A treasury secretary to be proud of
by Lawrence Reed
This past Sunday (March 24) marked the 158th anniversary of the birth of one of the best of the 76 men who have held the office of Secretary of the Treasury. His name was Andrew Mellon.
From 1921 to 1932, Andrew William Mellon served Presidents Harding, Coolidge, and Hoover as treasury secretary. His business prowess before that was legendary. With an uncanny ability to pick cutting-edge technologies and the right entrepreneurs to bet on, Mellon built a financial and industrial empire in steel, oil, shipbuilding, coal, coke, banking, and aluminum.
Mellon was one of the three wealthiest men in America when Harding tapped him for the $12,000-a-year federal job at the age of 65. He was the third highest income tax payer in the nation, behind only John D. Rockefeller and Henry Ford.
Mellon’s greatest contribution was not the vast wealth he created or the vast wealth he gave away, but rather the vast wealth his fiscal policies allowed millions of other Americans to produce.
When Mellon came to Washington in 1921, the top marginal income tax rate was 73 percent. Mellon noticed that confiscatory rates were putting scarce capital to flight as investors sought refuge abroad or in tax havens at home.
Arguing that taxes had to be slashed “to attract the large fortunes back into productive enterprise,” Mellon believed that “more revenue may often be obtained by lower rates.” Henry Ford, he noted, made more money by reducing the price of Model T’s from $3,000 to $380 and increasing his sales than he would have earned by keeping high the price and profit per car. Mellon pressed Congress to lower the top rate by two-thirds, from 73 to 24 percent. Those in the lowest income bracket saw their rates fall by an even greater percentage—from 4 percent to 0.5 percent.
Mellon tried to get the federal estate tax repealed, but Congress cut it from 40 to 20 percent. At his urging, the gift tax was abolished. Revenue to the federal government was one-third higher in 1929 than it was with much higher tax rates in 1921.
Mellon also helped to constrain the spending side of government. In 1928, total federal expenditures were slightly lower than they had been in 1923. Mellon eliminated an average of one treasury staffer per day for every single day during the 1920s.
Philanthropy was a big part of Andrew Mellon’s life. He gave away more of his own money than most likely any of his redistributionist political opponents ever gave of themselves.
Mellon died in 1937 at the age of 82. In 1955, to commemorate the 100th anniversary of his birth, the federal post office honored Mellon by placing his image on the three-cent postage stamp.
Left-wing historians ignore or besmirch Mellon (after all, he was one of those “rich” guys) or even wrongfully declare that his policies set the stage for the Great Depression. They should be ashamed of themselves. Andrew Mellon is worthy of so much more than his critics will ever be.
(Lawrence W. Reed, a resident of Newnan, is president of the Foundation for Economic Education in Irvington, NY and Atlanta.)