T? 
 
 19 
 
Cornell University Library 
 HJ 256.R19 
 The "Home market" and the federal su^^^^ 
 
ll}.:i'''^^ 
 
 The ''Nome Market'' 
 
 AND 
 
 The Federal Surplus 
 
 .N F. RANDOLPH 
 
 r 
 
 NEW YORK 
 1888 
 
Cornell University 
 Library 
 
 The original of tiiis book is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924014007490 
 
The ''Home Market'' 
 
 The Federal Surplus 
 
 CARMAN F. RANDOLPH 
 
 NEW YORK 
 
The larger .part of the following pages has been pub- 
 lished under the titles "Surplus Ee venue," in the June 
 number of the Political Science Quarterly, and the 
 " Home Market " Fallacy, in the Evening Post of Aug. 21, 
 1888. 
 
 Newark, N. J., Oct. '6, 1888. 
 
 Carman F. Eandolph. 
 
 [Copyrighted by Carman F. Randolph, 1888.] 
 
THE "HOME MARKET" 
 
 THE FEDERAL SURPLUS, 
 
 Public finance rarely becomes generally attractive until 
 there is danger in the air. The dull burden of routine 
 finance is borne by a few amongst us, and so long as taxes 
 are levied, collected, and paid in the ordinary way, so long 
 are we content to leave the care of administration to those 
 directly responsible, the paid officials. But there are times 
 when to every citizen the conduct of finance becomes of 
 absorbing interest. In war time, the intimate relation be- 
 tween the soldier and his base of supply divides the popu- 
 lar interest between the camp and the treasury. In peace 
 we have our crises caused by speculation and bad adminis- 
 tration, and the effort is then to straighten out our money 
 matters with all speed, pocketing our losses with what 
 philosophy we may. But there is a financial trouble so in- 
 sidious in its working, indeed so often tricking itself out in 
 the garb of prosperity, that its uprooting demands a vir- 
 tue and intelligence wholly different from the fervent 
 patriotism on which we rely in war or the quick self-in- 
 terest in panic. It is this rare trouble, the trouble of su- 
 perfluity, which the citizen is now called upon to combat. 
 To some a surplus is a thing to be proud of; they are at 
 a loss to see why an overflowing treasury is a signal of 
 distress, or how it is possible for a stable, popular govern- 
 ment to have too much money. They view a surplus as 
 
4 
 
 they would the fabled sands of the Pactolus, and if the 
 gold in the treasury were magic gold we might -welcome 
 its overflow and ask no questions; but as the treasury 
 creates no wealth, as every dollar in it is drawn from the 
 pockets of the people, it follows that all excess over and 
 above the just needs of the government is the product of 
 unjust taxation. 
 
 The conception of government funds as so much treas- 
 ure has long since faded away with the conception of gov- 
 ernment itself as a machine regulating the affairs of the 
 many for the benefit of the few. In former times money 
 was drawn to the treasury in the shape of exactions, 
 benevolences, blackmail, foreign spoil. The irregular 
 flow of the stream of tribute made the impounding of its 
 infrequent surplus a matter of necessity. The strength 
 of the government was largely measured by the size of 
 its hoard. The treasury is no longer the repository of 
 treasure, but the channel for the distribution of the pro- 
 ceeds of taxation. The strong box is open at both ends. 
 The state now relies on a comprehensive system of taxa- 
 tion which will bring to the public needs a yearly revenue;, 
 and the ideal revenue is one so elastic that it rises and 
 falls, not coincident with— that is impossible— but in close 
 relation to those needs. 
 
 A thing to be desired in any system of taxation is that, 
 taxes be levied and expended within districts widening 
 according to the nature of the expenditure; so that each 
 object of appropriation, whether it be the making of a 
 country road or the building of a war- ship, is controlled 
 by the community the nearest in interest to the work, the 
 most competent to secure its proper construction. We in 
 the United States are fortunate in having this admirable 
 division of the labor of taxation established in our con- 
 stitutional polity. We may and often do err in the ex- 
 
penditure of public moneys; but so long as we stick to 
 the spirit of our constitution we cannot commit the cap- 
 ital error of confounding local with general' responsibili- 
 ties to the weakening of both. 
 
 In the administration of finance the revenue should not 
 rise above the expenditure. If substantial equality can- 
 not be maintained, a slight deficit is preferable to a 
 marked excess, since the latter subjects the government 
 to the reproach of an unjust tax-gatherer. Yet a surplus 
 is sometimes taken as a sign of government wealth; in 
 truth it is rather a sign of unthrift on the part of the tax- 
 payer. This notion of government wealth is in itself the 
 parent of misconceptions which go to the root of our 
 democratic institutions. Our government possesses no 
 wealth which can be applied to general public wants, and 
 this not alone in the abstract sense that in a democratic 
 state as the government itself is of the people so are its 
 possessions, but in the fact that the property to which the 
 government holds title is not a source of net income. 
 The government owns ships, buildings, material, etc., 
 practically inconvertible. It holds the title to a vast 
 domain which as a financial investment has proved a 
 failure, since the cost of its acquisition and develop- 
 ment already exceeds the receipts from sales by about 
 $126,000,000. This domain has been at times treated as a 
 •source of general revenue; again, as the spoil of corpora- 
 tions; but the true policy is to develop the land for its 
 highest destination, its purchase at low, even nominal 
 prices, by actual settlers who in time build up self- sup- 
 porting States. 
 
 But if the government does not possess available wealth, 
 it commands that most fruitful of all resources, the ability 
 and willingness of a free people to tax themselves. This 
 source of cash and credit represents the real capital of the 
 
United States. That the amount of this capital is not 
 ascertained should not blind us to the fact that it is not 
 unlimited; and while the likelihood of its exhaustion, or 
 even its 'serious impairment, is too remote to be consid- 
 ered, yet in time of peace there should ever be a resolution 
 to keep the demands on the capital far under the ability 
 and willingness of the taxpayer. It is a foolish policy 
 which continually demands what the capital will bear; 
 and he who complacently boasts of an extra weight of 
 taxation patiently borne, a foolish statesman. The true 
 measure of taxation is not what the people can, but what 
 they ought to bear. 
 
 Now every tax must be scrutinized as to its mode of col- 
 lection, its rate, its subject, and the purpose to which it is 
 applied. A tax satisfactory in all these respects is in no 
 sense a draft on capital; the withdrawal of private moneys, 
 however great, being for the proper maintenance, perhaps 
 the salvation, of the state. When it offends in any of the 
 first three points its effect ranges from popular annoyance 
 to real oppression. The tax is inexpedient, it is wrongful, 
 but it is not yet wholly useless. When, however, a tax is 
 imposed or retained for a purpose unnecessary or, worse 
 still, made to order, nor ease of collection, nor lowness of 
 rate, nor fitness of subject can save it from condemna- 
 tion. To spend that you may tax is the high crime of 
 finance, a crime in nowise mitigated by popular acquies- 
 cence. Suppose a tax is imposed or retained for a pur- 
 pose which, though popular, is really unnecessary. The 
 willingness of the people to put their hands in their 
 pockets argues well for the propriety of this tax. But in 
 a few years an emergency occurs, war or its apprehension ; 
 the revenues must be speedily heavily increased; the re- 
 sources of the nation are strained to their uttermost; then 
 it is that the fancy tax rises to plague its sponsors or, worse 
 
still, its heirs, and the burdens of war-financiering are 
 weighted by the improvident pledging of a part of the 
 national capital. That the pledge once given would be re- 
 voked is possible, though not -probable; a service pension 
 once established, a subsidy once pledged to the States, 
 would be as firmly fixed in our annual budgets as are 
 the salaries of congressmen. Permanent appropriations 
 create permanent necessities. If government devotes 
 money to new uses, it soon makes them indispensable; if 
 it steps in to the assistance of existing agencies, the old 
 channels of supply dry up or are diverted elsewhere. 
 
 II. 
 
 An excess of revenue over ordinary expenditure, includ- 
 ing interest, has been an occurrence not unusual in the 
 course of our financial administration; and it might surprise 
 those who boldly assert that a surplus is an infallible sign 
 of prosperity to learn that in the earliest years of our gov- 
 ernment, with a country undeveloped, with the heavy load 
 of the revolutionary debt, our public stocks below par, 
 our finances managed experimentally, the annual budgets 
 showed in several instances large surpluses. In 18l7 and 
 in several years up to 1835 surpluses again appeared. 
 
 Of the total receipts of the government to 1835, exclud- 
 ing of course loans, nearly ninety per cent, was derived 
 from custom duties, the balance being made up from 
 public lands, internal revenue and direct taxes, two-thirds 
 of the sum of these taxes being collected in the years 
 1814-17. 
 
 The first tariff act was protective in name, and its suc- 
 cessors increasingly protective in principle; yet with all the 
 growing severity of the tariff fight, there was never a di- 
 rect issue involving the maintenance of the protective 
 
principle by an enforced expenditure of surplus receipts. 
 Circumstances prevented the attainment of this extreme 
 position. While the receipts in excess of ordinary expen- 
 ditures were in one sense surpluses, they were not, either 
 at this period or before, condemned to imprisonment in the 
 treasury, but were mainly applied to the reduction of the 
 public debt. Thus they never caused stringency, they 
 were ever applied to a worthy object. 
 
 Nor was there absent the notion that a surplus might be 
 beneficially applied to an extended system of internal im- 
 provements or even divided among the States. As a mat- 
 ter of fact, internal improvements figured but little in our 
 budgets up to the time of Jackson, and Monroe even de- 
 nied their constitutionality. The idea of distribution lay 
 dormant for some years, and became lively only when 
 the approaching satisfaction of the public debt became 
 manifest. Schemes for distribution, both with and with- 
 out a constitutional amendment, grew more and more 
 pronounced, until the payment of the debt in 1835, coin- 
 ciding with phenomenal receipts from public lands, made 
 possible the so-called distribution of 1837. 
 
 Up to this time the surplus over ordinary expenditure 
 had been generally applied to the purchase or call of public 
 stocks; but this surplus found a government without a 
 creditor. There was an unwihingness to alter custom 
 duties and thereby disturb the compromise tariff of 1833, 
 a tariff intended to gradually reduce duties until at the 
 end of eight years the equilibrium between income and 
 outgo should be established. Various plans for the devo- 
 tion of the money to objects of Federal importance were 
 proposed, notably that of Senator Benton, who advocated 
 the cause of coast fortification; but the surplus money 
 possessed a magnetic attraction too strong to be overcome 
 and the States pounced upon it and carried it off. 
 
Turning to the present surplus, we find that in each of 
 the past twenty years a high but remunerative tariff and 
 a large internal revenue tax have yielded an income out 
 of which, after paying ordinary expenses, interest, and in- 
 stallments on account of the sinking fund, there has each 
 year remained a surplus. These surpluses range in amount 
 from $2,000,000 in 1874 to $145,000,000 in 1882 and aggre- 
 gate about $1,500,000,000. Until recently the surplus 
 went to the satisfaction of a large part of the interest- 
 bearing debt, acting as an extraordinary adjunct to the 
 sinking fund. 
 
 The present surplus differs essentially from those pre- 
 ceding 1835 and that of 1837. The earlier surpluses were 
 mere account-book balances, in excess of ordinary expendi- 
 ture but not of the real necessities of the government as 
 evinced in its indebtedness, an indebtedness much dis- 
 organized and largely due to foreign creditors. The sur- 
 plus of 1837 was largely the result of a speculative craze 
 for western lands, the government having in the years 
 1834-6 received purchase money to the amount of $44,- 
 000,000, a sum about equalling the proceeds of all previous 
 sales, and making nearly one-half of the net revenue for 
 the years named. The people of that day may perhaps 
 be pardoned for treating this enormous, unforeseen deluge 
 of money as manna, but we can amuse ourselves with 
 no such magic. We know that our surplus is derived 
 from taxes paid out of our own pockets, that in eating it 
 up we simply feed upon ourselves. 
 
 Nor is the present surplus a passing one like that of 
 1837. With our present revenue system and objects of 
 expenditure, each annual accounting will show an excess 
 of income. To meet the question squarely we must either 
 decrease our income or increase our expenditure. 
 
 J'our courses are open to us. (1) The utilization of the 
 
10 
 
 surplus in purchase of unmatured bonds — that is coaxing- 
 bondholders to sell by offering a bonus made out of tax 
 receipts. (2) The extinguish m^nt of the surplus by its- 
 wasteful expenditure. (3) The reduction of the surplus 
 by wholesale remission of taxes on liquor and tobaccO' 
 leaving unlifted the burdens on necessaries. (4) The re- 
 vision of the tariff with a view to decreased revenue. 
 
