CHAPTER XIX.

PROGRESSIVE REDUCTION OF DUTIES.

IT has been demonstrated that if it were possible to carry the purposes of the McKinley act into effect by importing free of duty, all the things that we cannot produce to advantage, and by putting a prohibitive duty upon all articles, which, in the judgment of any Congress could be produced to advantage in this country, the result of that policy would correspond to the result that would be attained by the application of what is called "British Free Trade" to the commerce of the United States—namely, all revenue would cease under such a tariff, except on liquors and tobacco, our revenue would be derived mainly from our excise on liquors and tobacco, supplemented by an income tax, or by direct taxation. The fact is, however, that the purpose of the McKinley act cannot be realized, and the conception upon which it is based of "Protection with incidental Revenue" is incapable of application to

our commerce.

We have been saved from the complete destruction of our commerce except in sugar and some other relatively unimportant articles with a consequent prohibition of the greater part of our exports, by the incapacity of the dominating party to put their intention into effective action.

It already appears that import of many articles which it was the intention of the McKinley act to exclude, is

increasing at the present time. Nearly one half-48 per cent.-of the woollen and worsted fabrics which are consumed by the people of the United States are made either in this or some other country from wools grown in a foreign country. It may be asserted without fear of disproof, that the people of the United States are proportionately clothed in larger measure with the products of foreign countries than they were one hundred years ago when Alexander Hamilton bore testimony to the common wear of domestic fabrics by the people of that period.

Again, it does not appear that the futile attempt to establish the manufacture of tin-plates in this country. has yet been met by any measure of production even equal to the increase of the requirements of the present year as compared to other years; nor can any evidence be obtained that measures are in progress for beginning with the sheet metal and ending with the tin-plate that will, within any computable period, assure any considerable supply of tinned iron or steel wholly of domestic manufacture.

The evidence has also been submitted that so far as the future course of reform may be predicated upon the past, the Congress which is to be elected in November 1892, to meet in its first session, December 1893, will meet the following conditions:-Applications for pensions under the existing laws will have been so far examined and audited that the need of an appropriation to meet the first payments of pensions granted will have substantially ceased. The payment of the annual pension roll will then be less than one hundred million dollars and will be subject to rapid reduction under existing acts.

On the other hand, the revenue which will then be derived from liquors and tobacco under existing laws will

be very considerably more than the appropriation which will be made by the present Congress, except pensions, and will be more than sufficient to meet all the expenditures which will be authorized under such appropriations for all purposes except pensions.

It will follow that there will be at that time an excess of revenue from liquors and tobacco above all other expenditures which may be applied to the pensions. This excess of revenue from liquors and tobacco will certainly cover the few first payments of applicants which may not then have been passed upon, and it will be very sure to yield also a surplus to be applied to the pension roll itself. Therefore the legislation of the Congress about to be chosen will be limited to providing less than one hundred million dollars from duties upon all imports, except liquors and tobacco.

We may now revert to the official statement of the revenue from duties which was given in detail in the third chapter of this series of treatises. From that we may then undertake to select a list of the imports to be subject for taxation, from which an ample revenue may be derived without any undue interference with the freely chosen pursuits of the people. In making this selection one may rightly revert to the rule which was laid down by Sir Robert Peel in dealing with a similar condition which was given in Chapter VII., namely:

"If we had to deal with a new society, in which those infinite and complicated interests which grow up under institutions like those in the midst of which we live, had found no existence, the true abstract principle would be 'to buy in the cheapest market and to sell in the dearest.' And yet it is quite clear that it would be utterly impossible to apply that principle in a state of society such as that in which we live without a due consideration of the interests which have grown up under the protection of former laws.

"While contending for the justice of the abstract principle, we may at the same time admit the necessity of applying it partially. I think that the

proper object is first to lay the foundation of good laws, to provide the way for gradual improvement which may thus be introduced without giving a shock to existing interests. If you do give a shock to those interests, you create prejudice against the principles themselves and only aggravate the distress. This is the principle on which we attempted to proceed in the preparation of the tariff."

If we apply these considerations to our own case, it will appear that the direction of the investment of a large amount of capital has been very considerably changed by the long existence of a high tariff, but it has been proved that the duties on crude and on partly manufactured materials may all be removed without any injury, but on the contrary with actual benefit to the producers on iron and wool, while at the same time giving relief to manufacturers who convert these materials into form for consumption.

Again, it may be remarked, that there are certain articles taxed under the head of Class A, Food and Live Animals—such as fruits, including nuts upon which it may be wholly suitable to retain duties for revenue purposes only so long as it may be expedient to do so. Fruits and nuts are not necessaries of life, and if it is expedient to tax them for the payment of revenue one surely cannot object to that. They yield over four million dollars of revenue. All the rest of the taxes upon crude and partly manufactured materials, according to the figures of 1891 may be removed, and yet at the rates of duties imposed in that year on Class D, comprising manufactured articles ready for consumption, and Class E, articles of voluntary use and luxuries, with the four million dollars from fruit and nuts added the revenue would be one hundred and ten million dollars, which is in excess of what will be required by at least twenty millions. It may, however, be remarked, that when the duties

upon the materials which enter into the processes of manufacturing textile fabrics and articles made of metal have been wholly removed, there may be and probably will be a considerable reduction in the import of the finished articles, in which crude iron, steel, and wool are component materials of chief value. We shall then excel many other nations in the production of nearly all the finished fabrics in which these materials are consumed of which we now import a very considerable part. Therefore, except for the increase of population, a falling off in the revenue from finished fabrics might be looked for. But, on the other hand, the increased prosperity which must ensue from the promotion of manufactures under such a policy, coupled with the very large increase in exports which will ensue from the adoption of that policy must greatly increase the consumption of foreign as well as domestic fabrics which are not articles of necessary use, especially when the duties on foreign imports are reduced in proportion to the duties which have been taken from the materials. It follows, as a matter of course, that by the careful selection of manufactured articles and articles of voluntary use, luxuries, for revenue duties, etc., a revenue may be derived in ample measure to meet the requirements of that part of the pension roll for which no other provision is made. By maintaining the duties upon articles of luxury and voluntary use, covering mainly silks, laces, edgings, embroideries, artificial flowers, perfumery, cosmetics, etc., and the finer textile fabrics, chinaware, earthenware, which depend not upon utility or necessity for their use, but upon the fleeting fashion or fancy of each year, we may not only secure an ample revenue, but exercise the discretion and discrimination which Sir Robert Peel so wisely declared to be necessary in altering a system which has been so long in existence.