Editing Andrew Mellon (section)

==Political career, 1921–1933==
===Harding administration<span class="anchor" id="Mellonomics"></span>===
{{see also|Presidency of Warren G. Harding}}
[[File:TIMEMagazine2Jul1923.jpg|thumb|''[[Time (magazine)|Time]]'' cover, July 2, 1923]]

Following Harding's victory in the 1920 presidential election, Harding considered various candidates for Secretary of the Treasury, including [[Frank Lowden]], [[John W. Weeks]], [[Charles Dawes]], and, at the urging of Senator Knox, Andrew Mellon.<ref>Murray (1973), pp. 513–514, 517</ref> By 1920, Mellon was little-known outside of banking circles, but his potential appointment to the cabinet received strong support from bankers and Pennsylvania Republican leaders like Knox, Senator [[Boies Penrose]], and Governor Sproul. Mellon was reluctant to enter public life due to concerns about privacy and a belief that his ownership of various businesses, including Old Overholt distillery, would be a political liability.<ref>Murray (1973), pp. 517–519</ref> But Mellon also wanted to retire from active participation in business, and he saw a cabinet position as a prestigious capstone to his career.<ref>Murray (1973), pp. 525–526</ref>

Mellon agreed to accept appointment as Secretary of the Treasury in February 1921, and his nomination was quickly confirmed by the [[United States Senate]]. Though Mellon's supporters believed that he was highly qualified to address the economic issues facing the country, critics of the Harding administration saw the Mellon appointment as a sign that Harding would "reseat the power of special privileged interests, the powers of avarice and greed, the powers that seek self-aggrandizement at the expense of the general public".<ref>Cannadine (2006), pp. 273–274</ref> Harding paired the nomination of Mellon with that of Secretary of Commerce [[Herbert Hoover]], who was distrusted by many of the same Senate Republicans who favored Mellon's candidacy.<ref>Murray (1973), pp. 527–530</ref> Before joining the cabinet, Mellon sold his banking stock to his brother, Richard, but he continued to hold his non-banking stock.<ref>Murray (1973), p. 526</ref> Through Richard and other business associates, Mellon continued to be involved with the major decisions of the Mellon business empire during his time in public service, and he occasionally lobbied congressmen on behalf of his businesses.<ref>Cannadine (2006), pp. 296–298, 323</ref> His fortune continued to grow, and at one point in the 1920s he paid more in federal income tax than any other individual save John Rockefeller and [[Henry Ford]].<ref>Cannadine (2006), p. 349</ref>

[[File:President Warren G. Harding's First Cabinet 1921.jpg|thumb|upright=1.6|{{center|Mellon, second from left, seated next to President [[Warren Harding]] during a 1921 Cabinet meeting.}}]]

As Treasury Secretary, Mellon focused on balancing the budget and paying off World War I debts in the midst of the [[Depression of 1920–21]]; he was largely unconcerned with international affairs and economic matters such as the unemployment rate.<ref>Cannadine (2006), pp. 279–280</ref> To Mellon's chagrin, his department was charged with enforcing Prohibition; he did not believe in teetotaling himself and viewed the law as unenforceable.<ref>Cannadine (2006), p. 291</ref> Aside from balancing the budget, Mellon's top priority was an overhaul of the federal tax code.<ref>Cannadine (2006), pp. 286–287</ref> The income tax had become a major part of the federal government's revenue system with the passage of the [[Revenue Act of 1913]], and federal taxation on income had increased during [[World War I]] to provide funding for the war effort. According to M. Susan Murnane, major reforms to the federal income tax in the aftermath of World War I were "inevitable", but the exact nature of the tax system in the 1920s was debated by conservatives and progressives within the Republican Party. Unlike the progressives in his party, Mellon rejected the redistributive nature of the taxation system that had been left in place by the Wilson administration. Owing in part to the high debts left over from the war, Mellon did not join with some conservatives in the party, who favored the virtual abolition of the income tax in favor of high tariff rates, excise taxes, a national sales tax, or some combination thereof.<ref name="murnane820822"/>

