A Political History of the Tariff 1789-1861

By William Edmunds Benson

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• Language: English
• Publisher: Xlibris US
• Release date: Nov 18, 2010
• ISBN: 9781456812836

William Edmunds Benson

William Edmunds Benson is best known as a retinal specialist at the Wills Eye Institute in Philadelphia. He has published 8 books, 46 chapters, and 106 articles in the ophthalmologic literature, but this is his fi rst venture into Civil War history. To prepare for this book he has read all of the debates in Congress from 1789 to 1861 and hundreds of history books. His book is studded with citations so that anyone can verify his research and conclusions. Dr. Benson lives in Wynnewood, PA with Linda, his wife of 44 years

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Copyright © 2010 by William Edmunds Benson.

Library of Congress Control Number:   2010916735

ISBN: Hardcover    978-1-4568-1282-9

ISBN: Softcover      978-1-4568-1281-2

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CONTENTS

Preface

Chapter 1:  1789 The protective principle is introduced

Chapter 2:  1790-1801 The rest of the Federalist terms

Chapter 3:  1801-1815 Jefferson’s Presidency through the War of 1812

Chapter 4:  1816 A turning point in favor of protectionism

Chapter 5:  1817-1819 The Panic of 1819

Chapter 6:  1819-1823 Persistent protectionists barely miss getting more

Chapter 7:  1824 Impressive gains for protectionists

Chapter 8:  1825-1827 Protectionists still not satisfied

Chapter 9:  1828 The bill of abominations

Chapter 10:  1829-31 Southern anger builds

Chapter 11:  1832 Some relief is granted to the South

Chapter 12:  1833 The Compromise Act saves the Union

Chapter 13:  1834-1841 Minor tariff changes and the Panic of 1837

Chapter 14:  1841-3 Protectionists return to power, the little tariff and the black tariff

Chapter 15:  1843-5 The tide starts to turn against protectionism

Chapter 16:  1845-7 The Walker tariff, Relief at last!

Chapter 17:  1847-1855 Free traders rule

Chapter 18:  1856-1857 The apogee of free traders

Chapter 19:  1857-1859 The Panic of 1857

Chapter 20:  1859-1861 Protectionists return to power

Chapter 21:  Summary

Tables

Glossary and definitions

Endnotes

PREFACE

The idea for this book arose many years ago during a conversation about the Civil War with a doctor from South Carolina in the locker room of the Wills Eye Hospital’s surgical suite. He strongly denied that slavery was the reason the Confederate States seceded and informed me that his great-grandfather had fought for the South, but was not a slaveowner. He suggested that I do more reading. Later discussions with educated individuals from elite schools brought the same response, so I decided to do what they advised. At first, I was convinced that he was wrong: the overwhelming consensus of dozens of books by current historians is that slavery was the central issue.

