"...core conceits of Blainism, proven wrong multiple times previously but especially so in the Root era, was that the Liberals would eschew personalist patronage and instead hire "wise and sober statesmen," invariably university educated and often from wealthy families, as a form of noblesse oblige of the American variety to find smart and capable bureaucrats with which to staff the administration. One can already see in the choices of Presidents Hay and Foraker that this wasn't true, and despite his reputation for managing the war, Hughes churned through two mediocre War Secretaries, by far the most important position in the Cabinet, before finding a competent man in Stimson. By the time the 1916 elections rolled around, it wasn't even apparent that the electorate believed it anymore - but Elihu Root, possibly the most ardent disciple of the school of James G. Blaine, most certainly did, and it destroyed his Presidency.
For a man who was not President, Andrew Mellon has nonetheless retained an outsized position in the annals of American history, looming above the period of 1917-21 like a dark shadow, a specter behind every corner and decision taken during those years. His influence was not just pernicious, but avoidable; unlike Lodge or Stimson, Mellon was not friends with Root and had been placed in his Cabinet at the behest of Penrose and Knox, which to many observers - chief amongst them Hughes, whose advice to sack Mellon was ignored several times - suggested that Root either tacitly agreed with Mellon's economic program in its entirety, or that he was lazy and craven when it came to enforcing Presidential power in the Cabinet. As tensions advanced between the various protagonists of the Root administration, culminating with Stimson's resignation in February 1918 when he saw it was clear that Mellon was the ascendant figure, the President seemed almost incapable, if not unwilling, to manage their strident personalities, leaving the impression of a government that was not just a failure on policy grounds, but so inept as to be unable to even govern itself.
Mellon was, surprisingly enough, not a controversial figure upon entering Cabinet. He was a wealthy and respected Pittsburgh banker, his family's bank a major factor in financing concerns such as Carnegie (later US) Steel, [1] Alcoa, Westinghouse, Gulf Oil, and a generous benefactor to the new College of Industrial Science at the prestigious University of Pittsburgh - a college know known as Mellon College. [2] Mellon had even been a critical figure in the war effort, leading war bond drives and financing the government's war operations at generous, below-market rates of interest. He had thus ingratiated himself with Liberal movers and shakers both in the Pennsylvania machine and generally in Pennsylvania as he was perceived as being less imperious than the Wall Street bankers such as George Baker; it was also the case that he was, at first, reluctant to enter public life, for outside of banking circles he had been a highly obscure figure.
He was also perhaps one of the Liberal Party's most dogmatically conservative men, and had indeed privately opposed Hughes' potential renomination "for fear of what collectivist programs he may invent in a second term." Even a conservative figure like Root engendered some skepticism in him, what with Root's support for an income tax, and as such Mellon partly saw his role in the Root administration as serving as its "moral spine," particularly in opposition to Stimson. As demobilization plans were drafted in early 1917, for instance, Mellon pushed back at Stimson's proposal for reducing war contracts gradually over the course of six months and selling spare kit to China and Korea at market value, insisting instead that no contracts be renewed at expiry and that more men be demobilized more rapidly due to "the strain upon the Treasury." Mellon's obsession, indeed, was with balancing the national budget and reducing the government's war debts, efforts in which he was successful, but at the cost of the functional economy.
This was not to say that Mellon was entirely inflexible; Cabinet notes from as early as May of 1917 revealed his concession that the conservative dream of entirely repealing the income tax from the Revenue Act of 1910 was not just "immediately impractical, but financially irresponsible and politically suicidal" in the face of major debts, and there were enough progressive Liberal Senators opposed to a massive reduction in the tax. He also was, unsurprisingly for a figure from industrial Pittsburgh, considerably more favorable of tariffs than his average co-partisan, and advocated for a "scientific tax" using new tariffs to not only raise revenue to offset the income tax reduction and pay off war debts, but also protect American industries as they repositioned from wartime to peacetime. This "Mellon Plan," which he first outlined as early as April of 1917, intended to accomplish a number of things - it was meant to balance the budget, increase the disposable income of average Americans while protecting the viability of their industrial work, and encourage the wealthy to transfer their investments from tax-free municipal bonds to higher-yielding and taxable corporate bonds by improving industrial revenues. [3]
On paper, and according to the economic orthodoxies of the time, it was a perfectly fine, though uncreative, plan. But an economy is not on paper, and includes real people and real inputs, and from the viewpoint of modern day, the issues with it look apparent. Millions of people, primarily men, had immigrated to the United States during the 1910s, with a small increase in those figures in tandem with the Great American War itself as factories needed more bodies; as the war economy came to a sudden halt - thanks to Mellon's insistence on not staggering out contracts - factories had to close to retool, laying off hundreds of thousands in the space of weeks across the country, and by late summer, unemployment was perhaps so high that one in ten men, and over one in five working women, were without a job. The return of tens of thousands of foreigners, especially Italians, after the war years alleviated this a little, but the mounting employment crisis would only advance deep into 1918, generally regarded as the peak of the postwar depression, when as many as one in five men were without work for well over a year, many if not most of them veterans. Minneapolis thus looked to be the beginning rather than the end; mining strikes erupted in Wyoming's coalfields in November 1917, socialist railroad workers walked off the job in northern Idaho weeks later, and shipyard and longshoremen strikes rippled across the West Coast in waves from Seattle to Oakland to San Pedro deep into early 1918.