 A surplus and an unpaid debt seem to have a mutual 
 attraction. The application of the one to the other is at 
 first blush most fitting. True, it is sometimes said that 
 "a national debt is a national blessing." It has been, 
 argued even that had our country been blessed with a 
 heavy debt in 1860, and that debt held largely at the South,, 
 the self-interest of that section would have blocked its 
 secession. But the phrase was invented to lighten the 
 burden of debt which the Napoleonic wars had cast upon 
 England — a burden which could not be lifted. Our case is- 
 wholly different. Our debt is manageable and its pay- 
 ment fixed. As our debt is in course of easy payment it 
 is proper before adopting any new scheme of settlement 
 to consider its function — the cost of its cancellation. 
 
 The national debt is so far an institution that it forms 
 the basis of a banking system which gives us a currency 
 of capital, excellence and convenience. Now to strike 
 down this currency without immediately substituting 
 one as good, would be impolitic even in face of the 
 general rule that the best thing to do with a debt 
 is to pay it. Until a stable and convenient medium of 
 universal currency be established, the country can better 
 afford to pay the debt gradually through the sinking- 
 fund than run the risk of a disordered, perhaps discredited 
 currency. Further, the mass of the debt is not to be re- 
 duced by redemption but by purchase in open market. 
 The funding of the greater part of the debt at a low rate of 
 
11 
 
 interest, its exteasion to 1907, the demand for bonds for 
 banking and investment purposes have operated at once- 
 to decrease its burden and raise the market price of the- 
 bonds. The market price of the four per cents is now about 
 $130. The current treasury purchases,under the resolution 
 of last winter, have but skimmed the market, and prove 
 that if the surplus is to be reduced by bond purchase, a 
 bonus must be offered and paid. If the Secretary of tho 
 Treasury should construe his authority to extend to the- 
 compelling of bond offerings, by holding out the bait of 
 an arbitrary substantial advance on the market price, he 
 could find no justification for his action in the present, if 
 indeed in any exigency. The only method by which the 
 surplus can be reduced by bond purchase is by act of con- 
 gress compelling the treasury to spend a definite sura 
 within a definite time. The bondholder may then fix the 
 price and pocket the surplus. Small holders might be 
 content with a slight advance, but when there remain 
 only large individual holders, corporations and specula- 
 tors, a large bonus would be demanded and paid. There 
 may be methods of surplus reduction practically worse 
 than this. There can be none more vicious in principle. 
 To take money from the people under tax laws, which pre- 
 sume a public need, and then hand it over to a particular 
 class, would be a clear case of obtaining money under 
 false pretences. 
 
 III. 
 
 What is a surplus revenue ? Evidently an excess of in- 
 come over expenditure, which may be wiped out by the 
 reduction of revenue or increase of appropriations. If the 
 excess be marked, the withdrawal of money from circula- 
 tion will soon compel the adoption of makeshifts to avert 
 financial stringency. But any excess over economical 
 
12 
 
 constitutional expenditure embodies the worst feature of 
 a surplus, the improvident taking of money from the tax- 
 payer. While the surplus stands on the books, it warns 
 against waste ; when it is credited to improper appropria- 
 tions, the warning is unheeded. Apart from a few pleas- 
 antries about the easy handling of a surplus, there is no 
 difference of opinion as to the danger of a surplus in the 
 treasury and the necessity for its speedy disappearance ; 
 but in the means to the end the difference is the discord 
 between sound finance and rabid speculation, between 
 good government and bad government. One school of 
 statesmen profess no doubt of the only way to deal with a 
 surplus : Spend it. This counsel has apparently the merit 
 of simplicity, which, together with a seeming spirit of lib- 
 erality, makes it doubly engaging.' In reality it is neither 
 simple nor liberal. It is not simple. It necessitates the 
 ■enforced creation or adoption of objects of Federal aid. It 
 says to the taxpayer : You pay more than the government 
 can use, therefore you must invent such new wants as 
 will enable the government to dispose of your now use- 
 less contributions. You must, under penalty of a tight 
 money market, relieve the government from the stigma of 
 miserliness by becoming a spendthrift. It is not liberal. 
 It would almost seem that certain politicians rest under a 
 delusion which transmutes the proceeds of taxation into 
 the gifts of a grateful people, a sort of votive offering 
 reverentially laid upon the altar of patriotism to be doled 
 out or lavished, according .to the irresponsible will of the 
 state. Now people pay taxes grumbingly, dutifully, 
 cheerfully ; but the man is rarely found who pays because 
 he loves to pay. While there is no enforceable contract 
 between the taxpayer and the state, the whole system of 
 finance, nay of social order, is grounded on the assumption 
 that taxation is imposed only for the reasonable, econom- 
 
13 
 
 ical wants of the people. Through" the influence of this 
 delusion, expenditures are conceived which, under the 
 guise of charity or patriotism, are in fact misappropriations 
 of trust funds. Under a regime where exactions are 
 levied for the benefit of the few, an occasional largess to 
 the many may savor of liberality ; the government gives 
 where it might retain. In a popular government of 
 enumerated powers, the spending of money on any princi- 
 ple other than that of reasonable necessity is robbing Peter 
 to pay Paul. 
 
 Under the stimulus of this benignant counsel, charit- 
 able desires are taking on the semblance of public neces- 
 sities, real necessities are expanding beyond all recogni- 
 tion. The natural wish for the better education of the 
 negro has developed into the Blair bill. The just pension- 
 ing of invalid soldiers has broadened into the service pen- 
 sion scheme. 
 
 All extravagant, speculative, and corrupt interests are 
 galvanized into vigorous life through the influence of the 
 surplus. Promoters of all sorts of schemes, beggars for 
 the widening of rivulets, the deepening of rills, hang 
 about the treasury in the hope that the increasing pres- 
 sure of idle dollars must soon burst out the doors. Nor is 
 the treasury the Mecca of the needy alone. But the other 
 day the Empire State, which in her struggling youth built 
 the Erie Canal, was importuned, and by sons of her own, 
 to beg for Federal aid towards its enlargement. Happily 
 the temptation was repulsed by a round majority, and the 
 State declined to pose as that most shameless figure— a 
 beggar with a bank account. 
 
 If the policy of extravagance be adopted, it will be done 
 in cold blood. The indifference with which the corrupt 
 and wasteful management of the reconstruction period 
 was viewed is perhaps explainable by the fact that the 
 
14 
 
 popular thought was focused elsewhere. But since the 
 fact of a restored and strengthened Union is now accepted, 
 save by that band of politicians who desire the war to last 
 forever that they may exploit a pinchbeck patriotism and 
 save their occupations, the questions that now press upon 
 us are the passionless practical problems of every-day life. 
 If we are wasteful now it will be through deliberation, 
 not preoccupation. 
 
 IV. 
 
 Some of the schemes which would effect a reduction of 
 the surplus, and for that reason obtain an advocacy out- 
 weighing that due to their own attractions, are yet in the 
 air. Several, however, have taken such definite, threat- 
 ening shape as to warrant close attention. Of the various 
 propositions looking to the enlargement of the pension 
 list, the most popular is the most radical — the service pen- 
 sion scheme. 
 
 The true basis of all pension legislation is this: when a 
 man enlists and takes the risks of battle, exposure, and 
 privation, he justly expects to be i usured against loss oc- 
 curring through incapacity resulting from service, or if 
 death should cut him off, that his family should be to some 
 extent compensated. Thus far the aid is in no sense a 
 charity, for it may be said to be an understood, indeed it 
 has been at times an expressed, condition in the contract 
 of enlistment. But when one has passed through service 
 in safety and health, his claim to a pension must be either 
 in the nature of damages for business loss incurred through ' 
 absence, or simply as extra pay for patriotism. The former 
 claim may be easily disposed of. If the soldier were a 
 poor man the monthly pay, to say nothing of the high 
 bounty paid when men were most needed, rendered his 
 financial position no whit the worse, and in many cases 
 
15 
 
 ibetter. If he were rich and it was a question between 
 'business air^ service, he could have sent a substitute. 
 With regara to the latter claim, it should be sufficient to 
 say that under a popular government the cause of national 
 •defense should be nearest to the hearts, furthest from the 
 pockets of the citizens; that while it is right to pay for 
 service, it is wrong to pension patriotism. It is true that 
 after the lapse of many years, when the presumption is 
 that the survivors of war are incapacitated through age, 
 the nation has shown its gratitude by extending the relief 
 ■of a pension. In 1818 a pension was granted to each man 
 who had served nine months in the revolutionary army 
 and was in reduced circumstances. It was estimated that 
 about $160,000 would be the annual charge on this ac- 
 count, but the expenditure for the first year was nearly 
 two millions, for the second nearly three. Over twenty - 
 ;seven thousand claims were presented, representing about 
 ten per cent of the whole number of men enlisted. One- 
 third of the claimants were at once branded as impostors, 
 ■and a strict requirement of proof of proverty forced out 
 ■one-third of the remainder, so that but twelve thousand 
 passed muster. 
 
 A service pension to the survivors of the war of 1812 
 was granted in 18T8, and those whose familiarity with the 
 laws of mortality had led them to estimate the probable 
 number of claimants were astonished to see seven thou- 
 :sand survivors and twenty-four thousand widows enter 
 their claims. The survivors of the Mexican war were 
 ■allowed a service pension last year, forty years after ser- 
 'vice. Why should all precedent be violated in favor of 
 the survivors of the late war by granting a service pension 
 .after the lapse of but little more than twenty years? The 
 •average age of the soldiers was twenty-six years, which 
 would make that of the survivors about fifty, and it can- 
 
16 
 
 not be pretended that at this age the average man is in- 
 capable. Moreover, the cost of the scheme vv^ not only- 
 wipe out the surplus, but in all probability create a heavy 
 deficit. In 1882 the pension officials estimated that about 
 one million survivors vi^ere not on the pension rolls, and 
 in view of the fact that pension estimates are apt to be 
 under the mark, it is safe to count on at least that number 
 at the present time. Now if a pension of eight dollars a 
 month, the amount allowed the survivors of 1812 and the 
 Mexican war, were granted, the annual charge would be 
 about one hundred millions. Since the adoption of the 
 constitution nine hundred millions of dollars, about one- 
 tenth of our net ordinary expenditures, have been credited 
 to pensions. We are not called upon to supplement this 
 generosity by extravagance; to tax ourselves for the ad- 
 vancement of ambitious politicians whose object is not so 
 much to pension veterans as voters. 
 
 The statistics of illiteracy in the Southern States, as 
 published in the census of 1880, attracted instant and 
 widespread attention. The fact that in many of these 
 states nearly one-half of the voters could not read their 
 ballots, a fact to all men, of serious concern, so frightened 
 a few that all considerations of law and propriety were 
 overborne and the Blair bill was created. Now this bill, 
 which would effect the distribution of $77,000,000, chiefly 
 among the Southern states, during a period of ten years, 
 is in my judgment one of the most unconstitutional bills 
 that ever passed a House of Congress. I am one of those 
 who hold that the result of the war is the restoration of 
 the old Union, not the creation of a new one; that the 
 new amendments are not vague abstractions, but definite 
 enactments; that when the constitution vindicated its 
 supremacy, the clause relating to " the general welfare " 
 had suffered no change, but stood forth clothed with its 
 
17 
 
 old interpretation. As we honor Hamilton as the advo- 
 cate of th§ constitution and Marshall as its expounder, so 
 must we honor Joseph Story as its commentator. Is it in 
 order to quote Story, or is he superseded by BJair? Do 
 legislators make their views of constitutional law square 
 simply with their own prejudices or the wishes of their 
 constituents? Story says: 
 
 If the clause " to pay the debts and provide for the com- 
 mon defense and general welfare of the United States " is 
 construed to be an independent and substantive grant of 
 power, it not only renders wholly unimportant and unnec- 
 essary the subsequent enumeration of specific powers; but 
 it plainly extends far beyond them, and creates a general 
 authority in Congress to pass all laws, which they may 
 deem for the common defense and general welfare. Under 
 such circumstances, the constitution would practically 
 create an unlimited national government.* 
 
 Yet the power to render Federal aid to State education 
 could be derived only from that very interpretation of the 
 clause in question which Story so strongly repels. The 
 constitutional objection to the measure would be in itself 
 sufficient to insure its reprobation, were it not for the new 
 canon of interpretation which consists in reading, not on, 
 but between the lines of the constitution. This canon 
 which substitutes elastic construction for the broad con- 
 struction of the Federalist, which leaves blanks to be filled 
 up according to the taste and fancy of the interpreter, has 
 reduced the minds of many to a state of uncertainty as to 
 the exact force and effect of the constitution, and left 
 them open only to the argument of expediency.* Waiv- 
 ing then the question of law — Is it politic, is it right to lay 
 Federal taxes for the support of the Southern schools? 
 To narrow the question still further and avoid the selfish 
 position as to the fairness of taxing the richer States to 
 
 * Commentaries, § 906. 
 
