TWO DECADES OF FEDERAL LEGISLATION, 1877-1896
_Financial Questions_
It was inevitable that financial measures should occupy the first place
in the legislative labors of Congress for a long time after the War.
That conflict had left an enormous debt of more than two billion eight
hundred million dollars, and the taxes were not only high, but they
reached nearly every source which was open to the Federal government.
There were outstanding more than four hundred millions of legal tender
treasury notes, "greenbacks," which had seriously depreciated and, on
account of their variability as compared with gold, offered unlimited
opportunities for speculation and jugglery in Wall Street--of which Jay
Gould's attempt to corner the gold market and the precipitation of the
disaster of Black Friday in 1869 were only spectacular incidents.
Three distinct problems confronted the national administration: the
refunding of the national debt at lower rates of interest, the final
determination of the place and basis of the paper money in the currency
system, and the comparative treatment of gold and silver coinage. The
first of these tasks was undertaken by Congress during Grant's
administration, when, by the refunding acts of 1870 and 1871, the
Treasury was empowered to substitute four, four and one-half, and five
per cent bonds for the war issues at the high rates of five, six, and
even seven per cent.
The two remaining problems were by no means so easy of solution, because
they went to the root of the financial system of the country. Most of
the financial interests of the East were anxious to return to a specie
basis for the currency by retiring the legal tender notes or by placing
them on a metallic foundation. The Treasury under President Johnson
began to withdraw the greenbacks from circulation under authority of an
act of Congress passed in 1866; but it soon met the determined
resistance of the paper money party, which looked upon contraction as a
banker's device to appreciate the value of gold and reduce the amount of
money in circulation, thus bringing low prices for labor and
commodities. Within two years Congress peremptorily stopped the
withdrawal of additional Treasury notes.[28]
Shortly after forbidding the further retirement of legal tender notes,
Congress reassured the hard money party by passing, on March 18, 1869,
an act promising, on the faith of the United States, to pay in coin "all
obligations not otherwise redeemable," and to redeem the legal tender
notes in specie "as soon as practicable." A further gain for hard money
was made in 1875 by the passage of the Resumption Act, providing that on
and after January 1, 1879, "the Secretary of the Treasury shall redeem
in coin the United States legal tender notes then outstanding, on their
presentation for redemption at the office of the Assistant Treasurer of
the United States in the City of New York, in sums of not less than
fifty dollars." When the day set for redemption arrived, the Secretary
of the Treasury was prepared with a large hoard of gold, and public
confidence in the government was so high that comparatively little paper
was presented in exchange for specie.
Out of the conflict over the inflation and contraction of the currency
grew the struggle over "free silver" which was not ended until the
campaign of 1900. To understand this controversy we must go back beyond
the Civil War. The Constitution, as drafted in 1787, gives Congress the
power to coin money and regulate the value thereof and forbids the
states to issue bills of credit or make anything but the gold and silver
coin of the United States legal tender in the payment of debts. Nothing
is said in that instrument about the power of Congress to issue paper
money, and it is questionable whether the framers intended to leave the
door open for legal tenders or notes of any kind.
In 1792, the new Federal government began to coin gold and silver at the
ratio of 1 to 15, but it was soon found that at this ratio gold was
undervalued, and consequently little or no gold was brought to the
Treasury to be coined. At length, in 1834, Congress, by law, fixed the
ratio between the two metals approximately at 16 to 1; but this was
found to be an overvaluation of gold or an undervaluation of silver, as
some said, and as a result silver was not brought to the Treasury for
coinage and almost dropped out of the monetary system. Finally, in 1873,
when the silver dollar was already practically out of circulation,
Congress discontinued the coinage of the standard silver dollar
altogether--"demonetized" it--and left gold as the basis of the monetary
system.[29]
It happened about this time that the price of silver began to decline
steadily, until within twenty years it was about half the price it was
in 1870. Some men attributed this fall in the price of silver to the
fact that Germany had demonetized it in 1871, and that about the same
time rich deposits of silver were discovered in the United States.
