continuous deficiency of revenue for two years and a half without affecting its financial standing, as it is for an individual. It is impossible also for a Government to continue in this condition without casting a shadow of doubt and discouragement over all business operations within its borders.

The serious fact which we are called upon to confront is that in the two and a half years that have elapsed since July 1, 1893, this Government has had an insufficiency of revenue to meet current expenditures amounting in the aggregate to about $133,000,000. Even in the first half of the present fiscal year the deficiency will reach about $20,000,000 and about $3,000,000 in this present month. And up to the present time there is no sufficient ground for concluding that this insufficiency of revenue will not continue during the remainder of the fiscal year, and how much longer no one can safely predict.

If the consequences of such a chronic deficiency were only the necessity of borrowing money to meet current expenses in time of peace, even this would afford abundant reason for increasing the revenue. But the consequences are more wide-reaching than that. Insufficiency of revenue has made it necessary to use the redeemed United States legal-tender notes to pay current expenditures, and thus to supply additional means to draw gold from the greenback redemption fund-in short, to create the "endless chain" of which the Secretary of the Treasury complains, and which has made it necessary to sell issue after issue of bonds to replenish the reserve. This will be clearly seen when it is remembered that the Secretary of the Treasury has issued and sold a little over $162,000,000 of 5 per cent ten-years' and 4 per cent thirty-years' bonds, from which he has realized about 182,000,000 of dollars, and after redeeming $182,000,000 of United States legal-tender notes with the proceeds, he has been obliged to immediately pay out $133,000,000 of these demand notes to meet current expenditures, and thus has furnished $133,000,000 of governmental demand notes to be again and again used to draw gold from the Treasury. It is evident that so long as there is insufficient revenue this performance will go on, and bond sale after bond sale will be required.

It is also evident that if there had been a sufficiency of revenue these redeemed legal-tender notes would not have been paid out at once, and there would have been so much the less opportunity to draw gold from the Treasury. Indeed, there is good reason to believe that if in the first six months of the distrust which inaugurated the run on the redemption fund the Treasury had been receiving revenue more than adequate to meet expenditures, so as to temporarily hold the redeemed Government notes, the disposition to present these notes for redemption would have soon been overcome. That would have undoubtedly been the case if the redemption fund had been increased in the spring of 1893 and never allowed to fall below the $100,000,000 minimum, and the revenue had been sufficient to meet expenditures. And the necessity for more revenue from the point of view of the maintenance of the redemption fund is not taken away by the fact that we have $50,000,000 of cash in the Treasury in addition to the $100,000,000 (part gold) required for the redemption fund and the twenty-odd millions required as a working balance.

This $50,000,000 represents $50,000,000 of redeemed United States legal tender notes, for whose redemption we borrowed $50,000,000 in gold. If we continue to pay them out to meet a deficiency of revenue, then presently they will come back again to draw $50,000,000 more gold from the Treasury, which we must supply by selling $50,000,000 more of bonds. The suggestion, therefore, that we need no more revenue because we have a cash balance of $50,000,000 of Government notes in the Treasury that can be used to pay any deficiency for the next six or twelve months is in effect a proposition to issue more bonds to meet a deficiency which should be met at once by providing more revenue.

In other words, those who oppose raising more revenue in such a situation, in effect-whether they intend to do so or not-favor borrowing in preference to paying as we go.

Your committee believe that it is the duty of the House of Representatives, to which body the Constitution commits the inauguration of revenue bills, to frame and pass a measure that will yield not far from $40,000,000 (sufficient to put an end to a deficiency), and to do this without delay, leaving to others whose cooperation is required to finally place such legislation on the statute books to meet the responsibility in their own way. And the President's special message, setting forth so pointedly the seriousness of the situation and the necessity for the promptest action, only emphasizes the duty of the House.

