From Roosevelt to Taft
In 1908, Theodore Roosevelt persuaded the Republican Party to nominate William Howard Taft to run against Democratic candidate William Jennings Bryan.
Summarize the 1908 presidential election
- The Democrats nominated William Jennings Bryan, who remained popular among liberals and populists.
- Taft took support from his Democratic opponent William Jennings Bryan by endorsing some of his policies, which combined with Roosevelt’s Progressive record, blurred the distinction between the two parties, leading to Taft’s victory.
- Despite running a vigorous campaign against the nation’s business elite, Bryan suffered the worst loss of his three presidential campaigns.
- Republicans used the slogan, “Vote for Taft now, you can vote for Bryan anytime,” a sarcastic reference to Bryan’s two failed previous presidential campaigns.
- William Howard Taft: The 27th president of the United States who was defeated for reelection by Woodrow Wilson in 1912 after Roosevelt split the Republican vote by running as a third-party candidate.
- William Jennings Bryan: A leading American politician who was a dominant force in the liberal wing of the Democratic Party, and served as Wilson’s secretary of state until his resignation in frustration over Wilson’s war efforts. He lost to William Taft in the election of 1908.
- Theodore Roosevelt: The 26th president of the United States of America (1901–1909), noted for his exuberant personality and leadership of the Progressive movement. As president, his priorities included the Progressive aims of combating governmental corruption, limiting the power of large corporations, and establishing a colonial empire.
The Presidential Election of 1908
The U.S. presidential election of 1908 was between Republican Party candidate William Howard Taft and Democratic nominee William Jennings Bryan. Popular incumbent, Theodore Roosevelt, promising not to seek a third term, persuaded the Republican Party to nominate Taft, his close friend and secretary of war, to become his successor. On their side, the Democrats, after badly losing the 1904 election with a conservative candidate, turned to two-time nominee William Jennings Bryan, who had been defeated in 1896 and 1900 by Republican William McKinley. Despite these two previous defeats, Bryan remained extremely popular among the more liberal and Populist elements of the Democratic Party. However, despite running a vigorous campaign against the nation’s business elite, Bryan suffered the worst loss in his three presidential campaigns, and Taft won by a comfortable margin.
Bryan campaigned on a Progressive platform attacking “government by privilege.” His campaign slogan, “Shall the People Rule?,” was featured on numerous posters and campaign memorabilia. However, Taft undercut Bryan’s liberal support by accepting some of his reformist ideas, and Roosevelt’s Progressive policies blurred the distinctions between the two parties. Republicans used the slogan: “Vote for Taft now, you can vote for Bryan anytime,” a sarcastic reference to Bryan’s two failed previous presidential campaigns. Businessmen continued to support the Republican Party, and Bryan failed to fully secure the support of labor. As a result, Bryan ended up with the worst of his three defeats in the national popular vote, losing almost all of the northern states to Taft and the popular vote by eight percentage points.
Forty-six states participated in the election, as Oklahoma had joined the Union less than a year before, and Bryan won 48 counties there. The northern states went Republican, as did contiguous territory in Kansas. The most important increase in number of counties carried by Bryan was in the west south central section, due in part to the vote of newly admitted Oklahoma. Bryan carried more counties than he had in 1900, but he did not reach or surpass the number of counties he had won in 1896. Compared with his strength in previous elections, Bryan carried 69 counties in 1908 that had not been Democratic in either 1896 or 1900.
The total vote increased by more than a million compared to the vote of 1904. Each party shared in the increase, but whereas Taft had nearly 50,000 more votes than Theodore Roosevelt, Bryan had nearly 1,500,000 more votes than Alton Parker, and more votes than he had garnered in either of his previous campaigns.
In 1908, Republicans promised to lower unpopular tariffs on U.S. imports, but the Payne-Aldrich Tariff Act further divided Republicans.
Describe the role of tariffs in mid- and late-nineteenth-century politics
- Throughout the early twentieth century, most American manufacturers and union workers demanded the high tariff be maintained.
- During Taft’s election campaign in 1908, Republicans promised to lower unpopular tariffs on U.S. imports.
- The Payne-Aldrich Tariff Act of 1909, which lowered 650 tariffs, raised 220 tariffs, and left 1,150 tariffs untouched, was signed enthusiastically by Taft in 1909, who believed that the compromise would preserve party unity.
