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THE NATIONAL REVENUES:

A COLLECTION OF PAPERS

BY AMERICAN ECONOMISTS.



EDITED KY ALBERT SHAW, PH.D.

AtJTHOB OF " CO-OPERATION IN A WESTEKN ClTY, 1 ' " ICARIA ; A CHAPTER
IN THK HlSTOKY OF COMMUNISM," ETC.



WITH AN INTRODUCTION, AND AN APPENDIX OF
STATISTICAL TABLES.



CHICAGO:
A. C. McCLURG & COMPANY.

1888.



COPYRIGHT

BY A. C. McCLURG & COMPAXT,
A. D. 13S3.



flblversity of Southern California



CONTENTS.



PAGE.

I. INTRODUCTORY. By the Editor, 7

II. PROTECTIVE TARIFFS AS A QUESTION OF NA-
TIONAL ECONOMY. By Professor William
W. Folwell, of the University of Minnesota, 32

III. SURPLUS FINANCIERING. By Professor Henry

C. Adams, of the University of Michigan, 45

IV. THE TARIFF AND TRUSTS EXPENDITURES

FOR INTERNAL IMPROVEMENTS. By Pro-
fessor Richard T. Ely, of the Johns Hop-
kins University, 56
V. SHALL THE INTERNAL REVENUE BE RE-
TAINED ? By Professor Richmond M.
Smith, of Columbia College, - - - 68
VI. A DEFENSE OF THE PROTECTIVE POLICY.
By Professor Robert Ellis Thompson, of the
University of Pennsylvania, - - - 78
VII. THE READJUSTMENT OF THE REVENUES.
By Professor Edwin R. A. Seligman, of
Columbia College, - - 86
VIII. THE THEORY AND PRACTICE OF PROTECTION.

By Professor Jesse Macy, of Iowa College, 93
IX. THE CERTAINTIES OF THE TARIFF QUESTION.
By Professor, John B. Clark, of Smith Col-
lege, too

X. TAXATION AND APPROPRIATION. By Profes-
sor Woodrow Wilson, of the Bryn Mawr
College, 106

XI . EQUALITY IN TAXATION COMMERCIAL UNION
WITH CANADA. By Professor Anson D.
Morse, of Amherst College, - - - 112

8



4 The National Revenues.

PAOK.
XII. A GENERAL VIEW. By Chancellor Irving J.

Manatt, of the University of Nebraska, - 124

XIII. STEAMSHIP SUBSIDIES AS A MEANS OF RE-

DUCING THE SURPLUS. By Professor Arthur
T. Hadley, of Yale College, . - - 126

XIV. THE IMMEDIATE TASK. PROTECTION AND

AMERICAN AGRICULTURE. By President
Francis A. "Walker, of the Massachusetts
Institute of Technology, - - - - 135
XV. THE TARIFF AND THE WESTERN FARMER.
By Professor James H. Canfield, of the Uni-
versity of Kansas, - - - -152

XVI. INTERNAL TAXATION AND A REVENUE
TARIFF. By Professor Arthur Yager, of
the Georgetown (Kentucky) College, - - 161
XVII. A PLAN OF TARIFF REDUCTION. By Profes-
sor Edward W. Bemis, of Vanderbilt Uni-
versity, 167

XVIII. WAGES AND THE TARIFF. By Professor J.

Laurence Laughlin, of Harvard University, 176

XIX. THE SCIENTIFIC BASIS OF TARIFF LEGISLA-
TION. By Hon. Carroll D. Wright, United
States Commissioner of Labor, - - - 189

XX. CONCLUDING CHAPTER. By the Editor, - - 217



APPENDIX OF STATISTICAL TABLES.

PAGE.
I. Analysis of United States Revenues for year

ending June 30, 1887, - - 229

II. Analysis of United States Expenditures for

year ending June 30, 1887, - - - 229

III. Receipts of the United States by years, for
thirty years, from Customs, Internal Rev-
enue, and all other Sources, - - - 230



Contents. 6

Pimm.