In response to the urgent call of the President, your committee have felt impelled to act with all possible dispatch. Two facts have led your committee to look to an increase of customs duties as the most appropriate source of additional revenue. They are, first, the fact that we are already raising a disproportionate amount from internal revenue, which has always been regarded as a war resort, Indeed, Jefferson took the ground that excise taxes should not be resorted to by the Federal Government as sources of revenue in time of peace, and the Democratic National

Convention maintained the same doctrine in 1884; and, secondly, the fact that by increasing customs duties on imported articles which we can and ought to produce or make at home, for revenue purposes, we can at the same time incidentally encourage stricken industries and materially aid in turning in our favor the balance of trade which has been so heavily against us all through this calendar year, and which has caused a demand for gold for export that our Treasury has been called to supply. For so long as the balance of trade is against us on account of excessive imports of articles which we ought to produce or make for ourselves, we must export gold or (what is the same thing) promises to pay gold to pay for the excess of imports over the exports.

Your committee have not undertaken a general revision of the tariff on protection lines, as a majority hope can be done in 1897-98, not only because they know that such tariff legislation would stand no chance of becoming a law, but also because general tariff revision would require many months; and the need is more revenue at once. We believe, however, that this need of more revenue is so great that a simple measure increasing all duties of the dutiable list, and taking from the free list of the present tariff a few articles that were always on the dutiable list until August 27, 1894, and which have always been important revenue producers, and limiting the operation of such legislation to about two years and a half-until the present deficiency of revenue is overcome-ought to receive the approval even of those who do not favor protective duties on protective grounds; and that the fact that it may incidentally encourage the production of many articles that we require at home instead of abroad will not be regarded as a ground of opposition under present circumstances. In framing the bill submitted for your consideration it has been necessary, if action was to be taken promptly, to resort to a considerable extent to a horizontal raise of duties, for the reason that it would have required months to deal with each article separately. Horizontal dealing with tariffs can not be justified in ordinary times, but in such an exigency as exists now-so serious that the President felt it his duty to send us a special message of extreme urgency-and especially for a limited time, it is not only defensible, but is the only alternative.

DUTY ON WOOL AND WOOLEN GOODS.

But while we have presented in the bill reported a horizontal increase of 15 per cent of existing duties on all the schedules but two, which is an addition of less than 8 per cent to the average ad valorem rate, giving about $15,000,000 revenue from that source, yet more than $25,000,000 of the $40,000,000 which it is estimated this bill would add to our annual revenue will come mainly from wool, which is taken from the free list and given a moderate duty, and from manufactures of wool, which are given a compensatory duty equivalent to the duty on wool, which is always necessary when a duty is placed on wool, in order to give the woolgrower the benefit and make it possible to manufacture woolens at home.

The bill reported by your committee proposes to make the duty on imported clothing wool 60 per cent of the duty imposed by the act of 1890, which would give an equivalent of 6 cents per pound on unwashed wool, or about 40 per cent ad valorem. 17

This reduction from the duty of the act of 1890 has been made because the restoration of the full duty in that act might seem to be too great a change from the present law to those whose cooperation it is necessary to secure in order to have any legislation, and not as a measure of what might be done when all branches of the Government are in harmony with the majority of the House on protection lines. The duty on manufactures of wool is increased by a specific duty equivalent to the duty on wool.

The duty on carpet wools is left at the 32 per cent ad valorem, where it was placed in 1890. This is purely a revenue duty, as we raise very few carpet wools.

Such lumber as was placed on the free list by the act of 1890, without the slightest justification, is restored to the dutiable list, but with a duty of only 60 per cent of the duties provided by the act of 1890-giving an equivalent of only about 15 per cent. Such a reduction from the low rates of 1890 is justified only on the ground that the object of your committee has been to frame a bill mainly on revenue grounds, in the hope that it would secure the approval of those in official place whose cooperation is essential to legislation, and who may be supposed to feel that in such an exigency as now exists the public necessity must control.

