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Politics of the period were deeply affected by periods three depressions—1873-1879, the mid-1880’s, and 1893-1897. People tended to reject the politicians who held office, blaming them for hard times. Governments did almost nothing to remedy the situation no matter how much distress the citizenry had. Most educated people and a large proportion of the others believed in laissez-faire or free enterprise theory. They believed that, just as there were natural laws in physics or chemistry, there were also natural laws of economics and society. To interfere with natural laws was to court disaster for doing so would be a waste of effort action and counter to nature. They believed that the sum total of the selfishness of each individual in society would result in the common good as natural law balanced things put. Classical free enterprise argued that competition would prevent the rise of monopoly except in the case of the few "natural" monopolies.
Further, they believed that poverty was a punishment for laziness or vice or both. Put another way, they believed that rewards went to those who deserved them [ignoring inherited wealth or stealing, of course]. If there were difficulties or suffering, then these were spurs to greater effort. This was the American Way and efforts to aid the poor or the suffering was foolish and immoral. It was better that they should die so that the fitter would live. This was the law of the jungle—eat or be eaten. Some said it was the Divine Plan; others said it was biology. And these views were taught and preached and spread by word of mouth. After all, this was America and everyone could and should get rich.
The federal government’s role in economy was to raise enough money for its own modest wants by equitable means, provide a sound currency, protect property and enforce contracts, and, perhaps, seek to advance national products in international markets. Since the rise of the giant corporations was natural, nothing should be done to restore free enterprise. In fact, the 14th Amendment to the Constitution of 1787 was interpreted to mean that a corporation was a person, that liberty meant freedom on contract., and that due process of law meant freedom from "unreasonable" regulation. Reasonable regulation was, of course, determined by those who believed in no regulation.
The problem was that the Civil War had thrown these traditional economic functions out of kilter. The US government had collected huge sums of money by any means available including internal taxes from coal to billiard tables, an income tax, an increase in the protective tariff, the issuance of $450 million in Greenbacks, and floating loans.
After the war, people agreed that problem was to get rid of their burdens and go back to the simple, old ways. It was easy to remove the income tax and other internal taxes which was done by 1872. When they tackled the tariff next, they ran into difficulty. The protective tariff (designed to price foreign goods out of the domestic markets by forcing their prices up through high import taxes) constituted unfair favors to special interests and placed heavy burdens on consumers . A tariff reduction bill that passed one house tended to be amended piecemeal in the other and then again in conference committee and until it was no longer a reduction.. In Congress each man represented his constituents and consequently, often a geographical and economic special interest. It soon developed that easiest way to compromise between two conflicting interests, such as raw wood and woolen textiles or raw and refined sugar was to do a favor for each. The net result was that wartime rates were never substantially and permanently lowered by 1890. In fact, the Republican Party and a minority of the Democratic Party were openly committed to raising tariff higher.
The tariff brought treasury surplus problems. US government functions were so simple that the government could not spend all that it received. This created economic problems because it meant that too much of the limited money supply was accumulating in the US Treasury. Glover Cleveland made the suggestion in 1888 that the US should lower the protective tariff; Republicans acted as if he were suggesting the killing of first-borns. Instead, there were more politically appealing solutions to the problem. Congress lowered the non-protective tariff rate on coffee, tea, or sugar in 1872and 1890, thus reducing government income but not that of private interests. Congress went on a spending binge for river and harbor improvements and for subsidies to silver miners, railroad builders and other powerful groups. Congress granted pensions to US military veterans and then to persons who might have enlisted as a drummer boy on the last day of the war and to widows of these veterans. The veteran’s organization, the Grand Army of the Republic, constantly lobbied Congress to increase the largess and, in return, voted for its benefactors, almost all from the Republican Party.
In spite of laissez-faire/free enterprise theory, people turned to the government to give them money or land or favors. The federal government was involved in economic competition, for it could and did grant favors such as tariff protection, tax remissions, and subsidies, all bought by influence and money. Businessmen and industrialists wanted economic competition only if they were not winning. They were willing to pay to get what they want. So there was corruption.
