Chapter 138

PASSAGE OF THE WILSON TARIFF BILL. Second Session of the 53rd Congress--Recommendations of the President Concerning a Revision of the Tariff Laws--Bill Reported to the House by the Committee of Ways and Means--Supported by Chairman Wilson and Passed--Received in the Senate--Report of the Senate Committee on Finance--Passes the Senate with Radical Amendments-- These are Finally Agreed to by the House--The President Refuses to Approve the Bill--Becomes a Law After Ten Days--Defects in the Bill --Not Satisfactory to Either House, the President or the People-- Mistakes of the Secretary of the Treasury--No Power to Sell Bonds or to Borrow Money to Meet Current Deficiencies--Insufficient Revenue to Support the Government--A Remedy That Was Not Adopted-- Gross Injustice of Putting Wool on the Free List--McKinley Law Compared with the Wilson Bill--Sufficient Revenue Furnished by the Former--I Am Criticized for Supporting the President and Secretary.

The second session of the 53rd Congress commenced on the 4th of December, 1893. The President in his message was especially urgent in his recommendation of a revision of the tariff laws. He said:

"After a hard struggle tariff reform is directly before us. Nothing so important claims our attention, and nothing so clearly presents itself as both an opportunity and a duty--an opportunity to deserve the gratitude of our fellow-citizens, and a duty imposed upon us by our oft-repeated professions, and by the emphatic mandate of the people. After a full discussion our countrymen have spoken in favor of this reform, and they have confided the work of its accomplishment to the hands of those who are solemnly pledged to it.

"If there is anything in the theory of a representation in public places of the people and their desires, if public officers are really the servants of the people, and if political promises and professions have any binding force, our failure to give the relief so long awaited will be sheer recreancy. Nothing should intervene to distract our attention or disturb our effort, until this reform is accomplished by wise and careful legislation.

* * * * *

"Not less closely related to our people's prosperity and well-being is the removal of restrictions upon the importation of the raw materials necessary to our manufactures. The world should be open to our national ingenuity and enterprise. This cannot be while federal legislation, through the imposition of high tariffs, forbids to American manufactures as cheap materials as those used by their competitors."

In view of this message, it was manifest that the tariff would be the chief subject of legislation during the session. It was understood that a bill had been prepared by the committee of ways and means, which had been submitted to the President and Secretary of the Treasury and approved by them. It was reported to the House of Representatives, December 19, 1893. On the 8th of January, 1894, Mr. Wilson, chairman of the committee, made an elaborate speech in its support. The debate continued until the 1st of February, when, with some amendments, it passed the House. In the Senate, on the next day, it was referred to the committee on finance. On the 20th of March it was reported to the Senate, with amendments, by Mr. Voorhees. Mr. Morrill said:

"I desire to say that so far as the Republican members of the committee on finance are concerned they did not object to the reporting of the bill, while they are opposed not only to the proposed income tax, but to the many changes of specifics to _ad valorems_, and to the great bulk of the provisions of the bill."

On the 2nd of April Voorhees made a carefully prepared speech in support of the bill. The debate continued, occupying much the larger part of the time until the 3rd day of July, when the bill passed with radical amendments, which changed it in principle and details. Two conferences of the two Houses were held on amendments disagreed to, but failed to agree, and it appeared, after the long struggle, that he bill would be defeated, when, on the 13th of August, upon motion of Mr. Catchings, the House agreed to the Senate amendments in gross and thus the bill passed Congress. The President refused to approve it and it became a law after ten days without his approval.

This skeleton history of what is now known as the Wilson tariff partly discloses its imperfections. Framed in the House as a tariff for revenue only, and radically changed in the Senate to a tariff with protection to special industries, it was not satisfactory to either House, to the President or to the people. So far as it copied the schedules and the legislative provisions of the McKinley law, it met with approval. Its new features were incongruous, were decidedly sectional, and many of its provisions were inconsistent with each other.