IV. Expenditures of the United States for thirty

years, analyzed by years, - 231

V. Analysis of Interest-bearing Public Debt,

January 1, 1887, and January 1, 1888, 232
VI. Disposition of Surplus for year ending June

30, 1887, ... - 232

VII. Accumulation of Surplus in Treasury, by

months, from July 1, 1887, to May 1, 1888. 232
VIII. Statement of Amount of Interest-bearing
Debt each- year for thirty years, with
Amount of Annual Interest Charge, - - 233
IX. List of Leading Articles of "Free-list" Im-
ports, with Values of Goods Imported free
of duty in fiscal year 1887. Leading
Dutiable Articles, with Values of Importa-
tions, Amounts of Duties collected, and
Average (ad valorem) Rates of Duty, - - 234
X. Table showing Relative Values of Principal

Classes of Free and Dutiable Imports, etc , 239
XL Percentages of Total Duty paid by Leading

Articles and Classes of Imports, - 240
XII. Analysis of Internal Revenue Receipts for

1886 and 1887, 241

XIII. Table showing Estimate of the Effect of the

"Mills Bill" on Revenues from Customs, 242

XIV. Table showing Estimate of the Effect of the

" Mills Bill " upon Receipts from Internal

Revenue, ....... 243

XV. List of Revenue Reductions since the War,

with Estimated Amounts of Reduction, - 244
XVI. General Features of our Export Trade for

Fiscal Year 1887, 244

XVII. Carrying Trade in American and Foreign

Vessels for Fiscal Year 1887, ... 245



THE NATIONAL REVENUES.



INTRODUCTORY.

I.

The people of the United States are just now
engaged, with greater interest, candor and intel-
ligence than at any previous time in their his-
tory, in studying the problems of public econo-
mics. Circumstances all unite to make the times
favorable for this study, There is nothing else
in our national situation, external or internal, of
such paramount or pressing importance as to
divert the attention of the government and the
people from the questions that are chiefly admin-
istrative and economic in their nature.

The European powers are of necessity so
engrossed with affairs of diplomacy and interna-
tional politics that they are obliged to adjust
their economic arrangements to serve their polit-
ical and military exigencies first, and only as
a secondary consideration to enhance the well-
being of their people. Our country, happily, is
almost as free from the danger of invasion and
foreign war as if it were alone on the planet. It
7



8 The National Revenues.

has outgrown its earlier fears and dangers, and
it need have no thought of war, except for those
safeguards that common prudence might dictate
even in that golden era of world-federation and
universal peace that the poets foresee and the
philanthropists strive to realize.

Nor are we embarrassed by the distractions of
great domestic political problems of a funda-
mental nature, unsolved and irrepressible. The
franchise rests upon the broad basis of manhood;
we have no privileged classes ; we are, therefore,
exempt from those struggles between democracy
and hereditary privilege that form the principal
chapters in the recent constitutional history of
the European States. Fortunately, we began at
the point toward which the rest of the world is
inevitably moving, and have been spared the
agitation which always accompanies the process
of broadening the political fabric at its base.
Unfortunately, a "peculiar domestic institu-
tion," which was absolutely incompatible with
our civilization and our political system was
allowed to remain in existence, and a conflict of
three-quarters of a century was required to
eliminate it and to deal with the issues growing
out of it. While it remained, the nature of the
Federal Union and the supremacy of the Consti-
tution were in constant and grave dispute. So
long as there was lack of substantial agreement
as to the indissolubility and sovereignty of the



Introductory. 9

Union, it was impossible to deal upon their
merits with ordinary questions of national policy.
The difficulty of adopting broad and permanent
fiscal policies was made doubly great by the tact
'that the slaveholding States had not only dis-
tinct constitutional views to uphold, but had
also an industrial system so radically antagonistic
in principle to the system of the North that the
prosperity of the whole country under one com-
mon policy as regarded trade and industry
seemed impossible.