Nevertheless, I found a minority of authors who conclude that the South seceded for economic reasons. This should not be surprising, because the power to tax is the power to destroy and until the start of the Civil War, the tariff provided the Government with over 90% of its income. Charles and Mary Beard, in a wonderfully readable work, argue that high tariffs, and fear of higher ones, pushed the South into secession. The Beards charge that the North systematically used the tariff law to plunder the South and that the growing North became stronger and more capable of economic oppression with each passing decade. The Beards feel the primary goal of the Republicans was to get a higher tariff.¹ Charles Adams also blames high tariffs for secession.² Donald Davidson maintains that the South fought to the death for the cause of agrarianism against industrialism.³ Ludwell Johnson does not deny the importance of slavery, but says that if it is true that there would have been no Civil War without slavery, it is equally true that slavery would never have come to dominate national politics without a conflict of economic interests between the sections.⁴ James and Walter Kennedy charge that the North fought the Civil War to protect its economic well-being.⁵ Frank Owsley concludes that at times the protective tariff was as fundamental as the slavery question in the disputes between the North and South. He holds that the arguments over tariffs, shipping subsidies and internal improvements would have been enough even if slavery had never existed.⁶ Algie Simons, a Marxist who hated wage slavery as much as chattel slavery, says that the problem was that Northern capitalists wrested control of the national government from Southerners. Since the profits of chattel slavery were too narrow to compete with wage slavery, unless slaveowners could control how to raise and spend the national revenue, they had no choice but secession. A secondary reason was that secession would allow Southerners to repudiate over $200,000,000 in debts to Northern merchants.⁷ Reinhard Luthin makes a strong case for the importance of the tariff in the Republican victory in 1860.⁸ Howard Zinn says that Southerners saw Lincoln and the Republicans as making continuation of their pleasant and prosperous way of life impossible in the future.⁹ Richard Hofstadter points out that: it was tariffs, not slavery, that first made the South militant. Further, if the North gained political power, it could both reduce the planter class to economic bondage and emancipate its slaves.¹⁰ Robert McGuire and T. Norman Van Cott argue that the tariff issue may in fact have been even more important in the North-South tensions that led to the Civil War than many economists and historians currently believe. They support their case with the fact that the Confederate Constitution prohibited protective tariffs.¹¹ Finally, Thornton & Ekelund agree that slavery was an important factor, but maintain that a multiplicity of issues brought about the conflict and that those economic interests and the interest groups surrounding them" were a key factor in explaining secession.¹²

Unfortunately, none of these books provide enough detail on the tariff. The only two books on the history of the tariff are excellent, but they do not explain the politics well enough. ¹³ ¹⁴ So, I resolved to read all the debates in Congress to better inform myself. After this I decided that Hofstadter, Thornton and Ekelund were correct. Both slavery and economic factors were necessary to cause the South to secede. This book is an attempt to show the role of economic factors, especially the tariff, in the alienation of the South.

CHAPTER 1

1789 THE PROTECTIVE PRINCIPLE

IS INTRODUCED

On April 8, 1789, one week after the First Congress of the United States of America assembled a quorum, James Madison introduced tariff¹ and tonnage² bills as an expedient rendered eligible by the urgent occasion there is for the speedy supplies of the federal treasury, and a speedy rescue of our trade from its present anarchy. ³ He was not exaggerating. The new government had no source of income!

Congress had several ways to raise revenue. One choice it did not have was to lay a tariff on exported products, because the Constitution prohibited it. It could have chosen direct taxes, which are taxes levied directly on individuals or companies and paid directly to the government.⁴ For example, a tax can be levied on property, including land, personal property, income, etc. Another direct tax is the poll tax which is an identical fee paid by every citizen or voter. Practically no one wanted direct taxes because of the difficulty of evaluating property and the costs of collection. Another initially rejected choice was excise taxes, which are taxes on domestic products like whiskey. The final choice was tariffs on imported goods. Tariffs, or customs duties, are called indirect taxes because they are levied on imported goods, not directly on individuals. They are collected by a customs officer who then turns the money over to the government. Ultimately, of course, they are paid by the consumer who buys the imported goods, but he does not usually know how much the tariff increases the purchase price.

Under the Articles of Confederation, Congress had had to rely on requisitions on the States, and no tariff act to benefit the common treasury had ever been passed. Instead, each State levied its own tariffs, with Connecticut taxing goods from Massachusetts more than goods from England.⁵ Now, Madison and Congress chose the tariff to be the main source of federal income and, until 1861, with few exceptions, tariffs would account for over 90% of the Federal Government’s annual income. Nevertheless, it did not take long to see that there were serious sectional differences on how to assess them. In fact, future debates on the tariff were to generate nearly as much sectional animosity as did debates on the expansion of slavery.

The main issue was that domestic industries wanted protection from foreign competitors. For example, candle manufacturers who were being undersold by the British wanted high tariffs on imported candles. This, of course, would raise their price, allowing the domestic chandlers to either raise their prices or sell more candles. Protectionists were opposed by free-traders. In current parlance, free-traders object to any tariffs at all. In the early years of the Republic, nearly no one wanted that because tariffs had to be levied for revenue, but free-traders wanted them levied without consideration for special interests. In 1789 they were led by Southern planters and New England shippers and merchants, both of whom wanted low duties to encourage commerce and to keep the prices of necessities low.