- Instead, the Payne-Aldrich Tariff Act further split the Republicans, eventually leading to the split of Theodore Roosevelt ‘s “Bull Moose” Progressives from Taft’s Progressive Republicans.
- Bull Moose Party: The 1909 Progressive Party formed by former President Theodore Roosevelt after a split in the Republican Party between Roosevelt and President William Howard Taft.
- Payne-Aldrich Tariff: This act from 1909 began in the U.S. House of Representatives as a bill lowering certain tariffs on goods entering the United States. It was the first change in tariff laws since the Dingley Act of 1897. President William Howard Taft called Congress into a special session in 1909 shortly after his inauguration to discuss the issue.
- protectionism: The economic policy of restraining trade between countries through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow fair competition between imports and goods and services produced domestically.
During Reconstruction, high tariffs were the norm as the Republican Party maintained power and the Southern Democrats were restricted from office. The Republican high-tariff advocates appealed to farmers with the theme that high-wage factory workers would pay premium prices for foodstuffs. This was the “home market” idea, and it won over most farmers in the Northeast. However, it had little relevance to the southern and western farmers who exported most of their cotton, tobacco, and wheat.
Thanks to such tariffs, American industry and agriculture—apart from wool—had become the most efficient in the world by the 1880s as they took the lead in the Industrial Revolution. Hence, throughout the early twentieth century, most American manufacturers and union workers demanded the high tariff be maintained.
Tariffs remained a significant political issue during presidential elections and were often a source of contention between Democrats and Republicans. Democrats campaigned energetically against tariffs, especially the high McKinley Tariff of 1890. In 1892, Democrat Grover Cleveland was elected to the presidency, and much of his campaign platform focused on lowering the tariff. While in office, Cleveland attempted to follow through with his campaign promise with limited success. For instance, the Wilson-Gorman Tariff Act of 1894 did lower overall rates, but contained so many concessions to protectionism that Cleveland refused to sign it. In 1896, Republican McKinley campaigned heavily on the tariff issue, claiming that it was a positive solution to economic recession. Promising protection and prosperity to every economic sector, McKinley won, and the Republicans rushed through the Dingley Act in 1897, boosting rates again, while Democrats continued to argue that high rates enabled trusts to operate and led to higher consumer prices.
Taft and Tariff Reform
During Taft’s election campaign in 1908, Republicans promised to lower unpopular tariffs on U.S. imports. Industries and businesses supported this high tariff, because it enabled them to compete in the world market. However, small farmers, laborers, and manufacturers resented the tariff, because it affected their exports to foreign countries. Once elected, Taft called a special session of Congress in 1909 to discuss lowering the tariff. Senator Payne proposed a bill that lowered the tariff on many imported goods. However, Congress accepted an alternative bill, proposed by Nelson Aldrich, which lowered the tariff on only a few imported items and increased it on many other products. This met with severe opposition from a faction of Republicans in the Senate. In the end, Congress adopted the Payne-Aldrich Tariff Act, which lowered 650 tariffs, raised 220 tariffs, and left 1,150 tariffs untouched. The act was signed enthusiastically by Taft in 1909, who believed that the compromise would preserve party unity.
Although the Payne-Aldrich Tariff Act did very little to affect the current status of tariffs, it angered many Democrats, Progressives, and Progressive Republicans because it did not solve the tariff issue. Taft’s public support of the bill, instead of preserving party unity, further split the Republicans. Roosevelt in particular criticized Taft over the Payne-Aldrich Tariff Act, and led a faction of Progressive Republicans away from Taft’s conservative Republicans. This group of Progressive Republicans eventually formed the Bull Moose Party, which selected Roosevelt as its presidential nominee in the 1912 election. Meanwhile, unified in their commitment to lowering the tariff, Democrats enjoyed rising public popularity during Taft’s presidency.
Ballinger and Pinchot
The Pinchot-Ballinger Controversy was a dispute between U.S. Forest Service Chief Gifford Pinchot and Secretary of the Interior Richard Ballinger.
Describe the significance of the Pinchot-Ballinger Controversy for the Republican Party
- Gifford Pinchot endorsed an investigation by the General Land Office (GLO) into Richard Ballinger ‘s handling of an Alaskan coalfield claim. Ballinger had the investigator dismissed, and then resigned.
