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in the Report. Hamilton's argument — it need not be
said to those who have read even the brief summary
given — is far broader than a mere consideration of mil-
itary exigencies, broader than an examination of the
means for making the United States independent of for-
eign nations. It advocates the introduction of manufac-
tures as adding to the aggregate wealth, as inducing
immigration, and for other reasons in no way connected
with a system of centralized government, or with political
as distinguished from industrial objects in view. Indeed,
if Hamilton had an ulterior purpose in writing his Report,
one, namely, of securing executive centralization and build-
ing up a sentiment of nationality, he succeeded to a
marked degree in concealing that purpose. The Report is
related to the funding scheme, the assumption of State
debts, and the payment of the national debt, as any plan
of ways and means must be related to an expenditure to
be provided for ; and apparently not otherwise.

Professor Adams has far less ground, however, to hold
his opinion when he descends to particular reasons than
when he is arguing upon generalities. At the time
Adams wrote, the official figures of the Treasury Depart-
ment indicated that the average rate of duty collected
under the tariff acts before 1796 was only 13| jier cent.
But the sums reported as the yield of customs duty were
the net amount paid in by collectors, after deducting the


cost of collectiou, and not the amount paid by importers.
The figures were revised in 1888, and they now show, as
they should, the whole amount of duties paid ; and the
average is above 20 per cent.^ The bearing of this fact
upon Professor Adams's argument need not be pointed
out. Would his argument have been sound if the assertion
that the rate was 13 o- per cent, had been accurate? In
dealing with this epoch in our history we must not forget
that the elements which then constituted the natural pro-
tection of manufactures were more effective than they have
been in later times. Hamilton himself, in discussing the
question of bounties, estimated the charges — exclusive
of duties — upon the marketing of foreign goods at from
fifteen to thirty per ceut.^ It follows that a rate of duty
much lower than is now necessary to give home manufac-
tures full protection might then have been ample for the

The other points in Dr. Adams's argument seem to be
based upon an insufficient examination of the historical
facts regarding the financial legislation from 1791 to 1795.
It is asserted that " a general system of internal duties "
was introduced by the Federal party ; that the resort to
excise in the circumstances of the case " show that there
was no . . . appreciation of a fully developed sj^stem of
protection under the control of the Treasury Department " ;
and that the admitted effect of an excise in counteracting
the effect of a protective duty " was the case so far as beer
and spirits were concerned." Every one of these state-
ments is erroneous. There was no general system of internal
duties. The excise at first applies to distilled spirits only.
In 1794 duties were placed upon private carriages and car-
riages kept for hire, upon the manufacture of snuff and
refined sugar, and upon sales by auction. A license fee was

1 In 1793 it was 21.22 per cent. ; in 1794 it was 24.82 per cent. ; in 1795
it was 13.96 per cent.

2 See p. 86, ante.


also required of dealers in spirits. That was the extent
of the system of internal duties. Secondly, although there
is no evidence that Hamilton originated these internal
duties, there is a probability that he did so, and a certainty
that he approved of them, as is shown by his recommenda-
tion in a communication to the Senate, on January 20,
1795, that they be continued in force until January 1,
1800.1 Finally, in no case was the excise duty allowed to
counteract the effect of the protective duty. When an
excise was laid upon domestic spirits, the duty upon for-
eign spirits was more than doubled.^ The act which laid
an excise of four cents a pound on domestic snuff imposed
a customs duty of twelve cents in addition to the former
duty of ten cents upon imported snuff. The act which
taxed domestic refined sugar two cents a pound increased
the duty on imported refined sugar from four cents to nine
cents, which must have been prohibitive.

Quite as erroneous as are the statements concerning the
excise laws is the remark that " the subsequent [to the
Report] development of Treasury management does not
show such strict adherence to the principles of the Report,"
etc. In reply to this it may be said, first, that of the thirty
specific recommendations contained in the " Report upon
Manufactures " (omitted from the summary) twenty-one
were for an increase of duty ; of these eighteen were fol-
lowed in the act of 1792. Five were for a remission of
the duty on raw materials ; three were followed. Four
were for a bounty ; no bounty was granted. But, still
further, on March 8, 1792, the House of Representatives
asked the Secretary to report on the best mode of raisin ti-
the additional supplies requisite for the ensuing year. In
his reply,^ dated March 16, Hamilton repeated sixteen of
the recommendations contained in his " Report upon Manu-

I " Annals of Congress," Third Congress, 1793-1795, p. 1842.

