CHAPTER VI

The Income Tax Law of 1894

In the debates over tariff reduction, silver, and paper money, evidences of group and class conflicts were almost constantly apparent, but it was not until the enactment of the income tax provision of 1894 that political leaders of national standing frankly avowed a class purpose—the shifting of a portion of the burden of national taxes from the commodities consumed by the poor to the incomes of the rich.

The movement for an income tax found its support especially among the farmers of the West and South and the working classes of the great cities. The demand for it had been appearing for some time in the platforms of the agrarian and labor parties. The National or Greenback party, in its platform of 1884, demanded "a graduated income tax" and "a wise revision of the tariff laws with a view to raising revenues from luxuryrather than necessity." The Anti-monopoly party, in the same year, demanded, "a graduated income tax and a tariff, which is a tax upon the people, that shall be so levied as to bear as lightly as possible upon necessaries. We denounce the present tariff as being largely in the interest of monopolies and demand that it be speedily and radically reformed in the interest of labor instead of capital." The Union Labor convention at Cincinnati in 1888 declared in its platform: "A graduated income tax is the most equitable system of taxation, placing the burden of government upon those who can best afford to pay, instead of laying it upon the farmers and producers and exempting millionaire bondholders and corporations."

In the campaign of 1892, the demand for an income tax was made by the Populist party and by the Socialist Labor party. The former frankly declared war on the rich, proclaiming in its platform that, "The fruits of the toil of millions are boldly stolen to build up colossal fortunes for a few, unprecedented in the history of mankind; and the possessors of these, in turn, despise the republic and endanger liberty." Among the remedies for this dire condition of things the Populists demanded "a graduated income tax." The Democrats, at their convention of that year, denounced the McKinley tariff law "as the culminating atrocity of class legislation," and declared that "The Federal government has no constitutional power to impose and collect tariff duties except for the purpose of revenue only."

When it was discovered in the ensuing election that the Democratic party, with its low tariff pronunciamentowas victorious, and that the Populists with their radical platform had carried four western states and polled more than a million votes, shrewd political observers saw that some revision in the revenue system of the Federal government was imperative. President Cleveland, in his message of December, 1893, in connection with the recommendation for a revision of the tariff, stated that, "the committee ... have wisely embraced in their plans a few additional revenue taxes, including a small tax upon incomes derived from certain corporate investments." It is not clear what committee the President had in mind, and Senator Hill declared that the Ways and Means Committee had not agreed "upon any income tax or other internal taxation"; although it had undoubtedly been considering the subject in connection with the revision of the tariff.

When the tariff bill was introduced in Congress, on December 19, 1893, it contained no provision for an income tax, and it was not until January 29 that an income tax amendment to the Wilson bill was introduced in behalf of the Committee. In defending his amendment, the mover, Mr. McMillin, declared that the purpose of the tax was to place a small per cent of the enormous Federal burden "upon the accumulated wealth of the country instead of placing all upon the consumption of the people." He announced that they did not come there in any spirit of antagonism to wealth, that they did not intend to put an undue embargo upon wealth, but that they did intend to make accumulated wealth pay some share of the expenses of the government. The tariff, in his opinion, taxed want, not wealth.He was impatient with the hue and cry that was raised, "when it is proposed to shift this burden from those who cannot bear it to those who can; to divide it between consumption and wealth; to shift it from the laborer who has nothing but his power to toil and sweat to the man who has a fortune made or inherited." The protective tariff, he added, had made colossal fortunes by levying tribute upon the many for the enrichment of the few; and yet the advocates of an income tax were told that this accumulated wealth was a sacred thing which should go untaxed forever. In announcing this determination to tax the rich, Mr. McMillin disclaimed any intention of waging a class war, by declaring that the income tax, in his opinion, would "diminish the antipathy that now exists between the classes," and sweep away the ground for that "iconoclastic complaint which finds expression in violence and threatens the very foundations upon which our whole institution rests."

