Chapter IX · GREAT QUESTIONS AND GREAT ANSWERS. (continued 2)

“The bank has become the indispensable agent and instrument of trade throughout the civilized world, and not less in specie paying countries than in countries cursed by an inconvertible paper currency. Besides its function of issuing circulating notes, it serves as a clearing-house for the transactions of its customers. It brings the buyer and seller together, and enables them to complete their exchanges. It brings debtors and creditors together, and enables them to adjust their accounts. It collects the thousand little hoards of unemployed money, and through loans and discounts converts them into active capital. It is a reservoir which collects in amounts available for use, the rain-drops which would otherwise be lost by dispersion.

“I find there are still those who deny the doctrine that bank deposits form an effective addition to the circulation. But let us see. A bank is established at a point thirty or forty miles distant from any other bank. Every man within that circle has been accustomed is keep in his pocket or safe a considerable sum of money during the year. That average amount is virtually withdrawn from circulation, and for the time being is canceled, is dead. After a new bank is established, a large portion 347of that average amount is deposited with the bank, and a smaller amount is carried in their safes and pockets. These accumulated deposits placed in the bank, at once constitute a fund which can be loaned to those who need credit. At least four-fifths of the average amount of deposits can be loaned out, thus converting dead capital into active circulation.

“But the word deposits covers far more than the sums of actual money placed in the bank by depositors. McLeod, in his great work on banking, says: ‘Credits standing in bankers’ books, from whatever source, are called deposits. Hence a deposit in banking language always means a credit in a banker’s books in exchange for money or securities for money,’—Vol. ii, p. 267.

“Much the largest proportion of all bank deposits are of this class—mere credits on the books of the bank. Outside the bank, these deposits are represented by checks and drafts. Inside the bank, they effect settlements, and make thousands of payments by mere transfer from one man’s account to that of another. This checking and counter-checking and transferring of credit, amounts to a sum vastly greater than all the deposits. No stronger illustration of the practical use of deposits can be found than in the curious fact, that all the heavy payments made by the merchants and dealers in the city of Amsterdam for half a century, were made through a supposed deposit which had entirely disappeared some fifty years before its removal was detected. Who does not know that the six hundred millions of dollars of deposits reported every quarter as a part of the liabilities of the national banks, are mainly credits which the banks have given to business men?

“No currency can meet the wants of this country unless it is founded directly upon the demands of business, and not upon the caprice, the ignorance, the political selfishness, of any party in power.

“What regulates now the loans and discounts and credits of our National banks? The business of the country. The amount increases or decreases, or remains stationary, as business is fluctuating or steady. This is a natural form of exchange, based upon the business of the country and regarded by its changes. And when that happy day arrives, when the whole volume of our currency is redeemable in gold at the will of the holder, and recognized by all nations as equal to money, then the whole business of banking, the whole volume of currency, the whole amount of credits, whether in the form of checks, drafts, or bills, will be regulated by the same general law—the business of the country.”

348At last, Congress came up to the position taken by Garfield in 1868. In 1875, the Resumption Act was passed, providing that, after January 1, 1879, the United States Treasury would offer one dollar in gold for every dollar in greenbacks presented for redemption. That this law was ten years too late can not be doubted. The delay prolonged the agony. But it was all that popular opinion would allow. In the interim between 1875 and 1879, every effort was made by the paper-money men to repeal the act. Of General Garfield’s speeches in its defense, we select that of November 16, 1877, as the type. The reader shall see whether he had changed his views, whether the panic and hard times had disconcerted his calculations? Let James A. Garfield speak for himself:

THE REPEAL OF THE RESUMPTION ACT.

“We are engaged in a debate which has lasted in the Anglo-Saxon world for more than two centuries, and hardly any phase of it to which we have listened in the course of the last week is new. Hardly a proposition has been heard on either side which was not made one hundred and eighty years ago in England, and almost a hundred years ago in the United States. So singularly does history repeat itself.

“That man makes a vital mistake who judges of truth in relation to financial affairs from the changing phases of public opinion. He might as well stand on the shores of the Bay of Fundy, and, from the ebb and flow of a single tide, attempt to determine the general level of the sea, as to stand on this floor and from the current of public opinion in any one debate, judge of the general level of the public mind. It is only when long spaces along the shore of the sea are taken into account, that the grand level is found, from which all heights and depths are measured. And it is only when long spaces of time are considered that we find at last the level of public opinion which we call the general judgment of mankind. From the turbulent ebb and flow of the public opinion of to-day I appeal to that settled judgment of mankind on the subject-matter of this debate.

“In the short time which is allotted to me I invite the attention of gentlemen, who do me the honor to listen, to a very remarkable fact. I suppose it will be admitted on all hands, that 1860 was a year of unusual business prosperity in the United States. It was at a time when the 349bounties of Providence were scattered with a liberal hand over the face of our Republic. It was a time when all classes of our community were well and profitably employed. It was a time of peace; the apprehension of our great civil war had not yet seized the minds of our people. Great crops North and South, great general prosperity marked the era.

“If one thing was settled above all other questions of financial policy in the American mind at that time, it was this, that the only sound, safe, trustworthy standard of value is coin of a standard weight and fineness, or a paper currency convertible into coin at the will of the holder. That was and had been for several generations the almost unanimous opinion of the American people. It is true there was here and there a theorist dreaming of the philosopher’s stone, dreaming of a time when paper money, which he worshiped as a kind of fetish, would be crowned as a god; but those dreamers were so few in number that they made no ripple on the current of public thought, and their theories formed no part of public opinion, and the opinion of 1860–’61 was the aggregated result of the opinions of all the foremost Americans who have left their record upon this subject.

“I make this statement without fear of contradiction, because I have carefully examined the list of illustrious names and the records they have left behind them. No man ever sat in the chair of Washington as President of the United States who has left on record any word that favors inconvertible paper money as a safe standard of value. Every President who has left a record on the subject has spoken without qualification in favor of the doctrine I have announced. No man ever sat in the chair of the Secretary of the Treasury of the United States who, if he has spoken at all on the subject, has not left on record an opinion equally strong, from Hamilton down to the days of the distinguished father of my colleague [Mr. Ewing], and to the present moment.

“The general judgment of all men who deserve to be called the leaders of American thought ought to be considered worth something in an American House of Representatives on the discussion of a great topic like this. What happened to cause a departure from this general level of public opinion? Every man knows the history. War, the imperious necessities of war, led the men of 1861–’62 to depart from the doctrine of the fathers; but they did not depart from it as a matter of choice, but compelled by overmastering necessity. Every man in the Senate and House of 1862 who voted for the greenback law, announced that he did 350it with the greatest possible reluctance and with the gravest apprehension for the result. Every man who spoke on the subject, from Thaddeus Stevens to the humblest member in this House, and from Fessenden to the humblest Senator, warned his country against the danger that might follow, and pledged his honor that at the earliest possible moment the country should be brought back to the old, safe-established doctrine of the fathers.

“When they made the law creating the greenbacks they incorporated into its essential provisions the most solemn pledge men could devise, that they would come back to the doctrines of the fathers. The very law that created the greenback provided for its redemption and retirement; and every time the necessities of war required an additional issue, new guarantees and new limitations were put upon the new issues to insure their ultimate redemption. They were issued upon the fundamental condition that the number should be so limited forever that under the law of contracts the courts might enforce their sanctions. The men of 1862 knew the dangers from sad experience in our history; and, like Ulysses, lashed themselves to the mast of public credit when they embarked upon the stormy and boisterous sea of inflated paper money, that they might not be beguiled by the siren song which would be sung to them when they were afloat on the wild waves.

“But the times have changed; new men are on deck; men who have forgotten the old pledges; and now only twelve years have passed (for as late as 1865 this House, with but six dissenting votes, resolved again to stand by the old ways and bring the country back to sound money)—only twelve years have passed, and what do we find? We find a group of theorists and doctrinaires who look upon the wisdom of the fathers as foolishness. We find some who advocate what they call “absolute money;” who declare that a piece of paper stamped a “dollar” is a dollar; that gold and silver are a part of the barbarism of the past, which ought to be forever abandoned. We hear them declaring that resumption is a delusion and a snare. We here them declaring that the eras of prosperity are the eras of paper money; and they point us to all times of inflation as a period of blessing to the people, prosperity to business; and they ask us no more to vex their ears with any allusion to the old standard, the money of the Constitution. Let the wild crop of financial literature that has sprung into life within the last twelve years witness how widely and how far we have drifted. We have lost our old moorings, have thrown overboard our old compass; we sail by alien stars, looking not for the haven, but are afloat on an unknown sea....

