Part 10

The result was that the central government was reduced to the status of a pleader for money. It had no power to levy taxes directly. It could only appeal to the states to contribute to the expenses of the central government in proportion to the assessed value of their land. As a matter of fact, whenever the central government did ask the states for funds, as likely as not the states simply ignored the request.

In 1781, during the final months of the exhausting revolution and while the outcome still was in doubt, the central government was in need of $9 million for operating expenses. The Congress thought it possible to raise this amount by borrowing $4 million and then asking the states to contribute the additional $5 million. But the states responded to the urgent appeal with only $442,000. North and South Carolina, Georgia and Delaware contributed nothing. At times it seemed that if the British didn’t defeat the Revolution, an empty treasury would.

During and after the American Revolution, the tariff situation was an unholy mess. Each state had its own tariff laws, with the exception of New Jersey, which had none. The states often set up tariff barriers against each other, sometimes for protection and sometimes for reprisal. The dickering amongst them was continual and the maneuvering for advantage fierce.

On one occasion, New York, Connecticut and New Jersey plunged into a three-way fight that to later generations might seem little more than hilarious comedy--but there was nothing comic about it at the time for those involved. It began when the New York legislature reached the conclusion that the Connecticut Yankees and the New Jerseyites were taking too many dollars out of New York City, and giving too little in return.

It was true that Connecticut merchants supplied most of New York’s firewood, for a tidy profit. And the farmers of New Jersey were sending boatloads of chickens, eggs, vegetables and fruit across the river, selling them, and taking back dollars. The imports from Connecticut and New Jersey were running ahead of the exports to these two states by too great a margin--or so the gentlemen in the New York legislature figured. The legislature passed a tariff law which imposed a tax on every stick of Connecticut wood and each New Jersey egg, chicken, duck, goose and cabbage brought into the city. The chicken peddlers from New Jersey had to get clearance papers and pay taxes on each pullet or hen, each basket of eggs and each head of cabbage. Stovewood had to be measured and counted at the Customs House and taxes paid on the spot.

Naturally this state of affairs irked the New Jersey folk, whose legislature promptly looked around for a means of retaliation and, in so doing, spotted the City of New York’s lighthouse standing on Sandy Hook. It was solemnly agreed by a majority that this lighthouse should not stand out there flashing an untaxed warning to ships headed for the New York Harbor. And so the legislature voted to place an $1,800-a-year tax on the lighthouse.

In Connecticut, the merchants were no less aroused than the farmers of New Jersey. It was agreed that a boycott of New York products was justified. Whereupon the merchants formed themselves into an association dedicated to the proposition that no loyal Connecticut merchant would either buy or sell anything in the City of New York. Any member who violated the agreement was subject to a fine.

Again, the British in 1783 decided that only British vessels would be permitted to handle cargoes in the West Indian trade. This proclamation so enraged New Yorkers that they retaliated by laying a double duty on all cargoes arriving in British vessels. New Hampshire, Rhode Island and Massachusetts were equally incensed--and declared that no cargoes could leave their harbors if carried in a British ship.

But these tremors of righteous outrage did not stir the Connecticut Yankees. They saw the situation as holding the promise of fat profits. The ships of Great Britain were invited to use Connecticut ports, duty free. And then Connecticut further enraged its neighbors by imposing a tariff on goods coming into the state from Massachusetts.

Virginia and Maryland also were having their troubles. Virginia owned the lighthouses on both sides of the Chesapeake Bay entrance and demanded fees from every vessel entering the bay. Maryland, on the other hand, claimed the entire width of the Potomac River, citing old land charters to the effect that even if a vessel were tied to the Virginia shore, it still was in Maryland waters.

Connecticut, on the basis of a royal charter of 1662, laid claim to the Wyoming Valley, which Pennsylvania regarded as her own. The two states were on the verge of open war before cool heads prevailed and Pennsylvania’s claim was recognized as the more valid.

With such discord between the states, even in time of war, the winning of the Revolution and the survival of the Union approached the miraculous.

Merchants in Philadelphia and then in Boston decided to follow the lead of the New York merchants. Orders went out to English shippers not to ship more goods to America as long as the Stamp Act was in effect. In this tempest the seeds of revolution were broadcast, and it was a tempest that would not subside until the Colonies had won their freedom from Great Britain.

Despite the jealousies and the conflicts between the Colonies during and after the war, the people realized that only in unity could there be any real hope for survival. This realization moved leaders among the thirteen states to call the Constitutional Convention of 1787. And here it was they hammered out the Constitution which was to become the foundation for the United States of America and a blueprint for freedom.

