In spite of the equivocal position taken by the Democrats, the Republicans made great political capital out of the affair, apparently on the warranted a.s.sumption that the voters would not read Cleveland's message or the platform of his party. In their declaration of principles in 1888, the Republicans made the tariff the leading issue: "We are uncompromisingly in favor of the American system of protection. We protest against its destruction, as proposed by the President and his party. They serve the interests of Europe; we will support the interest of America. We accept the issue and confidently appeal to the people for their judgment. The protective system must be maintained.... We favor the entire repeal of internal taxes rather than the surrender of any part of our protective system, at the joint behest of the whisky trusts and the agents of foreign manufacturers." Again, in 1892, the Republicans attempted to make the tariff the issue: "We reaffirm the American doctrine of protection. We call attention to its growth abroad.

We maintain that the prosperous condition of our country is largely due to the wise revenue legislation of the Republican Congress," _i.e._ the McKinley bill.

The effect of this Republican hammering on the subject was to bring out a solemn declaration on the part of the Democrats. "We denounce," they say in 1892, "the Republican protection as a fraud, a robbery of the great majority of the American people for the benefit of the few. We declare it to be a fundamental principle of the Democratic party that the Federal government has no const.i.tutional power to impose and collect tariff duties, except for the purposes of revenue only, and we demand that the collection of such taxes shall be limited to the necessities of the government when honestly and economically administered." Although elected on this platform, the Democrats did not regard their mandate as warranting a serious attack on the protective system, for the Wilson tariff act of 1894 was so disappointing to moderate tariff reformers that Cleveland refused to sign it.

A close a.n.a.lysis of the platforms and performances of the parties from 1876 to 1896 shows no clear alignment at all on the tariff. Both parties promise reductions, but neither is specific as to details. The Republicans, while making much of the protective system, could not ignore the demand for tariff reform; and the Democrats, while repeating the well-worn phrases about tariff for revenue, were unable to overlook the fact that a drastic a.s.sault upon the protective interests would mean their undoing. In Congress, the Republicans made no serious efforts to lower the duties, and the attempts of the Democrats produced meager results.

Among the new issues raised by the economic revolution was the control of giant combinations of capital. Although some of the minor parties had declaimed against trusts as early as 1876, and the Democratic party, in 1884, had denounced "land monopolies," industrial combinations did not figure as distinct issues in the platforms of the old parties until 1888. In that year, the Democrats vaguely referred to unnecessary taxation as a source of trusts and combinations, which, "while unduly enriching the few that combine, rob the body of our citizens by depriving them of the benefits of natural compet.i.tion." Here appears the favorite party slogan that "the tariff is the mother of the trusts," and the intimation that the remedy is the restoration of "natural compet.i.tion" by a reduction of the tariff. The Republicans in 1888 also recognized the existence of the trust problem by declaring against all combinations designed to control trade arbitrarily, and recommended to Congress and the states legislation within their jurisdictions to "prevent the execution of all schemes to oppress the people by undue charges on their supplies or by unjust rates for the transportation of their products to market."

Both old parties returned to the trust question again in 1892. The Democrats recognized "in the trusts and combinations which are designed to enable capital to secure more than its just share of the joint product of capital and labor, a natural consequence of the prohibitive taxes which prevent the free compet.i.tion which is the life of honest trade, but we believe the worst evils can be abated by law." Thereupon follows a demand for additional legislation restraining and controlling trusts. The Republicans simply reaffirmed their declaration of 1888, indorsed the Sherman anti-trust law already enacted by Congress in 1890, and favored new legislation remedying defects and rendering the enforcement of the law more complete.

The railway issue emerged in 1880 when the Republicans, boasting that under their administration railways had increased "from thirty-two thousand miles in 1860 to eighty-two thousand miles in 1879," p.r.o.nounced against any further grants of public domain to railway corporations. The Democrats went on record against discriminations in favor of transportation lines, but left the subject with that p.r.o.nouncement. Four years later the subject had taken on more precision. The Republicans favored the public regulation of railway corporations and indorsed legislation preventing unjust discriminations and excessive charges for transportation, but in the campaign of 1888 the overshadowing tariff issue enabled them to omit references to railway regulation. The Democrats likewise ignored the subject in 1884 and 1888. In 1892 the question was overlooked by the platforms of both parties, although the minor parties were loudly demanding action on the part of the Federal Government. The old parties agreed, however, on the necessity of legislation protecting the life and limb of employees engaged in interstate transportation.