- William Howard Taft tried to clear Ballinger and mend fences with Pinchot. When the investigator sent his findings to the press, Pinchot sent them to Congress and was promptly fired. This further drove Progressives away from Taft and back toward Roosevelt.
- This controversy split the Republican Party: The conservatives stayed with Taft and the Progressives went with Roosevelt.
- Gifford Pinchot: The first chief of the U.S. Forest Service (1905–1910) and the 28th governor of Pennsylvania (1923–1927, 1931–1935).
- Richard Ballinger: Mayor of Seattle, Washington, from 1904 to 1906 and U.S. secretary of the interior from 1909 to 1911.
The Pinchot-Ballinger Controversy, also known as the “Ballinger Affair,” was a dispute between U.S. Forest Service Chief Gifford Pinchot and U.S. Secretary of the Interior Richard Achilles Ballinger. The dispute contributed to the split of the Republican Party before the 1912 presidential election and helped to define the U.S. conservation movement in the early twentieth century.
Theodore Roosevelt was an ardent conservationist, assisted in this by like-minded appointees, including Interior Secretary James R. Garfield and Chief Forester Gifford Pinchot. Taft agreed on the need for conservation, but felt it should be accomplished by legislation rather than by executive order. He did not retain Garfield, an Ohioan, as secretary, choosing instead a westerner, former Seattle mayor Richard A. Ballinger. Roosevelt was surprised at the replacement, believing that Taft had promised to keep Garfield, and this change was one of the events that caused Roosevelt to realize that Taft would choose different policies. Ballinger’s appointment was a disappointment to conservationists, who interpreted the replacement of Garfield as a break with the conservationist policies of the Roosevelt administration. Indeed, within weeks of taking office, Ballinger reversed some of Garfield’s policies, restoring 3 million acres to private use.
Allegations by Pinchot and Glavis
By July 1909, Gifford Pinchot, who had been appointed by William McKinley to head the USDA Division of Forestry in 1898, was convinced that Ballinger intended to, “stop the conservation movement” started under President Roosevelt. In August, speaking at the annual meeting of the National Irrigation Congress, Pinchot accused Ballinger of siding with private trusts in water-power issues. Pinchot arranged a meeting between Taft and Louis Glavis, chief of the Portland, Oregon, Field Division of the General Land Office (GLO). Glavis met with the president at Taft’s summer retreat in Beverly, Massachusetts, and presented him with a 50-page report accusing Ballinger of an improper interest in his handling of coalfield claims in Alaska.
Glavis claimed that Ballinger, first as commissioner of the General Land Office, and then as secretary of the Interior, had interfered with investigations of coal claim purchases made by Clarence Cunningham of Idaho. In 1907, Cunningham had partnered with the Morgan-Guggenheim “Alaska Syndicate” to develop coal interests in Alaska. The GLO had launched an antitrust investigation, headed by Glavis. Ballinger, then head of the GLO, rejected Glavis’s findings and removed him from the investigation. In 1908, Ballinger stepped down from the GLO, and took up a private law practice in Seattle. Cunningham became a client.
Convinced that Ballinger, now head of the U.S. Department of Interior, had a personal interest in obstructing an investigation of the Cunningham case, Glavis had sought support from the U.S. Forest Service, whose jurisdiction over the Chugach National Forest included several of the Cunningham claims. He received a sympathetic response from Alexander Shaw, Overton Price, and Pinchot, who had helped Glavis prepare the presentation for Taft.
Taft consulted with Attorney General George Wickersham before issuing a public letter in September, exonerating Ballinger and authorizing the dismissal of Glavis on grounds of insubordination. At the same time, Taft tried to amicably resolve the problem with Pinchot and affirm his administration’s pro-conservation stance. In response, Glavis took his case to the press. In November, Collier’s Weekly published an article that elaborated on his allegations, titled “The Whitewashing of Ballinger: Are the Guggenheims in Charge of the Department of the Interior?” In January 1910, Pinchot sent an open letter to Senator Jonathan Dolliver, who read it into the congressional record. In this letter, Pinchot praised Glavis as a “patriot,” openly rebuked Taft, and asked for congressional hearings into the propriety of Ballinger’s dealings. Pinchot was promptly fired, but from January to May, the U.S. House of Representatives held hearings on Ballinger. After this congressional investigation, Ballinger was cleared of any wrongdoing, but some continued to criticize him for favoring private enterprise and exploitation over conservationism.
