The Payne Tariff Law
A GENERAL revision of our tariff laws long ago came to be the most expensive of the processes of legislation. Revenue is often a secondary consideration, and the regulation of foreign competition in our domestic market the first. So long as there is doubt as to the extent to which the law will intervene in the ordinary processes of trade, there will be hesitancy in enterprise, a hand-to-mouth production, and a slackening from normal business activity. The revision which has just been accomplished has undoubtedly checked business, but it has been attended with much less than the usual amount of disturbance. The agitation which preceded it was less prolonged, and was only slightly partisan.
Ever since the repeal of the Wilson Act, the attitude of the Democratic party upon the tariff has been very mildly academic. As a party, it has shown very little of its old-time passion concerning the issue on which it has waged so many aggressive campaigns. Groups of its members have continued to advocate free raw materials, and the raising of revenue at the custom houses upon such articles only as were not produced in this country; but they have not represented a united party, or, indeed, its general attitude. In the session which has just closed, free iron ore and free lumber found their strongest opponents among the Democrats, and many of them in both houses favored high revenue duties which should have the incidental effect of giving protection. Whether revenue or protection was the incident, the result was the same. To the general Republican policy of protection there was little genuine opposition in the opposite party.
The tariff to be revised was a Republican tariff, and Republican also were the agitation which led to the revision and the auspices under which it was accomplished. The revision of a tariff by a party which made it, and which professed in the revision the same principles which animated it in the original work, would naturally be accompanied by the minimum of disturbance. Was it also accompanied by the minimum of accomplishment ? Was the revision a mere make-believe affair, which left the Dingley tariff substantially unchanged ? Has there been revision enough to justify the agitation, and to pay what it has cost us ? I do not mean to stir up the ancient inquiry into the effect of the tariff upon the prices which the “ ultimate consumer ” pays, but I mean only to ask whether we secured a substantial amount of what we thought was wanted and was promised. It would seem that it would not be difficult to decide whether the revision was up or down, but that very question has been foremost in public discussion during the month which has elapsed since the passage of the bill.
The obvious method of making a comparison is, of course, to compare: to take the corresponding Payne and Dingley duties opposite one another in parallel columns, and see just what duties have been increased, and what have been decreased. The difficulty with such an unambitious method is that it does away with the necessity of argument, and easily leads to a conclusion from which there is no escape. Hence we have had more abstract methods which, in proportion as they are fallacious, give a better foundation for denunciation, and for fine accusations of bad faith. The method commonly applied by the critics of the Payne Act is to compare its average ad valorem with that of the Dingley Act; and since there is little difference between the two laws in this respect, it is argued that there has been no downward revision.
A reverend American gentleman now abroad, having seen a statement of relative ad valorems in the London Times, makes haste to declare that the American people have been tricked, and proceeds to charge President Taft and his party with bad faith. I am not taking this outbreak because it is exceptional, but rather because it is based upon a method of going through the form of reasoning quite commonly employed. But it requires only the most superficial knowledge of the subject to know that the average ad valorem furnishes no test at all for a comparison of the character of the tariff bills. It takes no account, in the first place, of goods put on the free list. The Payne Act might have put everything upon the free list except sheep-dip, — some other equally inconsequential article would serve as well, — and have put a duty upon that of one hundred per cent. We should then, of course, have had absolute free trade in everything except sheep-dip, but the average ad valorem of the act would be more than twice that of the Dingley Act. Mr. Payne might therefore have just as reasonably been charged by somebody, talking simply out of the fullness of language, with revising the tariff upward in the most wicked fashion, although he put practically everything on the free list.
Take, for instance, the sugar schedule, and you run into this funny little paradox. The sugar duties were unchanged, except that the Payne Act made two reductions; and yet, although it had made nothing but reductions, the average ad valorem of its sugar schedule is higher than that of the previous law. One who is at all curious to know the reason for this will find it in the duties on Philippine sugars. These were formerly admitted at a reduced rate, and they, therefore, brought down the average duties somewhat below the general rate; but the Payne Act put them absolutely on the free list, and they ceased to be a factor in fixing the average duty upon dutiable sugar. If any advocate of revision downward still imagines that the average ad valorem of the Payne Act indicates that it increases, rather than diminishes, the amount of protection, he has only to look at the free-trade tariff of Great Britain, which has an average ad valorem very much higher.
