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THE TARIFF IN OUR TIMES
[Illustration]
THE MACMILLAN COMPANY
NEW YORK · BOSTON · CHICAGO
SAN FRANCISCO
MACMILLAN & CO., LIMITED
LONDON · BOMBAY · CALCUTTA
MELBOURNE
THE MACMILLAN CO. OF CANADA, LTD.
TORONTO
THE TARIFF IN OUR TIMES
BY
IDA M. TARBELL
AUTHOR OF
“THE LIFE OF ABRAHAM LINCOLN,” “THE HISTORY OF THE STANDARD OIL
COMPANY,” “MADAME ROLAND,” ETC.
New York
THE MACMILLAN COMPANY
1911
_All rights reserved_
COPYRIGHT, 1906, 1907, 1909, 1910, 1911,
BY THE PHILLIPS PUBLISHING CO.
COPYRIGHT, 1911,
BY THE MACMILLAN COMPANY.
Set up and electrotyped. Published October, 1911.
Norwood Press
J. S. Cushing Co.—Berwick & Smith Co.
Norwood, Mass., U.S.A.
TO
W. W. T.
------------------------------------------------------------------------
PREFACE
It takes no extended examination of any period in the last fifty
years—the term covered by the phrase “Our Times” in the title of this
book—to convince an unprejudiced student that as far as the tariff is
concerned public opinion has never been fairly embodied in the bills
adopted. If the popular understanding of protection as expressed in our
elections had been conscientiously followed, there would be to-day no
duties on iron and steel products, on cheap cottons and cotton mixtures,
and, certainly none on a great variety of raw materials probably
including raw wool. That is, in these cases and in multitudes of similar
ones, the purposes of protection had been realized, or it had been
proved that they never could be realized; and in either case the dogma
required the duty to be withdrawn. This volume is an attempt to tell in
narrative form the story of this defeat of the popular will.
The major part of the material in the volume has appeared at intervals
in the last five years in the _American Magazine_. So many persons
concerned in the making of our tariffs in the period covered have aided
me directly or indirectly by documents, personal reminiscences, and
explanations of points of view that I find it out of the question to
attempt to enumerate them. In one case, however, my debt is so great
that I must acknowledge it specifically, and that is to Mr. Horace
White, who has read, either in manuscript or proofs, the bulk of this
volume and who has been generous in his suggestions and criticisms.
CONTENTS
PAGE
PREFACE vii
CHAPTER
I. THE TARIFF AS A WAR TAX 1
II. AN OUTBREAK OF PROTECTIONISM 28
III. WAR TARIFFS CONTINUED 53
IV. THE BUSINESS MAN TAKES CHARGE 81
V. THE MONGREL BILL OF 1883 109
VI. GROVER CLEVELAND AND THE TARIFF 133
VII. THE MILLS AND ALLISON BILLS 155
VIII. THE MCKINLEY BILL 181
IX. THE WILSON BILL 209
X. THE DINGLEY BILL 237
XI. WHERE EVERY PENNY COUNTS 258
XII. THE MAKING OF THE BILL OF 1909 297
XIII. SOME INTELLECTUAL AND MORAL ASPECTS OF OUR TARIFF-MAKING 331
THE TARIFF IN OUR TIMES
CHAPTER I
THE TARIFF AS A WAR TAX
If there was any public question on which the minds of the people of the
United States were made up fifty years ago, it was that of the tariff.
They had not been made up in a day. On the contrary, it had taken nearly
seventy years of experimenting to bring them where they were—seventy
years in which all forms of taxation on imported goods had been tried,
from the supposed 8½ per cent of the first Congress to the 43 per cent
of the “tariff of abominations” in 1828. Some of their experiments had
been good and some bad, but out of them all they had struck a mean which
was something like this: As a nation we intend to raise money to carry
on our business by putting a duty on certain raw and manufactured goods
brought from foreign countries. If we find we are getting too large a
revenue we will cut down the duty, if too small we will raise it. In
placing these duties we will do as Alexander Hamilton advised—that is,
if there is a young industry in the country trying to produce something
which is _essential_ to war or on which our daily living depends, we
will protect it from foreign competition until it is established—_but no
longer_.
For ten years the country had been working on this tariff platform, and
so satisfied were they with it that when they found in 1857 they were
taking in more money than they needed for expenses, they promptly passed
a bill cutting the duties down to an average of 20 per cent—the lowest
they had been since 1816. The duty on many articles they removed
entirely—thus, cheap raw wool was allowed to come in free. Nobody,
except the Pennsylvanians, and a few New Englanders, objected strongly
to the bill; even the majority of manufacturers and old Henry Clay
tariff men agreed. Henry Clay had told them that protective duties were
never meant to be perpetual, and they looked upon this lowering of taxes
as a natural step in the process of gradual extinction which they had
been taught to expect.
Not only was the mind of the country satisfied with lower duties and an
increasing list of free goods, but it had accepted the idea that a
Christian nation should establish as rapidly as possible reciprocal
trade relations with its neighbors. For three years a reciprocity treaty
between ourselves and Canada had been working. It was not as good a
treaty as might be, and the Canadians were getting greater advantages
from it than we; but it could be improved, and there was much pride in
the country over the advance it was felt this treaty showed in national
broad-mindedness and generosity.
That was fifty years ago. To-day the average tax on dutiable goods
imported into the United States is nearer 50 per cent than 20. Instead
of reciprocity with Canada we have had for fifty years in many cases
prohibitive protection. Why is this? What has become of the theories and
practices of fifty years ago?
