Tariff legislation and effect on politics — Did not make Cleveland's mistake — Drives out tariff lobby — Abolishes "every semblance of privilege" — Income tax introduced — Refuses to sanction gold brick for relief of farmers
"We must abolish everything that bears even the semblance of privilege or of any kind of artificial advantage." — Wilson
Tariff changes have been held responsible for political successes and failures. To go back no further than September, 1890, when the McKinley Act was passed, the party responsible for it met a disastrous defeat in the November election. Its author, Mr. McKinley, who owed his subsequent promotion as President to issues not related to his tariff bill, was defeated. Democrats carried the house in 1890 by a majority of 148, the Republicans electing only 88 members. "The women shoppers did it," explained Thomas B. Reed, Speaker of the House, alluding to the increased prices charged by retail dealers immediately following the passage of the McKinley Tariff. It not only gave the Democrats control of the House of Representatives, but presaged the election of Cleveland in 1892 and the control of the executive and legislative departments of the government for the first time since 1856. Even earlier, the friends of Grover Cleveland asserted that his famous tariff message of 1887, "it is a condition and not a theory that confronts us", was responsible for p156 his defeat in 1888. They also attributed his second election to the fact that the people had, in the four years between his message and his re-election, decided he was right, as McKinley's friends asserted of his position when he became President in 1896. When Cleveland was inaugurated in 1893, he made a tactical mistake in postponing tariff legislation. If he had called Congress in session in April, 1893, to reduce the tariff in accordance with his great message of 1887, the abortion known as the Wilson-Gorman Tariff Act, which became a law without his signature, would not have called forth his statement that it represented "party perfidy and party dishonor." When, afterwards in his term, Mr. Cleveland's party had become hopelessly divided on the money question, he had lost the opportunity to obtain the sort of tariff measure upon which he had set his heart.
On the very day that he was elected, the matter of early tariff legislation was discussed by the President-elect with two friends, who afterwards became members of his Cabinet. Wilson was advertent to the disappointment of Mr. Cleveland. A short time after the election, and weeks before his inauguration, Mr. Wilson made a public statement that he would call a special session of Congress to reduce the tariff. It heartened the tariff reform forces of the country and guaranteed the victory which followed that summons.
It was said to be a theory of Theodore Roosevelt's that the party which meddled with the tariff would meet defeat at the next election. Whatever his reason, it is certain that during the seven years that he was in power the tariff schedules were not changed and he made no move to have them changed. Mr. Wilson would have used all his influence for the revision of the tariff downward p157 even if it had been definitely known that it would mean his defeat. He was as far as the poles from holding that platforms are made to get in on rather than to stand on. The first plank in the Democratic platform upon which he had been elected read in part:
"We favor the immediate downward revision of the existing high, and, in many cases, prohibitive tariff duties, insisting that material reductions be speedily made upon the necessaries of life. Articles entering into competition with trust-controlled products and articles of American manufacture which are sold abroad more cheaply than at home, should be put upon the free list."
Mr. Wilson early had strong convictions about the effect of a high tariff, as was shown when, having drawn the "Protection" side in a debate at Princeton, he declined to advocate a doctrine he did not believe sound. He said in his speech of acceptance that the rank and file of the people found life very hard to sustain and he was convinced that mistaken government policies had something to do with the fact. In his inaugural address he had renewed his own pledge and given further approval to his party pledge to seek to cure defects in government policies. He often said that of the possessions of mankind justice was the most precious. A protective tariff was, in his eyes, rank injustice to the great body of the people. A tariff which "cuts us off from our proper part in the commerce of the world, violates the just principles of taxation and makes the government a facile instrument in the hands of private interests," found in him a sincere and effective opponent.
Moved by his own convictions and with his personal and party pledges as further incentive, Mr. Wilson went into the tariff struggle with all his might. He saw reduction p158 of the rates as a practical means of proving his party a real servant of sound economics. There was such a strong sentiment in Congress for tariff reform that the compelling and driving force of the President did not have to be invoked to as great a degree as in some matters afterwards. But it was incumbent upon him to keep his party keyed up to its task and ready at all times to turn a deaf ear to the siren song of the interests which wanted a continuance of special privilege. Indeed, every one was familiar with the conditions at Washington, when the sugar, steel, and other lobbies came down on Washington "like the wolf on the fold." The scattering of the tariff lobby by Wilson was as wholesome as it was sensational. It freed legislators from the importunity of paid men and insured writing of tariff schedules by the legally elected agents of the people rather than by those who were to be the beneficiaries of high rates. All records of tariff-legislation were broken. Mr. Wilson displayed genius of leadership in carrying out this first big policy of his administration. Instead of any division in the party, or the predicted "shipwreck on the tariff rock" which had come to so many administrations, Mr. Wilson emerged with high prestige.
