Assum

extent of line which, but for them, would not have been built. ing the tonnage of these roads to equal 2,000 tons to the mile of road, the aggregate will be 9,800,000 tons, having a value of $490,000,000. The gain to the Federal Government from the creation of such an immense tonnage and value far exceeds the sums it has paid in aid of their construction, while the gain will, in a very short time, more than equal the principal sum of the bonds issued. Equally beneficent results will follow the construction of similar works. The people of the United States cannot afford to have extensive portions of their wide domain remain without means of access. In cases where such means have not been supplied by navigable water-courses they must be by a railway, or vast territories must remain, what they now are, deserts. The argument in favor of Government aid is as conclusive as it is simple.

There can be no doubt, if the railroads of the United States could have been secured in no other way, it would have been the soundest policy for Government to have assumed their construction, even without the expectation of realizing a dollar of direct income from them. The actual cost of these works have been about $1,200,000,000. The interest on this sum is $72,000,000. They have created a commerce worth $10,000,000,000 annually. Such a commerce has enabled the people to pay $400,000,000 into the public treasury with far greater ease than they could have paid $100,000,000 without them. No line of ordinary importance was ever constructed that did not, from the wealth it created, speedily repay its cost, although it may never have returned a dollar to its share or bondholders. If this be true of local and unimportant works, how much more so must it be of great lines, which will open vast sections of our public domain, now a desert, but abounding in all the elements of wealth.

While, therefore, there are but few cases which would justify the Government in extending aid to railroads, there are some in which its interposition becomes an imperative duty. In addition to the Central line now constructed, nothing could be more promotive of the general welfare than the opening, by its aid, both the Northern and Southern routes. Upon each of these are immense extents of territory, full of natural wealth, but which, without a railroad, are utterly beyond the reach of settlement or commerce. Aid extended to both lines, instead of weakening the public credit, would greatly strengthen it., . .

Henry V. Poor, Manual of the Railroads of the United States, 1869-1870 (New York, 1869), xlvi-xlviii passim.

164.

"A Condition, not a Theory" (1887)

BY PRESIDENT GROVER CLEVELAND

President Cleveland's annual message to Congress in December, 1887, from which this extract is taken, was devoted entirely to the question of surplus revenue, its causes and remedy. This unique presentation of the need of tariff reform as an issue of such paramount importance that, in a message devoted to the "state of the Union," no other subject was worthy of a place beside it, made tariff reform the issue in the presidential contest of the ensuing year. This was Cleveland's most famous message. -For Cleveland, see J. L. Whittle, Grover Cleveland. — Bibliography: Brookings and Ringwalt, Briefs for Debate, Nos. xxxvii-xliv; Bowker and Iles, Reader's Guide in Economic, Social, and Political Science, 54-64.- For other discussions of the tariff question, see Contemporaries, III, Nos. 78, 130; below, No. 166.

UR scheme of taxation, by means of which this needless surplus is taken from the people and put into the public treasury, consists of a tariff or duty levied upon importations from abroad, and internal-revenue taxes levied upon the consumption of tobacco and spirituous and malt liquors. It must be conceded that none of the things subjected to internal-revenue taxation are, strictly speaking, necessaries; there appears to be no just complaint of this taxation by the consumers of these articles, and there seems to be nothing so well able to bear the burden without hardship to any portion of the people.

But our present tariff laws, the vicious, inequitable, and illogical source of unnecessary taxation, ought to be at once revised and amended. These laws, as their primary and plain effect, raise the price to consumers of all articles imported and subject to duty by precisely the sum paid for such duties. Thus the amount of the duty measures the tax paid by those who purchase for use these imported articles. Many of these things, however, are raised or manufactured in our own country, and the duties now levied upon foreign goods and products are called protection to these home manufactures, because they render it possible for those of our people who are manufacturers to make these taxed articles and sell them for a price equal to that demanded for the imported goods that have paid customs duty. So it happens that while comparatively a few use the imported articles, millions of our people, who never use and never saw any of the foreign products, purchase and use things of the same kind made in this country, and pay therefor nearly or quite the same enhanced price which the duty adds to the imported articles. Those who buy imports pay the duty charged thereon into the public treasury, but the great majority of our citizens, who buy domestic articles of the same

class, pay a sum at least approximately equal to this duty to the home. manufacturer.

...

It is not proposed to entirely relieve the country of this taxation. It must be extensively continued as the source of the Government's income; and in a readjustment of our tariff the interests of American labor engaged in manufacture should be carefully considered, as well as the preservation of our manufacturers. It may be called protection, or by any other name, but relief from the hardships and dangers of our present tariff laws should be devised with especial precaution against imperiling the existence of our manufacturing interests. But this existence should not mean a condition which, without regard to the public welfare or a national exigency, must always insure the realization of immense profits instead of moderately profitable returns. As the volume and diversity of our national activities increase, new recruits are added to those who desire a continuation of the advantages which they conceive the present system of tariff taxation directly affords them. So stubbornly have all efforts to reform the present condition been resisted by those of our fellow-citizens thus engaged, that they can hardly complain of the suspicion, entertained to a certain extent, that there exists an organized combination all along the line to maintain their advantage.