The champions of property against this proposal to tax incomes in order to relieve the burden upon consumption summoned every device of oratory and argument to their aid. They ridiculed and denounced, and endeavored to conjure up before Congress horrible visions of want, anarchy, socialism, ruin, and destruction. J. H. Walker, of Massachusetts, declared that, "The income tax takes from the wealth of the thrifty and the enterprising and gives to the shifty and the sluggard." Adams, of Pennsylvania, found the income tax "utterly distasteful in its moral and political aspects, a piece of class legislation, a tax upon the thrifty, and a reward to dishonesty." In the Senate, where there issupposed to be more sobriety, the execrations heaped upon the income tax proposal were marked by even more virulence. Senator Hill declared that, "The professors with their books, the socialists with their schemes, the anarchists with their bombs, are instructing the people of the United States in the organization of society, the doctrines of democracy, and the principles of taxation. No wonder if their preaching can find ears in the White House." In his opinion, also, the income tax was an "insidious and deadly assault upon state rights, state powers, and state independence." Senator Sherman particularly objected to the high exemption, declaring, "In a republic like ours, where all men are equal, this attempt to array the rich against the poor, or the poor against the rich, is socialism, communism, devilism."

In spite of this vigorous opposition, the House passed the provision by a vote of 204 to 140 and the Senate by a vote of 39 to 34. In its final form the law imposed a tax of two per cent on all incomes above $4000—an exemption under which the farmer and the lower middle class escaped almost entirely. Cleveland did not like a general income tax, and he was dissatisfied with the Wilson tariff bill to which the tax measure was attached. He, therefore, allowed it to go into effect without his signature.

Labor Legislation

The only measures directly in the interests of labor generally passed during this period were the Chineseexclusion act, the law creating a labor bureau at Washington, and the prohibition of the importation of alien workingmen under contract. Shortly after the Civil War, protests were heard against cheap Chinese labor, not only in the western states, but also in the East, where manufacturers were beginning to employ coolies to break strikes and crush unions. At length, early in 1882, Congress passed a measure excluding Chinese laborers for a period of twenty years, the Republicans from the eastern districts voting generally against it. President Arthur vetoed the bill, holding in particular that it was a violation of treaty provisions with China, and suggested a limitation of the application of the principle to ten years. This was accepted by Congress, and the law went into force in August of that year. More stringent identification methods were later applied to returning Chinese, and in 1892, the application of the principle of exclusion was further extended for a term of ten years. In 1884, a Federal bureau of labor statistics was created to collect information upon problems of labor and capital. In 1885, Congress passed a law prohibiting the importation of laborers under contract, which was supplemented by later legislation.[33]

[28]See below, p. 123.

[29]The Silver Democrats declared that this demonetization was secretly brought about by a "conspiracy" on the part of gold advocates, and named the act in question "the crime of '73."

[30]See above, p. 167.

[31]National Problems, p. 103.

[32]See below, p. 332.

[33]In 1887, Congress enacted a law providing for counting the electoral vote in presidential elections. This measure grew out of the disputed election of 1876.

Important as was the legislation described in the preceding chapter, there were sources of discontent which it could not, in the nature of things, dry up. With the exception of the income tax, there had been no decisive effort to placate the poorer sections of the population by distinct class legislation. It is true, the alien contract labor law and the Chinese exclusion act were directed particularly to the working class, but their effects were not widely felt.

The accumulation of vast fortunes, many of which were gained either by fraudulent manipulations, or shady transactions within the limits of the law but condemned by elementary morals, and the massing of millions of the proletariat in the great industrial cities were bound in the long run to bring forth political cleavages as deep as the corresponding social cleavage. The domination of the Federal government by the captains of machinery and capital was destined to draw out a counter movement on the part of the small farmers, the middle class, and the laborers. Mutterings of this protest were heard in the seventies; it broke forth in the Populist and Socialist movement in the nineties; it was voiced in the Democratic campaign of 1896; silencedawhile by a wave of imperialism, it began to work a transformation in all parties at the opening of the new century.