Others declared that silver had not fallen so much in price, but that
gold, in which it was measured, had risen on account of the fact that
silver had been demonetized and gold given a monopoly of the coinage
market. On this matter Republicans and Democrats were both divided, for
it brought a new set of economic antagonisms into play--the debtor and
the creditor--as opposed to the antagonisms growing out of slavery and
reconstruction.
Some Republicans, like Senator Morrill, of Vermont, firmly believed that
no approach could be made to a genuine bimetallic currency, both metals
freely and equally circulating, without the cooperation of the leading
commercial nations of the world; and they also went so far as to doubt
whether it would be possible even then to adjust the "fickle ratio"
finely enough to prevent supply and demand from driving one or the other
metal out of circulation. Other Republicans, like Blaine, declared that
the Constitution required Congress to make both gold and silver coin the
money of the land, and that the only question was how best to adjust the
ratio. In a speech in the Senate on February 7, 1878, Blaine said: "I
believe then if Germany were to remonetize silver and the kingdoms and
states of the Latin Union were to reopen their mints, silver would at
once resume its former relation with gold.... I believe the struggle now
going on in this country and in other countries for a single gold
standard would, if successful, produce widespread disaster throughout
the commercial world. The destruction of silver as money and
establishment of gold as the sole unit of value must have a ruinous
effect on all forms of property, _except those investments which yield a
fixed return in money_."
It was this exception made by Blaine that formed the crux of the whole
issue. The contest was largely between creditors and debtors. Indeed, it
is thus frankly stated by Senator Jones of Nevada in a speech in the
Senate on May 12, 1890: "Three fourths of the business enterprises of
this country are conducted on borrowed capital. Three fourths of the
homes and farms that stand in the name of the actual occupants have been
bought on time, and a very large proportion of them are mortgaged for
the payment of some part of the purchase money. Under the operation of a
shrinkage in the volume of money, this enormous mass of borrowers, at
the maturity of their respective debts, though nominally paying no more
than the amount borrowed, with interest, are, in reality, in the amount
of the principal alone, returning a percentage of value greater than
they received--more in equity than they contracted to pay, and
oftentimes more in substance than they profited by the loan.... It is a
remarkable circumstance that throughout the entire range of economic
discussion in gold-standard circles, it seems to be taken for granted
that a change in the value of the money unit is a matter of no
significance, and imports no mischief to society, _so long as the change
is in one direction_. Who ever heard from an Eastern journal any
complaint against a contraction of our money volume, any admonition that
in a shrinking volume of money lurk evils of the utmost magnitude?... In
all discussions of the subject the creditors attempt to brush aside the
equities involved by sneering at the debtors." Both parties to the
conflict assumed a monopoly of virtue and economic wisdom, and the
controversy proceeded on that plane, with no concessions except where
necessary to secure some practical gain.
By 1877, silver had fallen to the ratio of seventeen to one as compared
with gold, and silver mine owners were anxious to have the government
buy their bullion at the old rate existing before the "demonetization"
of 1873. In this they were supported by the farmers and the debtor
classes generally, who thought that the gold market was substantially
controlled by a relatively few financiers and that the appreciation of
the yellow metal meant lower prices for their commodities and the
maintenance of high interest rates. Criticism was leveled particularly
against the bondholders, who demanded the payment of interest and
principal in gold, in spite of the fact that, at the time the bonds were
issued, the government had not demonetized silver and could have paid
in silver dollars containing 412-1/2 grains each. In addition to the
holders of the national debt, there were the owners of industrial,
state, and municipal bonds and railway and other securities who likewise
sought payment in a metal that was appreciating in value.
In the Forty-fourth Congress, the silver party, led by Bland, of
Missouri, attempted to force the passage of a law providing for the free
and unlimited coinage of silver approximately at the ratio of sixteen to
one, but their measure was amended on the motion of Allison, of Iowa, in
the Senate, in such a manner as simply to authorize the Secretary of the
Treasury to purchase not less than two million nor more than four
million dollars' worth of silver each month to be coined into silver
dollars. The measure thus amended was vetoed by Hayes, but was repassed
over his protest and became a law in 1878, popularly known as the
Bland-Allison Act. The opponents of contraction were able to secure the
passage of another act in the same year forbidding the further
retirement of legal tender notes and providing that the Treasury,
instead of canceling such notes on receiving them, should reissue them
and keep them in circulation.
