Popular Science Monthly/Volume 37/September 1890/Common Sense Applied to the Tariff Question II
|COMMON SENSE APPLIED TO THE TARIFF QUESTION.|
By EDWARD ATKINSON.
"WE are at the parting of the ways." Any one who takes the ground that the main object which should be kept in view in placing taxes upon foreign imports may rightly be an attempt to establish any and every branch of industry, great and small, without regarding the use to which imports are to be put, and without any consideration of the temporary obstruction to other branches of industry which must follow any interference with the natural course of trade, may take his own way; he will have no further interest in this essay. Such men may separate themselves under the guidance of their chosen leaders, for such influence upon the question of taxation as they may be capable of exerting. Their position is a very plain one, and it has been rightly named by its chief exponent, the chairman of the Committee of Ways and Means, the method of "protection with incidental revenue" May it not be held that this method is inconsistent with the public welfare and that it is contrary to the very principle of law which has been established by the Supreme Court of the United States in the case of the Loan Association vs. Topeka?
In this case, Justice Miller, on behalf of the court, stated this fundamental principle of law as follows: "To lay with one hand the power of the Government on the property of the citizen, and with the other bestow it on favored individuals to aid private undertakings, and to build up private enterprises, is none the less robbery because it is done under the forms of law and is called taxation. This is not legislation; it is a decree under legislative forms. . . . Beyond a cavil there can be no lawful tax which is not laid for a public purpose."
I think it must be clear to every unprejudiced mind that the theory of Mr. McKinley, of "protection with incidental revenue" is in fact forbidden by this dictum of the Supreme Court. It can only be justified by a legal subterfuge, to wit, that a public purpose or necessity exists which justifies doing away with the revenue duty on sugar, thereby depriving the Government of all revenue from that source, and continuing to tax the people in order to pay a bounty to the sugar-planters. The bounty to sugar-planters must be justified, if justified at all, upon the ground that public necessity requires the production of sugar within the limits of our own country, although sugar can be procured at less cost in exchange for wheat, cotton, and oil. If not so justified, the tax from which the bounty is to be "bestowed upon private individuals to aid private enterprises becomes none the less robbery because it is done under the forms of law, and is called taxation."
This proposition brings the effect of this theory of protection directly into view; one may well ask why the same method should not be adopted to promote other branches of industry. It is admittedly more important that this country should make its own iron than that it should make its own sugar, and the heavy duties on iron and steel have been justified upon the ground that it is for the public interest to make this country independent of all others in the production of iron. It is now independent, whether we will or no; we are consuming thirty-five to forty per cent of the iron of the world and no other country could possibly supply us. On the plea that this branch of industry should be sustained, the consumers of iron and steel in this country have paid a sum in excess of the price paid by the consumers who have been supplied by Great Britain and Germany, ranging from $50,000,000 to $80,000,000 a year for the last ten years. The excess of price has not been paid over to the workmen by the owners of the mines and works, it has been bestowed upon private individuals to aid private enterprises. One has only to examine the average wages of the workmen in the iron mines and works of this country to be convinced that they are much less than the wages of those who are engaged in the conversion of crude iron and steel into machinery, tools, beams, bars, and other forms for use. If it were proposed to remit all duties upon iron and steel, and to pay a bounty to the producers of these crude metals, equal to the excess of price which we have paid for the last ten years, would not that bring the case directly under the law as laid down by Justice Miller? If under such circumstances it would come directly under the law, why does not the case come indirectly under the law, provided a case could be made up to test the question in court? It might be difficult, as a matter of practice, to bring the case into court, but I am inclined to think that if this policy of protection with incidental revenue were to be forced into effect by the votes of a temporary majority of the Congress of the United States, a way might be found to bring this subject before the Supreme Court and to abate this evil by a decision of the court. That is the way by which many of the abuses of the taxing power have been prevented, but the remedy can be more easily applied through legislation. The present tax upon the import of tin plates is purely a revenue measure, because no one makes such plates in this country. The object of raising this tax to twice the rate now levied is that "a bounty may be bestowed upon private individuals in order to aid them in the private enterprise" of making tin plates. The income of the tax has been asked for this purpose—it has been granted by the majority of the Committee of Ways and Means for this purpose—it is consistent with the so-called principle of protection with incidental revenue, and not a man who has voted for this measure in the House of Representatives can deny that, under the ruling of the Supreme Court, this method "is not legislation; it is a decree under legislative forms, and is none the less robbery because it is called taxation."