18 
 
 make up the deficiencies of the poorer — Does the Blair bill 
 promise good results to the recipients of its bounty ? It 
 is impossible to discredit the rule that, as to individuals, 
 so to states, self-help is worth far more than charity. The 
 unaided step forward, taken hardly though it be, gives an 
 earnest of future progress wholly lacking in the quick 
 motion which follows a violent push. The charity of the 
 state can rarely be applied with propriety unless its re- 
 cipients are too weak to help themselves; and one of the 
 most important, most delicate responsibilities of states- 
 manship is the determination in a given case whether 
 hopeless distress or remediable misfortunes claim the aid 
 of the state. Under which category comes the illiteracy 
 of the South ? There is without doubt a phase of the ques- 
 tion so desperate as to admit of no palliative. The adult 
 illiteracy must be accepted as a misfortune beyond the 
 cure of even the wisest benevolence. Now the census of 
 1880 showed that, out of four million seven hundred and 
 fifteen thousand illiterates of ten years of age and over, 
 nearly three millions had passed the school age, so that the 
 South could be fairly held responsible for the ignorance 
 of seventeen hundred thousand persons. How has the 
 responsibility been met ? If indifference, shiftlessness or 
 a begging spirit mark the attitude of the South, then 
 might the plea be put forth for aid for those who cannot, 
 will not help themselves. But the South is not indifferent. 
 The Northern feeling of vague concern, caused by the 
 perusal of tremendous statistics, is replaced at the South 
 by that sober realization with which one views immediate 
 personal perils. This realization has been followed by en- 
 ergetic action. The progress of education is notable, not 
 only in view of the obstacles in the path, but in the 
 actual advance made, for many of the Southern States 
 now report a state of education fairly comparable with 
 
19 
 
 that existing in several New England States a quarter of 
 a century ago. For a people handicapped at the start by- 
 slavery, later ruined by war, to be less than a generation 
 behind New England communities in their common-school 
 system is proof that powerful self-reliant forces are at 
 work; and we of the North who, in the pride of our 
 wealth and philanthropy, ^eek to tax ourselves for the 
 supposed good of our neighbor should be mindful lest in 
 striving to raise the ignorant by act of Congress, we 
 weaken the educated by relieving them of the duty of 
 self-help. 
 
 There is another scheme for absorbing the surplus 
 which has distinguished promoters. If is far more liberal 
 than those already considered, and in its simple directness 
 is positively childlike, being entirely dissocciated from the 
 moral and charitable aims which temper the education 
 and pension plans. We are to rid ourselves of the surplus 
 by throwing it to the States. A system of taxation kept 
 up for the purpose of paying cash dividends is indeed a 
 startling novelty in finance. It is suggested that after 
 whiskey pays for fortifications it shall pay the taxes on 
 land. There is no hint of the ratio of distribution among 
 the states, whether in proportion to the value of real 
 estate, or the quantity of whiskey consumed. Probably 
 the latter, for then the scheme would not savor of a ruse 
 on the part of a "dry" but thrifty Maine to profit by the 
 thirst of a "wet "New York. It maybe objected that 
 this particular proposition is of no more serious import 
 than its deceased relative, the proposal to pay the debt of 
 West Virginia from the Federal treasury ; yet the senti- 
 ment behind it is sufficiently widespread to deserve atten- 
 tion. 
 
 The idea of the distribution of revenue among the States 
 is founded on honest misconception or sinister determina- 
 
20 
 
 tion. Place to stupidity ! Where is the constitutional 
 warrant for a distribution law ? If an amendment were- 
 proposed, what should be its purport ? A distribution 
 based on population, as evidenced by representation in 
 Congress, would be evidently a mere excuse for the scat- 
 tering of money without an intelligent thought as to its- 
 destination. Eich States and poor States, well-managed 
 and ill-managed, would alike reap the benefit. If distribu- 
 tion were made according to the needs of the States, it is 
 to be feared that few would yield the palm of misfortune 
 or unthrift, but that, with money going begging, each 
 would foUow its interest by Hiding its benefits and parad- 
 ing its burdens. If the surplus should be distributed on 
 the basis of State contributions to the Federal treasury, 
 the farce of paying out money as taxes to receive it later 
 as alms would be soon hissed off the stage. From any 
 point of view, a distribution must be unfair or unneces- 
 sary. 
 
 The experience of 1837 is worth the study of those- who 
 ignorantly rely upon it as a precedent. It had all the 
 defects of a distribution save one : it was not a distribution 
 but a deposit, and though practically lost still stands on 
 the books as a sum reclaimable. 
 
 Does it seem that the practical importance of the ques- 
 tion is exaggerated? Fifty millions of dollars may appear 
 a small sum in an annual distribution, when compared 
 with the wealth, population and extent of this country; 
 indeed there are several citizens whose fortunes are sup- 
 posed to exceed it; yet it is about one-sixth of the ordi- 
 nary expenditure of the Federal government, and more 
 striking still is its relation to State revenues. If this 
 amount were divided among the States, on the basis of 
 congressional representation, it could replace more than 
 two-thirds of the gross sum now raised by State taxation. 
 
21 
 
 Nearly one-half of the States would receive as their quo- 
 tas more than their tax levies now produce. It is obvious 
 that so great and sudden an influx could not fail to have 
 a decided effect upon State finances, upon State govern- 
 ments. It is but too probable that the immediate result 
 •of a distribution would be in many instances a course of 
 wasteful and corrupt expenditure; but, assuming these 
 •evils overcome, and the States settled down to the orderly 
 administration of the new revenue, how would they spend 
 it? An economical management would demand the appli- 
 •cation of the revenue to the reduction of taxation. Now, 
 if it were proposed to destroy, in the States, that right of 
 self -taxation which is the high mark of statehood, to dis- 
 solve that union of taxation and representation, as impor- 
 tant to the well-being of the States as to the Federal gov- 
 ■ernment, the scheme would be rightly denounced as 
 revolutionary. Yet, if a State should apply the fruits 
 •of distribution to reduction of its taxes, the Federal au- 
 thority would not only replace those taxes but to a great 
 •extent the power which imposed them. The State power, 
 thus restricted, might soon lose its vigor and the econom- 
 ical State become dependent on the Federal government. 
 Suppose, however, that a State, with a just pride in its 
 •ability to minister to its own necessities, chose to treat 
 the new revenue as extra revenue. The States, if any, to 
 which this course would commend itself, would naturally 
 be those which, by virtue of their wealth and character, 
 are already able to and do fulfill their duty to the citizens. 
 Their necessities being thus satisfied, the new revenue 
 would be likely to be devoted to luxuries, or at least to ob- 
 jects for which the States, if left to themselves, would not 
 •care, or perhaps dare, to lay taxes. 
 
 After necessities are provided for, further expenditure 
 is apt to run on the line of public charity, of works under- 
 
22 
 
 taken for the sake of giving employment, in a word, on 
 that paternal theory, hitherto foreign to our ideas, the 
 theory which substitutes state care for self-reliance. 
 
 And when all is done what good has been gained? The 
 surplus is not reduced, it is merely parceled out. Taxa- 
 tion is lightened but little, if at all, though by a juggler's- 
 trick its burden has been unfairly shifted. Worse than 
 all, the States are dependent on the Federal government 
 for necessities for which they themselves should pay, or 
 luxuries to which th^y should never be tempted. To the 
 valuable good of a general uniformity is sacrificed the 
 priceless good of local responsibility. 
 
 They who, brooding over the evils of high taxation, of 
 illiteracy, of poverty, seek to enact prosperity, are blind to 
 the mission of this Federal government of ours. They who, 
 trembling at the remembrance of a beaten confederacy, 
 think to strengthen a perfect union by centralization, 
 will do well to reflect that if the Union is ever to dissolve, it 
 will be because a national government, having attempted 
 the task of regulating the local affairs of widely distributed 
 communities of diverse character and interests, crumbles, 
 under the weight of unfulfilled responsibilities. 
 
 But how should they be judged, who, not ignorant, but 
 reckless of consequences, advocate schemes for the spend- 
 ing of public moneys, not for the sake of the objects, but 
 solely for the purpose of keeping up taxes ? Yet this 
 thriftless, unpatriotic sentiment is the hotbed of the 
 wasteful schemes which beset us on every side. The logic 
 of protection is pushed to its farthest, boldest, yet weakest 
 position, for it here violates the primary law of taxation.. 
 To tax for the sake of extravagant spending was and still 
 is in certain realms a frequent blot on public administra- 
 tion; but for this commonwealth, this time has been 
 reserved the suggestion of that grotesque blunder, to 
 
23 
 
 spend for the sake of extravagant taxing. It is no mere 
 political experiment which is thus coolly proposed, one 
 that if weighed and found wanting can be lightly cast 
 aside. It is a new financial principle of dangerous attrac- 
 tion. Once get the idea fixed that a tax can become an 
 institution so bound up with the fortunes of the country 
 that it must be sustained, even at the price of economy, 
 and the effect will outreach even the wide bounds of the 
 present controversy. 
 
 . I am well aware that there are protectionists who repel 
 the plan of increasing expenditures to save custom duties 
 and substitute a simpler and much less objectionable expe- 
 dient. Their argument is that the surplus does not repre- 
 sent customs, receipts, but internal revenue taxes; that the 
 repeal of the latter would restore equilibrium. This 
 position is straightforward and merits respectful consider- 
 ation. Now it is true that internal taxes have ever been 
 with us war taxes, while customs have been, both in war 
 and peace, the constant contributor to our treasury ; but 
 is it sensible to take a sentimental view of a plain business 
 question, and, substituting a name for a thing, decry a 
 tax because it has heretofore aided us solely in war ? It 
 is true that internal taxes bear solely on home production ; 
 it is no less true that import duties bear wholly on home 
 consumption, and that to an extent to be measured, not 
 alone by the receipts from customs, but by the enhanced 
 price paid for protected goods of home manufacture. It 
 is more importantly true that the subjects of our present 
 internal taxes are such as easily bear a great tax afford- 
 ing large returns ; it cannot be pretended that the tax 
 paid on imported or the bounty paid on domestic woolens 
 is lighter than that paid on whiskey. We confound all 
 rational difference between luxuries and necessaries, or 
 rather interchange the ideas conveyed by those terms, if 
 
 :^l^] 
 
24 
 
 we free whiskey and tax clothing. It is unnecessary to 
 consider the whiskey tax with reference to its efficiency 
 as a regulator of traffic and consumption, except to say 
 that the argument that the States and not the Federal 
 government should impose the tax will be pertinent when 
 the States generally show a diposition to that course. 
 Tried by sound rules of finance, the tax on luxuries, 
 whiskey and tobacco, is lighter than the tax on neces- 
 sities, clothing. But if the logic of finance points to a 
 theoretical conclusion, the logic of circumstances attains 
 a practical one. At the present writing there are not 
 enough votes in Congress to pass a law abolishing the tax 
 on liquors, and there is nothing to indicate a change of 
 sentiment in this or the next Congress. There is, how- 
 ever, a strong leaning toward the partial repeal of the 
 tobacco tax. Assuming then the tax on liquor retained, 
 that on tobacco partly repealed, there will still be a heavy 
 surplus which must be credited to customs, and to customs 
 alone. 
 
 The sugar duties produced last year over $50,000,000, 
 and the coincidence of this sum with the probable annual 
 surplus, the fact that domestic production supplies but 
 one-eighth of the demand, and the prime necessity of the 
 article itself have given rise to the suggestion that these 
 duties be repealed. As sugar making is practically con- 
 fined to Louisiana, and as Louisiana is a Democratic state, 
 Eepublican protectionists have hitherto had the delicacy 
 to refrain from a direct proposition for repeal, rightly 
 conjecturing that the abandonment of the principle that 
 "the injury of one is the concern of all" would be here 
 ascribed to partisan motives. True, the suggestion has 
 been sweetened by the vague hint of Federal bounties in 
 lieu of duties, but the most expert prospector in the con- 
 stitutional field would be driven to his wits' end to discover 
 
25 
 
 authority for the Federal government to become the finan- 
 cial backer of a sugar plantation. 
 