351“No theory of currency that existed in 1860 can justify the volume now outstanding. Either our laws of trade, our laws of value, our laws of exchange, have been utterly reversed or the currency of to-day is in excess of the legitimate wants of trade. But I admit freely that no Congress is wise enough to determine how much currency the country needs. There never was a body of men wise enough to do that. The volume of currency needed, depends upon laws that are higher than Congress and higher than governments. One thing only legislation can do. It can determine the quality of the money of the country. The laws of trade alone can determine its quantity.

“In connection with this view we are met by the distinguished gentleman from Pennsylvania [Mr. Kelley] with two historical references on which he greatly relies in opposing resumption. The first is his reference to France. Follow France, says the honorable gentleman from Pennsylvania, follow France, and see how she poured out her volumes of paper money, and by it survived a great crisis and maintained her business prosperity. Oh, that the gentleman and those who vote with him would follow France! I gladly follow up his allusion to France. As a proof that we have not enough money, he notices the fact that France has always used more money than either the United States or England. I admit it. But does the gentleman not know that the traditions and habits of France are as unlike those of England and the United States as those of any two nations of the world can be in regard to the use of money? I say to the gentleman that in France, banking, as an instrument of trade, is almost unknown. There are no banks in France except the Bank of France itself. The government has been trying for twenty years to establish branches in all the eighty-nine departments, and thus far only fifty-six branches have been organized. Our national, State, and private banks number nearly ten thousand. The habits of the French people are not adapted to the use of banks as instruments of exchange. All the deposits in all the saving-banks of France are not equal to the deposits in the saving-banks of New York City alone. It is the frequent complaint of Americans who make purchases in Paris that the merchants will not accept drafts, even on the Bank of France.

“Victor Bonnet, a recent French writer, says: ‘The use of deposits, bank accounts, and checks, is still in its infancy in this country. They are very little used even in great cities, while in the rest of France they are completely unknown. It is, however, to be hoped that there will be more employed hereafter, and that here, as in England and the United 352States, payments will be more generally made through the medium of bankers and by transfers in account-current. If this should be the case, we shall economize both in the use of specie and of bank-notes; for it is to be observed that the use of bank-notes does not reach its fullest development except in countries where the keeping of bank accounts is universal, as is evident by comparing France in this respect with England.’

“M. Pinard, manager of the Comptoir d’Escompte, testified before the commission of inquiry, that the greatest efforts had been made by that institution to induce French merchants and shopkeepers to adopt English habits in respect to the use of checks and the keeping of bank accounts, but in vain; their prejudices were invincible. ‘It was no use reasoning with them; they would not do it, because they would not.’

“So long as the business of their country is thus done hand to hand by the use of cash, they need a much greater volume of money in proportion to their business than England or the United States.

“How is it in England? Statistics, which no man will gainsay, will show that ninety-five per cent. of all the great mercantile transactions of England is done by drafts, checks, and commercial bills and only five per cent. by the actual use of cash. The great business of commerce and trade is done by drafts and bills. Money is now only the small change of commerce. And how is it in this country? We have adopted the habits of England, and not of France, in this regard. In 1871, when I was Chairman of the Committee on Banking and Currency, I asked the Comptroller of the Currency to issue an order naming fifty-two banks which were to make an analysis of their receipts. I selected three groups: The first group were the city banks; not, however, the clearing-house banks, but the great city banks not in the clearing-house association. The second group consisted of banks in cities of the size of Toledo and Dayton, in the State of Ohio. In the third group, if I may coin a word, I selected the ‘countriest’ banks—the smallest that could be found at points away from railroads and telegraphs.

“The order was that all those banks should analyze all their receipts for six consecutive days, putting into one list all that can be called cash, either in coin, greenbacks, bank-notes, or coupons; and into the other list all drafts, checks, or commercial bills. What was the result? During those six days $157,000,000 were received over the counters of those fifty-two banks; and, of that amount, $19,370,000 was in cash—twelve per cent. 353only in cash; and eighty-eight per cent. of that vast amount, representing every grade of business, was in checks, drafts, and commercial bills. Does a country that transacts its business in that way need as much currency afloat among the people as a country like France, without banks, without savings institutions, and whose people keep their money in hoards.

“I remember in reading one of the novels of Dumas, when an officer of the French army sent home his agent to run his farm, he loaded him down with silver enough to conduct the business for a year; there was no thought of giving him credit in a bank; but of locking in the till, at the beginning of the year, enough coin to do the business of the year. So much for the difference between the habits of France and those of Anglo-Saxon countries. Let us now consider the conduct of France during and since the German war. In July, 1870, the year before the war began, the Bank of France had outstanding $251,000,000 of paper circulation, and held in its vaults $229,000,000 of coin. When the war broke out, they were compelled immediately to issue more paper, and to make it a legal tender. They took pattern by us in their necessity, and issued paper until, on the 19th of November, 1873, four years ago next Monday, they had $602,000,000 of paper issued by the Bank of France, while the coin in the bank was reduced to $146,000,000.

“But the moment their great war was over, they did what I recommended to the gentleman from Pennsylvania [Mr. Kelley], they commenced to reduce their paper circulation, and in one year reduced it almost $100,000,000, and increased the coin circulation $120,000,000. In the year 1876 they had pushed into circulation $200,000,000 of coin, and retired nearly all their small notes. They are at this moment within fifty days of resumption of specie payments. Under their law, fifty days from to-day, France will again come into the illustrious line of nations who believe in a sound currency. I commend to the eloquent gentleman from Pennsylvania [Mr. Kelley] the example of France....

“The overwhelming and fixed opinion of England is that the cash-resumption act of 1819 was a blessing and not a curse, and that the evils which England suffered from 1821 to 1826 did not arise from the resumption of cash payments. I appeal to every great writer of acknowledged character in England for the truth of this position. I ask the gentleman to read the eighth chapter of the second book of Miss Martineau’s History of the Peace, where the case is admirably stated. 354I appeal also to the opinion of Parliament itself, especially to the House of Commons, which is as sensitive an index of public opinion as England knows. When they were within about eighteen months of resumption of specie payment, a motion was made, like the motion of my colleague from Ohio [Mr. Ewing], that the resumption-act bill be repealed or modified, because it was producing distress. And a number of gentlemen in the House of Commons made speeches of the same spirit as those which we have heard here within the past week. The distress among the people, the crippling of business, the alarm of the mercantile classes, all were paraded in the House of Commons, and were answered by those knights of finance whose names have become illustrious in English history. And at the end of a long debate on that proposition, on the 11th of April, 1821, a vote was taken, and the proposition was rejected by a vote of 141 to 27. In other words, by a vote of 141 to 27 the House of Commons resolved that their act for the resumption of specie payments was not causing distress, and ought not to be repealed, and ought not to be modified, except to make it more effective. As a matter of fact, it was so modified as to allow resumption to take place much sooner than was provided in the act of 1819....

“I now proceed to notice the second point that has been made in favor of this bill. It is assumed that specie payment will injure the debtor class of this country, and thereby oppress the poor; in other words, that the enforcement of the resumption law will oppress the poor and increase the riches of the rich. It is assumed that the laboring-men are in debt, and that the rich men constitute the creditor class. I deny this proposition in toto. I affirm that the vast majority of the creditors of this country are the poor people; that the vast majority of the debtors of this country are the well-to-do people—in fact, people who are moderately rich.

“As a matter of fact, the poor man, the laboring-man, can not get heavily in debt. He has not the security to offer. Men lend their money on security, and in the very nature of the case poor men can borrow but little. What then do poor men do with their small earnings? When a man has earned, out of his hard work, a hundred dollars more than he needs for current expenses, he reasons thus: ‘I can not go into business with a hundred dollars; I can not embark in trade; but, as I work, I want my money to work.’ And so he puts his small gains where they will earn something. He lends his money to a wealthier neighbor, or puts it in the savings-bank. There were, in the United States, on the 355first of November, 1876, forty-four hundred and seventy-five savings-banks and private banks of deposit, and their deposits amounted to $1,377,000,000, almost three-fourths of the amount of our national debt. Over two and a half millions of the citizens of the United States were depositors. In some States the deposits did not average more than $250 each. The great mass of the depositors are men and women of small means—laborers, widows, and orphans. They are the lenders of this enormous aggregate. The savings-banks, as their agents, lend it to whom? Not to the laboring poor, but to the business men who wish to enlarge their business beyond their capital. Speculators sometimes borrow it. But in the main, well-to-do business men borrow these hoardings. Thus the poor lend to the rich....

