government.

mining.

7. Extension of the equipment and powers of the Bureau of Mines for the encouragement of safe and economical 8. Provision of an effective employers' liability law for railway employees. 9. Alleviation of the conditions surrounding the employment of sailors. In urging the prompt enactment of legislation to provide for primary elections to enable the voters of the several parties to "choose their nominees for the Presidency without the intervention of nominating conventions," the President said:

railways as a first step, and establish- | Office. Decreases are anticipated in ment of a full territorial form of the expenditures for public buildings, $6,486,000; rivers and harbors, $9,472,000; and pensions, $11,150,000. The principal increases are requested by the War Department, $16,557,000; Navy Department, $3,670,000; and Department of Commerce, $4,225,000; while the Panama Canal is expected to cost $5,180,000 more than in 1914. The War Department increase is largely in the items of fortifications and organized militia. The small increase in the Navy Department accompanies a building programme including two battleships and eight destroyI venture the suggestion that this legers. Secretary Redfield's estimates islation should provide for the retention of party conventions, but only for the purpose of declaring and accepting the verdict of the primaries and formulat ing the platforms of the parties; and I suggest that these conventions should consist not of delegates chosen for this single purpose, but of the nominees for Congress, the nominees for vacant seats in the Senate of the United States, the Senators whose terms have not yet closed, the national committees and the candidates for the Presidency themselves, in order that platforms may be framed by those responsible to the people for carrying them into effect.

The most important subject dealt with in the message, the extension of the anti-trust law, the President dismissed very briefly wih a promise of a subsequent special message. The general nature of the legislation to be proposed was foreshadowed thus:

The immediate service we owe the business communities of the country is to prevent private monopoly more effectually than it has yet been prevented. I think it will be easily agreed that we should let the Sherman anti-trust law stand, unaltered, as it is, with its debatable ground about it. but that we should as much as possible reduce the area of that debatable ground by further and more explicit legislation; and should also supplement that great Act by legis lation which will not only clarify it but also facilitate its administration, and make it fairer to all concerned.

Estimates for 1915.-The estimates for the fiscal year 1915, prepared by the different Departments and submitted to Congress by Secretary McAdoo on Dec. 1, asked for appropriations amounting to $1,108,681,777, a sum $22,864,067 in excess of the appropriations for 1914 but $39,255,066 less than the estimates for that year. The cost of the Postal Service, estimated at $306,953,117, is expected to be met out of the revenue of the Post

new

provide for a force of foreign commercial attachés, a census of manufactures, and extended activities of the Bureau of Corporations in the investigation of corporation stock and bond issues, holding companies, interlocking directorates, etc., the economy and efficiency of trusts, and the conflict of state corporation laws.

Secretary McAdoo estimates the ordinary receipts for 1914 at $736,000,000, and the ordinary expenditures at $709,000,000. For 1915 the ordinary disbursements are estimated at the same figure, while the ordinary receipts are estimated to decline to $728,000,000. The surplus of $26,000,000 is estimated practically to meet the appropriation required for the Panama Canal.

Legislation. Besides the Federal Reserve Act, Congress enacted in December only one measure of general interest, the bill empowering the city of San Francisco to impound a water supply in the Hetch Hetchy Valley (H. R. 7207, 63d Cong., 1st sess.), ap: proved by the President on Dec. 19 (see X, Public Lands; and XXIII, Engineering).

On Dec. 3 the House passed a bill introduced by Mr. Hay (Va.) empowering the President to organize volunteer regiments for war purposes whenever in his judgment war is imminent or actually exists (H. R. 7138, 63d Cong., 2d sess.). The volunteer force thus organized would be enlisted for the entire war and would be entirely separate from the organized militia and on an equal footing with The President the regular Army. would appoint all officers, not more

than four regulars to any one volunteer regiment. The strength of the

force for which provision is made in the bill is estimated at 242,000 men.

THE UNDERWOOD TARIFF ACT

re

.