During Taft’s administration, a rift grew between Roosevelt and Taft as they became the leaders of the Republican Party’s two wings: the Progressives, led by Roosevelt, and the Conservatives, led by Taft. By 1910, the split between the two wings of the Republican Party was deep, and this, in turn, caused Roosevelt and Taft to turn against each other, despite their personal friendship. The Ballinger-Pinchot Controversy caused Progressives and Roosevelt loyalists to feel that Taft had turned his back on Roosevelt’s agenda. Pinchot’s dismissal alienated many Progressives within the Republican Party and drove a wedge between Taft and Roosevelt, which eventually led to the split of the Republican Party in the 1912 presidential election.
The Rise of Wilson
Defeating Theodore Roosevelt’s third-party “Bull Moose” candidacy in 1912, Wilson went on to enact sweeping Progressive reforms of his own.
Summarize Wilson’s rise to the presidency
- Woodrow Wilson defeated Theodore Roosevelt to become president in 1912. Wilson’s first term saw the passage of much Progressive legislation and focused on tariff reform and segregation.
- Wilson’s second term focused on WWI. By 1917, the United States had entered the war, and Wilson’s focus became supporting manufacturing, managing labor union agreements, and suppressing subversion.
- Wilson was a negotiator and was well versed in international affairs. To this end, he personally oversaw negotiations with postwar Europe, introducing his Fourteen Points statement in the post-WWI peace talks.
- Federal Reserve Act: Legislation that created the central banking system of the United States. It granted the legal authority to issue Federal Reserve Notes (now commonly known as the “U.S. dollar”) and Federal Reserve Bank Notes as legal tender.
- Fourteen Points: A speech delivered by U.S. President Woodrow Wilson to a joint session of Congress on January 8, 1918. The address assured the country that the Great War was being fought for a moral cause and for postwar peace in Europe.
- Federal Trade Commission Act: A statute establishing a committee that was authorized to issue “cease and desist” orders to large corporations to curb unfair trade practices. This act also gave more flexibility to the U.S. Congress for judicial matters regarding trade practices.
Thomas Woodrow Wilson (December 28, 1856–February 3, 1924) was the 28th U.S. president and a leader of the American Progressive movement. Running against Progressive (“Bull Moose”) Party candidate Theodore Roosevelt and Republican candidate William Howard Taft, Wilson was elected president in 1912 as a Democrat with a wide margin of victory.
Election of 1912
During Taft’s administration, a rift grew between Roosevelt and Taft as they became the leaders of the Republican Party’s two wings: the Progressives, led by Roosevelt, and the conservatives, led by Taft. The Progressive Republicans favored restrictions on the employment of women and children, championed ecological conservation, and were more sympathetic toward labor unions.
The results of the 1910 election made it clear to Taft that Roosevelt no longer supported his presidency, and that Roosevelt might even contend for the party nomination in 1912. To the surprise of observers who thought Roosevelt had unstoppable momentum, Taft did not step aside for the popular ex-president, despite Taft’s diminishing support. Taft acknowledged this, saying, “The longer I am president, the less of a party man I seem to become.” In February, 1912, Roosevelt declared his candidacy for the Republican nomination. In response, Taft soon decided that he would focus on canvassing for delegates and not attempt at the outset to confront Roosevelt. As Roosevelt became more radical in his Progressivism, Taft hardened his resolve to achieve renomination; ultimately he outmaneuvered Roosevelt, regained control of the GOP convention, and won the nomination.
As a result of Taft’s success in securing the nomination, Roosevelt and his group of disgruntled party members officially split from the Republicans to create the Progressive Party (or “Bull Moose” Party) ticket, splitting the Republican vote in the 1912 election. Taft thought that despite probable defeat, the Republican Party had been preserved as, “the defender of conservative government and conservative institutions.”
However Woodrow Wilson, the Democratic nominee, was elected with 41 percent of the popular vote; Roosevelt received 27 percent, and Taft received 25 percent. Taft won a mere eight electoral votes (in Utah and Vermont), marking his defeat as the worst in American history of an incumbent president seeking reelection. In part, Taft’s defeat resulted from his weakness as a campaigner. Furthermore, Taft’s indifference toward the press (he once sought to legislatively abolish the press’ reduced tariff rates on print paper and wood pulp) meant that he was an unpopular figure among political journalists and commentators, and the press seized the opportunity to lash out at Taft during the election.