Believing that such an increase of revenue as is proposed is essential as a first step in the restoration of confidence and the restoration of the Treasury to a sound condition, and that other legislation to be proposed to this end can not be effective

17 Footnote by William Lawrence:

The protective benefit of this bill, if enacted into a law, is discussed in Chapter I of this document and in the chapter which gives the form of a tariff bill desired by woolgrowers which see, post.

S. Doc. 17- -4

without adequate revenue to meet the expenditures of the Government, your committee recommend the passage of the accompanying bill (H. R. 2749), "to temporarily increase revenue to meet the expenses of Government and provide against a deficiency."

III. THE NEW YORK TRIBUNE ON The Dingley Bill.

[From the Weekly Tribune, December 2, 1896.]

THE DINGLEY COMPROMISE BILL.

Wrong is done to Mr. Dingley, and to the party he has so efficiently represented in the Ways and Means Committee, when the Dingley bill is spoken of as a remedy devised and chosen by the Republicans to settle the tariff question. By its terms that bill was limited in operation, and was to have effect only until a Republican or else a Democratic measure could be matured after the Presidential election. Not one of the Democrats in the present Congress was willing to accept it even as a temporary compromise, and now the situation has been entirely changed by a new decision of the people. More than seven million Americans have voted for William McKinley, believing that he could be trusted to carry out the assurances given day after day in his wise and manly speeches. Some journals protested because he constantly urged the necessity of tariff revision, and they called it a fatal mistake, but the people voted for him.

THE PEOPLE DO NOT WANT AN EXPURGATED EDITION OF MCKINLEY

TARIFF.

It is right to infer that they wanted, not an expurgated edition of McKinley, not the sort of McKinley the Free-Trade journals would have manufactured, but McKinley as he was and is.

2. AN EXTRA SESSION OF CONGRESS.

In any case, the man who so frankly exhibited himself and his convictions is the man who will be President, and with a Republican Congress can take up the tariff problem within about four months. The Dingley bill was a plank to bridge over this difficult and doubtful year, but no Republican would propose it now as a sufficient measure.

3. DINGLEY BILL AS A REVENUE MEASURE.

It is even a question whether it would yield the required revenue. In the last year of President Harrison the McKinley duties yielded not $2,000,000 more than the expenses. In the last fiscal year the present tariff yielded $29,800,000 from duties on sugar, which was formerly free, but cut off $72,075,000 from other duties, so that it yielded in all $42,275,000 less than the customs revenue in 1892-93. The Dingley bill would add 60 per cent of the McKinley duties on wool and woolens, but on imports equal to those of 1893 this would yield less than the present revenue on imports of woolens greatly stimulated by ad valorem duties. It would add 60 per cent of the old duty on lumber, which would be not more than $1,500,000. All the remaining duties woolens, lumber, and sugar excepted) yielded last year $103,000,000, and the increase of 15 per cent on these would add not more than $15,500,000 to make up a deficit of over $40,000,000.

4. DINGLEY BILL, OFFENSIVE DISCRIMINATIONS.

That is not the worst. Except in the woolens and lumber schedules where old duties would be partially restored, the bill was framed to secure Democratic support in the present Senate, and would continue all the offensive discriminations which have made the present Democratic tariff so objectionable. In a great number of cases that measure reduced or took off duties for a purely sectional or partisan reason, and by raising all alike the Dingley bill would prolong every such offensive favoritism, and where duties have been taken off entirely for such reasons would still leave the article free of duty. It would perpetuate many changes which were made in sheer, blind ignorance, putting different products of the same industry utterly out of line with each other. It would not merely continue, but increase most odiously all the special favors granted in the act of 1894, except those granted to the sugar and whisky interests. These were so many and so gross that even "The New-York Times" denounced the bill as packed with favors granted to monopolies in order to secure the votes of certain Democratic Senators; and Mr. Cleveland scorned it too thoroughly to sign it. But in every instance the Dingley bill would increase the favors thus granted by shameful Democratic bargains. If nothing better could be done last winter, with the balance of power held by the same Democratic Senators who had dictated the present tariff, something better can at least be done next spring.