The answer lies in a curious story—a story of a panic and a war and the
natural penalties which panics and wars impose. The panic came first—in
1857, just after Congress had lowered duties to prevent the collection
of more money than we needed for actual expenses. It was a logical
enough panic—panics always are logical. For several years the country
had been making money. It had lost its head over its growing wealth—had
speculated, had built railroads faster than they were needed, had spent
lavishly. Its expenses finally outran its income and a crash naturally
came.
The tariff had nothing whatever to do with the disturbance, but the
effect of the panic on the national income was soon evident; straitened
for money the country bought less abroad, buying less the revenue was
less. In 1857 it had been $64,000,000, but the year after it was but 42
millions, and the year after that (1859) but 48 millions. Instead of too
much money, Congress saw itself with too little. Its credit was sadly
disturbed, not only or chiefly because of this falling revenue, but
because of the agitation of the slavery question and the increasing
contention between North and South.
It was natural enough, of course, that when the revenues from imports
continued to be too little to pay the government’s bills, there should
be a demand for higher duties. This demand was headed by a member of the
House of Representatives from Vermont, Mr. Justin S. Morrill.
Mr. Morrill was an able and honest man, who had been sent to Congress by
the “Conscience Whigs” of his district—not because he had sought the
office, but purely because they believed from what they had seen of him
as a merchant in their community, they could trust him to represent them
on the slavery question. Now, Mr. Morrill was one of the Whigs who had
not been satisfied to see duties lowered in 1857, and who strenuously
objected to letting in raw products free of duty. He wanted all wool
protected. He wanted his Vermont marble protected. He wanted maple sugar
protected. He was one of the few New England representatives who had
spoken, as well as voted, against the bill of 1857, and his speech at
that time had been very able. Indeed it made him the acknowledged head
of the active protectionist sentiment left in the country, for he made
no bones about declaring his faith. “Such articles of primary
necessity,” he said, “as there is any hope of successfully producing
should be waked into life, nursed into perennial vigor by moderate and
steady discrimination in their favor, so long as their condition makes
it proper, so long as there is a probable chance of ultimate success.”
Mr. Morrill saw the opportunity for reviving protection in 1858 when the
revenues were insufficient, and he determined to prepare a new bill
which should represent his views. But the interest in the subject at
that moment was so little that he could not get a hearing from the
House. The next session, however, gave him a rare chance. In the fall of
1859 a Congress largely Republican took its seat. After a fierce fight
this Congress elected a Republican speaker, and this speaker put a young
man destined to play a large part in National finances at the head of
the Ways and Means Committee—John Sherman of Ohio. Mr. Sherman was just
37 years old, and as shrewd, as active, and as experienced a politician
as the Republicans had in the House. He had begun his political life
when about 21 years old with but two political tenets—hatred of the
Democratic party and belief in protection of American industries.
Political conscience had been unstirred within him until the repeal of
the Missouri Compromise. That turned him into a Crusader. Sherman had
been fighting solely against slavery extension for six years, when his
appointment to the head of the Ways and Means Committee suddenly made it
his duty to consider finances. At once his old faith in protection
asserted itself, and he gave full support to Mr. Morrill, who was
instructed by the Committee of Ways and Means to prepare a new tariff
bill.
Mr. Morrill worked out his bill with great care and patience, and when
it came out of committee early in 1860 it represented very nearly what
he believed. Mr. Sherman, who from this time on had much to do with
tariff bills, says in his autobiography that the Morrill Bill at the
start was nearer meeting the double requirement of revenue and
protection than any bill he was ever familiar with.
But good as the bill may have been when it came from the committee, it
was soon assaulted right and left by those who had something to protect
or those who were affected by what it protected. Much of the pressure,
Mr. Morrill found, was impossible to resist. What can you do when a
Senator of the United States, one so famous as Charles Sumner, “calls
your attention” to letting cocoa in free (though according to the
principle on which you are working it should pay a slight duty) because
his friend, the head of an “eminent house” (the friend was Henry L.
Pierce and the “eminent house” was his chocolate factory), wants his
cocoa free? What are you to do when Pennsylvania iron men and Rhode
Island manufacturers, who according to your theory of protection are
established and whose duties should gradually be lowered, come down on
you for higher rates, and your party colleagues tell you that if you
refuse their requests the election may be lost and the cause of human
freedom be retarded? Amendment after amendment was tacked on the bill,
many of them in direct contradiction of Mr. Morrill’s principles. They
destroyed the justice and the consistency of the measure, and he became
so disgusted that he was ready to abandon it. Inconsistency was less
troublesome to Mr. Sherman, however. He was a “practical politician,”
something Mr. Morrill never was. He believed more revenue to be
necessary; he believed in protection; he believed in winning votes for
the party wherever and however he could. This bill contributed to all
these ends, and he himself undertook to engineer it through the House.
Mr. Sherman’s task was made the easier because in May, when the
Republicans had met in Chicago to nominate their candidate for
president, they had put into their platform a plank which pledged the
party to support protection, though they did not have the courage to use
the word. This plank was plainly a bid for the vote of communities which
could be held to the party only by protection, preëminently the state of
Pennsylvania. The great leaders of the party, Mr. Lincoln, Mr. Chase,
and Mr. Seward, did not believe that the tariff should be taken up at
all at this time. Indeed, only a few days before he was nominated as
president Mr. Lincoln wrote to a correspondent that “the tariff question
ought not to be agitated in the Chicago Convention.” Mr. Chase had
always stood with the Democrats on the matter, and Seward had expressed
his view in the Senate in 1857 when the tariff bill was up: “It is not
wise, it is not just, to draw from the pockets of the people into the
Treasury of the country an amount of money greater than the current
expenses of the Treasury require.”