On the other hand, almost all the advocates of the theory of protection according to the principles of its founders—viz., temporary support during the period of the infancy of any art—may now be ready to join with the reasonable advocates of freer trade in coming to an agreement upon a measure which would be consistent with existing conditions, and also consistent with common sense. All admit, as Sir Robert Peel did, that we can not apply the absolute theory of free trade at the present time. But we can lay aside our prejudices; we can treat the whole subject in a judicial way; we can adopt a measure of tariff reform which shall lead in due season to such free trade as may be consistent with the necessity of deriving a revenue from duties upon imports, the subjects of taxation being selected with a view to the least burden upon consumers.
We may now take up the right method of bringing an agreement on method into practice and thereby giving the necessary direction to our legislators, who are all seeking for guidance among their constituents. How can we expect legislators to make good laws if their constituents do not.themselves know what kind of laws they want?
When this subject is thus approached in a judicial way, there are two lines of preliminary research and two sets of facts of which full cognizance must be taken:
The home market of this country rests for its development, its stability and its profit, upon the prosperity of the great mass of the consumers of this country who are working people busily occupied for gain in all the arts of life; of whom a vast majority are "working people" even in the narrow sense in which that term is commonly used. The census of occupations of those who are engaged in gainful pursuits is doubtless about as accurate as the enumeration of the population itself. Those who are thus occupied for gain and who do all the work of production and distribution, and who enjoy greater or less abundance in their consumption according to their larger or lesser share of the joint annual product, number one in three of the whole population, disregarding fractions. They are listed under different heads, viz.—four general classes, and a great many sub-classes under each of the general heads. The proportions under the four general classes have not varied much for several decades. According to the census of 1880, the total number of all who were occupied for gain was 17,400,000 out of 50,000,000. (I will omit fractions in dealing with these figures.) A little over twenty-three per cent, numbering about 4,000,000, were occupied in professional and personal service. There can, of course, be no direct foreign competition with this class through the import of products. Ten and four tenths per cent, numbering a little over 1,800,000, were occupied in trade and transportation; there can be no import of foreign products to compete with this class; it matters not to them what they move or what they may deal in. Forty-four per cent, numbering a little over 7,600,000, were occupied in agriculture as farmers and farm laborers, fruit cultivators, shepherds, and the like; and, lastly, twenty-two per cent, numbering a little over 3,800,000, were occupied in the manufacturing and mechanic arts and in mining. All who could or can be subjected to any change in the direction of their industry by alterations in the tariff policy of this country are substantially included in the two latter classes—i. e., in agriculture and manufactures.
According to the valuation of the products of agriculture, which was carefully revised by the Department of Agriculture after the census had been taken, the total value of the product of this great body of farmers and farm laborers, numbering 7,000,000, was a little under $4,000,000,000; that part of the product which consisted of sugar, tobacco, hemp, flax, wool, fruits, and the like, or of any other articles which could be in any part imported from abroad, came to less than $200,000,000—or less than five per cent of the total. It follows that not exceeding 350,000 to 400,000 of all who were occupied in agriculture could be subjected to any adverse influence by changes in the tariff, even if a larger proportion of these necessary articles were imported free of duty than had been imported while subject to duty; this estimate by persons being made in ratio to the relative value of different products.
In this consideration we of course leave out the Dominion of Canada. Owing to the difference in climate and to our advantage of position, there is a considerable exchange of products of agriculture between us and our neighbors in Canada; the amounts about balance. On the whole, we supply Canada with a rather larger part of the products of agriculture than they can supply to us. But the total traffic is relatively a very small part of our commerce, and may be wholly set aside, especially since the advocates both of protection and of freer trade are coming together in sustaining reciprocity among the nations on the American continents, especially with Canada.
On the other hand, in 1880, seventeen per cent of the value of the product of agriculture found its home market only by sale for export to foreign countries; since then the proportion of exports has diminished; exports now range from ten to fifteen per cent in value of the total product of agriculture, varying with the relative supply and demand. It therefore follows that there is a vastly greater proportion of farmers and farm laborers whose home market depends upon the export trade than there are of those who might possibly be harmed even if, through imports of foreign articles of like kind, the demand for their own product were reduced.
