Progressives, but a large share of the Republican Party, perhaps half, bolted in 1912 to vote for Theodore Roosevelt, the Progressive Party candidate, enabling Wilson to win. Wilson was a progressive but of a different stripe from Roosevelt. He emphasized individualism, he opposed the minimum wage, he had long been an advocate of the gold standard, and he retained a belief in the producerist philosophy that had informed 19th century Republicans.

Harding was not idelogical and has generally been viewed with skepticism by left wing historians as well as by the Progressives of his day. However, by 1920, after nearly two decades of Progressivism, the assumptions that politicians made were very much in the Progressive tradition. Neither Harding nor Coolidge, who succeeded Harding after his death, had any interest in repealing Progressive legislation such as the Hepburn Act, which established federal price controls on railroads, or the Federal Reserve Bank. Instead, Harding argued for "normalcy". In his riveting book The Politics of Normalcy*, Robert K. Murray describes the 67th Congress, which was Republican, as was Harding, as involving a contest between several special interests for regulatory privilege. The idea of laissez faire had already been forgotten. In its place, farm interests were clamoring for tariffs and farm supports and business interests were clamoring for tax reductions. In addition, there were regional conflicts over regulatory advantage.

One of the laws that the agricultural lobby pushed through early in the Republican Congress (irritating the business lobby, which thought they would get their special interest legislation passed first) was the passage of the Capper-Tincher bill**. The Capper-Tincher bill was passed as the Future Trading Act that:

"...more carefully regulated the grain exchanges by placing a prohibitive tax on speculative transactions involving puts and calls, bids and offers."

Although the politics of the 1920s are thought of as a reassertion of conservatism, it is important to understand that by 1921 Harding no longer thought in terms of the limited government philosophy of the late nineteenth century Mugwumps, Jackson or Jefferson. Rather, Harding's normalcy simply referred to an end to the inflation, radical emphasis on the League of Nations and war-related imbalances that occurred during the Wilson administration. It was no rejection of Progressivism.

Today, we again hear clamor for regulation of freedom of exchange in the name of economic illiteracy. Not surprisingly, the clamor comes from both parties.

*Robert K. Murray, The Politics of Normalcy: Government Theory and Practice in the Harding-Coolidge Era. New York: WW Nortn, 1973.

**Ibid., page 50