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Popular Science Monthly/Volume 74/May 1909/Tariff Revision from the Consumer's Standpoint

< Popular Science Monthly‎ | Volume 74‎ | May 1909

TARIFF REVISION FROM THE CONSUMER'S STANDPOINT
By JESSE F. ORTON

REFORM CLUB, NEW YORK CITY

EX-REPRESENTATIVE Charles H. Grosvenor, of Ohio, while addressing the Ways and Means Committee, December 2, on tariff revision, used this language: "It is an unfortunate reference that is constantly being made to the wants and anxieties of the consumer. . . . The prosperity of the consumer goes hand-in-hand with the prosperity of the manufacturer." We have long been accustomed to the view that the consumer's interest is a subordinate one; but now mere reference to it is "unfortunate"; perhaps it will soon be criminal, or at least an act calling for social ostracism.

The majority members of the ways and means committee did not in terms echo General Grosvenor's sentiment, that the "wants and anxieties of the consumer" should be tabooed, but most of them showed their sympathy by action throughout the hearings. Representative Boutell, of Illinois, from the very first, set out to ascertain from witnesses what effect the lowering of duties would have on what he termed "the ultimate consumer"; and this phrase soon became a standing joke with the committee. One would have thought that surely there could not be, among the constituents of these congressmen, a single person so insignificant and vulgar as this same "consumer" must be. As most of the witnesses were protected manufacturers, they easily agreed that the consumer would not be helped by any reduction of duties, that the wicked importers would take all the benefits. When witnesses thought duties should be increased, as they frequently did, they were sure that consumers would not feel the "infinitesimal" burden that would be added, if indeed any were added. There seemed to be a sort of division of labor among the committee members, and it was Mr. Boutell's task to show that the misguided consumers of the country had no need for "anxiety," that they could not be helped by removing taxes or harmed by putting taxes on. Unfortunately, a few tax-paying goats were mingled among the tax-eating sheep that appeared before the committee, and their answers were not satisfactory to Mr. Boutell; they were very sure that the consumer was hurt by taxing the things he must buy and would be relieved by reducing the taxes; but the good representative from Illinois quickly forgot the discordant notes and went on calmly stating, day after day, that the unanimous opinion of witnesses was that the consumer would not benefit, etc., and expressing a hope that, before the hearings closed, the committee might discover some schedule on which reduction of duty would profit "the ultimate consumer."

In showing up the folly of the consumer in supposing that he had an interest in the tariff revision, Mr. Boutell had an able assistant in Representative Gaines, of West Virginia. Mr. Gaines delighted in attempting to show that the duty, if it were all added to the selling price, would add very little to the cost of any particular article. For example, the duty on hides and leather meant only a few cents on a pair of shoes or a carriage top; and the duty on iron and steel meant only a trifle for each wagon. Plainly, it was his opinion that the consumer who would object to this small increase of cost was a very penurious fellow, one chronically disposed to find fault. As a rule, the committee members were careful to include in their reckoning only the added manufacturer's cost traceable to the duty. For example, they pointed to the fact that the duty on the leather in a pair of shoes is only about ten cents on the average, ignoring the profits that the wholesale and retail dealers must make on this ten cents, by which the added cost to the wearer of the shoes is made much greater.

There is at least one member of the committee who would not dignify the consumer's standpoint by the merest mention, Representative Fordney, of Michigan. The word consumer does not appear to be in his dictionary. He knows only the producer and regards as a blessing any duty whatever which prevents the importation of goods and compels their production in this country, no matter what may be the cost of producing them here. Here and there, among the majority members, there appeared a few indications of an appreciation of the rights and interests of the consumer. This was most noticeable in Representative Crumpacker, of Indiana, and Representative McCall, of Massachusetts, with an occasional gleam of light from Representative Hill, of Connecticut.

This general disparagement of the consumer's point of view did not seem to be the result of the old claim that the consumer does not pay tariff duties; but rather upon the consideration (1) that these taxes are small, (2) that the consumer derives great benefits from the tariff system, and (3) that if the taxes were removed, monopoly would prevent the consumer from getting the benefit. It seems to be generally admitted now that the consumer, and not the foreigner, pays the duty. One frank manufacturer said to the committee: "The consumer pays it and I am glad that he does."

If we were to inquire into the reasons why the representatives of the people at Washington are disposed largely to ignore the interest of the people as consumers, more than one answer might be made. To a certain extent, of course, this attitude is due to a peculiar economic belief, the acceptance of the protective theory, by which undue emphasis is placed upon the function of production at the expense of the correlative function of consumption. But protection, as a theory, certainly is not directly responsible for all the indifference to the consumer. Honest and consistent protection, assuming that there may be such, would not in every case forbid the consumer to purchase cheaply abroad; but would, before levying a tax on the importation of an article, give some consideration to the question whether it can be produced in this country with reasonable advantage. In like manner, honest protection would give to producing interests only such a duty as would enable them fairly to compete with foreign producers, not an excessive duty which will exclude the foreign article and enable manufacturers in this country to exact, by combination or otherwise, unreasonable or monopoly prices from consumers.

