The Dord of Darien

Musings from the Mayor of the Internet

Presidential Rankings #25: William Howard Taft

Jay Ward, creator of Rocky & Bullwinkle
Enthusiasm for a cause sometimes warps judgment.

In the popular recollection, the Progressive Era is dominated by the madness of Theodore Roosevelt and the evil of Woodrow Wilson. Stuck in between them is the forgotten progressive, William Howard Taft — Roosevelt’s protégé, though later disowned. Taft is often regarded as a more conservative interlude in between two bastions of progressivism, but nothing could be farther from the truth; in reality, Taft was, in many ways, far more progressive than either of his better-known contemporaries; he was more aggressive about regulation and trust-busting, for example, and far more willing to meddle in the affairs of foreign countries to serve American interests. Taft was, however, not a warmonger — this may seem odd, considering that Taft was not only Roosevelt’s hand-picked successor but also his Secretary of War, but he alone among the progressives truly appeared to desire peace.

The outcome of the election of 1908 was never really in question. Whatever I may have to say about him, president Roosevelt had been extremely popular among the American people, and he made quite a public spectacle of handing the reins over to Taft; there was no doubt which candidate Roosevelt’s fans should be supporting. Meanwhile, his opponent, Democrat William Jennings Bryan, was deep in the twilight of his political career; he had run (and lost) several presidential campaigns already, and his signature issue, free silver, no longer commanded the interest of the electorate the way it had in the previous century. Bryan won only one state outside the reliably-Democratic south — his own home state of Nebraska — and Taft was swept into the White House in a landslide, with a clear mandate to continue the Republican Party’s befouling of the American economy, and he leapt to it with gusto.

Theodore Roosevelt is known as the great trust-buster, but, in actual fact, William Howard Taft busted far more trusts than his predecessor, bringing more than twice as many suits under the dreadful Sherman Antitrust Act in his single term as Roosevelt had in two. In total, ninety-nine different individuals or companies were charged by the Taft administration with being "monopolistic" or otherwise operating "in restraint of trade," for the purpose, as president Taft put it, of "the suppression of the lawlessness and abuses of power of the great combinations of capital invested in railroads and in industrial enterprises carrying on interstate commerce." To put this into perspective, the actions taken by the Taft administration come down to focusing the power of the great combinations of capital invested in the federal government — a fiercely-protective territorial monopoly — for the express and singular goal of restraining other entities from engaging in trade. The attentive reader also spotted in Taft’s words the invocation of the phrase "interstate commerce," that wonderful, all-purpose phrase that can be invoked to render the monstrously tyrannical act of the government telling a private business what prices it must and must not sell its products at and who it can and cannot do business with into a perfectly ordinary act of no legal dubiousness whatsoever.

President Taft’s trust-bust-mania reached a fever pitch in 1911, with the U.S. Steel case. Having already broken up Standard Oil for its outrageous monopolistic behavior — which resulted in the wholesale price of kerosene falling from thirty cents per gallon to only eight cents — the Taft administration set its sights on Andrew Carnegie’s steel empire, which had produced similar results in its own field. This was a step too far even for Roosevelt, who complained that Taft couldn’t tell the difference between a "good trust" and a "bad trust," a trait I must confess I share with him. The prosecution of U.S. Steel dragged on for a staggering nine years before the Supreme Court ruled in 1920 that the company’s market share, having fallen precipitously during the interim, was no longer so large as to qualify as a trust. This is, of course, a wonderful case of the government winning either way; though the verdict was in favor of U.S. Steel, nine years of expensive litigation and the attendant uncertainty had weakened the company sufficiently that its competitors — most notably Bethlehem Steel, founded by former U.S. Steel president Charles Schwab — were able to overtake it. It’s difficult to see what the average American gained from nine years of expensive legal harassment and the reduced ability of U.S. Steel to compete in the marketplace, but it’s not difficult to find the people who really did benefit: government lawyers and, of course, rival steel companies that were unable or unwilling to match U.S. Steel’s performance.

To president Taft, of course, this all somehow made sense. His goal was to secure "freedom from alarm on the part of those pursuing proper and progressive business methods," which makes the point quite clear: firms that were too good or too productive were to be brought to heel so as to avoid causing "alarm" to politically-connected firms that may have difficulty competing with them. As Taft himself put it in his inaugural address:

It is believed that with the changes to be recommended American business can be assured of that measure of stability and certainty in respect to those things that may be done and those that are prohibited which is essential to the life and growth of all business. Such a plan must include the right of the people to avail themselves of those methods of combining capital and effort deemed necessary to reach the highest degree of economic efficiency, at the same time differentiating between combinations based upon legitimate economic reasons and those formed with the intent of creating monopolies and artificially controlling prices.

