Chapter II. The Failure to Reduce the Tariff after the War

WHEN THE WAR closed, the revenue acts which had been hastily passed during its course constituted a chaotic mass. Congress and the Secretary of the Treasury immediately set to work to bring some order into this chaos, by funding and consolidating the debt, by contracting the paper currency, and by reforming and reducing the internal taxes.⁴ The years between 1865 and 1870 are full of discussions and enactments on taxation and finance. On some parts of the financial system, in regard to which there was little disagreement, action was prompt and salutary. The complicated mass of internal taxes was felt to be an evil by all. It bore heavily and vexatiously on the people; and Congress proceeded to sweep it away with all possible speed. As soon as the immense floating debt had been funded, and the extent of the annual needs of the government became somewhat clear, Congress set to work at repealing and modifying the excise laws. It is not necessary to enumerate the various steps by which the internal-tax system was modified. Year after year acts for reducing and abolishing internal taxes were passed. By 1872 all those which had any connection with the subject of our investigation—the protective duties—had disappeared.⁵ The taxes on spirits and beer, those on banks, and a few comparatively unimportant taxes on matches, patent medicines, and other articles were retained. But all those taxes which bore heavily on the productive resources of the country—those taxes in compensation for which higher duties had been imposed in 1862 and 1864—were entirely abolished.

Step by step with this removal of the internal taxes, a reduction of import duties should have taken place; at the least, a reduction which would have taken off those additional duties that had been put on in order to offset the internal taxes. This, however, Congress hesitated to undertake. We have seen in the preceding chapter that the opportunity given by the war system of taxation was seized by the protectionists in order to carry out their wishes. It would not be easy to say whether at the time the public men who carried out this legislation meant the new system of import duties to be permanent. Certainly the war methods of finance as a whole were not meant to remain in force for an unlimited time. Some parts of the tariff were beyond doubt intended to be merely temporary; and the reasonable expectation was that the protective duties would sooner or later be overhauled and reduced. Had the question been directly put to almost any public man, whether the tariff system of the war was to be continued, the answer would certainly have been in the negative,—that in due time the import duties were to be lowered.⁶ During the years of confusion immediately after the war little was attempted; but soon a disposition to affect some reform in the incongruous mass of duties began to be shown. Each year schemes for reduction and reform were brought forward. Commissions were appointed, bills were elaborated and considered; but the reform was put off from year to year. The pressure from the interested domestic producers was strong; the power of the lobby was great; the overshadowing problem of reconstruction absorbed the energies of Congress. Gradually, as the organization of industry in the country adapted itself more closely to the tariff as it was, the feeling that no reform was needed obtained a stronghold. Many industries had grown up, or had been greatly extended, under the influence of the war legislation. As that legislation continued unchanged, still more capital was embarked in establishments whose existence or prosperity was in some degree dependent on its maintenance. All who were connected with establishments of this kind asserted that they would be ruined by any change. The business world in general tends to be favorable to the maintenance of things as they are. The country at large, and especially those parts of it in which the protected industries were concentrated, began to look on the existing state of things as permanent. The extreme protective system, which had been at the first a temporary expedient for aiding in the struggle for the Union, adopted hastily and without any thought of deliberation, gradually became accepted as a permanent institution. From this it was at short step, in order to explain and justify the existing state of things, to set up high protection as a theory and a dogma. The restraint of trade with foreign countries by means of import duties of forty, fifty, sixty, even a hundred per cent., came to be advocated as a good thing in itself by many who, under normal circumstances, would have thought such a policy preposterous. Ideas of this kind were no longer the exploded errors of a small school of economists; they became the foundation of the policy of a great people. Then the mass of restrictive legislation which had been hurriedly piled up during the war, was strengthened and completed, and made into a firm and consistent edifice. On purely revenue articles, such as are not produced at all in the country, the duties were almost entirely abolished. A few raw materials, it is true, were admitted at low rates, or entirely free of duty. But these were exceptions, made apparently by accident. As a rule, the duties on articles produced in the country, that is, the protective duties, were retained at the war figures, or raised above them. The result was that the tariff gradually became exclusively and distinctly a protective measure; it included almost all the protective duties put on during the war, added many more to them, and no longer contained the purely revenue duties of the war.