No one who looks the facts squarely in the face or knows anything that lies beneath the surface of action can fail to perceive the principles upon which recent tariff legislation has been based. Consciously or unconsciously, we have built up a set of privileges and exemptions from competition behind which it was easy by any, even the crudest, forms of combination to organize monopoly: until at last nothing is normal. nothing is obliged to stand the tests of efficiency and economy, in our world of big business, but everything thrives by concerted arrangement. Only new principles of action will save us from a final hard crystallization of monopoly and a complete loss of the influences that quicken enterprise and keep independent energy alive.

Preparation of the New Law. President made no specific reference The preparation of the Underwood to the measure which represented his Tariff Act of 1913 began in the first own views and the views of the session of the Sixty-second Congress leaders of the Democratic party in in 1911. In the chemical, metal, tex- Congress, but dealt broadly with the tile, and sugar schedules the new law fundamental principle of the pending followed in general the provisions of legislation in the following significant the tariff bills vetoed by President passage: Taft in 1911 and 1912 (A. Y. B., 1911, pp. 48-52, 291; 1912, pp. 332-4), and the principles laid down therein governed the revision of the maining schedules. The actual drafting of the Underwood bill was begun by the Democratic members of the Committee on Ways and Means on the opening of the final session of the Sixty-second Congress in December, 1912. A series of hearings on the different schedules were held in January and the first draft of the bill was completed late in February. At the close of the special session of the Senate in March, the Democratic members of the Senate Committee on Finance were admitted to conferences on the measure, which continued, with the occasional participation of President Wilson, until the opening of Congress on April 7. The bill as approved by the President and the Committee on Ways and Means was introduced in the House by Mr. Underwood on the first day of the session. It was immediately submitted to the Democratic caucus and on April 21 Mr. Underwood reintroduced the bill as amended by the caucus as an original measure (H. R. 3321, 63d Cong., 1st sess.).

The President's Tariff Message. President Wilson presented his first message to Congress on the second day of the session. He abandoned the custom of written messages followed for 112 years by every President since Jefferson, and, reverting to the practice of Washington and John Adams, read his message in person to the two houses of Congress assembled in joint session. The purpose of the extra session, said Mr. Wilson, was the revision of the tariff in accordance with the mandate received by the Democratic party in the election of 1912. The

It is plain what those principles must be. We must abolish everything that bears even the semblance of privilege or put our business men and producers unof any kind of artificial advantage, and der the stimulation of a constant necessity to be efficient, economical, and enpremacy, better workers and merchants terprising, masters of competitive suthan any in the world. Aside from the duties laid upon articles which we do not, and probably fore, and the duties laid upon luxuries cannot, produce, and merely for the sake of the revenues they yield, the object of the tariff duties petition, the whetting of American wits by contest with the wits of the rest of the world.

there

henceforth laid must be effective com

The Democratic Theory of Tariff Revision. The practical application of these principles in the framing of the Underwood bill was outlined by Mr. Underwood in an explanatory statement accompanying the bill (H. R. Report No. 5, 63d Cong., 1st sess.). At the outset the Democrats rejected as a guide to the fixing of tariff rates the doctrine of the Tariff Board that the United States should maintain a system of tariff rates equal to the differences in cost between foreign and domestic production plus a reasonable margin of profit. The Committee on Ways and Means adopted as funda mental the two essential ideas of the

Hence the programme of the Democratic party

tariff plank of the Democratic platform of 1912, first, that tariff duties should be designed primarily to pro- is the gradual and insistent reduction duce revenue for the Government and of our tariff laws to a basis where the without thought of protection, and American manufacturer must meet honsecond, that such duties should be his business along the best and most ecoest competition, where he must develop established by legislation that will nomical lines; where, when he fights at not injure or destroy legitimate in-home to control his market, he is forging the way in the development of his dustry. business to extend his trade in the mar

In the practical application of the first principle, the Committee kept in mind the distinction between the necessities and luxuries of life, reducing the tariff burdens on the necessities to the lowest points commensurate with revenue requirements and making the luxuries of life bear their proper portion of the tariff responsibilities. Many items of manufacture controlled by monopolies have been placed on the free list.