The vital defect of this bill is that it does not provide sufficient revenue to carry on the government. This is the primary and almost the only cause of the financial difficulties of the present administration. The election of Mr. Cleveland in 1892, upon the platform framed by him, naturally created distrust as to the ability of the government to maintain the parity of the different forms of money in circulation. Added to this, the broad declaration of the purpose to reduce taxation led to the reduction of importations and the diminution of the revenue from the McKinley tariff. Importers and dealers naturally reduced their imports in view of the expectation that duties would be reduced. By the 1st of July, 1893, when the Wilson bill was in embryo, the revenues had been so diminished as to yield a surplus of only $2,341,074 during the previous year. It was apparent, when Congress met in August, that the administration, having a majority in each House of Congress, was determined to reduce duties, and yet it made no effort to reduce expenditures. Soon after there was a large deficiency in the revenue, and the Secretary of the Treasury was compelled either to refuse to pay appropriations made by law in excess of receipts or to borrow money to meet the deficiencies.

In my judgment the better way for him would have been not to pay appropriations not needed to meet specific contracts, for an appropriation of money by Congress is not mandatory, but is permissive, an authority but not a command to pay, nor does an appropriation in itself authorize the borrowing of money. When this authority is required Congress must grant it, and, upon its failure to do so, all the Secretary of the Treasury should do is to pay such appropriations as the revenues collected by the government will justify. It is for Congress to provide such sums, by taxation or loans, as are necessary to meet all appropriations made in excess of revenue. If it refuses or neglects to do this, the responsibility is on it, not on the secretary. All he can do is choose what appropriations he will pay. This is a dangerous and delicate power, but it has frequently been employed and has never been abused. His failure to exercise this discretion was a grave mistake.

As revenues diminished deficiencies increased. A doubt arose whether, under the then existing conditions, the government would be able to pay gold coin for United States notes and treasury notes. These were supported by a reserve of $100,000,000 in gold coin and bullion, but this reserve fund was not segregated from the general balance in the treasury, as it ought to have been, but was liable to be drawn upon for all appropriations made by Congress. There was not then, and there is not now, any specific authority invested in the Secretary of the Treasury to sell bonds or to borrow money to meet current deficiencies, and he felt called upon to pay these out of the general fund, embracing that created for the redemption of United States notes under the act of 1875. The result was to create an alarm that the government could not or would not pay such notes and thus maintain the gold standard. The timid, and those whose patriotism is in their purse, were making inroads on the gold reserve, which fell below $100,000,000.

By the resumption act of 1875 the Secretary of the Treasury was authorized, to enable him to pay United States notes on demand, to sell either of three classes of bonds bearing respectively five, four and a half and four per cent. interest, but the question arose, in 1894, whether he could sell these bonds to meet current expenditures. All of them were worth a premium in the market. Bonds bearing three per cent. running a short period could then have been sold at par. In common with many others I foresaw, in February, 1893, that the tariff policy of the then incoming administration would reduce our revenue below our expenditures, and sought to have Congress authorize the sale of bonds bearing three per cent. interest instead of those at a higher rate already authorized. I saw plainly that the incoming administration would enter on precisely the same course as that adopted by Buchanan, of providing insufficient revenue for the support of the government, resulting in the gradual increase of the public debt and the disturbance of our financial system. During each year of Buchanan's administration the public debt increased, as it has been steadily increasing during Cleveland's administration, and great embarrassment grows out of this fact. My friendly suggestion was defeated and the result has been the sale of four per cent. bonds at a sacrifice.

The President recommended the removal of restrictions upon the importation of the raw materials necessary to our manufactures. The tariff bill, as it passed, imposed duties on nearly all raw materials except wool. This important product of the farmer was made duty free. I made every effort to prevent this injustice. Free wool was the culminating atrocity of the tariff law. By it a revenue of over eight millions a year was surrendered for the benefit of woolen manufacturers. I appealed to the Senate to give some protection to this great industry of our country. It was generally classed as the fifth of the industries of the United States, including the manufacture of woolens, and I have no doubt it fully came up to that grade. Over a million farmers were engaged in the growth of wool. It involved an annual product estimated at $125,000,000 under the former prices, but probably under the prices after the passage of the Wilson bill it was reduced to about eighty or ninety million dollars. It was, therefore, a great industry. And yet it was left solitary and alone without the slightest protection given to it directly or indirectly. The manufacture of woolen goods was amply protected. Amendments were proposed and adopted without dissent, adding largely to the protection at first proposed on manufactures of wool.

