How Did Tariffs Work?

[ole]

Aphillbilly:

I hope we're not talking something serious. Without you, the board could be boring.

Do what you need to do. I'll wait.

Ole

[thea_447]

Your posts are always worth the wait, Tommy. Take care and come back when you can. I'll say a prayer.

[unionblue]

Friends,

Been a while since anyone has visited here. Thought I would post a few more items.

From the book Emancipating Slaves, Enslaving Free Men, by Jeffrey Rogers Hummel, Chapter 9, page 221.

"The national government at the time had only two sources of revenue: a very low tariff and the sale of public lands. These had been more than adequate to cover minuscule peacetime budgets, except during periods of financial panic. The highest that annual outlays had reached was $74.2 million in 1858. Adjusting for population, the government in Washington was spending approximately $2.50 per person in 1858. This was less than 2 percent of the economy's total output.

Government overall was thus small and unobtrusive. The national debt, for all intents and purposes, had been completely paid off in 1835. By 1860, mainly as a consequence of the Mexican War, it stood at a bearable $65 million--less than annual outlays in 1858. Most Americans paid no taxes whatsoever to federal officials directly, and their only regular contact with any representatives of central authority was probably through the United States Post Office--if they had any contact at all."

Unionblue

[hawglips]

Neil, I am feeling giddy that you are quoting from Hummell's book.

Compared to post-Lincoln, yes, the federal government was very small.

But from a trader's point of view, the tariffs were huge.

Hal

[unionblue]

Hal!

Long time, no see or hear from! Good to see you back and active on the board again!

Frankly, I felt that if nothing else would, Hummell's book ought to get a rise from someone, especially, as you have noted, if I quoted from it!

It might interest you to know that I read Hummell's book a long time ago and felt that the man had a few valid points, not many, but a few, the tariff issue being one of them.

And what do you base your finding that from a trader's view, the tariffs were huge? And how did that in any way contribute to a cause of the war, when tariffs were at their lowest prior to the firing on Ft. Sumter?

And Hal, how can you not agree that the pre civil war government was also a rather small affair, that in could no way threaten the South with a interfering/intrusive federal govenment?

Sincerely,
Unionblue

(Message edited by Unionblue on February 18, 2005)

[unionblue]

Friends,

I see that we have again gone very quiet on the tariff front.

This time, I went fishing on the other side of the pond and came up with an English view of the Civil War. I gladly supply an extract from the following speech:

Volume II, AMERICAN WAR. Speech II.
ROCHDALE, NOVEMBER 24, 1863.

"...But I will tell you candidly, that if it was not for one cause, I should consider as hopeless and useless the attempt to subjugate the Southern States; and I will tell the parties upon whose views I have been commenting, that it is the object and purpose which they have that has rendered success by the Secessionists absolutely impossible. Indeed, if the moral and intellectual faculties of this country had not been misled upon that question, systematically misled, they would have been unanimous and of one opinion. We were told in the House of Commons by one, whom it was almost incredible to behold and think saying so--who was once the great champion of democracy and of the rights and privileges of the unsophisticated millions,--we heard him say--I heard him say myself--that this civil war was originated because the South wished to establish Free-trade principles, and the North would not allow it. I have travelled--and it is for this that I am now going to mention, that I touch upon the subject at all--I travelled in the United States in 1859, the year before the fatal shot was fired at Fort Sumter, which has made such terrible reverberations since. I travelled in the United States--I visited Washington during the session of the Congress, and wherever I go, and whenever I travel abroad, whether it be in France, America, Austria, or Russia, I at once become the centre of all those who form and who avow strong convictions and purposes in reference to Free-trade principles. Well, I confess to you what I confessed to my friends when I returned, that I felt disappointed, when I was at Washington in the spring of 1859, and that there was so little interest felt on the Free-trade question. There was no party formed, no public agitation; there was no discussion whatever upon the subject of Free Trade and protection. The political field was wholly occupied by one question, and that question was SLAVERY.

