American Experiment (238 page)

That important business was a ship subsidy bill, and the Republicans throughout the decade pushed through subsidies for a variety of business interests despite their vaunted belief in laissez-faire. But the most powerful Republican thrust came in the field of taxation. This was Treasury Secretary Mellon’s domain. The financier was quite direct and emphatic in his approach to taxation. The income tax and war demands had shifted the tax burden too heavily onto the upper-income classes, he believed, impairing their capacity to risk capital for the expansion of production. Soon after his appointment, Mellon appeared before the House Ways and Means Committee to urge repeal of the excess-profits tax and reduction of the maximum surtax rate from 65 percent to 32 percent.

Harding fully backed his Secretary, though he was hardly of much help intellectually. “I can’t make a damn thing out of this tax problem,” he exploded to an aide. “I listen to one side and they seem right, and then—God!—I talk to the other side, and they seem just as right.” But Mellon did not need Presidents; he had himself. With the help of Penrose and other Old Guard members of Congress, he pushed through the first of his revenue bills by the end of 1921. Unappeased, he pressed for further reductions in personal income taxes on the rich and in inheritance taxes, gaining these in the revenue acts of 1926 and 1928 under Coolidge. Mellon backed up both Harding and Coolidge in vetoing veterans’ bonus bills, and he worked closely with Harding’s budget director, Charles Dawes, on government economy. By the time Mellon left Hoover’s Cabinet for the Court of St. James’s in early 1932, the Mellon-Harding-Coolidge-Hoover fiscal program had long been firmly in place.

Only one thing seemed to threaten continued Republican ascendancy throughout the decade—scandal. Rumors of malfeasance on the part of an “Ohio gang,” climaxed by the suicide of an old friend of Harding and Daugherty, began circulating through Washington early in 1923. The President had been suffering from high blood pressure and other ills for some time, and his concern over the reports probably hastened his death,
apparently from an embolism, during a long trip back from Alaska early in August that year. For months, indeed years, following Harding’s death, Washington was titillated by revelations of fraud and bribery in the Veterans Bureau, of secret leases of Teapot Dome oil reserves to oil men in exchange for their “loans” to Harding’s Interior Secretary, Albert B. Fall. Attorney General Daugherty, who was accused of conspiracy, refused to testify, charged that “Red labor” was plotting against him, and got off with a hung jury, some three years after Coolidge had sacked him.

For all the publicity, the scandals had little effect on Republican presidential victories. In large part, this was due to Coolidge’s probity and his distance from the “Ohio gang.” Coolidge also possessed a gift that Harding lacked—luck. He had luck in small ways: the news of Harding’s death came to him while he happened to be in his rustic home town in Vermont, resulting in marvelous newspaper stories of his swearing-in by his father, a notary public, in the little parlor of the Coolidge household. If Harding had died a day later, the news would have come to Coolidge while he was stopping at the baronial New Hampshire estate of a rich Boston friend. He had luck in big ways too: the “Coolidge boom” roared all through the five and a half years of his presidency.

Coolidge
boom? This was just what Andrew Mellon had planned.

The Republican “compact majority” was far less united over foreign policy than domestic. Businessmen could agree on tax, labor, subsidy, and similar issues, but the business community fragmented in the face of world needs and demands. Ideologically they divided into isolationists, unilateralists, and internationalists; economically they divided into importers and exporters, competing regional producing interests, investment bankers like the House of Morgan favoring financial and commercial cooperation with London, and industrialists like the Rockefellers pressing for aggressive American investment abroad. Politically they divided into factions in the GOP, in Congress, and in the presidency. The conservatism that dominated the decade’s thought seemed to falter at the water’s edge.

The result was a foreign policy of zigzag, of “fits and starts, of hesitancy and of timid advance,” in L. Ethan Ellis’s words. At times, envoys to Washington could hardly find a foreign policy. Editors sardonically suggested that the American Secret Service or even Scotland Yard be dispatched to locate it.