None of the disasters prophesied by the gold advocates followed the
enactment of the Bland-Allison bill, but no one was satisfied with it.
The value of silver as compared with gold steadily declined, until the
ratio was twenty-two to one in 1887. The silver party claimed that the
trouble was not with silver, but that the appreciation of gold had been
largely induced by the government's discriminating policy. The gold
party pointed to the millions of silver dollars coined and unissued
filling the mints and storage vaults to bursting, all for the benefit of
the silver mine owners. The retort of the silver party was a law issuing
silver certificates in denominations of one, two, and five dollars, in
1886. This was supplemented four years later by the Sherman silver
purchase act of 1890 (repealed in 1893), which provided for the purchase
of 4,500,000 ounces of silver monthly and the issue of notes on that
basis redeemable in gold or silver at the discretion of the Treasury.
Congress took occasion to declare also that it was the intention of the
United States to maintain the two metals on a parity--a vague phrase
which was widely used by both parties to conciliate all factions.
Neither the Republicans nor the Democrats were as yet ready for a
straight party fight on the silver issue.
_Tariff Legislation_
At the opening of Hayes' administration the Civil War tariff was still
in force. It is true, there had been some slight reduction in 1872, but
this was offset by increases three years later. During the two decades
following, there was much political controversy over protection, as we
have seen, and there were three important revisions of the protective
system: in 1883 on the initiation of the Senate, in 1890 when the
McKinley bill was passed, and in 1894 when the Wilson bill was enacted
under Democratic auspices.
The first of these revisions was induced largely by the growing surplus
in the Federal Treasury and the inability of Congress to dispose of it,
even by the most extravagant appropriations. In 1882, the surplus rose
to the startling figure of $145,000,000, and a tariff commission was
appointed to consider, among other things, some method of cutting down
the revenues by a revision of duties. This commission reported a revised
schedule of rates providing for considerable reductions, but still on a
highly protective basis. The House at that time was Republican, and the
Senate was equally divided, with two independents holding the balance of
power. The upper house took the lead in the revision and escaped the
constitutional provision requiring the initiation of revenue bills in
the lower house by tacking their measure to a bill which the House had
passed at the preceding session.
Under the circumstances neither party was responsible for the measure,
and it is small wonder that it pleased no one, after the fashion of
tariff bills. There was a slight reduction on coarse woolens, cottons,
iron, steel, and several other staple commodities, but not enough to
place the industries concerned on a basis of competition with European
manufactures. New England agricultural products were carefully
protected, but the wool growers of Ohio and other middle western states
lost the ad valorem duties on wool. The Democrats in the House denounced
the measure, and most of them voted against it because, they alleged, it
did not go far enough. William McKinley, of Ohio, then beginning his
career, opposed it on other grounds; and Senator Sherman from the same
state afterward regretted that he had not defeated the bill altogether.
The tariff was "revised but not changed," as a wag put it, and no one
was enthusiastic about the measure.
Almost immediately attempts were made to amend the law of 1883. For two
years the Democrats, under the leadership of W. R. Morrison, chairman of
the Ways and Means Committee, pottered about with the tariff, but
accomplished nothing, partially on account of the opposition of
protectionist Democrats, like Randall, of Pennsylvania. In 1886,
President Cleveland, in his second message, took up the tariff
seriously; and under the leadership of Roger Q. Mills, of Texas, the
Democratic House, two years later, passed the "Mills bill" only to see
it die in the Senate. The Republican victory of 1888, though narrow, was
a warning that no compromise would be made with those who struck a blow
at protection.
The Republican House set to work upon a revision of the tariff with a
view to establishing high protection, and in May, 1890, Mr. McKinley,
chairman of the Ways and Means Committee, introduced his bill increasing
the duties generally. In the preparation of this measure, the great
manufacturing interests had been freely consulted, and their requests
for rates were frequently accepted without change, or made the basis for
negotiations with opposing forces, as in the case, for example, of the
binding twine trust and the objecting farmers. On the insistence of Mr.