Some numbers of the well-established Eastern middle class were deeply offended by this on moral grounds, but they liked the outcome. Thomas Nast, the great cartoonist, called them "Mugwumps" and drew them as an odd looking bird which had its mug on one side of the fence and its wump on the other. The chief proposal of these liberals was the creation of a federal civil service in which persons would be appointed to and advance in federal jobs based on objective standards of competence. Conservatives finally had to yield to the reform pressure and passed the Pendleton Act of 1883. The Act only allowed the President in his term of office to classify 10% of federal workers into the Civil Service. This was supposed to be a sop to reform efforts and preserve the spoils system. However, when Grover Cleveland won the presidency in 1884, the Republican president, Chester A. Arthur, classified 10% to protect Republican employees from being replaced by Democrats. Cleveland was beaten by Benjamin Harrison in 1888 so he classified 10% to protect Democratic officeholders from the Republican. Cleveland then won in 1892, so Harrison protected 10%. When McKinley won in 1896, Cleveland protected 10%. By time William McKinley took office in 1897, a substantial number of federal government employees had come under Civil Service protection.
Presidential campaigns were fought on the available false issues because neither party either believed that there was anything wrong. Whatever was should be. So they fought campaigns on issues which might arouse the voters. Reconstruction was one of these. Attacks on Catholics, immigrants, and foreign in general worked. Protestants were willing to applaud attacks on Pope. Any group kicked around by the British Empire, such as the Irish, liked on Great Britain. Race and ethnicity would get votes, War records, drinking habits, personal appearance, sex habits, and the marital life of leading candidates were attacked.
In this period, Congress had overwhelming power and the two main political parties were evenly divided. Although Republicans held the presidency during most of period, Democrats won popular plurality more often and controlled the House of Representatives more than half the time. National elections depended on a few thousand well-distributed votes. Senate political machines controlled the states and coalitions within the Senate controlled it. US Senators were elected by state legislators, a practice that allowed a single or a few economic interests in a state to control it.
To win the presidency, the political parties had to appeal to many different elements. The Republican Party could count on the support of US Army veterans, African Americans, businessmen who favored high tariffs, Midwestern farmers when the farm economy was flourishing, and most middle-class Protestants outside the South. The Democratic Party relied upon whites in the South, immigrants controlled by urban political machines, Midwestern farmers in bad economic times, workers in bad times, and those professionals and businessmen interested in foreign trade and, thus, a low tariff. In 1884, a clergyman in New York City remarked that the Democratic Party was the p[arty of "Rum, Romanism, and Rebellion," a stereotype that contained some truth.
In order to win the Presidency, the parties nominated "grey" compromise The parties were coalitions. The Republicans consisted of Stalwarts, who argued for voting the Republican ticket no matter who was running and who waved the "bloody shirt," calling for men to vote the way they shot in the Civil War. They tended to be deeply involved in machine politics and political corruption. At the other extreme were the Reformers who argued that politics needed to be cleaned up. Between the two were the Half-Breeds, men who liked the outcomes of the political system but were disturbed by the processes used. The Democratic Party was even broader, for it contained reactionaries, usually Southerners, who yearned for a supposedly idyllic pre-Civil War past all the way along the political spectrum to near radicals.
Candidates who ran on meaningless platforms full of catch phrases and shibboleths. To get voters interested, the parties ran campaigns based on personalities, scandals, and party regularity. The Republicans often chose candidates from Ohio with its large number of votes because party divisions were narrow there and they hoped that a native son could win. In tight elections, it was not uncommon for the parties to use bribery and even violence to "carry" close elections.