It was on April 8, 1913, a month after his inaugural, that Congress me in extraordinary session. On that day Mr. Wilson broke the precedent of executives sending their messages and appeared in person to deliver the first message Congress had heard a President deliver since 1796. That fact, added to the distinction of the occasion, helped to emphasize the significance of the message. He compressed into that message the philosophy and wisdom of tariff reformers of all time — John Bright, William L. Wilson, John G. Carlisle, William J. Bryan, Grover p159 Cleveland, Roger Q. Mills, David A. Wells, and a host of others who had sounded the clear note against public taxation for private profit.
Mr. Wilson declared "a duty was laid upon the party now in power, at the recent election, which it ought to perform promptly, in order that the burden carried by the people under existing laws may be lightened as soon as possible, and in order that the business interests of the country may not be kept too long in suspense as to what the fiscal changes are to be, to which they may be required to adjust themselves." He continued: "The sooner the tariff is altered, the sooner our men of business will be free to thrive by the law of nature — the nature of free business — instead of by the law of legislation and artificial arrangement." He went on to say:
"We have seen tariff legislation wander very far afield in our day — very far, indeed, from the field in which our prosperity might have had a normal growth and stimulation. No one who looks the facts squarely in the face or knows a thing that lies beneath the surface of action can fail to perceive the principles upon which recent tariff legislation has been based. We long ago passed beyond the modest notion of 'protecting' the industries of the country and moved boldly forward to the idea that they were entitled to the direct patronage of the Government. For a long time — a time so long that the men now active in public policy hardly remember the conditions that preceded it — we have sought in our tariff schedules to give each group of manufacturers or producers what they themselves thought that they needed in order to maintain a practically exclusive market as against the rest of the world. Consciously or unconsciously, we have built up a set of privileges and exemptions p160 from competition behind which it was easy by any, even the crudest, forms of combination to organize monopoly; until at last nothing is normal, nothing is obliged to stand the tests of efficiency and economy, in our world of big business, but everything thrives by concerted arrangement. Only new principles of action will save us from a final hard crystallization of monopoly and a complete loss of the influences that quicken enterprise and keep independent energy alive.
"It is plain what those principles must be. We must abolish everything that bears even the semblance of privilege or of any kind of artificial advantage, and put our business men and producers under the stimulation of a constant necessity to be efficient, economical, and enterprising, masters of competitive supremacy, better workers and merchants than any in the world. Aside from the duties laid upon articles which we do not, and probably cannot, produce, therefore, and the duties laid upon luxuries and merely for the sake of the revenues they yield, the object of the tariff duties henceforth laid must be effective competition, the whetting of American wits by contest with the wits of the rest of the world."
Wilson was no iconoclast, who would fail to recognize conditions. "It would be unwise," he said in that message, "to move toward this end headlong with reckless haste, or with strokes that cut at the very roots of what has grown up amongst us by long process and at our invitation. It does not alter a thing to upset it and break it and deprive it of a chance to change. It destroys itself. We must make changes in our fiscal laws, in our fiscal system, whose object is development, not revolution or upset or confusion." He declared that the remedies must be "genuine" but also said, "Remedies may be heroic."
p161 He signed the measure at the White House on October 3, 1913, and upon attaching his signature, in the presence of the Chairmen and members of the committee, cabinet and others, Mr. Wilson felicitated them upon their first step toward unfettering business.
It was hailed as the best tariff measure since the one enacted in 1846 of which James G. Blaine in his "Twenty Years of Congress" said it yielded "abundant revenue" and "the business of the country flourished under it, and seemed, for the time, to be so entirely vindicated and approved the resistance to it ceased."
The average rate of duties was reduced from forty to twenty-six per cent. The measure reduced or abolished tariff duties on practically all the articles entering into the cost of living. On all such articles the Payne-Aldrich Tariff Act, which it replaced, levied heavy duties with the effect of discouraging any competition from abroad and enabling home manufacturers, by combination and otherwise, to exact exorbitant prices.