We turn now to a somewhat more detailed account of the process by which the reform of the tariff was prevented. To give a complete account of the various tariff acts which were passed, or of the tariff bills which were pressed without success, is needless. Every session of Congress had its array of tariff acts and tariff bills; and we may content ourselves with an account of those which are typical of the general course of events. Of the attempts at reform which were made in the years immediately after the war, the fate of the tariff bills of 1867 is characteristic. Two proposals were then before Congress: one a bill passed by the House at the previous session; the other a bill prepared by Mr. David A. Wells, then Special Commissioner of the Revenue, and heartily approved by Secretary McCulloch. The great rise in prices and in money wages in these years, and the industrial embarrassment which followed the war, had caused a demand for still higher import duties; the House bill had been framed to answer this demand, and proposed a general increase. Mr. Wells recommended a different policy. He had not then become convinced of the truth of the principles of free trade; but he had clearly seen that the indiscriminate protection which the war tariff gave, and which the House bill proposed to augment, could not be beneficial. His bill reduced duties on raw materials, such as scrap-iron, coal, lumber, hemp, and flax; and it either maintained without change or slightly lowered the duties on most manufactured articles. A careful rearrangement was at the same time made in the rates on spices, chemicals, dyes, and dye-woods,—articles of which a careful and detailed examination is necessary for the determination of duties, and in regard to which the tariff contained then, as it does now, much that was arbitrary and indefensible. Mr. Wells’s bill, making these reforms, gained the day over the less liberal House bill. It was passed by the Senate, as an amendment to the House bill, by a large majority (27 to 10). In the House there was also a majority in its favor; but unfortunately a two-thirds majority was necessary in order to suspend the rules and bring it before the House. The vote was 106 to 64 in favor of the bill; the two-thirds majority was not obtained, and it failed to become law. The result was not only that no general tariff bill was passed at this session, but the course of tariff reform for the future received a regrettable check. Had Mr. Wells’s proposals been enacted, it is not unlikely that the events of the next few years would have been very different from what in fact they were. It would be too much to say that these proposals looked forward to still further steps in the way of moderating the protective system, or that their favorable reception showed any distinct tendency against protection. There was at that time no free-trade feeling at all, and Mr. Wells’s bill was simply a reform measure from the protectionist point of view. But the vote on it is nevertheless significant of the fact that the extreme and uncompromising protective spirit was not then all-powerful. The bill, it is true, had been modified in a protectionist direction in various ways before it came to be voted on; but the essential reductions and reforms were still contained in it and the votes show that the protectionist feeling was far from being solidified at that time to the extent that it came to be a few years later. Had the bill of 1867 been passed, the character of recent tariff legislation might have been very different. A beginning would have been made in looking at the tariff from a sober point of view, and in reducing duties that were clearly pernicious. The growing habit of looking on the war rates as a permanent system might have been checked, and the attempts at tariff reform in subsequent years would probably have found stronger support and met with less successful opposition. From this time till the tariff act of 1883 was passed, there was no general tariff bill which had so good a chance of being passed. The failure of the attempt of 1867 encouraged the protectionists in fighting for the retention of the war duties wherever they could not secure an increase over and above them; and in this contest they were, with few exceptions, successful.⁷

Of the legislation that was in fact carried out, the act of 1870 is a fair example. It was passed in compliance with the demand for a reduction of taxes and for tariff reform, which was at that time especially strong in the West, and was there made alike by Republicans and Democrats.⁸ The declared intention of those who framed it and had charge of it in Congress was to reduce taxation. But the reductions made by it were, almost without exception, on purely revenue articles. The duties on tea, coffee, wines, sugar, molasses, and spices were lowered. Other articles of the same kind were put on the free list. The only noteworthy reduction in the protective parts of the tariff was in the duty on pig-iron, which went down from $9.00 to $7.00 a ton. On the other hand, a very considerable increase of duties was made on a number of protected articles—on steel rails, on marble, on nickel, and on other articles.⁹ We shall have occasion to refer to some of these indefensible exactions in another connection.¹⁰ At present we are concerned only with the reductions of duty which were carried out. Among the protective duties the lowering of that on pig-iron was the only one of importance. This change, indeed, might well have been made at an earlier date, for the internal tax of $2.00 on pig-iron (in compensation for which the tariff rate had been raised to $9.00 in 1864) had been taken off as early as 1866.¹¹

