CHAPTER II
AN OUTBREAK OF PROTECTIONISM
Table of Contents The Civil War wrought many changes in the people of the United States, and none more amazing than that in their attitude toward money-the amount they could spend-the methods by which it could be raised. Here was a people who in 1859 had looked with dismay on a debt of $58,000,000 facing confidently one of $2,800,000,000; a people to whom in 1860 raising an income of $62,000,000 had seemed difficult, actually provided in 1866 one of $559,000,000; a people to whom direct taxes had always been abhorrent and who had repudiated high tariffs, submitting patiently to both as one of the dire necessities of war. The war was over, but the debt and the extraordinary expenses remained, and to meet them harsh and sweeping taxation must be continued.
This was plain to everybody, but it was equally plain to those who studied the balance sheet of the treasury that many things could be done to equalize and reduce the taxation. The debt itself could be readjusted to be much less burdensome. As it stood it was made up of some twenty different kinds of paper;-bonds, treasury notes, certificates of indebtedness of all kinds due at nearly twenty different dates, and drawing almost as many different rates of interest. The paper currency which kept the money market in a constant state of unrest could be redeemed. Great economies could be made in the administration of the government. These things done and a careful estimate of essential expenses computed, nobody had any doubt but that the people would consent to the taxation required with as little grumbling as human nature usually meets taxes.
That the revision of the revenue was work for experts, not for politicians, had been realized before Mr. Lincoln's death, and in March, 1865, a commission had been appointed to look into the whole subject and report. The head of this commission was a man who was to wield a big influence in the country in the next few years, and one to whom we owe more credit than he has ever received, David A. Wells. Mr. Wells was a New England man, who had first attracted attention by planning and constructing in the printing office of the Springfield Republican, where he wrote editorials, the first machine ever made for folding newspapers. He made money from his invention, and used some of it in giving himself a scientific training at Harvard as a special pupil of Louis Agassiz. In 1864 Mr. Wells, who had become interested in economic problems, wrote a pamphlet, called "Our Burden and Our Strength," which attracted general attention, both here and abroad, and led naturally enough to his choice as one of the revenue commission referred to above. There were two other members on the commission, but from the beginning Mr. Wells dominated it, and his first report, made January 1, 1866, showed in a very clear way what was before the country.
By his calculations the taxes and tariffs then in force ought to yield in the year ending June 30, 1867, $435,000,000. Now the Secretary of the Treasury had estimated that we could get along that year on $284,000,000. Let us say three hundred millions, proposed Mr. Wells, and then let us set aside fifty millions a year for reducing the debt-that still leaves $85,000,000 to be taken off the taxes. Where should it be applied? To the internal taxes or to the custom duties? Mr. Wells knew the feeling of the people. They hated direct taxation, they preferred duties on imports, and he worked out a plan for taking the $85,000,000 off the former, but at the same time he called attention to various inequalities in the tariff which should be corrected. They came mainly from the lack of equalization between the two systems of taxation. The duties on imports were supposed to be arranged so as to compensate for the internal taxation; not infrequently, however, the tariffs were placed without proper consideration, and grave inequalities had resulted. These were of two kinds: either the tariff was less than the taxes, so that the manufacturer could not compete with foreign goods imported, or it was considerably higher than the taxes, so that he could put up his prices until they practically prohibited importation, thus cutting off revenue and heavily burdening the consumer. Certain cases of the first kind became familiar at the time from the fact that they touched everybody, and were explained clearly and in detail in Mr. Wells's report. There was the matter of book-making. Everything which went to make a book was separately taxed,-paper, cloth, boards, glue, thread, gold-leaf, leather, and type,-and when the book was complete it was taxed 5 per cent on the selling price. It cost 59½ cents to make a book requiring a pound of paper. The same book could be made in England and delivered in New York, including duty (the duty on books was 25% on the value) for 26¼ cents. Little wonder that American book publishers sent their work abroad to be done or that the boys and girls of the time were using Webster's Spelling Books made in England. The umbrella was another common article over which there was much trouble. Each item which went into the making of the umbrella-sticks, rods, handles, tips, bands, tassels, buttons, cover-was produced by a different establishment, and each paid its own tax. The cover usually was imported, and silk paid a duty of 60 per cent. The finished parasol paid a 6 per cent tax. Now the duty on an imported umbrella was 35 per cent on its value. Naturally umbrellas were imported in quantities and sold at a price lower than they could be made for at home.
But while there were cases where the tariff did not compensate for the tax there were more where it had been forced far beyond it. If these tariffs had increased the revenue, they might, under the circumstances, have been justified, but they did not do that. They limited importation and enabled the home manufacturer to put up his prices, and it was he, not the government, who got the extra money. At the same time it cost the government a great deal to collect the small sums realized on these over-protected articles, often more than the sum itself.
If the government could get on with $85,000,000 less than it could collect, it seemed obvious that it ought to begin cutting down those internal taxes which were so much too high for the tariffs. It seemed obvious, too, that unremunerative tariffs ought to be cut off. But no sooner did the talk of reducing tariffs on any article begin than there came a loud outburst from many manufacturing centres against any reduction. The internal taxes must come off at once-that they demanded, but no tariffs should be lowered. The cry to preserve the tariffs soon turned in many mouths to one to raise them. Copper (in blocks), which under the bill of 1864 had had a duty of 2½ cents a pound, now asked for double that. Iron rails which already were carrying a duty of 70 cents a hundred pounds and selling in New York for over $80 a ton, while they cost only about $32 in Wales, asked a higher duty. The salt miners of Michigan and New York, whose profits at the moment were enormous, demanded still greater protection. As soon as the House Committee of Ways and Means got to work on a tariff bill, which was early in 1866, an army of determined tariff lobbyists poured into Washington, declaring they must have more protection or they would perish.
That there were grave embarrassments in the business of the country could not be denied. Five hundred thousand men, young men at that, had been taken permanently from the ranks of breadwinners by the war-and those dependent upon them were now the country's wards. Immigration to which the government had looked for reënforcements for labor was falling off. The tremendous demand which a great army makes upon manufactures of all kinds was at an end. Particularly did the iron mills, the woollen factories, the railroads, the produce merchants, feel this sudden cessation of trade. Prices were probably 90 per cent higher than before the war, although wages were not over 60 per cent higher. But these embarrassments were the inevitable results of war-as logical as the debt or the disabled soldier. Somehow the transition from the abnormal condition of war to the normal one of peace had to be made; somehow for the artificial demand and cost the natural must be substituted. It meant economy, curtailment, lower prices, lessened output; hard times, in short, for a period. There was no class in the country from whom patient endurance of the difficulties of the situation could be more fairly asked than the manufacturers. They had for the most part enjoyed four as fat years as ever fell to the lot of man. It is doubtful indeed if any industry at any period of the world's history had reaped so great rewards in so short a time as that of iron in the Civil War.
The difficulty now was that these manufacturers were not willing to pay their share of the cost of the war. They demanded higher protection that they might make their prices higher, and thus ease as much as possible the necessarily hard transition state. Congress was to do for them what economy and patience should have done.
As it happened the demands for a higher protection were made on a Congress under the dictatorship of a man for whom no tariff could ever be too high-that was Thaddeus Stevens. When the first tariff bill was presented to the House in June, 1866, by Mr. Morrill, everybody knew Stevens was near his end, but emaciated, white, and suffering as he was, his nerve was still superb. Too weak to walk up the Capitol steps, two stalwart negroes carried him. "Who will carry me when you are dead, boys?" he said to them one day with a chuckle. The fight between Congress and President Johnson...