When we take up the fourth class, manufacturing and mechanic arts and mining, one's judgment may vary as to the proportion whose home market depends upon export and the proportion whose product could be in part imported from a foreign country. In a rough and ready way it may be said that about one half the total number under this head of 3,800,000 were mechanics engaged in building trades or in other arts which can not be conducted on the factory principle, and which can not be interfered with or affected to their detriment by any import from any foreign country, but may be greatly benefited by the removal of taxes from the materials on which they work.
It is not worth while at this time to enter into the details of the classification of the other half of this number. Let it be admitted that there are about 1,900,000 to 2,000,000 people more or less, each of whom supports two others who are occupied distinctly in the manufacturing and mechanic arts, a part of whose work may be promoted by a tariff, and a part of whose work might perhaps be adversely affected by injudicious or revolutionary changes in the tariff policy of the country. The main point of this analysis is to call attention to the fact that at least eighty per cent, and probably more, of all who are occupied for gain in this country, have no direct interest in the tariff question except as consumers; while the remainder, about evenly divided between producers and consumers, may be affected more or less by changes in the tariff system to their benefit, or to their injury by injudicious or revolutionary changes.
There are probably twelve to fifteen hundred thousand persons occupied mainly in agriculture, but partly in the mining, mechanic, and manufacturing arts, whose home market depends absolutely on sales for export, and about ten to twelve hundred thousand occupied mainly in manufacturing and mining but in lesser proportion in agriculture, whose product would be in part imported if all duties on their products were abated. The reduction or abatement of duties on imports would necessarily promote exports, but how much imports would be increased or diminished can not be determined until the effect of the removal of duties on crude or partly manufactured materials shall have given our domestic manufacturers an even chance to compete with others.
If it be admitted that the number of persons who are occupied in branches of agriculture, in manufactures, and in mining, whose home market depends wholly upon sales for export to other countries, exceeds the number of those who are occupied in any branch of domestic production of which a part might be imported under other conditions, then it follows of necessity that the only effect of duties upon imports has been or is to give a different direction to domestic industry from that which it would otherwise have taken. By such a course we do not add anything to or take away anything from the work that is to be done, but we do or may diminish the value of the domestic product from which all wages and profits are alike derived, by restricting its market, thus diminishing both general wages and profits in the attempt to increase them in specific directions. If the import of foreign goods, either crude or manufactured, is obstructed, then it follows of necessity that the export of the products of the farm and of the mine is to that extent obstructed, because we buy our foreign goods in exchange for food that we can not consume, for cotton that we can not spin, and for oil that we can not burn. "But," some one says, "if these foreign goods were manufactured at home, there would then be the same market for the product of the farm, the mine, and the forest, within the limit of our country, that now exists abroad." That view of the matter opens a very complex question. One can neither admit nor deny that position, because we have no experience to guide us. If, however, we did make the finished goods which we import into this country, the work in the factories in which they would be made would give employment to a very much less number of laborers than are engaged in the product of wheat and cotton which we now exchange for them. The home market which would be established in this artificial way would not take up anything like the quantity of products of the farm, the mine, and the forest that is now exported.
To show the absurdity of this conception, I can not do better than to quote from Mr. Butterworth's late speech. Having laid down his base-line principle with reference to the revision of the tariff, viz., that of reduction, he says: "Otherwise we should have five gentlemen, honorable and learned gentlemen, arbitrarily shuffling and disarranging, according to their own partially enlightened judgment, the more than fifty thousand industries of sixty millions of people, scattered over a vast continent, affecting directly and indirectly every home in the land, and having to do with all the nations of the earth."
Is it not a simple absurdity to expect the men whom we elect to Congress, whose capacity or whose want of capacity we all know; many of whom we would never choose to manage a single large corporation, bank, or other commercial enterprise—to be able to choose and direct the occupations of this people? Are such men as our members of Congress to be empowered to say to us, This branch of work you shall do, and that branch of work you shall not do? What an absurdity! As if the people were not more competent than any Congress that ever existed, and more capable of managing their own affairs than the average member.