This protest found its political expression in the organization of "third" or minor parties. The oldest and most persistent of all these groups is the Prohibitionist party, which held its first national convention at Columbus, Ohio, in 1872, and nominated Mr. Black, of Pennsylvania, as its candidate. In its platform, it declared the suppression of the liquor traffic to be the leading issue, but it also proposed certain currency reforms and the regulation of transportation companies and monopolies.

Although their popular vote in 1872 was less than six thousand, the Prohibitionists returned to their issue at each succeeding campaign with Spartan firmness, but their gains were painfully slow. They reached 9522 in 1876, and 10,305 in 1880. In the campaign of 1884, when many Republicans were dissatisfied with the nomination of Blaine, and unwilling to follow Curtis and Schurz into the Democratic camp, the Prohibition vote rose to 150,369. A further gain of nearly one hundred thousand votes in the next election, to which a slight addition was made in 1892, encouraged the Prohibitionists to hope that the longed-for "split" had come, and they frightened the Republican politicians into considering concessions, especially in the states where the temperance party held the balance of power. In fact, in their platform of 1892 the Republicans announced in a noncommittal fashion that theysympathized with "all wise and legitimate efforts to lessen and prevent the evils of intemperance and promote morality." The scare was unwarranted, however, for the Prohibition party had about reached its high-water mark. Being founded principally on one moral issue and making no appeal to any fundamental economic divisions, it could not make headway against the more significant social issues, and its strength was further reduced by the growth of state and local prohibition.

Almost immediately after the Civil War, labor entered politics in a small way on its own account. In 1872, a party known as the "Labor Reformers" held a national convention at Columbus which was attended by delegates from seventeen states. It declared in favor of restricting the sale of public lands to homesteaders, Chinese exclusion, an eight-hour day in government employments, civil service reform, one term for each President, regulation of railway and telegraph rates, and the subjection of the military to the civil authorities. The party nominated Justice Davis, who had been appointed to the Supreme Court of the United States by Lincoln and had shown Populist leanings immediately after the War; but Mr. Davis declined to serve, and O'Connor of New York, to whom the place was then tendered, only polled about 29,000 votes.

This early labor party was simply a party of mild protest. It originated in Massachusetts, where there had been a number of serious labor disputes and a certain shoe manufacturer had imported a carload of Chinese to operate his machinery. Although Wendell Phillips,who had declared the emancipation of labor to be the next great issue after the emancipation of slaves, was prominently identified with it and stood next to Justice Davis on the first poll in the convention, the party as a whole manifested no tendency to open a distinct class struggle, and the leading planks of its program were shortly accepted by both of the old parties.

Standing upon such a temporary platform, and unsupported by any general philosophy of politics, the labor reform party inevitably went to pieces. Its dissolution was facilitated by the rise of an agrarian party, the Greenbackers, who, in their platform of 1880, were more specific and even more extensive in their declaration of labor's rights than the "Reformers" themselves had been. It was not until 1888 that another "labor" group appeared, but since that date there has been one or more parties making a distinct appeal to the working class. In that year, there were two "labor" factions, the Union Labor party and the United Labor party. Both groups came out for the public ownership of the means of transportation and communication and a code of enlightened labor legislation. The former advocated the limitation of land ownership and the latter the application of the single tax. Both agreed in denouncing the "Democratic and Republican parties as hopelessly and shamelessly corrupt, and, by reason of their affiliation with monopolies, equally unworthy of the suffrages of those who do not live upon public plunder." The vote of both groups in the ensuing election was slightly over 150,000.