Perhaps the most comprehensive test that can be applied to the character of the revision is seen in the nature of the articles upon which it has made decreases in duties, compared with those where increases are found. Mr. Payne applied his schedules to our domestic consumption, as shown by the latest census returns; and it appeared that duties had been decreased upon necessary articles consumed by the American people to the amount of five billion dollars’ worth annually, while they had been increased upon necessary articles consumed to the amount of only two hundred and seventythree million dollars each year.
It is the time-honored claim of the opponents of protection that it increases the price, not only of imported articles, but also of similar articles produced in this country; and that, in order to measure the cost of the system to the people, it is necessary to add to the taxes collected at the custom houses an amount equal to the aggregate of duties if they were levied upon all similar articles made and consumed in this country. The tariff, it was long argued, not only increased the price of the imported article by the amount of the duty, but similarly increased the price of the domestic article also. In this way, there was made out an aggregate cost of protection which was frightful to contemplate. While this aggregate was greatly exaggerated, because in some cases the duty was never needed and never operative here, and in other cases internal competition had reduced the price much below the importing point, it is undeniable that, as a general proposition, the effect of a customs duty is to increase the cost both of the foreign article and also of the similar article produced here. This effect is by no means confined to those articles in regard to which importations are active. Our domestic market may be under the control of a combination which, without regard to the internal cost of production, might push up the price under the shelter of a duty to a point just under the importing point, and a reduction of the duty would reduce the price even though the new duty might be prohibitory. It is, therefore, a striking test of the real character of the Payne Act that, of the necessary articles used by the American people, it reduces duties upon nearly twenty dollars of consumption for every dollar upon which it makes an increase.
The certain method of determining just what the Payne Act does is, as I have said, to take its paragraphs in detail and scrutinize the new duties in comparison with those which they have supplanted. Such a course will show the exact character and number of the increases and decreases. Those who have no other means of comparison at hand may safely take the table prepared by the Hon. Champ Clark of Missouri, Democratic leader in the House of Representatives, and produced by him July 31 last, in his speech in the House of Representatives against the Conference Report on the bill. It is true that in commenting upon it he showed that he was a trifle rusty on his Cobden, and made the amount of actual revenue the test, — a method only less weird than that based upon the average ad valorem, for it is demonstrable that a purely free-trade tariff after the British model would provide us a greater revenue than does the Payne Act. While the table given by Mr. Clark exaggerates in some cases the extent of the increases, it will clearly appear from it that on the whole the decreases so vastly outnumber the increases as to make the new law seem almost revolutionary in character. If one takes the schedules in their order, he will find in the first schedule, which relates to chemicals, that the increases are a bare halfdozen in number, and include fancy soaps and alkaloids of opium and cocaine, while the decreases are more than fifty, and include many of the articles which are in general consumption, such as sulphur, various forms of soda, potash, lead, and sulphate of ammonia, the last of which is put on the free list.
The second schedule shows a slight increase upon the smaller sizes of plate glass, and this increase is many times offset by decreases upon fire and other brick, gypsum, various kinds of windowglass, nearly all the grades of marble, and other important articles.
In the metal schedule there is an increase in fabricated structural steel, zinc ore, and a very few other items, some of which relate to articles not manufactured when the Dingley law was passed; but, on the other hand, the basic article of iron ore is reduced from forty to fifteen cents per ton, the lowest ad valorem that it has had in the history of the country; pig iron is reduced from four dollars to two dollars and a half per ton, scrap iron and steel from four dollars to one dollar per ton, bar iron from six-tenths to three-tenths of a cent a pound, cotton ties from fivetenths to three-tenths of a cent per pound, steel rails from seven dollars and eightyfour cents to three dollars and ninety-two cents per ton. There are nearly a hundred other reductions in the metal schedule: in fact, the reductions in this schedule are so general, and in some cases so drastic, that it may be said, practically, that these duties have been cut in two.