“There is another way in which poor men dispose of their money. A man says: ‘I can keep my wife and babies from starving while I live and have my health, but if I die they may be compelled to go over the hills to the poor-house’; and, agonized by that thought, he saves out of his hard earnings enough to take out and keep alive a small life-insurance policy, so that, if he dies, there may be something left, provided the insurance company to which he intrusts his money is honest enough to keep its pledges. And how many men do you think have done that in the United States? I do not know the number for the whole country, but I do know this, that from a late report to the insurance commissioner of the State of New York, it appears that the companies doing business in that State had 774,625 policies in force, and the face value of these policies was $1,922,000,000. I find, by looking over the returns, that in my State there are 55,000 policies outstanding; in Pennsylvania, 74,000; in Maine, 17,000; in Maryland, 25,000; and, in the State of New York, 160,090. There are, of course, some rich men insured in these companies, but the majority are poor people, for the policies do not average more than $2,200 each. What is done with the assets of these companies, which amount to $445,000,000? They are loaned out. Here again the creditor class is the poor, and the insurance companies are the agents of the poor to lend their money for them. It would be dishonorable for Congress to legislate either for the debtor class or for the creditor class alone. We ought to legislate for the whole country. But when gentlemen attempt to manufacture sentiment against the resumption act, by saying it will help the rich and hurt the poor, they are overwhelmingly answered by the facts.

356“Suppose you undo the work that Congress has attempted—to resume specie payment—what will result? You will depreciate the value of the greenback. Suppose it falls ten cents on the dollar, you will have destroyed ten per cent. of the value of every deposit in the savings-banks, ten per cent. of every life-insurance policy and fire-insurance policy, of every pension to the soldier, and of every day’s wages of every laborer in the nation.

“In the census of 1870, it was estimated that on any given day there were $120,000,000 due to laborers for their unpaid wages. That is a small estimate. Let the greenback dollar come down ten per cent. and you take $12,000,000 from the men who have already earned it. In the name of every interest connected with the poor man I denounce this effort to prevent resumption. Daniel Webster never uttered a greater truth in finance than when he said that of all contrivances to cheat the laboring-classes of mankind, none was so effective as that which deluded them with an irredeemable paper money. The rich can take care of themselves, but the dead-weight of all the fluctuations and losses falls ultimately on the poor man who has only his day’s work to sell.

“I admit that in the passage from peace to war there was a great loss to one class of the community, to the creditors; and in the return to the basis of peace some loss to debtors was inevitable. This injustice was unavoidable. The loss and gain did not fall upon the same. The evil could not be balanced nor adjusted. The debtors of 1862–’65 are not the debtors of 1877. The most competent judges declare that the average life of the private debts in the United States is not more than two years. Of course, obligations may be renewed, but the average length of private debts in this country is not more than two years. Now, we have already gone two years on the road to resumption, and the country has been adjusting itself to the new condition of things. The people have expected resumption, and have already discounted most of the hardships and sufferings incident to the change. The agony is almost over; and if we now embark again upon the open sea we lose all that has been gained, and plunge the country into the necessity of venturing once more over the same boisterous ocean, with all its perils and uncertainties. I speak the deepest convictions of my mind and heart when I say that, should this resumption act be repealed and no effectual substitute be put in its place, the day is not far distant when all of us, looking back on this time from the depths of the evils which will result, 357will regret, with all our power to regret, the day when we again let loose the dangers of inflation upon the country.

“Although I do not believe in keeping greenbacks as a permanent currency in the United States, although I do not myself believe in the Government becoming a permanent banker, yet I am willing for one that, in order to prevent the shock to business which gentlemen fear, the $300,000,000 of greenbacks shall be allowed to remain in circulation as long as the wants of trade show manifestly that they are needed. Now, is that a great contraction? Is it contraction at all?

“Why, gentlemen, when you have brought your greenback up two and one-half cents higher in value, you will have added to your volume of money $200,000,000 of gold coin which can not circulate until greenbacks are brought to par.

“Let those who are afraid of contraction consider that and answer it.

“Summing it all up in a word: the struggle now pending in the House is on the one hand to make the greenback better, and on the other to make it worse. The resumption act is making it better every day. Repeal that act and you make it infinitely worse. In the name of every man who wants his own when he has earned it, I demand that we do not make the wages of the poor man to shrivel in his hands after he has earned it; but that his money shall be made better and better, until the plow-holder’s money shall be as good as the bond-holder’s money; until our standard is one, and there is no longer one money for the rich and another for the poor.”

With these bits of marble chipped from the temple of his arguments on the currency question, we must content ourselves. Upon this question Garfield was undoubtedly ahead of his generation. The resumption bill which he introduced in 1868 was better than the one adopted in 1875. He presented the fundamental principles as he understood them in 1868. From them he never changed. All subsequent efforts were but their elaboration, and, at this writing, history itself is their fulfillment and demonstration.

It is easy to see that his style of speaking changed somewhat. He became more terse and epigrammatic. He condensed the 358philosophical parts of his speeches, and enlarged the practical parts. He became more direct in address, more sparing of ornament, and simpler in language. But this was all. He was never known to be on but one side of a question. He took his position only after the most laborious investigations and careful thought. Once taken, nothing could drive him from it. In his answers to the riddles propounded by the Sphinx of American currency and finance, James A. Garfield is entitled to a place in the gallery of fame, beside the greatest financiers known to our national history. In the future, no authority will be, or can be, higher than Garfield.

Our next inquiry relates to Garfield’s record upon questions affecting the Revenue and Expenditures of the United States. Owing to his long service on the Committees of Ways and Means and on Appropriations, these twin topics of surpassing importance continually lay like couchant lions right in his political pathway.

Of the question of revenue, the tariff is the most vital branch. On the subjects of free-trade and protection, Garfield had made up his mind while at Williams College. Professor Perry, the instructor in political economy, was an unqualified free-trader. After his usual careful investigation, Garfield took the opposite view. He formulated the following proposition: “As an abstract theory, the doctrine of Free-Trade seems to be universally true, but as a question of practicability, under a government like ours, the protective system seems to be indispensable.”

Into the defense of that proposition he threw all his energies. In his speeches on the tariff we will find but one continual elaboration of this view. The speeches are moderate and conservative, avoiding either extreme. His object was to legislate for the whole country and not for any locality or class alone. On April 1, 1870, he delivered a speech on the tariff, which is of the first rank among his earlier efforts.

It presents an interesting history of England’s tariff policy toward the colonies, a brilliant discussion of the trend of prices since the war, and closes with a review of the eventful history of tariff legislation in this country, not omitting the South Carolina 359nullification. The high tariffs required by the high prices prevailing during the war, he thought, should be gradually reduced. Every one knows that the advantage of a high tariff on imports is the protection it gives to American industry by keeping up the prices here, and preventing competition with the cheap labor of Europe. But it is equally true that, while keeping prices up is good for the seller, and indirectly for the laborer whom he employs, it is bad for the buyer. Free-trade makes low prices. Avoiding alike the Scylla on the one hand and the Charybdis on the other, Garfield chose a medium. He closed his speech of April 1, 1870, by an appeal against either extreme:

“I stand now where I have always stood since I have been a member of this House. I take the liberty of quoting, from the Congressional Globe of 1866, the following remarks which I then made on the subject of the tariff:

“‘We have seen that one extreme school of economists would place the price of all manufactured articles in the hands of foreign producers by rendering it impossible for our manufacturers to compete with them; while the other extreme school, by making it impossible for the foreigner to sell his competing wares in our market, would give the people no immediate check upon the prices which our manufacturers might fix for their products. I disagree with both these extremes. I hold that a properly adjusted competition between home and foreign products is the best gauge by which to regulate international trade. Duties should be so high that our manufacturers can fairly compete with the foreign product, but not so high as to enable them to drive out the foreign article, enjoy a monopoly of the trade, and regulate the price as they please. This is my doctrine of protection. If Congress pursue this line of policy steadily, we shall, year by year, approach more nearly to the basis of free-trade, because we shall be more nearly able to compete with other nations on equal terms. I am for that protection which leads to ultimate free-trade. I am for that free-trade which can only be achieved through a reasonable protection.’”

As the representative of General Garfield’s tariff speeches in these pages, we select the one of February 4, 1878. Of this speech a gentleman of high abilities and information, says: “Having read 360and re-read it carefully, and having read all the great speeches made in Congress for forty years before the war on this difficult question, it is my deliberate conviction that the sound American doctrine of protection has never been stated with equal clearness, breadth, and practicality.”

THE TARIFF.

“A few days ago, the distinguished gentleman from Virginia, who now occupies the chair [Mr. Tucker], made a speech of rare ability and power, in which he placed at the front of his line of discussion a question that was never raised in American legislation until our present form of Government was forty years old; the question of the constitutionality of a tariff for the encouragement and protection of manufacturers. The first page of the printed speech of the gentleman, as it appears in the Congressional Record, is devoted to an elaborate and very able discussion of that question.