The labor groups which had broken with the oldparties took a more definite step toward socialism in 1892, when they frankly assumed the name of the Socialist Labor party[34]and put forward a declaration in favor of the public ownership of utilities and a general system of protective labor legislation. Although the socialism of Karl Marx had by this time won a wide influence among the working classes of Europe, there are few if any traces of it in the Socialist Labor platform of 1892. That platform says nothing about the inevitable contest between labor and capitalism, or about the complete public ownership of all the means of transportation and production. On the contrary, it confines its statements to concrete propositions, including the political reforms of the initiative, referendum, and recall, all of which have since been advocated by leaders in the old parties. The small vote received in 1892 by the socialistic candidate, 21,532, is no evidence of the strength of the labor protest, for the Populist party in that year included in its program substantially the same principles and made a distinct appeal to the working class, as well as to the farmers.

Indeed, the discontent of the two decades from 1876 to 1896 was confined principally to the small farmers, who waged, in fact, a class war upon capitalists and financiers, although they nowhere formulated it into a philosophy. They chose to rely upon the inflation of the currency as their chief weapon of offense. A precursor to the agrarian movement in politics is to be found in the "Granger Movement," which began with the formation of anassociation known as the "Patrons of Husbandry" in 1867. This society, which organized local lodges on a secret basis and admitted both men and women, was originally designed to promote agricultural interests in a general and social way, and its political implications were not at first apparent. It naturally appealed, however, to the most active and socially minded farmers, and its leaders soon became involved in politics.

The sources of agrarian discontent were obvious. During the War, prices had been high and thousands of farm "hands" and mechanics had become land owners, thanks to the homestead laws enacted by the Republican party; but they had little capital to start with, and their property was heavily mortgaged. When the inflated War prices collapsed, they found themselves compelled to pay interest at the old rate, and they figured it out that capitalists and bondholders were the chief beneficiaries of the Federal financial legislation. In spite of all that had been paid on the national and private debts, the amount still due, they reckoned, measured in the products of toil, wheat and corn, was greater than ever. They, therefore, hit on the conclusion that the chief source of trouble was in the contraction of the currency which reduced the money value of their products. The remedy obviously was inflation in some form.[35]

While the currency thus became the chief agrarian issue, the farmers attributed a part of their troubles to the railway companies whose heavily "watered" capital made high freight rates necessary, and whosediscriminations in charges fell as heavy burdens on shippers outside of the zones of competition. The agrarians, therefore, resorted to railway legislation in their respective states—the regulation of rates and charges for transportation and the conditions under which grain should be warehoused and handled. In Illinois, Iowa, Wisconsin, and other states, the law makers yielded to the pressure of the farmers for this kind of legislative relief, and based their legal contentions on the ground that the railways "partook of the nature of public highways." The Grangers were strengthened in their convictions by the violence of the opposition offered on the part of the railways to the establishment of rates and charges by public authority, and by their constant appeals to the courts for relief.[36]

Of course, the fixing of flat rates without any inquiry into the cost of specific services was open to grave objections; but the opposition of the companies was generally based on the contention that they had a right to run their business in their own way. The spirit of this opposition is reflected in an editorial published in theNation, of New York, in January, 1875: "We maintain that the principle of such legislation is either confiscation, or, if another phrase be more agreeable, the change of railroads from pieces of private property, owned and managed for the benefit of those who have invested their money in them, into eleemosynary or charitable corporations, managed for the benefit of a particular class of applicants for outdoor relief—the farmers. If, in the era of progress to which the farmers'movement proposes to introduce us, we are going back to a condition of society in which the only sort of property which we can call our own is that which we can make our own by physical possession, it is certainly important to every one to know it, and the only body which can really tell us is the Supreme Court at Washington."

Not content with their achievements in the state legislatures, the agrarians entered national politics in 1876 in the form of the Independent National or Greenback party, designed to "stop the present suicidal and destructive policy of contraction." They declared their belief that "a United States note, issued directly by the government and convertible on demand into United States obligations, bearing a rate of interest not exceeding one cent a day on each one hundred dollars and exchangeable for United States notes at par, will afford the best circulating medium ever devised." In spite of the small vote polled by their standard bearer, Peter Cooper, of New York, they put forward a candidate in the next campaign[37]and made a third attempt in 1884, growing more and more radical in tone. In their last year, they declared: "Never in our history have the banks, the land-grant railroads, and other monopolies been more insolent in their demands for further privileges—still more class legislation. In this emergency the dominant parties are arrayed against the people and are the abject tools of the corporate monopolies." The Greenbackers demanded, inaddition to currency reform, the regulation of interstate commerce, a graduated income tax, labor legislation, prohibition of importation of contract laborers, and the reduction of the terms of United States Senators. Although their candidate, B. F. Butler, polled 175,000 votes in 1884, the Greenbackers gave up the contest, and in 1888 yielded their place to the Union Labor party.

The agrarian interest was, however, still the chief source of conscious discontent, and the disappearance of the Greenbackers was shortly followed by the establishment of two societies, the National Farmers' Alliance and Industrial Union and the National Farmers' Alliance, the former strong in the South and West, and the latter in the North. In 1890, these orders claimed over three million members, and in several of the southern states they had dominated or split the Democratic party. The Northern Alliance was likewise busy with politics, and in Kansas and Nebraska, by independence or fusion, carried a large number of legislative districts.

Although professing to be non-political in the beginning, the leaders of these alliances called a national convention at Omaha in 1892 and put forth the most radical platform that had yet appeared in American politics. It declared that the newspapers were subsidized, corruption dominated the ballot box, homes were covered with mortgages, labor was impoverished and tyrannized over by a hireling standing army, and the nation stood on the verge of ruin. "The fruits of the toils of millions," runs the platform, "are boldly stolen to build up colossal fortunes for a few, unprecedentedin the history of mankind; and the possessors of these in turn despise the republic and endanger liberty. From the same prolific womb of governmental injustice we breed two classes of tramps and millionaires." Their demands included the free coinage of silver, a graduated income tax, postal-savings banks, government ownership of railways, telegraph and telephones; they declared their sympathy with organized labor in its warfare for better conditions and its struggle against "Pinkerton hirelings"; and they commended the initiative, referendum, and popular election of United States Senators. On this program, the Populists polled over a million votes and captured twenty-two presidential electors. Evidently the indifference of the old parties to such issues could not remain undisturbed much longer.

Fuel was added to the discontent in the spring of 1895, when the Supreme Court declared null and void the income tax law of the previous year.[38]The opponents of the tax, having lost in the Congress, made their last stand in the highest Federal tribunal, and marshaled on their side an array of legal talent seldom seen in an action at law, including Senator Edmunds, Mr. Joseph H. Choate, and other attorneys prominently identified with railway and corporation litigation. No effort was spared in bringing pressure to bear on the Court, and no arguments, legal, political, and social, were neglected in the attempt to impress upon the Court the importance of stopping Populism by a judicial pronunciamento. Conservative New York papers, like theHerald, boldly prophesied in the summer of 1894 that "the income tax will be blotted from the statute books before the people are cursed with its inquisitorial enforcement."

No easy victory lay before the opponents of the income tax, for the law seemed to be against them. In 1870, the Supreme Court had upheld the Civil War income tax without a dissenting voice, and had distinctly said: "Our conclusions are that direct taxes, within the meaning of the Constitution, are only capitation taxes as expressed in that instrument and taxes on real estate, and that the tax of which the plaintiff in error complains [the income tax] is within the category of an excise or duty." Of course, the terms of the new law were not identical with those of the Civil War measure, and the Supreme Court had been known to reverse itself.