[[File:Portrait photograph of A.W. Mellon.jpg|thumb|left|Portrait photograph of A.W. Mellon, 1924]]
Mellon instead advocated the retention of a progressive income tax that would serve as an important, but not primary, source of revenue for the federal government. His so-called "scientific taxation" was designed to maximize federal revenue while minimizing the impact on business and industry.<ref name="murnane820822"/> The central tenet of Mellon's tax plan was a reduction of the surtax, a progressive tax that affected only high-income earners. Mellon argued that such a reduction would minimize tax avoidance and would not affect federal revenue because it would lead to greater economic growth.<ref>Murnane (2004), pp. 825–826, 837–838</ref> He hoped that tax reform would encourage high earners to move their savings from tax-exempt state and municipal bonds to taxable, higher yield industrial stocks.<ref>Cannadine (2006), pp. 287–288</ref> Though much of the tax plan that he proposed had been developed by former Wilson administration officials [[Russell Cornell Leffingwell]] and [[Seymour Parker Gilbert]], the press generally referred to it as the "Mellon Plan".<ref name="murnane820822">Murnane (2004), pp. 820–822</ref>

The [[Revenue Act of 1918]] had set a top marginal income tax rate of 73% and a corporate tax of approximately 10%. Due in part to the size of the U.S. public debt, which had grown from $1 billion before the war to $24 billion in 1921, the provisions of the Revenue Act of 1918 remained in place when Harding took office. In 1921, the Treasury Department and the [[United States House Committee on Ways and Means|House Ways and Means Committee]] jointly prepared a bill setting the top marginal rate at the level advocated by Mellon, but opposition in the Senate from progressives like Senator [[Robert M. La Follette]] limited the size of the tax cuts. In November 1921, Congress passed and Harding signed the [[Revenue Act of 1921]], which raised personal [[tax exemption]]s and lowered the top marginal tax rate to 58%.<ref>Murnane (2004), pp. 824–829</ref> Because it differed from his original proposals, Mellon was displeased by the bill.<ref>Cannadine (2006), p. 288</ref> He also strongly disapproved of a "Bonus Bill" passed by Congress that would provide for additional compensation to veterans of World War I, partly because he feared it would interfere with his plans to reduce debt and taxes. With Mellon's support, Harding vetoed the bill, and Congress failed to override the veto.<ref>Cannadine (2006), pp. 288–289</ref>

===Coolidge administration===
{{see also|Presidency of Calvin Coolidge}}
[[File:Calvin Coolidge cph.3g10777 (cropped).jpg|thumb|President [[Calvin Coolidge]] favored Mellon's economic policies]]

As the economy recovered from recession and began to experience the prosperity of the [[Roaring Twenties]], Mellon emerged as one of the most renowned figures in the Harding administration. One admiring congressman referred to Mellon as the "greatest Secretary of the Treasury since [[Alexander Hamilton]]".<ref>Cannadine (2006), pp. 309–310</ref> Harding died after suffering a stroke in August 1923, and he was succeeded by Vice President [[Calvin Coolidge]]. Mellon enjoyed closer relations with President Coolidge than he had with President Harding, and Coolidge and Mellon shared similar views on most major issues, including the necessity for further tax cuts.<ref>Cannadine (2006), pp. 311–315</ref> [[William Allen White]], a contemporary journalist, stated that "so completely did Andrew Mellon dominate the White House in the days when the Coolidge administration was at its zenith that it would be fair to call the administration the reign of Coolidge and Mellon."<ref name="Keller 1982, p. 777">Keller (1982), p. 777</ref>

Coolidge, Mellon, business organizations, and administration allies conducted a publicity campaign designed to convince wavering congressmen to support Mellon's tax plan.<ref name="murnane833836840841"/> Their efforts were opposed by the coalition of Democrats and progressive Republicans that exercised effective control over the [[68th United States Congress|68th Congress]].<ref>Cannadine (2006), p. 315</ref> In February 1924, the House Ways and Means Committee approved of a bill based on Mellon's plan, but an alliance of progressive Republicans and Democrats engineered passage of an alternative tax bill written by Democrat [[John Nance Garner]]; Garner's plan also reduced income taxes but set the top marginal tax rate at 46% rather than Mellon's preferred 33%. In June 1924, Coolidge signed the [[Revenue Act of 1924]], which contained the income tax rates of Garner's bill and also increased the [[Estate tax in the United States|estate tax]]. Coolidge signed the bill but simultaneously called for further tax cuts.<ref name="murnane833836840841">Murnane (2004), pp. 833–836, 840–841</ref> Congress also rejected Mellon's proposed constitutional amendment that would have barred the issuance of tax-exempt securities and, over Coolidge's veto, authorized a bonus to World War I veterans. Mellon did, however, win one legislative victory, as he convinced Congress to create the [[United States Tax Court|Board of Tax Appeals]] to adjudicate disputes between taxpayers and the government.<ref>Cannadine (2006), pp. 315–316</ref>

