The Tariff in Our Times

by Ida M. Tarbell

The bill was passed, “herrings,” income tax, and all, on February 1, 1894, and was at once sent to the Senate. So sharp had the criticism of the bill been that the Democratic caucus appointed a sub-committee of three to go over it and make a more representative Democratic measure, before it should be reported. This committee was made up of Jones of Arkansas, Vest of Missouri, and Mills of Texas. Colonel Mills had been elected to the Senate the fall before. Although not a member of the Finance Committee, he was placed on the sub-committee. After three weeks’ hard and incessant work, the bill was reported to the Democratic caucus, and here a strong opposition at once developed, an opposition so obstinate that it was obvious it would defeat the bill if it could not be satisfied. The leaders of this faction were Senators Arthur P. Gorman of Maryland and Calvin S. Brice of Ohio. These gentlemen had organized so solidly a small number of their party colleagues, dissatisfied with the reductions the bill made on articles in which they were interested, that they were able to say to the Committee that unless their demands were satisfied no bill should pass. A look at the make-up of the Senate shows how easily they could carry out their threat. There were in the body thirty-eight Republicans, forty-four Democrats, and four Populists, the latter voting on the tariff with the Democrats. Five votes diverted from the forty-four would, if the Republicans voted solidly, as they were expected to do, give a majority of one against the bill. Messrs. Gorman and Brice could show the five votes. One of these was that of David J. Hill of New York, who had given notice that he would in no case support a measure carrying an income tax. The result of this alignment was that the bill was revised under the direction of Senators Gorman and Brice and reported to the Senate with some 634 amendments.

As an illustration of the kind of reconstruction which went on, take the sugar schedule. It is an illuminating example of tariff-making as practised by the Senate of the United States, both then and now. We have seen what the McKinley Bill did for raw sugar,—made it free, but gave bounties to the home sugar-growers equivalent to two cents a pound. As for refined sugar, all grades from No. 16, Dutch Standard, upward, were allowed one-half cent a pound, which was undoubtedly a pure gratuity to the sugar trust. Formed in 1887, with a capital of $50,000,000, the stock of this organization had not been listed on the New York stock exchange until February of 1889. When the McKinley Bill was first brought into the House in January of 1890, sugar certificates were worth fifty cents on the dollar. Their rise between that date, when it looked as if refined sugar would be given no duty, and the date in May, when the one-half cent was fixed, was told three years later on the witness stand by a Senator of the United States who was familiar with operations of this sort, Calvin S. Brice of Ohio:

“During the month of January,” said Mr. Brice, “sugar stock fluctuated between 50 and 60, with as wide or wider fluctuations in each of the four following months. So then when the bill had passed the House of Representatives and had been favorably considered and settled in the Senate Finance Committee in May, the sugar trust certificates had advanced to 95, an advance of 45 points or $22,500,000 computed on the capital of the sugar trust, or $33,750,000 if the other $25,000,000 which were added a few months afterwards as representing the Spreckels, Harrison, and Knight refineries are taken into account. During the fall of 1890 the Baring panic temporarily depressed sugar trust certificates, as well as other securities in the New York Stock Exchange, but as soon as that had gone by, the sugar trust certificates went above par, and eventually under the operations of the McKinley Act reached 134 or 135; an advance from January, 1890, when the McKinley Bill was introduced, of 85 points, or $42,500,000 on the sugar trust certificates, and an advance of $63,750,000 on the American Sugar Refining Company’s Stock, the Company which in 1891 succeeded the original trust.”

The dealings in the certificates on the New York Stock Exchange in 1890 Senator Brice declared to have amounted to 8,000,000 shares, $800,000,000. As for profits, the trust’s president, Mr. H. O. Havemeyer, said on the witness stand in 1894 that he reckoned them at close to $25,000,000 for the three years, or, as he put it, “three-eighths of a cent more on every pound they (the consumers) ate.” Without the McKinley Bill this would have been impossible, and, said Mr. Havemeyer, “as long as the McKinley Bill is there we will exact that profit.”

This episode had scandalized the country and intensified the disgust with the sugar refiners which their open swindling in the preceding fifteen years had aroused. When the Democrats in the House came to make their bill they at first proposed a duty of one-fourth cent a pound on refined sugar, half of what McKinley had given. This was undoubtedly one-fourth of a cent too much. With free raw sugar the refiners could carry on their business at a profit. This was demonstrated to Mr. Wilson’s satisfaction while the bill was still in the House, and when it left, refined sugar as well as raw was free.