The attorneys against the tax left no stone unturned. As Professor Seligman remarks, "Some of the important financial interests now engaged a notable array of eminent counsel to essay the arduous task of persuading the Supreme Court that it might declare the income tax a direct tax without reversing its previous decisions. The effort was made with the most astonishing degree of ability and ingenuity, and the briefs and arguments of the opposing counsel fill several large volumes.... The counsel's arguments abound in historical errors and economic inaccuracies.... Errors and misstatements which might be multiplied pale into insignificance compared with the misinterpretation put upon the origin and purpose of the direct-tax clause—a misinterpretation which like most of the preceding mistakeswas bodily adopted by the majority of the Court, who evidently found no time for an independent investigation of the subject." Having exhausted their ingenuity in the matter of technicalities and imposing historical and economic and legal arguments, the counsel appealed to every class fear and prejudice that might be entertained by the Court.

The introduction of the passions of a social conflict into what purported to be a legal contest was intrusted to Mr. Choate. He threatened the Court with the declaration that if it approved the law, and "the communistic march" went on, a still higher exemption of $20,000 might be made and a rate of 20 per cent imposed—a highly important statement, but one that had no connection with the question whether an income tax was a direct tax. "There is protection now or never," he exclaimed. The very keystone of civilization, he continued, was the preservation of the rights of private property, and this fundamental principle was scattered to the winds by the champions of the tax. Mr. Choate concluded by warning the Court not to pay any attention to the popular passions enlisted on the side of the law, and urged it not to hesitate in declaring the law unconstitutional, "no matter what the threatened consequences of popular or populistic wrath may be."

The Court was evidently moved by the declamation of Mr. Choate, for Justice Field, in his opinion, replied in kind. "The present assault upon capital," he said, "is but the beginning. It will be but the stepping stone to others larger and more sweeping till our political conditions will become a war of the poor against therich; a war growing in intensity and bitterness." If such a law were upheld, he gravely announced, boards of walking delegates would be fixing tax rates in the near future. Mr. Justice Harlan, in his dissenting opinion, however, replied in behalf of the populace by saying: "The practical effect of the decision to-day is to give certain kinds of property a position of favoritism and advantage inconsistent with the fundamental principles of our social organization, and to invest them with power and influence that may be perilous to that portion of the American people upon whom rests the larger part of the burdens of government and who ought not to be subjected to the dominion of aggregated wealth any more than the property of the country should be at the mercy of the lawless."

At the best, the nullification of the income tax law was not an easy task. There were eight justices on the bench when the decision of the Court was handed down on April 8, 1895. All of them agreed that the law was unconstitutional in so far as it laid a tax on revenues derived from state and municipal bonds; five of them agreed that a tax on rent or income from land was a direct tax and hence unconstitutional unless apportioned among the states on the basis of population—which was obviously impolitic; and the Court stood four to four on the important point as to the constitutionality of taxes on incomes derived from mortgages, interest, and personal property generally. The decision of the Court was thus inconclusive on the only point that interested capitalists particularly, and it was so regarded by the Eastern press.

On April 9, the day following the decision of the Court, the New YorkSundeclared: "Twice in great national crises the Supreme Court of the United States has failed to meet the expectations of the people or to justify its existence as the ultimate tribunal of right and law. In both instances the potent consideration has been neither right nor law, but the supposed demands of political expediency.... Yesterday the failure of the Supreme Court to decide the main question of constitutionality submitted to it was brought about by political considerations. It was not Democracy against Republicanism as before, but Populism and Clevelandism against Democracy, and the vote was four to four." TheTribune, on April 10, declared that "the Court reached a finding which is as near an abdication of its power to interpret the Constitution and a confession of its unfitness for that duty as anything well can be."

In view of the unsatisfactory condition created by its decision, the Court consented to a rehearing, and, on May 20, 1895, added its opinion that the tax on incomes from personal property was also a direct tax, thus bringing the whole law to the ground by a vote of five to four. Justice Jackson, who was ill when the first decision was made, had in the meantime returned to the bench, and he was strongly in favor of declaring the law constitutional. Had the Court stood as before, the personal property income tax would have been upheld, but one Justice, who had sustained this particular provision in the first case, was induced to change his views and vote against it on the final count. Thus by a narrow vote of five to four, brought about by a Justicewho changed his mind within the period of a few days, all of the essential parts of the income tax law were declared null and void.

