WASHINGTON, _December 6, 1887_.
_To the Congress of the United States_:
You are confronted at the threshold of your legislative duties with a
condition of the national finances which imperatively demands immediate
and careful consideration.
The amount of money annually exacted, through the operation of present
laws, from the industries and necessities of the people largely exceeds
the sum necessary to meet the expenses of the Government.
When we consider that the theory of our institutions guarantees to every
citizen the full enjoyment of all the fruits of his industry and
enterprise, with only such deduction as may be his share toward the
careful and economical maintenance of the Government which protects him,
it is plain that the exaction of more than this is indefensible
extortion and a culpable betrayal of American fairness and justice. This
wrong inflicted upon those who bear the burden of national taxation,
like other wrongs, multiplies a brood of evil consequences. The public
Treasury, which should only exist as a conduit conveying the people's
tribute to its legitimate objects of expenditure, becomes 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place for money needlessly withdrawn from trade and the people's use,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.
This condition of our Treasury is not altogether new, and it has more
than once of late been submitted to the people's representatives in the
Congress, who alone can apply a remedy. And yet the situation still
continues, with aggravated incidents, more than ever presaging financial
convulsion and widespread disaster.
It will not do to neglect this situation because its dangers are not now
palpably imminent and apparent. They exist none the less certainly, and
await the unforeseen and unexpected occasion when suddenly they will be
precipitated upon us.
On the 30th day of June, 1885, the excess of revenues over public
expenditures, after complying with the annual requirement of the
sinking-fund act, was $17,859,735.84; during the year ended June 30,
1886, such excess amounted to $49,405,545.20, and during the year ended
June 30, 1887, it reached the sum of $55,567,849.54.
The annual contributions to the sinking fund during the three years
above specified, amounting in the aggregate to $138,058,320.94, and
deducted from the surplus as stated, were made by calling in for that
purpose outstanding 3 per cent bonds of the Government. During the six
months prior to June 30, 1887, the surplus revenue had grown so large by
repeated accumulations, and it was feared the withdrawal of this great
sum of money needed by the people would so affect the business of the
country, that the sum of $79,864,100 of such surplus was applied to
the payment of the principal and interest of the 3 per cent bonds
still outstanding, and which were then payable at the option of the
Government. The precarious condition of financial affairs among the
people still needing relief, immediately after the 30th day of June,
1887, the remainder of the 3 per cent bonds then outstanding, amounting
with principal and interest to the sum of $18,877,500, were called in
and applied to the sinking-fund contribution for the current fiscal
year. Notwithstanding these operations of the Treasury Department,
representations of distress in business circles not only continued, but
increased, and absolute peril seemed at hand. In these circumstances
the contribution to the sinking fund for the current fiscal year was at
once completed by the expenditure of $27,684,283.55 in the purchase of
Government bonds not yet due bearing 4 and 4-1/2 per cent interest,
the premium paid thereon averaging about 24 per cent for the former and
8 per cent for the latter. In addition to this, the interest accruing
during the current year upon the outstanding bonded indebtedness of
the Government was to some extent anticipated, and banks selected as
depositories of public money were permitted to somewhat increase their
deposits.
While the expedients thus employed to release to the people the money
lying idle in the Treasury served to avert immediate danger, our surplus
revenues have continued to accumulate, the excess for the present year
amounting on the 1st day of December to $55,258,701.19, and estimated to
reach the sum of $113,000,000 on the 30th of June next, at which date it
is expected that this sum, added to prior accumulations, will swell the
surplus in the Treasury to $140,000,000.
There seems to be no assurance that, with such a withdrawal from use of
the people's circulating medium, our business community may not in the
near future be subjected to the same distress which was quite lately
produced from the same cause. And while the functions of our National
Treasury should be few and simple, and while its best condition would be
reached, I believe, by its entire disconnection with private business
interests, yet when, by a perversion of its purposes, it idly holds
money uselessly subtracted from the channels of trade, there seems to be
reason for the claim that some legitimate means should be devised by the
Government to restore in an emergency, without waste or extravagance,
such money to its place among the people.
