George Magoffin Humphrey was one of the great budget hawks of the 20th century. He deserves a perch in the same pantheon of fiscal rectitude as Calvin Coolidge and Andrew Mellon.
But Humphrey, who served as Dwight D. Eisenhower’s first Treasury secretary, isn’t remembered that way — or remembered much at all. That’s probably because he had a harder job. When Coolidge and Mellon were cutting taxes and balancing budgets simultaneously (the tricky task at the heart of 20th-century conservatism), they had the wind at their backs. The economy of the 1920s was roaring, and the federal government was still small.
Humphrey, by contrast, had to deal with a shakier economy and a much larger, revenue-hungry federal state. It was impossible, in the 1950s, to cut taxes dramatically while still keeping the federal budget in balance (or at least headed that way). Humphrey had to make compromises that Coolidge and Mellon did not.
But that didn’t make Humphrey any less successful, at least when judged in context. His signal achievement? To reconcile postwar conservatism with the realities of postwar America. In practice, that meant making balanced budgets the centerpiece of Republican domestic policy — even at the expense of tax cuts.
That achievement may sound underwhelming, but it helped recast American politics in the postwar era.
Early Life
Humphrey was born in 1890 in Cheboygan, Michigan, the oldest of four children in a well-to-do family. He had a privileged upbringing, filled with hunting, horses, and other expensive pursuits. But it was also a childhood freighted with expectations. And for the most part, Humphrey delivered. “Possessed of the righteousness and self-confidence that comes from being pampered and provided for, he led the life of high accomplishment to which he was bred,” observes the Biographical Dictionary of the United States Secretaries of the Treasury, 1789-1995 (Bernard S. Katz and C. Daniel Vencill, 1996).
In 1912 Humphrey graduated from the University of Michigan Law School, passed the state bar, and joined his father’s law practice in Saginaw. The next year, he married his childhood sweetheart, Pamela Stark, and established himself as a small-town lawyer and business owner. It was all very conventional and successful.
And then Humphrey took a chance. In 1917 he left Saginaw for a job at the M.A. Hanna Co. in Cleveland. Founded in the 1880s by Mark Hanna — later an Ohio senator and national political figure — the firm was a leading coal, iron, and shipping conglomerate. Humphrey joined the legal staff, assuming responsibility for the company’s tax affairs. He did well enough to win the job of general counsel the following year.
Over the course of the 1920s, Humphrey continued to rise through the ranks, helping modernize and expand the company’s operations. The corporation prospered under his leadership, and his business acumen was widely acknowledged. “A colleague once remarked that ‘If you dropped George Humphrey in the middle of the Sahara, he’d come out with a newly organized corporation on a dividend-paying basis,’” The New York Times noted years later.
Humphrey was named president of M.A. Hanna in 1929. After another two decades of successful management (much of it conducted during the dark years of the Great Depression), Humphrey found himself chair of the board when Eisenhower came calling in 1952.
Joining the Cabinet
Actually, it wasn’t Eisenhower who did the calling but General Lucius Clay, one of the president-elect’s closest advisers. While serving as the military governor of Germany after World War II, Clay had been impressed by Humphrey, who was volunteering as a business adviser to the occupation forces.
Humphrey’s stint in Europe wasn’t his only venture into politics and policy. He had been a longtime supporter of his home state politician, Sen. Robert A. Taft of Ohio — a perennial candidate for president who had narrowly lost the 1952 nomination to Eisenhower. Humphrey had also served as chair of the Commerce Department’s Business Advisory Council in the 1940s.
Still, when Clay approached Humphrey about becoming Treasury secretary, he got an ambivalent response. Humphrey was already rich, successful, and over 60 — all of which made retirement sound like a good idea. But Humphrey was also a dyed-in-the-wool Republican and a vocal critic of the New Deal and its economic reforms. Didn’t such commitments (and complaints) imply a corresponding obligation? Could he really say no to the first Republican president in 20 years?
Apparently not. Humphrey said yes to Clay, and after taking his seat at the Cabinet table, the new Treasury chief became a powerful voice for fiscal retrenchment. Humphrey championed balanced budgets, lower spending, and lower taxes, more or less in that order. He would also prove receptive to plans for wholesale tax reform because he regarded the federal tax system with no small measure of distaste.
Humphrey’s priorities were sometimes in tension with one another — as priorities often are. And when forced to choose, he put balanced budgets at the top of his agenda, almost always. He was a fiscal conservative of the old school, and while not doctrinaire, he was remarkably consistent in his policy commitments.
Not every Republican shared Humphrey’s passion for black ink on federal ledgers. Many GOP lawmakers on Capitol Hill were especially eager to roll back high tax rates inherited from the New Deal and Harry Truman’s Fair Deal, as well as special war levies like the excess profits tax. For these Republicans, tax cuts should have been the nation’s top priority since the GOP held the reins again.
But Humphrey had an important ally in resisting calls for speedy tax reduction: Eisenhower saw Humphrey as a kindred spirit. “In cabinet meetings I always wait for George Humphrey to speak,” the president noted. “I sit back and listen to others talk while he doesn’t say anything. I know that when he speaks up he will say just what I am thinking.”
Observers echoed this sense of the two men. “They saw eye to eye on two big objectives — restraining the spread of the Federal Government and managing its finances conservatively,” said one reporter in 1962. “They operated from no intellectual theories of economics or of executive power. They operated from rather simple, and strong, Midwestern convictions.”
There’s a certain mythmaking quality to that assessment. After all, neither Humphrey nor Eisenhower was “simple,” “strong,” or devoid of intellectual curiosity. They were accomplished, sophisticated national leaders — something that historians have recognized for decades. Still, it seems clear that Eisenhower and Humphrey shared a personal affinity, as well as a worldview, especially when it came to fiscal policy.
Moreover, Humphrey was widely considered a leader among his Cabinet peers, who apparently appreciated his friendly but forceful personality. “The Humphrey mentality — direct, relatively unsubtle – makes him a powerful advocate among the men around Eisenhower,” The New York Times stated in early 1957. As a result, Humphrey usually enjoyed strong Cabinet support when arguing for the primacy of balanced budgets — no small thing when it came time to joust with congressional Republicans over the question of tax cuts.
Fiscal Hawking
Even before Eisenhower took office, GOP lawmakers were agitating for a tax cut. On January 3, 1953, House Ways and Means Committee Chair Daniel Reed of New York introduced a bill to accelerate expiration of the 11 percent income tax surcharge that had been imposed to help fund the Korean War.
In the committee’s majority report on the legislation, Reed defended the cut using what economist Herbert Stein has called “the traditional Republican argument”: that tax cuts would provide “added stimulation to incentives and production,” thereby promoting both economic growth and federal revenues simultaneously. Tax cuts, in other words, would be fully consistent with efforts to balance the budget.
“The administration seems not to have been even tempted by this reasoning,” Stein observed dryly in his 1969 magnum opus, The Fiscal Revolution in America. In Eisenhower’s State of the Union address on February 2, 1953, the president made his priorities clear. Balancing the budget was the first item on his economic to-do list. Cutting taxes was fifth, coming after paying for defense, retiring federal debt, and preventing “the menace of inflation.”
Undeterred, Reed fought on. He insisted that tax cuts were economically necessary and politically expedient. He even offered an argument presaging “starve the beast” theories from the 1980s. “Government expenditures are excessive at the present time,” he declared in the Ways and Means Committee report. “A tax reduction now will be a strong inducement for the elimination of unnecessary expenditures.”
Sadly for Reed, his tax cut was not to be. Both Eisenhower and Humphrey were convinced that inflation was a serious danger. Humphrey took the lead in marshaling Eisenhower loyalists, first to stall the Reed bill and eventually to kill it.
It was no small task, given Reed’s seniority and committee chairmanship. It was made even harder by the sympathy that almost all Republicans — including Humphrey — had for Reed’s broader agenda. But for fiscal hawks like Humphrey, tax cuts were premature. The first order of business was cutting expenditures.
And that was proving difficult.
Tenacious Spending
Less than a month into his tenure at Treasury, Humphrey was already coming to grips with a hard truth: Serious but responsible spending cuts were hard to find. The federal government was certainly huge. But a large percentage of the government’s spending was devoted to something that almost everyone supported: national security.
In a speech to the Cleveland Chamber of Commerce on February 17, 1953 (quoted by Stein), Humphrey acknowledged as much. “In this matter of cutting expenses, I just want to bring to your attention this thing that I had not appreciated as fully when I was here, just engrossed in business,” Humphrey told his hometown audience. “When you get right down to it, somewhere from 80 to 90 percent of the budget has nothing to do with just firing employees, or reducing what you may think are wasteful expenditures, but has to do with our security.”
Like fiscal hawks in almost every era, Humphrey was discovering that waste, fraud, and abuse were relatively easy to cut but only modestly important to the big fiscal picture. That realization didn’t mean Humphrey was planning to abandon his traditional conservative commitments to small government and low taxes. But it did begin to temper his hopes for achieving either goal in the short term.
More Tax Cut Battles
Later in 1953, Humphrey had to disappoint fellow Republicans once again, this time when the Eisenhower administration reluctantly asked for a six-month extension of the excess profits tax (slated to expire in the middle of 1953). Reed again tried to fight for tax reduction, but Humphrey and the president reprised their strong-arm tactics. Reed abandoned his fight, and fiscal responsibility retained its pride of place atop the GOP agenda.
Another important episode unfolded in January 1957 when the Eisenhower administration presented its budget plan for fiscal 1958. In a move that surprised many observers, Humphrey offered reporters his candid thoughts on the size of the budget, which featured spending of some $72 billion. Continuing to spend at that sort of scale would eventually produce a depression that would “curl your hair,” Humphrey declared.
This sounded like the old Humphrey, committed to small government and even smaller spending. Was Humphrey breaking with the president, tired of Eisenhower’s vaunted moderation?
Apparently not. By most accounts, Humphrey and the president were in cahoots. “Mr. Humphrey was pictured as having sabotaged the President,” one reporter later insisted. “In fact, General Eisenhower was much in agreement.” Eisenhower himself later acknowledged as much.
But lawmakers took Humphrey’s words as an invitation to cut the president’s spending requests. And over the next several months, they made good on that invitation, focusing especially on defense appropriations.
Still, the cuts were hardly draconian, because lawmakers knew from long experience what Humphrey had discovered in 1953: that meaningful budget reductions were hard, especially in the midst of a Cold War. Complaints about the budget notwithstanding, Humphrey understood the challenge facing postwar conservatives.
Finishing as He Started
Indeed, as Humphrey neared the end of his time at Treasury (he left the post on July 29, 1957), he had the chance to reiterate his fiscal philosophy in testimony before the Joint Economic Committee.
Humphrey’s comments revealed a certain moderation in his views, which had apparently been further tempered by experience. “I want to repeat my conviction that although present tax rates are too high and the present heavy tax burden will, in the long run, seriously hamper necessary economic growth, no general tax reduction should be considered at the present time,” he declared. Taxes should certainly be reduced. But not until the budget was in surplus, or at least credibly headed in that direction.
Indeed, over the course of his tenure, Humphrey had already signed off on several tax reductions. But in each case, he had been convinced that such cuts were fiscally responsible (or at least plausibly so). He had also consistently fought tax cut proposals that he considered too big, too abrupt, or otherwise imprudent. He hadn’t been rigid in his commitment to balanced budgets, but he remained consistent in prioritizing fiscal responsibility over tax reduction.
Humphrey never abandoned hope that significant spending reductions might someday be possible. “We must make every effort to live within our means and to get a dollar’s worth for every dollar that we spend,” he told the JEC members. But keeping a lid on spending was no simple task. “We must constantly guard against ill-considered, or dangerous, or so-called meat-axe slashing of the budget,” he warned.
The United States had genuine needs and responsibilities, especially when it came to national security, Humphrey continued. And in the wake of World War II, the nation also had global obligations and a position of leadership to maintain. “We must balance the necessary costs of our national responsibilities with the equally necessary maintenance of a strong and vigorous economy,” he said.
Wise words. But words describing an almost impossible task, as Humphrey himself had come to realize. The nation’s best hope for fiscal retrenchment depended ultimately on factors beyond the direct control of administration officials or lawmakers.
“The greatest hope for major reductions in government spending lies in a better world situation,” he acknowledged almost plaintively. “Some day the nations of the world must arrive at some better and insured form of understanding which will make it possible to reduce the large amounts of money and energy and resources now going into making things for killing.”
Humphrey intended that comment to be hopeful, I think. But to my ear, it sounds like quiet resignation. Humphrey had accepted that exigency can often be the enemy of frugality. Or at least the enemy of meaningful retrenchment.
As he left office, Humphrey seemed ready to implicitly acknowledge that the federal government would not be shrinking anytime soon. And given that reality, the conservative agenda was clear: If you must tolerate big government, at least make sure it’s paid for.