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President McKinley's Policy And The Nation's Future

( Originally Published Early 1900's )



ALTHOUGH President McKinley's inaugural address was published long since, it contains much valuable material and profound thought, that, more fully elucidated by the progress of events, will be highly interesting for many years to come. In this chapter, therefore, I propose to make a brief resume of the policy of the President as outlined in his inaugural address, especially his financial policy. That address was unique in the manner in which it got down to the most important business without any preliminaries. The President first described the business situation, as he found it, in the most succinct terms. After a few introductory remarks, he said: - "The responsibilities of the high trust to which I have been called - always of grave importance - are augmented by the prevailing business conditions, entailing idleness upon willing labor and loss to useful enterprises. "The country is suffering from industrial disturbances, from which speedy relief must be had. "Our financial system needs some revision; our money is all good now, but its value must not further be threatened. It should all be put upon an enduring basis, not subject to easy attack, nor its stability to doubt or dispute. "Our currency should continue under the supervision of the government. The several forms of our paper money offer, in my judgment, a constant embarrassment to the government, and a safe balance in the Treasury is absolutely indispensable. Therefore I believe it necessary to devise a system which, without diminishing the circulation medium or offering a premium for its contraction, will present a remedy for these arrangements which, temporary in their nature, might well in the years of our prosperity have been displaced by wiser provisions. "With adequate revenue secured, but not until then, we can enter upon such changes in our finance laws as will, while insuring safety and volume to our money, no longer impose upon the government the necessity of maintaining so large a gold reserve, with its attendant and inevitable temptations to speculation. Most of our financial laws are the outgrowth of experience and trial, and should not be amended without investigation and demonstration of the wisdom of the proposed changes. We must be both ' sure we are right ' and 'make haste slowly."' When adequate revenue was once secured, many of the financial difficulties, out of which there seemed no easy way during the previous two or three years, found their own solution. For instance, the necessity for bond sales to replenish the gold reserve no longer existed. This was an inevitable result which the former administration could never see and which the McKinley administration demonstrated with ease; nor was it entitled to very much credit for its discernment, except as compared with its predecessor. " Our money is all good now, but its value must not be further threatened," said the President. These words are very significant, especially in their application to those who have been proposing reforms since the inauguration which would strike at the very root of Mr. McKinley's wise recommendation. This "value " to which he refers would certainly be further "threatened" by retiring the greenbacks and the Treasury notes, and thus converting a non-interest-bearing debt of $500,000,000 into an interest-bearing one. "It has been our practice," said the President, "to retire. not to increase, outstanding obligations." This, certainly, though mild in form, was a very strong rebuke in its essence to those who were diametrically and avowedly opposed to these views. Of course it is all right for cabinet officers to cherish their own independent opinions, but if they try to enforce them when they are not in harmony with the views of the majority of the cabinet or of the President, I think it has a decided tendency to cause discord. The whole plan of providing a sufficient revenue, and at the same time laying the true foundation of national prosperity, is ably condensed in the following remarks of the President: - "The government should not be permitted to run behind or increase its debt in times like the present. " Suitably to provide against this is the mandate of duty, the certain and easy remedy for most of our financial difficulties. A deficiency is inevitable so long as the expenditures of the government exceed its receipts. It can be met only by loans or an increased revenue. "While a large annual surplus of revenue may invite waste and extravagance, inadequate revenue creates distrust and undermines public and private credit. "Neither should be encouraged. Between more loans and more revenue there ought to be but one opinion. We should have more revenue, and that without delay, hindrance, or postponement. "A surplus in the Treasury created by loans is not a permanent or safe reliance. It will suffice while it lasts, but it cannot last long while the outlays of the government are greater than its receipts, as has been the case during the past two years. Nor must it be forgotten that, however much such loans may temporarily relieve the situation, the government is still indebted for the amount of the surplus thus accrued, which it must ultimately pay, while its ability to pay is not strengthened but weakened by a continued deficit. "Loans are imperative in great emergencies to preserve the government or its credit, but a failure to supply needed revenue in time of peace for the maintenance of either has no justification. " The best way for the government to maintain its credit is to pay as it goes (not by resorting to loans, but by keeping out of debt), through an adequate income secured by a system of taxation, external or internal, or both. "It is the settled policy of the government, pursued from the beginning and practiced by all parties and administrations, to raise the bulk of our revenue from taxes upon foreign productions entering the United States for sale and consumption, and avoiding for the most part every form of direct taxation, except in time of war. "The country is clearly opposed to any needless additions to the subjects of internal taxation, and is committed by its latest popular utterance to the system of tariff taxation. There can be no misunderstanding, either, about the principle upon which this tariff taxation shall be levied. Nothing has ever been made plainer at a general election than that the controlling