The Morrill Bill passed the House in May, 1860, but the Senate would
have none of it. That body was still Democratic and the South still led.
Not only was the South strongly free trade in its opinions, but at that
moment no bill originating with the Republicans had a ghost of a chance,
such was the bitterness of the feeling. The bill went over to the next
session, and the next session brought a tragic change in the Senate. By
the time Mr. Morrill’s bill had a hearing six states had withdrawn from
the Union, and their Senators had left Washington. The withdrawal of the
Southern Senators left the control to the Republicans, and it soon
became evident that the bill would probably pass. The result was a
fierce onslaught by all sorts of interests. Almost everybody got what he
wanted. Some of the items which went into the schedule were long
subjects of mirth and scandal to the opposition. Such was the protection
of 20 per cent accorded to wood-screws. At that time there was but one
small factory for wood-screws in the country. It was situated in
Providence, Rhode Island, and Senator Simmons, who secured its
protection, and who was popularly supposed to be interested in the
concern, was long known as “Wood-Screw” Simmons. The bill also carried a
generous basket clause into which all raw materials and all manufactured
articles “not otherwise provided for” were dumped.
It was little wonder that jobbery found an easy way into the bill. The
country was in an uproar over secession and in a state of doubt and
unrest about Mr. Lincoln—what would he do? Was he the man for a crisis?
A poor time indeed to consider deliberately so serious a matter as new
tariff schedules! There was an imperative need of money and it looked as
if this bill would give it, so the Morrill Bill finally went through,
and 48 hours before his term ended President Buchanan gave it his
signature.
The immediate effect of the Morrill Bill was something quite unlooked
for. The increased tariffs made Europe deeply indignant. England and
France were particularly hard hit; for instance, the duties on cheap
clothes, of which they sent us great quantities, were largely raised.
Besides the growing free trade sentiment abroad, the sentiment of the
liberal party everywhere was shocked that the new Republican party,
which had arisen against human slavery, should take the narrower view of
commerce. To make the matter worse for the Republicans, the seceders, in
session at Montgomery, adopted a tariff for revenue only. Thus, before
Sumter was fired on, Europe had turned to the Confederacy as the more
liberal in commercial policy. It is probable that if the Morrill Bill
had been simply a revenue measure the cause of the North would have met
a very different reception in Europe from what it did.
The London _Times_ clearly stated the foreign point of view:
“It will not be our fault if the inopportune legislation of the
North combined with the reciprocity of wants between ourselves and
the South should bring about considerable modification in our
relations with America. No one after the recent debate on the slave
trade can doubt that England is still in earnest on this point, and
will never buy commercial advantage at the cost of her honor. We
should infinitely prefer dealing with a single responsible
government to maintaining two embassies and running the risk of
misunderstandings with two highly sensitive democracies. But the
tendencies of trade are inexorable, and our manufactures will
infallibly find their way to the best market with the regularity of
a mechanical law.... It may be the Southern population will become
our best customers.... Granted that a permanent secession can be
effected by a ‘peaceful appeal to the ballot-box,’ and that the
moral and economical evils of slavery do not prove fatal to a
society based on it, material prosperity will not fail to follow
unrestricted intercourse, and the free States will long repent an
act which brings needless discredit on the intrinsic merits of their
cause.”
This “discredit” to the cause grew in Europe as the days went on. Not
only did the bill hurt Northern trade and alienate European sympathy, it
was the chief reason the Confederates had for thinking their new
government would succeed. It was driving trade to their ports, thus
giving them money. It was making Europe their friend, thus giving them
position. And nothing could be done. On all sides the Morrill tariff was
denounced as a stupidity, a blunder, an outrage. There were even many
demands for an extra session to repeal it. Too late the Republicans saw
that their first measure as a party had been a mistake. And then
suddenly the whole situation of the unhappy bill was changed by the
breaking out of war between the North and South.
The first and most imperative necessity in war is money, for money means
everything else—men, guns, ammunition. Mr. Lincoln and his cabinet when
they found in the spring of 1861 that they were in for a war of more
than 90 days, at once called an extra session of Congress to provide the
means for carrying it on. It fell to Mr. Chase, the new Secretary of the
Treasury, to suggest what could be done. Practically our whole income
came at that time from duties on imported goods. How could they be made
to yield more? What other sources of revenue could be tapped? Mr. Chase
had various suggestions to make, but it is with only one of them that we
have to do here—the raising of the tariff on imported goods.
Under other circumstances it would not have been agreeable for Mr. Chase
to suggest increased duties. All his life he had been what the Whigs
called a free trader—that is, he had preached Democratic doctrines on
the tariff. He was one of a large number of leaders in the Republican
party who had originally been Democrats and who had joined the new
organization solely because of its anti-slavery sentiments, and who had
reluctantly swallowed the new party’s leanings towards protection,
hoping always, no doubt, to uproot them finally. Mr. Chase had probably
been the less inclined to make any show of objection to the
protectionist program of the new organization because he had hoped to be
its choice for president. But Mr. Chase had not been his party’s choice
for president. On the contrary, he had been obliged to accept from his
successful rival a portfolio for which he had no love and no
training—that of Secretary of the Treasury. Disappointed as he was,
badly used as he felt himself to be, he undertook manfully the hard task
of raising money for the war. From the first his determination and
confidence were the firmest. The money was in the country. It must come
into the National Treasury, if not by one means, then by another. “The
war must go on,” he told the bankers who hesitated to take his loans, in
July, 1861, “until this rebellion is put down, if we have to put out
paper until it takes a thousand dollars to buy a breakfast.” And when
they gave him their terms with a “this-is-our-ultimatum,” he replied,
“It is for me to make ultimatums; not you.” Higher tariffs then instead
of lower Mr. Chase naturally advised, and he asked Congress to amend the
Morrill Bill to this end. Many of its duties he raised, articles which
it placed on the free list he took off. On many articles he arranged for
a double duty, that is, duty on both value and quantity, and he tacked
to the bill a direct tax of $20,000,000 to be divided among the states
and a tax on all incomes of over $800. Mr. Chase expected from this
measure as amended to get something like $80,000,000 of the $318,000,000
he calculated he would need in the next year (ending June 30, 1862).