 V. 
 
 The last remedy for the surplus evil is found in tariff 
 revision. Now, revenue may be easily reduced by revis- 
 ing up. Yet, to try to escape from a surplus that is from 
 useless and, therefore, high taxation by imposing still 
 higher duties involves a gross delusion. 
 
 The fourth course — the remission and reduction of im- 
 port duties, while evidently one, the pursuit of which 
 would be followed by the benefits consequent on every re- 
 duction of taxes on necessaries, is violently opposed by 
 the adherents of the dogma of high protection. This 
 dogma, invested with the force of law, the dignity of 
 nearly thirty years' possession, attempts to block the true 
 way out of our difficulties. If, then, its pretensions be 
 proved illusive, its promises unstable, its performances 
 unjust, the dogma must be swept aside. 
 
 High protection is, for the first time, brought to a test 
 on its merits as a permanent policy. The old-time tariff 
 contests were different. Protection was then set up as a 
 shield to "infant" industries, that time might be granted 
 for the laying of an independent foundation. It is now 
 coveted 'as the complete armor of sturdy industries. 
 Where the "infant" plead for time, the adult demands 
 eternity. The present tariff was forged as a financial 
 weapon in war. We are asked to use it as a crutch in 
 peace. No hope is held out, that, in time, the crutch 
 may be cast aside; quite the reverse, for the protest with 
 which the protected manufacturers greeted the message, 
 the debate on the Mills bill show that the tariff, high as it 
 is, is yet insufficient to meet the wants of its beneficiaries. 
 
26 
 
 The logical outcome of protection to home products— pro- 
 hibition of foreign competing products— is the goal to- 
 wards which the faces of protectionists are set. Either 
 from conviction, which is possible, or through adherence 
 to that stupid political creed which prescribes enthusiastic 
 radicalism as an antidote to every declaration of principle 
 by the enemy; the Eepublican leaders have cast about, 
 since the opening of Congress, for a position as remote as 
 possible from that pre-empted by the message. They find 
 their ultima thule in the barren doctrine of the home 
 market. The Chicago platform recommends the reduc- 
 tion of revenue by repealing the internal taxes on tobacco 
 and on spirits used in the arts and for mechanical pur- 
 poses, "and by such revision of the tariff laws as will 
 tend to check imports of such articles as are produced by 
 our people, the production of which gives employment to 
 our labor, " and favors ' ' the entire repeal of internal taxes 
 rather than the surrender of any part of our protective 
 system." It is well that the protectionist plan has been 
 writ large. 
 
 If the protective system either in its present or a more 
 vigorous form is to be lasting it must be accepted not be- 
 cause a handful of manufacturers assuredly reap a bene- 
 fit, a few workmen perchance get higher wages, but be- 
 cause this evident bonus to a class far from being a burden 
 on the people, is but the visible sign of a great power 
 working to the common welfare. What general lasting 
 good is obtained through high protection? What indirect 
 recompense is made to the vast non-protected class? The 
 answer is that protection means " diversity of industry;" 
 that the Home Market is the best market. For a 
 country to produce everything it needs— for a people 
 profitably to exchange among themselves all commodities 
 produced is perhaps an admirable state of affairs. It 
 
27 
 
 may be that in years to come the spread of intelligence 
 and industry, the advance in science and art may render 
 each nation mistress of the necessaries, the amenities of 
 life may transform international intercourse into that of 
 friendship, unsulhed by the taint of commercial selfish- 
 ness. Every unforced step towards the realization of na- 
 tional completeness in things material will be welcomed' 
 by all well-wishers of humanity. They may well hesitate 
 however before rushing to the assistance of that slow- 
 moving impenetrable force which backs what we call 
 human progress, with the petty aid of an act of Congress. 
 The advantages, nay the necessity of "diversity of in- 
 dustry," are strongly urged. Its most personal office is to- 
 provide each individual with work in the calling best 
 suited to his taste and capacity. Now a butcher of hogs 
 might be translated into a shearer of sheep, a worker in< 
 sheet iron into a maker of tin plate, a farmer into an arti- 
 san. I misdoubt that an increase in tariff could change a 
 workingman into a banker, an engineer into a poet, an 
 artist into a manufacturer — could open the road to fame 
 or fortune to one w^hose talents are now misdirected — 
 though it might advance a manufacturer of moderate- 
 capital to the rank of a millionaire. This "diversity of 
 industry" would effect but the shifting of capital from 
 farm to factory, from factory to factory, without uniform 
 profit to the capitalist, with none to the workingman. It 
 is claimed that in diversity of production is the sign of 
 high intelligence of many-sidedness— granted; yet these- 
 qualifications are more striking in diversity of consump- 
 tion, and there is no bottom to the argument that the one- 
 must precede the other. There may be a productive en- 
 ergy so weak, so misdirected that it avails merely securing 
 to its possessors a bare subsistence, leave no means to^ 
 gratify those manifold wants implied in true diversity of 
 
28 
 
 consumption. Yet the maddest of prophets could not for- 
 see American energy reduced to so lax a stale. 
 
 It is no belittling of true diversity of industry to mock 
 the fetich to which some would have us bow. That whole- 
 some diversity which has marked our national growth 
 wUl continue and expand whether the tariff blow high or 
 low. The backers of the false principle do not mean that 
 reasonable variety of production which a clever people 
 living in a favored country are sure to compass, but an 
 absolute entirety of production, within the limitations im- 
 posed by nature, regardless of cost to the consumer. For 
 example, since tin is not found in this country, the tin plates 
 from which are made utensils found in every hous'ehold 
 a.re imported from the country where they are made the 
 cheapest, yet the home trader would have the industry 
 . created here by means of higher duties with the result of 
 increasing the price of pots and pans to every householder. 
 " Diversity of industry " might inflate our pride, it would 
 surely deplete our pockets. 
 
 The shapeless sentiment of "diversity of industry," 
 enters into the raw material from which is fashioned the 
 "theory new to our day and generation but familiar to 
 isolated China and Japan through their centuries of pre- 
 cocious childhood— the theory of the home market. A 
 fair statement of this theory is made by Hon. Thomas 
 Dudley, one of the ablest of protectionist writers. "We 
 now import only about 8 per cent, of the manufactured 
 commodities we consume in this country. Let Congress 
 pass such laws as will induce our people to manufacture 
 here at home, this 8 per cent, of manufactured commodi- 
 ties which we now import from Europe, and the effect will 
 be to draw from agriculture a portion of the labor now 
 engaged in it, and thereby to this extent to lesson the 
 quantity of agricultural products and at the same to in- 
 
29 
 
 crease the home market sufficiently to consume all our 
 surplus products." 
 
 It is not pretended that the home market is a natural 
 one ; that to take an extreme case, if all tariffs were ab- 
 rogated, all custom houses closed, the collective wisdom of 
 the American people would lead them to refuse to pur- 
 chase foreign or export American goods. It is highly 
 probable that in this event the people, as a whole, would 
 follow that course which each individual now tries to pur- 
 sue, would buy in the cheapest and sell in the dearest 
 markets. Yet we are invited to protect ourselves against 
 the dictates of our unfettered common sense ; to build, to 
 use a common figure, a tariff wall about the country so 
 high that outsiders cannot sell within, nor insiders sell with- 
 out; to enact a home market. Artificial restraint of trad© 
 has almost reached its limit. Imports are prohibited ; ex- 
 ports reduced ; for while we do not affect exports by tax- 
 ation, we diminish them none the less surely by prevent- 
 ing the profitable return cargo. 
 
 There are some who stupidly imagine that our export 
 trade would flourish without imports other than the coin 
 and bullion with which thankful foreigners would pay 
 their indebtedness. This is magnificent but it is not 
 trade. 
 
 It is true that people must be fed and clothed ; true, 
 that at present we feed and through our cotton clothe a 
 vast number of foreigners, but it is not true that for 
 any length of time we could make heavy exports for cash 
 only. The late Professor Fawcett, writing ten years ago, 
 expressed the opinion that in the contingency referred to, 
 Europe might be forced to continue her purchases of 
 American breadstuffs and for a time remit gold in pay- 
 ment, but that the enormous influx of gold would so 
 raise prices here that foreign manufacturers might renew 
 
30 
 
 ■their attempts on our markets undismayed by a tariff 
 which would have ceased to protect. But ten years have 
 Tneasurably weakened the importance of these conclu- 
 sions. The thorough-going home marketman is of com- 
 paratively recent creation. In the event naturally pre- 
 dicted by Professor Fawcett, the dull consistency of his 
 logic would inevitably lead him to put more bricks on the 
 i;ariff wall. 
 
 This notion of manufacturing everything we need and 
 exporting our usual quantity of food products, etc., 
 suffers a rude shock when it bumps up against those hard 
 rules of trade, that it takes two to make a bargain, and 
 that quality for quality price is the ruling factor in a 
 trade. What price must we get for our breadstuffs if we 
 close our markets to imports? Wheat now pays freight 
 from New York to Liverpool, and the ship finds her way 
 Jbackwith a profitable cargo; but if we prohibit the return 
 consignment wheat must pay freight both wa,ys. 
 
 Nor is this all. If England were to continue to buy our 
 wheat, etc., we buying little or nothing of her, the first 
 ^ost of our wheat in London would be increased in another 
 way. This increased cost would be due to the fact that 
 instead of making remittances to us through the common 
 medium of the foreign exchange, the full cost of freight 
 and insurance on gold shipment would be in every case 
 .added to the cost of our wheat to the English purchaser. 
 During the past decade the value of merchandise in 
 transit between the United States and foreign countries 
 was nearly $14,000,000,000. The coin and bullion trans- 
 ported during the same period amounted to nearly 
 $1,000,00.0,000. Thus, out of every $15 worth of goods 
 $14 worth was paid for in bills. The practical working 
 -of the foreign exchange has been so clearly stated by Mr. 
 Mill in a passage which Mr. Goschen has incorporated in 
 
31 
 
 his work, The Foreign Exchanges, that I quote it at 
 length substituting the United States for France in the 
 original: 
 
 " A merchant in England A, has exported English commodities, consigning 
 them to his correspondent B in the United States. Another merchant in the 
 United States, 0, has exported American commodities, suppose of equal value to 
 a merchant D in England. It is evidently unnecessary that B in the United 
 States should send money to A in England, and that T> in England should send 
 an equal sum of money to C in the United States. The one debt may be applied 
 to the payment of the other, and the double cost and risk of carriage be thus saved. 
 A draws a bill on B for the amount which B owes to him. D having an equal 
 amount to pay in the United States, buys this bill from A and sends it to C who, 
 at the expiration of the number of days which the bill has to run presents it to 
 B for payment. Thus, the debt due from the United States to England and 
 the debt due from England to the United States are both paid without sending 
 an ounce of gold or silver from one country to the other." 
 
 To put a practical case we will suppose that our tariff 
 laws discourage, if not prohibit, the importation of English 
 goods, but that England is naturally desirous of still ob- 
 taining our breadstuffs. The English dealer contracts in 
 New York for a cargo of wheat. As we import little 
 from England, there will be in New York but few debts 
 due that country. There will be in consequence few bills 
 in England, and the scarcity will raise their price to specie 
 point, that is to a point beyond which it is cheaper for the 
 English dealer to pay the freight and insurance on a gold 
 remittance. The par value of the sovereign here is $4,867. 
 If through scarcity of English bills their price rises to 
 $4.90, gold will be sent abroad in their stead. The differ- 
 ence then, $0,023 per sovereign, represents freight and 
 insurance on gold shipment. 
 
 It will be readily seen that the increase in the cost of 
 American wheat would stimulate wheat growing through- 
 out the world, and while the market for our great staple 
 seems at present reasonably secure, the home trader is es- 
 
32 
 
 topped from predicting its continuance under such adverse 
 conditions as I have indicated for he even now affects to 
 express a fear of foreign competition in the home market 
 by a duty of twenty cents per bushel on wheat, twenty 
 per cent, on flour, and twenty cents per bushel on corn, &c. 
 It is to be feared that foreign nations are not in such 
 absolute dependence on us, that they could be forced to 
 trade long with us at a loss. 
 
 VI. 
 