The Convention met in New York City on May 14, 1787. The delegates chose George Washington as presiding officer of the Convention. The document produced at this convention by no means won the unanimous approval of the representatives from the various states. There were disagreements and reservations to the Constitution. A total of sixty-five qualified delegates were certified by the states to attend the Convention but ten of these did not attend. When the document was completed there were only thirty-nine who actually signed on September 17, 1787. Sixteen failed to sign, and some of those who did sign had reservations. This document was sent by George Washington to Congress, and Congress sent it to the various legislatures for their consideration.

The greatest fear at the time was that a central government would become too powerful. Having thrown off the yoke of one oppressive government, the Colonies wanted no part of another.

Washington reflected these fears when he sent the newly drafted Constitution to Congress. He was sensitive to the fact that the states would have to surrender some rights if they hoped to have an effective central government. In a letter to the president of the Congress, dated September 17, 1787, he said in part:

... It is obviously impractical in the Federal government of these States to secure all rights of independent sovereignty to each, and yet provide for the interest and safety of all. Individuals entering into society must give up a share of liberty to preserve the rest....

The Constitution went into effect on March 4, 1789, and Congress acted with remarkable swiftness on measures which would insure the financial stability of the young government. On April 8, 1789, James Madison arose in the House of Representatives and said:

I take the liberty, Mr. Chairman, at this early state of the business, to introduce to the committee a subject which appears to me to be of the greatest magnitude; a subject, sir, that requires our first attention, and our united exertions....

The deficiency in our treasury has been too notorious to make it necessary for me to animadvert upon that subject. Let us content ourselves with endeavoring to remedy the evil. To do this a national revenue must be obtained; but the system must be such a one, that, while it secures the object of revenue, it shall not be oppressive to our constitutents. Happy it is for us that such a system is within our powers; for I apprehend that both these objects may be obtained from an impost on objects imported to the United States.

After some discussion Madison proposed a resolution to impose a flat fixed duty on rum, liquors, wines, molasses, tea, pepper, sugar, coffee and cocoa, with a percentage tax on all other imported articles, the tax to be based on the value of the imports at their time and place of importation. The resolution also recommended a tonnage tax on all vessels doing business at American ports.

Madison’s resolution touched off a fight between those who favored free trade and those who favored heavy duties to protect the interests of their particular region. There were those who wanted a heavy tonnage tax on vessels so that the American shippers would be given an advantage over foreign vessels. There were those who wanted to protect industries in their own states from the European competition. Congressmen from the agricultural states leaned heavily toward free trade.

Thomas Fitzsimons of Pennsylvania came forward with an amendment to the Madison resolution in which he asked that the duties be placed not only on the imports suggested by Madison but also on beer, ale, porter, beef, pork, butter, candles, cheese, soap, cider, boots, steel, cables, cordage, twine, malt, nails, spikes, tacks, salt, tobacco, snuff, blank books, writing, printing and wrapping paper, pasteboard and cabinet ware, buttons, saddles, gloves, hats, millinery, castings of iron, leather, shoes, slippers, coaches, chariots, carriages, nutmeg, cinnamon, cloves, raisins, figs, currants, and almonds.

Madison argued that his proposal was only a temporary one and that as far as possible the trade should be free. He said, “If my general principle is a good one, the term commerce ought to be free, and labor and industry left at large to find its proper object, the only thing which remains will be to discover the exceptions which did not come within the rule that I have laid down....”

It was Madison’s belief that the cheapness of land in the United States, compared with the cost of land in other nations, gave this country a great advantage in agricultural trade. He said that so far as manufacturing was concerned, “Other countries may and do rival us.” But then he added, “We may be said to have a monopoly in agriculture; the possession of the soil, and the lowness of its price, give us as much a monopoly in this case, as any other nation or other parts of the world have in the monopoly in any article whatever; but with this advantage to us, that it cannot be shared nor injured by rivalship.”

Nevertheless, while favoring free trade, Madison conceded that if America did leave her ports entirely free then the country would suffer. He said, “If America was to leave her ports perfectly free, and make no discrimination between vessels owned by her citizens and those owned by foreigners, while other nations make this discrimination, it is obvious that such policy would go to exclude American shipping altogether from foreign ports, and she would be materially affected in one of the most important interests.”

Despite sharp and often bitter differences, the young Congress was aware that sectional interests were secondary to the absolute necessity for action in collecting revenue. Within a short time it had put together the first Tariff Act. It was titled “An Act for laying a duty on goods, wares and merchandise imported into the United States.” And on July 4, the thirteenth anniversary of the signing of the Declaration of Independence, President Washington signed into law the act which was the second to be passed by the Congress.