^ There "was no excise on beer.

^ " Annals of Congress," Second Congress, 1791-1793, p. 1099.


factures ; " and fifteen of them were adopted and enacted
in the tariff act of that year. Whatever else, then, may
be said of that act, it cannot be said that it did not embody
Hamilton's ideas, since he himself drafted it, and it was
passed almost without amendment. Nor is it easy to
escape from the inference that, if Hamilton urged protec-
tion and pointed out the way to effect it, and if Congress
adopted his plan in its entirety. Congress itself approved,
sanctioned, and introduced the system.

One other point raised by Professor Adams may be
considered briefly, namely, that the protectionist senti-
ment in the Report and in the community was not a " sen-
timent merely industrial in character, or resting wholly
on an industrial basis." That is obvious, taking the words
quoted in their ordinary modern signification, from the
Report itself. There was no basis for a sentiment merely
industrial in character. There could be no argument for
a protective system founded upon solicitude regarding the
welfare of industries already established, when as yet no
employer of labor in manufacturing in the country had
upon his pay-roll as many names as are to be found at the
present time on that of a well-appointed city newspaper.
Hamilton does not once refer to the injustice of abandon-
ing to their fate manufacturers who had been encouraged
by State laws to engage in the business. The references
to that feature of the question, in the debates in the First
Congress, are the only allusion to the industrial side of
protection. Hamilton gave the reasons for favoring a
protective policy with great frankness and lucidity. The
security of the country against calamities that might be
brought about by interruption of commerce in time of
war, is one powerful reason ; it is not the only, or the most
prominent reason. It runs through the whole Report that
the encouragement of manufactures, the assisted estab-
lishment of new industries as well as the protection of
those which had made a start, in time of peace no less than


in time of war, is to result in the expansion of the conn-
try in population, in an increase of wealth, in the comfort
and general welfare of the people. It may be said with
truth that those are the reasons that have always actuated
and do still control the opinions of a vast majority of the
people who class themselves as protectionists. Unless,
therefore, it can be maintained that protectionism is not
protectionism if it be not advocated for reasons which are
applicable to the developed industrial system of our times,
if it does not derive its political strength from persons
who have a selfish end to be served by it, and if it does
have for its aim — mistaken or not as the means to an
end may be regarded — an enlargement of the aggregate
wealth and resources of the country, — unless this can be
successfully asserted, the " Report upon Manufactures "
and the legislation which was based ufion it were dictated
by the same spirit that has animated protectionists for
more than a hundred years since the Report was written.

Reference has been made, casually, in the preceding dis-
cussion, to the tariff acts of 1792 and 1794. It is neces-
sary now to narrate the circumstances of their passage
more in detail. The President reported to Congress in
his third annual address, in October, 1791, that the reve-
nues " promise to be adequate to their objects," and that
no new burdens were necessary. But in December, he had
to communicate to Congress the intelligence of the defeat
of General St. Clair. This calamity entailed a heavy ex-
pense to defend the frontiers. A considerable increase of
the army was authorized by a special act. As the revenue
for the year was estimated to be less by $650,000 than the
ordinary and extraordinary expenditures, a resolution was
offered in the House of Representatives on March 7, 1792,
that the Secretary of the Treasury be directed to report
his opinion of the best mode of raising the additional sup-
plies requisite for the ensuing year. Upon this resolution