Harding’s Cabinet epitomized the Republican disunity. On the President’s right sat Secretary of State Charles Evans Hughes, ardent
spokesman for the dwindling band of GOP internationalists. Across from him was the imperious Andrew Mellon, who had bankrolled the unilateralists’ campaign against Wilson’s League. Between them was Commerce Secretary Herbert Hoover, whose main goal now was to promote American exports while limiting imports. Alongside these men sat the knavish party regulars and domestic policy brokers, Albert Fall and Harry Daugherty. These regulars linked with the conservative congressional party centered in the Senate, where Lodge continued to press for a foreign policy expressive of American power, and where Borah and his fellow isolationists now opposed Lodge as tenaciously as they had fought Wilson.

Washington seemed headed for a dull and squalid unilateralism as the Republicans dropped any pretense of fulfilling Harding’s vague promise of an “association of nations” in place of the spurned League. Then came a historic zigzag.

A deadly spiral of naval shipbuilding had begun as the British, once America had opted out of the League, wished to reassert their traditional command of the seas, as the Japanese undertook their own buildup, and as American watchdogs called for escalation. But there were calls too for an end to the arms race. Borah, moving to head up the disarmament movement, proposed a simple halving of naval construction by the three maritime superpowers. Lodge earlier had buried two such resolutions, but Borah proved his match in legislative maneuver. Moreover, the Borah Resolution captured the imagination of the public, which hailed it as the “Model ‘T’ ” of diplomatic proposals for its simplicity and practicality. A sizable portion of the business community, concerned that the cost of the naval arms race—in an era when an estimated 93 percent of all federal expenditures went to military or veterans’ programs—would interfere with Mellon’s planned tax cuts and business subsidies, quietly rallied behind the peace movement.

In this thrust toward peace, women leaders were now playing their part. Fresh from their success in helping secure female suffrage, members of the League of Women Voters made disarmament the first issue on which to demonstrate the power of the woman’s vote. Carrie Chapman Catt roused the LWV convention in April 1921 with a hard-hitting call to action: “Everybody at this time is extremely careful about being nonpartisan. I don’t care a rap about it. I am for disarmament. I believe in taking action…. We are the appointed ones to lead in this question.” The women coordinated an alliance of church groups, unions, business and academic spokespeople in favor of arms control.

Lodge and Harding succumbed to the mounting public pressure; on July 10, Secretary of State Hughes invited the Japanese, British, and six other
powers to send representatives to Washington to discuss naval armaments and political problems in the Far East. Hughes saw in the negotiations an opportunity to revive the internationalist wing of the Republican party. Throughout the summer he consulted with a group of young naval officers and administrators, led by Assistant Secretary of the Navy Theodore Roosevelt, Jr., and together they hammered out an audacious proposal to end the arms race.

Although Harding appointed him as one of the four American negotiators, Lodge at first put little stock in the conference. “I do not for a moment believe that either Japan or England will accept any disarmament proposals,” he confided to his diary just days before the talks opened, “but ... we shall have made our position clear and will lay the responsibility where it will belong—with them.”

In mid-November 1921, the negotiators and their advisors assembled in Continental Memorial Hall for the first session of the naval talks. Only the handful of American experts who had been working with Hughes suspected that they were about to witness one of the most dramatic acts of individual leadership in the history of peace. The crowd of distinguished guests—senators and congressmen, Holmes and Brandeis from the Supreme Court, Vice-President Coolidge, British pacifist spokesman H. G. Wells—heard President Harding make a vapid introductory speech and then applauded politely as the Secretary of State took the floor.

It was the moment of a lifetime. Hughes, erect and gray-bearded at the podium, shocked the audience by calling for an immediate end to all naval construction, and went on to spell out in exquisite detail a plan for stopping the construction of capital ships for at least ten years. As the foreign negotiators sat bolt upright in disbelief, Hughes listed the ships that each power would have to cancel or scrap—seventy-eight battleships in all, totaling nearly 2 million tons. In the gallery, William Jennings Bryan, still the leader of American pacifists, sat with tears of joy in his eyes.

