The Tariff Bill
March 17, 1894 — Agora Society, Gymnasium, Wellesley College, Wellesley MA
Mr. President: — The elections of 1893 gave all branches of the government into the hands of the party pledged to the reversal of the policy under which during the last thirty years, this country has seen such prosperity as had never been seen in the history of the world, during which the wealth of the country has increased four fold, from sixteen to sixty-four billions of dollars. Before we enter upon the reversal of such a policy, it is well to pause and consider existing conditions and the first principles of a protective tariff. And the first condition to be taken into account is the greater cost of production in America than in foreign countries. Nobody will deny that wages are higher in America than in foreign countries. It is plain, therefore, that the cost of production must be greater. The American cannot pay two dollars for the same work for which the foreigner pays one dollar, and manufacture his goods just as cheaply. It is the mission of the tariff to equalize this difference in cost of production. A protective duty is one levied on articles of foreign production such as are or may be produced in this country, sufficient to measure the difference in cost of production in America and in foreign countries. For example, if a foreigner can manufacture an article so cheaply that the cost of production including the cost of transportation to America is eighty cents, while it costs the American manufacturer one dollar to produce the same article, then the tariff would be twenty cents, a sum sufficient to measure the difference in the cost of production and enable the American to compete with his foreign rival.
There are no words sweeter to the Democratic tongue than free competition, and they are fond of asserting that the tariff prevents free competition. But it is the tariff which makes free competition possible. If in a race one who intends to enter is crippled before the start, there can be no competition. If the cost of any article to a foreigner is eighty cents, while to the American it is one dollar, it is plain that the American cannot enter the race until the cost of pro duction is equalized. Without such equalization the result is foreign monopoly. It is free trade, but it is not free competition.
Excessive profits are often claimed to be due to the tariff. This is plainly false. The article which costs the foreigner eighty cents and the American one dollar, and on which there is a tariff of twenty cents, may sell for $1.50, an excess of profit. How would the removal of the tariff prevent such a profit? If it were removed, the foreigner could sell his goods for less than the cost of production to the American, drive the American out of business, and with the monopoly thus secured, put the price up again to $1.50. But such profits are impossible with the competition between home manufacturers. It is a law of Economics, which has no exception, that where any business yields excess of profits, and the supply is unlimited, men rush into that business and by increasing the supply lower the price.
The attributing of trusts to the tariff is equally absurd, and may be met with the same line of argument. Such a claim would have more force if trusts existed only in protective tariff countries, but there are many more trusts in free trade England than in protected America. Every evil, even to the failure of the crops, has been attributed to the tariff by the Democratic party. As the tariff is not the cause of trusts, neither do we claim that it will prevent trusts. The tariff is not a panacea. It will not cure the halt, the lame, or the blind, or raise the dead — except our halting looms and our dead furnace fires.
It is true that the tariff sometimes measures more than the difference in the cost of production, and in such a case, there might be excessive profits for a time, but internal competition would soon lower the price. There is a tariff of two dollars a keg on wire nails, while the nails are selling for $1.65 a keg. The tariff on steel rails under the McKinley bill is thirteen dollars and forty-four cents a ton; the difference in cost of production is about eight dollars. The tariff measures more than the difference in cost of production, but nevertheless American steel rails have recently sold in the American market for exactly the same price as English steel rails in the English market. How much lower would the price be under free trade? So high a tariff is plainly unnecessary for ordinary conditions, but internal competition prevents it from creating excessive profits.
Let us examine the shibboleths of the Democratic party and we will find that they have more sound than soundness. The “markets of the world” vanish in the light of fact. According to Mulhall, American manufactures equal one-third of all the manufactured products of the world. We consume them or their equivalent. The home market then is one-half that of all the rest of the world combined. According to Mulhall again, the American home market is five times as great as the amount of imports into all the free trade countries of the world, including England, ten times as great excluding England. Protection countries reserve their home markets for them selves, hence they are not open to us except at a price. If the free trader would turn his attention from foreign countries to our home market, he would learn more things than he has as yet dreamed of in his philosophy.
The argument against the constitutionality of the tariff is so absurd that it needs little attention. The first protective tariff act was passed by the Congress of 1789, introduced by James Madison and signed by George Washington. It would seem only fair to suppose that the men who made the constitution knew a little more about the spirit of the constitution than Grover Cleveland or the Democratic party.
