CHAPTER IV

The Development of Judicial Review

A further step toward judicial review even still more significant was taken, in the case of Reaganv.Farmers' Loan and Trust Company, decided by the Supreme Court in 1894. This case came up from the Federal circuitcourt of Texas which had enjoined the state railway commissioners from fixing and putting into effect railway rates which the Trust Company, as a bondholder and interested party, contended were too low, although not confiscatory.

The opinion of the Court, written by Justice Brewer, who, as Federal circuit judge, had already taken advanced ground in favor of judicial review, went the whole length in upholding the right of the judiciary to review the reasonableness, not only of a rate fixed by a commission, as in the case in hand, but even of one fixed by the legislature. The case differed in no essential way, declared the justice, from those cases in which it had been the age-long practice of the judiciary to act as final arbiters of reasonableness—cases in which a charge exacted by a common carrier was attacked by a shipper or passenger as unreasonable. The difference between the two cases was merely that in the one the rate alleged to be unreasonable was fixed by the carrier; in the other it was fixed by the commission or by the legislature. In support of this remarkable bit of legal reasoning, the opinion adduced as precedents merely a few brief excerpts, from previous decisions of the Court, nearly all of which were puredicta.

The absence of any dissent from this opinion, in spite of the fact that Judge Gray, who had concurred in Justice Bradley's vigorous dissenting opinion in the Chicago-Minnesota case four years before, was still on the bench, indicates that the last lingering opposition to the doctrine of judicial review in the minds of any of the Court had been dissolved. Henceforth it was but the emphaticaffirmation and consistent development of that doctrine that was to be expected.

If we leave out of account Mr. Justice Brewer'sdictaand consider the Court to have decided merely the issues squarely presented, the Reagan case left much to be done before the doctrine of judicial review could be regarded as established beyond all possibility of limitation and serious qualification. Other cases on the point followed quickly, but it was not until the celebrated case of Smythv.Ames, decided in 1898, that the two leading issues were fairly presented and settled. In this case the rate attacked was not fixed by a commission, but by a state legislature itself; and the rate was not admitted by the counsel for the state to be unreasonable, but was strongly defended as wholly reasonable and just. The Court had to meet the issues.

The original action in the case of Smythv.Ames was a bill in equity brought against the attorney-general and the Nebraska state board of transportation, in the Federal circuit court, by certain bondholders of the railroads affected, to restrain the enforcement of the statute of that state providing a comprehensive schedule of freight rates. The bills alleged, and attempted to demonstrate by elaborate calculations, that the rates fixed wereconfiscatory, inasmuch as a proportionate reduction on all the rates of the railroads affected by them would so reduce the income of the companies as to make it impossible for them to pay any dividends; and in the case of some of them, even to meet all their bonded obligations. On behalf of the state, it was urged that the reduction in rates would increase business, and, therefore, increasenet earnings, and that some at least of the companies were bonded far in excess of their actual value. Supreme Court Justice Brewer, sitting in circuit, on the basis of the evidence submitted to him, consisting mainly of statements of operating expenses, gross receipts, and inter- and intra-state tonnage, found the contention of the railroads well taken, and issued the injunctions applied for.

The opinion of the Supreme Court, affirming the decree of Judge Brewer, was, in the essential part of it—that asserting the principle of judicial review in its broadest terms—singularly brief. Contenting himself with citing a few shortdictafrom previous decisions, Justice Harlan, speaking for the Court, declared that the principle "must be regarded as settled" that the reasonableness of a rate could not be so conclusively determined by a legislature as to escape review by the judiciary. Equally well settled, it was declared, was the principle that property affected with a public interest was entitled to a "fair return" on its "fair" valuation. These principles regarded as established, the Court proceeded to examine the evidence, although it admitted that it lacked the technical knowledge necessary to a completely equitable decision; and sustained the finding of the lower court in favor of the railroads. There was no dissent.

With Smythv.Ames the doctrine of judicial review may be regarded as fully established. No portion of the judicial prerogative could now be surrendered without not merely "distinguishing" but flatly overruling a unanimous decision of the Court.

The significance of Smythv.Ames was soon observable in the activities of the lower Federal courts. Within the nine months of 1898 that followed that decision, there were at least four applications for injunctions against alleged unreasonable rates, and in three of these cases the applications were granted. During the years that followed Smythv.Ames, Federal courts all over the country were tying the hands of state officers who attempted to put into effect legislative measures regulating railway concerns. In Arkansas, Florida, Alabama, Minnesota, Missouri, Illinois, North Carolina, Louisiana, and Oregon, rates fixed by statute, commission, or ordinance were attacked by the railways in the Federal courts and their enforcement blocked. In several instances the injunctions of the lower courts were made permanent, and no appeal was taken to the Supreme Court of the United States. With Smythv.Ames staring them in the face, state attorneys accepted the inevitable.