The South produced a few staple crops, largely
for export, by slave labor, and had no desire for
either diversified agriculture or manufactures.
The men of the North, realizing the vast and
varied natural resources of the country, its geo-
graphical isolation and completeness and its con-
tinental extent, had a vision of national economic
independence through the utilization of natural
advantages and the diversification of industries.
They saw, at least more or less clearly, the close
relationship between the growth of cities and
industries and a complex economic life on the
one hand, and the attainment of a high civiliza-
tion on the other ; and they were willing to
make the sacrifices and pay the cost. Partly
through the promptings of a fine spirit of patri-
otism, partly through the necessities and oppor-
tunities arising from wars in Europe and wars
with Europe, partly through the superiority of



10 The National Revenues.

Yankee inventiveness and the unequalled pro-
ductivity of American labor, partly through
bounties given by the State governments, and
partly through the operation of national tariffs
so imposed as to discriminate in favor of Ameri-
can production, an agricultural North acquired
factories, shops, and cities, imported industries
instead of wares, increased rapidly in population,
and at the same time developed a more intensive,
more diverse and more prosperous agriculture.
It is quite impossible to determine satisfacto-
rily what part one factor or another played in
bringing about this result. They were all coop-
erating elements in this process of the rapid
economic upbuilding of a people. To regard
the discriminating tariff as a sort of deus ex
mac/iina, of its own inherent potential energy
bringing about the wonderful progress from a
simple farming people, few in number and of
small wealth, to a great and populous nation with
huge industries and splendid cities, is absurd.
But that a young people with high spirit and a
powerful awakening of national consciousness
should employ the protective tariff system as one
of various instruments and expedients for accel-
erating their material progress and attaining a
completeness and independence of the national
economic life that should in some measure corre-
spond with and minister to the political inde-
pendence of the country, is not at all absurd.



Introductory. 11

It was, under the circumstances then existing,
the most natural thing in the world.

Whether such an instrument can be maae
really effective, whether it can be made to pay
in social and political results not to speak of
economic results anything which compensates
for its initial pecuniary cost to the people who
employ it, must depend wholly upon the people
themselves, their territorial situation and natural
advantages, the vigor with which they use other
means for the national advancement, and, in
short, the degree of potency possessed by those
nascent forces in the young life of the nation
that are transforming it from one stage of eco-
nomic development to another.

There is certainly much reason to believe
that if slavery had not existed in the South,
making industrial progress beyond the simplest
forms of agriculture impossible for that portion
of the country, and making the free exchange of
cotton and tobacco for the cheap manufactures
of Europe the obvious and permanent policy of
the planters, the country would have made a
much more united, systematic and scientific trial
of the protective system. For both cotton and
iron manufactures the South had better advan-
tages than the North. New England's seafaring
industries and foreign commerce on the one
hand, and the South's superior resources on the
other, might possibly have reversed the tradi-



12 The National Revenues.

tional policies of the two sections and made the
South more ardent for protection to home indus-
tries, and the North more inclined to favor un-
hampered freedom for foreign trade.

But sectional lines would hardly have been
drawn. We should not have had two mutually
destructive economic systems within our nation-
al limits, but rather a thoroughly homogeneous
economic life throughout the entire country.
Whatever use, under the circumstances, the
American people might have made of protective
tariffs, they would assuredly have made material
progress " by leaps and by bounds." Slavery
retarded American development. If it had been
stamped out a hundred years ago we should have
had a hundred millions of people and a national
wealth almost doubled. It was the irrepressible
national development that finally, bursting its
vexatious bounds, overthrew slavery, settled the
old dispute as to the constitutional right of the
nation to build itself up as a nation, and made pos-
sible for the first time an economic policy freed
from the reproach, just or unjust, of sectionalism.

If the North had not persistently fostered
manufactures, in spite of Southern opposition
and consequent fluctuations of national policy,
slavery could not have been overthrown. The
truth of this proposition is so obvious to all
discerning minds that it needs no demonstration.
It was the true instinct of self-preservation that



Introductory. 13

guided, in the main, our economic progress, and
made us at length a nation in reality.

The painful period of Reconstruction could
not be omitted or bridged over ; it was inevit-
able. But fundamental issues were settled. The
constitutional dispute was at an end. The con-
dition of a true "federative balance" had been
attained between states and nation, and the
people of all parties and all sections are to-day
in substantial accord upon all fundamental
questions affecting our political structure. Such
temporary problems, growing out of the war,
as those of the suspension and resumption of
specie payments have been solved. The vigorous
industrial life of the North is rapidly assimilat-
ing that of the South. We have thus, for the
first time in our history, reached a point where,
without serious distractions from without or any
deep-lying sources of division within, we may
devote ourselves as a united people, with har-
mony of interests and with recognized oneness
of destiny, to the consideration of questions of
national administration and economics.