principle in the raising of revenue from duties on imports is zealous care for American interests and American labor. The people have declared that such legislation should be had as will give ample protection and encouragement to the industries and the development of our country. "It is therefore earnestly hoped and expected that Congress will, at the earliest practicable moment, enact revenue legislation that shall be fair, reasonable, conservative, and just, and which, while supplying sufficient revenue for public purposes, will still be generally beneficial and helpful to every section and every enterprise of the people. To this policy we are all, of whatever party, firmly bound by the voice of the people,-a power vastly more potential than the expression of any political platform. " The paramount duty of Congress is to stop deficiencies by the restoration of that protective legislation which has always been the firmest prop of the Treasury. The passage of such a law or laws would strengthen the credit of the government, both at home and abroad, and go far toward stopping the drain upon the gold reserve held for the redemption of our currency, which has been heavy and well-nigh constant for several years." The President was exceedingly circumspect in these recommendations. He very adroitly anticipated and forestalled the critics who were keeping ostentatious and pretentious watch over Uncle Sam's purse. In this instance he drew the line between these two extremes of a large surplus and a deficiency which have proved the Scylla and Charybdis of some other administrations. It has been a feast or a famine with some of them: either too much money, or else an embarrassment that menaced the country with a burden of debt and the payment of a big interest bill for many years to come. President McKinley can strike very hard without being offensive, and he has a peculiar knack of conveying a profound meaning in what seem to be the most unstudied expressions, as when he said, for instance, "A surplus created by loans is not a safe reliance." The last sentence of the above quotation from the inaugural address is unique in that it so combines the two indispensable points in legislation, "revenue" and the "tariff," as to show clearly without argument that they cannot be considered apart. It completely forestalls in a very simple style some of the favorite arguments of the free-traders, and shuts off by way of anticipations a flood of opposition oratory long since prepared to burst forth on the first favorable occasion. Events since this very comprehensive inaugural address was delivered have fully justified the wisdom and foresight which are implied in its sage advice. While many financiers and professors of economics were working hard over currency schemes, the advice of the President to "go slow" was both timely and prudent, and the admonition is as good to-day as it was then. His counsel concerning the most judicious methods of going about the question of currency reform is worthy of the most profound consideration of all who are interested in this subject; and it should be carefully studied by those who imagine that they have made the only true discovery in the department, before they rashly run into print with the publication of their views. He says: - " If, therefore, Congress in its wisdom shall deem it expedient to create a commission to take under early consideration the revision of our coinage, banking, and currency laws, and give them that exhaustive, careful, and dispassionate examination that their importance demands, I shall cordially concur in such action. "If such power is vested in the President, it is my purpose to appoint a commission of prominent, well-informed citizens of different parties, who will command public confidence both on account of their ability and special fitness for the work. Business experience and public training may thus be combined, and the patriotic zeal of the friends of the country be so directed that such a report will be made as to receive the support of all parties, and our finances cease to be the subject of mere partisan contention. The experiment is, at all events, worth a trial, and in my opinion it can but prove beneficial to the entire country. "The question of international bimetallism will have early and earnest attention. "It will be my constant endeavor to secure it by cooperation with the other great commercial powers of the world. Until that condition is realized when the parity between our gold and silver money springs from, and is supported by, the relative value of the two metals, the value of the silver already coined, and of that which may hereafter be coined, must be kept constantly at par with gold by every resource at our command. The credit of the government, the integrity of its currency, and the inviolability of its obligations must be preserved. This was the commanding verdict of the people, and it will not be unheeded." The latter part of this advice about keeping the value of silver at par with gold until bimetallism on international principles shall be realized, fell foul of several well-matured schemes in both the Republican and Democratic ranks to get silver out of circulation as suddenly as possible, both sides failing to see that the success of such a policy would give the free silverites the greatest triumph they have yet had, and would be a bad blow at the gold standard. Such a serious and sudden contraction of the currency, without something no more expensive than silver to supply its place, might readily cause one of the greatest panics in history, and enable the free silverites to say that their theory of the expansion of the currency volume would have prevented all this; the fact being, however, that free coinage of silver would probably have brought about an even worse calamity. The President's comments, therefore, on this phase of the subject, were not only timely but full of financial wisdom, and showed the extensive range of financial vision with which he is endowed. No doubt he had in his mind the ordeal of business embarrassment through which Germany passed during the few years succeeding her demonetization of silver, although she had the immense store of gold furnished by the French was indemnity to rely upon. The following points on reciprocity and the power of Congress in restoring prosperity show the President's keen appreciation of the then existing emergencies, as well as the means of relief:" In revision of the tariff, special attention should be