Madison’s proposal was mildly protectionist. It called for ad valorem⁶ duties on most items, but on others, the enumerated list, higher specific duties (a fixed amount per pound, per barrel, etc) would be levied for protection. Thomas Tucker (SC) proposed a totally different approach: a tax of 5% on all imported articles, a so-called horizontal tariff. He predicted that this would raise a considerable revenue, and be a sufficient encouragement to manufactures, especially if we add to this five percent the expense of freight and other charges of importation on foreign goods.⁷

Paul Bairoch credits Alexander Hamilton’s Report on Manufactures of 1791, as being the first formulation of modern protectionist theory.⁸ It may well be, but nearly all of its elements had already been put forth in the debates of 1789. Of these, the easiest case to make was national defense. Madison argued that in whatever relates to the operations of war, no State ought to depend upon a precarious supply from any part of the world.⁹ No one argued against this on principle, but, on some items, the issue was more complex and controversial. A good example was the manufacture of cordage,¹⁰ tons of which were used in sailing ships. Clearly, the cheaper the cordage, the less it would cost to build a ship, so, ship builders wanted to buy less expensive foreign cordage. On the other hand, those who wanted the United States to be independent of foreign supplies wanted high tariffs to protect domestic rope makers, who, it goes without saying, heartily agreed and, to maximize their profits, wanted low tariffs on hemp, the raw material,. George Partridge (MA), arguing for the rope makers, wanted the hemp duty not to exceed 5%.¹¹

He was opposed by farmers looking for a cash crop. In a great example of historical irony, Edanus Burke (SC) said that in South Carolina and Georgia, the staple products were hardly worth cultivating, on account of their low prices. They were considering hemp and hoped that cotton might succeed.¹² Madison originally wanted to encourage shipbuilding by having no duty on hemp at all, but later agreed that if rope-making were to be protected, a home supply should be encouraged by some protection.¹³ To protect the rope makers, the House approved a $15 a ton¹⁴ duty on tarred cordage and $18 a ton on untarred cordage. But, they also placed a duty of $12 a ton on hemp to protect hemp growers. This push-pull effect which we will see again and again, gave these two interests an enormous advantage, paid for by ship builders and shippers who had to compete with foreigners and, in turn, by consumers who had to pay higher prices.

The second reason offered to support protection was promotion of the national wealth. Thomas Hartley (PA) said that it was in our national interest to protect and promote our domestic manufactures [because] if we consult the history of the ancient world, we shall see that they have thought proper, for a long time past, to give great encouragement to the establishment of manufactures, by laying such partial duties on the importation of foreign goods, as to give the home manufactures a considerable advantage in the price when brought to market.¹⁵ Another Pennsylvanian, Thomas Fitzsimons said that if the nation prospered, so would the farmers, so they would not be hurt by the higher prices they would pay for imported goods. He counseled that Congress should lay aside local distinctions, [because] what operates to the benefit of one part in establishing useful institutions, will eventually operate to the whole."¹⁶

The third reason offered was presented by Fitzsimons who said that the desireable goal of making the United States as self-sufficient as possible required protecting our infant industries. His list included just about everything: beer, ale, porter, beef, pork, butter, candles, cheese, soap, cider, boots, steel, cables, cordage, nails, spikes, salt, tobacco, snuff, blank books, paper, buttons, saddles, gloves, hats, millinery, and castings of iron, slit or rolled iron, leather shoes, slippers, carriages, and a few others.¹⁷ All these interests had profited by the near total exclusion of foreign products during the Revolution and now had to face intense competition.¹⁸ Not for the last time was it claimed that protection would be temporary. For example, Fitzsimons claimed that just a few years of protection would enable candle manufacturing to become fully established. He wanted a duty of 2 cents a pound on candles. He was opposed by Thomas Tucker (SC), who said that protective tariffs would be unfair to South Carolina, because they tend to the oppression of a certain description of citizens and particular States, in order to promote the advantage of other States and other citizens.¹⁹ He added that his state required relief rather than additional oppression and saw from the start that South Carolina would pay for protection, but receive no benefits.²⁰

