The Tariff in Our Times

by Ida M. Tarbell

The matter of first moment in the new bill was of course the method taken for reducing the surplus, which had been piling up in an alarming fashion throughout the three years’ struggle. When Mr. Cleveland made his demand in 1887 for general tariff reduction in order to bring this overtaxation down to a normal figure, the Republicans had offered as a counter proposition—“spend it.” Mr. Blaine started the cry in his letter from Paris suggesting one of the most dubious schemes for handling revenues ever proposed by an American public man of any weight. It was to appropriate the whiskey tax (the internal revenue tax on distilled spirits amounted in 1888 to over $69,000,000) to coast fortifications. If there was something over after this was done and the National government had no use for the money, he would divide it among the Federal Union, with the specific object of lightening the tax on real estate. Mr. Blaine evidently had forgotten for the moment that the Constitution in defining the taxing powers of Congress does not include that of “lightening the tax on real estate.”

There had been various other plans offered. Mr. Aldrich would apply the surplus to the purchase of United States bonds, or as a prepayment of interest on the National debt. One Congressman wanted it applied in bounties to wheatgrowers, another wished it loaned, another would devote it to building the Ead’s ship railway, several proposed using it in elaborate educational schemes. The general consent that the best way to get rid of it was to spend it, of course made Congress reckless in appropriations, particularly of pensions. They jumped from $87,500,000 to about $107,000,000 in Harrison’s first year, and in his fourth year, they had risen to $159,000,000. But spending it was not enough. The taxes must come down some $60,000,000 a year and the Republican suggestion had been, “cut down the internal revenue.” The Republican platform declared, “We favor the entire repeal of internal taxes rather than the surrender of any part of our protective system.” Mr. Allison and his committee considered many suggestions for the repeal of all internal revenue taxes but stopped after taking them off tobacco. Mr. McKinley announced that he had not been compelled to abolish the internal revenue though he was ready to do so if it was necessary to save the protective system. He estimated that the taxes on tobacco and alcohol used in the arts, which his bill did abolish, would amount to $10,000,000. The other $50,000,000 of reductions he proposed to meet in two ways. The first was by so increasing duties that importations would fall off, i.e. Mr. McKinley accepted the principle of Mr. Kelley and Mr. Aldrich that the way to reduce revenue from customs is to make foreign goods which might compete with domestic products too dear to buy. When the Democrats attacked his increase with the assertion that he would increase taxation and so revenue, he answered: “That statement is entirely misleading. It can only be accepted upon the assumption that the importation of the present year under this bill, if it becomes a law, will be equal to the importations of like articles under the existing law; and there is not a member of the Committee of Ways and Means, there is not a member of the minority of that Committee, there is not a member of the House on either side, who does not know that the very instant that you have increased the duties to a fair protective point, putting them above the highest revenue point, that very instant you diminish importations and to that extent diminish the revenue.”

The chief articles which he hoped to make too dear to import were woollens and higher grade cottons, cotton knit goods, stockings, linens, and all iron and steel and metal products, the articles, it will be noted, which are essential to everybody. It was not necessary to raise the rates on all these products to make them too dear to import. Not a few rates then in force could be lowered and still be prohibitive. Thus in the case of structural steel and steel rails, the McKinley bill reduced the existing rate slightly without in the least disturbing the situation.

Mr. McKinley’s pet duty in the metal schedule, and indeed in the bill, was that on tin plate. There had been a duty of a cent a pound on tin plate for some years and throughout much of this period there had been a steady pressure to raise it to 2½ or 2½ cents. In the early ’70’s there had been a little tin plate manufactured in the country. The price at the time had been abnormally high on account of the Franco-Prussian War and the premium on gold. When things dropped back to normal, the industry lagged. But the would-be manufacturers—and many makers of iron plates naturally wanted to turn them into tin plates—for ten years at least had kept up an agitation. The tariff commission of ’82, through Commissioner Oliver’s influence probably, had advised 2½ cents, but Congress refused to raise the duty in the Bill of 1883. The Tin Plate Association and the Iron and Steel Association continued their work. An increased duty on tin plate became, in a way, in the ’80’s, a test of a Republican’s soundness in the minds of the big interest which had put themselves behind the party. If he hesitated, recalled that we had developed no tin mines, that inevitably the price would be higher for a long term, that such a duty would be a blow to an industry many times greater than tin plate could ever be,—that of canning,—that the burden would fall directly on the poor, they being the chief consumers of tin buckets, and cups, of canned fish, meat, and vegetables—the answer was the answer of “Pig Iron” Kelley!—“In God’s name do not let the gentleman lead us to declare that the people of this country shall never manufacture tin plate!”

