President Cleveland's political and personal philosophy led toward economy in expenditure and therefore toward revenue reduction. By nature he was frugal; in politics, a strict constructionist. In vetoing an appropriation bill he succinctly set forth his creed:
A large surplus in the Treasury is the parent of many ills, and among them is found a tendency to an extremely liberal, if not loose, construction of the Constitution. It also attracts the gaze of States and individuals with a kind of fascination, and gives rise to plans and pretensions that an uncongested Treasury never could excite.
The Republicans were becoming committed to the policy of large expenditures. President Harrison, to be sure, in his first annual message urged the reduction of receipts, declaring that the collection of money not needed for public use imposed an unnecessary burden upon the people and that the presence of a large surplus in the treasury was a disturbing element in the conduct of private business. Nevertheless such party leaders as Reed and McKinley, who effectively controlled the legislation of the Harrison administration, acted on the philosophy of Senator Dolph:
If we were to take our eyes off the increasing surplus in the Treasury and stop bemoaning the prosperity of the country, … and to devote our energies to the development of the great resources which the Almighty has placed in our hands, to increasing (our products) … to cheapening transportation by the improving of our rivers and harbors, … we would act wiser than we do.
Congress was more inclined to follow the policy suggested by Dolph than that proposed by Cleveland. One project was the return of the direct tax which had been levied on the states at the outbreak of the Civil War. At that time Congress had laid a tax of $20,000,000 apportioned among the states according to population. About $15,000,000 had been collected, mainly, of course, from the northern states. It was suggested that the levy be returned, a plan which would give the northern states a return in actual cash and the southern states "the empty enjoyment of the remission from a tax which no one now dared to suggest was ever to be made good." President Cleveland had vetoed such a bill, during his first administration, believing it unconstitutional and also objectionable as a "sheer, bald gratuity." Under the Harrison administration the scheme was revived and carried to completion, March 2, 1891.
Pension legislation was even more successful as a method of reducing the unwieldy surplus. Garfield had declared in 1872, when introducing an appropriation bill in the House of Representatives, "We may reasonably expect that the expenditures for pensions will hereafter steadily decrease, unless our legislation should be unwarrantably extravagant," and in fact the cost of pensions for 1878 had been lower by more than $7,000,000 than in 1871. The Arrears act of 1879 had given a decided upward tendency to pension expense, which amounted to over $20,000,000 more in 1880 than in 1879. The surplus was a constant invitation to careless generosity. Liberality to the veteran was a patriotic duty which lent itself to the fervid stump oratory of the time and presented an opportunity to the undeserving applicant to place his name on the rolls of pensioners along with his more worthy associates. Besides, an administration which seemed niggardly in its attitude toward the veterans was certain to lose the soldier vote, and neither party was willing to incur such a risk. Hence, despite Cleveland's vetoes of private pension legislation, hundreds of such measures passed during his first term. The Harrison administration proceeded upon the President's theory that it "was no time to be weighing the claims of old soldiers with apothecary's scales." A dependent pension bill like that which President Cleveland vetoed in 1887 was passed in 1890. The list of pensioners more than doubled in length; the number of applications for aid increased tenfold in two years. It became necessary for President Harrison to displace his over-liberal commissioner of pensions, but the mischief was already done. The total yearly pension expenditure quickly mounted beyond the one hundred million mark, where it has remained ever since. Indeed, the cost of pensions in 1872 when Garfield made his prophecy was less than one-sixth as great as in 1913. Large pension expenditure was clearly a permanent charge.
The improvement of the rivers and harbors of the country has always been a ready means of disposing of any embarrassing surplus and of assisting Congressmen to get money into their districts. "Promoters of all sorts of schemes, beggars for the widening of rivulets, the deepening of rills" clustered about the treasury during the eighties. During the early seventies expenditure on this account had not reached $6,500,000 annually, although in 1879 it exceeded $8,000,000. In 1882, the year of the mammoth surplus, Congress passed over Arthur's veto a bill carrying appropriations which amounted to almost nineteen million dollars.[2] Expenditures were somewhat reduced in the years immediately following, and Cleveland continued the repressive policy of his predecessor. Harrison in his first message to Congress in December, 1889, recommended appropriations for river and harbor improvement, although deprecating the prosecution of works not of public advantage. The recommendation fell upon willing ears and appropriations for undertakings of this sort at once increased again. Expenditure for rivers and harbors, like that for pensions, remained at a high level, the wise and necessary portions of such measures being relied upon to carry the unwise and unnecessary ones.
A project which lacked many of the unpleasant features of river and harbor legislation was the Blair educational bill, which proposed to distribute a considerable portion of the surplus among the states. As discussion of the Blair bill proceeded, it became clear that its results might be more far-reaching than had been anticipated. A gift from the national government seemed sure to retard local efforts at raising school funds and would initiate a vicious tendency to rely on federal bounty. Hence although the Senate passed the bill in 1884, 1886 and 1888, it never commended itself sufficiently to the House and eventually was dropped.
A small portion of the increased expenditure in the eighties was due to improvements in the navy, in which both parties shared. Presidents Arthur and Cleveland urged upon Congress the need of modern defences. Progress was slow and difficult. Although the day of steel ships had come, the American navy was composed of wooden relics of earlier days. The manufacture of armor and of large guns had to be developed, and skill and experience accumulated. Results began to appear in the late eighties when the number of modern steel war vessels increased from three to twenty-two in four years. Expenditures mounted from less than $14,000,000 in 1880 to over $22,000,000 in 1890.
As effective as new expenditure was the McKinley tariff act of 1890, the details of which from the point of view of tariff history have already been noted.[3] The extremely high rates levied under that legislation caused a slight reduction in customs revenue in 1891 and a sharp decline in 1892. Moreover the coincidence of instability in the currency system, business depression and the relatively high Wilson-Gorman tariff schedules of 1894 continued the decline of income from customs during the middle nineties.