If such an emergency arises, there now exists no clear and undoubted
executive power of relief. Heretofore the redemption of 3 per cent
bonds, which were payable at the option of the Government, has afforded
a means for the disbursement of the excess of our revenues; but these
bonds have all been retired, and there are no bonds outstanding the
payment of which we have a right to insist upon. The contribution to
the sinking fund which furnishes the occasion for expenditure in the
purchase of bonds has been already made for the current year, so that
there is no outlet in that direction.
In the present state of legislation the only pretense of any existing
executive power to restore at this time any part of our surplus revenues
to the people by its expenditure consists in the supposition that the
Secretary of the Treasury may enter the market and purchase the bonds
of the Government not yet due, at a rate of premium to be agreed upon.
The only provision of law from which such a power could be derived is
found in an appropriation bill passed a number of years ago, and it is
subject to the suspicion that it was intended as temporary and limited
in its application, instead of conferring a continuing discretion and
authority. No condition ought to exist which would justify the grant
of power to a single official, upon his judgment of its necessity, to
withhold from or release to the business of the people, in an unusual
manner, money held in the Treasury, and thus affect at his will the
financial situation of the country; and if it is deemed wise to lodge
in the Secretary of the Treasury the authority in the present juncture
to purchase bonds, it should be plainly vested, and provided, as far
as possible, with such checks and limitations as will define this
official's right and discretion and at the same time relieve him from
undue responsibility.
In considering the question of purchasing bonds as a means of restoring
to circulation the surplus money accumulating in the Treasury, it
should be borne in mind that premiums must of course be paid upon
such purchase, that there may be a large part of these bonds held
as investments which can not be purchased at any price, and that
combinations among holders who are willing to sell may unreasonably
enhance the cost of such bonds to the Government.
It has been suggested that the present bonded debt might be refunded
at a less rate of interest and the difference between the old and new
security paid in cash, thus finding use for the surplus in the Treasury.
The success of this plan, it is apparent, must depend upon the volition
of the holders of the present bonds; and it is not entirely certain that
the inducement which must be offered them would result in more financial
benefit to the Government than the purchase of bonds, while the latter
proposition would reduce the principal of the debt by actual payment
instead of extending it.
The proposition to deposit the money held by the Government in banks
throughout the country for use by the people is, it seems to me,
exceedingly objectionable in principle, as establishing too close a
relationship between the operations of the Government Treasury and the
business of the country and too extensive a commingling of their money,
thus fostering an unnatural reliance in private business upon public
funds. If this scheme should be adopted, it should only be done as a
temporary expedient to meet an urgent necessity. Legislative and
executive effort should generally be in the opposite direction, and
should have a tendency to divorce, as much and as fast as can be safely
done, the Treasury Department from private enterprise.
Of course it is not expected that unnecessary and extravagant
appropriations will be made for the purpose of avoiding the accumulation
of an excess of revenue. Such expenditure, besides the demoralization of
all just conceptions of public duty which it entails, stimulates a habit
of reckless improvidence not in the least consistent with the mission of
our people or the high and beneficent purposes of our Government.
I have deemed it my duty to thus bring to the knowledge of my
countrymen, as well as to the attention of their representatives charged
with the responsibility of legislative relief, the gravity of our
financial situation. The failure of the Congress heretofore to provide
against the dangers which it was quite evident the very nature of the
difficulty must necessarily produce caused a condition of financial
distress and apprehension since your last adjournment which taxed to the
utmost all the authority and expedients within executive control; and
these appear now to be exhausted. If disaster results from the continued
inaction of Congress, the responsibility must rest where it belongs.
Though the situation thus far considered is fraught with danger which
should be fully realized, and though it presents features of wrong to
the people as well as peril to the country, it is but a result growing
out of a perfectly palpable and apparent cause, constantly reproducing
the same alarming circumstances--a congested National Treasury and a
depleted monetary condition in the business of the country. It need
hardly be stated that while the present situation demands a remedy, we
can only be saved from a like predicament in the future by the removal
of its cause.