Ulysses S. Grant, the US Army general who beat Robert E. Lee in the Civil War, was elected President on the Republican ticket in 1868 and served until 1877. Grant was a great general and extremely popular but he was a poor administrator. He was personally very honest (he never had much money and wrote his Memoirs in an effort to support himself after leaving the presidency). However, some of his cronies were not and corruption became a hallmark of his presidency. He was too trusting and politically naďve. He was a moderate conservative. While he defended the continued circulation of Greenbacks, he vetoed a bill to issue more of them. An ineffective Civil Service Commission was created but politicians were not about to end political patronage. In 1872, a congressional committee uncovered the Credit Mobilier scandal. The Credit Mobilier construction company was owned by some Union Pacific stockholders, who gave the country large contracts and also funneled money from the US government subsidized Union Pacific Railroad company to Credit Mobilier. Thus, they were stealing public money. Congressmen, prominent Republicans, and even Vice President Schuyler Colfax had stock in the Credit Mobilier company. The corruption became bad enough in his first term that Horace Greeley, the famous newspaper editor, tried to lead liberal Republicans out of the party and, when he failed, accepted the nomination of the Democratic Party. Probably no one could beat a Civil War hero like Grant. With Grant’s victory, it appeared that the Stalwarts could do what they wanted but the Democrats got control of the House of Representatives in 1874 and launched investigations. They uncovered corruption in the Freedmen’s Bureau, frauds in the Indian Service which involved the Secretary of War, the Whiskey Ring which scandal involved bribes to agents of the Internal Revenue Bureau not to collect taxes on whiskey so they could pocket the money and give some to the Republican Party. Grant’s personal secretary was involved. Grant was not involved but he supported his friends. His opponents played up the scandals, of course, and the Republican Party was embarrassed.
Rutherford B. Hayes became president after a very controversial election and after post-election deals were done. He was an honest and able ex-Civil War general from Ohio where he had attended Kenyon College, thus making him one of the better educated people in the country. To the Republican Party, this "Mr. Clean" was untouched by the scandals of the Grant administration and could be elected. His opponent, Samuel J. Tilden, the Democratic governor of New York, was also known for being honest; he had destroyed the Republican Party political machine of New York City, the corrupt Tweed Ring. Tilden barely received the most votes, taking eight northern states and the South. Victory was to be denied, however, because presidents are actually elected by the Electoral College, not the people.
To win by one electoral vote, the Republican Party, backed by the federal government which it controlled, had to get 15 Republican electors instead of Democratic electors elected. They challenged the results in South Carolina, Florida, and Louisiana on the grounds that African American voters had been intimidated by whites (which was probably true), thus denying the Republican victory. Those state governments were still controlled by the Republicans. If they pulled this off, they still needed another electoral vote, which they found in Oregon where a Democratic elector could be disqualified because he was a US government employee, a postmaster. To settle the dispute, Congress agreed to create a bipartisan Electoral Commission of 15 men evenly split between the two parties and with the 15th member to be a non-partisan judge. Not long before the Commission was to meet, the judge resigned to take a federal job and the Republicans were able to get one of their own appointed. All decisions were made by that partisan 8-7 margin. But the Democrats controlled the House of Representatives and did not have to accept the results so the Compromise of 1877 was made by which federal troops would be withdrawn from the South thus allowing the bigots to resume full control and the South would get federal favors including the building of a Southern transcontinental railroad. Conservatives of both parties had joined to prevent a possible civil war.
Hayes as president was in a difficult position because of the circumstances of his election. Although both parties cheated in elections and it is not possible to know who would have won in an honest election, that was beside the point. The Stalwarts did not want him, especially after he tried to reform the bureaucracy. He was a fiscal conservative, beating back attempts to inflate the currency. In the 1877 railroad strikes, mobs took over and looted Baltimore and Pittsburgh. Hayes sent the US Army to restore order. He said that he would not seek another term, thus opening up the nomination process to the party regulars. Many Washingtonians, Republican and Democrat alike, rejoiced that he and his wife, "Lemonade Lucy," would be gone in four years. They refused to serve alcoholic beverages.
In 1880, the Democrats nominated a Civil War General, Winfield Scott Hancock, in an effort to capitalize on the halo effect enjoyed by the victors and to avoid the charge that it was the party that supported rebellion and he ran a close race. The victor was James A. Garfield, a moderate reformer but he only served a few months until he was murdered on September 29, 1881 by a disappointed office seeker. Chester Arthur, the Vice President and from the corrupt Stalwart faction of the Republican Party, took office. Suspicions about his own honesty were prevalent because he had been the customs collector in New York City. Arthur surprised people by being honest and reasonably ineffective. He fought corruption; tried tariff reform; and signed the Pendleton Act in 1883. In 1882, the US reversed its policy since the beginning of the Republic by abandoning open immigration in favor of excluding Chinese laborers and convicts, paupers, and criminals.