“He insists that the two powers conferred upon Congress, to levy duties and to regulate commerce, are entirely distinct from each other; that the one can not by any fair construction be applied to the other; that the methods of the one are not the methods of the other, and that the capital mistake which he conceives has been made in the legislation of the country for many years is that the power to tax has been applied to the regulation of commerce, and through that to the protection of manufactures. He holds that if we were to adopt a proper construction of the Constitution we should find that the regulation of commerce does not permit the protection of manufactures, nor can the power to tax be applied, directly or indirectly, to that object.

“I will not enter into any elaborate discussion of that question, but I can not refrain from expressing my admiration of the courage of the gentleman from Virginia, who in that part of his speech brought himself into point-blank range of the terrible artillery of James Madison, one of the fathers of the Constitution, and Virginia’s great expounder of its provisions.

“In a letter addressed to Joseph C. Cabell, on the 18th of March, 1827, will be found one of those discussions in which Mr. Madison gives categorically thirteen reasons against the very constitutional theory advanced now by the gentleman from Virginia [Mr. Tucker]. It would almost seem that the distinguished author of the book which I hold in 361my hand had prophetically in his mind the very speech delivered in this House by the later Virginian, for he refutes its arguments, point by point, thoroughly and completely.

“I say that more than a hundred pages of Madison’s works are devoted to discussing and exploding what was, in 1828, this new notion of constitutional construction. In one of these papers he calls to mind the fact that sixteen of the men who framed the Constitution sat in the first Congress and helped to frame a tariff expressly for the protection of domestic industries; and it is fair to presume that these men understood the meaning of the Constitution.

“I will close this phase of the discussion by calling the attention of the committee to the language of the Constitution itself:

“‘The Congress shall have power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States.’

“Language could hardly be plainer to declare the great general objects to which the taxing power is to be applied.

“It should be borne in mind that revenue is the life-blood of a government, circulating through every part of its organization and giving force and vitality to every function. The power to tax is therefore the great motive power, and its regulation impels, retards, restrains, or limits all the functions of the Government.

“What are these functions? The Constitution authorizes Congress to regulate and control this great motive power, the power to levy and collect duties; and the objects for which duties are to be levied and collected are summarized in three great groups: First, ‘to pay debts.’ By this, the arm of the Government sweeps over all its past history and protects its honor by discharging all obligations that have come down from former years. Second, is ‘to provide for the common defense.’ By this, the mailed arm of the Government sweeps the great circle of the Union to defend it against foes from without and insurrection within. And, third, is to ‘promote the general welfare.’ These are the three great objects to which the Constitution applies the power of taxation. They are all great, beneficent, national objects, and can not be argued out of existence.

“The fifteen specifications following in the eighth section of the same article—such as the power to raise armies, to maintain a navy, to establish courts, to coin money, to regulate commerce with foreign nations and 362among the several States, to promote science and the useful arts by granting patents and copyrights—are all specifications and limitations of the methods by which this great central power of taxation is to be applied to the common defense and the general welfare. And it is left to the discretion of Congress to determine how these objects shall be secured by the use of the powers thus conferred upon it.

“The men who created this Constitution also set it in operation, and developed their own idea of its character. That idea was unlike any other that then prevailed upon the earth. They made the general welfare of the people the great source and foundation of the common defense. In all the nations of the Old World the public defense was provided for by great standing armies, navies, and fortified posts, so that the nation might every moment be fully armed against danger from without or turbulence within. Our fathers said: ‘Though we will use the taxing power to maintain a small army and navy sufficient to keep alive the knowledge of war, yet the main reliance for our defense shall be the intelligence, culture, and skill of our people; a development of our own intellectual and material resources, which will enable us to do every thing that may be necessary to equip, clothe, and feed ourselves in time of war, and make ourselves intelligent, happy, and prosperous in peace.’

“To lay the foundation for the realization of these objects was a leading motive which led to the formation of the Constitution, and was the earliest and greatest object of solicitude in the First Congress.

“Two days after the votes for president were counted, and long before Washington was inaugurated, James Madison rose in the first House of Representatives, and for the first time moved to go into the Committee of the Whole on the state of the Union, for the express purpose of carrying out the theory of the Constitution to provide for the common defense and the general welfare, both by regulating commerce and protecting American manufactures. Thus, on the 8th of April, 1789, he opened a debate which lasted several weeks, in which was substantially developed every idea that has since appeared save one, the notion that it was unconstitutional to protect American industry. All other phases of the subject were fully and thoroughly handled in that great debate.

“Our fathers had been disciplined in the severe school of experience during the long period of colonial dependence. The heavy hand of British repression was laid upon all their attempts to become a self-supporting people. The navigation laws and commercial regulations of the mother 363country were based upon the theory that the colonies were founded for the sole purpose of raising up customers for her trade. They were allowed to purchase in British markets alone any manufactured article which England had to sell. In short, they were compelled to trade with England on her own terms; and whether buying or selling, the product must be carried in British bottoms at the carrier’s own price. In addition to this, a revenue tax of 5 per cent. was imposed on all colonial exports and imports.

“The colonists were doomed to the servitude of furnishing, by the simplest forms of labor, raw materials for the mother country, who arrogated to herself the sole right to supply her colonies with the finished product. To our fathers, independence was emancipation from this servitude. They knew that civilization advanced from the hunting to the pastoral state, from the pastoral to the agricultural, which has such charms for the distinguished gentleman from Virginia. But they also knew that no merely agricultural people had ever been able to rise to a high civilization and to self-supporting independence. They determined, therefore, to make their emancipation complete by adding to agriculture the mechanic arts, which in their turn would carry agriculture and all other industries to a still higher development, and place our people in the front rank of civilized and self-supporting nations. This idea inspired the legislation of all the earlier Congresses. It found expression in the first tariff act of 1789; in the higher rates of the act of 1790; and in the still larger schedule and increased rates of the acts of 1797 and 1800.

“In 1806 the non-importation act forbade the importation of British manufactures of silk, cloth, nails, spikes, brass, tin, and many other articles; and the eight years of embargo witnessed a great growth in American manufactures. When the non-importation act was repealed in 1814, John C. Calhoun assured the country that Congress would not fail to provide other adequate means for promoting the development of our industries; and, under his lead, the protective tariff of 1816 was enacted.

“I have given this brief historical sketch for the purpose of exhibiting the ideas out of which the tariff legislation of this country has sprung. It has received the support of the most renowned names in our early history; and, though the principle of protection has sometimes been carried to an unreasonable extreme, thus bringing reproach upon the system, it 364has nevertheless borne many of the fruits which were anticipated by those who planted the germ.

“Gentlemen who oppose this view of public policy tell us that they favor a tariff for revenue alone. I therefore invite their attention to the revenue phase of the question. The estimated expenditures for the next fiscal year are two hundred and eighty and one-half million dollars, including interest on the public debt and the appropriations required by law for the sinking fund. The Secretary of the Treasury estimates the revenues which our present laws will furnish at $269,000,000; from customs, one hundred and thirty-three millions; from internal revenue, one hundred and twenty millions; and from miscellaneous sources, sixteen millions. He tells us that it will be necessary to cut down the expenditures eleven millions below the estimates in order to prevent a deficit of that amount. The revenues of the last fiscal year failed by three and a quarter millions to meet the expenditures required by law.

“In the face of these facts can we safely diminish our revenues? If we mean to preserve the public faith and meet all the necessities of the Government we can not reduce the present revenues a single dollar. Yet the majority of this House not only propose to reduce the internal tax on spirits and tobacco but they propose in this bill to reduce the revenues on customs by at least $6,000,000. To avoid the disgrace of a deficit they propose to suspend the operations of the sinking fund and thereby shake the foundation of the public credit. But they tell us that some of the reductions made in this bill will increase rather than diminish the revenue. Perhaps on a few articles this will be true; but as a whole it is undeniable that this bill will effect a considerable reduction in the revenues from customs.

“Gentlemen on the other side have been in the habit of denouncing our present tariff laws as destructive to, rather than productive of, revenue. Let me invite their attention to a few plain facts:

“During the fifteen years that preceded our late war—a period of so-called revenue tariffs—we raised from customs an average annual revenue of forty-seven and a half million dollars, never in any year receiving more than sixty-four millions. That system brought us a heavy deficit in 1860, so that Congress was compelled to borrow money to meet the ordinary expenses of the Government.

“Do they tell us that our present law fails to produce an adequate 365revenue? They denounce it as not a revenue tariff. Let them wrestle with the following fact: During the eleven years that have passed since the close of the war we have averaged one hundred and seventy and one-half million dollars of revenue per annum from customs alone. Can they say that this is not a revenue tariff which produces more than three times as much revenue per annum as that law did which they delight to call ‘the revenue tariff?’ In one year, 1872, the revenues from the customs amounted to two hundred and twelve millions. Can they say that the present law does not produce revenue? It produces from textile fabrics alone more revenue than we ever raised from all sources under any tariff before the war. From this it follows that the assault upon the present law fails if made on the score of revenue alone.