The only effort to reform the protective parts of the tariff which had any degree of success, was made in 1872. The tactics of the protectionists in that year illustrate strikingly the manner in which attempts at tariff reform have been frustrated and the history of the attempt is, from this point of view, so instructive that it may be told somewhat in detail. The situation in 1872 was in many ways favorable for tariff reform. The idea of tax and tariff reform was familiar to the people at large. It was not as yet openly pretended that the protective duties were to remain indefinitely as they had been fixed in the war. The act of 1870 had made a concession by the reduction on pig-iron; further changes of the same kind were expected to follow. Moreover, the feeling in favor of tariff reform was in all these years particularly strong in the West. So strong was it that, as has already been noted, it overrode party differences, and made almost all the Western Congressmen, whether Democrats or Republicans, act in favor of reductions in the tariff. The cause of this state of things is to be found in the economic condition of the country from the end of the war till after the panic of 1873. The prices of manufactured goods were then high, and imports were large. On the other hand, exports were comparatively small and the prices of grain and provisions low. The agricultural population was far from prosperous. The granger movement, and the agitation against the railroads, were one result of the depressed condition of the farmers. Another result was the strong feeling against the tariff, which the farmers rightly believed to be among the causes of the state of things under which they were suffering.¹² Their representatives in Congress were therefore compelled to take a stand in favor of lowering the protective duties. The Western members being nearly all agreed on this subject, Congress contained a clear majority in favor of a reform in the tariff. Party lines at that time had little influence on the protective controversy, and, although both houses were strongly Republican, a strong disposition showed itself in both in favor of measures for lowering the protective duties.

Added to all this, the state of the finances demanded immediate attention. In 1872, as later in 1883 and in 1890, a redundant revenue compelled Congress to take action of some sort on the tariff as the chief source of federal income. In each of the fiscal years 1870–71 and 1871–72, the surplus revenue, after paying all appropriations and all interest on the public debt, amounted to about $100,000,000, a sum greatly in excess of any requirements of the sinking fund. The government was buying bonds in the open market in order to dispose of the money that was flowing into the treasury vaults.¹³

This being the state of affairs, the Committee on Ways and Means introduced into the House a bill which took decided steps in the direction of tariff reform. Mr. Dawes, of Massachusetts, the chairman of the committee, was opposed to the recommendations of the majority of its members, and therefore left the explanation and management of the bill to Mr. Finkelnburg, of Missouri. That gentleman explained that the committee’s measure was intended merely to “divest some industries of the superabundant protection which smells of monopoly, and which it was never intended they should enjoy after the war.”¹⁴ The bill lopped off something from the protective duties in almost all directions. Pig-iron was to be charged $6.00 instead of $7.00 a ton. The duties on wool and woollens, and those on cottons, were to be reduced by about twenty per cent. Coal, salt, and lumber were subjected to lower duties. Tea and coffee were also to pay less; but the duties on them were not entirely abolished,—a circumstance which it is important to note in connection with subsequent events. The bill still left an ample measure of protection subsisting; but it was clearly intended to bring about an appreciable and permanent reduction of the war duties.

This bill was introduced into the House in April. Before that time another bill had been introduced in the Senate, by the committee of that body on finance, which also lowered duties, but by no means in so incisive a manner as the House bill. The Senate bill simply proposed to reduce all the protective duties by ten per cent. When the ten per cent. reduction was first suggested, it was strongly opposed by the protected interests, whose representatives, it is hardly necessary to say, were present in full force. They were unwilling to yield even so small a diminution. When, however, the House bill, making much more radical changes, was brought forward with the sanction of a majority of the Committee on Ways and Means, they saw that an obstinate resistance to any change might lead to dangerous results. A change of policy was accordingly determined on. Mr. John L. Hayes, who had been for many years Secretary of the Wool-Manufacturers’ Association, and became President of the Tariff Commission of 1882, was at that time in Washington as agent for the wool manufacturers. Mr. Hayes has given an account of the events at Washington in 1872, from which it appears that he was chiefly instrumental in bringing about the adoption of a more far-sighted policy by the protectionists.¹⁵ Mr. Hayes believed it to be more easy to defeat the serious movement in favor of tariff reform by making some slight concessions than by unconditional opposition. The woollen manufacturers were first induced to agree to this policy; the Pennsylvania iron makers were next brought over to it; and finally, the whole weight of the protected interests was made to bear in the same direction. As a concession to the demand for reform, the general ten per cent. reduction was to be permitted. With this, however, was to be joined a sweeping reduction of the non-protective sources of revenue: the taxes on whiskey and tobacco were to be lowered, and the tea and coffee duties were to be entirely abolished.