Our scheme of taxation, by means of which this needless surplus is
taken from the people and put into the public Treasury, consists of a
tariff or duty levied upon importations from abroad and internal-revenue
taxes levied upon the consumption of tobacco and spirituous and malt
liquors. It must be conceded that none of the things subjected to
internal-revenue taxation are, strictly speaking, necessaries. There
appears to be no just complaint of this taxation by the consumers of
these articles, and there seems to be nothing so well able to bear the
burden without hardship to any portion of the people.
But our present tariff laws, the vicious, inequitable, and illogical
source of unnecessary taxation, ought to be at once revised and amended.
These laws, as their primary and plain effect, raise the price to
consumers of all articles imported and subject to duty by precisely the
sum paid for such duties. Thus the amount of the duty measures the tax
paid by those who purchase for use these imported articles. Many of
these things, however, are raised or manufactured in our own country,
and the duties now levied upon foreign goods and products are called
protection to these home manufactures, because they render it possible
for those of our people who are manufacturers to make these taxed
articles and sell them for a price equal to that demanded for the
imported goods that have paid customs duty. So it happens that while
comparatively a few use the imported articles, millions of our people,
who never used and never saw any of the foreign products, purchase and
use things of the same kind made in this country, and pay therefor
nearly or quite the same enhanced price which the duty adds to the
imported articles. Those who buy imports pay the duty charged thereon
into the public Treasury, but the great majority of our citizens,
who buy domestic articles of the same class, pay a sum at least
approximately equal to this duty to the home manufacturer. This
reference to the operation of our tariff laws is not made by way of
instruction, but in order that we may be constantly reminded of the
manner in which they impose a burden upon those who consume domestic
products as well as those who consume imported articles, and thus create
a tax upon all our people.
It is not proposed to entirely relieve the country of this taxation.
It must be extensively continued as the source of the Government's
income; and in a readjustment of our tariff the interests of American
labor engaged in manufacture should be carefully considered, as well
as the preservation of our manufacturers. It may be called protection
or by any other name, but relief from the hardships and dangers of
our present tariff laws should be devised with especial precaution
against imperiling the existence of our manufacturing interests. But
this existence should not mean a condition which, without regard
to the public welfare or a national exigency, must always insure the
realization of immense profits instead of moderately profitable returns.
As the volume and diversity of our national activities increase, new
recruits are added to those who desire a continuation of the advantages
which they conceive the present system of tariff taxation directly
affords them. So stubbornly have all efforts to reform the present
condition been resisted by those of our fellow-citizens thus engaged
that they can hardly complain of the suspicion, entertained to a certain
extent, that there exists an organized combination all along the line to
maintain their advantage.
We are in the midst of centennial celebrations, and with becoming pride
we rejoice in American skill and ingenuity, in American energy and
enterprise, and in the wonderful natural advantages and resources
developed by a century's national growth. Yet when an attempt is made to
justify a scheme which permits a tax to be laid upon every consumer in
the land for the benefit of our manufacturers, quite beyond a reasonable
demand for governmental regard, it suits the purposes of advocacy to
call our manufactures infant industries still needing the highest and
greatest degree of favor and fostering care that can be wrung from
Federal legislation.
It is also said that the increase in the price of domestic manufactures
resulting from the present tariff is necessary in order that higher
wages may be paid to our workingmen employed in manufactories than are
paid for what is called the pauper labor of Europe. All will acknowledge
the force of an argument which involves the welfare and liberal
compensation of our laboring people. Our labor is honorable in the eyes
of every American citizen; and as it lies at the foundation of our
development and progress, it is entitled, without affectation or
hypocrisy, to the utmost regard. The standard of our laborers' life
should not be measured by that of any other country less favored, and
they are entitled to their full share of all our advantages.
By the last census it is made to appear that of the 17,392,099 of our
population engaged in all kinds of industries 7,670,493 are employed in
agriculture, 4,074,238 in professional and personal service (2,934,876
of whom are domestic servants and laborers), while 1,810,256 are
employed in trade and transportation and 3,837,112 are classed as
employed in manufacturing and mining.