Naturally relieving the people of part of the tariff tax resulted in a reduction of the treasury receipts. The platform on which Mr. Wilson had been elected had demanded an income tax. Provision for such a tax had been incorporated in the Wilson-Gorman tariff in Cleveland's last administration. It had been declared unconstitutional when, as Senator Vest stated, "a judge changed his mind over night." From 1896 until it was adopted, there had been an organized fight for the adoption of an amendment to the constitution authorizing the levying of an income tax. Its advocates believed that the expenses of national government ought not to be borne entirely on the basis of consumption, as the tariff tax imposes its burdens, but the cost of government ought p162 to be apportioned in accordance with ability to pay. Of the $627,000,000 the Government received from the tariff and internal revenue taxes in 1913, only a comparatively small part was paid by those in receipt of large incomes. The income tax afforded the best measure of ability to pay. On February 25, 1913, an amendment to the constitution was adopted, giving Congress the power to levy a tax on incomes. This power the framers of the Underwood-Simmons Act availed themselves of and a rated income tax was incorporated in the measure. When the demands of war called for the raising of billions of dollars, the basis for securing taxation from incomes was ready at hand.
Professor Taurig, a tariff expert and impartial critic, gave this statement on the tariff measure: "The pertinent sections of the tariff were rewritten. That they were substantially improved was the judgment of specialists competent on this intricate subject. Wilson had never claimed perfection for them, much less that there was anything in schedules too sacred to be changed. In fact, a non-partisan tariff commission was later created with ample power to obtain and report to Congress the facts essential to tariff making. This was to be no executive usurpation of the exclusive power of Congress to levy taxes. That was not the Wilson conception of the wish to go about securing changes. A new agency, composed of competent specialists, was given the duty of ascertaining the facts by scientific investigation, and these were to be available to the executive for recommendation and to Congress in levying taxes for the support of government. It was recognized in 1916 that two years of war brought about economic changes and that the government should be ready to wisely alter its tariff and other revenue laws to p163 meet changed or changing conditions. The facts obtained by the commission, to quote Wilson, were "for the guidance alike of our business men and our Congress." "For," he added, "American energies are now directed toward the markets of the world."
"Laws explicitly to remove any ban supposed to rest upon co‑operation among exporters in seeking and securing their proper place in the markets of the world" opened the way for the marvelous expansion of foreign trade. "We have barred monopoly," he declared, and insured "peace in the business world, and, with peace, revived confidence and life."
The attempt in 1920 to relieve agricultural distress with the gold brick of high tariff, after the Senate had definitely kept the United States out of the concert of world powers, received no countenance from President Wilson. Farmers had made their crops at large expense. When the "bottom dropped out", they petitioned Washington for relief. The Republican leaders said, "A high tariff on wheat will insure you profitable prices. We will give it to you." They hurried through the Fordney Emergency Tariff, levying a tax of thirty cents a bushel on wheat and increasing the rates on other agricultural products. Wilson, in substance, said: "A high tariff on farm products the price of which is fixed in foreign markets, will bring no relief."
On March 4, 1921, on the last day he was chief executive, President Wilson sent one of the very few veto messages he ever wrote to Congress. "The situation in which many of the farmers of the country find themselves," he said in this message, "cannot be remedied by a measure of this sort. There is no short way out of existing conditions, and measures of this sort can only p164 have the effect of deceiving the farmers and raising false hopes among them. The farmer needs a better system of domestic marketing and credit, but especially larger foreign markets for this his surplus products. Clearly, measures of this sort will not conduct to an expansion of the foreign market. Actual relief can come only from the adoption of constructive measures of a broader scope, from the restoration of peace elsewhere in the world, the resumption of normal industrial pursuits, the recovery particularly of Europe, and the discovery there of additional credit foundations on the basis of which her people may arrange to take from farmers and other producers of this nation, a greater part of their surplus production."
On the same day an ineffective effort was made to pass the measure over his veto, but it lacked 21 votes of the necessary two-thirds. Upon his inauguration, President Harding called an extra session of Congress and the emergency tariff was passed. It substantially increased the duties on farm products. The increases were maintained in the Fordney-McCumber tariff enacted the following year. The farmers were told that an era of better prices would result from higher tariff rates. The bitter experience of the wheat farmers, who were to be the chief beneficiaries, has proved that President Wilson in his last message was right when he refused to be a party to giving, in the emergency tariff measure, "the promise to the ear" which has been "broken to the hope."
Wilson's tariff barred privilege.
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