paid to the reenactment and extension of the reciprocity principle of the law of I890, under which so great a stimulus was given to foreign trade. " It will take some time to restore the prosperity of former years, but we can resolutely turn our faces in that direction, and aid its return by friendly legislation. The restoration of confidence and the revival of business depend more largely upon the prompt, energetic, and intelligent action of Congress than upon any other single agency affecting the situation." The "reciprocity principle" was suppressed by mere partisan feeling, but it is hoped that we shall yet benefit largely by its revival. At the conclusion of the inaugural address the President dilated further on the necessity of the special session, and corrected some popular errors concerning its purpose and influence. He said: - " I do not sympathize with the sentiment that Congress in session is dangerous to our general business interests. Its members are the agents of the people, and their presence at the seat of government in the execution of the sovereign will should not operate as an injury but a benefit. There could be no better time to put the government upon a sound financial and economic basis than now. "The people have only recently voted that this should be done, and nothing is more binding upon the agents of their will than the obligation of immediate action. It has always seemed to me that the postponement of the meeting of Congress until more than a year after it has been chosen, deprived Congress too often of the inspiration of the popular will, and the country of the corresponding benefits. " It is evident, therefore, that to postpone action in the presence of so great a necessity would be unwise on the part of the Executive, because unjust to the interests of the people. Our actions now will be freer from mere partisan consideration than if the question of tariff revision was postponed until the regular session of Congress. "We are nearly two years from a congressional election, and politics cannot so greatly distract us as if such contest was immediately pending. We can approach the problem calmly and patriotically, without fearing its effect upon an early election." The peroration of this address is so fine, patriotic, and conciliatory in tone and sentiment, that I consider it worthy of being given in full. "In conclusion, I congratulate the country upon the fraternal spirit of the people and the manifestations of good will everywhere so apparent. The recent election not only most fortunately demonstrated the obliteration of sectional or geographical lines, but to some extent also the prejudices which for years have distracted our councils and marred our true greatness as a nation. " The triumph of the people, whose verdict is carried into effect to-day, is not the triumph of one section, nor wholly of one party, but of all sections and all the people. The North and the South no longer divide on the old lines, but upon principles and politics; and in this fact surely every lover of the country can find cause for true felicitation. " Let us rejoice in and cultivate this spirit; it is ennobling, and will be both a gain and blessing to our beloved country. It will be my constant aim to do nothing, and permit nothing to be done, that will arrest or disturb this growing sentiment of unity and cooperation, this revival of esteem and affiliation which now animates so many thousands in both the old antagonistic sections; but I shall cheerfully do everything possible to promote and increase it. " Let me again repeat the words of the oath administered by the Chief Justice, which, in their respective spheres, so far as applicable, I would have all my countrymen observe: 'I will faithfully execute the office of President of the United States, and will, to the best of my ability, preserve, protect, and defend the Constitution of the United States.' "This is the obligation I have reverently taken before the Lord Most High. To keep it will be my single purpose, my constant prayer, and I shall confidently rely upon the forbearance and assistance of the people in the discharge of my solemn responsibilities.' " It is interesting to reflect how vividly these sentiments of the oneness of all sections were illustrated during the war with Spain. Apropos of Mr. McKinley's reference to reciprocity, it is presumed by the free-trade element in politics that if got down to a free-trade level it would greatly encourage and stimulate other nations to purchase our goods, produce, and manufactures; or, in other words, that it would "extend our foreign markets," as the ordinary free-trade phraseology has it. There is no good reason, resting upon business principles, to expect any such result. Nations, like individuals, buy in the cheapest market and sell in the dearest, the latter being the chief reason why England is anxious to obtain control of our markets for her goods. The people of other nations will not buy anything for friendship's sake from us that they can get cheaper elsewhere; and certainly we do not put any tariff on the goods that we send abroad, though free-traders talk as if we did. We sell at rates that will enable us to compete with foreign manufacturers, if we can produce the article cheap enough to come down to that scale. If we cannot, we have to do the best we can with our home market; and if, as free-traders hold, our home market is already overcrowded, it will certainly not stop the native glut if we give away a large portion of what is too small for ourselves to British manufacturers and to investors, speculators, and adventurers in British and foreign goods. The people who talk free trade seem to forget, when they tell us about the money we save in buying foreign goods, that the home-made goods afford about one third or more of the working population of this country the means of earning a living, through the prudent and skillful investment, by our own manufacturers, of money which would on free-trade principles go abroad. It may be objected that the manufacturers on this side take the lion's share of the profits. We may grant that; but do not the British manufacturers and manufacturers of other nations do the same? They are certainly not philanthropists in business. Besides, they do not possess the merit of leaving half as much residue for wages as the American manufacturers do. To put the case even as strongly as the most rabid socialist would do, namely, that it is "robbery," then it is robbery on both sides of