It is impossible to see by what means a business firm could "artificially control prices." No market price is any more or less artificial than any other; prices only become "artificial" when someone violently interferes with the normal operation of the market and compels people to exchange on terms they otherwise wouldn’t accept. It should go without saying that neither U.S. Steel nor any of the other companies attacked by the Taft administration were so much as accused of any such behavior — no, this behavior is the exclusive purview of the federal government. Needless to say, president Taft never even considered attempting to break up that monopoly.

The Taft administration sought (and received, though to a lesser extent than the president desired) tariff reductions — this is an odd position coming from a Republican, and, indeed, it caused a great schism in the Republican Party that probably, more than any other action Taft undertook, led to the party split in 1912 and the election of Woodrow Wilson. The Republican Party had historically been the party of high protectionist tariffs, and its 1908 platform had called for "revision" without clearly spelling out what that meant; the platform stated only that

In all tariff legislation the true principle of protection is best maintained by the imposition of such duties as will equal the difference between the cost of production at home and abroad, together with a reasonable profit to American industries. We favor the establishment of maximum and minimum rates to be administered by the President under limitations fixed in the law, the maximum to be available to meet discriminations by foreign countries against American goods entering their markets, and the minimum to represent the normal measure of protection at home; the aim and purpose of the Republican policy being not only to preserve, without excessive duties, that security against foreign competition to which American manufacturers, farmers and producers are entitled, but also to maintain the high standard of living of the wage-earners of this country, who are the most direct beneficiaries of the protective system.

Underneath all the scientific-sounding language, it’s plain to see that there are no definitions provided (or even possible) for most of the terms in this paragraph; the tariff called for in the Republican platform could, and would, be purely arbitrary, set at the whim of the president. This much was likely obvious to the party at large, but they probably were not prepared for Taft’s whims to be in favor of lower tariffs, and indeed no tariffs of any sort on any trade with the Philippines. Protection aside, the federal government was, in 1908, principally funded through tariffs; how did president Taft intend to make up the shortfall? Again, from his inaugural address, he declared that "new kinds of taxation must be adopted, and among these I recommend a graduated inheritance tax as correct in principle and as certain and easy of collection." Setting aside the question of how "correct in principle" an inheritance tax actually is, what did president Taft mean when he described it as "certain and easy of collection?" In a sense, his language here was rather circumspect; Taft strongly favored a graduated income tax, but the Supreme Court had already rejected such a tax once, in the 1895 case Pollock v. Farmers’ Loan and Trust Company, stating:

Taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes.

Taxes on personal property, or on the income of personal property, are likewise direct taxes.

The tax imposed by sections twenty-seven to thirty-seven, inclusive, of the act of 1894, so far as it falls on the income of real estate and of personal property, being a direct tax within the meaning of the Constitution, and therefore unconstitutional and void became not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid.

We’ll leave aside the question of whether or not the court was correct in its reasoning (which is a bit less than obvious, to say the least); correct or not, this ruling was very recent and was not at all unclear, meaning that an income tax simply was not possible as ordinary legislation. An inheritance tax, on the other hand, was quite widely understood to be a variety of excise, and a preëminent example of an indirect tax; the graduated inheritance tax was, thus, the closest thing to a graduated income tax that was going to be possible without a Constitutional amendment. Taft’s scheme sailed through the House, but hung up in the Senate; the Senate voted the Taft proposal down in favor of recommending "to make up the deficit by the imposition of a general income tax, in form and substance of almost exactly the same character as that which in the case of Pollock v. Farmers’ Loan and Trust Company (157 U. S., 429) was held by the Supreme Court to be a direct tax, and therefore not within the power of the Federal Government to impose unless apportioned among the several States according to population." An irritated Taft responded by chastising congress for proposing a bill effectively identical to one already struck down by the Court, claiming that such behavior could call the whole concept of judicial review into disrepute; instead, he called upon congress to propose an amendment to the Constitution "granting to the Federal Government the right to levy and collect an income tax without apportionment among the States according to population." Historians — myself included — are often inclined to blame Woodrow Wilson for the income tax, and, while it surely is true that the sixteenth amendment was not ratified until 1913, when president Wilson was in office, it was William Howard Taft who got the ball rolling to enable this most pernicious of government powers.