The value of the wool in woolen goods as a rule is equal to the cost of manufacturing the cloth. The duty on cloth under this law averages 40 per cent., so that the domestic manufacturer of cloth gets the benefit not only of a duty of 40 per cent. on the cost of manufacture, but he gets a duty of 40 per cent. on the cost of the wool in the cloth, thus getting a protection of 80 per cent. on the cost of manufacture, while the farmer gets no protection against foreign competition for his labor and care. This gross injustice is done under the name of free raw materials. When I appealed to the Senate for a duty on wool I was answered by one Senator that free wool was all that was left in the bill of the Democratic doctrines of free raw materials, and, if only for this reason, must be retained. I made two speeches in support of a duty, but was met by a united party vote, every Democrat against it and every Republican for it. In the next tariff bill I hope this decision will be reversed.

On the 31st of May, 1894, I made a long speech in favor of the McKinley law and against the Wilson bill. While the McKinley law largely reduced the taxes and duties under pre-existing laws, yet it furnished ample revenue to support the government. The object of the act was declared to be to reduce the revenue. It was impartial to all sections and to all industries. The south was well cared for in it, and every reasonable degree of protection was given to that section. In growing industries in the north, which it is desirable to encourage, an increase of duty was given. In nearly all the older industries the rates were reduced, and the result was a reduction of revenue to the extent of $30,000,000. There was no discrimination made in the McKinley act between agriculture and mechanical industries. The Wilson bill sacrificed the interests of every farmer in the United States, except probably the growers of rice and of fruit in the south. The McKinley act, I believe, was the most carefully framed, especially in its operative clauses and its classification of duties, of any tariff bill ever passed by the Congress of the United States.

It has been said that the McKinley act was the cause of the deficiency of revenue that commenced about three years after its passage. That is a mistake. Until Mr. Cleveland was sworn into office, March 4, 1893, there was no want of revenue to carry on the operations of the government. Until July, 1893, there was a surplus of revenue, and not a deficiency. The receipts during the fiscal years ending June 30, 1891, 1892, 1893, under the McKinley act, furnished ample means for the support of the government, and it was not until after Cleveland had been elected, and when there was a great fear and dread all over the country that our industries would be disturbed by tariff legislation, that the revenues fell off. The surplus in 1891 was $37,000,000; in 1892, in the midst of the election, it was $9,914,000, and in 1893, up to June 30, the surplus revenue was $2,341,000. Yet in a single year afterwards, after this attempt to tinker with the tariff had commenced, after the announcement as to the tariff had been made by Mr. Cleveland, after the general fear that sprang up in the country in regard to tariff legislation, the revenues under the McKinley act fell off over $66,000,000, and the deficiency of that year was $66,542,000.

I believe that if Harrison had been elected President of the United States the McKinley act would have furnished ample revenue for the support of the government, because then there would have been no fear of disturbance of the protected industries of our country. Cleveland's election created the disturbances that followed it. The fear of radical changes in the tariff law was the basis of them. That law caused the falling of prices, the stagnation of some industries, and the suspension of others. No doubt the fall in the value of silver and the increased demand for gold largely precipitated and added to the other evils that I have mentioned.

If when Congress met in December, 1893, there had been a disposition on the part of both sides to take up the tariff question and discuss it and consider it as a pure question of finance, there would have been no difficulty with the Republicans. We were all ready to revise the rates contained in the McKinley tariff act. The body of that act had been embodied in the Wilson bill as part of the proposed law. Nearly all of the working machinery of the collection of customs, framed carefully under the experienced eye of Senator Allison, is still retained. All the schedules, the formal parts of the act, which are so material, and the designation into classes --all those matters which are so complicated and difficult to an ordinary lawyer or an ordinary statesman, have been retained.

If the bill had been taken up in the spirit in which it should have been, and if an impartial committee of both parties in the Senate and the House had gone over it, item by item, it would have passed in thirty days without trouble. That was not the purpose; it was not the object, and it was not the actual result.

During the long session of 1893-94 I was the subject of much controversy, debate, censure and praise. While distinctly a Republican, and strongly attached to that party, I supported, with the exception of the tariff law, the financial policy of the President and Secretary Carlisle. Mr. Cleveland was a positive force in sustaining all measures in support of the public credit. Mr. Carlisle, who as a Member and Senator had not been always equally positive on these measures, yet was regarded as a conservative advocate of a sound financial policy, readily and heartily supported the President in his recommendations. As these were in harmony with my convictions I found myself indorsing them as against a majority of the Democratic Senators. My Republican colleagues, with scarcely an exception, favored the same policy.