The split in the Republican vote made it possible for Wilson to carry a number of states that had been reliably Republican for decades. For the first time since 1852, a majority of the New England states were carried by a Democrat. In fact, Wilson was the first Democratic presidential candidate ever to carry the state of Massachusetts (whereas Rhode Island and Maine had not been carried by a Democrat since 1852). On the West Coast, Oregon had not been carried by a Democrat since 1868. The split in the Republican vote resulted in the weakest Republican effort in history.
In his inaugural address, Wilson reiterated his agenda for lower tariffs and banking reform, as well as for aggressive trust and labor legislation.
In his first term as president, Wilson persuaded a Democratic Congress to pass major Progressive reforms: the Federal Reserve Act, the Federal Trade Commission Act, the Clayton Antitrust Act, the Federal Farm Loan Act, and an income tax. He also had Congress pass the Adamson Act, which imposed an eight-hour workday for railroad workers.
Wilson, the only Democrat other than Grover Cleveland to be elected president since 1856 and the first Southerner since 1848, recognized his party’s need for high-level federal patronage. Wilson worked closely with Southern Democrats. In Wilson’s first month in office, Postmaster General Albert S. Burleson brought up the issue of segregating workplaces in a cabinet meeting and urged the president to establish it across the government, and in restrooms, cafeterias, and work spaces. Treasury Secretary William G. McAdoo also permitted lower-level officials to racially segregate employees in the workplaces of those departments.
In an early foreign-policy matter, Wilson responded to an angry protest by the Japanese when the state of California proposed legislation that excluded Japanese people from land ownership in the state. Wilson was reticent to assert federal supremacy over the state’s legislation. There was talk of war and some argument within the cabinet for a show of naval force, which Wilson rejected; after diplomatic exchanges the scare subsided.
In implementing economic policy, Wilson had to transcend the sharply opposing policy views of the Southern and agrarian wing of the Democratic Party led by William Jennings Bryan, and the pro-business and Northern wing led by urban political bosses: Tammany in New York, Sullivan in Chicago, and Smith and Nugent in Newark. In his Columbia University lectures of 1907, Wilson had said, “The whole art of statesmanship is the art of bringing the several parts of government into effective cooperation for the accomplishment of particular common objects.” As he took up the first item of his “New Freedom” agenda—lowering the tariffs—he quite adroitly applied this artistry. With large Democratic majorities in Congress and a healthy economy, Wilson seized the opportunity to achieve his agenda. Wilson also made quick work of realizing his pledges to beef up antitrust regulation and to bring reform to banking and currency matters.
Narrowly reelected in 1916, Wilson centered his second term on World War I and the subsequent peace treaty negotiations in Paris. He based his reelection campaign around the slogan, “He kept us out of war,” but was soon forced to abandoned U.S. neutrality. In early 1917, Germany began unrestricted submarine warfare against American ships. During the war, Wilson focused on diplomacy and financial considerations, leaving the waging of the war itself primarily in the hands of the army. On the home front in 1917, he began the United States’ first draft since the American Civil War, raised billions of dollars in war funding through Liberty Bonds, set up the War Industries Board, promoted labor-union cooperation, supervised agriculture and food production through the Lever Act, took over control of the railroads, and suppressed antiwar movements.
In the late stages of the war, Wilson took personal control of negotiations with Germany, including the armistice. In 1918, he issued his Fourteen Points, which stated his view of a postwar world that could avoid another terrible conflict. In 1919, he went to Paris to create the League of Nations and shape the Treaty of Versailles, giving special attention to creating new nations out of defunct empires. In 1919, Wilson engaged in an intense fight with Henry Cabot Lodge and the Republican-controlled Senate over giving the League of Nations power to force the United States into a war. Wilson collapsed with a debilitating stroke that rendered him ineffective until he left office in March 1921. The Senate rejected the Treaty of Versailles, the United States never joined the League of Nations, and the Republicans won by a landslide in 1920 by denouncing Wilson’s policies.