There was no delay in the adoption of the bill. Its worst enemies were
for it. Even the New York _Evening Post_, which had fought the Morrill
Bill with teeth and claws, which had called it a “booby of a bill,” the
“blunder of the age,” now said resignedly that in the situation the best
thing to do was to “patch it up.” “The great object we have in view
during the continuance of the war by financial regulations,” said the
_Post_, “is to raise, in the easiest and least burdensome manner, the
largest possible amount of revenue. To further this object, free traders
can readily work with protectionists. War is an exceptional state and
demands extraordinary measures. For this reason we are prepared to
support a scale of duties at present which we should oppose if the
nation were at peace.”
Thus, in less than five months after its passage the Morrill Bill, a
protectionist measure, framed when there was but little protectionist
sentiment in the country and made a law by the signature of a Democratic
president elected on a platform of free trade throughout the world, a
bill so changed from its first condition that its author had been
inclined to abandon it, loaded with jobs, the cause of serious business
disturbances in the North, of the alienation of European sympathy, of
great gain and satisfaction to the South, had been accepted with
resignation by its most intelligent enemies. Almost without knowing it
the country had returned to a policy which nearly 20 years before it had
abandoned. It is not too much to call the measure the foundation of a
revolution in our commercial life. Henry C. Cary, the economist, did not
greatly exaggerate its importance when he wrote Mr. Morrill: “You have
connected your name with what is destined, I think, to prove the most
important measure ever adopted”; nor did Mr. Blaine when he said, in his
Recollections, that if the Morrill Bill had been passed under other
circumstances, it would have been regarded as an “era in the history of
the government.”
Mr. Chase had calculated that the receipts from the amended Morrill Bill
would amount to about $80,000,000 a year, but they fell far short—only
about 51 millions, of which the customs yielded 49 millions. The
expenses of the war increased at a frightful rate, and it was soon
evident that the struggle was to be longer than had been expected. Early
in 1862 new schemes of taxation began to be considered. The result was
that the Ways and Means Committee decided to ask Congress to pass an
internal revenue bill, and still further to add to the duties provided
for in the Morrill Bill. It was in June when the two new measures came
from the committee. Taken together they were calculated to make the
country gasp. The tax bill touched almost every article of daily life.
It provided for licenses on a man’s business whatever it was—running a
bowling alley, a hotel, or an attorney’s office; for taxes on his income
and his inheritances, on his carriages, his gold watch, his silver
plate; for revenue stamps on the documents he signed, the telegrams he
sent, the matches he struck; nothing that he ate or drank or made
escaped. The direct taxation on manufactured articles was so high that
in many cases it would have acted as a bonus to foreigners to bring in
their goods if the Ways and Means Committee had not foreseen this, and
aimed to amend the tariff law so that increased duties would compensate
for the internal taxes. As might have been expected from the hurried way
in which the bill had been prepared, the duties intended as
compensations were not always exact. Sometimes, as in the case of books
and umbrellas, they were insufficient, and the foreigner could bring
over his wares and undersell the overtaxed domestic producer. Again, the
duties were in excess of the direct taxes and served only to protect the
home manufacturer in extortionate prices. Thaddeus Stevens, the chairman
of the Committee, and Mr. Morrill both explained to the House with great
care that the whole scheme of the changes was to make the additional
duty cover as nearly as possible the internal taxes. “If we bleed
manufacturers we must see that the proper tonic is administered at the
same time,” said Mr. Morrill. Any duty not compensatory was placed
purely for revenue reasons. In no case, they said, were the new duties
for protective purposes—the whole change must be regarded as
“temporary”—a war measure, and nothing else.
It was a foregone conclusion that the bills whatever their provisions
would pass, for the people were actually demanding taxation, that the
war might be properly waged. Nevertheless, there was much bitter
remonstrance at the duplication of taxes, which in certain cases was
excessive and unjust. Take the newspaper business, for instance. Almost
everything a printing house used was taxed—paper paid 3 per cent; a duty
was put also on rags imported for paper making, which still further
raised the price; the advertising income was taxed. Revenue stamps were
required on every telegram a member of the staff sent, on every check
made out, on every official paper signed. When the bill was under
consideration, the New York _Herald_ computed that it would add from
thirty to forty thousand dollars a year to its expenses. The _Herald_
got great joy out of the situation. _It_ could afford the expense, but
in its judgment no other New York newspaper could, and in a long and
interesting editorial (July 1, 1862) it said, jubilantly: “Many papers
will be killed, but the _Tribune_ and the _Evening Post_ will die first.
They have no advertising patronage and but very little circulation, and
so by a just retribution of Providence they will be the first victims of
the taxation which they have brought upon us by causing our Civil War.”
The comforting assurance of the destruction of his two hated
contemporaries, combined with the disgust and anger of England over the
increased duties, gave Mr. Bennett such satisfaction at this time that
he became almost benevolent towards the Lincoln administration.