The decision in Smythv.Ames left still one matter in doubt. The allegation of the railroads in that case had been that the rates fixed were actually confiscatory—that is, so low as to make dividends impossible. In the course of his opinion, Justice Harlan had stated, however, that the railroads were entitled to a "fair return," an opinion that had been expressed also in the Reagan case, where indeed it had been necessary to the decision, and still earlier, but with little relevancy, in the Chicago-Minnesota case. In none of these cases, however, had any precise definition of the terms "reasonable" or "fair" return been necessary, and none had been made.

The first direct suggestion of the development of thejudicial reasoning on this point that was to take place is found in the Milwaukee Electric Railway case, also decided in 1898. In that case Judge Seaman, of the Federal circuit court, found from the evidence that the dividends of the street railway company for several years past had been from 3.3 to 4.5 per cent, while its bonds bore interest at 5 per cent. Anything less than these returns, the judge declared, would be unreasonable, inasmuch as money loaned on real estate, secured by a first mortgage, was at that time commanding 6 per cent in Milwaukee.

Eleven years later, in 1909, the Supreme Court sustained virtually the same rule in the New York Consolidated Gas case, holding, with the lower court, that the company was entitled tosixper cent return on a fair value of its property (including franchises and the high values of the real estate used by it in the business), because six per cent was the "customary" rate of interest at that time in New York City. On the same day the court decided that a return of six per cent on waterworks property in Knoxville, Tennessee, was also not unreasonable. In neither of these cases, however, did the Court attempt any examination or explanation of the evidence on which it rested its determination that six per cent was the "customary" rate in the places named; nor did it attempt to explain the principle on which such "customary" rate could be determined for other times and places. Plainly there is still room for a great deal of "distinguishing" on this point. The extreme vagueness of the rule was exemplified by the decision of Federal circuit Judge Sanborn in the Shephard case (1912), in which hedecided that, for a railroad running through Minnesota,sevenper cent was no more than a "fair" return, and that any reduction in rates which would diminish the profits of the road below that figure was unreasonable.

Equally important and of as great difficulty are the questions entering into the determination of a "fair" valuation. This point is both too unsettled and too technical to render any discussion of it profitable here. Attention may, however, be called to two of the holdings in the Consolidated Gas case. In arriving at a "fair" valuation of the gas company's property, the Court allowed a large valuation to be placed upon the franchises of the company—none of which had been paid for by the companies to which they had originally been issued, and which had not been paid for by the Consolidated Company when it took them over, except in the sense that a large amount of stock, more than one sixth of the total stock issued by the company, had been issued against them, when the consolidation was formed. The particular facts surrounding this case are such as to make it very easy for the Court to "distinguish" this case from the usual one, for the consolidation was formed, and its stock issued, under a statute that authorized the formation of consolidations, and forbade such consolidations to issue stock in excess of the fair value of the "property, franchises, and rights" of the constituent companies. This last prohibition the Court construed as indicative of the legislative intention that the franchises should be capitalized. Equally plain is it, however, that this particular circumstance of the Consolidated Gas case is so irrelevant that it willoffer no obstacle whatever to the Court's quoting that case as a precedent for the valuation of franchises obtainedgratis, should it so desire.

Another holding of great importance in the Gas case was that the company was entitled to a fair return on the value of real estate used in the business, that value having appreciated very greatly since the original purchase of the real estate, and there being no evidence to show that real estate of so great value was essential to the conduct of the business.

The importance of these two holdings is exemplified by the fact that in this particular case the combined value attributed to the franchises and the appreciation of real estate was over $15,000,000—more than one fourth of the total valuation arrived at by the Supreme Court. It will readily be seen that if these two items had been struck from the valuation by the Court, it would be possible for the state to make a still further substantial reduction in the rate charged for gas in New York City without violating the Court's own canon of reasonableness—a six per cent return.

The steps in the evolution of the doctrine of judicial review may be summarized in the following manner:

The Supreme Court first declared that the legislative determination of what was a "reasonable" rate was not subject to review by the courts.

The first departure from this view was an intimation, confirmed with increasing emphasis in several cases, that a rate so low as to make any return whatever impossible was confiscatory and would be set aside by the Court as violating the Fourteenth Amendment. For a time,however, the Court took the position (steadily undermined in subsequent decisions) that a rate which allowed some, even though an "unreasonably low" return, was not prohibited by the Fourteenth Amendment and could not be set aside by the Court.

Next in order came the holding that the determination of a commission as to what was reasonable could not be made conclusive upon the courts, at least when the commission had acted without the forms and safeguards of judicial procedure, and, probably, even when it had acted with them.

In the same decision appeared an intimation, which in subsequent decisions became crystallized into "settled law," that not only were totally confiscatory rates prohibited by the Fourteenth Amendment, but also any rates which deprived the owners of the property regulated of a return equal to what was "customary" in private enterprises.

This rule was applied by the Court for the first time against a rate fixed by a commission, and where the rate was admitted by the pleadings to be confiscatory. But it was shortly thereafter applied to a rate fixed by a legislature, and where the "reasonableness" (not the confiscatory character) of the rate was a direct issue on the facts and evidence.