Blaine, then Secretary of State, a "reciprocity" clause was introduced
into the bill, authorizing the President to place higher duties on
certain commodities coming from other countries, in case he deemed their
retaliatory tariffs "unreasonable or unjust."
The opposition to the McKinley bill was unusually violent, and no
opportunity was given to test its working before the country swung again
to the Democrats in the autumn of 1890; but the Republican majority in
the Senate prevented the House from carrying through any of its attacks
on the system. The election of Cleveland two years later and the capture
of the Senate as well by the Democrats seemed to promise that the
long-standing threat of a general downward revision would be carried
out. William Wilson, of West Virginia, reported the new bill from the
Ways and Means Committee in December, 1893. Although it made numerous
definite reductions in duties, it was by no means a drastic "free trade"
measure, such as the Republicans had prophesied in their campaign
speeches. The bill passed the House by a large majority, with only a few
Democrats voting against it. Even radical Democrats from the West, who
would have otherwise demanded further reductions, were conciliated by
the provision for a tax on all incomes over $4000.
When the Wilson bill left the House of Representatives, it had some of
the appearances at least of a "tariff-for-revenue" measure. Reductions
had been made all along the line, not without regard, of course, for
sectional interests, in memory of the principle that the "tariff is a
local issue." But the Senate made short work of it. There the individual
member counted for more. He had the right to talk as long as he pleased,
and he could trade his vote on schedules in which he was not personally
interested for votes on his own schedules. Thus by forceful and
ingenious manipulation, the Wilson bill was shorn of its most drastic
features (not without some rejoicing in the House as well as in the
Senate), and it went to President Cleveland in such a form that he
refused to accept it as a tariff reform measure and simply allowed it to
become a law without his signature.
The action of the Democratic Senate is easily accounted for. Hill, of
New York, was almost rabid in his opposition to the income tax
provision. Louisiana was a great sugar-growing state, and her Senators
had their own notion as to what were the proper duties on sugar. Alabama
had rising iron industries, and her Senators shared the emotions of the
representatives from Pennsylvania as the proposed reductions on iron
products were contemplated. Senator Gorman, of Maryland, had no more
heart in "attacking the interests" than did Senator Quay, of
Pennsylvania, who, by the way, used his "inside information" during the
passage of the bill to make money by speculating in sugar stocks.
With glee the Republicans taunted the Democrats that their professions
were one thing and their performances another. "This is not a protective
bill," said Senator O. H. Platt, of Connecticut. "It is not in any sense
a recognition of the doctrine of protection high or low. It is not a
bill for revenue with incidental protection. It is a bill (and the truth
may as well be told in the Senate of the United States) which proceeds
upon free trade principles, except as to such articles as it has been
necessary to levy protective duties upon to get the votes of the
Democratic Senators to pass the bill.... No such marvel has ever been
seen under the sun as all the Democratic Senators, with the possible
exception of the Senator from Texas (Mr. Mills), giving way to this
demand of the sugar trust. How this chamber has rung with the
denunciations of the sugar trust! How the ears of waiting and listening
multitudes in Democratic political meetings have been vexed with
reiterated denunciations of this sugar trust! And here every Democratic
Senator, with one exception, is ready to vote for a prohibitive duty
upon refined sugar."
Twenty years of tariff agitation and tinkering had thus ended in general
dissatisfaction with the promises and performances of both parties. The
Republicans had advanced to a position of high protection based
principally upon the demands of manufacturing interests themselves,
modified by such protests on the part of consumers as became vocal and
effective in politics. The Democrats had been driven, under Mr.
Cleveland's leadership, to what seemed to be a disposition to reduce the
tariff to something approaching a revenue basis, but when it came to an
actual performance, their practical views, as manifested in the
Wilson-Gorman act, were not far behind those of the opposing party.