For present purposes, however, the last number given should be
considerably reduced. Without attempting to enumerate all, it will be
conceded that there should be deducted from those which it includes
375,143 carpenters and joiners, 285,401 milliners, dressmakers, and
seamstresses, 172,726 blacksmiths, 133,756 tailors and tailoresses,
102,473 masons, 76,241 butchers, 41,309 bakers, 22,083 plasterers, and
4,891 engaged in manufacturing agricultural implements, amounting in the
aggregate to 1,214,023, leaving 2,623,089 persons employed in such
manufacturing industries as are claimed to be benefited by a high
tariff.
To these the appeal is made to save their employment and maintain their
wages by resisting a change. There should be no disposition to answer
such suggestions by the allegation that they are in a minority among
those who labor, and therefore should forego an advantage in the
interest of low prices for the majority. Their compensation, as it may
be affected by the operation of tariff laws, should at all times be
scrupulously kept in view; and yet with slight reflection they will not
overlook the fact that they are consumers with the rest; that they too
have their own wants and those of their families to supply from their
earnings, and that the price of the necessaries of life, as well as the
amount of their wages, will regulate the measure of their welfare and
comfort.
But the reduction of taxation demanded should be so measured as not to
necessitate or justify either the loss of employment by the working-man
or the lessening of his wages; and the profits still remaining to the
manufacturer after a necessary readjustment should furnish no excuse
for the sacrifice of the interests of his employees, either in their
opportunity to work or in the diminution of their compensation. Nor can
the worker in manufactures fail to understand that while a high tariff
is claimed to be necessary to allow the payment of remunerative wages,
it certainly results in a very large increase in the price of nearly all
sorts of manufactures, which, in almost countless forms, he needs for
the use of himself and his family. He receives at the desk of his
employer his wages, and perhaps before he reaches his home is obliged,
in a purchase for family use of an article which embraces his own labor,
to return in the payment of the increase in price which the tariff
permits the hard-earned compensation of many days of toil.
The farmer and the agriculturist, who manufacture nothing, but who pay
the increased price which the tariff imposes upon every agricultural
implement, upon all he wears, and upon all he uses and owns, except
the increase of his flocks and herds and such things as his husbandry
produces from the soil, is invited to aid in maintaining the present
situation; and he is told that a high duty on imported wool is necessary
for the benefit of those who have sheep to shear, in order that the
price of their wool may be increased. They, of course, are not reminded
that the farmer who has no sheep is by this scheme obliged, in his
purchases of clothing and woolen goods, to pay a tribute to his
fellow-farmer as well as to the manufacturer and merchant, nor is any
mention made of the fact that the sheep owners themselves and their
households must wear clothing and use other articles manufactured from
the wool they sell at tariff prices, and thus as consumers must return
their share of this increased price to the tradesman.
I think it may be fairly assumed that a large proportion of the sheep
owned by the farmers throughout the country are found in small flocks,
numbering from twenty-five to fifty. The duty on the grade of imported
wool which these sheep yield is 10 cents each pound if of the value of
30 cents or less and 12 cents if of the value of more than 30 cents. If
the liberal estimate of 6 pounds be allowed for each fleece, the duty
thereon would be 60 or 72 cents; and this may be taken as the utmost
enhancement of its price to the farmer by reason of this duty. Eighteen
dollars would thus represent the increased price of the wool from
twenty-five sheep and $36 that from the wool of fifty sheep; and at
present values this addition would amount to about one-third of its
price. If upon its sale the farmer receives this or a less tariff
profit, the wool leaves his hands charged with precisely that sum, which
in all its changes will adhere to it until it reaches the consumer. When
manufactured into cloth and other goods and material for use, its cost
is not only increased to the extent of the farmer's tariff profit, but a
further sum has been added for the benefit of the manufacturer under the
operation of other tariff laws. In the meantime the day arrives when the
farmer finds it necessary to purchase woolen goods and material to
clothe himself and family for the winter. When he faces the tradesman
for that purpose, he discovers that he is obliged not only to return in
the way of increased prices his tariff profit on the wool he sold, and
which then perhaps lies before him in manufactured form, but that he
must add a considerable sum thereto to meet a further increase in cost
caused by a tariff duty on the manufacture. Thus in the end he is
aroused to the fact that he has paid upon a moderate purchase, as a
result of the tariff scheme, which when he sold his wool seemed so
profitable, an increase in price more than sufficient to sweep away all
the tariff profit he received upon the wool he produced and sold.