Mellon had originally planned to retire after one presidential term but decided to remain in the cabinet in the hope of presiding over the full enactment of his taxation proposals.<ref>Murray (1975), pp. 227–228</ref> In the [[1924 United States presidential election|1924 presidential election]], the Republicans campaigned on further tax cuts, while both the Democrats and third-party candidate [[Robert M. La Follette|Robert La Follette]] denounced Mellon's tax proposals as "a device to relieve multi-millionaires at the expense of other taxpayers".<ref>Murnane (2004), p. 841</ref> Buoyed by the strong economy, and overcoming the [[Presidency of Warren G. Harding#Administration scandals|scandals of the Harding years]], Coolidge won re-election by a decisive margin.<ref>Cannadine (2006), p. 317</ref> Coolidge saw his victory as a mandate to pursue his favored economic policies, including further tax cuts.<ref name="Keller 1982, p. 777"/>

When Congress reconvened after the 1924 elections, it immediately began working on another bill designed to lower tax rates on the highest earners.<ref>Murnane (2004), p. 851</ref> In February 1926, Coolidge signed the [[Revenue Act of 1926]], which reduced the top marginal rate to 25%. Mellon was extremely pleased by the passage of the act, because, unlike the Revenue Act of 1921 and the Revenue Act of 1924, the Revenue Act of 1926 closely reflected Mellon's proposals. In addition to cutting tax rates on top earners, the act also raised the personal exemption for federal income taxes, abolished the [[Gift tax in the United States|gift tax]], reduced the estate tax rate, and repealed a provision that had required the public disclosure of federal income tax returns. Meanwhile, the booming economy fostered a $400 million budget surplus in 1926, and the country's national debt dropped from $24 billion in early 1921 to $19.6 billion at the end of fiscal year 1926.<ref>Cannadine (2006), pp. 317–318</ref> Government revenues increased considerably under Mellon's plan, largely collected from higher-income earners.<ref>"The facts are unmistakably plain, for those who bother to check the facts. In 1921, when the tax rate on people making over $100,000 a year was 73 percent, the federal government collected a little over $700 million in income taxes, of which 30 percent was paid by those making over $100,000. By 1929, after a series of tax rate reductions had cut the tax rate to 24 percent on those making over $100,000, the federal government collected more than a billion dollars in income taxes, of which 65 percent was collected from those making over $100,000." Thomas Sowell (2012). ''"Trickle Down Theory" and "Tax Cuts for the Rich"''.  The Hoover Institution Press, ISBN 978-0-8179-1615-2, p. 3</ref>

With his top priority of tax reform accomplished, Mellon increasingly turned over management of the Treasury Department to his deputy, [[Ogden L. Mills]].<ref>Cannadine (2006), p. 355</ref> After the 1926 elections, Mellon and Mills sought to cut the corporate tax and fully repeal the estate tax. The [[Revenue Act of 1928]] did indeed cut the corporate tax, but the estate tax was left unchanged.<ref>Cannadine (2006), pp. 357–358</ref> Mellon also focused on the construction of new federal buildings, and his efforts led to the construction of several buildings in the [[Federal Triangle]].<ref>Cannadine (2006), pp. 372–375</ref> In 1928, Mellon stated that "in no other nation, and at no other time in the history of the world, have so many people enjoyed such a high degree of prosperity or maintained a standard of living comparable to that which prevails throughout this country today."<ref>Cannadine (2006), p. 364</ref>

Responsibility for foreign relations lay with the State Department rather than the Treasury Department, and [[Benjamin Strong Jr.]] and other central bankers took the lead with regard to international monetary policy, but Mellon nonetheless exercised some influence in foreign affairs.<ref>Cannadine (2006), p. 279</ref> He strongly opposed the cancellation of European debts from World War I but recognized that Britain and other countries would be unable to pay those debts without a renegotiation of terms. In 1923, Mellon and British [[Chancellor of the Exchequer]] [[Stanley Baldwin]] negotiated an agreement in which Britain promised to pay off the debts over a 62-year period.<ref>Cannadine (2006), pp. 289–290</ref> After the adoption of the [[Dawes Plan]], Mellon reached debt settlements with several other European countries. After protracted negotiations, the United States and France agreed to the [[Mellon-Berenger Agreement]], which reduced France's debt and set terms for repayment.<ref>Cannadine (2006), pp. 319–321</ref>