The temper of the country over the affair was well manifested in the press comments on the last decision. The New YorkSun, which had roundly denounced the Court in the first instance, now joined in a chorus of praise: "In a hundred years the Supreme Court of the United States has not rendered a decision more important in its immediate effect or reaching further in its consequences than that which theSunrecords this morning. There is life left in the institutions which the founders of this republic devised and constructed. There is a safe future for the national system under which we were all born and have lived and prospered according to individual capacity. The wave of socialistic revolution has gone far, but it breaks at the foot of the ultimate bulwark set up for protection of our liberties. Five to four, the court stands like a rock."

TheTribune, on May 24, added: "The more the people study the influences behind this attempt to bring about a communistic revolution in modes of taxation, the more clearly they will realize that it was an essential part of the distinctly un-American and unpatriotic attempt to destroy the American policy of defense for home industries, in the interest of foreigners.... Thanks to the Court, our government is not to be dragged into communistic warfare against rights of property and the rewards of industry while the Constitution of its founders remains a bulwark of the rights of states and of individual citizens."

The New YorkWorld, on the other hand, which had so stoutly championed the tax in behalf of "the masses," represented the decision of the Court as "the triumph of selfishness over patriotism. It is another victory of greed over need. Great and rich corporations, by hiring the ablest lawyers in the land and fighting against a petty tax upon superfluity as other men have fought for their liberties and their lives, have secured the exemption of wealth from paying its just share towards the support of the government that protects it.... The people at large will bow to this decision as they habitually do to all the decrees of their highest courts. But they will not accept law as justice. No dictum or decision of any wrong can make wrong right, and it is not right that the entire cost of the Federal government shall rest upon consumption.... Equity demands that citizens shall contribute to the support of the government with some regard to benefits received and ability to pay."

Although the conservative elements saw in the annulment of the income tax nothing but a wise and timely exercise of judicial authority in defense of the Constitution and sound policy, the radical elements regarded it as an evidence "that the judicial branch of the government was under the control of the same interests that had mutilated the Wilson tariff bill in the Senate." The local Federal courts augmented this popular feeling by frequently issuing injunctions ordering workingmen in time of strikes not to interfere with their employers' business, thus crippling them in the coercion ofemployers, by imprisoning without jury trial those who disobeyed judicial orders.

Although the injunction was an ancient legal device, it was not until after the Civil War that it was developed into a powerful instrument in industrial disputes; and it became particularly effective in the hands of Federal judges. They were not popularly elected, but were appointed by the President and the Senate (where corporate influences were ably represented). Under the provisions of the law giving Federal courts jurisdiction in cases involving citizens of different states, they were called upon to intervene with increasing frequency in industrial disputes, for railway and other corporations usually did business in several states, and they could generally invoke Federal protection by showing that they were "non-residents" of the particular states in which strikes were being waged. Moreover, strikers who interfered with interstate commerce were likely to collide with Federal authorities whose aid was invited by the employers affected. Whenever a corporation was in bankruptcy, control over its business fell into the hands of the Federal courts.

The effectiveness of Federal judicial intervention in labor troubles became apparent in the first great strikes of the seventies, when the state authorities proved unable to restrain rioting and disorder by the use of the local militia. During the railway war of 1877 a Federal judge in southern Illinois ordered the workingmen not to interfere with a railway for which he had appointed a receiver, and he then employed Federal troops under the United States marshal to execute his mandate.About the same time other Federal judges intervened effectively in industrial disputes by the liberal use of the injunction, and the president of the Pennsylvania Railroad Company pointed out in an article published in theNorth American Reviewfor September, 1877, how much more potent Federal authority was in such trying crises to give railway corporations efficient protection.