When the number of farmers engaged in wool raising is compared with all
the farmers in the country and the small proportion they bear to our
population is considered; when it is made apparent that in the case of
a large part of those who own sheep the benefit of the present tariff
on wool is illusory; and, above all, when it must be conceded that
the increase of the cost of living caused by such tariff becomes a
burden upon those with moderate means and the poor, the employed and
unemployed, the sick and well, and the young and old, and that it
constitutes a tax which with relentless grasp is fastened upon the
clothing of every man, woman, and child in the land, reasons are
suggested why the removal or reduction of this duty should be included
in a revision of our tariff laws.
In speaking of the increased cost to the consumer of our home
manufactures resulting from a duty laid upon imported articles of the
same description, the fact is not overlooked that competition among our
domestic producers sometimes has the effect of keeping the price of
their products below the highest limit allowed by such duty. But it is
notorious that this competition is too often strangled by combinations
quite prevalent at this time, and frequently called trusts, which have
for their object the regulation of the supply and price of commodities
made and sold by members of the combination. The people can hardly hope
for any consideration in the operation of these selfish schemes.
If, however, in the absence of such combination, a healthy and free
competition reduces the price of any particular dutiable article of home
production below the limit which it might otherwise reach under our
tariff laws, and if with such reduced price its manufacture continues to
thrive, it is entirely evident that one thing has been discovered which
should be carefully scrutinized in an effort to reduce taxation.
The necessity of combination to maintain the price of any commodity to
the tariff point furnishes proof that someone is willing to accept lower
prices for such commodity and that such prices are remunerative; and
lower prices produced by competition prove the same thing. Thus where
either of these conditions exists a case would seem to be presented for
an easy reduction of taxation.
The considerations which have been presented touching our tariff laws
are intended only to enforce an earnest recommendation that the surplus
revenues of the Government be prevented by the reduction of our customs
duties, and at the same time to emphasize a suggestion that in
accomplishing this purpose we may discharge a double duty to our people
by granting to them a measure of relief from tariff taxation in quarters
where it is most needed and from sources where it can be most fairly and
justly accorded.
Nor can the presentation made of such considerations be with any
degree of fairness regarded as evidence of unfriendliness toward our
manufacturing interests or of any lack of appreciation of their value
and importance.
These interests constitute a leading and most substantial element of
our national greatness and furnish the proud proof of our country's
progress. But if in the emergency that presses upon us our manufacturers
are asked to surrender something for the public good and to avert
disaster, their patriotism, as well as a grateful recognition of
advantages already afforded, should lead them to willing cooperation. No
demand is made that they shall forego all the benefits of governmental
regard; but they can not fail to be admonished of their duty, as well
as their enlightened self-interest and safety, when they are reminded
of the fact that financial panic and collapse, to which the present
condition tends, afford no greater shelter or protection to our
manufactures than to other important enterprises. Opportunity for safe,
careful, and deliberate reform is now offered; and none of us should
be unmindful of a time when an abused and irritated people, heedless of
those who have resisted timely and reasonable relief, may insist upon
a radical and sweeping rectification of their wrongs.
The difficulty attending a wise and fair revision of our tariff laws is
not underestimated. It will require on the part of the Congress great
labor and care, and especially a broad and national contemplation of the
subject and a patriotic disregard of such local and selfish claims as
are unreasonable and reckless of the welfare of the entire country.
Under our present laws more than 4,000 articles are subject to duty.