a remarkable debate took place, and was continued on the
next day. The debate on the 8th is alone reported ; but
it is clear, from the remarks of Mr. Sedgwick, of Massa-
chusetts, that Mr. Madison objected strongly to asking
the Secretary to outline a policy of taxation, and that Mr.
Fitzsimons also opposed the resolution. How far they
went in opposition cannot be known. Mr. Page, of Vir-
ginia, who quoted some of their remarks approvingly,
thought that the motion could " be supported on no other
principle but such as may be used to subvert our govern-
ment and to introduce a monarchy ; " that the arguments
in support of it were " mischievous, and ought to be op-
posed by every friend to a free government;" and that
the English Parliament was " not so obsequious to minis-
ters as some gentlemen are disposed to be to our secre-
taries." These extracts represent fairly the spirit in which
the resolution was opposed. Nothing was urged against
the Secretary's knowledge and judgment in financial mat-
ters, nor was there a word of criticism of his revenue
system. The objection was based wholly upon the alleged
impropriety of asking advice from an appointed minister,
and upon the constitutional duty of the House of Repre-
sentatives to originate tax bills. The resolution was
adopted by a yea and nay vote of 31 to 27, which was in
a general way a party vote, and, more precisely, a sec-
tional vote. Pennsylvania, Virginia, North Carolina, and
Georgia, gave 22 of the 27 negative votes. New Eng-
land, New York, New Jersey, Maryland, and South Caro-
lina gave 27 of the 31 affirmative votes.

The Secretary of the Treasury reported a plan for a
revenue bill on March 16, 1792. He estimated the ex-
pense entailed by the act making additional provision for
the protection of the frontiers at 1675,950 ; the ordinary
surplus for the year at $150,000 ; and the amount neces-
sary to be raised at 1525,950. Of three expedients, — a
sale of the interest of the United States in the Bank of


the United States, a loan, and additional taxes, — lie un-
hesitatingly chose the last named. In accordance with
this ojjinion, he proposed additional import duties. In
discussing his own propositions he remarked : ^ "It will
not have escaped the" observation of the House that the
duties which were suggested in the Secretary's report on
that subject as encouragements to manufactures are for
the most part included in the objects of this report."

The report was referred to a committee of which Mr.
Fitzsimons was chairman. On the 11th of April the com-
mittee reported a bill which seems to have followed Ham-
ilton's recommendations with absolute exactness. The bill
was taken up for consideration by the House of Repre-
sentatives on April 17 and was debated until the 21st,
when it was passed. The debate is not fully reported.
A motion was made to increase the duty on hemjD from.
54 cents to $1 a hundredweight, and to add 75 cents a
hundredweight to the duty on cordage. After discussion
the motion was carried. A motion was also adopted to
strike out the exemption of raw cotton from duty. Ham-
ilton had advised that cotton be placed on the free list.
The duty was advocated by all the Southern members who
spoke upon the question, and opposed by all the Northern
members. The question between them was as to the
adaptability and supply of American cotton. All amend-
ments having been voted upon, and the question being on
passing the bill, Mr. Page, of Virginia, oi3posed it. " If
the bill were what its title says it is [for raising a further
sum of money for the protection of the frontiers] , I should
be the last man in this House to vote against it. . . . Sir,
it is not a bill for the protection of the frontiers, but for
the encouragement of certain manufactures and of the
fisheries, and for the increase of the sinking fund."

Mr. Murray, of Maryland, reviewed the proceedings by
which the House had come to its present position. He

1 " Annals of Congress," Second Congress, 1791-1793, p. 1105.


criticised those members who objected to this bill but had
no plan of their own to substitute for it. Coming to the
objection that it was a protective measure, he called atten-
tion to the fact that every local interest which had asked
for protection had been gratified, — the hemp and cotton
of the South, and the iron of the Middle States. The
predominant feature of the bill was its nationality, giving
impartial and as far as circumstances admitted, equal jus-
tice and encouragement to the interests and raw materials
of the respective States. " In the early stages of this bill
several gentlemen complained of the preference shown to
the manufacturing parts of the country, and it was said
that the protecting duties would operate exclusively in the
Eastern States. When, however, on the completion of
this bill we see the reciprocity under which the agricul-
tural and the manufacturing interests have been viewed
and cherished, we must be forced to own both the liberal
and conciliating spirit with which the House has been
moved, as well as the mutual dependence on which these
apparently opposite interests really are supported. . . .
The objection of some gentlemen that the protection of
manufactures was not the original object of the bill he
did not think a sound one. Several modes of raising the
sum, which is our first object, were held out as alterna-
tives. This mode by imposts was most liked. The line
of taxation being once adopted, the protection of manu-
factures naturally arose out of the thing itself. It arose
not as a prime object, but as a necessary incident. He
thought the bill would insure productive revenue ; and he
thought the collateral benefit, as it touched a production of
the natural riches of the country, a high recommendation."
The biU was passed by a vote of 37 to 20. The divi-
sion was quite different from that on the reference of the
matter to the Secretary. New England gave but two
votes against the bill ; Pennsylvania came unanimously to
the support of the measure ; Virginia was nearly evenly