Again, what could be more absurd than the bugbear which is held up to us, of a community which would be exclusively devoted to agriculture, as the penalty for doing away with protection to domestic industry? Such a community never existed upon this continent except in the slave States. There, owing to slavery, we had a community almost wholly devoted to agriculture, and this was due to the coercion of law and the attempt to direct and control the labor of a great community by statute.
The first pamphlet ever printed by the writer, on Cheap Cotton by Free Labor, was devoted to an economic review of the slave system of labor. In that and in other articles I treated the system purely from the economic standpoint; I ventured to predict the changes which would come whenever the attempt to direct the labor of the community by the force of slavery should be removed. When the economic history of the present generation shall be written, it will give a picture of the most wonderful industrial revolution that has ever been witnessed, and it will do away forever with the conception that infant industries require even temporary support from the Government.
Witness the conditions. In 1865 the people of the Southern States were subjected not only to a revolution of institutions but of ideas. A considerable part of the most effective brain-power of the South was disfranchised as a penalty for having taken part in the rebellion, while the franchise was given to the most ignorant portion of the community. I fully justify the enfranchisement—the protection of the ballot was necessary to the black citizens of the United States—but I have never justified the disfranchisement. The result was as bad as it could be. We all know the history of what had been miscalled "carpet-bag" governments. They were not "carpet-bag" governments in any single State, so far as I can find out. The Northern men who took part in the readmission of the Southern States brought to their aid the best constitutional lawyers, and the organic laws of these States were most admirably framed and carried through by them. It was in specific legislation under these organic laws that the abuses happened; and, so far as I can learn, there was not one single instance or not one single law called into existence under these conditions, in which the majority of white men were not Southern born and Southern bred in each so-called "carpet-bag Legislature." If, then, the ignorant blacks were led to pervert the trust that was imposed upon them, they were not led thereto by the Northern "carpet-baggers."
The very necessities of society made it necessary that this perversion of the powers of government should be stopped. It was done; and the old colored man at the Capitol in South Carolina explained the case in a single phrase when I asked him why the Republican Governor had been thrown out and Wade Hampton elected the year before; his answer was, "Yer can't put igmance top o' 'telligence and make it stay dar." It might be wise for those who are pressing the "Force bill" in the present Congress to take counsel from this old colored man. No force bill can "put ig'nance on top o' 'telligence and make it stay dar," but the enactment of such a measure will make it very plain that intelligence must displace ignorance of the present conditions of the South in many of the seats in the present House and Senate.
Under these adverse conditions—with that element of property which had been the main-stay of its citizens totally destroyed, its railway system torn up, its fields devastated, its fences burned, and many of its most important mills and works utterly destroyed; without capital, without inherited skill or aptitude—the South entered upon new fields of industry, exposed to the absolutely free and unrestricted competition of the Northern farmers, the Northern miners, the Northern manufacturers and the Northern artisans and mechanics in every branch of work.
No one can yet measure the progress which has been made in all the arts and industries which are necessary to civilized life in that great Southland. I have lately been on a hasty trip as far as New Orleans; I have witnessed the progress of white and black alike; progress upon the farm, in the field, in the great factory, in the workshop; progress in better conditions of life, in higher wages and in lower cost, in every town and city and wherever the railway has penetrated. It is a complete proof that diversity of employment establishes itself in spite of legislation and in spite of every bad form of taxation.
If you will glance over the analysis of the occupations of the people of the several States in the census of 1880, limiting your observation to those which had not been subject to the indignity of slavery, you will find that in a very short time after a State or Territory is open to settlement a certain balance of occupations establishes itself. Where the land is poor, as in New England, the larger number will be occupied in the manufacturing and mechanic arts; where the land is good, and the connection with the markets established, there may be for a time an excess in agriculture as compared with other occupations; but after the normal conditions have become established by long settlement, as in Ohio, for instance—a State midway between the great prairies of the West and the factories of the East—we find that, although there is almost nothing produced in Ohio which could be imported from any foreign country, except a little wool and a little pig-iron—the two together constituting a small proportion of the product of the State and giving employment in 1880 to only thirty-two thousand out of one million persons then occupied for gain, rating persons in ratio to the relative value of products—the balance of occupations is about the same as that which has established itself on the average throughout the country. That average is forty to forty-five per cent in agriculture; ten to eleven per cent in trade and transportation; twenty to twenty-four per cent in professional and personal service; twenty to twenty-four per cent in manufacturing and mechanic arts and in mining.