 It is of course impossible to predict with accuracy the 
 course of trade under the conditions of the home market, 
 but it may be approximated. Our free list now contains, 
 in the language of a leading protectionist member of the 
 Tariff Commission, of 1882, " almost every article that 
 we don't produce here." The non-dutiable imports for 
 1878-87 averaged $196,000,000 a year, mainly comprising 
 those products which nature in utter disregard of the home 
 market principle, has long since decreed shall be produced 
 under conditions of soil and climate other than those be- 
 stowed on our land. Add to this sum about $100,000,000 — 
 a figure which represents imports of those commodities — 
 chiefly products of the sugar cane — the demand for which 
 cannot be filled by home production. The total of $296,- 
 000,000 will about measure our dependence on foreign 
 countries. This sum with an important addition to be 
 mentioned, would about measure the value of our exports, 
 for exports and imports must in some way be balanced 
 without the intervention of heavy cash remittances. This 
 law of trade is often denied by protectionists since 
 it has received the approval of the "dismal science" of 
 political economy for which your true home trader has an 
 antipathy akin both in genesis and effect to that which 
 impels the devil to flee holy water. I think that the bare 
 
33 
 
 statement '' imports and exports must balanqe " is respon- 
 sible for much of the misconception which clouds this law 
 of international trade. Such a statement is hastily as- 
 sumed to refer to the exchange of merchandise. As an 
 international trade account rarely shows a close corre- 
 spondence between imports and exports of goods the law 
 is straightway discredited and denounced. Go further, 
 gather all the facts before denying the law. England, for 
 example, has in the past ten years imported merchandise 
 to the value of £3,852,000,000, while her exports amounted 
 to but £2,805,000,000. From these figures the inference 
 is drawn that England has been obliged to make good the 
 balance of over £1,000,000,000 against her by gold remit- 
 tances. I do not mean to insinuate that men famihar 
 with the subject could beheve the truth of the inference 
 but they are more than willing to have uninformed audi- 
 tors shake their heads over it and gossip about the awful 
 drain of gold due to free trade. Now, if one were deter- 
 mined to take nothing but import and export figures in 
 making up the foreign trade account of England, he 
 would be startled to find that England had paid practi- 
 cally nothing for this £1,000,000,000 of merchandise. In- 
 stead of being drained of money to meet this enormous 
 balance, England during the past decade has actually ex- 
 ported but £3, 628, 000 of coin and bullion in excess of her im- 
 ports. By adding more facts the whole question is readily 
 solved. When a ship owned in Liverpool brings a cargo 
 to New York and takes one back to the horoe port an 
 American merchant pays the return freight. The effect 
 of such a payment on the English trade account is the 
 same as if the American had bought English goods, he 
 simply pays for freight service instead of goods. Further- 
 more, England holds large sums in American and other 
 foreign securities, interest on which must be paid in Lon- 
 
34 
 
 don. The receipts of freight and interest are as truly pe- 
 cuniary benefits to England as are receipts from sales of 
 goods abroad. England then is a creditor nation, and in 
 figuring out her trade account, receipts frona freight, in- 
 terest, etc., must be set down against imports, or more 
 accurately, the imports apparently unbalanced must be 
 considered as going to the cancellation of indebtedness. 
 
 Turning to the foreign commerce of the United States 
 we find the main conditions of English trade reversed. 
 ■Our exports exceed our imports. 
 
 But the operation of the law is clearly shown in our inter- 
 national trade account for the past decade 1878-87. 
 
 Exports merchandise (domestic) $7,4M,00'0,00O 
 
 Imports " 6,083,000,000 
 
 Balance exports $1,361,000,000 
 
 This balance according to protectionist reasoning should 
 have been accompanied by " a bounteous flow of gold" to 
 this country. What is the fact? During the decade the 
 average annual balance of gold in our favor was less than 
 $20,000,000, and in two years it was against us. The 
 movement of silver reduces the favorable balance of 
 coin and bullion to about $10,000,000 per annum. The 
 account then stands 
 
 Balance exports of merchandise. .. $1,361,000,000 
 
 " imports, coin and bullion 100,000,000 
 
 $1,263,000,000* 
 
 Where, then, is the equivalent for this billion and a 
 quarter of merchandise? Is this merchandise unbalanced? 
 Have we tendered it as a gift? Our export trade performs 
 two functions: it first pays for imports and after it passes 
 the sum of these, off- sets our indebtedness to foreigners; 
 
35 
 
 an indebtedness which falls readily into two classes: 
 interest on money borrowed and money drawn for the 
 expenditure of Americans abroad. In other words, instead 
 of exporting gold to pay our debts or make good our 
 credits, we export wheat. It follows, then, that in the 
 settlement of our international trade account the money 
 balance one way or the other bears small relation to the 
 volume of trade; that exports of merchandise are set off 
 against imports or indebtedness on other accounts. The 
 position is then held that international commerce is con- 
 ducted on a basis of exchange, not cash. To ascertain 
 the approximate annual limit of international trade for the 
 next ten years, taking as a basis that of the past decade, 
 the values against which we may export our merchandise 
 must first be determined. These values are: 
 
 Imports of sugar, &c $100,000,000 
 
 " merchandise on free list 196,000,000 
 
 Debts due abroad 126,000,000 
 
 Imports coin and bullion (favorable bal.)--. 10,000,000 
 
 $432,000,000 
 
 As our exports of merchandise have for the given period 
 averaged $744,000,000, our estimated loss on export trade 
 would be $31'2,000,000 a year. To one unaccustomed to 
 play with millions this sum seems stupendous. At any 
 rate, the estimated loss for the decade— four billions— is a 
 figure of unimpeachable respectability. Can the home 
 market make good the loss? 
 
 VII. 
 
 But the diminution of exports does not disturb the home 
 trader. To him the loss is a gain for the stream of indus- 
 trial energy is turned full on the home market, and to bis 
 
36 
 
 thinking the market bounded by act of Congress is more 
 profitable than that bounded by the law of supply and 
 demand. Before passing to the grave economic questions 
 involved in such an argument, there is a social one worth 
 noting. If there be a subject on which thinkers and men of 
 affairs agree it is that the increasing tendency of men to 
 gravitate towards the municipality is fraught with most 
 troublesome, even dangerous possibilities. The problem 
 of municipal control involving the questions of pauperism, 
 crime and local taxation in their most acute forms, pre- 
 sents already difficulties in contrast to which those sur- 
 rounding the administration of Federal, State and county 
 affairs seem simple. We may fairly doubt the expediency 
 of enacting laws which stimulate factories at the expense 
 of farms, which tend to drive producers from country to 
 town. 
 
 The first step in the Homo Market is the diversion of 
 sufficient farm capital and labor to manufactures to fill 
 the gap in supply caused by prohibition of foreign im- 
 ports. The absolute value of our export trade has been 
 shown already, but its real importance can be determined 
 only by its relative value. A statement of the production 
 and export of three great staples will partially show our 
 stake in export trade. 
 
 Production and export 1878-86 in millions of pounds and 
 bushels: 
 
 Production. Export. 
 
 Wheat 4,002 bush 1,281 bush. 
 
 Cotton 25,308 lbs -17,097 lbs. 
 
 Tobacco- - 4,408 " 2,201 " 
 
 Thus, nearly two-thirds of the whole of these great 
 crops were grown expressly for the foreign market. 
 As has been shown, the effect of a diminution of im- 
 
37 
 
 ports must be the dirniuution of exports. The question then 
 arises, will the onslaught on exports be all long the line 
 affecting each branch of agriculture in equal, perhaps 
 bearable, degree, or will a single or a few products be 
 marked for attack? It is evident that that commodity 
 will suffer most, the foreign demand for which could be 
 most readily supplied elsewhere; equally evident that 
 wheat is in this case being a crop of the first importance 
 the widest distribution. 
 
 Take, then, the position of the wheat grower under the 
 proposed rearrangement of trade, bearing in mind that he 
 is the greatest but not the only sufferer. The price of 
 wheat is regulated in the free trade market of London, 
 while that of manufactures is largely fixed in the protected 
 market on this side of the water. This manifest discrim- 
 ination would be intensified under the rigor of the home 
 market. The wheat grower being cut off from the bulk 
 of his present export trade, must reduce his crop area. He 
 has paid for his land; in too many instances mortgaged it, 
 partly in order to pay the price of protected implements, 
 lumber, etc.; he has improved and stocked it at heavy ex- 
 pense. He must, to conform to the new conditions, plant 
 fewer acres, run fewer machines, use fewer buildings; in 
 short, diminish the utility of every valuable possession. 
 All this means reduction of farming capital, and reduction 
 here oftener implies cancellation than conversion. An 
 acre of farm laud, a reaper, a farm building, are in most 
 cases valueless, unless in use for their original purpose; 
 yet the farmer, who has long been the butt of protection, 
 is invited to come to the rescue of his tormentor by mak- 
 ing further sacrifices. The invitation, it is fair to say, is 
 accompanied by an inducement, a steady market and 
 higher prices. The steady market is to be secured in this 
 fashion. When the tariff is perfected, new factories are 
 
38 
 
 to spring up everywhere to supply the demand hitherto 
 satisfied by imports. Now, a factory brinpi;s people to- 
 gether and creates a center of distribution, thus making a 
 somewhat better, because simpler market than a more 
 scattered community. But the high-sounding promise 
 would be followed by a petty performance. Out of every 
 §100 worth of manufactured goods consumed we now 
 make $92 worth. Can the erection of factories to supply 
 the small remainder of eight per cent, create so valuable a 
 market that for its attainment, the farmer would barter the 
 great share of the foreign market which he now enjoys? 
 The farmer is offered the home market, he has it now. 
 He is asked to supply sixty millions of people; he now sup- 
 plies half as manj' again. Thus far the inducement is a 
 sham; it is baited, however, with a bribe. As has been 
 said, the price of wheat is now regulated by the competi- 
 tion of the world, the duty on breadstuffs being a practical 
 joke played on the agriculturalist. If the farmer is forced 
 to reduce his exports, he must increase the price of his 
 products to cover the loss; the increase must be a substan- 
 tial one to enable him to come out even. A decided rise 
 in wheat would draw to our markets the produce of 
 Canada, if not of more remote countries. Behold the 
 bribe! Protection keeps out foreign wheat by its tariff 
 wall. When the home trader has raised the price of 
 bread, he can rest content. Every Hnk in the chain of his 
 logic is perfectly welded, firmly interlaced. Are we ready 
 to enact Corn Laws? Surely, those who falsely accuse 
 tariff reformers of servile imitation of English practice, 
 should pause before even faintly imitating those English 
 statutes which exploit the most disgraceful legislation of 
 the century. Bread made dear by scarcity is a misfortune, 
 by act of Congress a crime. 
 
39 
 VIII. 
 
 It will be affirmed that a rise in prices will be followed 
 by increased wages. Even if the rule were generally a 
 sound one it would fail where its need is greatest. It is 
 impossible that protection can perform the feat of keeping 
 up wages in the face of constant immigration and secur- 
 ing full working tipie throughout the year. It would 
 often happen that the price of wheat kept up to a point 
 necessary to afford a profit to the farmer would be beyond 
 the reach of the workingman. But the rule itself does 
 not hold. A rise in the price of subsistence caused by law 
 has no more effect to raise wages than a rise caused by 
 deficiency; the effect of the Corn Laws of England differed 
 only in degree from the famines in India. 
 
 The fallacy of the statement that bread would be no 
 dearer in the home market will be shown in investigating 
 the sweeping assertion of the protectionist that high tariff 
 makes the protection commodity cheaper through internal 
 competition. Cheaper than what? If it is meant that the 
 prices of certain commodities being lower now than before 
 the war, the credit is due to the Morrill tariff, the unan- 
 swerable reply is that as the improvements in machinery, 
 in transportation facilities, have brought down these 
 prices in every civilized country — notably in free trade 
 England —the relation of the tariff to cheaper commodities 
 is plainly that of the fly on the wheel. If, however, the 
 position is taken that protected goods here are quality for 
 quality cheaper than abroad, the absurdity of pleading for 
 the protection of cheap against dear goods drives the home 
 trade to a singular explanation. His assertion amounts 
 to this: In the event of tariff reduction, England would 
 " flood our markets " with goods at, or even less than cost 
 price, with intent to break down our industries, and hav- 
 
40 
 
 ing forced our manufacturers into bankruptcy, closed our 
 mills, driven our operatives from factory to poor-house, 
 she would then raise prices beyond our old figures. Ac- 
 cept this dismal prophecy as a possibility and note the 
 result. The ruin of our manufacturing industry would " 
 mean wide-spread disaster, involving every interest save 
 usury. It i^upon such a market that England is expected 
 to raise prices. Eather would she be forced to compound 
 with an army of insolvent debtors. Furthermore, the 
 prosperity of the United States is worth more to England 
 in pounds, shillings and pence than is that of any other 
 nation. The interest on millions of pounds invested in 
 our securities, the use of millions of bushels of wheat and 
 thousands of bales of cotton represent a part of her stake 
 in our solvency. 
 
