had been for 50 years. The alarming fact was that the immigration from W. Europe fell off, while great numbers of ignorant and unskilled people crowded in from Russia, Austria-Hungary, and other parts of E. Europe. Still, the newcomers found work and their employers found a profit in employing them.
Finances and the Tariff, 1908-13.—Every growing unit in the country—from a small school district to New York State—was harassed by questions of taxation and expenditure. The U.S. Government also searched for new resources, and found them in the income-tax, a method familiar in European countries and open to the individual American states. An income-tax had been levied by Congress during the Civil War, and again in 1884, when it was set aside by the odd decision of the U.S. Supreme Court that it was a direct tax which could be levied among the states only in proportion to their representation in Congress. Successful agitation brought about, July 13 1909, the submission of a 16th Amendment, to remove the restriction, and it was declared adopted by the necessary three-fourths majority of states, Feb. 25 1913.
June 25 1910 a postal deposit Act was passed which created a vast savings bank, of which many post-offices were the local branches. The new form of savings attracted foreigners who were accustomed to a similar system in their own countries; and in 1920 the deposits had risen to $157,276,322. Another new resource of the Federal Government was a tax upon corporations levied on net income (Aug. 5 1909). The immediate proceeds were small—only about $30,000,000 a year; but corporations were obliged to file accounts which showed their net income, and thus to give access to facts about their profits and methods. The more important question of reorganizing the national banking system so as to furnish a strong national institution was debated from 1908 to 1912, and was the subject of an elaborate report by a National Monetary Commission; but no action was taken at that time. The net Federal debt was $1,000,000,000, which was only about $11 per head of the population.
A financial resource as to which Congress had sole authority was the tariff. Under strong pressure from members of the party to carry out the promises of the Republican Convention of 1908, President Taft, a few days after his inauguration, summoned Congress to meet in special session, for a “revision.” As usual there was a long controversy which resulted, Aug. 5 1909, in the Payne-Aldrich Tariff Act. The administrative features were good. The act created a permanent court of customs appeals, with power to determine finally all questions as to the value of imports; and also a Tariff Board, expected to make investigations and recommend specific measures which Congress would adopt. As to rates, the Act was not very different from its predecessor, except for a decided increase of duties on cotton and silk manufactures. There was a loud outcry that the “revision” called for by the party platform was plainly a revision downward and not upward. President Taft argued against the textile schedules, but signed the bill and in a speech at Winona, Minn., Sept. 17 1909, surprised the country by declaring that it was the “best tariff bill that the Republican party has ever passed.” When in the next Congress the Democrats had a majority of the House, they passed a series of bills, covering a farmers' free list, woollens and cottons, which were carried also in the Senate by the aid of low-tariff Republicans; all these were vetoed by President Taft. In the campaign of 1912 the tariff played very little part. It was accepted that a considerable revenue must be raised by import duties; and the large import trade showed that the existing tariff was not prohibitive.
Trusts and Transportation.—During the 20 years ending with 1910 it had become clear that the most difficult question before the U.S. Government was the regulation of the vast aggregates of capital, commonly called trusts, which were combined into corporations and aimed at the control of particular lines of business, and also of the railways, which, as general transportation agencies, were of great importance in connexion with every kind of industry and trade. For many years Congress had been struggling with this question, and the result was two lines of restrictive statutes, headed by the Interstate Commerce Act of 1887 and the Sherman Anti-Trust Act of 1890. Upon these and the amendments to the Interstate Commerce Act was built a structure of decisions of the U.S. Supreme Court, sometimes annulling provisions of the statutes, more often altering decisions by the Interstate Commerce Commission. Partly to carry out and partly to avoid these decisions, the Mann-Elkins Act of June 18 1910 widely extended the Interstate Commerce Acts by including telephones, telegraphs, express and sleeping-car companies, and setting up a Commerce Court which was to hasten decisions on transportation questions. Armed with these new powers the Commission reduced some freight rates and raised others. December 2 1910, the Supreme Court dissolved the combination of the Union Pacific and Southern Pacific railways as contrary to the laws against mergers. The Commerce Court proved a failure; its decisions were received by the public as an unreasonable attempt to control the Commission; and in 1914 Congress refused appropriations, and the President was obliged to abandon it.
Federal control of railways on the whole worked well. It secured uniform appliances and a system of rates based on successive decisions of the Interstate Commerce Commission. This Commission was a striking example of disregard of the great principle of separation of powers inasmuch as it was a rule-making body, an executive body, and a court which interpreted its own rules, subject as to some questions to appeal to the Federal Courts. The great problem of the trusts was much farther from a solution than that of the railways, because the large corporations were linked together through the holding and manipulation of stocks by capitalists and banks, and through the so-called “interlocking of interests.” Furthermore, except for Treasury processes for collecting taxes, there was no public agency other than the Department of Justice to call into action the anti-trust laws in specific cases and exact penalties for their violation.
The process of forming new and powerful corporations, frequently by the union of previous companies or firms, grew more active from year to year. Capital was abundant, vast riches lay in the development of mines and oil-wells and in manufactures and trade. The constant tendency was to combine and systematize so that such large lines of business as the production and manufacture of oil, the mining of iron ore and the manufacture of steel, the weaving of cotton, woollen and other textiles, the manufacture of tobacco, packing of meat, making of cordage, were rolling up into larger and larger corporate units. Above all, the railways which stretched throughout the country and were indispensable to business of every kind had consolidated into great systems which destroyed competition.
The only effective way of dealing with large corporations whose activities extended from state to state was to bring suit against them for monopolizing or conspiring to monopolize in their lines of trade. These were difficult matters to prove against corporations of great resources. Hence it was considered a triumph when, May 9 1911, the U.S. Supreme Court rendered decisions against two of the most powerful trusts, the Standard Oil Co. and the American Tobacco Co., the latter on an issue which had been pending since 1906. The minds of a majority of the Court worked in a roundabout way. It held that the anti-trust legislation must be interpreted by the “standard of reason” namely, that a combination was not unlawful or against the public interest unless it actually caused a restraint of trade and commerce among the Federal states or with foreign nations. Having thus set up a “rule of reason” which Congress had refused to enact, and created an example of judicial legislation, the Court proceeded in both the pending cases to hold that the companies were guilty of attempts to monopolize their lines of trade, and had tried to cloak their monopoly by setting up a variety of intertwined companies, thus concealing their transactions. The Court, therefore, upheld the justice and constitutionality of the Sherman Act, but as to penalties, the Court contented itself with ordering the offenders to disintegrate. The companies reluctantly and slowly went through the process of reorganization, but their stocks immediately rose on the market a sufficient proof that the court decisions were more favourable than had been expected. Thenceforth the “rule of reason” required