Representatives of both parties talked as if the issue was a contest
between tariff-for-revenue and protection, but in fact it was not. The
question was really, "which of the several regions shall receive the
most protection?" Of attempts to get the tariff upon a "scientific
basis," striking a balance among all the interests of the country,
there was none. Ten years of political warfare over free silver and
imperialism were to elapse before there could be a renewed examination
of protection as a system.
_The Civil Service Law of 1883_
The "spoils system" of making Federal offices the reward for partisan
services began to draw a strong fire of criticism in Grant's first
administration. It was natural that the Democrats should view with
disfavor a practice which excluded them entirely from serving their
country in an official capacity, and the reformers regarded it as a
menace to American institutions because it was the basis of a "political
machine" which controlled primaries and elections and shut out the
discussion of real issues. In response to this combined attack, Congress
passed in 1871 a law authorizing the President to prescribe regulations
for admission to the civil service and provide methods for ascertaining
the fitness of candidates--a law which promised well while the
distinguished champion of reform, George William Curtis, was head of the
board in charge of its administration. Congress, however, had accepted
the reform reluctantly and refused to give it adequate financial
support. After two years' experience with the law, Curtis resigned, and
within a short time the whole scheme fell to the ground.
The reformers, however, did not give up hope, for they were sufficiently
strong to compel the respect of the Democrats, and the latter, by their
insistence on a reform that cost them nothing, forced the Republicans
to give the merit system some prominence in their campaign promises.
But practical politicians in both parties had small esteem for a plan
that would take away the incentive to work for victory on the part of
their followers. It was scornfully called "snivel service" and
"goody-goody reform"; and the old practices of distributing offices to
henchmen and raising campaign funds by heavy assessments on
officeholders were continued.
Never was the spoils system more odious than when the assassination of
Garfield by a disappointed office hunter startled the country from its
apathy. Within a year, a Senate committee had reported favorably on a
civil service reform bill. It declared that the President had to wear
his life out giving audiences to throngs of beggars who besieged the
executive mansion, and that the spectacle of the chief magistrate of the
nation dispensing patronage to "a hungry, clamorous, crowding, and
jostling multitude" was humiliating to the patriotic citizen. And with
the Congressman the system "is ever present. When he awakes in the
morning it is at his door, and when he retires at night it haunts his
chamber. It goes before him, it follows after him, and it meets him on
the way." The only relief, concluded the report, was to be found in a
thoroughgoing merit system of appointing civil servants.
At length in 1883 Congress passed the civil service act authorizing, but
not commanding, the President to appoint a commission and extend the
merit system to certain Federal offices. The commission was to be
composed of three members, not more than two of the same party,
appointed by the President and Senate, and was charged with the duty of
aiding the President, at his request, in preparing suitable rules for
competitive examinations designed to test the fitness of applicants for
offices in the public service, already classified or to be classified by
executive order or by further legislation. The act itself brought a few
offices under the merit system, but it left the extension of the
principle largely to the discretion of the President. When the law went
into force, it applied only to about 14,000 positions, but it was
steadily extended, particularly by retiring Presidents anxious to secure
the jobs already held by their partisans or to improve the efficiency of
the service. Neither Cleveland nor Harrison enforced the law to the
satisfaction of the reformers, for the pressure of the office seekers,
particularly under Cleveland's first administration, was almost
irresistible.
_Railway and Trust Regulation_
In the beginning of the railway era in the United States, Congress made
no attempt to devise a far-sighted plan of public control, but
negligently devoted its attention to granting generous favors to
railways. It was not until the stock-watering, high-financing,
discriminations and rebates had disgraced the country that Congress was
moved to act. It is true that President Grant in his message of 1872
recommended, and a Senate committee approved, a comprehensive plan for
regulating railways, but there was no practical outcome. The railway
interests were too strong in Congress to permit the enactment of any
drastic regulatory laws. But at length the Granger movement, which had
produced during the seventies so much railway regulation in the
States,[30] appeared in Congress, and stirred by a long report by a
Senate committee enumerating a terrifying list of abuses against
shippers particularly, Congress passed, in 1887, the first important
interstate commerce law.