Wilson was also a highly effective partisan campaigner as well as a legislative strategist. A Presbyterian of deep religious faith, Wilson appealed to a gospel of service and infused a profound sense of moralism into his idealistic internationalism, an ideology now described as “Wilsonian.” Wilsonianism called for the United States to enter the world arena to fight for democracy and has remained a contentious position in American foreign policy. For his sponsorship of the League of Nations, Wilson was awarded the 1919 Nobel Peace Prize. However, Wilson remained opposed to African American Civil Rights and imposed a segregation policy in most Washington, D.C., federal offices that was not overturned until President Harry S. Truman.
During his first term as president, Woodrow Wilson focused on three types of reform: tariff reform, banking reform, and business reform.
Discuss the central components of Wilson’s reform program
- Tariff reform was achieved through the passage of the Underwood Tariff Act of 1913, which lowered tariffs for the first time since the American Civil War, despite the protectionist lobby.
- Business reform was established in 1914 through the passage of the Federal Trade Act, which investigated and halted unfair and illegal business practices, and the Clayton Anti- Trust Act, which specified these “unfair and illegal” business practices in legislation.
- Banking reform was most notably accomplished by the 1913 creation of the Federal Reserve System and the passage of the Federal Farm Loan Act (1916), which set up Farm Loan Banks to support farmers.
- Wilson also sought to establish child-labor laws and laws that established maximum-hour work weeks and minimum wages; in addition, he made great strides in improving the environment, farmer’s rights, and veteran affairs.
- Adamson Act: A U.S. federal law passed in 1916 that established an eight-hour workday, with additional pay for overtime work, for interstate railroad workers.
- Federal Farm Loan Act: A U.S. federal law aimed at increasing credit to rural, family farmers. It did so by creating a federal farm loan board, 12 regional farm loan banks, and tens of farm loan associations.
- Federal Trade Commission: A U.S. government agency with the principal mission to promote consumer protection and the elimination and prevention of anticompetitive business practices, such as coercive monopoly.
- New Freedom: A term used to refer to the campaign speeches and promises Woodrow Wilson made during the 1912 presidential campaign. They called for less government, but in practice as president, Wilson added new controls such as the Federal Reserve System and the Clayton Antitrust Act.
- Federal Reserve System: The central banking system of the United States.
- New Nationalism: A term used to describe Theodore Roosevelt’s Progressive political philosophy during the 1912 election.
President Woodrow Wilson was a leading force in the Progressive movement, bolstered by his Democratic Party ‘s winning control of both the White House and Congress in 1912.
In office, Wilson reintroduced the spoken State of the Union, which had been out of use since 1801. Leading the Congress, now in Democratic hands, he oversaw the passage of Progressive legislative policies unparalleled until the New Deal in 1933. Included among these were the Federal Reserve Act, the Federal Trade Commission Act, the Clayton Antitrust Act, and the Federal Farm Loan Act. Having taken office one month after ratification of the Sixteenth Amendment, Wilson called a special session of Congress, whose work culminated in the Revenue Act of 1913, reintroducing an income tax and lowering tariffs. Through passage of the Adamson Act, imposing an eight-hour workday for railroads, he averted a railroad strike and an ensuing economic crisis. During his first term as president, Wilson focused on three types of reform: tariff reform, business reform, and banking reform.
Wilson’s tariff reform was largely achieved through the passage of the Underwood Tariff Act of 1913. This act lowered tariffs for the first time since the American Civil War, despite the protectionist lobby.
In April 1913, President Wilson summoned a special joint session of Congress in order to confront the perennial tariff question. He brought special attention to the matter by making his appeal before Congress in person. Wilson spoke only briefly, but made it clear that in order to avoid repeating the embarrassment of the thwarted reform of 1894, tariff reform was essential. The burden was clearly on Democratic shoulders, because they controlled both houses of Congress for the first time in more than 18 years. On September 9, 1913, Oscar W. Underwood of Alabama guided the Revenue Act of 1913 through the House (where it passed, 281 to 139) and the Senate (where it passed, 44 to 37). Contemporaries considered the Revenue Act a political triumph for Wilson.
The 1913 Act established the lowest rates since the Walker Tariff of 1857. Most schedules were put on an ad valorem basis (that is, X percent of the dollar value of the item). The duty on woolens, for instance, went from 56 percent to 18.5 percent. Steel rails, raw wool, iron ore, and agricultural implements had zero rates. The reciprocity program favored by Republicans was eliminated. Congress rejected proposals for a tariff board to scientifically fix rates, but did set up a study commission to monitor them.