The error which Mr. Gladstone has made in his article in the North American Review, to which Mr. Blaine replied, is of this nature. If I read his article correctly from his standpoint, I think he holds to the mistaken idea that the conditions of this country are more especially adapted to agriculture than to the manufacturing arts. A greater mistake could not be made. We possess greater advantages in our natural conditions and resources for the establishment of the mining industry, the mechanic arts and manufacturing, than we do in agriculture; and it is only due to our own blunders that we do not take the paramount position in the world in all these arts.
On the other hand, the reply of Mr. Blaine is full of yet more gross errors; not errors of opinion, but errors in the statement of facts. A more mistaken or erroneous statement of the course of economic history not only in Great Britain but also in this country, could hardly have been compiled than is found in Mr. Blaine's reply to Mr. Gladstone. A complete review of these two articles remains to be written.
So much for the analysis by persons. Now, if we adopt the theory so well laid down by Sir Robert Peel, after he had become convinced of the necessity of tariff reform, that if our condition had not been changed by our long persistence in a high tariff policy, we might choose the subjects from which to derive our revenue so as to interfere in the least degree either with commerce, agriculture, or manufactures—then the collection of our. necessary revenue either from customs or from excise, or both, would become a very simple matter.
Let us for a moment take up this subject as a matter of theory and not of condition. Let us investigate our resources, and lay out an ideal method for collecting the national revenue wholly from articles of voluntary rather than of necessary use, exempting everything that enters into the process of domestic industry, and taxing only those articles of which consumers may even be deprived of some part on account of the cost, and yet not be in any degree harmed or prevented from doing the most effective work of which they are capable; our object being to leave them free, so as to be able to obtain the largest annual product either by the application of the labor of the people of the country to its own resources, or indirectly by devoting their labor and capital to exchanging their own products for articles of necessity which may be of foreign origin, thus securing every article of necessity at the lowest cost, whether of foreign or of domestic origin. We could then raise all the necessary revenue from spirits, wines, beer, sugar, tea, coffee, silks, the finer textile fabrics of wool and cotton, laces, embroideries, furs, and fancy goods.
In order to apply this theory to our present condition, we may take as our basis the estimates of the Secretary of the Treasury for the ensuing fiscal year; but in so doing we must bear in mind that there has scarcely been a single estimate of prospective revenue submitted by any Secretary for the last twenty-five years which has not been exceeded in result; we must also bear in mind, in considering estimates of expenditure, that the recommendations of the Secretary of the Treasury have been more apt to be cut down by Congress than to be increased. At the present time, however, when our legislators are so anxious to dispose of a surplus in order that they may not be called upon to reduce taxation, we may find an exception to this latter rule; but for the purposes of study the ordinary conditions may be applied to the present case.
I might have attempted to lay down the basis for an act for the collection of our national revenue consistently with theory; of course, our condition will not permit the immediate application of this theory in its full force on account of our present conditions. A beginning, however, may be made; and, as the effects of the changes upon the progress of the country are developed, the work can proceed more and more rapidly.
No one can yet venture to forecast the prosperity of this country which would ensue the moment all crude and partly manufactured materials which are necessary in the main processes of our domestic industry were made free from duties, and were therefore supplied to our domestic manufacturers on even terms with our competitors in other countries. As one can not forecast the beneficial effect of the removal of these taxes, so no one can measure the injury which has been inflicted in consequence of the higher price of iron, steel, copper, lead, and other metals, of wool, chemicals and dye-stuffs, through this long term of high-tariff obstruction.
The true change may now be readily brought about, because the masters of the art of converting ore into iron have become aware that, owing to the scarcity of the fine ores suitable for the Bessemer metal, and of coal suitable for coking in Great Britain, the paramount control of the metal industry is passing to this country; it needs only the maintenance of the prices on the other side without a reduction of our own, to put us in a position of advantage for converting the crude metals into the higher forms in which ten or twenty men may be called for as compared to one in the production of pig-iron, copper, lead, and zinc. The prosperity which would ensue, as it did in Great Britain, after similar changes in the tariff were made, would tend to increase the consuming power of our own people in respect to the dutiable goods from which we should still derive a constantly increasing revenue. In this way we might gain a true protection to our domestic industry and the development of our home market; we might then take the paramount position in manufacturing arts as well as in agriculture to which we are entitled and yet enjoy the full benefit of low price and high wages.
I have endeavored to bring out this point very conspicuously, because many persons have looked upon those who are stigmatized as free-traders as if they advocated radical and injudicious changes in our revenue system, such as would launch us upon free trade without warning and without preparation. It is time to lay aside such prejudice with regard to those who advocate tariff reform in the direction of freer trade. I can not name a man among my associates in the study of these economic questions whose views are not substantially like my own and who is of any considerable influence or importance either as a student, economist, or legislator—not one who would not deprecate radical and revolutionary changes and who would not be guided by the most conservative ideas in the measures by which an ultimate but very profound change in our fiscal system would be brought about.
So far as one may judge by the course which has been taken in the House of Representatives and in the Senate, and by the position taken by ex-President Cleveland, the advocates of tariff reform and reduction first declared their adhesion to this proposed method by putting wool, hemp, flax, and many other articles which are most important products in the specific States from which they have been elected at once into the free list. May not men like the representatives from Texas, Kentucky, Tennessee, and Arkansas, who led off in the Committee of Ways and Means in taking off the taxes from wool, hemp, and flax, well be sustained in the brave stand which they have taken and on the lines on which they have carried their constituents with them? These men have also been willing, even eager, to grant rates of duty on finished fabrics, such as might allay the fears of those who have been so long sustained by high duties that they dread any change. This is a reasonable method. The matter of importance is that we should be headed in the right direction. The time covered in the process of change may well correspond substantially with the life of the existing machinery which has been put at work at the high cost due to past and present conditions. All the machinery in our textile factories has cost at least fifty per cent if not seventy-five per cent more than that of our competitors in England, France, and Germany, on account of the tax upon materials of which that machinery is made. The life of machinery which is used in modern manufacturing ranges from ten to twenty years, averaging perhaps fifteen years. If the relief could at once be given by a removal of the duties upon crude and partly finished materials, with very moderate reduction on the finished goods, we should probably repeat the experience of Great Britain, and we should find, as Gladstone put it, that "the road to free trade is like the road to virtue; the first step the most painful, the last step the most profitable."
The manufacturers of England were formerly so afraid of pauper labor, so called, that when the proposition for the union of Ireland with England was pending, the purport of which was of course to bring Ireland under the same tariff system as that of England, they sent memorials to Parliament in opposition to the union, on the ground that they would be ruined by the cheap labor of Ireland. Of course, they were disappointed; they were not obliged to disturb or stop the factories of Lancashire and of Yorkshire, or to move them across the Channel. The manufacturers of England soon found out that the low-priced labor of people verging on pauperism is the dearest and not the cheapest labor that can be offered.
I will now close this over-long treatise upon the Method of Tariff Reform by submitting what may be called a practical budget. The figures are based upon the actual accounts of the Treasury of the United States, and upon what is hoped may be the maximum expenditure that will be warranted even by the present Congress.
First let me call attention to a few facts. Let us suppose that the civil war were ended—I mean the financial war, which will not be ended until the last dollar of debt shall have been paid and the last pension shall have fallen in. There are certain necessary annual appropriations which must be met year by year. How could we meet them with the least interference with the freely chosen pursuits of the people, and yet with due regard to the conditions in which we are? The ordinary expenses consist of, first, the cost of the civil service, legislative, judicial, consular, and the like, and the cost of the collection of revenue; second, the support of the army and the construction of fortifications; third, the support of the navy, without expensive appropriations for construction; fourth, the deficiency in the postal service; fifth, the interest on the public debt; sixth, the support of the Indians; and seventh, the miscellaneous expenses. The sum of these regular or normal expenditures, aside from war obligations, according to the estimates submitted by the Secretary of the Treasury for the next fiscal year, which estimates until now have been more apt to be cut down than increased by Congress, amount to less than $200,000,000. We may set off a tax against each branch of expenditure, and the conclusion which we reach is rather singular.
Omitting fractions, the internal revenue from whisky more than pays the cost of the civil government. The excess added to the tobacco tax more than suffices to pay the army expenses and fortifications. The navy floats on beer, with a part of the beer tax to spare and carry forward. The income from the Indian trust funds meets the cost of the Indian Department. The miscellaneous permanent receipts of various kinds more than cover the miscellaneous permanent expenses; while the sugar tax and the revenue derived from imported liquors and tobacco cover the postal deficiency and the interest on the public debt, with $10,000,000 to spare.