Many of these do not in any way compete with our own manufactures, and
many are hardly worth attention as subjects of revenue. A considerable
reduction can be made in the aggregate by adding them to the free list.
The taxation of luxuries presents no features of hardship; but the
necessaries of life used and consumed by all the people, the duty upon
which adds to the cost of living in every home, should be greatly
cheapened.
The radical reduction of the duties imposed upon raw material used in
manufactures, or its free importation, is of course an important factor
in any effort to reduce the price of these necessaries. It would not
only relieve them from the increased cost caused by the tariff on
such material, but the manufactured product being thus cheapened that
part of the tariff now laid upon such product, as a compensation to
our manufacturers for the present price of raw material, could be
accordingly modified. Such reduction or free importation would serve
besides to largely reduce the revenue. It is not apparent how such a
change can have any injurious effect upon our manufacturers. On the
contrary, it would appear to give them a better chance in foreign
markets with the manufacturers of other countries, who cheapen their
wares by free material. Thus our people might have the opportunity of
extending their sales beyond the limits of home consumption, saving them
from the depression, interruption in business, and loss caused by a
glutted domestic market and affording their employees more certain and
steady labor, with its resulting quiet and contentment.
The question thus imperatively presented for solution should be
approached in a spirit higher than partisanship and considered in the
light of that regard for patriotic duty which should characterize the
action of those intrusted with the weal of a confiding people. But the
obligation to declared party policy and principle is not wanting to
urge prompt and effective action. Both of the great political parties
now represented in the Government have by repeated and authoritative
declarations condemned the condition of our laws which permit the
collection from the people of unnecessary revenue, and have in the most
solemn manner promised its correction; and neither as citizens nor
partisans are our countrymen in a mood to condone the deliberate
violation of these pledges.
Our progress toward a wise conclusion will not be improved by dwelling
upon the theories of protection and free trade. This savors too much of
bandying epithets. It is a _condition_ which confronts us, not a
theory. Relief from this condition may involve a slight reduction
of the advantages which we award our home productions, but the entire
withdrawal of such advantages should not be contemplated. The question
of free trade is absolutely irrelevant, and the persistent claim made in
certain quarters that all the efforts to relieve the people from unjust
and unnecessary taxation are schemes of so-called free traders is
mischievous and far removed from any consideration for the public good.
The simple and plain duty which we owe the people is to reduce taxation
to the necessary expenses of an economical operation of the Government
and to restore to the business of the country the money which we hold in
the Treasury through the perversion of governmental powers. These things
can and should be done with safety to all our industries, without danger
to the opportunity for remunerative labor which our workingmen need, and
with benefit to them and all our people by cheapening their means of
subsistence and increasing the measure of their comforts.
The Constitution provides that the President "shall from time to time
give to the Congress information of the state of the Union." It has been
the custom of the Executive, in compliance with this provision, to
annually exhibit to the Congress, at the opening of its session, the
general condition of the country, and to detail with some particularity
the operations of the different Executive Departments. It would be
especially agreeable to follow this course at the present time and to
call attention to the valuable accomplishments of these Departments
during the last fiscal year; but I am so much impressed with the
paramount importance of the subject to which this communication has thus
far been devoted that I shall forego the addition of any other topic,
and only urge upon your immediate consideration the "state of the Union"
as shown in the present condition of our Treasury and our general fiscal
situation, upon which every element of our safety and prosperity
depends.
The reports of the heads of Departments, which will be submitted,
contain full and explicit information touching the transaction, of
the business intrusted to them and such recommendations relating to
legislation in the public interest as they deem advisable. I ask for
these reports and recommendations the deliberate examination and action
of the legislative branch of the Government.
There are other subjects not embraced in the departmental reports
demanding legislative consideration, and which I should be glad to
submit. Some of them, however, have been earnestly presented in previous
messages, and as to them I beg leave to repeat prior recommendations.
As the law makes no provision for any report from the Department of
State, a brief history of the transactions of that important Department,
together with other matters which it may hereafter be deemed essential
to commend to the attention of the Congress, may furnish the occasion
for a future communication.