Even before the Civil War, the labor vote had become a factor that could not be ignored, and both old parties consistently conciliated it by many references. The Republicans in 1860 commended that "policy of national exchanges which secures to the workingmen liberal wages." The defense of the protective system was gradually shifted by the Republicans, until, judging from the platforms, its continuation was justifiable princ.i.p.ally on account of their anxiety to safeguard the American workingman against "the pauper labor of Europe." The Democrats could not overlook the force of this appeal, and in their repeated demands for the reduction of the tariff they announced that no devotion to free trade principles would allow them to pa.s.s legislation which might put American labor "in compet.i.tion with the underpaid millions of the Old World." In 1880, the Democratic party openly professed itself the friend of labor and the laboring man and pledged itself to "protect him against the cormorant and the commune." In their platform of 1888, the Democrats promised to make "due allowance for the difference between the wages of American and foreign labor" in their tariff revisions; and in 1892 they deplored the fact that under the McKinley tariff there had been ten reductions in the wages of the workingmen to one increase. In the latter year, the Republicans urged that on articles competing with American products the duties should "equal the difference between wages abroad and at home."

Among the more concrete offerings to labor were the promises of homesteads in the West by the Republicans--promises which the Democrats reiterated; protection against Chinese and coolie labor, particularly in the West, safety-appliance laws applicable to interstate carriers, the establishment of a labor bureau at Washington, the prohibition of the importation of alien laborers under contract, and the abolition of prison contract labor. On these matters there was no marked division between the two old parties; each advocated measures of its own in general terms and denounced the propositions of the other in equally general terms.

The money question bulked large in the platforms, but until 1896 there was nothing like a clean-cut division.[27] Both parties hedged and remained consistently vague. The Republicans in 1888 declared in favor of "the use of both gold and silver as money," and condemned "the policy of the Democratic administration in its efforts to demonetize silver."

Again, in 1892, the Republicans declared: "The American people, from tradition and interest, favor bimetallism, and the Republican party demands the use of both gold and silver as standard money, with such restriction and under such provisions, to be determined by legislation, as will secure the maintenance of the parity of values of the two metals, so that the purchasing and debt-paying power of the dollar, whether of silver, gold, or paper, shall be at all times equal." The Democrats likewise hedged their profession of faith about with limitations and provisions. They declared in favor of both metals and no discrimination for mintage; but the unit of coinage of both metals "must be of equal intrinsic or exchangeable value, or be adjusted through international agreement or by such safeguards of legislation as shall insure the maintenance of the parity of the two metals." Thus both of the platforms of 1892 are paragons of ambiguity.

FOOTNOTES:

[24] See below, p. 130.

[25] Below, p. 133. The tenure of office law was repealed in 1887. The presidential succession act was pa.s.sed in 1886.

[26] A judicial order to all and sundry forbidding them to interfere with the movement of the trains.

[27] See below, p. 119.

CHAPTER V

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 subst.i.tute 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 pa.s.sed 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 rea.s.sured the hard money party by pa.s.sing, 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 pa.s.sage 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 a.s.sistant 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 h.o.a.rd 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 Const.i.tution, 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 Const.i.tution 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 ma.s.s 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 princ.i.p.al 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 circ.u.mstance 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 a.s.sumed 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 cla.s.ses 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 princ.i.p.al 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- grains each. In addition to the holders of the national debt, there were the owners of industrial, state, and munic.i.p.al 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 pa.s.sage 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 repa.s.sed 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 pa.s.sage 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 pa.s.sed, 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 const.i.tutional provision requiring the initiation of revenue bills in the lower house by tacking their measure to a bill which the House had pa.s.sed at the preceding session.

Under the circ.u.mstances 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 coa.r.s.e woolens, cottons, iron, steel, and several other staple commodities, but not enough to place the industries concerned on a basis of compet.i.tion 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, pa.s.sed 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 pa.s.sed 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 pa.s.sage 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 pa.s.s 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 mult.i.tudes 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."