Mr. Greeley did not share Mr. Bennett’s conviction that the _Tribune_
would be destroyed by the new taxes, for he wrote Mr. Morrill:
“If newspapers are to be taxed at all, their advertising can bear it
best, as it is a source of profit which circulation is not. We can
stand 2 mills per pound on paper—though that will be a pretty
productive tax. I think that item alone will cost the _Tribune_
establishment $7000 per annum, all to come out of profits that can’t
be made in these times. Still taxes must be put on—only do give us
some substantial retrenchment—especially of mileage—to go to the
people on.”
The House passed the new bill promptly. Even if it had felt more
seriously than it did the objections to it there would have been little
chance of delay, for the chairman of the Ways and Means Committee,
Thaddeus Stevens of Pennsylvania, was a dictator who tolerated little
interference with any measure he approved. Mr. Stevens at this time was
a man of 70, sombre and gaunt, with rugged features, deep-set eyes, and
a splendid brow. He was lame, a club foot, and his health was
permanently broken. But never had his wit been keener, his sarcasm more
biting, his eloquence greater, his will more indomitable. He understood
Congressional tactics as few men ever have, and he was a filibuster of
first order. He was frequently unscrupulous in getting what he wanted.
If _he_ wanted it, it must be right and the means were a secondary
consideration. Stevens always stood by his own, right or wrong, not that
he entertained illusions about his Republican colleagues. “Which one is
our d——d rascal?” he asked one day when called upon to vote in a
contested election case, and “our d——d rascal” got his vote. The last
thing Stevens would allow was delay over revenue bills. If a member took
to questions he considered immaterial in the debate he hauled him back
sharply to his muttons, and it was a rash man indeed who offended a
second time. Only one thing would send him off on a tangent, and that
was an effort to secure some advantage over a man of another race or
color. In the debate on the present bill, for instance, he broke out in
a fiery denunciation of California because the representatives were
trying to secure a high duty on cleaned rice, which the Chinese used
almost exclusively. The Californians frankly avowed that the duty was
intended as a discrimination against the Chinaman. Stevens was at them
in an instant, the engineering of the bill quite forgotten, in a hot
speech against the injustice of their attitude.
That there was discrimination possible against your white fellow-man in
applying a protective tariff, Stevens seems never to have understood.
Duties were never too high for him, particularly on iron, for he was an
iron manufacturer as well as a lawyer, and it was often said in
Pennsylvania that the duties he advocated in no way represented the
large iron interests of the state, but were hoisted to cover the needs
of his own small and badly managed works. He was as unsound on all
financial matters as he was on protection. He wanted to pay the war debt
in greenbacks, had a horror of gold going out of the country, and once
proposed a law forbidding it to be bought and sold. But taken all in
all, Thaddeus Stevens was probably what the House needed in the crisis,
a prejudiced, violent dictator, with a holy passion for the Union cause.
Such men get things done if the after-cost of their work is heavy.
Stevens soon sent the tax and tariff bills to the Senate, where, if not
greatly improved, they were passed with promptness. Considerable
suspicion was popularly attached to many of the Senate changes in the
excise bill, particularly because of the close connection with it of
Senator Simmons of Rhode Island. The Senator’s connection with the
Morrill Bill which had won him the sobriquet of “Wood-Screw” Simmons has
been referred to above. It was fresh in public mind then. He still
further distinguished himself at the time he was engineering the tax
bill by a gun contract so unsavory that it had to be investigated. It
was shown beyond quibble that he had been promised $50,000 for getting a
contract for one of his constituents and that he had already received
some thousands of the money. The Senator did not pretend to deny the
fact, but he declared his transaction to be “strictly legal.” The
committee was severe on him. He had no more right to sell his influence,
they said, than his vote, both were “the property of the country”; but
they intimated that as he was really no worse than many of his
colleagues, it was better to let him off, and let off he was, though he
soon resigned. The affair did not raise the tax bill in the estimation
of the public, nor increase public confidence in the merits of the
compensating tariffs which accompanied it.
The passing of the bill went almost unnoticed by the press, so engrossed
were the people in war. (It was the summer of McClellan’s Virginia
campaign.) A few newspapers of free-trade principles tried to make an
issue of it, but without success. Mr. Greeley came out in the _Tribune_
declaring that he would not be drawn into a discussion on protection as
long as the war lasted. Indeed there was room for little on the
wonderful editorial page of the _Tribune_, where Horace Greeley stripped
bare his agonized heart, but the war and the emancipation of the slave.
Greeley, too, was satisfied enough to let protection reëstablish itself
through a revenue bill, for if there was anything which he held almost
as sacred as human liberty, it was the doctrine of protection to
American industries. Greeley saw protection as an actual wealthproducer,
and when the Morrill Bill was up in 1860, he declared: “We have as
undoubting faith that this bill if passed would add at least
$100,000,000 per annum to the earnings and wages of labor throughout the
country as we have that the sun will rise to-morrow.” He was one of a
very few men in public life whose belief was something more than an
inheritance from Henry Clay. In one of his Institute talks he once told
how he became a protectionist:
“From early boyhood I had sat at the feet of Hezekiah Niles, Henry
Clay and Walter Forward and Rollin C. Mallary, and other champions
of this doctrine, and I had attained from a perusal of theirs and
kindred writings and speeches a most undoubting conviction that the
policy they commended was eminently calculated to impel our country
swiftly and surely onward through activity and prosperity to
greatness and well-assured well-being. I had studied the question
dispassionately, for the journals accessible to my boyhood were
mainly those of Boston, then almost if not quite unanimously hostile
to protection; but the arguments they combated seemed to me far
stronger than those they advanced, and I early became an earnest and
ardent disciple of the schools of Niles and Carey, and could not
doubt that the policy they commended was that best calculated to
lead a country of vast and undeveloped resources like ours up from
rude poverty and dependence to skilled efficiency, wealth, and
power.”