divided. The Senate made sundry amendments relating
to matters of administration, not to rates of duty, and
passed the bill. An agreement between the two Houses
was reached quickly and the act was approved on May 2,
1792. Mr. Murray seems to have set forth exactly the
motives and wishes of the majority of Congress in passing
the bill. It would not have been introduced at all but
for the urgent necessity of more revenue, which was there-
fore its prime object. The occasion of an increase of
the tariff having arisen, the opportunity of adopting Ham-
ilton's recommendations of protective duties was taken ;
and on the request of members from certain parts of the
countrj^, who thought their local interests not sufficiently
regarded, the system of protection was extended and made
as general as circumstances allowed.

A situation somewhat like that which led to the enact-
ment of the law of 1792 rendered necessary an increase
of the revenue in 1794. It may be maintained with some
plausibility that the act of 1794 originated in a spirit of
commercial retaliation rather than in the need of revenue.
The evidence for and against this proposition is not con-
clusive. On the 3d of January, 1794, Mr. Madison intro-
duced in the House of Representatives a series of resolu-
tions, the first of which declared " that the interest of the
United States would be promoted by further restrictions
and higher duties in certain cases on the manufactures and
navigation of foreign nations employed in the commerce
of the United States than those now imposed." His idea
was to lay additional duties on goods coming from coun-
tries with which the United States had no commercial
treaty. There is no doubt that the commercial regula-
tions of Great Britain were highly injurious to the mer-
cantile interests of this country ; but it is impossible here
to go into any of the details of our grievances, or into the
minute comparisons, which were made with tiresome pro-
lixity, of the policy of Great Britain with that of France.


The resolutions of Mr. Madison were debated in Commit-
tee of tlie Whole on several days in each week, until the
17th of March, — more than ten weeks, — but after that
day no mention is made of them. They were never voted
on by the House. On the 26th of March a resolution was
passed constituting a committee of fourteen members " to
inquire whether any or what further or other revenues are
necessary for the suj)port of public credit ; and if further
revenues are necessary, to report the ways and means."
The resolution was understood by Mr. Page, of Virginia,
to direct the committee to " inquire " of the Secretary of
the Treasury ; and he opposed it as a proceeding far more
objectionable than that in 1792, when the inquiry was made
directly. The resolution was passed; and Mr. William
Smith, of South Carolina, whose objections to Mr. Madi-
son's resolutions fill more than twenty of the large, closely
printed pages of the " Annals of Congress," was made the
chairman of the committee.^

The report was made on April 17, 1794. The com-
mittee found that the ordinary deficit for the year, ac-
cording to the estimate of the Secretary of the Treasury,
woirld be 1425,633 ; that $650,000 additional ought to be
ajjpropriated for the military service ; and that the inter-
rujition to commerce would probably cause a loss of
f 1,300,000 of revenue from duties according to the exist-
ing rates. The sum of these items is §2,375,633. It had
been determined already to raise a million dollars by bor-
rowing. The deficiency the committee proposed to supply
by a series of measures laying an excise on carriages, sales
by auction, manufactured snuff, and sugar, establishing