Taft wasn’t yet done imposing new schemes of taxation, either. In the very same address in which he called upon congress to create the sixteenth amendment, he also called for "an amendment to the tariff bill imposing upon all corporations and joint stock companies for profit, except national banks (otherwise taxed), savings banks, and building and loan associations, an excise tax measured by 2% on the net income of such corporations." President Taft believed that this would be accepted by the Court as an excise tax rather than a direct income tax because it was "an excise tax upon the privilege of doing business as an artificial entity and of freedom from a general partnership liability enjoyed by those who own the stock;" this sounds like so much sophistry, but it turns out the president was correct: the congress did enact his corporate excise tax (though at a 1% rather than a 2% level), and the Supreme Court did uphold it, ruling in Flint v. Stone Tracy Co. that this was an excise tax on the privilege of doing business, and that the fact that the level of taxation was determined by the income of the business was insufficient to show that it was an income tax; according to the court, the tax was not on the income, it was just relative to the size of the income. One is given to wonder precisely what taxes could fail to meet this "standard."

The modern United States has the highest corporate taxes in the world, and they are all pyramided atop this original tax manufactured by president Taft. Taft also is no innocent party who had no idea what evils the tax code would eventually engender, either. Here are his closing remarks in urging the adoption of a corporate income tax:

Another merit of this tax is the federal supervision which must be exercised in order to make the law effective over the annual accounts and business transactions of all corporations. While the faculty of assuming a corporate form has been of the utmost utility in the business world, it is also true that substantially all of the abuses and all of the evils which have aroused the public to the necessity of reform were made possible by the use of this very faculty. If now, by a perfectly legitimate and effective system of taxation we are incidentally able to possess the Government and the stockholders and the public of the knowledge of the real business transactions and the gains and profits of every corporation in the country, we have made along step toward that supervisory control of corporations which may prevent a further abuse of power.

The first thing that jumps out is that president Taft is hailing the invasive, pervasive, privacy-destroying surveillance the modern tax system has brought into being as not an accidental side effect, but a positive good. The federal government did not, in 1909, have any power to surveil the books of private businesses, which was a major impediment to those who, like president Taft, wanted to privilege those businesses "pursuing proper and progressive business methods" against their competitors; Taft, in a moment of remarkable shrewdness, clearly saw that the tax law could be used to enable the government to get away with invasions of liberty and privacy that it never could have justified otherwise — in the years since, this has become quite a regular feature of the tax law, all the way down to the Lois Lerner scandal. Since president Taft was so keenly attuned to the idea of using tax policy to effect social change, it is perhaps ironic that he promoted his new corporate tax by stating that "the tax on net income is preferable to one proportionate to a percentage of the gross receipts, because it is a tax upon success and not failure;" consider briefly that one of the primary tenets of using taxation as a vehicle for social policy is that one taxes what one wants less of.

While president Taft, much to his credit, was not a warmonger, and he neither sought out nor received any full-blown wars, he should not be misconstrued as a dreaded "isolationist;" far from being isolationist, Taft believed that America had vital interests in foreign countries, and that it was vital to meddle in their affairs. He was not, however, especially interested in Europe; nearly all of president Taft’s attention was spent on South America and Asia. Having served previously as the governor of the Philippines (following the American conquest during the McKinley administration), Taft was keenly interested in the territory, and was a passionate advocate for nearly everything that could be done to improve conditions on the islands or relations between the islands and the United States. Taft also meddled frequently in Chinese affairs, and this eventually led to disastrous consequences.

China, at the dawn of the twentieth century, was being industrialized, though not entirely of its own accord. Many years of de facto western imperial domination had left China itself weak and impoverished, meaning that its industrialization was mainly funded and directed by western powers — typically the British. With the emergence of the United States as a global imperial power following the Spanish-American War, American companies and the United States government itself began to take an interest in the commercial opportunities to be had by industrializing China as well, and began to involve themselves in the crazy mercantilism of the Chinese railroad contracts. The way it worked was quite simple: foreign powers would lend the Chinese government large amounts of money to build railroads. In return, the Chinese government would pledge to buy the materials from the lending country, and also to repay the loan with interest (typically 5%). Specific to this case, Belgium, the United Kingdom, Germany, and France had worked a contract to lend the Chinese government twenty-seven million dollars to construct a railroad between Hankow and Szechuan. The United States wanted a piece of this deal, so the Taft administration sent the Chinese a letter gently insisting that it be included. So a deal was worked out to increase the size of the loan package to thirty million dollars so the United States could become a Chinese creditor too.