Now, I will mention an ill ustrative fact, which I have not seen referred to. To my mind, it is conclusive on this subject. In December, 1860, whilst Congress was sitting, and when the country was in the agony of suspense, fearing the impending rupture amongst them, a committee of their body, comprising thirty-three members, being one representative from every State then in the Union,--that committee, called the Committee of Thirty-three, sat from December 11th, 1860, to January 14th, 1861. They were instructed by Congress to inquire into the perilous state of the Union, and try to devise some means by which the catastrophe of a secession could be averted. Here is a report of the proceedings in that committee [holding up a book in his hand]. I am afraid there is not another report in this country. I have reason to know so. There are forty pages. I have read every line. The members of the Southern States, the representatives of the Slave States, wee invited by the representatives of the Free States to state candidly and frankly what were the terms they required, in order that they might continue peaceable in the Union; but in every page you see their propositions brought forward, and from beginning to end there is not one syllable said about tariff or taxation. From the beginning to end there is not a grievance alleged but that which was connected with the maintenance of slavery. There were propositions calling on the North to give increased security for the maintenance of that institution; they are invited to extend the area of slavery; to make laws, by which fugitive slaves might be given up; they are pressed to make treaties with foreign Powers, by which foreign Powers might give up fugitive slaves; but, from beginning to end, no grievance is mentioned except connected with slavery,--it is slavery, slavery, slavery, from the beginning to the end. Is it not astonishing, in the face of facts like these, that any one should have the temerity, so little regard to decency and self-respect, as to get up in the House of Commons, and say that secession has been upon a question of Free Trade and Protection?

Well, this is a war to perpetuate and extend human slavery. It is a war not to defend slavery as it was left by their ancestors--I mean, a thing to be retained and to be apologised for,--it is a war to establish a slave empire,--a war in which slavery shall be made the cornerstone of the social system,--a war which shall be defended and justified on scriptural and on ethnological grounds. Well, I say, God pardon the men, who, in this year of grace 1863, should think that such a project as that could be crowned with success."

If you wish to view the entire speech, click on the following web site:

http://www.econlib.org/library/YPDBo...,%20Speech%202

Another point of view that the war was not about tariffs. And, it seems to me, that even in the year of grace 1863, the idea and institution of slavery was not considered OK, alright, etc., thoughout the rest of the civilized world.

Just an observation.

Sincerely,
Unionblue

[cedarstripper]

Originally Posted by unionblue

It has often been brought up that tariffs were a cause of the Civil War, or at least one of the causes.

How did tariffs work? And in what way did it effect the average citizen of the country?

James DeBow (although he consistently objected to tariffs as a revenue form for economics reasons) wrote that tariffs were a favorable alternative to the regular visit from the tax man, especially when you were not prepared to pay. Because they were an external revenue, their only effect was on dutiable articles, which the individual had the choice of whether to buy, and in what quanity. While all the humbug about the burden to average citizens, it cannot be ignored that their was an apparent absense of internal revenue acts introduced and debated in Congress to replace the tariff. Taussig says that in the fifteen years before the Civil War, 'agitation on the tariff almost ceased entirely.'

Comparing both tariff rates of different acts and tariff's effects on prices of both imported and domestic articles is in my estimation, a quagmire founded in inaccuracies. Ad valorem rates are dependent on invoiced prices to determine actual tax revenue, and prices of goods during the thirty or so years before the Civil War were anything but static. Different articles on different schedules reaped different rates, but by itself, it is not indicative of the amounts of those articles actually imported. A 1000% duty on moon rocks might look impressive, but if none are imported, what of it?

If comparing ad valorem rates is troublesome, then comparing ad valorem with specific rates should set off flashing lights. Most items in the tariff act of 1857 were on schedule C, which charged a 24% ad valorem rate. The 1861 tariff act raised that ad valorem rate to 28%, still two percentage points below the 30% rate of the 1846 (Walker) act. It was hardly the oppressive act that it is now often characterized as. Many articles were assigned specific rates, but comparing those rates requires knowing the market value of that item. Duties on pig iron, IIRC, did almost double under the specific rate. To accurately guage a burden of a duty on a particular article, it is necessary to know who produced it, who bought it, what its demand elasticity was, what its supply was, etc. This is practically an impossible task, so instead we are littered with these gross generalizations that cannot do the subject justice.

Rather than compare individual articles to see the burden on consumers, it is undoubtedly more accurate and helpful to look at the ratio of duties collected to dutiable imports. Taussig's Tariff History of the United States inludes this in Table 1 of the Appendix. Those ratios were for the fiscal year (ending June 30) 1860 - 19.67%; 1861 - 18.84%; 1862 - 36.19%; 1863 - 32.62%; 1864 - 36.69%; and 1865 - 47.56%. As to the effect of the 1861 tariff act (aka Morrill), it must be noted that it only went into effect on April 1, 1861, and starting in that summer's session, continual revenue measures were passed in Congress due to the war in progress. Therefore, the effect of the Morrill tariff cannot be accurately measured, as it was only a part of the revenue for fiscal year 1861, which you'll notice actually boasted a lower revenue ratio than pre-Morril 1860. All ratios during the war years were due to the effects of war tariffs.

What I think is another common misconception is that tariffs only offered benefits to "the industrial North." First, it should be reminded that the North was still primarily agrarian. Much of the tariff schedules were affixed to raw materials or finished agricultural products. Even the "Tariffs of Abominations", in actuality a backfired political scheme to help "Jackson men", were especially hurtful to the New England states. Regulary fed a diet of 'the evils of northern industrialists plundering the South,' it might surprise many to find that sugar actually raised almost twice the revenue as iron/steel.

The following figures originate from an 1860 Treasury Department report.
(Congressional Globe, p1055, 36th Congress, 2nd Session, Senate, Mr Gwin, California)

Total merchandise imported............$279,872,327
Free goods admitted....................... $82,291,614
Total duties collected..................... $53,979,570.


Of these $54 million of import revenues, $40,378,943 were collected on just seven different articles:

sugar/molasses............................$8,711,118
manufactures, wool......................$8,155,578
manufactures, cotton....................$7,120,647
manufactures, silk.........................$6,491,822
manufactures, iron, steel...............$4,835,973
wines/spirits............................... .$3,421,805
cigars, tobacco............................ $1,742,000
Total.........................................$ 40,378,943

Finally, there is much contradiction in just who actually paid the tariff. When an import entered a Port of Entry or Port of Delivery, the tariff was calculated by Customs inspectors and paid by the importer, or the goods were stored in bonded warehouses until the duty was paid, or a bond was posted guaranteeing payment . Who exactly the importer represented, I don't know. If it is assumed that the pass-through effect of the tariff was 100% (the duty added to the price) then there is no argument that the foreign producer is hurt by the tariff - he has not paid it. If it is assumed that the imported price has necessarily been reduced (as a cost of doing business much like shipping) in order for the tariff-added goods to compete with domestic, then there is no argument that American consumers were hurt by it - they did not pay it. I think the average probably lies somewhere in between.

But the assumption that domestic producers could simply add the duty to their price I think defies the principles of supply and demand in a post young-industry commerce like the 1850s. While protection from imports reduced foreign competition, it had no effect on domestic competition. If the demand for an article was low, then duties on imports would have stifled imports and left domestic producers competing for market share, making the duty irrelevant. If demand was high enough to support duty-added prices, then the market would have supported those prices anyways. I contend that duties could not have had the effect on domestic commerce that is generally supposed. And the argument that a duty enduced trade imbalance with England would reduce their cotton consumption, history shows is also unfounded. Cotton demand, prices and exports were at all time high prior to the Civil War.

