The next thing we want to understand is the tariff, and how that works to take money out of the pockets of the poor and put it into the pockets of the rich.
The government has to have money, like any other business. We all desire government services, and should pay our proper share, honestly and openly calculated. But we haven’t an honest government, nor an honest social system; nobody wants to pay his share of anything, and taxes are unpopular; therefore the politicians put their wits to work and devise what are called “indirect taxes,” ways of getting your money without your knowing it. Among these ways is the “protective tariff.”
This was another great issue of the McKinley days, and well I remember the campaign slogans, devised for tricking the poor voters! “Protection and Prosperity; the Full Dinner Pail; the Foreigner Pays the Tax!” We liked the last one especially; we hated the foreigner, and were strong for making him pay—though just why we should have expected foreigners to put up the money to support the government of the United States, was something we might have been puzzled to explain!
A tariff is a tax imposed on all goods brought into the country. A protective tariff is a tax high enough to shut out foreign competition, by raising the cost of imported goods. Who pays the tax? The importer pays it, and he at once adds it to the price of the goods, so that the tax is passed on to the person who uses the goods, the ultimate consumer. He is the man who pays, always and everywhere; and the effect of the tariff is simply to boost prices in a whole line of commodities. If the government got all this boost, it wouldn’t be so bad; but the government gets only a small fraction, and the rest is a fat and juicy graft for the “protected” manufacturers.
But, say the newspapers and campaign orators of the “Grand Old Party,” it is the workingman as well as his boss who is “protected”; if it were not for the tariff, our wage scales would be dragged down to the levels of Europe; the labor-sweating foreigner would “dump” his goods on us! Well, Judd, for the workingman to try to improve his condition by a tariff, is as if a man should make himself rich by taking money out of his right-hand pocket and putting it into his left-hand pocket. If you look only at the left side of this man, you will think he is enjoying “prosperity”; and that is what the newspapers and the campaign orators did—and the poor workingman too, alas; for the subject is complicated, and the workingman does not have much time to think.
But you can see, Judd, that after the workingman has got his protected job and has collected his protected wages, he has to go to the stores and spend his money, and there he pays higher prices for everything he buys, because all these things have been “protected” from foreign competition, and the manufacturers of the things have been able to form trusts and fix the prices at higher levels. Just how much higher are the levels? The answer is easy; they are always a little higher than the wages! The whole story was told in the figures I gave you as to the movement of real wages in our country. Following the example of the “Grand Old Party,” let me give you a slogan:
The protective tariff in the past thirty-five years has reduced the real wages of the American workingman by five per cent!
And what about the farmer? The farmer does not get much protection on his products, but has to buy vast quantities of manufactured goods at “protected” prices. Take the United States Census Reports, and study the growth of farm mortgages from 1890 to 1920. This is the final test, you understand; for the farmer does not give the banker a mortgage on his land because he loves the banker, but solely and simply because the cost of running his farm is greater than the income derived from the farm. We find that in 1890 there were mortgages on 27.8% of our farms, and in 1920 on 37.2%. So here is a slogan for the farmers:
The protective tariff has increased the enslavement of the farmers to the bankers by thirty-three per cent in thirty years!