It can not be doubted that congress has departed very widely from honest or consistent protection. That this is the inevitable result of the system of protecting private industries is my own belief; but that it is a necessary consequence of that system conjoined with our unrepresentative scheme of government, I think no observer at Washington can fail to see. Not only do selfish private interests nominate and elect congressmen and control their course in regard to legislation, but congressmen themselves do not blush to have it known that they are personally and pecuniarily interested in the levying of certain tariff duties for which they vote as public legislators and for which they work and lobby with all the skill at their command. If we had a high and honest standard of public morals in congress, it would be much easier to get an honest tariff, and the consumer would not be plundered as he is now. Whatever may be said of the personal character of congressmen as compared with the personal character of city councilmen, I venture to say that the publicly established moral code in congress is lower than in most city councils. In nearly all city councils a member is not allowed to vote upon any contract or other question in which he is known to have a pecuniary interest; and in many cities all members of the council are absolutely forbidden to have any pecuniary interest in any contract awarded by that body. In Washington it is common gossip, that, out of the nineteen members of the ways and means committee which will frame a new tariff, various ones are pecuniarily interested in this or that schedule; that one is interested in tobacco, another in olives, a third in lumber, and so on. Some of these personal interests cropped out at the hearings. Representative Fordney stated that he was engaged in the manufacturing of lumber, and he bitterly opposed all proposals to remove the duty from that necessity in the interest of 80,000,000 consumers and the conservation of the country's forests. Ex-Representative Rhodes, of Missouri, told how he had introduced a bill in a former congress, increasing the duty on barytes, while he was personally engaged in producing this mineral. A considerable number of congressmen appeared before the committee as attorneys representing private interests and asking for duties on various articles. If a judge should descend from the bench and address the court of which he is a member, or a coordinate court, in the interest of private suitors, we should at once cry out against the system which made such an act possible. But in congress, representatives, whose votes will be needed when the bill reaches the house, appear before the committee in behalf of private parties; and senators, who will vote on the bill when it reaches that body, appear and ask for favors to certain private industries. At the recent hearings Senator Hale, of Maine, a member of the finance committee, to which the tariff bill will be referred and one of the most influential men in the senate, appeared in behalf of a duty on starch.

When the judges who are commissioned to sit at "Washington and deal impartially between tariff-burdened consumers and tariff-protected producers, not only represent selfish interests, but are themselves pecuniarily interested in their own decision, what wonder is it that the consumer's interests are ignored. So far as moral quality is concerned, Senator Burton's act in representing private interests before one of the government departments, for which he was sent to prison, was mild and harmless, as compared with the acts which are openly committed by members of congress in tariff legislation. The one has been made criminal by statute; the others have not.

I have dwelt at some length upon the methods and means by which tariff revision will have to be obtained under present conditions. The situation indicates that unless the law-making body is constrained by an insistent and powerful public opinion, consumers are not likely to get any fair measure of relief. With reference to the specific relief that ought to be granted, something may now be said.

It is generally admitted that many existing duties are much higher than the difference in the cost of producing goods here and abroad. This difference in cost, considering reasonable profit as one of the elements of cost, is a test which the people are entitled to insist upon at this time. If it could be fairly applied, consumers would escape the payment of tribute to monopoly, although they might be injured by the protection given to certain industries that are not well suited to this country. Among the schedules that should be entirely removed, according to this standard, may be noted iron and steel, lumber, coal, lead, salt, petroleum and hides. Among those which will stand marked reductions, on the basis of relative costs, are sugar, many chemicals, woolen, cotton and silk goods, glass and earthenware, machinery and implements generally. We have, in the wool-raising industry, one that should be removed from the protected list on the ground that the duty is a burdensome tax on the people, without any prospect of developing a supply at all adequate for the needs of the country. That these changes which I have mentioned, and others of a like character, would bring great relief to the consumers of the country, the whole people, I think, can not be doubted by any one who does not ignore the ordinary laws of trade. If the ways and means committee, or congress believes that some or all of the relief intended for consumers would be absorbed by trusts and combinations, by the thwarting of the laws of trade, these law-makers should be reminded that this is a poor excuse for their failure to remove burdensome and unjust taxes, that their proper function is to find a remedy for acts in restraint of trade, not to make fear of these wrongful acts the pretext for continuing oppressive burdens on the people.

If duties were reduced in strict accordance with the test relating to cost of production, using cost figures that now obtain, it would certainly be found that in the near future further reductions could be made in accordance with the same rule. This is so on account of the extent to which present costs in almost every industry in this country are increased by the tariff duties themselves, making materials and labor more expensive than they would otherwise be. Thus reductions in one industry will make reductions possible in other industries, until finally we may get down off from the unnatural level of prices caused by the extraordinary tariff rates which we have had for several decades. I believe that when we get down to natural conditions, we shall find that there are few industries that any longer need protection from the standpoint of actual inability to compete with foreign producers in this market.

I have spoken of results that might follow honest application of the test relating to comparative costs of production; but I regard this test as at best capable of only a very rough and imperfect application. Costs vary so much for different times and places, and the difficulty of getting real facts is so great, that this test, probably the best that can be offered in theory for "honest" protection, is wholly unsatisfactory to consumers and to the general public interest. This fact, with many others, leads me to reject entirely the system of protection, as a scheme which is incapable of honest application. Even if we should grant the essential economic arguments of the protectionist, the irresistible tendency of the system toward corruption of government, toward discriminating and excessive duties and monopoly, toward the encouragement of inefficient industry, would condemn it as one of the greatest forces for evil existing in our present civilization.