The Democrats finally won the White House in 1884 with Grover Cleveland, a conservative who also had mugwump support. He had beaten James G. Blaine in one of the dirtiest elections in US history. Blaine was accused of corruption involving the railroad industry, the "Mulligan Letters," and Cleveland, a bachelor, was accused of fathering an illegitimate child. "Pa, pa! Where’s my pa?" Blaine supporters shouted at Cleveland rallies. When Cleveland won, his supports replied "Gone to the White House, ha ha ha." Cleveland was an honest man. He admitted that he might have fathered the child and had made provisions for mother and child. He fought the granting of Civil War pensions to people who had not fought in the Civil War and returned Confederate battle flags to Southern states, both which made him unpopular with some elements. Cleveland was not an innovator. He was committed to a lower tariff and fought to lower it in 1887 but that would not happen until 1913. He signed the Interstate Commerce Act (1887) which created the Interstate Commerce Commission. The ICC could require that interstate shipping rates be published and reasonable and it could appeal to the courts with its findings. Aimed at railroad abuses, it was ineffective. The courts did not believe in the regulation of business.
The Republicans recaptured the presidency in 1888 with Benjamin Harrison, grandson President William Henry Harrison, who lost the popular vote to Cleveland but won in the Electoral College. The main issue had been the tariff and Harrison argued a high protective tariff was the basis of prosperity. Harrison argued that he had a mandate to raise the tariff higher and the subsequent McKinley Tariff of 1890 was sky high. Anti-monopolists finally got a general anti-monopoly law in the Sherman Anti-Trust Act (1890) which vaguely said that conspiracy in restraint of interstate or foreign trade was illegal. The law, however, was vitiated by the general belief that only harmful restraint was illegal and, since most monopolies were natural, they could not be harmful. The Republicans lost the 1890 congressional elections and the presidency to Cleveland in 1892.
When Cleveland returned to the presidency, the Panic of 1893 struck and Cleveland generally followed his free enterprise beliefs that the national government should not intervene in the economy. He wanted to lower the tariff, which would not happen. As jobs were lost and people suffered, the federal government did nothing. His immediate problem was the lack of gold in the Treasury. Previously administrations had made silver certificates redeemable in gold, creating a situation whereby investors could earn sizable amounts simply by cashing in the overvalued silver certificates. The government was caught in a vicious and expensive redemption Gold also flowed out from the Treasury because of pork barrel expenditures and "veterans" pensions as well. The high Wilson-Gorman Tariff slowed international trade resulting in a decrease in revenue. Moreover, the law required the US government to buy the entire output of the silver mines and, of course, it paid in gold. The Treasury twice borrowed money by selling bonds on the open market but only with difficulty. In February, 1895, the Treasury got the help of a syndicate of J. P. Morgan, August Belmont, and the Rothschild interests who promised to sell the bonds abroad, thus bringing new gold into the treasury. They got a good fee for this service but many people complained that the national government had become beholden to a few private bankers and spending huge sums of money while people were suffering. The Sherman Silver Purchase Act, which Cleveland blamed for the depression, was repealed.
Cleveland won praise and some condemnation in his handling of the Pullman strike of 1894. George Pullman had created the model town of Pullman, Illinois where the workers for his Pullman Palace Car Company. They lived in the town, bought from Pullman stores, and lived in quarters supplied by the Pullman company. The company made sleeper cars for the railroads. Because of the Panic/Depression (which began in1893 and lasted until 1897), the Pullman Company cut wages 30-40%. It continued to pay high dividends to its stockholders. Rents for workers were not cut however, causing them severe distress. Eugene Debs of the American Railway Union led the workers on strike. The Pullman officials refused to discuss the situation with the workers, taking the position that the workers could find work elsewhere if they did not like working for Pullman. When the ARU refused to handle trains with Pullman cars on them, US mail cars were put on each train and the General Managers Association, the union of railroad managers, asked Cleveland to get a federal injunction against the strikers on the grounds that they were interfering with the US mail. Obviously, it was the GMA causing any problems but the anti-organized labor views of Cleveland caused him to get the injunction. Debs refused to obey it and was jailed. Governor John Peter Altgeld told Cleveland not to send troops but Cleveland did, vowing that the mail would go through. The troops prompted riots, which the US Army suppressed.