This plan of action was successfully carried out. An act for abolishing the duties on tea and coffee was first passed.¹⁶ This being disposed of, the general tax and tariff bill was taken up in the House. The Senate had already indicated its willingness to act in the manner desired by the protectionists. It had passed and sent to the House a bill making the general reduction of ten per cent., and nothing remained but to get the consent of the House. But this consent was not easily obtained. A large number of representatives were in favor of a more thorough and radical reform, and wished for the passage of the bill prepared by the Ways and Means Committee. But unfortunately the reform forces were divided, and only a part of them insisted on the Ways and Means bill. The remainder were willing to accept the ten per cent. reduction, which the protectionists yielded. On the other hand the protectionist members were united. Messrs. Kelley and Dawes led them, and succeeded in bringing their whole force to vote in favor of the horizontal reduction. The powerful influence of the Speaker, Mr. Blaine, was also on their side. They finally succeeded in having the original committee bill set aside, and in passing the bill for the ten per cent. reduction. Most of the revenue reformers in the end voted for it, believing it to be the utmost that could be obtained. It must be observed, however, to their credit, that the “horizontal “reduction of the protective duties was not the only concession to the reform feeling that was made by the act of 1872. It also contained a number of minor but significant changes of duty. The duty on salt was reduced to one half the previous rates; for the feeling against the war-duty on salt, which very clearly resulted in putting so much money into the pockets of the Syracuse and Saginaw producers, was too strong to be resisted. The duty on coal was reduced from $1.25 to 75 cents a ton. Some raw materials, of which hides and paper stock were alone of considerable importance, were admitted free of duty. The free list was also enlarged by putting on it a number of minor articles used by manufacturers. But the important change in the protective duties was the ten per cent. reduction, which applied to all manufactures of cotton, wool, iron, steel, metals in general, paper, glass, and leather,—that is, to all the great protective industries.

It is worth while to dwell for a moment on the abolition of the duties on tea and coffee; for this change may fairly be said to have been decisive in fixing the character of our tariff system. The question was whether the reduction of the revenue should be effected by lowering the protective or the non-protective duties. As matters stood in 1872, the removal of the tea and coffee duties prevented a more extended reduction of the protective duties, and, as we shall presently see, eventually left these latter precisely at the point at which they had been before.

The difference in effect between duties on articles like tea and coffee on the one hand, and articles like iron and wool on the other, is easily stated. Both are indirect taxes, reaching the consumer in the shape of higher prices on the commodities he uses. But when a duty is imposed on an article like tea and coffee, the whole increase in price to the consumer is offset by the same amount of revenue received by the government whereas when a duty is imposed on an article like iron or wool, the effect is different. In the latter case also the commodity is increased in price to the consumer, and he is thereby taxed. So far as the articles continue to be imported, the increased price, as in the case of tea and coffee, represents revenue received by the government. But when the consumer buys and uses an article of this kind made at home, he must pay an increased price, or tax, quite as much as when he buys the imported article, with the difference that the tax is not paid to the government, but to the home producer. The extra price so received by the home producer does not necessarily, or indeed usually, yield him exceptionally high profits. It is true that in some cases of more or less perfect monopoly he may make, permanently or for a long time, exceptionally high profits; and in these cases there is ground for saying that the protective system has the effect of robbing Peter to pay Paul. But in the majority of cases, where the conditions of monopoly do not exist, the home producer, while getting a higher price because of the duty, does not make correspondingly high profits. It may cost more, for one reason or another, to make the article at home than it costs to make it abroad, and the duty simply serves to offset this disadvantage of the domestic producer. In not a few cases, while it may cost more to make the article at home than abroad, the duty is greater than the difference in cost. Domestic competition then will cause the price at home to fall to a point less than the foreign price plus the duty; importation will cease; and yet a virtual tax will still be levied in the shape of prices higher than those which would obtain if there were no duty. Whatever be the details of the working of a protective duty, it is prima facie less desirable than a revenue duty, on the simple ground that the tax serves not to yield revenue, but to offset the greater cost of making the commodity at home. Whether the stimulus to domestic production brings other benefits to the community, sufficient to compensate for this disadvantage of protective duties involves the whole problem of the operation of international trade; indeed, the discussion spreads over the entire range of economic principles, and can be settled only by reasoning in which all those principles are taken into account.