As said above, the bill was referred to a sub-committee of which Colonel Roger Q. Mills was a member. Now Mr. Mills, like most tariff-for-revenue only Democrats, had always held that a tax on raw sugar was one of the least obnoxious that could be placed. It yielded a large and steady revenue. It was true that it was a tax falling more heavily on the poor than on the rich, but unhappily most taxes are unjust in this respect. Holding this opinion, and believing that the bill did not provide sufficient revenue, Mr. Mills, as he later related, said to his colleagues:

“We have got to have more money than the Wilson Bill makes, and we have to have a duty on sugar. I do not want it. I do not like to go backwards. I would not have taken sugar off the dutiable list and put it on the free list. It has been done, and I do not like to put anything back on the dutiable list, but we have got to do it, and you may as well make up your minds about it. We have to have more money.”

Senators Vest and Jones held out for several days against him, but finally they reluctantly agreed to a duty on raw sugar. On refined they proposed only enough to make up to the refiners for the extra cost of their raw material—that is, a compensatory, not a protective, duty.

But this plan never reached the public. The House bill had aroused the Sugar Trust to wrath, and all through the winter and spring of 1894 one or more of its chief officers was in Washington, besieging the Senate and the Administration. Mr. H. O. Havemeyer, the president, Theodore Havemeyer, the vice-president, and John O. Searles, secretary and treasurer, armed with samples and statistics and proofs of political influence, urged upon a worried and reluctant committee a scheme of duties which would give them at least as large a benefit as they had under the McKinley Bill. The gentlemen seem to have been able to secure the attention of all the Senators whom they thought it worth while to approach, excepting Senator Mills. Mr. Havemeyer made repeated efforts to get to him, but always failed. Finally he asked Secretary Carlisle to give him a note of introduction. He knew Senator Mills, he told the secretary, but he was a busy man and peculiar, and it was difficult to see him. Mr. Carlisle gave the note, and one evening Mr. Havemeyer presented it at the Senator’s door with his own card and that of Mr. J. R. Rickey, the inventer of the famous “gin-Rickey.” Was the Senator in, and would he see them? The answer came back. “Senator Mills is in, but he will not see the gentlemen.” Nor did Mr. Havemeyer ever succeed in presenting his ideas of a sugar schedule to Senator Mills.

The activities of the sugar people caused all sorts of rumors to run rife through the press, and finally when the bill was reported on the 20th of March providing a rate of about one cent a pound on raw sugar with an additional one-eighth of a cent per pound on refined, there was an immediate outcry. When later further changes were made in the schedule, making it more intricate and more advantageous to the refiners, dissatisfaction grew. “It would have been quite as appropriate and edifying,” said the Nation, “and quite as good policy, to have enacted that the Standard Oil Trust should receive $30,000,000 out of the public treasury during the next six months as a reward of merit, and two and one-eighth cents per gallon for all the oil they might hereafter sell in this country, as to do what is done for the sugar trust.” The ugliest rumors were afloat, talk of bribes, deals, and threats. They finally culminated in an article published in the Philadelphia Press and signed “Holland” (E. J. Edwards), in which in a most circumstantial way the author declared that $500,000 had been contributed to the Democratic campaign fund by the Sugar Trust. In return pledges had been given that the Trust would be taken care of. When the House removed the duty, the Trust had reminded the Administration of its pledges. Mr. Carlisle, by Mr. Cleveland’s directions, had appeared before the sub-committee and had told them that the party was bound to satisfy the sugar interests. There were detailed descriptions of interviews between sugar men and Senators, and of directions sent from the White House. One of the shameful features of the story was that a number of Senators had taken advantage of secret information on the sugar schedule to speculate in sugar stock. This amazing story of political barter would have raised a chorus of jeers, had there not been before the country’s eye so much corroborating evidence. The clamor was so loud over the article that in May an investigation was made. Many of the details of the story were discredited. Mr. Cleveland, Mr. Carlisle, and Mr. Mills were certainly cleared, but a substantial scandal remained. By the frank admission of Mr. Havemeyer, it was proved that the trust was in the habit of making contributions to both parties, that is, each party got something, if the result was doubtful. If not, the contribution went to the dominant side, that being the one to which the trust would look for favors. This conclusion is clinched by the following bit of a dialogue which occurred in the course of the investigation: