"Henceforth, I must have no friends": evaluating the economic policies of Grover Cleveland.

• Author: Dupont, Brandon
• Position: Essay

[Government paternalism] is the bane of republican institutions and the constant peril of our government by the people. It degrades to the purposes of wily craft the plan of rule our fathers established and bequeathed to us as an object of our love and veneration. It perverts the patriotic sentiments of our countrymen and tempts them to pitiful calculation of the sordid gain to be derived from their Government's maintenance. It undermines the self-reliance of our people and substitutes in its place dependence upon governmental favoritism. It stifles the spirit of true Americanism and stupefies every ennobling trait of American citizenship.

--Grover Cleveland, Second Inaugural Address, March 4, 1893

Grover Cleveland was the first Democrat elected to the presidency since before the Civil War and the only president in U.S. history to have served two nonadjacent terms; he was the twenty-second and twenty-fourth president, in office from March 4, 1885, to March 4, 1889, and from March 4, 1893, to March 4, 1897. Halfway through his first term in office, Cleveland explained his overall economic philosophy in a message accompanying his veto of proposed federal aid to drought-stricken Texas farmers:

I feel obliged to withhold my approval of the plan as proposed by this bill, to indulge a benevolent and charitable sentiment through the appropriation of public funds for that purpose. I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and duty of the general government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty' should, I think, be steadfastly resisted, to the end that the lesson should be constantly enforced that, though the people support the government, the government should not support the people. The friendliness and charity of our countrymen can always be relied upon to relieve their fellow citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood. ("Veto of the Texas Seed Bill" 2009)

The Texas Seed Bill veto may have been his most well known, but Cleveland used his veto power frequently, deploying it no less than 584 times (only 7 of which were overturned by Congress). Clearly, he believed that stopping legislative handouts to special interests was a primary function of the executive, even as he well understood that such an approach would likely be politically harmful; not long before his 1885 inauguration, Cleveland acknowledged that "henceforth, I must have no friends" (qtd. in Brodsky 2000, 107).

His two administrations came in the midst of important structural changes that were occurring in the late-nineteenth-century American economy. It was during that pivotal century that the American economy was transformed from a rural agrarian economy to a rapidly urbanizing industrial superpower. Census data show that the number of urban places rose from 400 in 1860 to 1,737 by the end of the century, and the fraction of Americans living in cities nearly doubled over this period, rising to more than 39 percent. By 1890, the U.S. resident population was 63 million compared to only 31.4 million in 1860, and population densities were rising as a result of both the rapidly increasing population and urbanization. And the population continued its relendess drive to the West: between 1860 and 1890, Chicago displaced Philadelphia as the nation's second-largest city. By 1890, only 19 percent of GDP was produced in the agricultural sector, and only 40 percent of the labor force worked in agriculture, down from 56 percent in 1860 and from 74 percent in 1800 (Carter et al. 2006, series Ba829-830, Ba814, Ba817). (1) By the latter part of the century, the manufacturing sector itself was undergoing rapid changes associated with mechanization and mass production, and the United States would become the world leader in industry by the turn of the century. Railroad track mileage tripled between 1860 and 1880, revolutionizing Americans' access to distant places, dramatically lowering transportation costs, and knitting together previously segmented regions of the country. And the pace of innovation was progressing at an astonishing rate by historical standards: nearly 417,000 patents were issued between 1860 and 1890, and the mileage of telegraph lines more than doubled in the decade of the 1880s alone (U.S. Census Bureau 1895, table 93, p. 332).

So the country was changing in fundamental ways as the pivotal nineteenth century drew to a close, and the structural changes inevitably brought promise as well as challenge. There was also political agitation over the distribution of income during this period, so while average material living conditions were improving at a remarkable rate by historical standards (real income per capita nearly doubled between 1860 and 1890), considerable growing pains would manifest in some of the most pressing problems to confront the Cleveland administration; many of Cleveland's decisions would be driven by the need to react to them. (2) Among these problems were the great tariff debate of the late 1880s, violent labor unrest, and the devastating 1893 bank panic, which struck only months after Cleveland's second inauguration.

The remainder of this essay explores the major economic issues of Cleveland's two administrations, starting with the tariff debates that attracted a great deal of attention in this period, particularly during his first term. Next, I examine the issue of silver agitation and the financial crisis of 1893. Finally, I describe the Pullman labor strike and the administration's response to it. The paper concludes with an evaluation of the effectiveness of Cleveland's responses to these issues.

Tariff Policy

Congress maintained relatively high tariff rates in the years following the Civil War in part to generate revenues that were needed to pay off the wartime debt (see figure l). (3) The highest tariffs were placed on imported manufactured products and various consumption goods (see table 1), although quite a few products entered American markets duty free when they did not compete with American manufacturing industries (among the duty-free imports were Indian rubber, tropical fruits, coffee, and tea) (Irwin 2007). But by the 1880s, the federal budget surplus was substantial: revenue was nearly 42 percent higher than the level of federal spending in 1888. In response, Cleveland's Democratic Party proposed lower tariffs to reduce revenue, whereas the Republicans proposed higher protective tariffs, which they believed would reduce imports, lower customs revenues, and protect American industry from foreign competition. This fundamental disagreement on the direction of future tariff policy laid the groundwork for the "Great Tariff Debate of 1888."

The president's December 1887 message to Congress was devoted entirely to the tariff issue, and the tone was urgent from the outset. In it, he argued for lowering the tariff rate given the sizable surplus revenue the federal government was collecting and that such an approach was required for the limited role ascribed to the federal government by the Constitution:

When we consider that the theory of our institutions guarantees to every citizen the full enjoyment of all the fruits of his industry and enterprise, with only such deduction as may be his share toward the careful and economical maintenance of the Government which protects him, it is plain that the exaction of more than this is indefensible extortion and a culpable betrayal of American fairness and justice.... The public Treasury ... becomes a hoarding place for money needlessly withdrawn from trade and the people's use, thus crippling our national energies, suspending our country's development, preventing investment in productive enterprise, threatening financial disturbance, and inviting schemes of public plunder. (Cleveland 1887)

The message was a pointed and outspoken advocacy for lowering tariffs and removing duties on raw materials. Cleveland did not go so tar as to advocate a complete dismantling of tariffs, apparently to diffuse the issue of protectionism, but he had nonetheless positioned himself and his party as solidly in favor of lower import duties.

The Great Tariff Debate became the central issue of the 1888 presidential election, but Cleveland was on the losing end of that debate and the election (he won the popular vote but lost in the electoral college to Benjamin Harrison). (4) Nonetheless, the president's clear position resonated with many and represented perhaps the boldest statement of the period regarding the limited role of the state in economic affairs.

Tariff policy got even worse during the Harrison administration (1889-93), at least from Cleveland's perspective. In 1890, the protectionist McKinley Tariff increased the average ad valorem tariff rate to more than 48 percent (see figure 1), although it reduced or eliminated some tariffs (notably, on raw sugar imports). (5) Partly due to the unpopularity of Harrison's tariff policies, Cleveland easily defeated Harrison in the 1892 election. In 1894, a compromise revenue act, the Wilson-Gorman Tariff, lowered average tariff rates slightly (it also imposed a 2 percent income tax on the wealthy, although the Supreme Court struck down the tax provision in the following year); Cleveland, who was then serving his second term, opposed the Wilson-Gorman Tariff but allowed it to become law without his signature, arguing that it was at least a slight improvement over the McKinley Tariff.

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