The history of the duties on tea and coffee is curious. In the early days of the Republic, when the need of revenue was pressing, they were subjected to duties which for those times were heavy. But in 1830, when the revenue became more than ample, and when there was also a strong feeling in favor of maintaining protective duties, tea, coffee, and cocoa were put on the free list. The situation in 1830 was not unlike that in 1872, except that the feeling through the North in favor of maintaining the protective duties was probably stronger at the earlier date. From 1830 to the Civil War, these revenue articles remained free of duty. The tariff acts of 1846 and 1857, though supposed to be based on revenue principles, made no attempt to secure revenue from this certain and simple source. Protective duties are as certainly taxes as are those on tea and coffee; but in the latter case no domestic producers ask for the retention of the taxes; consequently the revenue duties, unsupported by any strong interest, are easy victims when a curtailment of the national revenue becomes convenient or necessary.

For our present purpose it suffices to point out that the removal of the tea and coffee duties in 1872 served to fix for a long time the character of our legislation on the revenue articles of which they are the type. Step by step, in the various tariff acts passed since the war, all the non-protective duties have been swept away. By far the most important recent legislation in this direction was the removal of the duties on sugar in the act of 1890, a change which, like the removal of the tea and coffee duties in 1872, emphasized the determination of the protectionists to give up the simplest and surest sources of revenue rather than yield an abatement of the protective duties.

To return from this digression to the tariff act of 1872. The free-traders were on the whole satisfied with it; they thought it a step in the right direction, and the beginning of a process of reform. The protectionists, however, believed that they had won a victory; and, as events proved, they were right.¹⁷

It is not within the purpose of this volume to discuss the intrinsic merits of a “horizontal reduction,” such as was carried out in the act of 1872. Undoubtedly it is a simple and indiscriminating method of approaching the problem of tariff reform. The objections to it were very prominently brought forward when Mr. Morrison, during the session of 1883–84, proposed to take off ten per cent. from the duties, in exactly the same way that the tariff of 1872 had taken off ten per cent. It is certainly curious that this method, when proposed by Mr. Morrison in 1884, should be vehemently denounced by protectionists as crude, vicious, unscientific, and impractical, although, when proposed by Mr. Dawes in 1872, it received their earnest support. There is, however, one objection to such a plan which was hardly mentioned in connection with Mr. Morrison’s bill, but was brought out very clearly by the experience of 1872. This is, that a horizontal reduction can very easily be revoked. The reduction made in 1872 was repealed with little difficulty in 1875. After the panic of 1873, imports greatly diminished, and with them the customs revenue. No further thought of tax reduction was entertained and soon a need of increasing the revenue was felt. In 1875 Congress, as one means to that end, repealed the ten per cent. reduction, and put duties back to where they had been before 1872.¹⁸ The repeal attracted comparatively little attention, and was carried without great opposition. If a detailed examination of the tariff had been made in 1872, and if duties had been reduced in that year carefully and with discrimination, it would have been much more difficult in 1875 to put them back to the old figures. If some of the duties which are of a particularly exorbitant or burdensome character had been individually reduced in 1872, public opinion would not easily have permitted the restitution of the old rates. But the general ten per cent. reduction, which touched none of the duties in detail, was repealed without attracting public attention. The old rates were restored; and the best opportunity which the country has had for a considerable modification of the protective system, slipped by without any permanent result.

Of the attempts at reform which were made between 1875 and 1883, little need be said. Mr. Morrison in 1876, and Mr. Wood in 1878, introduced tariff bills into the House. These bills were the occasion of more or less debate; but there was at no time any probability of their being enacted.¹⁹ In 1879 the duty on quinine was abolished entirely,—a measure most beneficial and praiseworthy in itself, but not of any considerable importance in the economic history of the country.

Of the tariff act of 1883 we do not purpose speaking in this connection. It will be discussed in detail in the concluding pages.

We have now completed our account of the attempts to reform the tariff which were made between the close of the Civil War and the general revision of 1883. It is clear that the duties, as they were imposed in the act of 1864, were retained substantially without change during the whole of this period. The non-protective duties were indeed swept away. A few reductions of protective duties were made in the acts of 1870 and 1872; but the great mass of duties imposed on articles which are produced in this country were not touched. It is worth while to note some of the more important classes of goods on which the duties levied in 1864 remained in force, and to compare those duties with the rates of the Morrill tariff of 1861. The increase which was the result of the war will appear most plainly from such a comparison. In the appended table²⁰ it will be seen that the rates on books, chinaware, and pottery, cotton goods, linen, hemp, and jute goods, glass, gloves, bar- and hoop-iron, iron rails, steel, lead, paper, and silks, were increased by from ten to thirty per cent. during the war, and that the increase then made was maintained without the slightest change till 1883. That these great changes, at the time when they were made, were not intended or expected to be permanent, cannot be denied. An example like that of the duty on cotton goods shows plainly how the duties were fixed during the war according to the conditions of the time, and without expectation of their remaining indefinitely in force. The duty on the cheapest grade of cotton tissues had been in 1861 fixed at one cent per yard. During the war the price of cotton rose greatly, and with it the prices of cotton goods. Consequently it is not surprising to find the duty in 1864 to be five cents per yard on this grade of cottons. But shortly after the war, raw cotton fell nearly to its former price; and it does occasion surprise to find that the duty of five cents per yard should have been retained without change till 1883, and even in the act of 1883 retained at a figure much above that of 1861. The duty on cheap cottons happens not to have been particularly burdensome, since goods of this kind are made in this country as cheaply as they can be made abroad. But the retention of the war duty on them, even after it became exorbitantly high, is typical of the way in which duties were retained on other articles on which they were burdensome. Duties which had been imposed during the war, and which had then been made very high, either for reasons of revenue or because of circumstances such as led to the heavy rate on cottons, were retained unchanged after the war ceased. It would be untrue to say that protection did not exist before the great struggle began,—the tariff of 1861, was a distinctly protectionist measure; but it is clear that the extreme protectionist character of our tariff is an indirect and unexpected result of the Civil War.

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⁴ Those who wish to get some knowledge of the confused character of the financial legislation called out by the war, are referred to Mr. David A. Wells’s excellent essay on “The Recent Financial Experiences of the United States” (1872). Those who wish to study more in detail the course of events after the war should read Mr. Wells’s reports as Commissioner of the Revenue, of 1867, 1868, 1869, and 1870.

⁵The most important acts for reducing the internal taxes were those of July 11, 1866; March 2,1867; March 31, 1868; July 14, 1870; June 6, 1872.

⁶ As late as 1870, Mr. Morrill said: “For revenue purposes, and not solely for protection, fifty per cent. in many instances has been added to the tariff [during the war] to enable our home trade to bear the new but indispensable burdens of internal taxation. Already we have relinquished most of such taxes. So far, then, as protection is concerned * * * we might safely remit a percentage of the tariff on a considerable share of our foreign importations. * * * It is a mistake of the friends of a sound tariff to insist on the extreme roles imposed during the war, if less will raise the necessary revenue. * * * Whatever percentage of duties was imposed on foreign goods to cover internal taxation on home manufactures, should not now be claimed as the lawful prize of protection, when such taxes have been repealed. There is no longer an equivalent.”—Congress. Globe, 1869–70, p. 3295. These passages occur at the end of a long speech in favor of the principle of protection.

⁷ Mr. Wells’s bill and the rates proposed in the House bill may be found in his report for 1866–67, pp. 235–290. The principle of “enlightened protection” on which he proceeded is stated on p. 34. At this time Mr. Wells was still a protectionist; it was not until he prepared his report for 1868–69 that he showed himself fully convinced of the unsoundness of the theory of protection. His able investigations and the matter-of-fact tone of all of his reports gave much weight to his change of opinion, and caused it to strengthen greatly the public feeling in favor of tariff reform.

⁸ President Garfield (then Representative) said in 1870: “After studying the whole subject as carefully as I am able, I am firmly of the opinion that the wisest thing that the protectionists in this house can do is to unite on a moderate reduction of duties on imported articles. * * * If I do not misunderstand the signs of the times, unless we do this ourselves, prudently and wisely, we shall before long be compelled to submit to a violent reduction, made rudely and without discrimination, which will shock, if not shatter, all our protected industries.”—Young’s Report, p. clxxii. It is worthy of remark that Mr. Garfield had also supported earnestly the unsuccessful bill of 1867. He had appealed to his party to vote so as to make up the two-thirds majority necessary for its consideration, telling them that later they might “make up their record” by voting against it.—Congr. Globe, 1866–67, pp. 1657, 1658.

⁹ An increase in the duties on bar-iron was also proposed in the bill as reported by the Committee on Ways and Means; but this, fortunately, was more than could be carried through. See the speeches of Messrs. Brooks (Congr. Globe, 1869–70, part 7, appendix, pp. 163–167) and Allison (ibid., p. 192 et seq.), which protest against the sham reductions of the bill.

¹⁰ See chapter iii.

¹¹ See the list of reductions made by the act of 1870 in Young’s Report, p. clxxvii.

¹² No satisfactory investigation of the period preceding the crisis of 1873 has yet been made. Of the fact that the situation was especially depressing for the agricultural parts of the country, there can be no doubt. The speculative mania and the fictitious prosperity of those years were felt most strikingly in manufactures and railroad building; exactly why so little effect of this appeared in agriculture has never been clearly explained. The whole period will repay careful economic study.

¹³ On account of the low premium on bonds and the high premium on gold, it was cheaper for the government at that time to buy bonds in the open market than to redeem them at par.

¹⁴ See Mr. Finkelnburgs speech, Congr. Globe, 1871–72, pp. 2828–29.

¹⁵ See the speech which Mr. Hayes made, shortly after the close of the session of 1872, at a meeting of the wool manufacturers in Boston; printed in the Bulletin of the Wool Manufacturers, vol. iii., pp. 252–290.

¹⁶ The House had already passed, at the extra session in the spring of 1871, a bill for admitting tea and coffee free of duty. This bill was now taken up and passed by the Senate.

¹⁷ Mr. Hayes, in the speech already referred to, spoke of “the grand result of a tariff bill reducing duties fifty-three millions of dollars, and yet leaving the great industries almost intact. The present tariff (of 1872) was made by our friends, in the interest of protection” And again: “A reduction of over fifty millions of dollars, and yet taking only a shaving off from the protection duties”

¹⁸ It was far from necessary, for revenue purposes, to repeal the ten per cent. clause. Mr. Dawes (who advocated in 1875 the repeal of his own measure of 1872) attempted to show the need of raising the tariff by assuming that a fixed sum of $47,000,000 per year was necessary for the sinking-fund—that the faith of the government was pledged to devoting this sum to the redemption of the debt. But it was very clearly shown that the government never had carried out the sinking-fund provision in any exact way. In some years it bought for the sinking fund much less than the one per cent of the debt which was supposed to be annually redeemed; in other years (notably in 1869–73) it bought much more than this one per cent. The same policy has been followed in recent years. There can be little doubt that the need of providing for the sinking fund was used merely as an excuse for raising the duties. See Mr. Woods remarks, Congr. Record, 1874–75, pp. 1187, 1188, and Cf. Mr. Beck’s speech, ibid., pp. 1401, 1402. It may be noted that in 1875 President Grant and the Secretary of the Treasury recommended, and men like Senators Sherman and Schurz supported, a re-imposition of duties on tea and coffee as the best means of increasing the customs revenues.

¹⁹ Those who are interested in the details of these measures will find the bill of 1876 explained in Mr. Morrison’s speech, in Cong. Record, 1875–1876, p. 3321. The bill of 1878 was similarly explained by Mr. Wood, Cong. Record, 1877–78, p. 2398. It was at one time supposed that Mr. Wood’s bill might be passed by the House; but the enacting clause was struck out, after some debate, by a vote of 137 to 114.

²⁰ See table III., Appendix.