Representatives quickly identified other needy infant industries. Daniel Carroll (MD) moved to insert glass on the protected list.²¹ George Clymer (PA) said that paper manufacture was doing well and deserved encouragement.²² Clymer and Fisher Ames (MA) wanted a duty on wool cards, because they could be manufactured in the United States.²³ Virginians Richard Bland and Jonathan Parker said that coal also needed protection until Virginia could develop its mines.²⁴ The steel industry got a duty of $11.20 a ton over Madison’s objection that agricultural prices were already low and that the duty would further hurt farmers by increasing the prices of their tools.²⁵

To get protection for nails, spikes, tacks, and brads, Fisher Ames (MA) introduced the fourth reason for protection which was to protect our industry from cheap foreign labor.²⁶ Protection for these items was opposed by Richard Lee and Theodoric Bland of Virginia, but Bland’s ideas on nail and coal duties show how politicians’ thinking on picking winners and losers was affected by local interests. Although he supported protection for Virginia’s coal mines, he thought a duty on nails an unequal tax, burthening the southern States, but not felt by the Northern.²⁷ The House voted to have no tariff on these items, but a 1 cent a pound duty was later restored by the Senate.

Duties on coffee, tea and many other items which could not be produced in the United States were strictly for revenue and were passed without much debate. The duty on salt was another matter. In 1789, there were few domestic sources, so the initial duty was almost entirely for revenue. Nevertheless, the amount of the duty was hotly contested and would remain so for many years. John Lawrence (NY) proposed a duty of 6 cents per bushel because it would be a big revenue producer. Others said that this would be oppressive to farmers because cattle, sheep, and horses needed salt to thrive and because salt was needed to cure the meat. Thomas Tucker (SC) said that the duty would bear hardest on the poor because a poor man consumes as much salt as a rich man. In this point of view, it operates as a poll-tax,²⁸ the most odious of all taxes . . . but is heavier on the poor than on the rich, because the poor consume greater quantities of salted provision than the rich.²⁹

Thomas Scott (PA) agreed that the salt tax was odious because salt was a necessity of life and was already very expensive for western farmers because of transportation costs. He went so far as to predict rebellion if 6 cents were passed.³⁰ Alexander White (VA) agreed with Scott that the duty was oppressive, and, noting that the Constitution had been adopted by narrow majorities in some states, he feared that a high salt duty might push Kentucky to join itself to Spanish Louisiana.³¹ Madison, on the other hand, argued that the westerners who were said to be particularly hard-hit by the salt tax would pay very few other taxes.³² Six cents passed.

The duty on molasses stirred up another hotly contested debate. No sugar cane was being grown in the United States in 1789, so; the duty was to be levied solely for revenue, not protection. Nevertheless, the debate was long and bitter. Madison wanted a duty of 8 cents a gallon, arguing that if the Government did not collect sufficient revenue, it might have to resort to either direct or excise³³ taxes or both.³⁴ He was strongly resisted by Fisher Ames, Elbridge Gerry, George Thatcher and Benjamin Goodhue of Massachusetts. Prior to the war, New England traded fish to both the British and the French West Indies for molasses, which was either directly consumed or made into rum, some of which was traded to Africa for slaves. After the war, the fishing industry was suffering because the British put high duties on American fish imported by British colonies. The New England fishers thus became dependent upon the French West Indies for their trade, especially for low grade summer fish which were unfit for any market except feeding slaves.³⁵ New Englanders said that if Congress, by high taxes, cut the importation of molasses, the West Indies would refuse our fish. Ames claimed this would ruin both the fisheries and the rum distillers. It would not only carry devastation throughout all the New England states, it would threaten their very existence.³⁶ Goodhue could not consent to allow more than 2 cents.³⁷ Gerry introduced an argument that the South would later use against high tariffs on cotton bagging. He maintained that a high molasses duty was unfair to Massachusetts, because it imported more than the rest of the Union and therefore would pay most of the tax.³⁸ Others argued that a high duty would cause the poor to suffer, because molasses ought likewise to be considered . . . a necessary of life.³⁹ Thatcher even brought slavery into the argument. If the pernicious effects of New England rum have been justly lamented, what can be urged for negro slavery? Certainly there is no comparison; but I will avoid the enumeration of its evils, and conclude with a hope that, if the House will not condescend to strike it out, they will reduce it to two cents.⁴⁰ He and others predicted that a high duty would be resisted by the people and result in smuggling, and even possibly in disunion.⁴¹