“I freely admit that revenue is the primary object of taxation. That object is attained by existing law. But it is an incidental and vitally important object of the law to keep in healthy growth those industries which are necessary to the well-being of the whole country.

“Let us glance at the leading industries which, under the provisions of the existing law, are enabled to maintain themselves in the sharp struggle of competition with other countries. I will name them in five groups. In the first I place the textile fabrics, manufactures of cotton, wool, flax, hemp, jute, and silk. From these we received during the last fiscal year $50,000,000, which is more than one-third of all our customs revenue.

“It is said that a tax should not be levied upon the clothing of the people. This would be a valid objection were it not for the fact that objects of the highest national importance are secured by its imposition. That forty-five millions of people should be able to clothe themselves without helpless dependence upon other nations is a matter of transcendent importance to every citizen. What American can be indifferent to the fact that in the year 1875 the State of Massachusetts alone produced 992,000,000 yards of textile fabrics, and in doing so consumed seventy-five million dollars’ worth of the products of the fields and flocks, and gave employment to 120,000 artisans? There is a touch of pathos in the apologetic reply of Governor Spottswood, an early colonial Governor of Virginia, when he wrote to his British superiors:

“‘The people of Virginia, more of necessity than inclination, attempt to clothe themselves with their own manufactures.... It is certainly necessary to divert their application to some commodity less prejudicial 366to the trade of England.’—Bancroft’s History of the United States, vol. iv, page 104.

“Thanks to our independence, such apologies are no longer needed. Some of the rates on the textiles are exorbitant and ought to be reduced; but the general principle which pervades the group is wise and beneficent, not only as a means of raising revenue, but as a measure of national economy.

“In the second group I have placed the metals, including glass and chemicals. Though the tariff upon this group has been severely denounced in this debate, the rate does not average more than thirty-six per cent. ad valorem, and the group produced about $14,000,000 of revenue last year. Besides serving as a source of public revenue, what intelligent man fails to see that the metals are the basis of all the machinery, tools, and implements of every industry? More than any other in the world’s history, this is the age when inventive genius is bending all its energies to devise means to increase the effectiveness of human labor. The mechanical wonders displayed at our Centennial Exposition are a sufficient illustration.

“The people that can not make their own implements of industry must be content to take a very humble and subordinate place in the family of nations. The people that can not, at any time, by their own previous training, arm and equip themselves for war, must be content to exist by the sufferance of others.

“I do not say that no rates in this group are too high. Some of them can safely be reduced. But I do say these industries could not have attained their present success without the national care; and to abandon them now will prevent their continued prosperity.

“In the third group I place wines, spirits, and tobacco in its various forms which come from abroad. On these, rates of duty range from eighty-five to ninety-five per cent. ad valorem; and from them we collected last year $10,000,000 of revenue. The wisdom of this tax will hardly be disputed by any one.

“In the fourth group I have placed imported provisions which come in competition with the products of our own fields and herds, including breadstuffs, salt, rice, sugar, molasses, and spices. On these provisions imported into this country we collected last year a revenue of $42,000,000, $37,000,000 of which was collected on sugar. Of the duty on the 367principal article of this group I shall speak further on in the discussion.

“On the fifth group, comprising leather and manufactures of leather, we received about $3,000,000 of revenue.

“On the imports included in the five groups I have mentioned, which comprise the great manufacturing industries of the country, we collect $119,000,000—more than ninety per cent. of all our customs revenue. I ask if it be not an object of the highest national importance to keep alive and in vigorous health and growth the industries included in these groups? What sort of people should we be if we did not keep them alive? Suppose we were to follow the advice of the distinguished gentleman from Virginia [Mr. Tucker] when he said:

“‘Why should me make pig-iron when with Berkshire pigs raised upon our farms we can buy more iron pigs from England than we can get by trying to make them ourselves? We can get more iron pigs from England for Berkshire pigs than we can from the Pennsylvania manufacturers. Why, then, should I not be permitted to send there for them?...

“‘What a market for our raw material, for our products, if we only would take the hand which Great Britain extends to us for free-trade between us!’

“For a single season, perhaps, his plan might be profitable to the consumers of iron; but if his policy were adopted as a permanent one, it would reduce us to a merely agricultural people, whose chief business would be to produce the simplest raw materials by the least skill and culture, and let the men of brains of other countries do our thinking for us, and provide for us all products requiring the cunning hand of the artisan, while we would be compelled to do the drudgery for ourselves and for them.

“The gentleman from Virginia [Mr. Tucker] is too good a logician not to see that the theory he advocates can only be realized in a state of universal peace and brotherhood among the nations; and, in developing his plan, he says:

“‘Commerce, Mr. Chairman, links all mankind in one common brotherhood of mutual dependence and interests, and thus creates that unity of our race which makes the resources of all the property of each and every member. We can not if we would, and should not if we could, remain isolated and alone. Men under the benign influence of 368Christianity yearn for intercourse, for the interchange of thought and the products of thought as a means of a common progress toward a nobler civilization....

“‘Mr. Chairman, I can not believe this is according to the Divine plan. Christianity bids us seek, in communion with our brethren of every race and clime, the blessings they can afford us, and to bestow in return upon them those with which our new continent is destined to fill the world.’

“This, I admit, is a grand conception, a beautiful vision of the time when all the nations shall dwell in peace; when all will be, as it were, one nation, each furnishing to the others what they can not profitably produce, and all working harmoniously together in the millennium of peace. If all the kingdoms of the world should become the kingdom of the Prince of Peace, then I admit that universal free-trade ought to prevail. But that blessed era is yet too remote to be made the basis of the practical legislation of to-day. We are not yet members of the ‘parliament of man, the federation of the world.’ For the present, the world is divided into separate nationalities; and that other divine command still applies to our situation: ‘He that provideth not for his own household has denied the faith, and is worse than an infidel;’ and, until that better era arrives, patriotism must supply the place of universal brotherhood.

“For the present Gortschakoff can do more good to the world by taking care of Russia. The great Bismarck can accomplish more for his era by being, as he is, a German to the core, and promoting the welfare of the German Empire. Let Beaconsfield take care of England, and McMahon of France, and let Americans devote themselves to the welfare of America. When each does his best for his own nation to promote prosperity, justice, and peace, all will have done more for the world than if all had attempted to be cosmopolitans rather than patriots. [Applause.]

“But I wish to say, Mr. Chairman, that I have no sympathy with those who approach this question only from the stand-point of their own local, selfish interest. When a man comes to me and says, ‘Put a prohibitory duty on the foreign article which competes with my product, that I may get rich more rapidly,’ he does not excite my sympathy; he repels me; and when another says, ‘Give no protection to the manufacturing industries, for I am not a manufacturer and do not care to have them sustained,’ I say that he, too, is equally mercenary and unpatriotic. 369If we were to legislate in that spirit, I might turn to the gentleman from Chicago and say, ‘Do not ask me to vote for an appropriation to build a court-house or a post-office in your city; I never expect to get any letters from that office, and the people of my district never expect to be in your courts.’ If we were to act in this spirit of narrow isolation we should be unfit for the national positions we occupy.

“Too much of our tariff discussions have been warped by narrow and sectional considerations. But when we base our action upon the conceded national importance of the great industries I have referred to, when we recognize the fact that artisans and their products are essential to the well-being of our country, it follows that there is no dweller in the humblest cottage on our remotest frontier who has not a deep personal interest in the legislation that shall promote these great national industries. Those arts that enable our nation to rise in the scale of civilization bring their blessings to all, and patriotic citizens will cheerfully bear a fair share of the burden necessary to make their country great and self-sustaining. I will defend a tariff that is national in its aims, that protects and sustains those interests without which the nation can not become great and self-sustaining.

“So important, in my view, is the ability of the nation to manufacture all these articles necessary to arm, equip, and clothe our people, that if it could not be secured in any other way I would vote to pay money out of the Federal Treasury to maintain government iron and steel, woolen and cotton mills, at whatever cost. Were we to neglect these great interests and depend upon other nations, in what a condition of helplessness would we find ourselves when we should be again involved in war with the very nations on whom we were depending to furnish us these supplies? The system adopted by our fathers is wiser, for it so encourages the great national industries as to make it possible at all times for our people to equip themselves for war, and at the same time increase their intelligence and skill so as to make them better fitted for all the duties of citizenship both in war and in peace. We provide for the common defense by a system which promotes the general welfare.

“I have tried thus summarily to state the grounds on which a tariff which produces the necessary revenue and at the same time promotes American manufactures, can be sustained by large-minded men, for national reasons. How high the rates of such a tariff ought to be is a question on which there may fairly be differences of opinion.