Finally, the principle that what is a "fair" or "reasonable" rate is to be measured by the customary return in private enterprises under similar conditions, has been applied in several cases to warrant the requirement of a definite rate of interest; but no precise rules have been laid down for the determination of such rate in all cases.

The most striking feature, perhaps, of the development of the doctrine of judicial review here traced, as seen in the opinions of the Supreme Court, is the brevity and almost fortuitous character of the reasoning given in support of the most important and novel holdings. A comparison of the reasoning in Smythv.Ames, for example, with that in Marburyv.Madison, in which Chief Justice Marshall first held a law of Congress unconstitutional, will forcibly exemplify this. The explanation is to be found largely in the fact that each step in advance in the building up of the doctrine had been foreshadowed indictumbefore it was established as decision. It was thus possible for the judge writing the opinion in a case when a new rule was actually established, to quote, as "settled law," a meredictumfrom a previous opinion. Justice Gray's citation, in this fashion, in the Dow case, of Chief Justice Waite'sdictumin the Ruggles case (although he might, with equal cogency, have cited the Chief Justice's contrarydictumin the Munn or Peik cases), is a good instance of this curious use of "precedent"; and parallel instances could be adduced from virtually every one of the important subsequent cases on this subject.[22]

It is apparent from this all too brief and incompleteaccount of the establishment of judicial review over every kind and class of state legislation affecting private property rights that no layman can easily unravel the mysterious refinements, distinctions, and logical subtleties by which the fact was finally established that property was to be free from all interference except such as might be allowed by the Supreme Court (or rather five judges of that Court) appointed by the President and Senate, thus removed as far as possible from the pressure of public sentiment. Had a bald veto power of this character been suddenly vested in any small group of persons, there can be no doubt that a political revolt would have speedily followed. But the power was built up by gradual accretions made by the Court under the stimulus of skilful counsel for private parties, and finally clothed in the majesty of settled law. It was a long time before the advocates of leveling democracy, leading an attack on corporate rights and privileges, discovered that the courts were the bulwarks oflaissez faireand directed their popular battalions in that direction.

Those who undertake to criticize the Supreme Court for this assumption of power do not always distinguish between the power itself and the manner of its exercise. What would have happened if the state legislatures had been given a free hand to regulate, penalize, and blackmail corporations at will during the evolution of our national economic system may be left to the imagination of those who recall from their history the breezy days of "wild-cat" currency, repudiation, and broken faith which characterized the thirty years preceding the Civil War when the Federal judiciary was under the dominanceof the states' rights school. The regulation of a national economic system by forty or more local legislatures would be nothing short of an attempt to combine economic unity with local anarchy. It is possible to hold that the Court has been too tender of corporate rights in assuming the power of judicial review, and at the same time recognize the fact that such a power, vested somewhere in the national government, is essential to the continuance of industries and commerce on a national scale.

Thus far attention has been directed to the activities of the Federal Supreme Court in establishing the principle of judicial review particularly in connection with legislation relative to railway corporations, but it should be noted that judicial review covers all kinds of social legislation relative to hours and conditions of labor as well as the charges of common carriers. In 1905, for example, the Supreme Court in the celebrated case of Lochnerv.New York declared null and void a New York law fixing the hours of work in bakeshops at ten per day, basing its action on the principle that the right to contract in relation to the hours of labor was a part of the liberty which the individual enjoyed under the Fourteenth Amendment. Mr. Justice Holmes, who dissented in the case, declared that it was decided on an economic theory which a large part of the country did not entertain, and protested that the Fourteenth Amendment did not "enact Mr. Herbert Spencer'sSocial Statics."

As a matter of fact, however, the Supreme Court of the United States has declared very little sociallegislation invalid, and has been inclined to take a more liberal view of such matters than the supreme courts of the states. The latter also have authority to declare state laws void as violating the Federal Constitution, and when a state court of proper jurisdiction invalidates a state law, there is, under the Federal judiciary act, no appeal to the Supreme Court of the United States. Consequently, the Fourteenth Amendment means in each state what the highest court holds it to mean, and since the adoption of that Amendment at least one thousand state laws have been nullified by the action of state courts, under the color of that Amendment or their respective state constitutions.

As examples, in New York a law prohibiting the manufacture of cigars in tenement houses, in Pennsylvania a law prohibiting the payment of wages in "scrip" or store orders, and in Illinois a statute forbidding mining and manufacturing corporations to hold back the wages of their employees for more than a week were declared null and void. Such laws were nullified not only on the ground that they deprived the employer of property without due process, but also on the theory that they deprived workingmen of the "liberty" guaranteed to them to work under any conditions they chose. In one of these cases, a Pennsylvania court declared the labor law in question to be "an insulting attempt to put the laborer under a legislative tutelage which is not only degrading to his manhood but subversive of his rights as a citizen of the United States."

