Financial History Issue 129 (Spring 2019) | Page 23
The Republican-controlled Senate
Finance Committee proposed a different
bill that would actually raise most tar-
iffs. The debate that raged in Congress
throughout 1888 reflected the two political
parties’ worldviews that tariffs were either
essential to the protection of American
manufacturers against foreign competition
(Republican) or harmful to most consum-
ers and farmers forced to pay higher prices
for manufactured goods (Democratic).
The political deadlock seemed to be
broken by the election of 1888 that saw
Republicans win both the presidency and
the control of both houses of Congress.
But the victors misinterpreted Americans’
feelings about the need for high tariffs.
Benjamin Harrison actually lost the popu-
lar vote to incumbent Grover Cleveland;
but the Republican became the 23rd Presi-
dent by winning a majority of votes in the
Electoral College. From his position as
the new chairman of the House Ways and
Means Committee, Congressman William
McKinley shepherded through Congress
what became known as the McKinley Tar-
iff Act of 1890; that bill raised the average
duty on imports by about 45%.
The next two elections proved that the
Republicans had overplayed their hand.
In November 1890, Democrats won back
control of the House and gained seats in
the Senate; in 1892, Cleveland re-claimed
the presidency and Democrats re-gained
control of both houses of Congress. Pre-
dictably, key legislators in the House and
Senate crafted the Wilson-Gorman Tariff
Act, which lowered tariffs to their pre-
1890 levels and which President Cleve-
land signed in August 1894. The lingering
effects of the Panic of 1893 were instru-
mental in making the election of 1896 yet
another realigning one in which Repub-
licans took control of the presidency and
both houses of Congress. Party leaders
devoted their time to again addressing the
tariff issue; by July 1897, President William
McKinley was ready to sign the Dingley
Act and, thereby, raise tariffs back towards
their 1890 levels.
After winning re-election in 1900, the
protectionist-minded McKinley found
himself challenging the long-held Repub-
lican idea that American industry ben-
efitted from the existence of a high wall of
protective tariffs. Companies of all sizes
were increasing their efforts to market their
products to customers throughout Europe,
South America and Asia. The President
came to realize that high levels of tariffs
levels for both tariffs and the income tax.
The federal government borrowed more
than $2.6 billion to finance the war; it gen-
erated another $360 million from income
taxes and $300 million from tariffs.
The income tax expired in 1872. Fed-
eral fiscal policy returned to what had
been considered normal in the antebel-
lum era. From 1875 to 1890, tariffs con-
sistently accounted for well over half of
federal receipts. Meanwhile, total federal
spending declined steadily, leading to the
generation of sizable budget surpluses
throughout the 1870s and 1880s and the
eventual calls for substantial tariff reform,
i.e. reductions.
In December 1887, Democratic Presi-
dent Grover Cleveland sparked what con-
gressmen themselves called “The Great
Tariff Debate of 1888” by devoting much
of his Annual Message to tariffs. It was
a blistering attack on the overall level of
tariffs, the inequitable nature of the levies
imposed on various imported products
and the damage that high tariffs did to the
financial health of consumers and farmers.
The Democratic majority on the House
Ways and Means Committee spent the
next year crafting a bill that would reduce
the average tariff by almost 30%.
1906 postcard for the American Protective Tariff League showing a bowl labeled “Cleveland Soup, 1893.” The words
“free trade” and “lest we forget” appear to the left and right of the bowl, and a spoon “democracy” rests inside the bowl.
The image references the Panic of 1893 and President Grover Cleveland’s inaction at reforming the tariff laws.
www.MoAF.org | Spring 2019 | FINANCIAL HISTORY 21