1 " I am at no loss to ascribe Smith's speech to its true father. ETCry
tittle of it is Hamilton's, except the introduction. There is scarcely any-
thing- in it which I have not heard from him in our various private, though
official discussions." (Jefferson to Madison.) Nevertheless, Mr. Smith
expressed his own views, and on subsequent occasions, when Hamilton's
help was not at hand, he made reports and speeches on financial subjects
which prove that he was in no need of assistance.


stamp duties, requiring licenses for retail dealers in liquor,
a direct tax on land, and an increase of the impost. The
propositions were debated at great length in Committee
of the Whole. The direct tax was rejected by a most
emphatic vote, — seventy members for striking out the
tax, the nays not counted. The bill laying a stamp tax
was approved by the committee, but when put on its pas-
sage was defeated, 50 to 32.^ The other excise measures
were j)assed, as was also the bill increasing customs duties.
The House pronounced adversely to duties discrimi-
nating against Great Britain when first the resolution
relating to an increase of the impost was considered. The
opinions expressed seem to have convinced the mover of
the amendment that the House would not agree to it, and
the motion was withdrawn. The impost bill was reported
on May 13 ; it was considered in Committee of the Whole
on the 16th, and reported back to the House. The only
debates were upon the salt and coal duties. The Penn-
sylvania and Western members successfully resisted an
addition of three cents a bushel to the salt duty, and suc-
cessfully defended an increase of duty upon coal. The
bill was passed on the 17th ; the Senate passed it with
amendments on June 3. An agreement was quickly made
upon the amendments, and the act was approved June 7,

^ A tax on stamped veUum, parchment, and paper, used in a great va-
riety of leg-al documents, was levied by an act passed in July, 1797, to take
effect at the end of the year. By a subsequent act the time for its coming
into operation was postponed untU July 1, 1798.



We have now reached a period when the financial iDolicy
of the government was fully established and when the
discussion of abstract principles of taxation ceased for a
long time. Numerous changes in the revenue laws were
required and were made. Twenty-four acts modifying
the duty on foreign imports more or less were passed dur-
ing the twenty-two years between the act of 1794 and the
general revision of the tariff in 1816. With two or three
exceptions they had no other motive than to adjust the
revenue to the needs of the Treasury. A summary of
this legislation may properly precede a survey of the gen-
eral conditions that prevailed during those years.

In 1795 the duties on sugar and tea were simjjlified.
An important change was also made in the method of
valuing goods charged with an ad valorem duty. The early
practice was to assess duties upon the value of goods " at
the time and place of importation." The new law im-
posed duties upon the value at the place of exportation
plus all charges, — commissions, outside packages, and
insurance only excepted.

In 1797 an addition was made to the duty upon sugar,
molasses, tea, cocoa, velvets, and muslins. The revenue
derived from the increase was appropriated specifically
toward the payment of the public debt. A later act of
the same year increased the duty on salt from twelve cents
a bushel to twenty cents, and augmented correspondingly
the drawback on salted provisions and pickled fish and
the bounty to vessels engaged in the cod fishery. The salt


tax was a standing grievance of the people who dwelt in
the "back country "; and the increase was strenuously
resisted by their representatives ; but it was carried by a
narrow majority. The act was by its terms limited in
duration to two years. In 1800 its operation was extended
for ten years ; in 1807 the salt duty and its concomitant
drawbacks and bounty were all repealed.

Further additions were made, in 1800, to the duty on
sugar, sugar candy, molasses, wine, and all goods paying
ten per cent, ad valorem. This increase also was appro-
priated toward the payment of the public debt. The
troubles with the Barbary powers led to the enactment of
a law, in 1804, laying two and a half per cent, additional
duty on all goods paying ad valorem, which addition con-
stituted the " Mediterranean fund," and was appropriated
toward the expenses of the war. The act was to continue
in force until the expiration of three months after the
conclusion of peace with the regency of Trij^oli. The in-
creased revenue was so much needed that the section of
the act levying the additional duties was continued in
force by eight successive acts until the war of 1812. In
the same year, 1804, which saw the creation of the Medi-
terranean fund, a few articles were added to the free list,

Online LibraryEdward StanwoodAmerican tariff controversies in the nineteenth century → online text (page 10 of 36)