Coxey’s Army in 1894 marched on Washington from the Midwest, gathering people as it went, to protest US government inaction about the economic distress and demanding that the government do something about providing jobs for the unemployed. Neither Republicans nor Democrats believed that the government should help the average person so the movement was doomed. The leaders were arrested for walking on the grass. In 1895, the Supreme Court upheld the injunction against Debs, thus setting the precedent that the federal government could intervene on only one side of a labor dispute. It threw out the income tax provision of the Wilson-Gorman Tariff. In U.S. v. E. C. Knight and Co. (1895), it ruled that the federal government could not regulate the Knight sugar-refining monopoly because it was a manufacturer, and manufacturing was not commerce. So most of the Sherman Anti-Trust Act (1890) was made moot.
Farmers, particularly in the South and Midwest, became vocal critics of the political and economic system and came close to changing it in the presidential election of 1896. They overproduced because they had adopted machines to help them sow and harvest; expanded into new lands; begun using hardier, high-yielding varieties of seed; and measures which made them more efficient. Other nations had also improved their agriculture and competed against US farmers in the international market place, nations such as Russia, Argentina, and Australia. Farm prices declined from 1869-1895, with sharp declines in 1869 and 1887. Farmers tended to blame others for their woes. Since commercial farming is a credit-intensive business, they were very sensitive to the cost of money. Because the US had gone onto the gold standard, money was expensive and the supply of it was inadequate. So the farm sector wanted cheaper money and wanted to get it by abandoning the gold standard by the US government issuing paper money (Greenbacks) or coining silver at the 16-1 ratio. In addition, they argued that there costs were artificially high because they were being gouged by manufacturers and by middlemen. Interest rates were rising. Railroad and grain elevator rates were high and arbitrary but there were no alternatives. They bought manufactured goods in a non-competitive because US manufacturers had gotten the national government to tax imports that foreign goods couldn’t be sold at a profit in the US. This protective tariff hurts some businesses and consumers in general as well but they did not realize it as farmers did. Besides, the Republican Party and most of the Democratic Party were telling the nation that the high protective tariff was why the US was so prosperous.
Politicians were not indifferent to agrarian complaints about the money supply but they did not intend to do anything that would cause general inflation. Three main methods of inflation attracted widespread support. One was the Ohio Idea in the Democratic Party platform of 1868, to wit , government bonds would be paid in greenbacks. Congress turned this down in 1869, saying that "coin or its equivalent" was required. Another centered on Greenbacks, the paper money issued during the Civil War. Whereas most people had assumed that these promises to pay would disappear from circulation once the War was over, The Greenback Party and others argued, successfully, that existing Greenbacks to stay in circulation but no more would be issued. In 1875, Congress resolved that $300 million would be left in circulation but, on January 1, 1879, Greenbacks were made redeemable in gold, thus making them the equivalent of gold. In the 1890s, inflationists turned to the "free coinage of silver" as the solution to their monetary ills. The US used gold and silver as the basis for its currency. The 1834 official ratio of silver to gold had been 16 ounces of silver equaled 1 ounce of gold, a 16-1 ratio. This undervalued silver in terms of world prices so people hoarded silver and spent gold. Silver dollars gradually disappeared from circulation. As Gresham’s Law states, "Cheap money drives out dear. " In 1873, the US quit coining silver dollars because they were not used. However, in the decade after this, silver stakes in the Far West increased the silver supply substantially. Now, if it were coined at the old ratio, it would be cheaper than gold and therefore dominant. Coinage at 16-1 would expand the currency and help silver mining interests as well as inflating the currency.