It is undoubtedly true that the mantle of the early protectionist
advocates Niles and Carey fell on Horace Greeley, and that what the one
did in the “Register” and the other in his pamphlets, Greeley continued
in the _Tribune_.
There was much calculating on all sides of the amount the new tax bills
would yield. _Harper’s Weekly_ at the start estimated that it would be
$185,000,000, and in November (1862) it said the amount would be nearer
$275,000,000, but it was far too sanguine. At the end of the year (June,
1863) it was found that the customs had yielded less than $64,000,000
and the excise only about $41,000,000, and the country had been spending
in the last two years an average of over one and one-half millions a
day. The funds raised by taxation were a bagatelle beside the enormous
loans which had to be made, the legal tender which had to be issued. By
the beginning of 1864 it became evident to Mr. Lincoln and his cabinet
that more money must be raised by taxation. It was not a popular thing
to do, for the slow progress of the war, the awful cost in life and
money, had raised a strong party against Lincoln. It looked as if he
might not be reëlected. The opportunists around him advised against any
measures which would increase dissatisfaction, but Mr. Lincoln wanted no
misunderstanding about his intentions in regard to the war. It had got
to be finished at all cost, and he wanted the people to understand what
his reëlection meant. He asked them for more men and more money, another
draft, higher taxes, higher tariffs. The raising of the tariff was as a
method much less disturbing to Lincoln than imposing direct taxes. He
had the old Whig’s horror of the tax-collector, and indeed had pictured
effectively in his early campaigning “assessors and collectors going
forth like swarms of Egyptian locusts, devouring every blade of grass
and other green thing.” In 1859, when there was a general curiosity as
to what he believed, a correspondent asked him as to his tariff views,
and he replied:
“I was an old Henry Clay-Tariff-Whig in old times, and made more
speeches on that subject than any other. I have not since changed
my views. I believe yet, if we could have a moderate,
carefully-adjusted protective tariff, so far acquiesced in as not
to be a perpetual subject of political strife, squabbles, changes
and uncertainties, it would be better for us. Still it is my
opinion that just now the revival of that question will not
advance the cause itself or the man who revives it.... We, the old
Whigs, have been entirely beaten out on the tariff question, and
we shall not be able to reëstablish the policy until the absence
of it shall have demonstrated the necessity for it in the minds of
men heretofore opposed to it.”
In May, 1860, he was still of the same opinion on making the tariff an
issue. “I now think,” he wrote the same correspondent, “that the tariff
question ought not to be agitated in the Chicago Convention, but that
all should be satisfied on that point with a presidential candidate
whose antecedents give assurance that he would neither seek to force a
tariff law by executive influence nor yet to arrest a reasonable one by
a veto or otherwise.” After his nomination and election he steadily
refused to say anything on the question. It was not, in fact, until
February 15 (1861), when he reached Pittsburg on his way to his
inauguration, that he uttered a word. In Pennsylvania, however, some
expression was unavoidable. The tariff had played a greater part in that
state in electing Mr. Lincoln than had slavery and unionism. Indeed, Mr.
Blaine does not hesitate to say that if Governor Curtin had not spent
most of his time in the campaign advocating protection, the state would
have gone Democratic, and if Pennsylvania had gone Democratic, Mr.
Lincoln would probably have been defeated. An expression of opinion then
was unavoidable, and he gave it;—certainly it was moderate enough. After
quoting the tariff plank of the party platform he said modestly: “I have
by no means a thoroughly matured judgment upon this subject, especially
as to details.... I have long thought it would be to our advantage to
produce any necessary article at home which can be made of as good
quality and with as little labor at home as abroad. At least by the
difference of the carrying from abroad. In such cases the carrying is
demonstrably a dead loss of labor....” After developing this argument,
which was one of his strongest early ones and the only one of which full
notes have been saved to us, he added: “The condition of the Treasury
would seem to render an early revision of the tariff indispensable,” and
he went on to advise “every gentleman who knows he is to be a member of
the next Congress to take an enlarged view and post himself thoroughly
so as to contribute his part to such an adjustment of the tariff as
shall produce a sufficient revenue, and in its other bearings, so far as
possible, be just and equal to all sections of the country and classes
of the people.”
There is nothing to show that after he reached Washington Mr. Lincoln
ever considered the tariff other than as one of the several methods by
which money could be raised. If he saw, as he probably did, that there
were many injustices in the measures passed, that some duties were too
high for revenue and beneficial only to the special interests which had
fought for them, that others were trades outright, he still knew that,
all things considered, the bills were as good as could be expected. It
is probable indeed that none of the important legislation of the war
received less attention from the president than the tariff bills.