Taussig considered tariffs harmful when they were overused and industry failed to become efficient because of them. DeBow considered them an expensive way to collect revenues and an obstacle to free trade. Calhoun found them a subject for his demagoguery. But as a genuine cause of southern discord and secession, I think they are little more than a red herring. I sincerely doubt the 1850s customer buying flour, thread and a shovel, or a rail ticket for that matter, had any more idea of what the effect of duties had on their purchase than the 2005 customer has.

Regards

[unionblue]

Ceaderstripper,

Thank you very much for your post above. May I enquire where the source of this article came from? I am really interested in the tariff before the Civil War and would like to do more research on it. Any site or book you could recommend to me would be appreciated.

Sincerely,
Unionblue

[cedarstripper]

Thank you very much for your post above. May I enquire where the source of this article came from?>>>>

Sorry. No article. The post is my creation. The amounts of duties collected on the seven articles can be found in the Congressional Globe on the date and page I gave. The ratios of duties collected to dutiable articles is from the Statistical Abstract of the United States and is found in Table 1 of the appendix in Frank Taussig's Tariff History of the United States which can be found online at Ludwig Von Mises Institute.

As far as a site on the tariff question, it seems to be found only in extremes....either extremely generalized and false, or extremely technical (complex economic equations). For a truly fair, balanced and educational look at tariffs, I'd suggest starting with Taussig's Tariff History. Reading Chapters 1-3 of Part 1, and Chapter 1 of Part 2 will take you from Protection to Young Industries up to The War Tariff. This will cover everything relevant to secession and the Civil War. The reading is very easy, non-technical, and very informative. Tom DiLorenzo attributed to Taussig heavily in articles and interviews in the year after his TRL came out, but don't waste too much of your time looking for it....it ain't there.

For a look at the actual tariff acts, you might want to start with the tariff act of 1846 (aka Walker Tariff) It was H.R. 384. http://memory.loc.gov/cgi-bin/ampage...db&recNum=1046 This act was fairly popular and supplied the government with revenues to pay for the Mexican War in just 2 years, IIRC. Its undoing was that it was supplying annual surplus revenues, which was thought an invitation to corruption and squander. Most important items were on Schedule C, which charged 30% ad valorem. The 1846 act lists the assignment of articles to their schedules and rates.

To reduce revenue, the tariff act of 1857 was passed and can be found at the same site, under House Bills and Resolutions, 34th Congress, H.R 566 http://memory.loc.gov/cgi-bin/ampage...db&recNum=1411
This was actually just an amendment to the 1846 act and used the same schedules. This tariff act was the lowest of all, but the government found itself having to borrow on six occasions to keep itself afloat.

The tariff act of 1861 was H.R. 338, and can be found at http://memory.loc.gov/cgi-bin/ampage...db&recNum=1442 This is the final bill as amended (dated Feb 21, 1861) after having been passed in the Senate the day before. It is not bedside reading, but is easily checked to refute myths of how it allegedly tripled rates of the 1857 act. It replaced ad valorem tariffs with specific rates in many cases.

Just a tudbit: Some will claim that Lincoln held onto Fort Sumter because he insisted on collecting the tariff there. In 1859, net revenues from duties at Charleston (after expenses) was only $234,890, a little more than net collections at Portland, ME, and about 1/4 net collections at San Francisco. Net Customs collections at New York City were $33,783,002 in 1859.

[unionblue]

ceaderstripper,

Thanks for all the additional info. I have read Taussig's Tariff History of the United States and the chapters you have noted at his site.

Most of all I want to thank your for all the sites that list the actual tariff acts from the Walker Tariff on. I knew if I wanted to dig them out at the Congressional Globe web site I could, but I feared going blind at all the reading to track the actual acts themselves down.

Now, one more question, if you please. You will make note of a conversation between President Lincoln and a man who talked to him about tariff collections. In this conversation, it is reported by this man that Lincoln said something to the effect that he must have his tariff revenues. Do you recall the man, the conversation and the date? It is often brought up by those on this board who claim Lincoln really went to war over the tariff and I know that this conversation is dismissed by most historians but do you have any information on it?

Sincerely,
Unionblue