Farmers, with the support of silver miners, pressured Congress to go back to the free coinage of silver at the 16-1 ratio. Congress made half-hearted concessions. The 1878 Bland-Allison Act provided that the Treasury would purchase between $2-4 million of silver a month and coin it into dollars. In 1890, the Sherman Silver Purchase Act required the US treasury to buy the net entire silver mine output (some was sold for other purposes) and issue treasury notes based on the silver. Had the federal government simply followed this procedure the currency would have been inflated and gold currency would have started to disappear. The Treasurer, however, made them convertible into gold on demand, which made the silver certificates the same as gold. Doing so put enormous pressure on the Treasury since one could cash in silver certificates for gold and make money. The US government had to scramble to maintain enough gold in its coffers to meet the demand. But it saved the gold standard.
Farmers organized politically to try to get redress of their grievances. Although they are conservative by nature, in large part because of the vagaries of such things as crop prices, the cost of money, and the weather, they also had a tradition of calling upon governments for help. Before the Civil War, for example, they had demanded and got cheap land which they could by with cheap credit furnished by the US government. With the Homestead and subsequent land acts, the government launched "give away" programs for them. Not only were they the majority, the view in the US was that farmers were especially virtuous and valuable, that they were "the salt of the earth." As there troubles mounted after the 1870s, they were quick to stress this myth (research shows that they acted like other businessmen), yearn for what they thought were the "good old days," and demand action.
Some farmers organized before they formed the People’s or Populist Party. The Grangers of the 1860s argued for Greenback and silver inflation as well as for land banks to cut the supply of agricultural commodities by taking farm land out of circulation. The Granges were not solely political, for their social function was more important. The Farmers’ Alliances of the North and South argued for economic and social reforms and either ran candidates for public office or supported those who promised to back the Alliance platform. In 1890, they elected two US Senators and 8 members of the House as well as others sympathetic to the Alliance cause. In 1890-92, they formed the Populist Party.
The Omaha convention of 1892 delineated the Populist platform. They wanted inflation by silver coinage. They wanted the land grants made by the national government recovered and the railroads themselves brought under government ownership since most of the costs of building them had been with public money. They also wanted the nationalization of the telegraph system. They wanted to forbid alien land ownership, for they did not want to compete with foreigners for the purchase of land. In an effort to get the support of urban workers, the party argued for the 8 hour day, immigration restriction, and the abolition of the Pinkerton Detective Agency (which was used to break strikes and enforce management wishes). To break the power if political machines and make the country more democratic, they wanted the citizens of a state to elect US Senators instead of the state legislature and the institution of the initiative and referendum. They wanted an income tax. They wanted a general extension of government powers, both national and state, to end injustice and poverty. In the 1892 election, their candidate, General J. B. Weaver, got over one million votes or 8.3%.
Although the Populists showed surprising strength, they realized that they had to back the Democratic Party candidate, William Jennings Bryan, if they were to have any hope of beating William McKinley of Ohio, the high priest of the protective tariff, in the presidential election of 1896. Bryan campaigned hard, crisscrossing the country in the first "whistle stop campaign" in US history and he received more votes than any previous candidate in US history. He won the South, the Great Plains states, and the mountain states. McKinley, however, won even more, 51.2% of the vote. Mark Hanna, the steel industrialist from Ohio and the first national political boss, cleverly had McKinley campaign by sitting on his front porch in Canton, Ohio and having delegations come to him. He billed McKinley as the "Advance Agent of Prosperity." The message was clear. McKinley was calm and in charge while Bryan was like a chicken running with its head cut off. Towards election day, factory workers were told that their jobs would end if they supported Bryan. The Democratic-Populist coalition was not well organized enough to beat the Republican machine. Farm prices rose just before the election, taking the wind out of some sails.
McKinley claimed that his victory brought prosperity but what had happened had nothing to do with US politics. Gold was discovered in Alaska and South Africa, thus lowering it value and increasing the US money supply. Crop failures in Europe expanded the market for US farm products.
The election of 1896 was a watershed in US history. Clearly a near majority of citizens had rejected laissez-faire/free enterprise theory beyond intervening in the economy to aid large corporations.