The lumber schedule shows but two unimportant increases, while the schedule generally is cut nearly forty per cent. One grade of sawed boards is reduced from one dollar to fifty cents per thousand feet, and all other sawed lumber from two dollars to a dollar and a quarter per thousand. Fence-posts are put on the free list. Dressed lumber, telephone poles, railroad ties, and other important products of wood, are very much reduced.
Notwithstanding the attempt that is being made to create a sectional feeling in the West, the only schedule covering necessary articles in which increases predominate is the agricultural schedule. The duties are also increased upon champagnes and other wines, brandy, ale, beer, tobacco, silks, high-priced laces, and various other articles which, for want of a better term, are called luxuries.
Bituminous coal is reduced from sixtyseven cents to forty-seven cents per ton, which, with the exception of a very brief period, is in value the lowest duty we have ever imposed upon it.
Agricultural implements are reduced, and a provision added admitting them free of duty from any country which admits our agricultural machinery free.
Works of art more than twenty years old are put on the free list.
Hides of cattle are put on the free list, and an enormous reduction made, not merely on all the products of these hides, but on nearly all articles of leather. Sole leather is cut from twenty to five per cent ad valorem, upper leather from twenty to seven and a half per cent, and boots and shoes from twenty-five to fifteen per cent, and, on important kinds, to ten per cent.
It is perhaps a matter of indifference at the present time what the duty may be upon boots and shoes. That industry has become so developed in the United States, our machinery is so vastly superior to that of any other nation, that under present conditions our manufacturers could easily compete with manufacturers abroad on equal terms; and, on the other hand, the business is conducted here by so many independent concerns, and it has been so impossible to organize anything like a shoe trust or combination, that we should get the benefit of the fullest domestic competition, even if the importation of foreign shoes were absolutely prohibited. But our shoe machinery is now being introduced into other countries. The United Shoe Machinery Company, which has the practical control of the best shoe machinery, has built factories in Germany and Great Britain, and has sent experts abroad to educate the workmen there in the use of its machines. It has also been announced that it is intending to build similar factories in France, Russia, and later in Japan. It seems altogether likely, therefore, that we are approaching a period of actual competition from abroad in the manufacture of boots and shoes. With the scale of wages prevailing in those countries, which is one-half, and in some of the countries one-quarter, of the scale prevailing here, a substantial duty will be necessary. If protection in any great line of duties has been cut to the quick, it has been in that relating to boots and shoes.
It would be tedious to follow the paragraphs in detail, and I shall refer only to the more important of them and give the general conclusions which I think can be fairly drawn. The two great textile schedules are practically unchanged. The wool duty is politically the most powerful of any in the tariff. The farmers of the country have been pretty thoroughly educated to the belief, whether rightly or wrongly, that the free-wool agitation, culminating in the tariff of 1894, was responsible for the slaughter of their flocks. Their representatives formed the strongest single element behind the passage of the Dingley law; and, in the session just ended, their strength was so great as to discourage any assault upon the wool duties. These duties range from forty to more than one hundred per cent of the value, and so long as they are maintained at such a high point it is idle to talk of any very material reduction on woolens or worsteds. The centre of the entire schedule is the duty upon wool. In order for that to be effective, there must be duties sufficiently high upon manufactured woolens to lend people to engage in the business of manufacturing in this country; for otherwise our wool would need to be exported and sold upon a free-trade market, and the duty would become of no value. The reading of the debates upon the bill will show that the schedule, as a whole, found its most conspicuous supporters among the senators and representatives from the wool-growing states. Every duty in this schedule from top to bottom might have been cut ten per cent without trenching upon the necessary amount of protection.