Where the state court nullified under the stateconstitution, it was of course relatively easy to set aside the doctrines of the court by amending the constitution, but where the state court nullified on the ground of the Fourteenth Amendment to the Federal Constitution, there was no relief for the state and even no appeal for a review of the case to discover whether the Supreme Court of the United States would uphold the state tribunal in its view of the national law. Under such circumstances, the highest state court became the supreme power in the state, for its decrees based on the Federal Constitution were final. It was the freedom, one may say, recklessness, with which the courts nullified state laws that was largely responsible for the growth of the popular feeling against the judiciary, and led to the demand for the recall of judges.[23]

[13]A. R. Conkling,Life of Roscoe Conkling, p. 297.

[14]A. R. Conkling,Life of Roscoe Conkling, p. 699.

[15]Ibid., p. 671.

[16]Ibid., pp. 679 ff.

[17]See below, p. 57.

[18]Ibid., p. 540.

[19]Taylor,Origin and Growth of the American Constitution, p. 355. As a matter of fact, Conkling, who was a member of the committee that drafted the Fourteenth Amendment, voted against these provisions in Committee.

[20]It is to be noted that the demand of the warehousemen on the second point was not for a judicialreviewof the reasonableness of a rate fixed by the legislature, but a totaldenialof thepowerof alegislatureto act in the matter. The question of the propriety of a judicial review of the reasonableness of the rates in question was not raised in the pleadings. It was not difficult, therefore, for judges in subsequent cases in which the question of judicial review was squarely raised to explain away as meredictumthis solemn statement by Chief Justice Waite to the effect that the power of the legislature to regulate being conceded, the determination of the legislature was binding on the courts and not subject to review.

[21]Except for two unimportant cases decided in the lower courts.

[22]It should be noted that the Supreme Court not only undertook to pass upon the reasonableness of such rates as the states were permitted to make, but also added in 1886 that no state could regulate the rates on goods transported within its borders, when such goods were in transit to or from a point in another state. Such regulation was held in the Wabash, etc., Railway Companyv.Illinois (118 U. S. 557) to be an interference with interstate commerce which was subject to control by Congress only.

[23]Below, p. 287.

It was a long time before the conditions created by the great economic revolution were squarely reflected in political literature and party programs. Indeed, they were but vaguely comprehended by the generation of statesmen who had been brought up in the days of the stagecoach and the water mill. It is true that the inevitable drift of capitalism in the United States might have been foreseen by turning to Europe, particularly to England, where a similar economic revolution had produced clearly ascertainable results; but American politicians believed, or at least contended, that the United States lived under a special economic dispensation and that the grave social problems which had menaced Europe for more than a generation when the Civil War broke out could never arise on American soil.

From 1861 to 1913, the Republican party held the presidential office, except for eight years. That party had emerged from the Civil War fortified by an intense patriotism and by the support of the manufacturing interests which had flourished under the high tariffs and of capitalists anxious to swing forward with the development of railways and new enterprises. Its origin had been marked by a wave of moral enthusiasm such as has seldom appeared in the history of politics.It came to the presidency as a minority party, but by the fortunes of war it became possessed of instruments of power beyond all calculation. Its leading opponents from the South deserted in a mass giving it in a short time possession of the field—all the Federal branches of government. It had the management of the gigantic war finances, through which it attached to itself the interests and fortunes of the great capitalists and bankers throughout the North. It raised revenues by a high tariff which placed thousands of manufacturers under debt to it and linked their fortunes also with its fate. It possessed the Federal offices, and, therefore, railway financiers and promoters of all kinds had to turn to it for privileges and protection. Finally, millions of farmers of the West owed their homes to its generous policy of giving away public lands. Never had a party had its foundations on interests ramifying throughout such a large portion of society.

And over all it spread the mantle of patriotism. It had saved the Union, and it had struck the shackles from four million bondmen. In a baptism of fire it had redeemed a nation. Europe's finger of scorn could no longer be pointed to the "slave republic paying its devotions to liberty and equality within the sound of the bondman's wail." The promises of the Declaration of Independence had been fulfilled and the heroic deeds of the Revolution rivaled by Republican leaders. As it declared in its platform of 1876, the Republican party had come into power "when in the economy of Providence this land was to be purged of human slavery and when the strength of the government of the people, by thepeople, and for the people was to be demonstrated." Incited by the memories of its glorious deeds "to high aims for the good of our country and mankind," it looked forward "with unfaltering courage, hope, and purpose."

Against such a combination of patriotism and economic interest, the Democratic party had difficulty in making headway, for its former economic mainstay, the slave power, was broken and gone; it was charged with treason, and it enjoyed none of the spoils of national office. But in spite of all obstacles it showed remarkable vitality. Though divided on the slave question in 1860, those who boasted the name of "Democrat" were in an overwhelming majority, and even during the Civil War, with the southern wing cut off completely, the party was able to make a respectable showing in the campaign which resulted in Lincoln's second election. When the South returned to the fold, and white dominion drove the negro from the polls, the Democratic party began to renew its youth. In the elections of 1874, it captured the House of Representatives; it narrowly missed the presidency in 1876; and it retained its control of the lower house of Congress in the elections of 1876 and 1878.