In applying the second principle the Committee had to consider the effect of the sudden elimination of the multitude of unnecessary and uneconomi. cal establishments which had grown up under the protective system. To avoid unnecessary disturbance of trade and to give every opportunity for reasonable adjustment, a gradual transition in tariff conditions was demanded, and the Underwood Tariff attempts, as a preliminary step,

1. To eliminate protection of profits and to cut off the duties which enable industrial managers to exact a bonus for which no equivalent is rendered.

2. To introduce in every line of industry a competitive tariff basis providing for a substantial amount of importation, to the end that no concern shall be able to feel that it has a monopoly of the home market gained other than through the fact that it is able to furnish better goods at lower prices than others.

kets of the world. In our judgment the future growth of our great Industries lies beyond the seas.

The Underwood Bill.-H. R. 3321 was referred to the Committee on Ways and Means on April 21 and reported without change the following day. The general character of the measure is outlined in the following summary of the more important changes proposed, quoted from Mr. Underwood's explanatory statement (see also XIV, Public Finance; and XXI, Manufactures):

Schedule A, Chemicals, Oils, and Paints. The rates on certain commodities show heavy reductions. Boracic acid is cut from 78.70 per cent., computed on imports of 1912, to 21.43 per cent., glue from 35.06 to 14.29 per cent., and red lead from 60.35 to 25 per cent. Moderate reductions have been made on medicinal preparations, which are cut from 25 to 15 per cent., drugs from 12.54 to 10 per cent., and olive oil in bottles from 35.18 to 21.05 per cent.

Schedule B, Earths, Earthenware, and Glassware.-Rates on all brick have been cut on the average from 30.23 per cent., computed on imports of 1912, to 10.28 per cent., tile from 47.84 to 23.38 per cent., asphalt from 35.05 to 9.62 per cent. Ordinary earthenware, which was already relatively low, being subject to an average duty of 24.67 per cent., has now been cut to 15 per cent., while window glass has been given an average reduction of from 46.38 to 28.30

The theory of a competitive tariff is per cent. briefly this:

and slabs, which were 16.35 and 17.79 per cent., have been cut to 8 per cent. in each case; beams from 23.20 to 12 per cent, and forgings from 30 to 15 per cent.

Schedule C, Metals and Manufactures of. In iron, steel, and their products, Where the tariff rates balance the dif- and other metals, there have been imference in cost at home and abroad, in- portant extensions of the free list, including an allowance for the difference including iron ore and steel rails. Pig iron freight rates, the tariff must be competitive, and from that point downward to the lowest tariff that can be levied it will continue to be competitive to a greater or less extent. Where competition is not interfered with by levying the tax above the highest competitive point, the profits of the manufacturer are not protected. On the other hand, when the duties levied at the custom house are high enough to allow the American manufacturer to make a profit before his competitor can enter the field, we have invaded the domain of the protection of profits. In our judgment the protection of any profit must of necessity have a tendency to destroy competition and create monpoly, whether the profit protected is reasonable or unreasonable.

Schedule D, Wood and Manufactures of. The idea of the large extension of the free list for the unmanufactured products has been the fundamental conception. Thus sawed boards other than cabinet wood have been carried to the free list, while sawed cabinet woods, which were 12.75 per cent., are now 10 per cent.; casks, barrels, etc., which were 30 per cent. in 1912, are now 15 per cent.; and house furniture, which was 35 per cent., is now 15 per cent.

Schedule E, Sugar, Molasses, and Manufactures of. The action of the

of less than $20,000. For the purpose of graduating the tax on individuals the bill imposed additional taxes on larger incomes as follows: one per cent. on the amount by which the total net income exceeds $20,000 up to a limit of net income of $50,000; two per cent. on the amount by which Agricultural Imple- the total net income exceeds $50,000 up to a limit of net income of $100,on and three per cent. the 000; amount by which the total net income exceeds $100,000. Subject to certain exemptions and deductions, the net income of a taxable person was defined as: