President Reagan appears to have a fondness for the good old days, what with their simple life and government unburdened with the problems of deficits. To be sure, only 30 years of the era from 1804 until World War I saw deficits in the federal budget. But there were problems, just the same. With surpluses. That's right, surpluses, and often big ones.
So oppressive were the surpluses that not a few presidents lost plenty of sleep over the matter. Two even devoted parts of their inaugural addresses to lamentations over surpluses they inherited from their predecessors (talk about looking a gift horse in the mouth!). "Our present financial condition," moaned James Buchanan on taking office in 1857, "is without a parallel in history. No nation has ever before been embarrassed from too large a surplus in its treasury." Benjamin Harrison, on the same occasion 32 years later, echoed the concern that "while a Treasury surplus is not the greatest evil, it is a serious evil."
Now what could be so bad about surpluses in the federal budget?
For one thing, surpluses in the 19th century were largely attributable to income from tariffs. The latter were high because American manufacturers wanted protection from foreign competition, and they were not about to reduce tariffs and open the gates to foreign goods.
Secondly, surpluses mean special interests would attempt to get a piece of the pie, sometimes for activities of dubious social value. Once the special interests succeeded, Congress and the president found it difficult to prevent expansion of their programs.
Pension legislation for soldiers is a case in point. Originally designed for Union troops disabled in the line of duty, pensions in time became available to any veteran who could lay claim to a sore back or toe.
Then there was the avenue of private pension bills which few presidents had the courage to veto, save for Grover Cleveland, who would draw in return the wrath of the Grand Army of the Republic. Its commander, however, did pray for Cleveland: "May God palsy the hand that wrote that order! May God palsy the brain that conceived it! May God palsy the tongue that dictated it!"
Of course, surpluses could be used to reduce or retire the national debt. But this meant buying securities at the premium prices investors in this favorable position demanded. In this instance the government could be criticized for using public funds to reward big investors.
Another alternative for government was to keep the money, but this practice also had drawbacks. For the Treasury would become a "hoarding place for money needlessly withdrawn from trade and the people's use, thus crippling our national energies, suspending our country's development, preventing investment in productive enterprise, threatening financial disturbance, and inviting schemes of public plunder."
So how did most presidents deal with the dilemma? You might have guessed it. They practiced rigid economy in government spending. Which meant bigger surpluses.
Anyone for going back to the good old days?