===Hoover administration===
{{see also|Presidency of Herbert Hoover}}

====1928 election====
[[File:andrew mellon stamp.JPG|right|thumb|Mellon on US stamp]]
Coolidge surprised many observers by announcing that he would not seek another term in August 1927. The decision left Hoover as the presumed front-runner for the [[1928 United States presidential election|1928 presidential election]], but many conservatives within the party opposed Hoover's candidacy. The conservative resistance to Hoover centered around Mellon, who controlled Pennsylvania's delegation at the [[1928 Republican National Convention]] and was influential with Republicans throughout the country. Though they had maintained an amicable relationship in public, Mellon privately distrusted Hoover, resented Hoover's engagement in the affairs of other cabinet departments and feared that a President Hoover would move away from Mellon's tax policies. Several Republicans urged Mellon to run for president, but Mellon believed that he was too old to seek the presidency. Mellon attempted to convince Coolidge or Charles Evans Hughes to run, but neither heeded his appeals.<ref>Rusnak (1983), pp. 269–272</ref> In the months before the 1928 Republican Convention, Mellon maintained his neutrality in the presidential race, but with no compelling alternative Republican candidate willing to run, Mellon finally threw his support behind Hoover. With Mellon's backing, Hoover won the Republican nomination on the first ballot of the convention, and he went on to defeat [[Al Smith]] in the [[1928 United States presidential election|1928 presidential election]].<ref>Rusnak (1983), pp. 274–276</ref> Defying widespread expectations that he would retire, Mellon chose to stay on as Secretary of the Treasury.<ref>Cannadine (2006), pp. 379–380</ref> Along with Secretary of Agriculture [[James Wilson (Secretary of Agriculture)|James Wilson]] and Secretary of Labor [[James J. Davis]], Mellon is one of only three cabinet members to serve in the same post under three consecutive presidents.<ref>{{cite book |last1=Farina |first1=William |title=The Afterlife of Adam Smith: The Influence, Interpretation and Misinterpretation of His Economic Philosophy, 1760s-2010s |date=13 August 2015 |publisher=McFarland |isbn=978-1-4766-2360-3 |page=224 |url=https://books.google.com/books?id=jQNJCgAAQBAJ&pg=PA224 |language=en}}</ref>

====Great Depression====
[[File:Andrew W. Mellon Ogden Mills.jpg|thumb|Mellon and his successor as Secretary of the Treasury, [[Ogden L. Mills]]]]

Secretary Mellon had helped persuade the Federal Reserve Board to lower interest rates in 1921 and 1924; lower interest rates contributed to a booming economy, but they also encouraged stock market speculation.<ref>Cannadine (2006), pp. 286, 321</ref> In 1928, responding to increasing fears of the dangers of speculation and a booming stock market, the Federal Reserve Board began raising interest rates.<ref>Cannadine (2006), p. 359</ref> Mellon favored another interest rate increase in 1929, and in August 1929 the Federal Reserve Board raised the discount rate to six percent. The higher rate failed to curb speculation, and the activity on the stock market continued to grow.<ref>Cannadine (2006), pp. 388–390</ref> In October 1929, the [[New York Stock Exchange]] suffered the worst crash in its history in what was called "[[Wall Street Crash of 1929|Black Tuesday]]". As the vast majority of Americans did not own shares in the stock market, the crash did not immediately have disastrous effects on the U.S. economy as a whole. Mellon had little sympathy for the speculators who lost their money, and he was philosophically opposed to an interventionist economic policy designed to address the stock market crash. Nonetheless, Mellon immediately began calling for cuts to the discount rate, which would reach two percent in mid-1930, and successfully urged Congress to pass a bill providing for temporary, across-the-board tax cuts. Mellon supported the idea of asset liquidation to balance budgets, even if it meant shutting down entire industries.<ref>Cannadine (2006), pp. 391–395</ref>