“Buy where you can buy the cheapest.” This can be more quickly answered by illustration than by argument. Such a maxim gives us the sweating system; such a maxim would lead us to buy the pearl buttons manufactured by Austrian convicts rather than those manufactured by American laborers.
All Democratic eloquence culminates in the cry, “the tariff is a tax.” Suppose it were; taxes are the price of government. But the tariff is usually not a tax on the consumer, because when our manufacturers are driven out of business, we are at the mercy of the foreign monopolist, who may charge whatever price he pleases. In 1870 tin plate was selling for twelve dollars a box. Americans went into the business; English manufacturers dropped the price to seven dollars — to three dollars and fifty cents — to anything to undersell Americans. There was no tariff sufficient to measure the difference in cost of production, Americans were driven out of business, English manufacturers secured a monopoly and put up the price again. The McKinley bill put an additional tariff of $1.29 a box on tin plate, and yet a year after the passage of the McKinley bill, tin plate was selling at a lower price than it had been a year before the McKinley bill, but the price of English tin plate at our ports had dropped by the amount of the tariff.
Most of all, the tariff is needed to protect labor. Senator Frye states that when in Paisley, Scotland, he secured the pay roll from the superintendent of the cotton thread manufactory of Coates & Co. A short time afterward he secured the pay roll for the same month from Coates & Co. in Pawtucket, R.I. The wages paid in America were from two to three times as great as those paid in Scotland. The same work, the same kind of machinery, the same class of employees, the same employers, and wages from two to three times as much! Under such circumstances, competition is impossible unless the difference in cost of production due to high wages is measured by a protective tariff.
We have a Contract Labor Law to prevent the importation of foreign labor at foreign prices. What is the difference between importing pauper labor and importing free the products of that pauper labor? It is said that wages are determined by the law of supply and demand ; exactly, and the tariff, by creating new manufactories, creates a demand for labor.
The great mistake of the Democratic party is in dividing the people into consumers and producers. We are all consumers, we are all producers. The farmer consumes the products of the manufacturer, the manufacturer consumes the products of the farmer.
Republican policy was crystalized in the McKinley bill. True to the principles of the protective tariff, this bill admits free all products which can not be produced in this country, except luxuries, and puts a duty sufficient to measure the difference in the cost of production on all articles which are or can be produced in this country. Nor is the McKinley bill a return to the old War tariff. Those who claim it is are guilty of the grossest ignorance or the most culpable perversion of fact. The average rate of duty in the McKinley bill is lower than that of any other protective tariff act in this century, except the Com promise Tariff of 1833, lower than the free trade tariff of 1S46. The McKinley bill puts on the free list fifty-five per cent of our imports, puts an average tariff of forty-five per cent on the remaining forty-five per cent, making an average duty on all imports of about twenty-one per cent. The Walker tariff put a duty of twenty-five per cent on eighty-eight per cent of our imports, making an average duty on all imports of about twenty-two per cent. The rate under the McKinley bill is lower on an average, but the principle is different.
Nor has the McKinley bill created a Chinese wall about the country. During the first year of its operation, both exports and imports in creased. It has protected labor. The reports of the labor commissioners of New York, Massachusetts and Indiana have proved this. It did not increase the cost of living. The report of the Senate committee of investigation showed this. It has created new industries. The Democrats have called the tin plate industry bogus; Republicans are not afraid of the facts. Since the passage of the McKinley bill, between forty and fifty tin plate factories have been built, with a capital of three and one-half millions. During the first year, over thirteen million pounds of tin plate were manufactured in this country, in the second year nearly one hundred million pounds — seven times as much. Not exactly a bogus industry.
Not only has the McKinley bill built up our industries, thereby developing our resources and protected our labor, but it has also provided a revenue sufficient for the expenses of the government, and issued in an era of marvellous prosperity.
For such a policy as this the Democrats offer us a tariff for revenue only, a tariff which performs only one of the functions of a protective tariff and which would deliver over our home market to the foreign manufacturers. They offer us incidental protection. Incidental protection is a delusion. If the tariff protects every industry which needs protection, it is a protective tariff pure and simple; if it protects one industry needing protection and not another, it is favoritism. But these are as nothing before the magic phrase “tariff reform.” Since the appearance of the Wilson bill, “tariff reform” has ceased to be a term to conjure with. Men will no longer swear by, but at it. The report of the committee is enough to condemn the bill. It claims to be a bill to provide revenue and it creates a deficit. It denounces protection as unconstitutional, and yet does not claim to be “purged of all protection.” The only attempt at consistency is in the putting of so-called “raw materials” on the free list, a consistency notappreciated in the Senate Finance Committee. Raw materials” what are they? As soon as man’s labor has been put into a product it ceases to be “raw.” Wool is “raw material” to the manufacturer but not to the sheep raiser; lumber is raw material to the furniture maker but not to the lumber man. The only fair way is to protect everything which needs protection.