Congress was with the president in 1864 in his insistence on means for
finishing the war, and in June a new tariff bill went to the Senate. It
had been out of committee just eight days when it was adopted by the
House and the debate on it lasted less than two days. The Senate was
even more expeditious, for it was reported there on the 14th, taken up
on the 16th, and passed on the 17th. That it was possible so to push the
bill through was due to the wonderful generalship of the chairman of the
Senate Committee on Finance, William Pitt Fessenden of Maine, a man whom
Charles Sumner once declared to have been in the financial field what
all our best generals were in arms. Fessenden was at this time about 58
years old, and he had been in the Senate for nearly ten years. Before
the slavery question called him into public life, he had stood at the
head of the Maine bar, a position his father had occupied for forty
years before him. He was an untiring student, a clear thinker, and a
forcible and convincing speaker. He had great dignity—“the dignity of a
Cato,” one of his acquaintances has said, but he combined with it “the
bitterness of a Junius.” Certain things were sure to arouse
him—buncombe, misrepresentation, jobbery, and—_Charles Sumner_. His
propensity to quarrel with Sumner was chronic. He seemed to take as a
personal insult Sumner’s untiring fight in war times to keep a tariff
off books, rags for paper making, magazines, philosophical apparatus for
schools and works of art. Sumner never lost a chance to declare these
tariffs “barbaric,” “taxes on knowledge.” “Why should not knowledge pay
as well as everything else?” Fessenden would ask. This is war, and these
tariffs are justified by the circumstances. Why should not rags pay? and
he intimated that he knew well the gentleman in Boston who made paper
and who had stirred Sumner up to make an attack on the rag duty.
Besides, why should not American ragpickers be protected as well as
American wool-growers? It was an industry to be cultivated.
But while Fessenden’s antagonism to Sumner coupled with his dyspepsia
might make him often irascible, it never interfered with getting things
done. The bill in question was put through with only two days’ debate,
purely from his ability to whip the members into prompt action—to his
quick wit, his fine tact in steering them away from unprofitable side
issues and from subjects which precipitated heated and time-taking
discussion. For instance, in the present bill the higher duty proposed
on railroad iron caused great anxiety to railroad interests, especially
in the West, where much building was going on. The duty on railroad iron
in the bill of 1861 had been $12.00 per ton; it was proposed now to make
it 70 cents per 100 pounds. The whole West rose in arms. Kansas and
Minnesota were particularly disturbed, since they were laying track as
rapidly as possible. It cost from two to three thousand dollars a mile
for rails now, and nobody knew what it would cost if duties were raised.
It looked very much as if railroad building would be stopped. “The
development of the country was something even in war times,” urged the
Senator from Minnesota. This tariff meant less revenue, Senator Pomeroy
of Kansas declared, for importation would cease. It simply meant that
the iron men who were demanding it would put up their prices. They were
paying 50 per cent dividends now and watering their stock. The entire
iron business was rapidly becoming a monopoly. We could better afford to
import all our iron from England than let this happen. But the
suggestion of importing anything from England at that moment was like
fire to powder. An explosion always followed. Mr. Pomeroy’s suggestion
brought Zach Chandler of Michigan roaring to his feet. “If I had my
way,” he shouted, “I would raise a wall of fire between this nation and
Great Britain. I would not only not allow her iron to come here, but I
would not let a single pound of any article she manufactured come here
during this war.... Let the railroad interest suffer and any other
interest suffer. It is nothing to me, I am for the tax and the highest
tax.” Mr. Fessenden well understood the danger in allowing an outbreak
against England to start, and he quietly and firmly insisted that the
discussion be confined to the duty on rails.
The new bill was signed on June 30, and went into effect at once. Under
it duties rose from the 37 per cent of the bill of 1862 to over 47 per
cent. The effect on prices was appalling. The cost of living, already
enormous, increased, until it looked as if the “thousand-dollar
breakfast” Secretary Chase had threatened was to come; even goods
unembarrassed by taxes or tariffs, like butter and eggs, rose with the
rest—sympathy and speculation the causes. In some cases the hoisting of
prices almost caused riot. In New York and Brooklyn there was great
excitement over the attempts of the gas companies and the street
railroads to take their taxes out of the public, although it had been
expressly stipulated that they were to pay them themselves. In August
after the bill went into force, the Manhattan Gas Company notified
customers that they must pay $3.25 per thousand instead of $2.50; the
Brooklyn Gas Light Company and several others did the same. Higher fares
on the street car lines were announced. There was a great uproar in the
press and on the street, for it was well known that the companies were
already making enormous profits. The Manhattan Gas stock at this time
was quoted at $1.90 (50 being par) and New York Gas Light at $2.85¼ (50
par). Confiscation of franchises and the establishment of municipal
plants were advocated generally. In Philadelphia there was an agitation
at the same time in favor of coöperative coal companies, the price of
coal, which it was estimated cost $6.00 per ton delivered, being put at
$10.00. If the indignant cities had carried out their threats they would
probably by this time have been free of their most arrogant
task-masters.
Hard as the situation was made for common folks, they endured it
patiently, grimly, convinced that there was no other way to end the war.
There has never been seen, indeed, in the world’s history, a more
splendid courage in bearing burdens than the people of the United
States—North and South—showed in the Civil War. It is an inspiring thing
to study. If it had had no reverse! But it is one of the curious and
puzzling phenomena of human nature that the situation which inspires
some to their highest endeavor arouses others to their lowest. That the
same cause makes martyrs of some men, cormorants of others. If a war for
a great cause brings out the nobler qualities of human nature, it brings
out at the same time the vicious. If fine fellows march in the line and
go bravely into battle, mean ones hang on their flanks and rob the
battlefield. If the mass of people pay the cost by the sweat of their
brow, a minority trades on their necessity. Never have we had this
violent contrast more marked than in the Civil War. Take the attitude of
the people towards the taxes and tariff. The mass bore the burdens
imposed without a whimper, yet from the first there was a large number
whose sole aim was to manipulate taxes and tariff to serve their
interests. They ignored the principles the makers of the bills laid down
clearly, that everything was to have a duty put on it which could be
made to yield revenue. The consumers of raw materials fought fiercely
for free wool, free cocoa, free everything, and they fought as hard for
increased duties on their products; not satisfied that these duties
compensate for internal taxes, they wanted them higher than the taxes.