This act was a timid, halting measure, and the Supreme Court almost
immediately sheared away its effectiveness by decisions in favor of the
railway companies. The law created a commission of five members
empowered to investigate the operations of common carriers and order
those who violated the law to desist. The act itself forbade
discriminations in rates, pooling traffic, and the charging of more for
"short" than "long hauls" over the same line, except under special
circumstances. In spite of the good intentions of the commission, the
law was practically a dead letter. According to a careful scholar,
Professor Davis R. Dewey, "By 1890 the practice of cut rates to favored
shippers and cities was all but universal at the West; passes were
generally issued; rebates were charged up to maintenance of way account;
special privileges of yardage, loading, and cartage were granted;
freight was underbilled or carried under a wrong classification and
secret notification of intended reduction of rates was made to favored
shippers.... The ingenuity of officials in breaking the spirit of the
law knew no limit, and is a discouraging commentary on the dishonesty
which had penetrated into the heart of business enterprise."[31]
The critics of railway policy who were able to force the passage of the
interstate commerce act usually coupled the denunciation of the
industrial monopolies with their attacks on common carriers; and, three
years after the establishment of the interstate commerce commission,
Congress, feeling that some kind of action was demanded by the political
situation, passed the Sherman anti-trust law of 1890. There was no
consensus of opinion among the political leaders as to the significance
of the trust. Blaine declared that "trusts were largely a private affair
with which neither the President nor any private citizen had any
particular right to interfere." Speaker Reed dismissed the subject by
announcing that he had heard "more idiotic raving, more pestiferous
rant, on that subject than on all others put together." Judge Cooley, on
seeing "the utterly heartless manner in which the trusts sometimes have
closed many factories and turned men willing to be industrious into the
streets in order that they may increase profits already reasonably
large," asked whether the trust "as we see it is not a public enemy;
whether it is not teaching the laborer dangerous lessons; whether it is
not helping to breed anarchy."
In the midst of this general confusion of opinion on the trust, it is
not surprising that Congress in the Sherman law of 1890 enunciated no
clear principles. Apparently it intended to restore competition by
declaring illegal "every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce among the
several states or with foreign nations." But a study of the debates over
the law fails to show any consistent opinion as to what combinations
were included within the prohibition or as to the exact meaning of
"restraint of trade." Of course, the lawyers pointed at once to the
simplicity of the old common law doctrine that conspiracies in restraint
of trade are illegal, but this was an answer in verbiage which gave no
real clew to concrete forms of restraint under the complex conditions of
modern life.
The vagueness of the Sherman anti-trust law was a subject of remark
during its passage through Congress. O. H. Platt, in the Senate,
criticized the bill as attacking all combinations, no matter what their
practices or forms. "I believe," he said, "that every man in business--I
do not care whether he is a farmer, a laborer, a miner, a sailor,
manufacturer, a merchant--has a right, a legal and a moral right, to
obtain a fair profit upon his business and his work; and if he is driven
by fierce competition to a spot where his business is unremunerative, I
believe it is his right to combine for the purpose of raising prices
until they shall be fair and remunerative. This bill makes no
distinction. It says that every combination which has the effect in any
way to advance prices is illegal and void.... The theory of this bill is
that prices must never be advanced by two or more persons, no matter how
ruinously low they may be. That theory I denounce as utterly untenable,
as immoral."
Senator Platt then went on to say that the whole subject had not been
adequately considered and that the bill was a piece of politics, not of
statesmanship. "I am sorry, Mr. President," he continued, "that we have
not had a bill which had been carefully prepared, which had been
thoughtfully prepared, which had been honestly prepared, to meet the
object which we all desire to meet. The conduct of the Senate for the
past three days--and I make no personal allusions--has not been in the
line of the honest preparation of a bill to prohibit and punish trusts.
It has been in the line of getting some bill with that title that we
might go to the country with. The questions of whether the bill would be
operative, of how it would operate, or whether it was within the power
of Congress to enact it, have been whistled down the wind in this Senate
as idle talk, and the whole effort has been to get some bill headed: 'A
Bill to Punish Trusts,' with which to go to the country."