370“Fortunately or unfortunately, on this question I have long occupied a position between two extremes of opinion. I have long believed, and I still believe, that the worst evil which has afflicted the interests of the American artisans and manufacturers has been the tendency to extremes in our tariff legislation. Our history for the last fifty years has been a repetition of the same mistake. One party comes into power, and believing that a protective tariff is a good thing establishes a fair rate of duty. Not content with that, they say: ‘This works well, let us have more of it,’ and they raise the rates still higher, and perhaps go beyond the limits of national interest.

“Every additional step in that direction increases the opposition and threatens the stability of the whole system. When the policy of increase is pushed beyond a certain point, the popular reaction sets in; the opposite party gets into power and cuts down the high rates. Not content with reducing the rates that are unreasonable, they attack and destroy the whole protective system. Then follows a deficit in the Treasury, the destruction of manufacturing interests, until the reaction again sets in, the free-traders are overthrown, and a protective system is again established. In not less than four distinct periods during the last fifty years has this sort of revolution taken place in our industrial system. Our great national industries have thus been tossed up and down between two extremes of opinion.

“During my term of service in this House I have resisted the effort to increase the rates of duty whenever I thought an increase would be dangerous to the stability of our manufacturing interests; and by doing so, I have sometimes been thought unfriendly to the policy of protecting American industry. When the necessity of the revenues and the safety of our manufactures warranted, I have favored a reduction of rates; and these reductions have aided to preserve the stability of the system. In one year, soon after the close of the war, we raised $212,000,000 of revenue from customs.

“In 1870 we reduced the custom duties by the sum of twenty-nine and one-half millions of dollars. In 1872 they were again reduced by the sum of forty-four and one half millions. Those reductions were in the main wise and judicious; and although I did not vote for them all, yet they have put the fair-minded men of this country in a position where they can justly resist any considerable reduction below the present rates.

371“My view of the danger of extreme positions on the questions of tariff rates may be illustrated by a remark made by Horace Greeley in the last conversation I ever had with that distinguished man. Said he:

“‘My criticism of you is that you are not sufficiently high protective in your views.’

“I replied:

“‘What would you advise?’

“He said:

“‘If I had my way—if I were king of this country—I would put a duty of $100 a ton on pig-iron and a proportionate duty on every thing else that can be produced in America. The result would be that our people would be obliged to supply their own wants; manufactures would spring up; competition would finally reduce prices; and we should live wholly within ourselves.’

“I replied that the fatal objection to his theory was that no man is king of this country, with power to make his policy permanent. But as all our policies depend upon popular support, the extreme measure proposed would beget an opposite extreme, and our industries would suffer from violent reactions. For this reason I believe that we ought to seek that point of stable equilibrium somewhere between a prohibitory tariff on the one hand, and a tariff that gives no protection on the other. What is that point of stable equilibrium? In my judgment it is this: a rate so high that foreign producers can not flood our markets and break down our home manufacturers, but not so high as to keep them altogether out, enabling our manufacturers to combine and raise the prices, nor so high as to stimulate an unnatural and unhealthy growth of manufactures.

“In other words, I would have the duty so adjusted that every great American industry can fairly live and make fair profits; and yet so low that if our manufacturers attempted to put up prices unreasonably, the competition from abroad would come in and bring down prices to a fair rate. Such a tariff I believe will be supported by the great majority of Americans. We are not far from having such a tariff in our present law. In some respects we have departed from that standard. Wherever it does, we should amend it, and by so doing we shall secure stability and prosperity.

“This brings me to the consideration of the pending bill. It was my hope, at the beginning of the present session, that the Committee of Ways and Means would enter upon a revision of the tariff in the spirit I have 372indicated. The Secretary of the Treasury suggested in his annual report that a considerable number of articles which produced but a small amount of revenue, and were not essential to the prosperity of our manufacturers, could be placed upon the free list, thus simplifying the law and making it more consistent in its details. I was ready to assist in such a work of revision; but the committee had not gone far before it was evident that they intended to attack the whole system, and, as far as possible, destroy it. The results of their long and arduous labors are embodied in the pending bill.

“Some of the rates can be slightly reduced without serious harm; but many of the reductions proposed in this bill will be fatal. It is related that when a surgeon was probing an emperor’s wound to find the ball, he said:

“‘Can your Majesty allow me to go deeper?’

“His Majesty replied:

“‘Probe a little deeper and you will find the Emperor.’

“It is that little deeper probing by this bill that will touch the vital interests of this country and destroy them.

“The chief charge I make against this bill is that it seeks to cripple the protective features of the law. It increases rates where an increase is not necessary, and it cuts them down where cutting will kill. One of the wisest provisions of our present law is the establishment of a definite free list. From year to year when it has been found that any article could safely be liberated from duty it has been put upon the free list. A large number of raw materials have thus been made free of duty. This has lightened the burdens of taxation, and at the same time aided the industries of the country.

“To show the progress that has been made in this direction, it should be remembered that in 1867 the value of all articles imported free of duty was but $39,000,000, while in 1877 the free imports amounted to $181,000,000.

“As I have already said, the Secretary of the Treasury recommends a still further increase of the free list. But this bill abolishes the free list altogether and imposes duties upon a large share of articles now free. And this is done in order to make still greater reduction upon articles that must be protected if their manufacture is maintained in this country.

“Let me notice a few of the great industries at which this bill strikes. In the group of textile fabrics, of which I have spoken, reductions are 373made upon the manufactures of cotton which will stop three-quarters of the cotton mills of the country, and hopelessly prostrate the business. Still greater violence is done to the wool and woolen interests. The attempt has been made to show that the business of wool-growing has declined in consequence of our present law, and the fact has been pointed out that the number of sheep has been steadily falling off in the Eastern States. The truth is that sheep-culture in the United States was never in so healthy a condition as it is to-day. In 1860 our total wool product was sixty millions of pounds. In 1877 we produced two hundred and eight millions of pounds.

“It is true that there is not now so large a number of sheep in the Eastern States as there were a few years since; but the center of that industry has been shifted. Of the thirty-five and a half millions of sheep now in the United States, fourteen and a half millions are in Texas and the States and Territories west of the Rocky Mountains. California alone has six and a half millions of sheep. Not the least important feature of this interest is the facility it offers for cheap animal food. A great French statesman has said: ‘It is more important to provide food than clothing,’ and the growth of sheep accomplishes both objects. Ninety-five per cent. of all the woolen fabrics manufactured in this country are now made of native wool.

“The tariff on wools and woolens was adopted in 1867, after a most careful and thorough examination of both the producing and manufacturing interests. It was the result of an adjustment between the farmers and manufacturers, and has been advantageous to both. A small reduction of the rates could be made without injury.

“Both of these interests consented to a reduction, and submitted their plan to the Committee of Ways and Means. But instead of adopting it, the committee have struck those interests down, and put a dead level ad valorem duty upon all wools. The chairman tells us that the committee had sought to do away with the ad valorem system, because it gave rise to fraudulent invoices and undervaluation. Yet on the interest that yields twenty millions of revenue, he proposes to strike down the specific duties and put the interest upon one dead level of ad valorem duty without regard to quality.

“I would not introduce sectional topics in this discussion, but I must notice one curious feature of this bill. In the great group of provisions, on which nearly fifty millions of revenue are paid into the Treasury, 374I find that thirty-seven millions of that amount come from imported sugar. No one would defend the levying of so heavy a tax upon a necessary article of food were it not that a great agricultural interest is thereby protected, and that interest is mainly confined to the State of Louisiana. I am glad that the Government has given its aid to the State, for not a pound of sugar could be manufactured there if the tariff law did not protect it.

“As the law now stands, the average ad valorem duty on sugar is sixty-two and one-half per cent. But what has this bill done? The complaint is made by its advocates that the rates are now too high. The rates on all dutiable articles average about forty-two per cent.; yet on sugar the average is sixty-two and one-half per cent., greatly above the average. This bill puts up the average duty on sugar to about seventy per cent. This one interest, which is already protected by a duty much higher than the average, is granted a still higher rate, while other interests, now far below the average rate, are put still lower. Metals, that now average but thirty-six per cent. ad valorem, far less than the general average—but little more than half of the rate on sugar—are cut down still more, while the protection of the sugar interest is made still higher.

“If the planters of Louisiana were to get the benefit there would be some excuse for the increase; but what is the fact? One thousand four hundred and fifteen million pounds of sugar were imported into this country last year, but not one pound of refined sugar; every pound was imported in the crude form, going into the hands of about twenty-five gentlemen, mostly in the city of New York, who refine every pound of this enormous quantity of imported sugar. This bill increases the rates on the high grades of sugar far more than on the lower grades, and makes the importation of any finished sugar impossible. It strengthens and makes absolute the monopoly already given to the refining interest; yet we are told that this is a revenue-reform tariff.