The government was the best patron of importers and manufacturers, and
it was a customer not too careful that it got what it bargained for,
such was the stress of its situation, and these manufacturers and
importers cheated their great patron at every turn. They gave shoddy for
wool, adulterated the food they sold, undercounted and underweighed.
Frequently what they sold had been smuggled in, for smuggling flourished
abundantly under the high duties. All that free traders had ever said of
the inducement the protective system gave for cheating the government
was more than proved true. An organized system of smuggling from Canada
was in operation before the end of 1862, and it grew steadily throughout
the war until it was an open secret that the markets of Boston
particularly were full of smuggled goods. The closest watch had to be
kept for this reason, on every attempt to put a duty on an article
hitherto free. Thus in 1864 Mr. Fessenden stopped a proposed tariff on
spices. He had discovered, he said, that the gentlemen who imported
spices had already on hand in warehouses a great quantity held for the
higher prices which the duty would cause, and that full preparations had
been made to keep up this supply by smuggling from Canada—an easy thing
to do, since anybody could fill his pockets with nutmegs and walk in
unnoticed. The cost of guarding the border became enormous, three times
the ordinary number of revenue cutters were on the Lakes, and a cordon
of officers extended from Maine to the Pacific coast. Besides, the
management of the custom houses throughout the war was notoriously bad,
the service being sprinkled with the incompetent and dishonest. In New
York alone it was estimated that the government lost from 12 to 25
millions annually through fraud—then as now false invoices being the
favorite method of cheating.
But the adherents of free trade and direct taxation could not boast that
their system gave no opportunity for like abuses. The men who fought for
higher duties fought against excise. They made false returns of income
and property in the same way that importers made false invoices. If
importers brought in great quantities of unprotected goods and then
organized a campaign for protection, manufacturers in anticipation of
taxes piled up huge stocks; 40 millions of gallons of distilled spirits
and nearly 80 millions of cigars were made and stored in anticipation of
the tax of 1864. When it was seen that matches were to be taxed, stocks
were so piled up that the first year the government collected only a
small proportion of its estimate. After the stock was exhausted the
return from the tax on matches increased 216 per cent in five months;
then the manufacturers devised a new trick; they put 100 instead of 50
matches in a box. The law required only one stamp on a box—thus the tax
was cut in two. Factories were transported across the Canadian border;
and as the reciprocity treaty let matches in free, it began to look
before the close of the war as if the match tax would be null.
On the whole, it is probable that the collection of the direct tax was
accompanied by less fraud than the collection of the customs, but the
service made up in inefficiency what it may have lacked in dishonesty.
The taxed were on the alert to escape, and the collectors were too
inexperienced to circumvent them.
There certainly never has been in this country so admirable an
opportunity to compare these two systems of raising revenue as we had at
this period. The amount each yielded, the expense and difficulty of
collection, the effect on the loyalty of the people and the opportunity
for greed and dishonesty—all can be placed in parallel columns for
comparison. If anything is proven by the comparison it is that no system
of organization and administration does away with human selfishness;
that whatever the system, the men who have it in their hearts to cheat
their fellows, are going to find a way. Regeneration lies deeper than
system: it lies in the nature of the men who use the system.
On March 31, 1865, the last tariff bill of the Civil War was passed, an
amendment raising many duties, among others that on railroad iron. Nine
days after it was passed Lee surrendered, and almost as soon as the news
reached Washington orders went forth to stop many of the extraordinary
measures which war had made imperative. It had been declared from the
first that the high tariff and the direct taxes were simply and only
measures for war revenue. In framing the tariff bill of 1862 the
committee entitled it a bill to increase duties “_temporarily_.” Mr.
Morrill, Mr. Stevens, and Mr. Fessenden all explained again and again
that the increased duties were to compensate for excise taxes. There are
repeated passages from their speeches of the same tenor as this from Mr.
Fessenden in 1864: “The tariff is adjusted and was adjusted upon the
simple principle with reference to the internal tax.” Sumner reiterated
the idea whenever he had the chance. “I regard all our present
legislation as temporary or provisional in its character,” he said in
1864, when an irate fellow Senator pointed out the growing hardihood of
manufacturers in demanding protection and the danger of fastening high
duties irrevocably on the country. “It is to meet the exigency of the
hour.”
Nothing is clearer indeed than that in the minds of the men who devised
them—in the minds of the people who paid them, the tariffs with which
the country found itself in 1865 were temporary, just as the army was
temporary, the internal taxes temporary, that with the end of the war
they would come off. But a war does not “end” with the laying down of
the musket. That is but the turning point in the fever. The consequences
are left to take care of—tens of thousands of men to detach from army
life and reassimilate into civilian life; thousands of maimed and
weakened soldiers to find occupation and homes for; thousands of widows
and orphans to care for. It is over forty years since Lee surrendered to
Grant, but the army of the Civil War is still with us.
Nor does the laying down of the musket put an end to the cost. War means
debt. It is fought on a nation’s credit—not wholly on its income—not on
its surplus, and the debt remains. When the government at Washington
came to consider its financial condition in 1865 after the so-called
“end of the war,” it found itself with the colossal debt of over
_twenty-eight hundred million dollars_ ($2,808,549,437.55 to be exact).
Interest on this must be paid. The principal must be paid. Tariffs and
taxes might be “temporary,” but it was evident that they must be
adjusted to take care of the war debt. How was it to be done? It was
evident that between redeeming its pledge to make the taxes temporary
and meeting its obligations the government of the United States had a
very pretty financial problem on its hands.