We are in the midst of centennial celebrations, and with becoming pride we rejoice in American skill and ingenuity, in American energy and enterprise, and in the wonderful natural advantages and resources developed by a century's national growth. Yet when an attempt is made to justify a scheme which permits a tax to be laid upon every consumer in the land for the benefit of our manufacturers, quite beyond a reasonable demand for governmental regard, it suits the purposes of advocacy to call our manufactures infant industries still needing the highest and greatest degree of favor and fostering care that can be wrung from Federal legislation. . . .

...

But the reduction of taxation demanded should be so measured as not to necessitate or justify either the loss of employment by the workingman nor the lessening of his wages; and the profits still remaining to the manufacturer, after a necessary readjustment, should furnish no excuse for the sacrifice of the interests of his employés either in their opportunity to work or in the diminution of their compensation.

Under our present laws more than four thousand articles are subject to duty. Many of these do not in any way compete with our own manufactures, and many are hardly worth attention as subjects of revenue. A

considerable reduction can be made in the aggregate, by adding them to the free list. The taxation of luxuries presents no features of hardship; but the necessaries of life used and consumed by all the people, the duty upon which adds to the cost of living in every home, should be greatly cheapened.

The radical reduction of the duties imposed upon raw material used in manufactures, or its free importation, is of course an important factor in any effort to reduce the price of these necessaries; it would not only relieve them from the increased cost caused by the tariff on such material, but the manufactured products being thus cheapened, that part of the tariff now laid upon such product, as a compensation to our manufacturers for the present price of raw material, could be accordingly modified. Such reduction, or free importation, would serve beside to largely reduce the revenue. It is not apparent how such a change can have any injurious effect upon our manufacturers. On the contrary, it would appear to give them a better chance in foreign markets with the manufacturers of other countries, who cheapen their wares by free material. Thus our people might have the opportunity of extending their sales beyond the limits of home consumption-saving them from the depression, interruption in business, and loss caused by a glutted domestic market, and affording their employés more certain and steady labor, with its resulting quiet and contentment. . . .

Our progress toward a wise conclusion will not be improved by dwelling upon the theories of protection and free trade. This savors too much of bandying epithets. It is a condition which confronts us—not a theory. Relief from this condition may involve a slight reduction of the advantages which we award our home productions, but the entire withdrawal of such advantages should not be contemplated. The question of free trade is absolutely irrelevant; and the persistent claim made in certain quarters, that all the efforts to relieve the people from unjust and unnecessary taxation are schemes of so-called free-traders, is mischievous and far removed from any consideration for the public good.

The simple and plain duty which we owe the people is to reduce taxation to the necessary expenses of an economical operation of the Government, and to restore to the business of the country the money which we hold in the Treasury through the perversion of governmental powers.

Senate Journal, 50 Cong., I sess. (Washington, 1887), 11–16 passim.

165.

The Interstate Commerce Commission

(1887-1891)

BY ALDACE FREEMAN WALKER (1891)

Walker is a prominent lawyer and financier. When the Interstate Commerce Commission was organized in 1887, President Cleveland appointed him a member of the body. He served two years, and then held important positions in railroad-traffic associations until 1894, when he became a receiver of the Santa Fé railroad system, and, later, chairman of the board of directors of the reorganized company. - Bibliography: Brookings and Ringwalt, Briefs for Debate, Nos. xlvii, lii; Bowker and Iles, Reader's Guide in Economic, Social, and Political Science, 47-51; Library of Leland Stanford Junior University, Catalogue of the Hopkins Railway Library, 150–152.

HIS universal reliance upon competition as the safeguard of the public has had two noticeable results: first, it has tended to entrench railroad managers in the belief that the public was protected sufficiently thereby, and that carriers by rail, like carriers by sea, were entitled to fix rates at will, subject only to the control of competitive conditions. . . .

In the second place, in its practical working, competition bred discrimination. The evils of unjust discrimination in railway methods cannot be too vividly portrayed. As time went on they became more and more pronounced, until they were too great to be endured. Legislative investigations were demanded. . . .

The remedy proposed was the forbidding of unjust discrimination under pains and penalties. That was the essence of the Interstate Commerce law. In other words, the result was prohibited while the cause was left in full operation. It was thought that free and unrestricted competition must be maintained as an essential principle of the American railway system. . . .

... Of course discriminations in railway rates are necessary; for example, the rate upon silk and upon sand should not be the same, and the question is often a doubtful one whether a particular discrimination is or is not unjust. The determination of this question, arising in innumerable forms, is the matter which has chiefly occupied the attention of the Commission since the passage of the law. . .

. . . When the law first went into operation it was felt that a new era had arrived. The statute demanded the undeviating and inflexible maintenance of the published tariff rates. . . . This was just what conservative and influential railway managers desired. It was not only