The New Nation

by Frederic L. Paxson

In 1882 Congress, with Arthur's approval, took up a revision of the tariff. Neither of the great parties had, in 1882, received a clear mandate touching the tariff, although it was true that most Republicans were content with the system in its general outlines, while a considerable number of Democrats were listening to tariff reform and asking for a tariff for revenue only. It had been eighteen years since the last general revision had taken place, and in that period unforeseen conditions had developed, whose tendency was at once to point the need for a readjustment of schedules and to create a class of citizens whose profits would be touched thereby. The course of financial reconstruction between 1865 and 1875 had raised the rate of actual protection beyond the expectations of its advocates.

In 1865 the revenues of the United States, amounting to $322,000,000, and far exceeding the needs of the Treasury in time of peace, came chiefly from the tariff and the internal revenue. The two taxes were dependent upon each other. Each increase in the latter had forced an increase in the former, lest special burdens should be laid upon American manufacture. The ideal of protection had never been lacking, nor had special interests failed to look out for themselves, but the dominant spirit in the war taxes was revenue.

When Congress undertook to reduce the revenue to a peace basis, it found that every approach to the tariff aroused classes of interested manufacturers, while every attack upon the internal revenue was welcomed by the public. As a result, following the line of least resistance, most of the internal taxes were removed by 1870, leaving the tariff rates where they had been, and higher than any protectionist had asked. A large part of the tariff rate had been intended to equalize the internal revenue tax; the removal of the latter created to that extent an incidental protection, which was unexpected but was none the less acceptable. Some few details of the tariff were modified by special acts, and there was a flat reduction of ten per cent in 1872. But the panic of 1873 reduced the revenues and frightened Congress, in 1875, into restoring the ten per cent. In 1882 the rates of 1865 remained substantially unchanged, leaving the protected industries in the enjoyment of an incidental protection never intended for them and created only by accident in the general reduction of revenue.

Spasmodic attacks were made upon the tariff system throughout the seventies, but since few defended it on principle they failed to affect the public. The tariff was not a political issue. Opposition to it was confined to members of the Democratic party, in search for weapons to turn against the Republicans, and to theorists and economists who had little connection with politics. There were free-trade clubs after 1868, though few ever wanted to establish real free trade. All that the free-trader commonly desired was a mitigation of protection and the establishment of reasonable rates. Godkin, Schurz, Sumner of Yale, David A. Wells, Edward Atkinson, and Henry D. Lloyd taught the tariff-for-revenue theory wherever they could find listeners. Wells wrote on "The Creed of Free Trade," in the Atlantic Monthly in 1875, and was sure he had found the issue of 1876. But in neither this nor the next campaign did the parties face the issue. In 1880 the tariff figured only as a means of embarrassing Hancock, while Garfield did not even mention it in his inaugural.

The forces that compelled a revision of the tariff in 1882-83 had to do with revenue and expenditures. Following the new prosperity the receipts increased beyond the ability of Congress to spend them. There was a small surplus in 1879. In 1880 it was $68,000,000; in 1881, $101,000,000; in 1882, $145,000,000; in 1883, $132,000,000. The surplus was a constant incentive to extravagance and deranged the currency. If it was allowed to remain in the Treasury, its millions were withheld from circulation, and contraction was the result; if it was applied to the purchase or redemption of bonds, the national bank currency was contracted, for this was founded upon bonds owned by the banks; and it could not be spent without the invention of new channels. The temptation to increase pension payments was strengthened, while public works multiplied without reason.

The waste of money on public works induced Arthur to advertise the need for a reduction of the revenue. The annual River and Harbor Bill had consumed $3,900,000 in 1870, and $8,900,000 in 1880. In 1882 the bill was swollen to over $18,000,000 by greed and log-rolling. Arthur vetoed it as unreasonable and unconstitutional in August, 1882. It passed over his veto, but the defeat of his party in the following November was construed as a vindication of the President. The Republicans lost control of the House of Representatives, Democratic governors were elected in Massachusetts and Pennsylvania, in New York, Connecticut, New Jersey, and Indiana, and critics began to ask if this was the beginning of the end of the party. The certainty that party bills could not be passed in the next Congress, with the control divided, stimulated the Republicans to act while they could. The Civil Service Act was passed early in 1883, and on the same day the House took up the consideration of a new tariff.

Arthur, in 1881, had urged that the revenues be reduced and the tariff be revised, and Congress had created a commission to investigate the needed changes, in May, 1882. This committee was in session throughout the following summer, sitting in manufacturing centers all over the East and hearing testimony from all varieties of manufacturers. It had been organized on a conservative basis, containing members familiar with the needs of sheep-raisers and wool manufacturers, and iron and sugar, as well as experts on administration. Its enemies thought that it was pledged to protection at the start. The commission expressed a belief that the country desired to adhere to the general idea of protection, but it early learned the force of the demand for revision and reduction, and sent into the House, in December, 1882, a project for a bill intended to reduce the tariff at least twenty per cent. The bill based on this was reported from the Committee on Ways and Means on January 16, 1883, and was debated until February 20, and then abandoned in the House for a bill which had passed the Senate.

The Senate Bill was in the form of an amendment to an Internal Revenue Bill already before that house. It was passed on February 20 under the leadership of the young Senator from Rhode Island, Nelson W. Aldrich, and was sent to conference by the House a week later. In conference a new bill was substituted for the Senate Bill. This was hurried through both houses in time to receive the signature of Arthur on March 3, 1883.

The tariff of 1883 failed to meet the demand for a revision. Its debates show the difficulties attendant upon the construction of any tariff. Congress was divided upon the theory of protection, both parties including high protectionists as well as tariff-for-revenue men. The revenue-producing side of the tariff increased the complexities, since every change in a rate might affect the standing of the Treasury. In addition to the economic and the fiscal needs, quite serious enough, there was the tireless influence of the lobby of manufacturers, pressing for single rates which should aid this business or that. Few Congressmen were sufficiently detached in interests to be entirely dispassionate as they framed the schedules. Many did not even try to disguise their desire to promote local interests. Neither party had a mandate on the tariff in 1882, but when the act had become a law it was clear that most of the Republican leaders voted cheerfully for all the protection they could get, that the intent to reduce the revenue had failed, and that what little hope of revision remained was in the opposition party. "The kaleidoscope has been turned a hair's breadth," said the Nation, "and the colors transposed a little, but the component parts are the same." It was deliberate bad faith throughout, urged a Democratic leader, and "finished this magnificent shaft [of the tariff policy] which they had been for years erecting, and crowned it with the last stone by repealing the internal tax on playing cards and putting a twenty per cent tax upon the Bible."

Throughout the tariff debate no argument had been used more steadily than that of the protectionists that protection to labor was their aim. The degradation of "pauper labor" in Europe was contrasted repeatedly with that prosperity that was typical of America. The insistence upon the argument revealed the desire to conciliate a class that was being noticed in American society for the first time.