The dawning of this fortunate period brings
with it the demand for a new kind of statesman-
ship and a new kind of knowledge diffused
among the people. The questions now upper-
most require for their wise solution a large
knowledge of public economy as a science. No
nation has ever offered so vast and inviting



14 The National Revenues.

a field as ours now presents, both for the study
of economic subjects and for the application,
through broad and well-informed statesmanship,
of the results of economic study to the solution
of practical questions.

It would be an easy thing to enumerate scores
of vital subjects affecting our American life, as
that of a social, industrial and political entity,
upon which political and economic science can
throw valuable light. A practical exigency has
made the National Revenue System uppermost
of all these questions.

By common consent and long usage, the
reasons of which our financial history supplies
abundantly, customs duties and excise taxes
have been appropriated by the federal govern-
ment as its exclusive sources of income, Avhile
direct taxation has been left to the States and
their subordinate municipalities as their princi-
pal means of support. So colossal was the
national expenditure during the period of civil
war and immediately following it, that the gov-
ernment was obliged to consult ways and means
for the largest possible income with compara-
tively little regard to the niceties of finance as a
science. The national conditions made depend-
ence upon home production more imperative
than ever before.

The South had" withdrawn from Congress, and
in the construction of the new tariff there was



Introductory. 15

something like unanimous consent to the most
pronounced protective measures the country
had ever adopted. But the decay of
foreign trade incident to the war reduced the
customs revenue to a minimum, and made
recourse to a most elaborate and unsparing
system of excise and "internal revenue"
taxation an unavoidable necessity. For four
years the aggregate income from internal taxes
was twice as great as that from customs. But
after the war there came a revival of foreign
commerce with an accompanying increase in the
revenue from customs, and there followed a
gradual cutting off of the more burdensome
internal taxes, until little was left of the once
elaborate schedule except the taxes upon liquor
and tobacco.

These sources of income have supplied the
treasury so abundantly as to permit not only the
most liberal current expenditure but also the un-
precedentedly rapid reduction of the interest-
bearing public debt, sixty per cent, of which
has been paid off, while the annual interest
charge has been reduced to one-fourth of the
amount paid in 1865 when the debt was at its
highest point. A cessation of debt payment re-
sulting from the fact that of the bonds now out-
standing none will be due until 1891, has been
followed by the rapid accumulation of a large
surplus of revenue in the treasury.



16 The National Revenues.

This situation, in many indirect ways a very
serious one, has brought about a discussion
that is destined to result in something more
than the averting of an immediate crisis. The
country has a mind to deal critically and
thoroughly with the whole question of its na-
tional revenue system. If the protective idea is
henceforth to govern in the imposition of cus-
toms taxes, the people desire to know more pre-
cisely what its objects are and how its arrange-
ments actually affect the industrial life of the
nation. They desire to learn what it costs, and
to what extent and by what means its cost is
distributed ; and also what in kind and amount
its benefits are, and how generally those benefits
are diffused. They also desire to know the rel-
ative merits of the excise system and the cus-
toms system. In short, they desire not only to
know at what points it is wisest to cut away
sources of revenue in view of the present
superabundance, but also upon what general
lines an intelligent readjustment of the revenue
system as a whole shall proceed.

Evidently these are not questions of a day or
a single session of Congress. They can only be
settled after much thought and discussion; and
it is well that people should have the educa-
tional benefit of a thorough, protracted and
popular agitation of all the phases of the com-
plicated subject. These are matters for careful



Introductory. 17

study and candid judgment, rather than for party
clamor. They are matters about which the
scientific students of public economy may have
opinions worthy to be taken into account.



n.

The present little volume makes no pretense
to be a treatise. It is, on the contrary, some-
what impromptu and quite unambitious. Never-
theless, it is believed that it will serve a useful
purpose. Our political economists are no longer
to be likened to " astronomers who have never
seen the stars." Their attention is given very
much less to philosophical abstractions and dia-
lectical diversions than to the study of actual
problems of social organization, economic wel-
fare, and public administration. While the
statesman's task is a different one, he is no closer
to the facts of history and of the current life of
society than is the economist of to-day; and he is
learning to rely upon the student of economic
science with growing confidence.