The administration of President Hayes did little to strengthen the position of the Republicans. His policy of pacification in the South alienated many partisans who believed that those who had saved the Union should continue to rule it; but it is difficult to say how much disaffection should be attributed to this cause. It seems to have been quietly understood within officialcircles that support would be withdrawn from the Republican administrations in Louisiana and South Carolina. Senator Hoar is authority for the statement "that General Grant, before he left office, had determined to do in regard to these state governments exactly what Hayes afterward did, and that Hayes acted with his full approval. Second, I have the authority of President Garfield for saying that Mr. Blaine had come to the same conclusion."

Charges based on sectional feeling were also brought forward in criticism of some of Hayes' cabinet appointments. He terrified the advocates of "no concession to rebels" by appointing David M. Key, an ex-Confederate soldier of Tennessee, to the office of Postmaster-General; and his selection of Carl Schurz, a leader of the Liberal Republican Movement of 1872 and an uncertain quantity in politics, as Secretary of the Interior, was scarcely more palatable in some quarters. He created further trouble in Republican ranks by his refusal to accede to the demands of powerful Senators, like Cameron of Pennsylvania and Conkling of New York, for control over patronage in their respective states. No other President for more than a generation had so many nominations rejected by the Senate.

On the side of legislation, Hayes' administration was nearly barren. During his entire term the House of Representatives was Democratic, and during the last two years the Senate was Democratic also by a good margin. Had he desired to carry out a large legislative policy, he could not have done so; but he was not a man of great capacity as an initiator of public policies.He maintained his dignity and self-possession in the midst of the most trying party squabbles; but in a democracy other qualities than these are necessary for effective leadership.

In their desperation, the conservative leaders of the Republican party resolved to have no more "weak and goody-goody" Presidents, incapable of fascinating the populace and keeping it in good humor, and they made a determined effort to secure the renomination of Grant for a third term, in spite of the tradition against it. Conkling captured the New York delegation to the national convention in 1880 for Grant; Cameron swung Pennsylvania into line; and Logan carried off Illinois. Grant's consent to be a candidate was obtained, and Conkling placed his name in nomination in a speech which Senator Hoar describes as one of "very great power."

Strong opposition to Grant developed, however, partly on account of the feeling against the third term, and particularly on account of the antagonism to the Conkling faction which was backing him. Friends of Blaine, then Senator from Maine, and supporters of John Sherman of Ohio, thought that Grant had had enough honors at the hands of the party, and that their turn had come. As a result of a combination of circumstances, Grant never received more than 313 of the 378 votes necessary to nomination at the Republican convention. After prolonged balloting, the deadlock was broken by the nomination of James A. Garfield, of Ohio, as a "dark horse." The Grant contingent from NewYork received a sop in the shape of the nomination of Chester A. Arthur, a politician of the Conkling school, to the office of Vice President.

In spite of the promising signs, the Democrats were unable to defeat the Republicans in 1880. The latter found it possible to heal, at least for campaign purposes, the breaches created by Hayes' administration. It is true that Senator Conkling and the "Stalwart" faction identified with corporation interests were sorely disappointed in their failure to secure the nomination of Grant for a third term, and that Garfield as a "dark horse" did not have a personal following like that of his chief opponents, the Hero of Appomattox, Blaine of Maine, and Sherman of Ohio. But he had the advantage of escaping the bitter factional feeling within the party against each of these leaders. He had risen from humble circumstances, and his managers were able to make great capital out of his youthful labors as a "canal-boat boy." He had served several terms in Congress acceptably; he had been intrusted with a delicate place as a member of the electoral commission that had settled the Hayes-Tilden dispute; and he was at the time of his nomination Senator-elect from Ohio. Though without the high qualities of leadership that distinguished Blaine, Garfield was a decidedly "available" candidate and his candidature was strengthened by the nomination of Arthur, who was acceptable to the Conkling group and the spoilsmen generally.

The Republican fortunes in 1880 were further enhanced by the divisions among the Democrats and their inability to play the game of practical politics. Two setsof delegates appeared at the convention from New York, and the Tammany group headed by "Boss" Kelly was excluded, thus offending a powerful section of the party in that pivotal state. The candidate nominated, General Hancock, was by no means a skilful leader. In fact, he had had no public experience outside of the Army, where he had made a brilliant record, and he showed no ability at all as a campaigner. Finally, the party made its fight principally on the "great fraud of 1876," asking vindication at the hands of the people on the futile theory that the voters would take an interest in punishing a four-year-old crime. In its platform, reported by Mr. Watterson, of Kentucky, it declared that the Democrats had submitted to that outrage because they were convinced that the people would punish the crime in 1880. "This issue precedes and dwarfs every other; it imposes a more sacred duty upon the people of the Union than ever addressed to the conscience of a nation of freemen." Notwithstanding this narrow issue, Hancock fell behind Garfield only about ten thousand votes, although his electoral vote was only 155 to 214 for his opponent.