From that time forward the injunction was steadily employed by Federal and state courts, but it was not until the great railway strike of 1894 in Chicago that it was brought prominently before the country as a distinct political issue. In that strike, the Democratic governor, Mr. Altgeld, believing that the employers had fomented disorder for the purpose of invoking Federal intervention (as was afterward pretty conclusively shown), refused to employ the state militia speedily and effectively, contending that the presence of troops would only make matters worse. The postal authorities, influenced by a variety of motives, of which, it was alleged, a desire to break the strike was one, secured prompt Federal intervention on the part of President Cleveland and the use of Federal troops. Thus the labor unions were quickly checkmated.

This action on the part of President Cleveland was supplemented in July, 1894, by a general blanket injunction issued from the Federal district court in Chicago to all persons concerned, ordering them not to interfere with the transmission of the mails or with interstate commerce in any form. Mr. Debs, president of the American Railway Union, who was directing the strikewhich was tying up interstate commerce, was arrested, fined, and imprisoned for refusing to obey this injunction. Mr. Debs, thereupon, through his counsel, claimed the right to jury trial, asserting that the court could not impose a penalty which was not provided by statute, but which depended solely upon the will of the judge. On appeal, the Supreme Court of the United States upheld the lower court and declared that imprisonment for contempt of court did not violate the principle of jury trial.

It was not merely labor leaders who were stirred to wrath by this development in judicial authority. Many eminent lawyers saw in it an attack upon the ancient safeguards of the law which provided for regular proceedings, indictment, the hearing of witnesses, jury trial, and the imposition of only such punishments as could be clearly ascertained in advance. On the other hand others held it to be nothing new at all, but simply the application of the old principle that injunctions could issue in cases where irreparable injury might otherwise ensue. They pointed out that its effectiveness depended upon speedy application, and that the delays usually incident to regular judicial procedure would destroy its usefulness altogether. To workingmen it appeared to be chiefly an instrument for imprisoning their leaders and breaking strikes by the prevention of coercion, peaceful or otherwise. At all events, the decision of the Supreme Court upholding the practice and its doctrines added to the bitterness engendered by the income tax decision—a bitterness manifested at the Democratic convention at Chicago the following year.

The crowning cause of immediate discontent was the financial policy pursued by President Cleveland,[39]which stirred the wrath of the agrarians already agitated over inflation, and gave definiteness to an issue on which both parties had been judiciously ambiguous in their platforms in 1892. The farmers pointed out that, notwithstanding the increased output of corn, the total amount of money received in return was millions less than it had been in the early eighties. They emphasized the fact that more than half of the taxable acreage of Kansas and Nebraska was mortgaged, and that many other western states were nearly as badly off. The falling prices and their inability to meet their indebtedness they attributed to the demonetization of silver and the steady enhancement of gold.

For the disease, as they diagnosed it, they had a remedy. The government, they said, had been generous to Wall Street and financial interests at large by selling bonds at rates which made great fortunes for the narrow group of purchasers, and by distributing its deposits among the banks in need of assistance. The power of the government could also be used for the benefit of another class—namely, themselves. Gold should be brought down and the currency extended by the free coinage of silver on a basis of sixteen to one. The value of crops, when measured in money, would thus mount upwards, and it would be easier to pay the interest on mortgages and discharge their indebtedness. Furthermore, while the government was in the business of accommodating the public it might loan money to thefarmers at a low rate of interest.[40]But the inflation of the currency and the increase of prices of farm products by the free coinage of silver were the leading demands of the discontented agrarians—an old remedy for an old disease.

[34]See below, p. 296.

[35]See above, p. 121.

[36]See above, pp. 67 ff.

[37]They polled about a million votes in the congressional elections of 1878.

[38]See above, p. 137.

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