“Before closing I wish to notice one thing which I believe has not been mentioned in this debate. A few years ago we had a considerable premium on gold, and as our tariff duties were paid in coin, there was thus created an increase in the tariff rates. In 1875, for instance, the average currency value of coin was one hundred and fourteen cents; in 1876, one hundred and eleven cents; in 1877, one hundred and four cents. Now, thanks to the resumption law and the rate of our exchanges and credit, the premium on gold is almost down to zero. But this fall in 375the premium has operated as a steady reduction of the tariff rates, because the duties were paid in gold and the goods were sold in currency.

“Now, when gentlemen say that the rates were high a few years ago, it should be remembered that they have been falling year by year, as the price of gold has been coming down. When, therefore, gentlemen criticise the rates as fixed in the law of 1872, they should remember that the fall in the premium on gold has wrought a virtual reduction of fourteen per cent. in the tariff rates.

“Mr. Chairman, the Committee of Ways and Means has done a large amount of work on this bill. But the views which have found expression in his bill must be criticised without regard to personal consideration. A bill so radical in its character, so dangerous to our business prosperity, would work infinite mischief at this time, when the country is just recovering itself from a long period of depression and getting again upon solid ground, just coming up out of the wild sea of panic and distress which has tossed us so long.

“Let it be remembered that twenty-two per cent. of all the laboring people of this country are artisans engaged in manufactures. Their culture has been fostered by our tariff laws. It is their pursuits and the skill which they have developed that produced the glory of our centennial exhibition. To them the country owes the splendor of the position it holds before the world more than to any other equal number of our citizens. If this bill becomes a law, it strikes down their occupation and throws into the keenest distress the brightest and best elements of our population.

“It is not simply a stalking-horse upon which gentlemen can leap to show their horsemanship in debate; it is not an innocent lay-figure upon which gentlemen may spread the gaudy wares of their rhetoric without harm; but it is a great, dangerous monster, a very Polyphemus which stalks through the land. Monstrum horrendum, informe, ingens, cui lumen ademptum. If its eye be not out, let us take it out and end the agony.” [Applause on the Republican side.]

But the correlative of revenue is expenditure. Only one other man of this age ever attempted a philosophy of national expenditure besides Garfield—that was Gladstone. No other American ever attempted to regulate appropriations by a philosophical principle. No other man ever attempted to reduce 376the fabulous and irregular outlay of the Government to a science. Of Garfield’s studies in this direction we have spoken elsewhere. On January 23, 1872, upon the introduction of his first bill as Chairman of the Committee on Appropriations he delivered an elaborate speech on the subject of

PUBLIC EXPENDITURES

“It is difficult to discuss expenditures comprehensively without discussing also the revenues; but I shall on this occasion allude to the revenues only on a single point. Revenue and the expenditure of revenue form by far the most important element in the government of modern nations. Revenue is not, as some one has said, the friction of a government, but rather its motive power. Without it the machinery of a government can not move; and by it all the movements of a government are regulated. The expenditure of revenue forms the grand level from which all heights and depths of legislative action are measured. The increase and the diminution of the burdens of taxation depend alike upon their relation to this level of expenditures. That level once given, all other policies must conform to it and be determined by it. The expenditure of revenue and its distribution, therefore, form the best test of the health, the wisdom, and the virtue of a government. Is a government corrupt? that corruption will inevitably, sooner or later, show itself at the door of the treasury in demands for money. There is scarcely a conceivable form of corruption or public wrong that does not at last present itself at the cashier’s desk and demand money. The legislature, therefore, that stands at the cashier’s desk and watches with its Argus eyes the demands for payment over the counter, is most certain to see all the forms of public rascality. At that place, too, we may feel the Nation’s pulse; we may determine whether it is in the delirium of fever or whether the currents of its life are flowing with the steady throbbings of health. What could have torn down the gaudy fabric of the late government of France so effectually as the simple expedient of compiling and publishing a balance sheet of the expenditures of Napoleon’s government, as compared with the expenditures of the fifteen years which preceded his reign? A quiet student of finance exhibited the fact that during fifteen years of Napoleon’s reign the expenditures of his government had been increased by the enormous total of three hundred and fifty million dollars in gold per annum.

377

HOW SHALL EXPENDITURES BE GAUGED?

“Such, in my view, are the relations which the expenditures of the revenue sustain to the honor and safety of the nation. How, then, shall they be regulated? By what gauge shall we determine the amount of revenue that ought to be expended by a nation? This question is full of difficulty, and I can hope to do little more than offer a few suggestions in the direction of its solution.

“And, first, I remark that the mere amount of the appropriations is in itself no test. To say that this government is expending two hundred and ninety-two million dollars a year, may be to say that we are penurious and niggardly in our expenditures, and may be to say that we are lavish and prodigal. There must be some ground of relative judgment, some test by which we can determine whether expenditures are reasonable or exorbitant. It has occurred to me that two tests can be applied.

TEST OF POPULATION.

“The first and most important is the relation of expenditure to the population. In some ratio corresponding to the increase of population it may be reasonable to increase the expenditures of a government. This is the test usually applied in Europe. In an official table I have before me the expenditures of the British government for the last fifteen years, I find the statement made over against the annual average of each year of the expenditure per capita of the population. The average expenditure per capita for that period, was two pounds, seven shillings and seven pence, or about twelve dollars in gold, with a slight tendency to decrease each year. In our own country, commencing with 1830 and taking the years when the census was taken, I find that the expenditures, per capita, exclusive of payments on the principal and interest of the public debt were as follows:

In 1830 $1 03

In 1840 1 41

In 1850 1 60

In 1860 1 94

In 1870 4 26

or, excluding pensions, three dollars and fifty-two cents. No doubt this test is valuable. But how shall it be applied? Shall the increase of expenditures keep pace with the population? We know that population tends to increase in a geometrical ratio, that is, at a per cent. compounded 378annually. If the normal increase of expenditures follow the same law, we might look forward to the future with alarm. It is manifest, however, that the necessity of expenditures does not keep pace with the mere increase of numbers; and while the total sum of money expended must necessarily be greater from year to year, the amount per capita ought in all well-regulated governments in time of peace to grow gradually less.

TEST OF TERRITORIAL SETTLEMENT AND EXPANSION.

“But in a country like ours there is another element besides population that helps to determine the movement of expenditures. That element can hardly be found in any other country. It is the increase and settlement of our territory, the organic increase of the nation by the addition of new States. To begin with the original thirteen States, and gauge expenditure till now by the increase of population alone, would be manifestly incorrect. But the fact that there have been added twenty-four States, and that we now have nine territories, not including Alaska, brings a new and important element into the calculation. It is impossible to estimate the effect of this element upon expenditures. But if we examine our own records from the beginning of the Government, it will appear that every great increase of settled territory has very considerably added to the expenditures.

“If these reflections be just, it will follow that the ordinary movement of our expenditures depends upon the action of two forces: first, the natural growth of population, and second, the extension of our territory and the increase in the number of our States. Some day, no doubt—and I hope at no distant day—we shall have reached the limit of territorial expansion. I hope we have reached it now, except to enlarge the number of States within our borders; and when we have settled our unoccupied lands, when we have laid down the fixed and certain boundaries of our country, then the movement of our expenditure in time of peace will be remitted to the operation of the one law, the increase of population. That law, as I have already intimated, is not an increase by a per cent. compounded annually, but by a per cent. that decreases annually. No doubt the expenditures will always increase from year to year; but they ought not to increase by the same per cent. from year to year; the rate of increase ought gradually to grow less.

EXPENDITURES OF ENGLAND.

“In England, for example, where the territory is fixed, and they are 379remitted to the single law of increase of population, the increase of expenditure during the last fifteen years of peace has been only about one and three-quarter per cent. compounded annually. I believe nobody has made a very careful estimate of the rate in our country; our growth has been too irregular to afford data for an accurate estimate. But a gentleman who has given much attention to the subject expressed to me the belief that our expenditures in time of peace have increased about eight per cent. compounded annually. I can hardly believe it; yet I am sure that somewhere between that and the English rate will be found our rate of increase in times of peace. I am aware that such estimates as these are unsatisfactory, and that nothing short of the actual test of experience can determine the movements of our expenditures; but these suggestions which have resulted from some study of the subject, I offer for the reflection of those who care to follow them out.

EFFECTS OF WAR ON EXPENDITURES.

“Thus far I have considered the expenditures that arise in times of peace. Any view of this subject would be incomplete that did not include a consideration of the effect of war upon national expenditures. I have spoken of what the rate ought to be in time of peace, for carrying on a government. I will next consider the effect of war on the rate of increase. And here we are confronted with that anarchic element, the plague of nations, which Jeremy Bentham called ‘mischief on the largest scale.’ After the fire and blood of the battle-fields have disappeared, nowhere does war show its destroying power so certainly and so relentlessly as in the columns which represent the taxes and expenditures of the nation. Let me illustrate this by two examples.