Whether Garfield would have been able to consolidate his somewhat shattered party by effective leadership is a matter of speculation, for, on July 2, 1881, about four months after his inauguration, he was shot by Charles J. Guiteau, a disappointed and half-crazed office seeker, and he died on September 19. His successor, Vice President Arthur, though a man of considerable ability, who managed his office with more acumen and common honesty than his opponents attributed to him, was unable to clear away the accumulating dissatisfaction withinhis party or convince the country that the party would do its own reforming.

In fact, Arthur, notwithstanding the taint of "spoils" associated with his career, proved to be by no means the easy-going politician that had been expected. He took a firm stand against extravagant appropriations as a means of getting rid of the Treasury surplus, and in 1882 he vetoed a river and harbor appropriation bill which was specially designed to distribute funds among localities on the basis of favoritism. In the same year, he vetoed a Chinese exclusion act as violating the treaty with China, and made recommendations as to changes which were accepted by Congress. Arthur also advocated legislation against the spoils system, and on January 16, 1883, signed the Civil Service law.[24]He recommended a revision of the tariff, including some striking reductions in schedules, but the tariff act of 1883 was even less satisfactory to the public than such measures usually are. Judging by past standards, however, Arthur had a claim upon his party for the nomination in 1884.

But Arthur was not a magnetic leader, and the election of Grover Cleveland as governor of New York in 1882 and Democratic victories elsewhere warned the Republicans that their tenure of power was not indefinite. Circumspection, however, was difficult. A "reform" faction had grown up within the party, protesting against the gross practices of old leaders like Conkling and urging at least more outward signs of propriety. In thisfaction were Senator Hoar of Massachusetts, George William Curtis, Henry Cabot Lodge, and Theodore Roosevelt—the last of whom had just begun his political career with his election to the New York legislature in 1881. Senator Edmunds, of Vermont, was the leader of this group, and his nomination was warmly urged in the Republican convention at Chicago in 1884.

The hopes of the Republican reformers were completely dashed, however, by the nomination of Blaine. This "gentleman from Maine" was a man of brilliant parts and the idol of large sections of the country, particularly the Middle West; but some suspicions concerning his personal integrity were widely entertained, and not without reason, by a group of influential leaders in his party. In 1876, he was charged with having shared in the corruption funds of the Union Pacific Railroad Company, and as Professor Dunning cautiously puts it, "the facts developed put Mr. Blaine under grave suspicion of just that sort of wealth-getting, if nothing worse, which had ruined his colleagues in the Crédit Mobilier." Moreover, Mr. Blaine's associations had been with that wing of his party which had been involved or implicated in one scandal after another. Partly on this account, he had been defeated for nomination in 1876, when he was decidedly the leading aspirant and again in 1880 when he received 285 votes in the convention. But in 1884, leaders like Senator Platt, of New York, declared "it is now Blaine's turn," and he was nominated in spite of a threatened bolt.

The Democrats were fortunate in their selection of Grover Cleveland as their standard bearer. He hadbeen mayor of Buffalo and governor of New York, but he had taken no part in national politics and had the virtue of having few enemies in that field. He was not a man of any large comprehension of the economic problems of his age, but he was in every way acceptable to financiers in New York, for he had showed his indifference to popular demands by vetoing a five-cent fare bill for the New York City elevated roads which were then being watered and manipulated by astute speculators, like Jay Gould. Moreover, Mr. Cleveland possessed certain qualities of straightforwardness and homely honesty which commended him to a nation wearied of scandalous revelations and the malodorous spoils system.

These qualities drew to Cleveland the support of a group of eminent Republicans, like Carl Schurz who had been Secretary of the Interior under Hayes, George William Curtis, the civil service reformer, Henry Ward Beecher, and William Everett, who were nicknamed "Mugwumps" from an Indian word meaning "chief." Although the "reformers" talked a great deal about "purity" in politics, the campaign of 1884 was principally over personalities; and, as a contemporary newspaper put it, it took on the tone of "a pothouse quarrel." There was no real division over issues, as will be seen by a comparison of platforms, and scandalous rumors respecting the morals of the two candidates were freely employed as campaign arguments. Indeed, the spirit of the fray is reflected in the words of the Democratic platform: "The Republican party, so far as principle is concerned, is a reminiscence. In practice, it is an organization for enriching those who control its machinery.The frauds and jobbery which have been brought to light in every department of the government are sufficient to have called for reform within the Republican party; yet those in authority, made reckless by the long possession of power, have succumbed to its corrupting influence and have placed in nomination a ticket against which the independent portion of the party are in open revolt. Therefore a change is demanded." Having enjoyed no opportunities for corruption worthy of mention, except in New York City where they had reaped a good harvest during the sunshine, the Democrats could honestly pose as the party of "purity in politics."