 To predict that England would take, even if she were 
 able, a course which would turn a good customer into a 
 bankrupt, is to predict a gross commercial blunder on the 
 part of a people who have never been accused of stupidity 
 in trade. The dread lest England should be benefited by 
 our action is one of the greatest, the most senseless, ob- 
 stacle in the path of tariff reform, it being eagerly 
 aRsumed that her loss must be our gain. 
 
 Mr. Eobert Giffen, one of the most accurate observers 
 in England, has expressed an opinion carrying all the more 
 weight in the present controversy, in that it contemplates 
 the complete reversal of our tariff policy from protection 
 to actual free trade, instead of the mere tariff revision 
 which is proposed. In his Essays. on Finance, Second 
 Series, p. 271, he thus writes: " Relatively, perhaps the 
 United States, with all its natural advantages, may ad- 
 vance quicker under free trade than we shall then do, but 
 absolutely we shall be better off; weshall advance quicker 
 than we should otherwise do, and shall be all the richer 
 
41 
 
 because of the increased wealth of so large a customer and 
 neighbor." 
 
 Now, it is by no means certain that a policy which will 
 compel our manufacturers to seek foreign markets will 
 redound to the advantage of England. Indeed, there is 
 every reason to believe that in many markets now sub- 
 stantially controlled by English merchants our products 
 will find ready and profitable sale. South America and 
 Australasia offer a superb field for American manufac- 
 turers. Yet suppose England is benefited in general trade. 
 Would a prudent business man decline to enter into a 
 transaction because another would also make a profit out 
 of it? 
 
 Would he refuse to increase his capital by ten per cent, 
 because another might make five or even fifteen per cent.? 
 May not every business transaction not reprobated by law or 
 ethics result in a benefit to both buyer and seller? A mer- 
 chant is not concerned with the profits of his rivals if his 
 own be sure. In the olden time when foreign commerce 
 was often linked with oppression, piracy and war, when 
 cannon compelled the surrender of merchandise on terms 
 much cheaper than cash payments, there may have been 
 some ground for holding foreign commerce to imply a 
 gain and a loss. Commerce to-day stands on a higher 
 level. It is the orderly exchange of superfiuities for 
 necessaries. Mercliants may trade where they list, may 
 seek their profit in every quarter of the globe. If the 
 prosperity of a nation be real it is cause of thanksgiving 
 to every other. A prosperous nation is a solvent debtor 
 a fair creditor. Were it otherwise; were each state to 
 strive for the monopoly of civilization,, of comfort and 
 happiness, every lesson of Christianity, every precept of 
 morality would be ground under the heel of a selfishness 
 as gross as profitless. 
 
42 
 
 To the argument against the probabihty of the "flood" 
 of Enghsh goods to our ruin shall be added the weight of 
 experience. Such a flood did not whelm us in the low 
 tariff period, 184'7-60. 
 
 In 1850, three years after the passage of the Walker 
 Tariff bill, 88.39 per cent, of the value of manufactured 
 articles consumed in the county were made hei'e', in 1860, 
 87.57 per cent, were of domestic production. If the slight 
 difference of 00.87 per cent, is to be counted a loss through 
 low tariff, to what cause are we to assign a loss of 00.56 
 per cent, found in comparing the figures of 1880 with those 
 of 1870? If it be objected that a test cannot be fairly made 
 by comparing a few single years, the answer is that they 
 are the only ones for which official statistics are obtainable. 
 So far as the statistics of 1860 are concerned they are- 
 taken but three years after the panic of 1857 and on the 
 principle that prosperity is apt rather to precede than 
 follow a commercial crisis, it may be urged that the latter 
 part of the decade was not more prosperous than the 
 earlier. There is a deal of misrepresentation about this 
 period. The high protectionist always refer to it as a 
 "period of storm and stress." Every misfortune, every 
 mistake is carefully gathered up and laid at the door of 
 low tariff. The revenue tariff acts of 1846 and 1857 are 
 held responsible for every drawback, receive no credit for 
 any advance. What was the real state of affairs when 
 state interference with private business touched its lowest 
 point; when taxation was primarily for revenue? There 
 is nothing to encourage the delusion that a rational system 
 of taxation retarded our progress, pauperized our opera- 
 tives, crushed out our self-reliance. On the contrary, 
 there was a remarkable advance in material well being. 
 In agriculture, in manufactures, in railroad building, in 
 the exploration and development of new territory, Ameri- 
 
43 
 
 can energy was at its best and bravest. Pages might be 
 filled, with figures proving the prosperity of this period, 
 but there is a shorter road to the heart of the truth. 
 
 The Walker Tariff act was approved July 30, 1846, and 
 went into effect the latter part of the year. By this law 
 all specific duties were abolished, and the ad valorem rate 
 on dutiable goods then at 33.47 per cent, was reduced to 
 26.22. The bill passed the House by a vote of 114 to 95, 
 the majority representing the West and South, the minor- 
 it,y the East. In 1847, the Whigs obtained a majority of 
 three in Congress, and in 1848, elected a President, who 
 in his inaugural referred but briefly and coldly to the pro- 
 tective principle. In the session of 1847-8, the Whig House 
 passed a bill admitting Canadian grain free of duty on a 
 basis of reciprocity. The bill was not acted on in the 
 Senate, but was the forerunner of the Canadian reciproc- 
 ity treaty of 1855. The House of 1849-51, was Demo- 
 cratic by a small majority. In that of 1851-53, the Whigs 
 had a two-third vote against them. The last Whig 
 platform, that of 1852, contained this plank: " Grovern- 
 ment should be conducted upon principles of the strictest 
 economy, and revenue sufficient for the expenses thereof 
 in time of peace ought to be mainly derived from a duty 
 on imports, and not from direct taxes; and in levying 
 such duties sound policy requires a just discrimination 
 and protection from fraud by specific duties, where prac- 
 ticable, whereby suitable encouragement may be assured 
 to American industry equally to all classes and to all por- 
 tions of the country." Contrast this cold blooded indorse- 
 ment with the desperate enthusiasm with which the 
 Chicago platform attempts to infuse vitality into the home- 
 market theory. But the Republican platform of 1856, 
 omitted all reference to protection; and in the first Re- 
 publican House was dealt what appeared to be its death- 
 
44 
 
 stroke— the Tariff Act of 1857. This act, which reduced 
 the tariff on dutiable goods to 20.12 per cent., the lowest 
 point since 1816, received the support of many New Eng- .♦ 
 land Eepublicans, and was passed bj'' a non-partisan vote 
 of 123 to Y2. The salient fact in this brief political review 
 is the waning force of the principle of high protection as a 
 live issue. Ten years of low duties had so satisfied the 
 people that still lower duties were demanded and obtained. 
 Of course, protection was still desired by those who were 
 interested in the private profits which it assures to its 
 favorites. Pennsylvania ever longed for the return of 
 high tariff, and was enabled just before the election to use 
 its electoral vote as a lever to raise the iron duties. The 
 Morril Act of 1861 was mainly a political measure, the 
 lukewarmness of New England manufacturers and others 
 divesting it of all claim to be considered as passed at the 
 demand of the general industrial interests of the country. 
 From 1861-1864 tariff acts and amendments multiplied 
 without let or .hindrance. Every manufacturer who de- 
 manded increased dividends through a tariff tax not only 
 got them, but posed as an unselfish patriot. The climax 
 was reached in 1864, when a tariff act embracing every 
 article possible, and increasing the average rate of duty 
 from 37.2 to 47.6 per cent., was rushed through Congress 
 after a so-called debate lasting five days, received the Ex- 
 ecutive approval, and, to the astonishment alike of friend 
 and foe, still stands as the basis of many of the most im- 
 portan,t schedules. 
 
 The protective system of' to-day is not the outgrowth of 
 •discontent with a low tariff, but was conceived as a politi- 
 cal measure, developed by its assumed connection with 
 warlike patriotism. It has held its ground partly through 
 habit, partly through the long tenure of authority held 
 by its sponsor, the Republican party— a tenure toward the 
 
45 
 
 last due to the clever manipulation of ingenious scare- 
 crows—principally through the cohesion of its benefici- 
 aries. 
 
 The fallacy which is the root of the home market 
 theory is, that in purchasing abroad goods which it is 
 physically possible to produce here, we lose a part of our 
 wealth — Said Mr. Reed, at the close of the preliminary 
 debate on the Mills bill, referring to the wealth of the 
 United States : " We mean to keep this wealth here — we 
 mean to do it even if we build a Chinese wall of tariff 
 taxes around this country." If our imports were regu- 
 larly paid for in gold drawn from our pockets and banks, 
 and expressed abroad ; if commerce meant goods crowd- 
 ing on us, gold pouring from us, there might be realized 
 the economic nightmare of the home trader ; a people 
 drained of gold, falling back on a clumsy system of 
 neighborhood barter. This one-sided commerce is not 
 ours. Admit that, in paying for imports, w^e pay the 
 wages of foreign workmen, the commodity with which 
 we cancel the debt is produced by American labor. Take 
 again, for an example, the tin plate industry. During 
 the past sixteen years we have purchased abroad tin 
 plates to the value of $223,000,000. This transaction is 
 stigmatized as violating the interests of home labor. It 
 is urged that had the duty been high enough to warrant 
 the maintenance of the industry here, this vast siun 
 would have supported an army of workmen at good 
 wages ; wages in their turn spent here to the satisfaction 
 of other home producers. Look at the reverse of the 
 picture. The wheat or other commodity which we ex- 
 ported to pay for tin plate was itself the product of labor j 
 were it not needed for this purpose it would not be pro- 
 duced, unless, indeed, to pay for for another import 
 equally detrimental to the home market. 
 
46 
 
 But even if " keeping wealth within the country" by 
 tariff taxes be a possible or a desirable thing, how lamely 
 the protective system halts toward the goal. In 1860 the ^ 
 percentage of domestic manufactures in the total con- 
 sumption was 87.51; in 1880, 92.58, an increase of but 5.01 
 per cent. There are losses which offset in great part this 
 gain. In 1860 we exported 2.42 per cent, of the products 
 of our manufactures, in 1880 but 1.48 per cent. Further- 
 more, the protective system must account for the where- 
 abouts of the once great American merchant marine. 
 In 18C0 it earned freight on 66^ per cent, of the value 
 of imports and exports; in 1887 but 13y% per cent. The 
 enormous loss resulting from this decline must be laid at 
 the door of those who having at heart the interests of a few 
 shipyards refused to amend our navigation laws in the 
 direction of free ships; who equally careful of the profits 
 of iron founders, declined to lower the duties on raw mate- 
 rial who said to the American merchant: Sail dear ships or 
 sail none. 
 
 Though even from the high protective standpoint, the 
 office of the tariff to keep wealth within the country is 
 trivial, there is no gainsaying its powerful leverage on 
 the internal distribution of wealth. Now every tax law 
 effects in some degree an artificial distribution of wealth, 
 but grounds its justification on the public necessity. Our 
 present tariff law ranges through a wider sphere. Up to 
 the point when its collections go to the fair needs of gov- 
 ernment, it is an ordinary, perhaps to some extent a vol- 
 untary tax, as in many cases its objects are luxuries or of 
 voluntary consumption. The real burden of the tariff is in 
 its reflex action. Through its enhancement of prices it 
 draws a little from each individual, and divides the lump 
 among a few. Whether this lump amounts to five hun- 
 dred million a year, or a billion, or more, is a matter of ag- 
 
47 
 
 gravation. It is evidently sufificiently large to justify the 
 conclusion that the indirect operation of the law effects an 
 artificial distribution of wealth for private benefit, many 
 times greater than its direct action affects for the public 
 necessity. 
 
 IX. 
 