Hughes had instantly riveted world attention on the Washington Conference, making it difficult for any of the delegates to challenge the American proposal. Though weeks of hard negotiating still followed, the Secretary’s task was made considerably easier by the cryptologists of the Navy’s “Black Chamber,” who broke Japan’s diplomatic codes and so were able to learn the Japanese negotiating positions in advance. But it was Hughes’s benign persistence, coupled with his willingness to link the arms talks to the resolution of the political problems pending in the Far East, that finally turned the tide. The Americans’ flexibility in mixing diplomatic, territorial, and arms compromises, Hughes said later, “alone made possible the success of the Conference.”

A broad-ranging series of agreements grew out of the Washington talks. The British and Japanese accepted Hughes’s ten-year freeze and a ratio of 5:5:3 in battleships between their fleets and the U.S. Navy. Japan settled for the short end of the ratio, but in return Britain and America promised not to build or fortify any new bases in the Western Pacific. France and Italy also agreed to limit the number of their capital ships, as long as smaller vessels were exempted from the treaty. Limits were set on the tonnage and armament of all remaining warships. On the political front, Japan and Britain replaced their military alliance with a four-power nonaggression pact that included France and the United States, thus laying to rest American fears of a possible joint Anglo-Japanese attack. Lodge was able to secure Senate approval of all these agreements, although the isolationists balked at the Four-Power Treaty, which barely passed with help from Senate Democrats. The final fruit of the negotiations was a nine-power treaty in which all the nations with interests in the Far East bound themselves to uphold the independence and territorial sovereignty of China. After more than twenty years, John Hay’s Open Door proposal had finally been transformed into an international covenant.

A triumph for American ideals and interests, the Washington Conference also proved to be the swan song of the Republican internationalists. Over the rest of the decade, the leaders of the GOP proceeded to undermine or fritter away the gains that the talks had brought them. Relations between Japan and America began to improve after the conference, only to be poisoned by the xenophobic Immigration Act of 1924. Sponsored by Lodge and by California’s Hiram Johnson, the bill closed the United States to immigrants from the Orient—a mortal insult in the eyes of the Japanese. Partly as a result of rising anti-American and anti-Western sentiments in Japan, a second round of arms talks, convened in Geneva in 1927, ended in failure.

Another set of negotiations, held in London in 1930, did produce an agreement to limit all vessels, not just battleships, but only at the price of major new concessions to Japan. The London talks, moreover, foreboded a bleak future for arms control. The French and Italian delegates walked out of the conference, and the Japanese government suffered a wave of assassinations and mass protests when it ratified the new treaty.

On other fronts as well the Republicans failed to capitalize on the openings made by Hughes. After years of coaxing, the Senate in 1925 agreed to America’s joining the World Court, but only with a series of reservations that the court administrators in Geneva declined to accept. The United States also joined an international movement, led by Columbia professor James Shotwell, to “outlaw” war. The resulting Kellogg-Briand Pact,
which twenty-six nations signed in 1928, had no enforcement mechanism—and just to be sure, the Senate appended a list of occasions when the United States would not be bound by it. One senator labeled it “an international kiss.”

If the Republicans stood divided in their response to internationalism, on the economics of foreign affairs they were somewhat more united. The economic thrust of American policy in the 1920s was set by Andrew Mellon and Herbert Hoover, who despite occasional disagreements over tactics basically concurred. The Treasury and Commerce secretaries promoted a business approach to international affairs. Drawing on their experiences in private enterprise, the two focused on “fostering the use of experts, on finding apolitical solutions, on encouraging private voluntary and cooperative action, and on enlarging but circumscribing the role of government.” They would rely on private trade, buttressed by federal data-gathering and voluntary international cooperation, to advance American interests abroad. Most of all, they would rely on Mellon’s old colleagues, the staid Republican investment bankers.

The help of the bankers was especially needed to untangle the international financial mess left by the World War and the peace settlement. The war had disrupted the old, London-based network of financial ties between Europe and the rest of the world. The Allies had been forced to borrow billions of dollars from the United States, and the various European states needed billions more to rebuild their economies when the fighting ended. When Harding entered the White House, the American government had loans out to seventeen European nations totaling more than $10 billion. The main debtors, Britain and France, made their repayment contingent on receiving reparations from Germany.