New England rum makers wanted low duties on molasses, the raw material, but they wanted a protective duty on rum, the product. Madison and Thomas Fitzsimons (PA) went further, because they wanted to use tariffs as a weapon against the British to force them to open their West Indies ports to American trade and even suggested a total ban on British rum.⁴² Southerners complained that New England was being unfair. James Jackson (GA) failed to see the justice of imperiling the trade of Georgia’s lumber for West Indies rum by levying a high duty on rum while saving New England’s fish sales by a low duty on molasses.⁴³ Thomas Tucker’s comments presaged later bitter battles between South Carolina and Massachusetts. He said that he did not really favor a high tax on molasses because it hurt the poor, but that he voted for it, because Massachusetts’ representatives insisted on a high duty on rum. He said that he would vote for a lower tax on molasses if similar reductions were made on items of interest to South Carolina.⁴⁴

In the bill passed by both Houses, the duty on molasses was 2.5 cents per gallon and on rum, 10 cents per gallon. In 1789, Jamaican rum cost about 45 cents a gallon, so a duty of 10 cents was a 22% tax. Molasses cost about 16 to 20 cents per gallon, so a duty of 2.5 cents was a tax of about 12 to 16%. Rum distillers got a further break in the form of a 3 cent per gallon drawback⁴⁵ on the rum they exported.

Senate amendments to the bill included a 10% discount on duties on goods carried on American built and owned ships. Nevertheless, the final bill was clearly intended to be protective. Its preamble states: Whereas it is necessary for the support of the Government, for the discharge of the debts of the United States, and the encouragement and protection of manufactures, that duties be laid on goods, wares, and merchandises. Be it enacted . . .⁴⁶ The enumerated list of specific protective duties included salt, molasses, rum, other distilled spirits, hemp, cordage, coal, steel, nails and spikes. Low ad valorem duties were generally levied for revenue alone. For example, a duty of 7.5% ad valorem was placed on rolled iron, anchors, and ready made clothing. The relatively low duty on iron reflected that, at this time, Great Britain actually imported pig iron from the United States. Soon, however, the British would develop the use of coke and coal which would greatly reduce the costs of production, allowing them to markedly under price American iron.⁴⁷ Higher ad valorem duties had a protective intent, for example, 10% was levied on several items including mirrors and window glass.

James Jackson (GA) was so unhappy at the final bill that he advocated direct taxation instead: With regard to the equity of the impost system, I conceive direct taxation will be more equitable. We, in the Southern States, shall then pay in proportion to our numbers; [because the Constitution provided that representatives and direct taxes should be apportioned among the respective states according to the number of free inhabitants plus three-fifths of the slaves, the 3/5 rule] but under this law we shall contribute much more.⁴⁸

Another bill passed for protection was a tonnage bill, which levied fees on ships entering American harbors according to their size. Madison and others suggested higher tonnage fees on foreign ships to encourage building of American ships and hiring of American sailors with a goal of increasing our maritime strength for times of war.⁴⁹ He acknowledged that creating a large tonnage differential put money in the pockets of ship owners at the expense of producers, but said this was a small price to pay for national security. The highest fees were to be on the British to retaliate against their not letting American vessels trade with England or to the British West Indies unless they carried American produce, and because Great Britain accounted for too much of American trade. There would be lower fees for the French, because the United States owed them for their help in the Revolution and because they levied the same tariffs on French built and owned ships as on American built and French owned ships.⁵⁰ Fisher Ames (MA) and Samuel Livermore (NH) supported high tonnage duties because encouragement of America’s shipping would rid the country of dependence on foreign ships to carry its products.⁵¹ John Page (VA) also supported high fees, because of the revenue they would produce, because otherwise Congress might have to institute direct taxation.⁵²