The Dingley duties upon cottons were greatly less than those in the woolen schedule. This was doubtless due to the fact that we are the great cotton-producing nation, and our manufacturers are at no disadvantage in raw material with any of their foreign competitors. The cottonmanufacturing industry has taken a firm hold in the South, and it is so widely extended that it is not exposed to sectional attack. There was little fault found with the Dingley cotton schedule as a whole. The annual importation of seventy million dollars’ worth of cotton goods showed that foreign competition was most active. These duties are so complicated that it is difficult for one who is not an expert to understand them; but, according to the best experts, they are, at least, no higher in the Payne Act than the Dingley duties were intended to be, and were interpreted to be for four years after the passage of the act. The duty of sixty per cent, at first levied upon some of the finer fabrics, was reduced to six and seven per cent by a change in classification, made necessary by judicial construction. In the same way, cloths of a variety of colors were brought in as plain white cloths at little more than a nominal duty. Some fabrics, the foreign value of which was fifty cents per yard, were admitted as the commonest sort of cotton cloth at the flat duty of one cent a yard, or only two per cent ad valorem. No party could honestly revise a tariff and not correct such glaring inequalities, permitting articles of luxury to come through our custom house writh a nominal ad valorem, while imposing a duty of thirty per cent upon cloths in general use among the people. It was therefore necessary to restore the duties which had been practically removed by judicial construction. In most other respects, the duties upon cotton cloths generally show slight decreases. The important increases in this schedule were upon hosiery and gloves.
It is not easy to understand why the removal of the duty from hides should have given rise to so acrimonious a controversy. Our first tariff act, approved July 4, 1789, placed hides on the free list; and, except under the Walker revenue tariff, which impartially levied a duty on almost everything, and during the Civil War period, when revenue was sought wherever it could be found, on the free list they remained until the passage of the Dingley Act in 1897. They were on the free list as the bill passed the House, and the duty first appeared in a Senate amendment. The Payne Act simply returned to the ancient and almost uninterrupted policy. Our tariff laws have commonly taken into account the important difference between producing wool and producing hides. Many kinds of sheep are bred and cared for chiefly for their wool, of which they yield the farmer an annual crop; but cattle are raised primarily for beef, in the production of which the hide is merely a by-product. Quite often their price in this country is fixed at Liverpool, and vast numbers of cattle are exported. The meat industry in this country is largely in the hands of a few concerns, and their control of the raw material for sole leather would portend very strongly a sole-leather trust, and possibly a shoe trust.
Undoubtedly the industry of raising cattle will flourish almost equally well in this country if hides are free; and if the farmer’s profits should be slightly less, which is by no means certain, they would be more than made good to him in the decreased cost of his boots and shoes and other articles made of leather: for since there is now the most active internal competition in these articles, whatever will reduce their cost will go to the consumer, and not to the manufacturer. It is a prime object of protection to keep up the wages of labor, but hardly of the sort involved in the production of a hide. That is contributed chiefly by the placid steer patiently cropping all the long day the predigested food growing upon the government ranges.
The removal of the hide duty was most strongly opposed by the senators from a half-dozen Far Western states. The interest of those states in the duty is relatively less than is commonly supposed. There are seven great and populous states, having together one hundred and fifty-one representatives in the House, and there is another group of eight states, having, all told, only thirteen representatives in the House. The first group contains sixteen million cattle, and their one hundred and fifty-one representatives were almost unanimously in favor of free hides. The second group contains eight million cattle, and their representatives were for retaining the duty, but gracefully yielded. The second group of states with their small population had — such in that regard is the beauty of our Constitution — sixteen votes in the Senate, as against only fourteen from the populous group. But since the representatives of states having a vast majority of the people, and a majority of the cattle as well, were in favor of free hides, there would hardly seem a good reason for attempting to arouse sectional antagonism, and shaking the pillars of the empire.