Their demand for a change was approved by the voters, for Cleveland received 219 electoral votes as against 182 cast for Blaine. A closer analysis of the vote, however, shows no landslide to the Democrats, for had New York been shifted to the Republican column, the result would have been 218 for Blaine and 183 for Cleveland. And the Democratic victory in New York was so close that a second count was necessary, upon which it was discovered that the successful candidate had only about eleven hundred votes more than the vanquished Blaine. Taking the country as a whole, the Democrats had a plurality of a little more than twenty thousand votes.

Cleveland's administration was beset by troubles from the beginning. The civil service reformers were early disappointed with his performances, as they might have expected. It is true that the Democratic party had posed in general as the party of "reform," because forsooth having no patronage to dispense nor favorsto grant it could readily make a virtue of necessity; but it is fair to say that the party had in fact been somewhat noncommittal on civil service reform, and Cleveland, though friendly, was hardly to be classed as ardent. The test came soon after his inauguration. More than one hundred thousand Federal offices were in the hands of Republicans; the Senate which had to pass upon the President's chief nominations was Republican and the clash between the two authorities was spectacular. The pressure of Democrats for office was naturally strong, and although the civil service reformers got a few crumbs of comfort, the bald fact stood forth that within two years only about one third of the former officeholders remained. "Of the chief officers," says Professor Dewey, "including the fourth class post-masters, collectors, land officers, numbering about 58,000, over 45,000 were changed. All of the 85 internal revenue collectors were displaced; and of the 111 collectors of customs, 100 were removed or not reappointed."

Cleveland's executive policy was negative rather than positive. He vigorously applied the veto to private pension bills. From the foundation of the government until 1897, it appears that 265 such bills were denied executive approval; and of these five were vetoed by Grant and 260 by Cleveland—nearly all of the latter's negatives being in his first administration. Cleveland also vetoed a general dependent pension bill in 1887 on the ground that it was badly drawn and ill considered. Although his enemies attempted to show that he was hostile to the old soldiers, his vetoes were in fact basedrather upon a careful examination of the merits of the several acts which showed extraordinary carelessness, collusion, and fraud. At all events, the Grand Army Encampment in 1887 refused to pass a resolution of censure. Cleveland also killed the river and harbor bill of 1887 by a pocket veto, and he put his negative on a measure, passed the following year, returning to the treasuries of the northern states nearly all of the direct taxes which they had paid during the Civil War in support of the Federal government.

On the constructive side, Cleveland's first administration was marked by a vigorous land policy under which upwards of 80,000,000 acres of land were recovered from private corporations and persons who had secured their holdings illegally. He was also the first President to treat the labor problem in a special message (1886); and he thus gave official recognition to a new force in politics, although the sole outcome of his recommendations was the futile law of 1888 providing for the voluntary arbitration of disputes between railways and their employees. The really noteworthy measure of his first administration was the interstate commerce law of 1887, but that could hardly be called a partisan achievement.[25]

Holding his place by no overwhelming mandate and having none of those qualities of brilliant leadership which arouse the multitude, Cleveland was unable to intrench his party, and he was forced to surrenderhis office at the end of four years' tenure, although his party showed its confidence by renominating him in 1888. He had a Democratic House during his administration, but he was embarrassed by party divisions there and by a Republican Senate. Under such circumstances, he was able to do little that was striking, and in his message of December, 1887, he determined to set an issue by a vigorous attack on the tariff—a subject which had been treated in a gingerly fashion by both parties since the War. While he disclaimed adherence to the academic theory of free trade as a principle, his language was readily turned by his enemies into an attack on the principle of the protective tariff. Although the performance of the Democrats in the passage of the Mills tariff bill by the House in 1888 showed in fact no strong leanings toward free trade, the Republicans were able to force a campaign on the "American doctrine of protection for labor against the pauper millions of Europe."

On this issue they carried the election of 1888. Passing by Blaine once more, the Republicans selected Benjamin Harrison, of Indiana, a United States Senator, a shrewd lawyer, and a reticent politician. Mr. Wanamaker, a rich Philadelphia merchant, was chosen to raise campaign funds, and he successfully discharged the functions of his office. As he said himself, he addressed the business men of the country in the following language: "How much would you pay for insurance upon your business? If you were confronted by from one to three years of general depression by a change in our revenue and protective measures affecting ourmanufactures, wages, and good times, what would you pay to be insured for a better year?" The appeal was effective and with a full campaign chest and the astute Matthew S. Quay as director of the national committee, the Republicans outwitted the Democrats, winning 233 electors' votes against 168 for Cleveland, although the popular vote for Harrison was slightly under that for his opponent.

Harrison's administration opened auspiciously in many ways. The appointment of Blaine as Secretary of State was a diplomatic move, for undoubtedly Blaine was far more popular with the rank and file of his party than was Harrison. The civil service reformers were placated by the appointment of Theodore Roosevelt as president of the Civil Service Commission, for he was a vigorous champion of reform, who brought the whole question forcibly before the country by his speeches and articles, although it must be said that no very startling gains were made against the spoils system under his administration of the civil service law. It required time to educate the country to the point of supporting the administrative heads in resisting the clamor of the politicians for office.