The differential fees were opposed by exporting farmers and merchants who wanted a large volume of trade. John Lawrence from New York City said that high fees would destroy agriculture itself and that since we did not have enough ships to export all of our products, tonnage fees were in reality a charge on exports. Moreover, since the fees would raise foreigners’ costs, prices of imported goods would rise.⁵³ Southern planters supported the merchants. Thomas Tucker (SC) said that high tonnage fees were unfair to South Carolina. He argued that In order to preserve the peace and tranquility of the Union, it [would] become necessary that mutual deference and accommodation should take place on subjects so important as [this]. He agreed with differential fees to encourage our navigation, but wanted them lessened. He well understood that high tonnage fees on foreigners would aid American shipbuilding at the expense of South Carolina.⁵⁴ High fees would be a bounty to American vessels, which, without competition, would raise their prices. James Jackson (GA), like Tucker, agreed to some discrimination, but wanted it deferred to a distant day when there were enough American ships to carry all the goods. He said that rice, lumber, and tobacco were lying in warehouses waiting for shipping. The unequal fees would not only hurt the trade of Georgia and South Carolina, but also might even cause North Carolina to reject joining the 12 States already in the Union and might even cause disunion.⁵⁵ William Smith (SC) said that the Southern states were willing to submit to navigation laws, but did not want to pay more than their fair share. He hoped that gentlemen would not insist upon 40 or 50 cents per ton, because he thought that to be really oppressive and would certainly give displeasure to the Southern States.⁵⁶

In the final bill, ships built and owned by Americans paid a fee of 6 cents a ton once per year. Other ships had to pay each time they entered any American port.⁵⁷ Those built in America and owned wholly, or in part, by foreigners paid 30 cents per ton. All others paid 50 cents per ton. This gave a large advantage to American ships in the coasting trade,⁵⁸ because a British ship which unloaded one-third of its cargo in New York, one-third in Baltimore and one-third in Charleston would have to pay full tonnage fees in all three ports. Similarly, if a British merchant unloaded his goods in New York and then bought wheat there and carried it to Charleston he would have to pay tonnage fees twice.

In summary, the first tariff, chosen as the least bad choice for providing the national revenue, was mildly protective. Reasons given for protecting domestic industries included national defense, self-sufficiency, national prosperity, and development of a market for domestic farmers. Compromises had to be made on how much protectionism to provide. Protectionists, led by Pennsylvanians, wanted high tariffs on imported goods which competed with domestic products so that infant industries could thrive. Madison wanted high tonnage fees to encourage the development of our maritime strength. New England’s shipping industry agreed with this, but was also motivated by a desire to reduce foreign competition. Southerners, on the other hand wanted low tariffs and tonnage fees. They quickly saw that protectionism meant picking winners and losers and that they would be the losers. They would pay higher prices for imported goods and for shipping their products without deriving any real benefit. Long before slavery became a contentious issue, threats of disunion because of economic issues were made.

CHAPTER 2

1790-1801 THE REST OF

THE FEDERALIST TERMS

In January 1790, Hamilton released his Report on the Public Credit which called for raising $55 million to restore public credit. Congress responded by increasing the duty on salt 100%, on tarred cordage 33%, on untarred cordage 67%, and on steel 34%. To further encourage shipbuilding, a select committee suggested increasing the tonnage fee on foreign ships from 50 cents to $1.00 per ton. Opposition was led by William Smith (SC) and James Jackson (GA). Smith chided the shippers who, with all their advantages, were not satisfied, but were pressing for further benefits. Jackson