cleveland takes on tariffs -- 3/27/23
Today's selection -- from The Wealth of a Nation by C. Donald Johnson. In the 1880s, the United States had high tariffs and a huge budget surplus. President Grover Cleveland had great difficulty with legislation designed to reduce tariffs, since they were deemed to protect "the American workingman from the conditions of 'pauper labor' of Europe":
"There is little evidence that Grover Cleveland had given much attention to the issue of trade policy before his election to the presidency, an event that ended twenty-four years in the wilderness for Democrats since James Buchanan had left the executive mansion in 1860. Before he was nominated to run for president, Cleveland's political career was hardly three years old; he had been mayor of Buffalo in 1882 and governor of New York during the years 1883-84. In his short tenure he had acquired a reputation for integrity and fighting graft, which contrasted nicely with Blaine's reputation for corruption. In the particularly nasty 1884 campaign, however, the Republicans revealed that Cleveland, a bachelor, had fathered an illegitimate child ten years earlier. Paternity of the child was actually questionable, but Cleveland candidly and without hesitation accepted responsibility. With issues like this personal attack -- which, while embarrassing, had the unintended consequence of enhancing Cleveland's reputation for honesty -- and Blaine's 'Burn this letter' incident dominating the campaign, tariff policies took a backseat.
|Cleveland portrayed as a tariff reformer|
"Although he was cautious and gradual in his approach, the new president soon picked up on the tariff issue, taking the side of the moderate reformers. In his first annual message to Congress in December 1885, he reflected his fiscally conservative bias when he justified proposals for reductions in customs duties with the simple observation that 'our revenues are in excess of the actual needs of an economical administration of the Government'. In an effort to avoid a philosophical and political quagmire, Cleveland studiously added, 'The question of free trade is not involved, nor is there now any occasion for the general discussion of the wisdom or expediency of a protective system.' Throwing a bone to the protectionists, he further cautioned that the reductions should be done 'in such manner as to protect the interests of American labor .... Its stability and proper remuneration furnish the most justifiable pretext for a protective policy.' His only directive regarding the selection of tariffs to reduce was to focus on duties 'upon the necessaries of life' so as to 'lessen the cost of living in every family of the land and release to the people in every humble home a larger measure of the rewards of frugal Industry.'
"Modest as it was, Cleveland's proposal did not win approval in Congress.
"Although Democrats controlled the House with a comfortable majority, protectionist Republicans still maintained a slim rule over the Senate -- a sizable faction of Democratic votes could be expected to line up against any tariff reduction. Hence, when the Ways and Means Committee produced a bill containing moderate tariff reductions supported by the president, the Republicans with the aid of thirty-five Democratic dissenters were able to defeat a motion to bring it to the House floor for a vote.
"In the months that followed, Cleveland became more determined to address the growing surplus in the government treasury and more infuriated with the inequity of protectionist tariff policies. In his second annual address to Congress in December 1886, he renewed his tariff reduction proposal using language that contrasted sharply with that in his soft-pedaling proposal the year before. In a section much longer than in his previous address, he wrote passionately about the plight of the American farmers, who were 'forced to pay excessive and needless taxation, while their products struggle in foreign markets.' Assuming an Adam Smith perspective and a Jacksonian posture, he pointed out the 'abnormal and exceptional business profits, which ... increases without corresponding benefit to the people at large the vast accumulation of a few among our citizens, whose fortune, rivaling the wealth of the most favored in antidemocratic nations, are not the natural growth of a steady, plain, and industrious republic.' Despite its more passionate approach, the president's message again failed to move Congress, which adjourned in March the following year without taking a vote on a tariff bill.
"Adding to the president's frustrations, Republican protectionist forces, led by the secretary of the American Tin Plate Association, had trooped into the Illinois district of Cleveland's tariff reform workhorse, Ways and Means chairman William R. Morrison, and marshaled his defeat. A number of other tariff reform candidates lost in the 1886 midterm elections, reducing the Democratic majority in the House to a narrow margin.