 One of the most notable features of a Jiome market 
 would be the limitation of production to our necessities. 
 Now, large as is our population, manifold our wants, it is 
 evident that our productive ability, measured in brain, 
 brawn and machine, may easily distance our capacity for 
 consumption. The great complex machinery of produc- 
 tion is doing its best and most profitable work when it 
 produces fully up to the limit of its power; the larger the 
 field of its activity, the less likelihood is there of trade 
 •disturbance, for while wide-spread depression may be ex- 
 perienced at times, it is offset by periods of general pros- 
 perity, and between these extremes therfe are generally 
 some profitable markets open. A forced limitation of 
 production is possible only when industrial energy out- 
 runs the market. This condition is now present in many 
 industries. The "pool" which was so familiar a few 
 years ago; the "trust'' — a pool, the members of which 
 are presumably checked from selling out each other— bear 
 witness to this state of trade that the consumers of the 
 restricted commodity are paying a price higher than they 
 would were the maj:-ket extended, and this without ad- 
 verting to the danger lest a trust or other combination 
 might, for a time at least, actually raise prices. The 
 trusts to which I refer are not, as a rule, evidences of 
 attempts to prevent competition in a widening market, 
 but rather to retain control of a market stationary or 
 
48 
 
 overstocked. The number of combinations prove then 
 that in many industries our productive energy is artifi- 
 cially restricted. One phase of the home market is 
 partially realized : Are we satisfied with it ? But the 
 claim is set up that combination is the only method to 
 prevent the glutting of the market. Then extend the 
 market. A high protection law promises special rewards 
 to certain industries, with the effect of drawing to them 
 a superabundance of capital. A lively competition . for 
 profits soon descends to a desparate struggle for existence. 
 Prices at first, perhaps, driven below a fair standard, are 
 forced up by combination. Thus production is kept in a 
 state of unnatural contraction or expansion —to the loss 
 and annoyance of both producer and consumer. 
 
 X. 
 
 Though there is little room in the home market theory 
 for export trade of any sort, there is none at all for an 
 export of manufactures, for it is asserted that we are pre- 
 cluded from all competition abroad on account of our 
 high-priced labor. In this assertion is found the sheet 
 anchor of the present system: Protection raises wages. 
 The home trader declares what is perfectly true, that 
 wages are higher now than before the war. Here again 
 is a general improvement twisted into a local advantage. 
 A decided rise in wages is a notable feature in other 
 countries, and nowhere more pronounced than in Eng- 
 land, where, say competent observers, wages have, during 
 the past half-century, advanced from fifty to one hundred 
 per cent. 
 
 High protection, high wages, and a home market have 
 really so slight a connection, that we are treated to-day 
 to a curious spectacle — a sort of economic Comedy of 
 Errors. A few Englishmen agitate for protection against 
 
49 
 
 the assults of the cheap labor of protectionist Germany; 
 and are encouraged by American protectionists who in 
 their turn dread the competition of the cheap labor of free 
 trade England; when we recall that Germany sought in 
 protection a barrier against the aggression of the high- 
 priced labor of England the puzzle is complete. Let the 
 home trader now pick from this bundle of contradictions 
 an argument that will satisfy the American, the Enghsh, 
 the German workman that protection raises wages. The 
 rule if sound, is universal. Indeed as the labor of Europe 
 is generally referred to as "pauper" labor it stands in 
 greater need of protection than does the higher class labor 
 of America. Must we not seek the causes of the superior 
 condition of American workmen in a higher plane than 
 that of mere statute law? 
 
 There is an old adage "figures cannot lie," but its truth 
 has been sadly weakened in recent tariff discussion. The 
 defenseless numerals, cursed with the likeness of accuracy, 
 are wrested into supporting statements ranging from the 
 suppression of the truth to the expression of the lie. De- 
 ception finds its favorite mouthpiece in the comparative 
 table of wages. This table appears in every protectionist 
 speech and tract. It invariably shows, and truly, that 
 workmen here are paid more money than those abroad. 
 Here it stops, admitting no allowances, no corrective 
 figures. The force of this table lies in its simplicity, its 
 brevity, above all in its ceaseless iteration. It is the be all, 
 the end all of every argument. Arguments drawn from 
 principle and experience are as featherweights compared 
 with the dull heaviness of this comparative table of wages. 
 On the blind acceptance of this simple statement by simple 
 people rests the assurance of the protected class. The first 
 objection to the table is its real vagueness. It attempts 
 one of the most difficult problems of statistical science, and 
 
50 
 
 gives no data by which its correctness may be tested. I 
 admit that there is a reason for this omission. There are, 
 as yet, no accurate comprehensive figures showing the re- 
 wards of American industry. The census of 1880 is con- 
 fessedly imperfect in this respect. The work of the Massa- 
 chusetts Bureau of Statistics gives the best, practically the 
 only results on the subject. As it deals with but a fraction 
 of American labor it will not, as a rule, serve as a basis 
 for international comparison. Where, however, an in- 
 dustry is highly localized as is the cotton manufacture, 
 where, according to the census of 1880 out of 230,000 looms 
 94,000 were operated in Massachusetts and 88,000 in other 
 New England states it is possible to collect data which will 
 serve as a basis for comparison. In every case, however, 
 we must be informed as to the source whence the data are 
 taken. For example, in a comparison of the wages of 
 steel workers here and in England, we should know 
 whether the American figures are taken from the Union 
 Steel Works at Chicago or from Mr. Carnegie's works at 
 Braddock, Pennsylvania. The importance of this infor- 
 mation will appear when the wages paid in these estab- 
 lishments are compared. 
 
 Blast Furnace Department. Fdrnace FciaNAcE No. 2, Union Steel Company,* 
 A, Braddock. Chicago. 
 
 SLIDING SCALE, STANDARD SCALE. 
 
 Turn 12 hours. 
 
 Keeper $2 23 $3 25 
 
 First helper 1 YO 2 60 
 
 Second helper 160 2 45 
 
 No thirdhelper 2 45 third helper. 
 
 Stoveman. 1 70 2 50 
 
 Top filler 161 2 50 
 
 Filler 1 51 2 25 
 
 * Tlie table is printed in the Iron Age of July 26, Ifi 
 
61 
 
 Converter Department. 
 
 First converter $133 per 100 tons. $1 80 per 100 tons. 
 
 First pitman 1 32 " " i 80 " •' 
 
 First ladleman 99 " " 1 80 " " 
 
 Blower 108 " " 2 34 " " 
 
 Bottom builder 1 06 " " 89 tonnage of 2 
 
 turns. 
 
 Spiegel melter 1 33 " " 1 80 per 100 tons. 
 
 Blooming Department. 
 
 Heater $5 00 per 100 tons 
 
 Heater's help'r $132 per 100 tons. 3 00 
 
 Asst. roller 1 09 " " 1 53 " " 
 
 Leverm'n (sh'rs) 63 " " 99 " " 
 
 Rail Mill Department. 
 
 Roller $210 00 per month. 
 
 Leverman $3 10 turn 12 h. 3 72 turn 12 h. 
 
 Spell leverman 2 85 " " 3 72 " " 
 
 First engineer 2 38 " " 3 50 " " 
 
 Water tender 2 00 " " 2 90 " 
 
 Straightener ^ 1 43 100 tons on en- 9 00 100 tons on 
 
 tire output of individual 
 
 mill. work. 
 
 The surest method of discrediting this bogus compara- 
 tive table of wages is to illustrate the general principles 
 which must be kept in view in framing a true one. When 
 the real elements are indicated it is possible to draw infer- 
 ences approximately correct. I will take the wages of 
 cotton weavers as figured out by Mr. Schoenof in his con- 
 sular report on Technical Education in Europe. The 
 figures for the United States are taken from Massachusetts. 
 
 Daily Wages of Cotton Weavers. 
 
 Switzerland... $0.44-49 
 
 Germany 0.48 
 
 England ..-. 0.65 
 
 United States o 0.80-1.12^ 
 
52 
 
 This statement goes far enough for the purposes of pro- 
 tectionist argument, though a consistent explanation of 
 the higher wages of free trade England over protectionist 
 Germany can hardly be forthcoming. For the attainment 
 of any valuable result the table must be thus enlarged : 
 
 , 
 
 
 m © 
 
 o 
 
 >,a> 
 
 
 
 i§ 
 
 o 
 
 i§ 
 
 
 
 o 
 
 u 
 
 
 
 
 ^^ 
 
 
 ^P 
 
 
 
 
 u 
 
 ated 
 put 
 aver. 
 
 
 
 
 O 03 
 
 ■u^ 
 
 
 p 
 
 ^ 
 
 1-^ 
 
 H 
 
 Switzerland 
 
 $0.44-49 
 
 2-3 
 
 $0,606 
 
 466 yds. 
 
 Germany 
 
 0.48 
 
 2-3 
 
 0.606 
 
 
 England 
 
 0.65 
 
 3-4 
 
 .55 
 
 709 yds. 
 1,200 yds. 
 
 United States 
 
 0.80-1.12J 
 
 6-8 
 
 .40 
 
 These figures show the elements to be taken into 
 account. Working energy, labor, cost of product must 
 be estimated before a fair comparison of money wages can 
 be made. But money wages are themselves but incom- 
 plete indication of the true conditions of workingmen. 
 Wages are high or low according to their purchasing 
 power as they afford a fair livelihood or a bare one. In 
 the Eeport of the Massachusetts Bureau of Statistics for 
 1885 there appears the following table of prices in Eng- 
 land and Massachusetts : 
 
53 
 
 Prices in Great Britain and Mass., 1885. 
 
 Perceyitages. 
 
 Higher in Masa. Higher in G. B. 
 
 Groceries 16.18 
 
 Provisions 23.08 
 
 Fuel 101.96 
 
 Dry Goods, all gratjes 13.26 
 
 " 3 lower grades 90 
 
 Boots and shoes, all " 62.59 
 
 " 3 lower grades.- 42. Y5 
 
 Clothing, all grades... 45.06 
 
 " 3 lower grades 27.30 
 
 " lowest " 18.01 
 
 2 highest " 56.57 
 
 Rents 89.62 
 
 Board and lodging 39.01 
 
 Another element is that of steadiness of employment. 
 Accurate and comprehensive figures are not at hand on 
 which to found any comparison in this respect between 
 England and the United States. Possibly the United 
 States has the advantage in this respect, although the 
 returns made by the Massachusetts census of 1885 demon- 
 strate that in that busy State days of idleness are not 
 uncommon. In the census report it is stated that "a 
 little less than one-third of the persons returned as being 
 engaged in remunerative labor were unemployed for 
 about one-third of their working time." Of this third 
 107,000 or 69.14 per cent, were engaged in manufactures. 
 Since the comparative table of v/ages as it figures in pro- 
 tectionist argument gives us no information concerning 
 labor, cost of product, cost of living, steadiness of employ- 
 ment, it not onl}^ fails to clear up the real issue, the com- 
 parative conditions of the workingmen, but falls far short 
 of the very point it pretends to prove — that the higher 
 wages of American labor are due to the tariff. When the 
 chief controversial weapon of the protectionists is proved 
 
54 
 
 dull of edge its wielders might be fairly called upon to put 
 it to the grindstone, since on them rests the burden of 
 making good their assertions. But I shall not thus leave 
 the question at loose ends. 
 
 After making all allowances the substantial fact re- 
 mains that the real wages of American labor are some- 
 what higher than obtain in Great Britain, mueh higher 
 than in other foreign countries. The reason for this need 
 not be grubbed for in tariff schedules often so involved 
 that they can be understood only by their interested 
 framers or instigators, but in the plainest of, all business 
 principles. A man's wages are gauged by his efficiency — 
 herein lies the open secret of American wages — the truth 
 so long obscured, yet ever within easy reach. The Amer- 
 ican workman, especially he who has to do with machin- 
 ery, is worth more to his employer than is the English 
 workman to his. In the case of the cotton weavers noted, 
 above the relative ability of American as against English 
 labor is nearly two to one. A remarkable example of 
 superior ability was given by Mr. Eussell,of Massachusetts, 
 in the recent debate in Congress. A New Englander hav- 
 ing patented machines for sewing and heeling shoes, a 
 company was formed to lease them to manufacturers here 
 and abroad, receiving a royalty on every pair of shoes 
 turned out. At the end of a year it was discovered that 
 the royalties collected from a machine in England were 
 but forty-seven per cent, of those returned from a machine 
 in the United States. The company suspected fraud and 
 sent an expert to England to investigate the working of 
 the machines. The report was that the English returns 
 were correct, the English operator turning out forty-seven 
 pair of shoes when the American turned out one hundred. 
 Instances might be multiplied to prove the higher effi- 
 ciency of American labor. But deeper yet must we go 
 
{)5 
 
 and strike the foundation of American efficiency. The 
 countries of Europe are crowded with seekers after work. 
 The great difficulty of hfe — living — is there in every acute 
 case. National institutions are based on real class dis- 
 tinctions which oppress, or nominal class distinctions 
 which irritate. Unless we except Switzerland, Holland, 
 possibly England, in no country in Europe does the exist- 
 ing sovereignty, whether reposed in autocrat, constitu- 
 tional monarch or people, find unquestioned acceptance. 
 Each year of peace is but a twelve months' truce. Ever 
 resting on their arms the nations must bear the costly 
 charge of readiness, watchfulness. The results are 
 national debts so large that the payment of the principal 
 is not dreamed of; national expenses so gross in bulk that 
 the most ingenius financiering cannot deceive the people 
 as to the real burden of taxation. 
 