Senator Hoar, who claimed that he was the author of the Sherman
anti-trust law, says, however, that the act was not directed against
_all_ combinations in business. "It was expected," he says, "that the
court in administering that law would confine its operations to cases
which are contrary to the policy of the law, treating the words
'agreements in restraint of trade' as having a technical meaning, such
as they are supposed to have in England. The Supreme Court of the United
States went in this particular farther than was expected.[32] ... It has
not been carried to its full extent since, and I think will never be
held to prohibit those lawful and harmless combinations which have been
permitted in this country and in England without complaint, like
contracts of partnership, which are usually considered harmless."
The immediate effects of the Sherman anti-trust law were wholly
negligible. Seven of the eight judicial decisions under the law during
Harrison's administration were against the government, and no indictment
of offenders against the law went so far as a trial. During Cleveland's
second term the law was a dead letter. Meanwhile trusts and combinations
continued to multiply.
_The Income Tax Law of 1894_
In the debates over tariff reduction, silver, and paper money, evidences
of group and class conflicts were almost constantly apparent, but it was
not until the enactment of the income tax provision of 1894 that
political leaders of national standing frankly avowed a class
purpose--the shifting of a portion of the burden of national taxes from
the commodities consumed by the poor to the incomes of the rich.
The movement for an income tax found its support especially among the
farmers of the West and South and the working classes of the great
cities. The demand for it had been appearing for some time in the
platforms of the agrarian and labor parties. The National or Greenback
party, in its platform of 1884, demanded "a graduated income tax" and "a
wise revision of the tariff laws with a view to raising revenues from
luxury rather than necessity." The Anti-monopoly party, in the same
year, demanded, "a graduated income tax and a tariff, which is a tax
upon the people, that shall be so levied as to bear as lightly as
possible upon necessaries. We denounce the present tariff as being
largely in the interest of monopolies and demand that it be speedily and
radically reformed in the interest of labor instead of capital." The
Union Labor convention at Cincinnati in 1888 declared in its platform:
"A graduated income tax is the most equitable system of taxation,
placing the burden of government upon those who can best afford to pay,
instead of laying it upon the farmers and producers and exempting
millionaire bondholders and corporations."
In the campaign of 1892, the demand for an income tax was made by the
Populist party and by the Socialist Labor party. The former frankly
declared war on the rich, proclaiming in its platform that, "The fruits
of the toil of millions are boldly stolen to build up colossal fortunes
for a few, unprecedented in the history of mankind; and the possessors
of these, in turn, despise the republic and endanger liberty." Among the
remedies for this dire condition of things the Populists demanded "a
graduated income tax." The Democrats, at their convention of that year,
denounced the McKinley tariff law "as the culminating atrocity of class
legislation," and declared that "The Federal government has no
constitutional power to impose and collect tariff duties except for the
purpose of revenue only."
When it was discovered in the ensuing election that the Democratic
party, with its low tariff pronunciamento was victorious, and that the
Populists with their radical platform had carried four western states
and polled more than a million votes, shrewd political observers saw
that some revision in the revenue system of the Federal government was
imperative. President Cleveland, in his message of December, 1893, in
connection with the recommendation for a revision of the tariff, stated
that, "the committee ... have wisely embraced in their plans a few
additional revenue taxes, including a small tax upon incomes derived
from certain corporate investments." It is not clear what committee the
President had in mind, and Senator Hill declared that the Ways and Means
Committee had not agreed "upon any income tax or other internal
taxation"; although it had undoubtedly been considering the subject in
connection with the revision of the tariff.