With the Iron and Steel Association taking the important place it did in the campaign of 1888, it was of course inevitable that the Allison Bill should recognize its demand for an advance on tin plate. Mr. McKinley found the duty then in the bill he inherited and Mr. Allison, who believed sincerely that the tariff on tin plate had justified itself, was sore to the day of his death because Mr. McKinley never credited it to the Allison Bill. It is doubtful if an important duty was ever laid on facts so distorted and in answer to pressure so questionable. The chief advocate was the American Tin Plate Association. Their circulars went out broadcast as appeals to patriotism. “If this little circular should fall into the hands of a patriotic lady or gentleman,” wrote the Secretary in a circular which was printed in 1888, “we ask that you kindly give this matter some study; it is a patriotic feeling and nothing else that instigates the members of this association.” The patriotic lady or gentleman who had given the circular study would have found it started with a statement so absurd that he would have only continued because of the amusement he might get from it. According to this circular we consumed about $35,000,000 worth of tin plate a year (the figure was greatly exaggerated), and “if it were made in this country several hundred thousand residents of the United States would gain a livelihood thereby.” If the value of the tin plate consumed were $35,000,000 and the sum was divided into one-third for materials and two-thirds for wages and the “several hundred thousands” were reckoned as 300,000, their annual wages would have been about $78.00 a year!

Mr. McKinley saw a wonderful future for the industry—23,000 men employed directly in the business (in 1900 there were 4000; in 1905, 5000), $30,000,000 of capital invested (in 1905 it was $10,000,000). He did not seem to think there was any impropriety in a part of the capital ready to go into tin plate making, being that of a member of the House long a supporter of the duty, F. G. Niedringhaus, of Missouri. This gentleman wrote on November 27 a letter read in Congress by Mr. McKinley, saying one of his mills had been arranged for tin plate work and in case of a “proper duty,” he could turn out tin plate on short order, and “if the fact as I believe it to be can be generally established in the minds of the people, that the Republicans will continue to govern this country in the future, there will be plenty of money forthcoming to embark in the manufacture of tin and terne plate.”

The violent attack upon this duty and the very plausible reasons for believing that the industry could never be selfsupporting, led to the adopting of an ingenious provision, limiting the time that manufacturers might have to establish the business. Tin plate was to be admitted free of duty after October 1, 1897, unless in some one of the years between 1891 (when the duty was to go into effect) and 1897, one-third as much tin plate was produced here as was imported in any one of the other six years. This clever device originated with Senator Spooner of Wisconsin.

The Tin Plate and Iron and Steel Associations practically wrote their own schedules in the McKinley Bill. The wool growers and woollen manufacturers did the same. A series of poor years in wool occurred in the ’80’s. There were legitimate causes outside of the tariff for the depression, but a large and influential part of the industry believed or professed to believe the trouble to come solely from reductions in duties made in 1883. These reductions had disturbed the “harmony” in wool which they claimed the growers and manufacturers had established in 1867, and which they now loudly affirmed must be restored if the two branches of the industry were again to be prosperous. There were long petitions presented by manufacturers asking for free wool, arguing that the industry could never hope to compete until it was on an equal footing with other nations in the matter of raw materials; but this point of view was not supported by the National Association of Wool Manufacturers, which by this time had become one of the most powerful political organizations in American industry. It held that the manufacturer must support the duty on wool if he did not wish to set the growers against the duty on woollens. It had been established in 1867 “almost as economic law,” Mr. Whitman, the president of the organization claimed, that the wool-grower was to have his duty, and that the wool manufacturer was to be given two kinds of duties, one which would compensate him fully for the tariffs on his raw materials, not only wool but dyestuffs, and that after that, he was to have the same measure of protection that other industries received. Mr. Whitman claimed that the lowering of the compensating duty in 1883 had particularly disturbed the “economic law.” As we have seen, this duty had been dropped from 50 to 35 cents. In making this drop the Committee had decided that it was a mistake to count 4 pounds of grease wool to one pound of cloth as had been done in 1867, since 4 pounds were rarely used. It had said that 3½ pounds was a generous allowance—as it was. Mr. Whitman remonstrated against this decreased compensation. He wanted the duty based on the 4 pounds and he wanted other upward revisions. The program proposed by the Association was practically adopted. It contained one curious provision new to the wool schedule and important in the later history of the tariff; that was a duty on tops and all wools and hair advanced beyond a washed condition. Tops are wool in one of the early stages on the way to yarn. Mr. Whitman, asked how the cost of making tops compared with that of making yarn, said it was about one-half. In the same examination Mr. Whitman also said the principle which he wished applied in the fixing of the duties was that there should be a higher duty on cloth than yarn, on clothing than cloth, and he suggested that the relative per cent of the three should be 40 per cent for yarn, 50 per cent for cloth, and 60 per cent for clothing. As to tops, which could be made according to Mr. Whitman at one-half the expense of yarn, he suggested for them a duty not lower, as one would expect from the “principle” he had himself laid down, nor indeed did he fix a direct duty. Mr. Whitman suggested that the rate on tops be that fixed for the basket or catch-all clause of the schedule. Turning to that clause we find it to be not less than the rate on yarn, but considerably more. The suggestion was embodied in the McKinley Bill apparently without anybody except Mr. Whitman understanding its motive. Other suggestions of the manufacturers were also adopted, resulting in increased protection on those classes of goods where there was any amount of importation. Generally speaking, the efforts of the manufacturers was to secure advances in both the wool and cotton schedules where competition still persisted.