 The conditions in the United States are happily differ- 
 ent. The extent of our territory precludes any real "land 
 question." The form and spirit of our government is not 
 only universally accepted but almost universally accept- 
 able. Whatever heavy burdens may be imposed in some 
 localities through municipal taxation, our national reven- 
 lues are in part evidently superfluous, and yet one of the 
 greatest economic contests in our history is now been 
 waged over the question: Shall we remit the most bur- 
 densome of our taxes or the least? Above all the individ- 
 ual has a better chance for development here than abroad. 
 Should it surprise a believer in our republican institutions 
 that their highest claim to regard is founded on the intel- 
 ligence, the contentment, the freedom which flourish 
 under them? Should it be a revelation to men of affairs 
 that the intelligent, the contented, the free workman is a 
 better workman than he who is branded as a "pauper?" 
 These considerations may be deemed sentimental, yet the 
 
56 
 
 " sentiment " that under free institutions the individual 
 may reahze a sturdier independence, a higher efSciency, a 
 greater happiness, is the bed-rock of the EepuWic. Leav- 
 ing out the law of supply and demand as a regulator of 
 money wages, and the effect of prices on their purchasing^ 
 power, influences that obtain the world over, the relatively 
 greater prosperity of the American operative may be set 
 down to his superior excellence. 
 
 It would be untrue to assert that there is no cheap labor 
 in the United States. There are work people paid as low, 
 lodged as badly, fed as poorly; every whit as depraved as 
 the pauper workman of Europe. I do not refer to natives 
 or voluntary immigrants seeking a permanent home, but 
 to foreigners lured from their homes by false promises, 
 consigned to agents here, shipped to points of distribution, 
 whence they are sent out to break down the wages of our 
 workmen. The iron founder who unctuously blesses the 
 tariff for giving his skilled workmen two or three dollars 
 a day, will ransack Europe for the most degraded of its- 
 people and keep them at his mines and coke furnaces at 
 seventy-five cents a day. 
 
 I have shown the hollowness of the pretence that the- 
 high wages of American workmen are due to our present 
 import duties. If the claims of the protectionist are true, 
 the taxpayers of this country are daily putting their hands- 
 in their pockets to help manufacturers pay their employees. 
 If such were the case it would be pertinent to inquire 
 whether such a charity were profitable or worthy. But 
 the case is radically different. Where an American oper- 
 ative is paid high wages it is because he deserves them by 
 the quality and quantity of his work. He does not figure 
 as an assisted laborer but earns his whole wages. True, the- 
 taypayer continues to pay tribute, but it goes to swell 
 dividends, not wages. 
 
5T 
 
 The attitude of the workmgmen themselves throws a 
 strong side-hght on the question of wages and the tariff. 
 . The American workman cannot be accused of losing sight 
 of his own interests, nor is he backward in demanding 
 what he conceives to be his rights. Shorter hours, higher 
 ■wages, abolition of convict labor, regulation of child labor, 
 figure frequently in the programme of organized labor. If 
 the home trader be right these things are but trifles when 
 measured by the standard of the protective principle which 
 arrogantly assumes to be the regulator of wages if not the 
 source of employment itself. Is it not singular that labor 
 is so blind to its highest interest that rarely in speech or 
 platform is the present tariff upheld, that the labor press 
 is generally in favor of tariff reduction, that on election 
 day workingmen are often rallied to the standard of pro- 
 tection by w^hat is known as the "tariff scare" or by the 
 sharper method of coercion? 
 
 I have hitherto mainly dealt with that labor which is 
 supposed to be directly protected by the tariff. Now the- 
 number of men in this class is, according to the census 
 returns as classified in the President's message 2,623,000. 
 On the other hand, 14,769,000 men are removed from 
 foreign competition either because their work must be 
 done on the spot or on account of the quality and cheap- 
 ness of their product. The claim that this class receives 
 an incidental benefit through the operation of the tariff in 
 providing a home market has already been examined and 
 disallowed. 
 
 The argument that high-priced labor prevents the profit- 
 able export of manufactures leads to the conclusion that 
 wages is the only element worth considering in estimating 
 the value of an article. Labor enters largely into cost, but 
 value is something different. It is the estimation placed 
 upon that article by the consumer in disregard, generally 
 
58 
 
 in ignorance of its labor cost. The consumer Jooks first 
 to the quality of the article, and as the commerce of the 
 world is not wholly conducted on the slop-shop principle a 
 better grade of work will, in the long run, command the 
 higher price, which is its due. That there is a market in 
 the world for the product of well paid labor is shown by 
 the signal success which has followed enterprising Ameri- 
 can manufacturers in their ventures abroad. 
 
 XI. 
 
 Were the tariff reduced on the lines of the message as 
 modified by the underlying principle of the Mills bill, the 
 capital invested in certain branches of industry would be 
 perhaps assailed. These branches are too few in number, 
 too small in importance to excuse a plea for their mainten- 
 ance at the expense of the general interest in low taxes. 
 In other and perhaps more important interests there 
 might be a temporary, even a permanent shrinkage of 
 profits, but the people may rightly decline to stand as guar- 
 antors of a rate of interest on private investments, and 
 here, as in the former case, refuse to consider a tariff act 
 as creating between the state and the protected class a 
 contract of eternal obligation. Manufacturers generally 
 would be benefited by that change of policy, which, by 
 reducing the cost of raw material, would enable them 
 to enlarge the market by cheapening the product. 
 
 There is a "smart" argument pressed with childish in- 
 sistence that tariff reform is stultified in the Mills bill with 
 its average duty of 42^ per cent. ; that if high protection is 
 ■error, truth cannot be found short of free trade. Now, 
 theoretical free trade, the total abolition of all revenues 
 from imports, can never be practicable until people choose 
 to pay their public expenses through direct rather than 
 
59 
 
 indirect taxation. Nor is practical free trade, as evidenced 
 in its great exemplar the British revenue system, much 
 less foreign to our ideas of public economy. 
 
 The leading items of British revenue are (1886-Y) as 
 follows: 
 
 Excise $126,534,000 
 
 Income tax 80,754,000 
 
 Stamp duties 58, 046, 000 
 
 Post office (net) 14,663,000 
 
 Customs 98,822,000 
 
 The receipts from customs may be thus classified: 
 
 Tobacco $46,069,000 
 
 "Wines, liquors, etc -- 26,158,000 
 
 Tea and coffee 22,910,000 
 
 Fruits 2,323,000 
 
 These articles and the few others taxed are luxuries or at 
 least of voluntary consumption, and the tariff is a true 
 free trade tariff, one for revenue without incidental pro- 
 tection. 
 
 If the attempt were made to reduce our tariff to the free 
 trade basis, the first stumbling block would be the duty on 
 tea and coffee, and it is unhkely that we would support 
 the taxation of these articles. Our gross revenue from 
 imported liquors, tobacco and fruits is (1887) $20,740,000. 
 The budget for the fiscal year ending June 30, 1889, is thus 
 estimated: 
 
 Eeceipts. 
 
 Customs ---- - $228,000,000 
 
 Internal revenue. .- 120,000,000 
 
 Sales of Public lands 10,000,000 
 
 Other sources 25,000,000 
 
 • — $383,000,000 
 
60 
 
 Expenditures. 
 
 Including sinking fund and interest 326,530,T9-4 
 
 Estimated surplus $56,469,206 
 
 Now if, meanwhile, we cut down our list of dutiable 
 imports to conform to the English system, the estimate 
 would then stand : 
 
 Receipts (customs $20,740,000) $175,740,000 
 
 Expenditures... 326,530,794 
 
 Apparent deficit $150,790,794 
 
 How would this deficit be met ? To return to our English 
 example — Would an income tax be tolerated in this 
 country at this time ? As for stamp duties, petty clogs on 
 private business transactions, such as the execution of 
 deeds, the drawing of notes, bills and the like, would 
 these duties, a nuisance in war time, find favor in peace ? 
 Our postal service is not managed for revenue, nor can it 
 be so long as we continue the policy of affording cheap 
 postage in a country so vast, so sparsely populated. 
 
 The question of ways and means flattens this argument. 
 Eeyenue must be raised ; raised by taxation. If we close 
 our custom houses we must open more internal revenue 
 offices. If we give up submission of imports to the custom 
 officers, we must send the tax gatherer among the people. 
 If we free imports we must tax incomes, trades ; impose 
 a penalty on deeds, wills, checks and notes ; place all our 
 peace taxes on a war footing. 
 
 The establishment in this country of anything like the 
 English revenue system is barred alike by the traditions 
 of the past, the interests of the present. Whatever be 
 the advantages of a free trade system, we cannot now 
 
61 
 
 afford to pay the price at which they are quoted. Our 
 revenue must be mainly drawn from a tariff which of 
 necessity affords an incidental protection. 
 
 There is no issue joined between protection and free 
 trade. Indeed, the controversy in which we are now 
 engaged is, on one side, of a broader scope than a tariff 
 question affords. The issue, to which that between high 
 protection and a tariff for revenue with incidental protec- 
 tion is subordinate, is between protection and economy — 
 dogma against principle. Protection is now to be judged, 
 not merely by its own merits or demerits, but by the vice 
 of its ally, extravagance. 
 
 There are those who through ignorance or interest have 
 the hardihood to set up protection as the pillar of the state ; 
 and whatever virtue there be in consistent dullness and 
 selfishness^ it shall remain in them unassailed ; but from 
 that great body of citizens which has heretofore supported 
 the protective principle either because of its establishment, 
 or for more intelligent reasons, this question demands its 
 answer : Is not high protection too dear at the price of 
 economy ? ■ 
 
 The bold plea for the sanctity of the private profits with 
 which protection blesses its beneficiaries is worthless. 
 Somewhat the same claim, couched in an appeal for 
 vested interests, is valid only so far as fair play demands 
 that such interests should receive reasonable warning of 
 any change, that they may be adapted to new conditions ; 
 beyond that, the vested interests of the taxpayer in 
 economical administration must prevail. 
 
 We have gone beyond the fact of the present surplus, 
 and are now concerned with future administration. The 
 admitted evil of a continuing surplus will not cure itself, 
 nor will it yield to administrative remedies. Legislation 
 
62 
 
 and legislation alone can master it. Upon what lines 
 shall this legislation be drafted? Will American common 
 sense give way under the strain of the surplus, and* 
 through sheer inability to cope with it, permit it to flood 
 or filter through the country? 
 
 If we do not waste tax receipts, we must reduce the 
 taxes themselves. Which will pay best: to revise the 
 tariff up or revise the tariff down? The home market or 
 tariff reform? 
 
 The home market aims at entirety of production re- 
 gardless of cost; contracts a great foreign and offers a 
 slightly enlarged home market; declares for cheap luxuries, 
 dear necessaries. It links public administration and pri- 
 vate enterprise in a partnership fatal to every interest of 
 the one, the true interest of the other. In its partiality 
 there is a broad hint of that utterly defenseless form of 
 State Socialism— State Favoritism. 
 
 The extravagant claims sometimes put forth in behalf 
 of tariff reform are misleading. A revenue tariff is not a 
 cure-all. Its strength is simplicity. It does not seek the 
 impossible, the creation of wealth by law, but it lifts real 
 burdens from the taxpayer, suffers capital to flow in 
 natural channels, and leaves to each producer the fruit of 
 his industry. It decrees a divorce between trade and poli- 
 tics. The government withdraws from its silent but 
 profitless partnership in private enterprise, declines to 
 "foster" new and costly industries or bolster up old ones. 
 The government then being in such fortunate case that 
 prudent management cannot be imputed to it as error, re. 
 trenchment as mortal sin, is free to collect and administer 
 revenue with sole regard to public necessities, and aiming 
 at low taxes and legitimate and economical expenditures, 
 fulfills the duties of its stewardship. 
 
63 
 
 Shall the new policy strike at the root of things and in- 
 volve the maintenance of economy, if not the relations of 
 ^ the States to the Federal government? Shall it attempt 
 the commercial isolation of the whole country in order that 
 the profits of a few may be secure? 
 
 May we not rather turn the surplus to honest account, 
 and, in removing it from our budget, revive the principles 
 of low taxation, economical expenditure and equality be- 
 fore the law? 
 
 [FSliS]