The last decade, and more especially the last
half decade, has witnessed a remarkable im-
pulse in this country to economic study and
writing. The universities have become the
recognized centers of this activity. Original
investigation in economic fields has increased
ten-fold. The study of political science has



18 The National Revenues.

become prominent and popular at all our leading
seats of learning, and the new work of the spe-
cialists in economic and historical research has
begun to exert a marked influence upon public
affairs. Not many years ago it was a common
thing to hear men refer to the college professors
as unpractical in their views, and to their politi-
cal economy as a " science based on assump-
tions."

But there has come a change. The method
and spirit of economic study has been greatly
transformed. It can no longer be said, if ever
it was said truly, that all our college graduates
are free-traders when they leave school by vir-
tue of a few easy and captivating syllogisms
learned from their professors, and that alt be-
come protectionists a few years later by virtue
of their contact with affairs and their participa-
tion in the actual economic life of the nation.
Some college teaching of economics may still
be as shallow and as unrelated to the facts of
history and the life of nations as some college
teaching formerly was; but the best teaching is
open to no such reproach, and fortunately there
is now much of the thorough and truly scientific
instruction.

It has occurred to the writer that the opinions
of a number of our American economists, chiefly
university professors, upon phases general and
particular of the national revenue situation,



Introductory. 19

might just at this time be read with interest and
profit. This collection of brief essays is the re-
sult of that thought. The papers are not elabo-
rate studies. They were sent in response to re-
quests which did not call for very extended or
laborious replies. It was believed that the ex-
pressions taken as a whole would reveal the
trend of thought among our foremost economic
students, and would also help the average citi-
zen to find the main bearings of subjects the in-
telligent approach to which puzzles very many.
Whether the result justifies that anticipation, the
reader must decide for himself. The collection
of the papers has involved no little correspond-
ence, and the attempt was made to secure some
range and variety by suggesting special phases
for treatment by particular individuals. The
following general letter explanatory of the plan
was also sent out:

"The people of the Uiiited States seem to be more
generally and thoroughly interested just now than for many
years past in the problems of national taxation. Candid
discussion of these problems upon their merits, without
reference to supposed party advantage, and without the bias
of class interest or locality interest, is unfortunately too
rare. I am persuaded that the views of our prominent
political economists would at this time receive marked at-
tention and exert a valuable influence. The importance of
the numerous writings in general or special fields of finance
and administration that have recently emanated from the
American universities, is recognized at home and abroad,
and the country is turning to the schools of political science,



20 The National Revenues.

as never before, for light and aid in questions of practical
statesmanship.

"After the holiday recess Congress must grapple in
earnest the economic problems of the day. They are not
to be finally adjusted by any mere makeshift, nor are they
to be very quickly settled in one way or in another. An
unusual number of men in public life as well as of private
citizens are in an inquiring frame of mind and are open to
conviction. It is my purpose to secure expressions of opin-
ion from a score or more of those economists who are well
known as writers and instructors, who are versed in the
principles of taxation, and who know the economic experi-
ence of other countries as well as the history and present
condition of our own national finances.

"It is perhaps to be preferred that these brief papers
should give more prominence to conclusions than to the
methods pursued iu reaching them. I prefer not to present
a list of questions for categorical reply, altnough I shall be
glad, of course, to have the statements as frank and specific
in their prescriptions as the writers may be ready and will-
ing to make them It is not my plan to pit different eco-
nomic schools against one another, or to obtain material for
controversial uses. I confidently hope to secure a series of
brief statements or papers that will as a whole greatly aid
the intelligent reader in finding the bearings of those great
subjects, national taxation and revenue. Some plain, clear
statements by gentlemen whose views of a national eco-
nomic policy are presented from the scientific standpoint,
will serve a real educational purpose.

" It being generally conceded that Congress must cut off
some existing sources of revenue, and reduce the. surplus
income, in what way should the reduction be made, and
upon what governing considerations ?

" Should it be attempted, by refunding or in some other
way, to bring the public debt into such form as to permit
the continuance of a policy of somewhat rapid payment,
or should we adjust the revenues upon a plan that will al-



Introductory. 21

low nothing for debt payment beyond sinking-fund require-


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Online LibraryAlbert ShawThe national revenues: a collection of papers by American economists → online text (page 1 of 14)