By mid-1930, many, including Mellon, believed that the economy had already experienced the worst effects of the stock market crash. He did not object to the [[Smoot–Hawley Tariff Act]], which raised tariff rates to one of the highest levels in U.S. history.<ref>Cannadine (2006), pp. 395–397</ref> Despite the optimism of Hoover and Mellon, in late 1930 the economy went into a deep slump, as gross national product declined dramatically, and numerous workers lost their jobs. While numerous banks failed, Democrats won control of Congress in the [[1930 United States elections|1930 mid-term elections]]. As the economy declined, so did Mellon's popularity, which was further damaged by his opposition to another bonus bill for veterans.<ref>Cannadine (2006), pp. 399–401</ref> In mid-1931, the country entered a deep depression, and, at Hoover's request, Mellon negotiated a moratorium on German debt repayments. After Mellon returned to the United States in August 1931, he was confronted by another series of bank failures. Among the banks that failed was the Bank of Pittsburgh, the lone remaining major Pittsburgh bank not controlled by the Mellon family. Again, following Hoover's lead, Mellon presided over the creation of the National Credit Association, a voluntary initiative among the larger banks that was designed to assist failing institutions. As the National Credit Association proved to be ineffective at stemming the tide of bank failures, Congress and the Hoover administration established the [[Reconstruction Finance Corporation]] to provide federal loans to banks.<ref>Cannadine (2006), pp. 437–443</ref>

With the unemployment rate approaching twenty percent, Mellon became one of the most "loathed leaders" in the United States, second only to Hoover himself.<ref>Cannadine (2006), pp. 442–444</ref> Facing this unprecedented economic catastrophe, Mellon urged Hoover to refrain from using the government to intervene in the depression. Mellon believed that economic recessions, such as those that had occurred in 1873 and 1907, were a necessary part of the business cycle because they purged the economy. In his memoirs, Hoover wrote that Mellon advised him to "liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. ... enterprising people will pick up the wrecks from less competent people."<ref>Cannadine (2006), pp. 444–445</ref><ref>{{cite news |last1=Davidson |first1=Adam |title=De-leveraging — Fairy Tale Endings |url=https://www.npr.org/sections/money/2008/10/deleveraging_fairy_tale_ending.html |access-date=December 12, 2018 |publisher=NPR |date=October 6, 2008}}</ref>

Facing a large deficit, Mellon and Mills called for a return to the tax rates set by the Revenue Act of 1924 and also sought new taxes on automobiles, gasoline, and other items. Congress responded by passing the [[Revenue Act of 1932]], which included many of the Treasury Department's proposals.<ref>Cannadine (2006), pp. 448–449</ref> In early 1932, Congressman [[Wright Patman]] of Texas initiated [[Impeachment in the United States|impeachment]] proceedings against Mellon, contending that Mellon had violated numerous federal laws designed to prevent conflicts of interest. Though Mellon had defeated similar investigations in the past, his falling popularity left him unable to effectively counter Patman's charges. Hoover removed Mellon from Washington by offering him the position of [[List of ambassadors of the United States to the United Kingdom|ambassador to the United Kingdom]]. Mellon accepted the post, and Mills replaced his former boss as Secretary of the Treasury.<ref>Cannadine (2006), pp. 450–452</ref>

Mellon arrived in Britain in April 1932, receiving a friendly reception from a country he had often visited over the previous thirty years.<ref>Cannadine (2006), pp. 455–456</ref> From his post, he watched the collapse of the international economic order, including the debt accords that he had helped negotiate. He also convinced the British to allow Gulf Oil to operate in [[Kuwait]], a British protectorate in the oil-rich region of the [[Persian Gulf]]. Defying Mellon's expectations, Hoover was defeated by [[Franklin D. Roosevelt]] in the [[1932 United States presidential election|1932 presidential election]].<ref>Cannadine (2006), pp. 459–461, 463–464</ref> Mellon left office when Hoover's term ended in March 1933, returning to private life after twelve years of government service.<ref>Cannadine (2006), p. 468</ref>

===Pennsylvania politics, 1921–1933===

Knox and Penrose both died in 1921, leaving a power vacuum in Pennsylvania Republican politics. Along with his nephew, William Larimer Mellon, Mellon became an influential player in Pennsylvania politics, and their support helped ensure the elections of Senator [[David A. Reed]] and Senator [[George W. Pepper]] in 1922.<ref>Murray (1975), pp. 224–227</ref> Mellon was unable to assert the same level of control that Boies Penrose had had over state politics, and his leadership of the state party was challenged by [[William Scott Vare]] of Philadelphia and progressive leader [[Gifford Pinchot]], who won the 1922 Pennsylvania gubernatorial election.<ref>Cannadine (2006), pp. 294–295</ref> Nonetheless, Mellon would continue to exert an important influence on Pennsylvania politics throughout the 1920s, especially in senatorial elections and in Allegheny County.<ref>Murray (1975), pp. 231–233</ref> Mellon's influence over state politics waned in the early 1930s, as the progressive allies of Governor Pinchot took control of the state Republican Party.<ref>Murray (1975), p. 240</ref>