5. WHY PROLONG ITS OFFENSIVE PROVISIONS?

The one thing to be gained, if this bill could be passed at the coming short session, would be partial and inadequate relief for a few industries a little earlier than it could be gained otherwise. But at this time, when it is no longer necessary to meet a sudden emergency and to provide revenue for a whole year to come, there is not the same reason for prolonging and making more offensive by the votes of Republicans the objectionable features of the present tariff. It is in their power to send to the President some brief and simple bill, based in the main upon the adjustments of the act of 1890, and not upon the barter and sale of 1894. It would surely be better to restore, as far as may be practicable or in present conditions desirable, the principles of the act of 1890 under which great prosperity was realized, than to prolong for a year or more the characteristic features which made the act of 1894 discreditable to Congress and disastrous to the country.

THE DINGLEY BILL.

[From the Boston American Wool and Cotton Reporter of May 7, 1896, reprinted in the Reporter of December 3, 1896.]

By WILLIAM LAWRENCE, President of the National Wool Growers' Association. IV. AN OPEN LETTER TO HON. THOMAS H. CARTER, U. S. SENATE, ON THE DINGLEY BILL.

BELLEFONTAINE, OHIO, March 13, 1896.

The Hon. THOMAS H. CARTER, U. S. Senate.

DEAR SIR: I have the honor to acknowledge the receipt, through your kindness, of your very able and instructive speech in the Senate on the

26th ultimo, which I have read with much interest and profit. I deem it proper to say as to the tariff on wool and the Dingley tariff bill:

1. As president of the National Wool Growers' Association, I have not felt that I could oppose the passage of the so-called "Dingley bill," in case we can get nothing better, and if it is not to be kept in operation beyond the time when a new Congress can change it.

[Conditions have changed since this was written. There is now a probability of an extra session of Congress under a new Administration soon after March, 1897. Such Congress can act on a wool and woolen goods tariff as a special measure in a brief space of time.-W. L., December 5, 1896.]

But I have letters from prominent woolgrowers and others, declaring that if it becomes a law it will give so much protection to wool manufacturers and so little to woolgrowers that there is very great danger that the influence of manufacturers will, even under a Republican Administration, be thrown against any change as to duties on wool and woolen goods, which of course would be ruinous to our American wool industry. This view seems to be strengthened by what is said-and possibly in some measure correctly said-in the Boston American Wool and Cotton Reporter of March 12, 1896, as to the effect of the Wilson bill tariff, under the caption of "Political Prostitution of Woolen Mills.”

2. WHY CONTINUE THE DINGLEY BILL DUTIES UNTIL AUGUST, 1898?

There is a somewhat remarkable provision in the Dingley bill. It contains a distinct pledge that it shall continue in operation “until August 1, 1898." It is quite certain that a Republican protective tariff President and Congress will be in power on and after March, 1897; that Congress should convene within thirty days after that date, and enact a good protective tariff law before August, 1897. Why then delay and deny adequate protection to woolgrowers until August 1, 1898? During that time enough cheap, foreign wool could be imported and stored up to run our factories during the residue of this century. The wool manufacturers have entered no protest against this denial and delay. There is just a possibility that too many of them may desire further delay.

SHERMAN ON THE WOOL MANUFACTURERS.

In his recently published memoirs, page 852, the illustrious Senator Sherman has told us of the dangerous opposition woolgrowers encountered from manufacturers in the tariff bill of 1883.

It is to be observed that wool growers did not in any instance object to duties proposed or desired by manufacturers for woolen goods, while some, too many, of the manufacturers opposed and succeeded in reducing the duties asked for in the McKinley bill and really needed by woolgrowers. The protective purpose of the law was largely defeated especially by the "loophole" provisions engrafted on it. (See Senate Document No. 17, pp. 45, 50.) And some of the carpet manufacturers succeeded in having the specific duties for class three wools in the McKinley bill as reported to the House, stricken out, and the ruinous fraudulent ad valorem duties substituted, greatly to the damage of woolgrowers.