Harrison's leadership in legislation was not noteworthy. The Republicans were in power in the lower house in 1889 for the first time since 1881, but their majority was so small that it required all of the parliamentary ingenuity which Speaker Reed could command to keep the legislative machine in operation. Nevertheless, several important measures were enacted into law. The McKinley tariff act based upon the doctrineof high protection was passed in 1890. In response to the popular outcry against the trusts, the Sherman anti-trust law was enacted the same year; and the silver party was thrown a sop in the form of the Sherman silver purchase act. The veterans of the Civil War received new recognition in the law of 1890 granting pensions for all disabled soldiers whether their disabilities were incurred in service or not. Negro voters were taken into account by an attempt to get a new "force bill" through Congress, which would insure a "free ballot and a fair count everywhere."

There had been nothing decisive, however, about the Republican victory in 1888, for a few thousand votes in New York changed the day as four years before. Harrison had not proved to be a very popular candidate, and there was nothing particularly brilliant or striking about his administration to enhance his reputation. He was able to secure a renomination in 1892, largely because he controlled so many officeholding delegates to the Republican convention, and there was no other weighty candidate in the field, Blaine being unwilling to make an open fight at the primaries.

In the second contest with Cleveland, Harrison was badly worsted, receiving only 145 electoral votes against 277 cast for the Democratic candidate and 22 for the Populist, Weaver. The campaign was marked by no special incidents, for both Cleveland and Harrison had been found safe and conservative and there was no very sharp division over issues. The tariff, it is true, was vigorously discussed, but Cleveland made it clearthat no general assault would be made on any protected interests. The million votes cast for the Populist candidate, however, was a solemn warning that the old game of party see-saw over personalities could not go on indefinitely. The issues springing from the great economic revolution were emerging, not clearly and sharply, but rather in a vague unrest and discontent with the old parties and their methods.

President Cleveland went into power for the second time on what appeared to be a wave of business prosperity, but those who looked beneath the surface knew that serious financial and industrial difficulties were pending. Federal revenues were declining and a deficit was staring the government in the face at a time when there was, for several reasons, a stringency in the gold market. The Treasury gold reserve was already rapidly diminishing, and Harrison was on the point of selling bonds when the inauguration of Cleveland saved the day for him. Congress was deadlocked on the money question, though called in a special session to grant relief; and Cleveland at length resorted to the sale of bonds under an act of 1875 to procure gold for the Treasury. The first sale was made in January, 1894, and the financiers, to pay for the bonds, drew nearly half of the amount of gold out of the Treasury itself.

The "endless chain" system of selling bonds to get gold for the Treasury, only to have it drawn out immediately, aroused a great hue and cry against the financial interests. In November, 1894, a second sale was made with similar results, and in February, 1895, Cleveland in sheer desperation called in Mr. J. P. Morgan andarranged for the purchase of gold at a fixed price by the issue of bonds, with an understanding that the bankers would do their best to protect the Treasury. To the silver advocates and the Populists this was the climax of "Cleveland's iniquitous career of subserviency to Wall Street," for it seemed to show that the government was powerless before the demands of the financiers. This criticism forced the administration to throw open the issue of January 6, 1896, to the public, and the result was decidedly advantageous to the government—apparently an indictment of Cleveland's policy. Congress in the meantime did nothing to relieve the administration.

While the government was wrestling with the financial problem, the country was in the midst of an industrial crisis. The number of bankruptcies rose with startling rapidity, hundreds of factories were closed, and idle men thronged the streets hunting for work. According to a high authority, Professor D. R. Dewey, "never before had the evil of unemployment been so widespread in the United States." It was so pressing that Jacob Coxey, a business man from Ohio, planned a march of idle men on Washington in 1894 to demand relief at the hands of the government. His "army," as it was called, ended in a fiasco, but it directed the attention of the country to a grave condition of affairs.

Reductions in wages produced severe strikes, one of which—the Pullman strike of Chicago—led to the paralysis of the railways entering Chicago, because the Pullman employees were supported by the American Railway Union. The disorders connected with thestrike—which are now known to have been partially fomented by the companies themselves for the purpose of inducing Federal interference—led President Cleveland to dispatch troops to Chicago, against the ardent protest of Governor Altgeld, who declared that the state of Illinois was able to manage her own affairs without intermeddling from Washington. The president of the union, Mr. E. V. Debs, was thrown into prison for violating a "blanket injunction"[26]issued by the local Federal court, and thus the strike was broken, leaving behind it a legacy of bitterness which has not yet disappeared.

The most important piece of legislation during Cleveland's second administration was the Wilson tariff bill—a measure which was so objectionable to the President that he could not sign it, and it therefore became law without his approval. The only popular feature in it was the income tax provision, which was annulled the following year by the Supreme Court. Having broken with his party on the money question, and having failed to secure a revision of the tariff to suit his ideas, Cleveland retired in 1897, and one of his party members declared that he was "the most cordially hated Democrat in the country."

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