For the first time in our tariff legislation, the Payne Act presents an elaborate set of maximum and minimum duties. The general minimum duties are now in force in favor of all countries, and they will continue in force in favor of such countries as give us their lowest tariffs. If another country prefers to favor other nations as against us, it thereby elects to take our maximum tariff. This maximum is twenty-five per cent ad valorem upon all articles which are dutiable, and does not apply to articles on the free list. It must be admitted that it is a high maximum, but if there is to be a maximum at all, there is much to be said in favor of its being a heavy one. Foreign nations will be less likely to invoke its operation against them. An important part of the world’s trade is carried on under commercial treaties, by which nations grant one another special concessions from their tariffs. We have the greatest market in the world, and it is quite unlikely that other countries will discriminate against what we send them, at the risk of losing our market for their own products. The maximum and minimum clauses are so drawn as to exempt Canada from their operation in such of her tariffs as may discriminate in favor of Great Britain. If Canada has no aspirations for independence, she is in reality a nation, and this concession is a friendly recognition of the fact that she is our near neighbor, and also of the important trade between the two countries.
The bill reduces the duty on print paper from six dollars to three dollars and seventy-five cents per ton, with a higher duty to be put in force contingent upon the action of other countries. Whatever the course which some of the Canadian provinces may take, it is likely that the provisions of the bill will result in cheaper print paper than we should have had under the old law, although such a result may be a doubtful blessing. There are doubtless some who think that it would not be easy to expiate the crime committed against civilization in the invention of wood-pulp paper. Before this inventor appeared with his chest of “ oak and triple brass,” it was necessary for the newspaper publisher to attempt to condense; but with the cheap pulp-paper, dilution, or rather invention, has been called into play. As in the case of the good and bad trusts, it is necessary or discreet to discriminate between the good newspapers and the bad ones. In the old days, our nerves were sufficiently thrilled by the publication of crime in ordinary type; now, however, when print paper is so cheap, the report of it is broken to us by smearing a single startling word across a whole page in dripping red. It is the boast of a publisher that forty acres of noble spruces have been sent to the shambles in order to make the paper necessary for a single issue of one of his monstrosities. But whatever the public value of the fact, or whether a further development of the type of journalism which cheap pulp-paper has fostered will tend still further to nullify the hundreds of millions which the states and churches are spending in the causes of religion, education, and order, the act is strongly in the interest of cheaper paper.
A careful scrutiny of the act will show that the decreases vastly outnumber the increases; and that, when luxuries are thrown out of the account, there are probably five hundred more decreases than increases. Except in the case of luxuries, there are few increases that are really important in character; while many of the decreases are upon articles that underlie great industries, and are of fundamental importance. The act is drawn upon great industrial lines, and takes a long step in the direction of emancipating many enterprises from the tribute that high duties compelled them to pay for the privilege of existing at all. The New York Nation cannot be accused of any friendliness towards protection. The new law has had no severer or more intelligent critic, and yet it frankly declares that it is the best tariff ever enacted by the Republican party. Here and there, some child of the people may be seen riding the tumult, and basking in a popularity won by indiscriminate abuse of the bill; but only time, and a brief time at that, will be needed to dissipate the tumult, and give the people a correct view.
The President effectively used his great influence to secure a downward revision in accordance with his own pledges made before the election, and those of his party as they were commonly interpreted; and unless the President is to be a mere dummy, taking no part in formulating great party policies to be enacted into law and not permitted to be consulted as to their details, he could not have acted differently. And if it is conceded that he may make his views known to individual members of Congress, not even the most sensitive spirit could take offense at the manner in which it was done. He has acquired the habit of patiently hearing before deciding; and he gives his visitor a chance, instead of making all the noise himself. He represents, in his manner, a return to the normal type; and he shows himself to be both a constitutional and a human president. When we awake in the morning, we may feel reasonably sure of finding the country here. Compared with the satisfaction over that, the dislike of his inheritance tax or corporation income-tax, or of any other mere policy, becomes a small matter. To have the air no longer filled with strident voices, to have something left to Congress, something to the courts, something to the states, and something also to each individual one of us, is indeed a very great deal; and hence it is that, for those of us who think that there should be something in the Republic besides the mere name, the stars once again shine.
But to return to the tariff, which happily I have succeeded for a moment in forgetting, the Payne Act does not represent the sum of human wisdom; it doubtless has some duties which are too high, or are otherwise out of gear with the conditions to which they should be adjusted; but having regard to those duties which are protective in character, it represents the greatest reduction that has been made in the tariff at any single time since our first revenue law was signed by George Washington.