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. OUR 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 manund many are hardly worth attention as subjects of revenue. A fa 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. THIS 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 just, but it protected their revenues. The new rule was cheerfully accepted and imperative orders were issued for its obedience. But toward the close of 1887 it began to be perceived that there were difficulties, which became much more serious in 1888. On even rates the traffic naturally flowed to the direct lines, which could give the best service and make the best time. Roads less direct or of less capacity, roads with higher grades or less advantageous terminals and roads. otherwise at a disadvantage, found that business was leaving them. It was discovered that the law in this its most essential feature, as well as in other respects, was practically a direct interference by the government in favor of the strong roads and against the weak. Dissatisfaction arose among officials of roads whose earnings were reduced and which were often near the edge of insolvency. It had been customary for them to obtain business by rebates and other like devices, and they knew no other method. It presently became to some of them a case of desperation. There was nothing in the law specifically forbidding the payment of "commissions," and it was found that the routing of business might be secured to a given line by a slight expenditure of that nature to a shipper's friend. Other kindred devices were suggested, some new, some old; the payment of rent, clerk hire, dock charges, elevator fees, drayage, the allowance of exaggerated claims, free transportation within some single State - a hundred ingenious forms of evading the plain requirements of the law were said to be in use. The demoralization was not by any means confined to the minor roads; shippers were ready to give information to other lines concerning concessions which were offered them, and to state the sum required to control their patronage. A freight agent thus appealed to at first perhaps might let the business go, but when the matter became more serious and he saw one large shipper after another seeking a less desirable route, he was very apt to throw up his hands and fall in with the procession. - Meanwhile nothing was done in the way of the enforcement of the law. It was found that the sixth or administrative section had been so framed as to require the exact maintenance of the tariffs of each carrier, but that this important provision had been omitted respecting "joint tariffs," in which two or more carriers participate; rates upon interstate traffic are usually joint. Toward the end of the second year came a reaching out for a remedy. In the closing days of the Fiftieth Congress amendments to the law |