Part of Mellon's assumption in not getting instantly involved in the demand-side equation of the American economy as unemployment ballooned and class tensions spiked - most clearly evidenced in the Minneapolis general strike of June 1917 - was that factories would quickly pivot back to peacetime and that pent-up demand for "normalcy" would lead to a boom of consumer spending as relieved war veterans returned. To say that this assumption was wrong would be an understatement. War rationing had been coordinated between the Department of War and local Supply Boards, and thus was not necessarily an entirely federal endeavor. States were, individually, caught between a rock and a hard place; rationing had been seen as a point of pride and sacrifice on the home front during the war, but many veterans who returned home and their families harbored similar assumptions as their reactionary Treasury Secretary, that the world would start to return to normal once they came back. Some Supply Boards had slowly eased up on rationing as early as the March to the Sea with phased, scientific suspensions; these were typically the most successful ones, with the Denver Supply Board being viewed as having stuck the landing perhaps the best anywhere in the country. Most counties and localities, however, either simply ended rationing all at once, particularly in March and April of 1917 after Root's inauguration and the euphoria that came with the Treaty of Mount Vernon being signed, or in the opposite direction maintained their strict rationing deep into late 1917.
There was no good answer, because both warped the consumer economy that Mellon and Root were banking on to carry the Republic back to some sense of normalcy, and the spectacular unemployment crisis was thus immediately paired with a remarkable inflation crisis as well, not unlike the one gripping Brazil and Argentina but this one at the heart of the world's largest industrial economy. The swell of unemployed persons, which was coupled with a commensurate slump or freeze in wages, occurred at a time when scarce goods were available for the first time unrationed in years and thus demand spiked through the roof. Automobiles, which had been gradually rising in popularity immediately before the war despite a severe crisis in the automotive sector in 1911 that saw dozens of manufacturers shutter, were as much as eleven times as expensive as they had been in 1913, when they certainly were not cheap; certain foodstuffs cost three or four times more, and clothes were often twice as expensive, all at a time when people had less money, if they had any, than in recent memory. A particularly acute crisis emerged in housing; many workers had been housed in temporary wartime barracks at factories that were torn down shortly after the war ended, and about a third as many new homes had been constructed per annum during the period 1913-16 as had been built between 1910-12. With the swell of foreign workers and now returning veterans, which brought with it the start of the postwar "baby boom," the lack of housing was an acute crisis that forced thousands in already-cramped tenement dwellings into even worse squalor, while thousands more began living in shantytowns on the peripheries of cities, often in or near abandoned industrial lots, that quickly earned the monikers "Mellonvilles" or "Rootburgs" in mockery of the distant men in Philadelphia they pointedly blamed for their troubles.
By the autumn of 1917 it was clear that there would be no "return to normalcy," and that between the industrial strikes, ethnic riots against Negroes and European immigrants in many cities, and spiraling cycle of poverty that was exacerbated by bank failures as industrial production declined sharply, the Root administration had a bonafide crisis on its hands. But economic orthodoxy of the time dictated that the government not intervene; even in the Hearst era, coming out of the Panic of 1904, that historically progressive administration had not considered counter-cyclical stimulus of the kind that would eventually become economic consensus, rather instead proposing new bureaus and agencies to regulate economic activity to prevent such a crisis again, which they partially succeeded at in seeing to it that the events of 1910-11 were a mere recession, rather than another economic depression. Proposals to deepen the United States' debt load and deploy stimulatory spending were, even then, still relatively fringe, and Mellon was hesitant to even spend money to replenish state unemployment benefits or workers' compensation plans, which in late 1918 looked about to bankrupt several states including Michigan and New Jersey. Relief would have to come from "these matters shaking themselves out," as Mellon haughtily said it.
It is important to state that the structural issues of the 1917-19 postwar depression - a calamity which no economic shock, not even the severe early 1980s credit crisis, the late 1980s oil crisis, or the early 2000s global financial contagion have come close to matching within the United States - would have flummoxed any President and ruined their Presidency. But one has to wonder if Hughes would not have listened to his close confidant Stimson and kept the standing army larger for longer, and continued demand-side spending through government contracts, and while historians have debated what a McClellan Presidency could have looked like, a figure like Mellon did not exist within the Democratic Party. It is also important to note that much of what sank Root was a matter of publicity - he was the oldest President ever elected, and acted as if his ideas were as old as himself, and Mellon was a figure so publicly callous towards the issues effecting the American worker and veteran that he became almost a caricature of a heartless banker and capitalist, a stance that made the general perception of his conservative policies even worse.
The eruption of the Central European War in the spring of 1919 would help lift American factories out of their doldrums and substantially reduced unemployment while filling government tax coffers again to retire war bonds and other debts; this narrowing of the national debt was also what allowed the more ambitious progressive programs of the 1920s to be deployed under a fiscal regime that was much more conservative than its reputation would suggest. Said circumstances would, briefly, lead some conservative Liberals in the 1970s and 1980s to claim that Mellon was proven correct and that the postwar depression was simply a period of unavoidable "hard medicine" coming out of the war economy; but, as late as the 2008 Presidential election, Liberal candidate Roger Goodell was accused in his reelection campaign of "neo-Mellonism," proving the shadow of Mellon's unpopularity was long and enduring many decades after his death..."
- The Root of the Problem: The Tumultuous Term of America's 29th President
[1] Much smaller trust than OTL thanks to antitrust/not absorbing Tennessee Coal and Iron, though still a major conglomerate
[2] Essentially Pitt stays private, and Carnegie Mellon University is a sub-college of it, making it an even more elite campus.
[3] I didn't find a good way to weave this into the narrative, but Mellon was also anti-Prohibition and thought teetotalers were lame, so he's probably not super gung-ho about enforcing the interstate liquor ban coming down the pike, either.