When the tariff bill was introduced in Congress, on December 19, 1893,
it contained no provision for an income tax, and it was not until
January 29 that an income tax amendment to the Wilson bill was
introduced in behalf of the Committee. In defending his amendment, the
mover, Mr. McMillin, declared that the purpose of the tax was to place a
small per cent of the enormous Federal burden "upon the accumulated
wealth of the country instead of placing all upon the consumption of the
people." He announced that they did not come there in any spirit of
antagonism to wealth, that they did not intend to put an undue embargo
upon wealth, but that they did intend to make accumulated wealth pay
some share of the expenses of the government. The tariff, in his
opinion, taxed want, not wealth. He was impatient with the hue and cry
that was raised, "when it is proposed to shift this burden from those
who cannot bear it to those who can; to divide it between consumption
and wealth; to shift it from the laborer who has nothing but his power
to toil and sweat to the man who has a fortune made or inherited." The
protective tariff, he added, had made colossal fortunes by levying
tribute upon the many for the enrichment of the few; and yet the
advocates of an income tax were told that this accumulated wealth was a
sacred thing which should go untaxed forever. In announcing this
determination to tax the rich, Mr. McMillin disclaimed any intention of
waging a class war, by declaring that the income tax, in his opinion,
would "diminish the antipathy that now exists between the classes," and
sweep away the ground for that "iconoclastic complaint which finds
expression in violence and threatens the very foundations upon which our
whole institution rests."
The champions of property against this proposal to tax incomes in order
to relieve the burden upon consumption summoned every device of oratory
and argument to their aid. They ridiculed and denounced, and endeavored
to conjure up before Congress horrible visions of want, anarchy,
socialism, ruin, and destruction. J. H. Walker, of Massachusetts,
declared that, "The income tax takes from the wealth of the thrifty and
the enterprising and gives to the shifty and the sluggard." Adams, of
Pennsylvania, found the income tax "utterly distasteful in its moral and
political aspects, a piece of class legislation, a tax upon the thrifty,
and a reward to dishonesty." In the Senate, where there is supposed to
be more sobriety, the execrations heaped upon the income tax proposal
were marked by even more virulence. Senator Hill declared that, "The
professors with their books, the socialists with their schemes, the
anarchists with their bombs, are instructing the people of the United
States in the organization of society, the doctrines of democracy, and
the principles of taxation. No wonder if their preaching can find ears
in the White House." In his opinion, also, the income tax was an
"insidious and deadly assault upon state rights, state powers, and state
independence." Senator Sherman particularly objected to the high
exemption, declaring, "In a republic like ours, where all men are equal,
this attempt to array the rich against the poor, or the poor against the
rich, is socialism, communism, devilism."
In spite of this vigorous opposition, the House passed the provision by
a vote of 204 to 140 and the Senate by a vote of 39 to 34. In its final
form the law imposed a tax of two per cent on all incomes above
$4000--an exemption under which the farmer and the lower middle class
escaped almost entirely. Cleveland did not like a general income tax,
and he was dissatisfied with the Wilson tariff bill to which the tax
measure was attached. He, therefore, allowed it to go into effect
without his signature.
_Labor Legislation_
The only measures directly in the interests of labor generally passed
during this period were the Chinese exclusion act, the law creating a
labor bureau at Washington, and the prohibition of the importation of
alien workingmen under contract. Shortly after the Civil War, protests
were heard against cheap Chinese labor, not only in the western states,
but also in the East, where manufacturers were beginning to employ
coolies to break strikes and crush unions. At length, early in 1882,
Congress passed a measure excluding Chinese laborers for a period of
twenty years, the Republicans from the eastern districts voting
generally against it. President Arthur vetoed the bill, holding in
particular that it was a violation of treaty provisions with China, and
suggested a limitation of the application of the principle to ten years.
This was accepted by Congress, and the law went into force in August of
that year. More stringent identification methods were later applied to
returning Chinese, and in 1892, the application of the principle of
exclusion was further extended for a term of ten years. In 1884, a
Federal bureau of labor statistics was created to collect information
upon problems of labor and capital. In 1885, Congress passed a law
prohibiting the importation of laborers under contract, which was
supplemented by later legislation.[33]
FOOTNOTES:
[28] See below, p. 123.
[29] The Silver Democrats declared that this demonetization
was secretly brought about by a "conspiracy" on the part of
gold advocates, and named the act in question "the crime of
'73."
[30] See above, p. 167.
[31] _National Problems_, p. 103.
[32] See below, p. 332.
[33] In 1887, Congress enacted a law providing for counting
the electoral vote in presidential elections. This measure
grew out of the disputed election of 1876.