Were it not for pensions and sinking funds, our pleasant vices, with the tax on sugar added, would support the Government on a very adequate scale, not very economically administered, and with a margin for contingencies of more than $10,000,000 to spend on rivers and harbors.
This is only one way of putting the case. It shows how easily we could cover all the normal or peace expenditures of the Government by taxing nothing but spirits, beer, tobacco, and sugar. But we are subject to war expenses and we must continue some war taxes for a term of years. We may therefore make up two accounts:
|War Expenses:No. 1|
|Current annual pensions, $65,000,000; arrears, $35,000,000||$100,000,000|
|Interest on war debt||31,500,000|
|Total war expense||$180,000,000|
|Internal tax on whisky||$78,000,000|
|Internal tax on beer||27,000,000|
|Internal tax on tobacco||33,000,000|
|Duties on sugar and molasses||60,000,000|
|Elasticity in next fiscal year||2,000,000|
|Total war taxes||$200,000.000|
|Excess of war revenue carried forward||$20,000,000|
|Army and fortifications||37,000,000|
|Rivers and harbors||10,000,000|
|Peace Revenue on Present Basis:|
|Brought forward from the war taxes||$20,000,000|
|Miscellaneous permanent receipts, omitting so-called profit on silver coinage||30,000,000|
|Customs revenue on basis of calendar year ending December 31, 1889.||$230,000,000|
|Less sugar assigned to war expenses||60,000,000|
|Surplus available for reduction of taxation||47,000,000|
On reference to the table of the revenue derived from imports, sorted according to their kind, given in the first part of this treatise, it will be found that—
|Aside from sugar, necessary articles of food have been taxed annually between $10,000,000 and||$12,000,000|
|Articles in a crude condition necessary in the processes of domestic industry $13,000,000 to||14,000,000|
|Articles partly manufactured which are necessary in the processes of domestic industry||$23,000,000|
|Less some duties which are imposed in order to adjust other duties to the internal taxes, etc.||3,000,000|
All this revenue can be spared. All these taxes are a useless burden upon domestic industry. This relief can be given within the surplus proved to exist, if this Congress does not waste the substance of the people in order to prevent a reduction of taxation.
Of course, one can not enter into details in a magazine article. Judgment would be required in abating the duties upon crude and partly manufactured materials. Under these headings there may be a very few articles which it may be necessary to move into another class, or on which, duties would have to be maintained because of their close relation to finished products of a very similar kind. So long as we maintain a duty upon spool cotton, for instance, it would not be safe or judicious to remove all duties upon fine cotton thread which could be imported in the skein and reeled here. But these are all small matters of detail. Suffice that the revenue which is now derived from spirits, tobacco, beer, and sugar, from silks, furs, and fancy goods, and from laces, embroideries, and the fine textile fabrics which are articles of luxury rather than of utility, is so large that it would suffice to meet all the ordinary and all the extraordinary expenditures of the Government.
But there is another element to be considered. When a reform of the English tariff was laid down on these lines under the direction of Sir Robert Peel, even he could not anticipate the prosperity which would ensue from the removal of the little petty obstructions to the commerce of the globe, which had yielded only a small part of the customs revenue. He expected a deficiency in the revenue from the duties on imports in consequence of the abatement of the duties on the articles made free; and to meet this expected deficiency he carried a temporary income tax for three years, beginning in 1842 to end in 1845. But such was the stimulus given to industry, trade, and commerce with all the world, that the revenue on dutiable imports soon rose to the same amount that had been yielded before the reform. By 1845 the previous deficiency in the revenue had been surmounted and the Treasury of Great Britain had a surplus to dispose of for the first time in many years.
But the lesson had been learned. Opposition to tariff reform almost ceased; in 1845 another list of articles of more importance was added to the free list. Still it could not be conceived that the revenue would not be diminished and the income tax was again imposed for the term of three years. But again the revenue from dutiable imports increased rapidly, again the consuming power of the people had increased with their prosperity. Then came the Irish famine. The corn laws went by the board by Orders in Council, afterward justified by act of Parliament. The prosperity of England went forward by leaps and bounds. And in 1853 Gladstone completed the work that Peel had begun.