the Atlantic; and, if we are forced to a choice between two robbers, is it not better to choose the one that will give us enough of the plunder to feed and clothe us decently, than to permit ourselves to be victimized by the other, who will reduce us to starvation and rob our own "robber" manufacturers besides? I, for one, should certainly prefer to be " robbed " by our native monopolists, who generally keep the money in the country where I have a chance of getting some of it, even though it be not a fair share, than to throw myself and the fruits of my labor recklessly into the hands of foreign pirates, who spend it in Europe where we never have a ghost of a chance of getting back a solitary cent. If this argument is not clear and conclusive, common sense must be a very scarce commodity, and therefore an article of great value, according to the political economists. One of the strong charges of the free-traders is that the former McKinley Law prevented importation in order to give the American market to "trusts and combines." Suppose, it will be granted for the sake of argument, that they were American trusts and combines, not British or foreign? This is simply the same argument, and the same answer applies to it. The McKinley Law was "A bill to reduce taxation, and for other purposes." Paradoxical as it may seem, it was more of a free trade bill in one sense of the term than was the Wilson measure as the latter finally passed, which put only 48 per cent. of all our importations of merchandise on the free list, while the McKinley Law let in 60 per cent. of the whole list free of duty. There was this important distinction, however, with regard to the quality and class of the goods: The McKinley Law admitted as few articles as possible that came in competition with our manufacturers, artisans, farmers, mechanics, and laborers, while the goods which the Wilson measure admitted came largely in direct competition with all these. These five special classes of our industrial system have had the object lesson which enables them to draw conclusions from their own respective standpoints; and they expressed their views very forcibly, more in actions than words, by the election of President McKinley by an overwhelming majority, and by the return of positive working majorities in both houses of Congress, in which the majorities four years previously were so decidedly in favor of something akin to free trade that the Democrats were predicting the enjoyment of half a century of unassailable power in office. But the people again proved that they themselves are the disposing power. It required this object lesson to teach the would-be reformers the great object lesson that was to be the forerunner of national prosperity. And now what has become of all the free-traders, with their panaceas and specifics for all financial ills? If they are dead, have they no successors among their many admirers of the past? Seldom has there been in politics such a large conversion of a big majority into a vanishing minority. It is important to note the fact that President McKinley favored revision, but not revolution of the tariff, and a remodeling of the currency without diminishing its volume. He did not propose " taking the government out of the banking business" either; but he did propose taking the currency revision out of politics by placing it in the hands of a commission composed of up-to-date business men, irrespective of party politics. "Taking the government out of the banking business," "The endless chain," " The greenbacks must go," and other phrases of that kind should now be considered as having gone down with the general wreck. One of the best and most reassuring utterances of President McKinley in his inaugural address is this sentence: "The value of silver already coined or to be coined must be kept at par with gold by every resource at our command. The credit of the government and the integrity of its obligations must be preserved." If Mr. Cleveland had made a similar statement in his inaugural address four years before, this country might have been saved from the disastrous panics which took place during his term. I think, in conclusion, that a word of friendly counsel which I have already suggested, might not be out of place, as far as the present Secretary of the Treasury is concerned. Mr. Gage favors taking up the greenbacks, thereby relieving the government from the responsibility of sustaining gold payments and putting that obligation upon the national banks. He admits that it would result in a contraction of the currency which would depress values generally, but he says the situation would adjust itself through that process, as values would go down sufficiently low to induce foreign buying, which would make gold flow this way, so supplementing the currency thus contracted. To bring about a condition of depression such as Mr. Gage suggests, for the purpose of making bargains in our securities and products for the benefit of foreigners, would be resented by the people injured thereby in every State. The very thing that reduced securities and commodities to panic prices would revive the silver mania, on the belief of the need of more money, and would justify foreign capitalists in believing that this country was surely going to drift to a silver basis. If once they believed that, they would not buy our securities, however low in price; but, on the contrary, the lower they sold, the more Europe would liquidate what they held. That was the experience during the last silver dementia. The taking up of greenbacks by the government would of course save the United States Treasury from being exposed to the suspension of gold payments; but it would be at the expense of the national banks, as it would take from them the money which they now hold for their reserves and for the redemption of their notes. The banks in times of severe depression and distrust would then be almost sure to suspend gold payments; besides, as soon as the government went out of the legal tender currency business, the national banks would immediately begin to contract their circulation rather than be exposed sooner or later to a default in payment when gold should be demanded for their notes. A severe depression in business, such as Mr. Gage proposes, would surely elect some such man as William Jennings Bryan as President of the United States in 1900. We had better "bear the ills we have than fly to others that we know not of."



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