"Despite bleak odds and his poor track record, Cleveland resolved over the summer and fall of 1887 to force the tariff reform issue in a bold and unprecedented fashion that would define his presidency. Taking few into his confidence, the president decided to devote his entire annual message to Congress in 1887 to the tariff issue. Following the tradition of his predecessors, his previous annual messages had been long, ponderous briefs, covering a multitude of 'State of the Union' issues on domestic and foreign affairs with a variety of legislative recommendations scattered throughout. This year the input his cabinet secretaries provided on the sundry matters of concern within their departments was a wasted effort. Cleveland wanted no distractions from other public issues. He intended to present the tariff issue in a manner that would shock the conscience of the public, if not Congress; With only a few edits from close advisers, the president was solely responsible for the message. In making a methodical and straightforward case against protective tariffs, he wrote the address in the fashion of a lawyer's appeal, though he spiced it with a fair share of emotive, political rhetoric.
"Cleveland began by laying out the central problem of the government's growing surplus, which he said was turning the public treasury into 'a hoarding place for money needlessly withdrawn from trade and the people's use, thus crippling our national energies ... and inviting schemes of public plunder.' He charged that collecting more revenue from citizens than was necessary to maintain the government was a 'perversion' tantamount to 'indefensible extortion and a culpable betrayal of American fairness and justice.' Reviewing the current fiscal picture in some detail, he warned that the surplus would almost triple in the next year with no productive use for the surplus funds. All of the government's bonded indebtedness that could be paid off without premium or penalty had already been retired. Cleveland was opposed to 'unnecessary and extravagant appropriations'; he also objected to depositing US Treasury money in private banks because it established 'too close a relationship between the operations of the Government Treasury and the business of the country ... thus fostering an unnatural reliance in private business upon public funds.' Predicting disaster if Congress continued its inaction, the president said 'the gravity of our financial situation' demanded a remedy and turned his attention to the cause of the problem.
"The system of taxation that had caused this 'needless surplus' consisted of import duties and internal excise taxes levied on tobacco and alcoholic beverages. Since the latter were not in Cleveland's view, 'strictly speaking, necessaries.' consumers of alcohol and tobacco had no just complaint as to this tax. On the other hand, the tariff laws, which he called 'the vicious, inequitable, and illogical source of unnecessary taxation,' should be revised and amended 'at once.' These laws, he contended, raised the price not only of all imported goods but all domestic goods that were protected by tariffs as well, because domestic producers increased their prices to correspond with the protective duty. Cleveland said he was not proposing to eliminate protection of American labor or manufacturing interests but only the protection of 'immense profits instead of moderately profitable returns.' In the midst of the United States' centennial celebration, he scorned those who justified this unreasonable tariff scheme under Alexander Hamilton's infant industry argument, condemning domestic manufacturers 'still needing the highest and greatest degree of favor and fostering care that can be wrung from Federal legislation' after 100 years.
"As to the protectionist argument that high tariffs shielded the American workingman from the conditions of 'pauper labor' of Europe, Cleveland observed that of the approximately 17.4 million workers engaged in all American industries only 2.6 million were employed in manufacturing industries that benefited from high tariffs. He was careful not to suggest that the protected workers -- who were in the minority -- should forgo the benefit that high tariffs might have on their wages in order to lower prices for the majority of wage earners. But, with a degree of understatement, Cleveland noted that the protected workers 'will not overlook that they are consumers with the rest.'
"He then turned to the effect of the tariff on the farmers, 'who manufacture nothing, but who pay the increased price which the tariff imposes upon every agricultural implement, upon all he wears, and upon all he uses and owns.' Addressing the wool tariff issue, Cleveland said that the farmer who had no sheep was forced 'to pay a tribute to his fellow-farmer as well as to the manufacturer and merchant.' He said the benefit even to sheep farmers was 'illusory' because most sheep were raised by farmers in small flocks of twenty-five to fifty sheep, which at then current prices would allow a tariff profit of only $18 to $36, depending upon the number in their flock. When the wool was manufactured into cloth, he observed, a further sum was added to the price to benefit the tariff-protected woolen product manufacturer. By the time the sheep farmer purchased his own woolen goods for his family for the winter, he had lost his tariff profit through the cost of his new merchandise. Considering the small number of sheep farmers in proportion to the rest of the country's population and the illusory value of the wool tariff even to them, the president concluded that 'it constitutes a tax which with relentless grasp is fastened upon the clothing of every man, woman, and child in the land' and should be removed or reduced.
"Taking up a theme addressed by Adam Smith a century earlier, Cleveland attacked monopolies, which had come of age in America's Gilded Age in the form of trusts."