We have yet to learn how to increase the public revenue by the abatement of obnoxious and obstructive taxation; even the simple system which is herein presented, under which even an excessive expenditure can be met by a very simple system of taxation, under which every necessary article in our domestic manufactures will be free could it be put in force, would be immensely disappointing, and in the same way in which Peel and his coadjutors were disappointed. The mass of the people, who are the great consumers both of domestic and of foreign products, would gain so much in their consuming power as to cause the revenue from dutiable imports to become greater than it had ever been before, even if we take off fifty million dollars of taxes now derived from such foreign imports as have been named above.
Again, while the ordinary expenditures of the Government may increase with the population, the burden of interest and of pensions will soon rapidly diminish; therefore I am justified in predicting that if this policy should be adopted and continue for fifteen years or during the life of existing machinery, in which interval all our processes of manufacturing would be readily adapted to the new conditions at a diminishing cost, we might then, if we chose, relieve every article of import from foreign countries from taxation, except spirits, beer, tobacco, and sugar, and perhaps relieve sugar by substituting some other less onerous tax, as the people of Great Britain have done within a very few years.
We might come to these conditions sooner if it were expedient, provided the mass of the people could be persuaded to put a moderate duty on tea and coffee as a substitute for duties on some other commodities. This, however, can hardly be expected; the great objection to the present removal of the duty on sugar is that, once off, it would be difficult to put it on again even if the public should become convinced that they had better put a tax on sugar than on wool, hides, lumber, leather, tin plates, salt fish, potatoes, and other articles of like kind.
Strange as it may seem, a small part of the members of the Senate and House of Representatives seem to believe that the dogma of "protection with incidental revenue" has some foundation in right and justice—notably the author of this catch-word or phrase, who has been pushed into temporary prominence as Chairman of the Committee of Ways and Means by the very sincerity of his convictions.
The greater part of the support of this measure is, however, given by the mis-representatives of their respective States, who can only be designated as political lacqueys or time-servers, many of whom are known to vote against their own convictions.
It happens that most of the representatives on the Democratic side who have not heretofore agreed with the majority of their own number upon this question, have either been removed by death or by failure to be re-elected. Hence comes the necessity for a choice of parties, if this question is to be the paramount one in politics. It is a pity, even a shame, that a plain, practical business question can not be taken out from party politics to be settled on its merits. What is there that we can do to bring this about? This is a meeting of representative business men who have heretofore voted, some with, one party, some with another. Some are called protectionists, some are classed as free-traders, yet all may come to a practicable agreement on practical methods of tariff reform. If that agreement could be brought into effect both, here and elsewhere, to the end that every candidate for election to Congress or to the Senate of the United States, whether named Republican or Democratic, would be given to understand that his election would depend upon his giving his support to methods of tariff reform which are consistent with common sense, such as I have attempted to bring before you, we might feel perfectly sure that the average candidate on either side would hasten to get the benefit of the first conversion to these views.
In the great struggle by which personal liberty was established, the men at arms knew no difference between Republican and Democrat. Loyalty to the principle of liberty was the sole test by which men were justified or condemned. May we not establish the same test in the struggle for relief from the burden of obstruction and destructive taxation?
When in the fullness of time, with due preparation, with careful consideration, and with consistent regard to all existing conditions, the object may be attained which is aimed at by every intelligent protectionist, tariff reformer, and free-trader alike; when all the conditions precedent have been safely established on the lines upon which we may now enter—we may begin the next century free from slavery, free from debt, free from destructive taxation, free from the cruel burden of great standing armies and navies. Then may the people of Massachusetts and all her sister States conduct their work and serve all nations as they serve themselves, sustained and governed by the principle which is engraved upon her own great seal:
Ense petit placidam sub libertate quietem.
- Since this treatise was first prepared for submission to a private club, the dependent pension bill has been passed, which may increase the current annual obligation to $100,000,000 a year. If common sense ruled in fiscal legislation, a duty on tea and coffee would have been imposed to meet this increased obligation. But even this new burden will not prevent the application of this budget within two or three years by the next Congress—such is the elasticity of our revenue, in spite of all the stupidities of partisan legislation.