One of the most striking illustrations of the lack of practical sense shown in the Wilson bill is the change from specific to ad valorem duties — a system beautiful in theory but a failure in practice, a system giving dishonesty an advantage over honesty, a system denounced by nearly every Secretary of the Treasury from Hamilton to Manning. The author of the bill claims that specific duties blind the public to the rate of the tariff, and calls attention to the fact that the tariff of eight cents per hundred pounds on salt, i. e. one-twelfth of a cent a pound, is at the rate of eighty per cent. The bill retains a specific duty of a cent and a half a pound on rice. Is it to blind the people to the fact that this is at the rate of eighty-four per cent?
It is a bill of inconsistencies. The Southern product of rice carries a duty of eighty-four per cent, while the Northern product of barley has a duty of but twenty per cent; iron hoops to bind the Southern planter’s cotton are free, while the same hoops if used to bind the Northern farmer’s hay carry a duty of thirty per cent.
Moreover, the bill strikes a crushing blow at our industries. It has so reduced the tariff on cutlery that the workmen are clamoring for its defeat. And well they may, for the price per dozen of certain grades of English knives at our ports is less than the amount actually paid in America for the labor put into a dozen knives of the same kind. It puts wool on the free list. It is plain that it is impossible for the American wool-grower, without a protective tariff, to compete with his Australian rival, who pays one penny an acre rent for his land, or with the South American sheep-raiser, who has his land free and hires labor at fifteen cents a day. It is an industry of the first magnitude that the Wilson bill would so ruthlessly destroy. Forty-seven million sheep are owned by the wool-growers of this country (or were before the prospect of the Wilson bill led their owners to drive them to the slaughter house); over a hundred million dollars are invested in the business and the yearly product is worth from sixty to seventy million dollars. Petitions from thirty-five states and territories against free wool have been presented to Congress. Nor would this bill by its destruction of this American industry accomplish what it claims and give us cheap wool. The increased demand for foreign wool in the American market would soon increase the price.
These could be multiplied a hundred times, but enough has been shown to illustrate the incompetency and inconsistencies which mark the Wilson bill, enough to show its disastrous effects, if the thousands of unemployed had not already shown them. One little instance will show its lack of practical sense. Hydraulic hose is classed with wearing apparel, with the idea evidently that it is some new kind of stocking.
Instead of revenue sufficient to meet the expenses of government, the bill creates a deficit. It is claimed by certain supporters of the bill that increased importations would meet this deficit, but with the lower wages and the scarcity of work caused by the destruction of our industries bythis bill, such a thing could hardly be hoped for. Moreover, an increase in importations of two hundred and fifty million dollars a year would be necessary to bring about this result. Do the supporters of the bill expect us to pay for this increase of importations with our increase of exportation? They say they do, but history does not seem to give support to their expectations. During the years from 1846 to i860, the balance of trade against us was four hundred and twenty millions of dollars and that balance we paid for in gold, exporting during those years four hundred and thirty millions in gold; and the Secretary of the Treasury was obliged to issue bonds, a course upon which our present secretary has already entered.
Finally, the Wilson bill introduces no new principle. It does not claim to be “purged of all protection.” It is in fact only more tariff tinkering, a tattered and torn McKinley bill. What excuse is there for such tariff tinkering in the midst of such business depression? The author claims that it contains the “principle of growth.” Does he propose to re-enact this scene every few years? If a protective tariff is unconstitutional and a robbery, why not eradicate “at one fell swoop” such a vicious growth, instead of dragging the process on year after year?
With reason we protest against the passage of this bill, which is the outgrowth of ignorance and incompetency; which paralyzes our industries and yet claims to introduce no new principle; which purposees to provide revenue for the government, yet creates a deficit; a bill the very prospect of whose passage has caused such business depression, such wide-spread distress, as has not been seen in this country since the last Democratic tariff.
Source: A College Girl on the Wilson Bill: The Brilliant Speech of Miss. Gail H. Laughlin (of Portland, ME., Before the Agora Society of Wellesley College, Sitting as The United States Senate, March 17, 1894 (Boston: Home Market Club) 1894, pp. 3-8.