The Act also provided for the reinstitution of a federal income tax as a means of compensating for anticipated lost revenue due to the reduction of tariff duties. The most recent effort to tax incomes (the Wilson-Gorman Tariff of 1894) had been declared unconstitutional by the Supreme Court because the tax on dividends, interest, and rents was not a direct tax apportioned by population. That obstacle, however, was removed by the ratification of the Sixteenth Amendment on February 3, 1913, and the Revenue Act. Within a few years after the Revenue Act was implemented, the federal income tax replaced tariffs as the chief source of revenue for the government.
Wilson’s banking reform was most notably accomplished by the 1913 creation of the Federal Reserve System. It also was aided through the passage of the Federal Farm Loan Act (1916), which set up Farm Loan Banks to support farmers.
President Wilson secured passage of the Federal Reserve Act in late 1913, as an attempt to carve out a middle ground between conservative Republicans, led by Senator Nelson W. Aldrich, and the powerful left wing of the Democratic party, led by William Jennings Bryan over the banking issue. In contrast to the Republicans, the liberal Democrats opposed all banking schemes and strenuously denounced private banks and Wall Street. Instead, Democrats advocated for a government-owned central bank that could print paper money as Congress required, a measure that Aldrich and the Republicans vigorously opposed.
The compromise, based on the Aldrich Plan but sponsored by Democratic congressmen Carter Glass and Robert Owen, allowed the private banks to control 12 regional Federal Reserve Banks and placed controlling interest in a central board to be appointed by the president with Senate approval. Moreover, Wilson convinced Bryan’s supporters that because Federal Reserve notes were issued by the government, the plan met their demands for an elastic currency. The decision to create 12 regional banks was meant to weaken the influence of the powerful New York banks, a key demand of Bryan’s allies in the South and West. The final Federal Reserve Act passed in December 1913, and most bankers criticized the plan for giving too much financial control to Washington, while liberal reformers claimed that it allowed bankers to maintain too much power.
Wilson named Paul Warburg and other prominent bankers to direct the Federal Reserve. The new system began operations in 1915, playing a significant role in financing the Allied and American war effort. Despite the fact that the Federal Reserve Act intended to diminish the influence of the New York banks, the New York branch continued to dominate the Federal Reserve until the New Deal reorganized and strengthened the Federal Reserve in the 1930s.
In addition to the Underwood tariff, which seemed to finally resolve the political debate over tariff rates, and the creation of the Federal Reserve, Wilson also supported antitrust legislation. This legislation fulfilled both the Progressive aims of Roosevelt and Taft while deviating from their approach to breaking monopolies. Wilson deviated from his presidential predecessors, who relied on lawsuits to break trusts and monopolies, by founding a new trust-busting approach through encouraging competition through the Federal Trade Commission. The Federal Trade Commission effectively restricted unfair trade practices and enforced the 1914 Clayton Antitrust Act.
The Clayton Antitrust Act was a law that specified and outlined “unfair and illegal” business practices such as price discrimination, agreements prohibiting retailers from handling other companies’ products, and agreements to control other companies.
It was a stronger piece of legislation than other antitrust laws because it held individual officers of corporations responsible if their companies violated the laws. It also included a clear set of guidelines that corporations had to follow to ensure legal business practices. This was seen as a dramatic improvement over the more ambiguous language of previous antitrust legislation. Rather than the piecemeal success of Roosevelt and Taft in targeting certain trusts and monopolies in lengthy lawsuits, the Clayton Antitrust Act effectively defined unfair business practices and created a common code of sanctioned business activity.
By the end of Wilson’s first term, a significant amount of Progressive legislation had been passed, affecting not only economic and constitutional affairs, but also farmers, labor, veterans, the environment, and conservation. The reform agenda of Wilson’s “New Freedom,” however, did not extend as far as Theodore Roosevelt ‘s proposed New Nationalism in relation to the latter’s calls for a standard 40-hour work week, minimum wage laws, and a federal system of social insurance. Despite this, Wilson did much to extend the power of the federal government in social and economic affairs, and paved the way for future federal reform programs such as the New Deal.