“In 1792, the year preceding the commencement of the great war against Napoleon, the expenditures of Great Britain were less than twenty million pounds sterling.

“During the twenty-four years that elapsed, from the commencement of that wonderful struggle until its close at Waterloo, in 1815, the expenditures rose by successive bounds, until, in one year near the close of the war, it reached the enormous sum of one hundred and six million seven hundred and fifty thousand pounds.

“The unusual increase of the public debt, added to the natural growth of expenditures from causes already discussed, made it impossible for England ever to reach her old level of expenditure. It took twenty years after Waterloo to reduce expenditures from seventy-seven million 380seven hundred and fifty thousand pounds, the annual average of the second decade of the century, to forty-five million seven hundred and fifty thousand pounds, the expenditure for 1835.

“This last figure was the lowest England has known during the present century. Then followed nearly forty years of peace, from Waterloo to the Crimean war in 1854. The figures for that period may be taken to represent the natural growth of expenditures in England. During that period the expenditures increased, in a tolerably uniform ratio, from forty-five million seven hundred and fifty thousand pounds, the amount for 1835, to about fifty-one million seven hundred and fifty thousand pounds, the average for the five years ending 1853–’54. This increase was about four million dollars of our money per annum. Then came the Crimean war of 1854–1856, during one year of which the expenditures rose to eighty-four million five hundred thousand pounds.

“Again, as after the Napoleonic war, it required several years for the expenditures of the kingdom to get down to the new level of peace, which level was much higher than that of the former peace.

“During the last ten years the expenditures of Great Britain have again been gradually increasing; the average for the six years ending with March 31, 1871, being sixty-eight million seven hundred and fifty thousand pounds.

WAR EXPENDITURES OF THE UNITED STATES.

“As the second example of the effect of war on the movement of national expenditures, I call attention to our own history.

“Considering the ordinary expenses of the Government, exclusive of payments on the principal and interest of the public debt, the annual average may be stated thus:

“Beginning with 1791, the last decade of the eighteenth century showed an annual average of three million seven hundred and fifty thousand dollars. During the first decade of the present century, the average was nearly five million five hundred thousand dollars. Or, commencing with 1791, there followed twenty years of peace, during which the annual average of ordinary expenditures was more than doubled. Then followed four years, from 1812 to 1815, inclusive, in which the war with England swelled the average to twenty-five million five hundred thousand dollars. During the five years succeeding that war, the average was sixteen million five hundred thousand dollars, and it was not until 1821 that the new level of peace was reached. During the five years, from 1820 to 3811825, inclusive, the annual average was eleven million five hundred thousand dollars. From 1825 to 1830, it was thirteen million dollars. From 1830 to 1835, it was seventeen million dollars. From 1835 to 1840, in which period occurred the Seminole war, it was thirty million five hundred thousand dollars. From 1840 to 1845, it was twenty-seven million dollars. From 1845 to 1850, during which occurred the Mexican war, it was forty million five hundred thousand dollars. From 1850 to 1855, it was forty-seven million five hundred thousand dollars. From 1855 to June 30, 1861, it was sixty-seven million dollars. From June 30, 1861, to June 30, 1866, seven hundred and thirteen million seven hundred and fifty thousand dollars; and from June 30, 1866, to June 30, 1871, the annual average was one hundred and eighty-nine million dollars.

“It is interesting to inquire how far we may reasonably expect to go in the descending scale before we reach the new level of peace. We have already seen that it took England twenty years after Waterloo before she reached such a level. Our own experience has been peculiar in this, that our people have been impatient of debt, and have always determinedly set about the work of reducing it.

DURATION OF WAR EXPENDITURES.

“Throughout our history there may be seen a curious uniformity in the movement of the annual expenditures for the years immediately following a war. We have not the data to determine how long it was, after the war of independence, before the expenditures ceased to decrease; that is, before they reached the point where their natural growth more than balanced the tendency to reduction of war expenditure; but in the years immediately following all our subsequent wars, the decrease has continued for a period almost exactly twice the length of the war itself.

“After the war of 1812–’15, the expenditures continued to decline for eight years, reaching the lowest point in 1823.

“After the Seminole war, which ran through three years, 1836, 1837, and 1838, the new level was not reached until 1844, six years after its close.

“After the Mexican war, which lasted two years, it took four years, until 1852, to reach the new level of peace.”

Probably the most remarkable portion of this speech is the following prophecy:

382

WHEN SHALL WE REACH OUR NEW LEVEL OF EXPENDITURES?

“It is, perhaps, unsafe to base our calculations for the future on these analogies; but the wars already referred to have been of such varied character, and their financial effects have been so uniform, as to make it not unreasonable to expect that a similar result will follow our late war. If so, the decrease of our ordinary expenditures, exclusive of the principal and interest of the public debt, will continue until 1875 or 1876.

“It will be seen by an analysis of our expenditures, that, exclusive of charges on the public debt, nearly fifty million dollars are expenditures directly for the late war. Many of these expenditures will not again appear, such as the bounty and back pay of volunteer soldiers, and payment of illegal captures of British vessels and cargoes. We may reasonably expect that the expenditures for pensions will hereafter steadily decrease, unless our legislation should be unwarrantably extravagant. We may also expect a large decrease in expenditures for the internal revenue department. Possibly, we may ultimately be able to abolish the department altogether. In the accounting and disbursing bureaus of the treasury department, we may also expect a further reduction of the force now employed in settling war claims.

“We can not expect so rapid a reduction of the public debt and its burden of interest as we have witnessed for the last three years; but the reduction will doubtless continue, and the burden of interest will constantly decrease. I know it is not safe to attempt to forecast the future; but I venture to express the belief that if peace continues, the year 1876 will witness our ordinary expenditures reduced to one hundred and twenty-five million dollars, and the interest on our public debt to ninety-five million dollars; making our total expenditures, exclusive of payment on the principal of the public debt, two hundred and thirty million dollars. Judging from our own experience and from that of other nations, we may not hope thereafter to reach a lower figure. In making this estimate, I have assumed that there will be a considerable reduction of the burdens of taxation; and a revenue not nearly so great in excess of the expenditures as we now collect.”

Seven years afterwards, in the June number (1879) of the North American Review, General Garfield quoted the above paragraphs from the speech of January, 1872, and called attention to the fulfillment of his prediction in the following words:

383“Reviewing the subject in the light of subsequent experience, it will be seen that the progress of reduction of expenditures from the war level has been very nearly in accordance with these expectations of seven years ago.

“The actual expenditures since the war, including interest on the public debt, as shown by the official record, were as follows:

1865 $1,297,555,224 41

1866 520,899,416 99

1867 357,542,675 16

1868 377,340,284 86

1869 322,865,277 80

1870 399,653,560 75

1871 292,177,188 25

1872 277,517,962 67

1873 290,345,245 33

1874 287,133,873 17

1875 274,623,392 84

1876 258,459,797 33

1877 238,660,008 93

1878 236,964,326 80

“Omitting the first of these years, in which the enormous payments to the army swelled the aggregate of expenses to $1,297,000,000, and beginning with the first full year after the termination of the war, it will be seen that the expenditures have been reduced, at first very rapidly, and then more slowly, from $520,000,000 in 1866 to about $237,000,000 in 1878.

“The estimate quoted above was that in 1876 expenditures would be reduced to $230,000,000, including $95,000,000 for interest on the public debt. In 1877, one year later than the estimated date, the actual reduction had reached $238,000,000, including $97,000,000 for interest on the public debt. [He means the expenditures had been reduced to $238,000,000.]

“It is evident that in 1877 we had very nearly reached the limit of possible reduction, for the aggregate expenditures of 1878 show a reduction below that of the preceding year of less than $2,000,000; and the expenditures, actual and estimated, for the current year ending June 30, 1879, are $240,000,000. It thus appears that 1878 was the turning-point from which, under the influence of the elements of normal growth, we may expect a constant, though it ought to be a small, annual increase of expenditures.”

If anywhere there is to be found a more scientific statesmanship than this, the average man knows not the place to seek it out. Garfield had discovered the law of the increase and decrease of national expenditures. It was as fixed as the laws which lengthen and shorten the day. Scientists agree that the laws of society are 384far more difficult of discovery and of demonstration than the laws of nature. Only one man in a generation makes any real advance in the study of those laws which pervade the affairs of men. In his philosophy of public expenditures, James A. Garfield was that man of his political generation. On March 5, 1874, in another speech on the same topic, he unfolded the philosophy and laws of growth of the public debt. As usual, it is an illumination of a vast and foggy subject. It is impossible to give, in our already crowded pages, even a synopsis of this address.