The wool growers were equally successful. The duties were raised on the various classes of wool. Moreover, the duty on shoddy, mungo, and wool wastes which had been low were raised so high that importation became impossible. This change was made on the imperative demand of the Ohio “Wool Trinity,” who declared these substances were taking the place of pure wool and so injuring the wool-grower. The same argument was largely responsible for an increased duty on carpet wool. We grow no carpet wool in this country and probably can never afford to do so, our land and labor being too valuable. The wool-growers contended, however, that the manufacturer was using carpet wool in making cloth and that they must be protected against this injustice. It is probable that considerable carpet wool does find its way into some grades of cloth, but not enough to have any effect on domestic wool production.

The largest lump of reduction provided for in the new bill came by making raw sugar free and by reducing the duty on refined sugar to one-half a cent a pound. The revenue from sugar was so great, about $55,000,000 annually in this period, that the schedule had been a favorite point of attack for years, when reduction was necessary. There were two difficulties in the way of the Republican protectionist in reducing the duty on raw sugar. The American sugar cane and American sugar beet growers under the high duty which they had been enjoying had come in 1890 to produce about one-seventh of the sugar we used. This amounted to something like 220,000 tons. Of this amount only a little over 3000 tons were made from beets and sorghum. Small as was the amount, the beet and sorghum advocates were as insistent in their demands for protection as the tin plate people. The Kansas (sorghum) and California (beet sugar) Congressmen were certain that, properly protected, these states would produce great quantities of sugar, and it is pretty certain that they were ready to fight the tin plate, wool, cotton, or any other duty if their demands were not granted. Take care of them and they would soon grow all the sugar the United States could eat, they said. Their product, small as it was, caused high protectionists like Kelley, Haskell, and McKinley to rejoice. It was proof of what they claimed—protection did diversify industry, and Kelley, at least, always carried in his pocket a sample of beet sugar raised in this country to show to the doubting. At the same time even Kelley and McKinley found it hard to defend a tax of $55,000,000 a year, to protect an industry which after a century’s experience had been able to supply no more than one-seventh of our wants. The sugar bill was really staggering when it came to be counted up for the century as one advocate of free sugar did; he estimated we had paid $1,400,000,000 in the period. To cut down this tax and at the same time to satisfy the growers, Mr. McKinley proposed that raw sugar should be free and that the sugar-growers should receive a bounty. The idea did not originate with his committee. It had been a provision of the Allison Bill to which Mr. Allison confessed he came slowly, but which he had consented to try “as an experiment.” It had been a hobby of various members for years. John Sherman had long believed in sugar bounties and had often advocated them. In 1888 Joseph Cannon of Illinois had proposed a bill providing for free sugar and bounties for growers. There were many Republicans who baulked at the idea, declaring it unconstitutional. They might not object to an indirect tax like a custom duty, being so applied as to subsidize the man’s business, but when it came to appropriating undisguisedly to this purpose funds raised by taxation they could not consent. It was a case of a distinction without a difference, however, and as they became familiar with the idea the scruples of many of them, enough of them at least, to pass the bill, seem to have disappeared.