Think about that for a moment. To build exactly the same railroad, the government of China agreed to spend an additional three million dollars it didn’t have, and it did so for the express purpose of becoming indebted to yet another foreign power. One can expect that this sends up red flags all over the place, and that’s precisely what happened; before long, the governments of Japan and Russia were also politely insisting on being added to the loan package, with the total amount of the loan continuing to increase for no actual reason whatsoever. Meanwhile, the Chinese people — who had by this point been exploited by these one-sided "deals" for quite a long time — became increasingly agitated, and began to protest the situation, asserting (not unreasonably) that the railroad could be constructed domestically without the dubious "help" of no fewer than seven foreign powers. They also pointed to the Imperial Edict of 1899, which stated that the Chinese would have prior right in the construction of any Chinese railroads, and which was clearly being abrogated by the government’s deal. Still and all, in 1911, the government of China nationalized the railroads and handed them over to the foreign powers, compensating the previous owners only with rapidly-depreciating government bonds, rather than with silver. This would be the final indignity that led to the Xinhai Revolution, the fall of Imperial China, and (eventually) the rise of Mao. While it’s clear that bloodshed was never president Taft’s goal as such, it’s equally clear that his meddlesome policies were not as harmless as he wished to believe.

In South America, the Taft administration was firmly committed to the Monroe Doctrine, though it was apparently also willing to pretend the Roosevelt Corollary never happened; while president Taft never openly repudiated the Roosevelt Corollary, he proceeded according to older traditions, declaring that:

there are expenditures of Government absolutely necessary if our country is to maintain its proper place among the nations of the world, and is to exercise its proper influence in defense of its own trade interests in the maintenance of traditional American policy against the colonization of European monarchies in this hemisphere, and in the promotion of peace and international morality. I refer to the cost of maintaining a proper army, a proper navy, and suitable fortifications upon the mainland of the United States and in its dependencies.

We should have an army so organized and so officered as to be capable in time of emergency, in cooperation with the national militia and under the provisions of a proper national volunteer law, rapidly to expand into a force sufficient to resist all probable invasion from abroad and to furnish a respectable expeditionary force if necessary in the maintenance of our traditional American policy which bears the name of President Monroe.

A bit Trumpian perhaps, no? President Taft was a believer in military strength, but not in aggressive warfare; he wanted a big army and a big navy to show those Europeans that America was not to be messed with, and also, evidently, to show them that Bolivia, Chile, and El Salvador were not to be messed with, per the Monroe Doctrine. Taft attempted the same kind of mercanitilist approach that so successfully destabilized China throughout Latin America, pressuring foreign governments (such as, most notably, Nicaragua) to accept loans from the United States that would be spent buying products from the United States and then paid back with interest. Latin America showed more backbone than China had, however, and the American economic imperialism led chiefly to violent backlash throughout the subcontinent, which often (again, as in the case of Nicaragua) resulted in the Taft administration deploying American troops to "protect American interests" in those countries. President Taft’s commitment to peace, however, was on full display when the government of Mexico collapsed, and the country devolved into civil war. Taft refused to be drawn into the war, stationing troops at the border as a show of force, but actually — and unusually — refusing the send them into combat. Even when violence on the border resulted in the deaths of two Americans in the Arizona Territory, president Taft still refused to pull the trigger, and the world was spared another senseless and destructive Mexican-American War.

The election of 1912 was a losing proposition from the beginning. Taft had alienated much of the Republican base, and the Morgan interests took full advantage of this, dressing Theodore Roosevelt for a third-party run. As expected, the result was a Democratic landslide, as the Republicans in most states were split between Taft and Roosevelt, leaving almost all the electoral votes for Woodrow Wilson. Taft would not fade into obscurity, however, involving himself in the Harding campaign in 1920 in return for what he had always wanted in the first place: a seat on the Supreme Court. Indeed, after some politicking, president Harding acquiesced, and William Howard Taft became Chief Justice of the United States Supreme Court on 11 July 1921, serving on the court until 3 February 1930, becoming at the time (and remaining to this day) the only man to be both president of the United States and Chief Justice of the Supreme Court. Indeed, he remained on the court until he was physically incapable of doing so; his health declined quite rapidly after he left the White House, but he refused to leave the bench due to concerns that "the Bolsheviki" — by which he meant the court’s hard-left wing, and Justice Harlan F. Stone in particular — would take control. He finally stepped down after president Hoover assured him that Justice Charles Evan Hughes, and not Stone, would succeed him; scarcely a month later, on 8 March 1930, William Howard Taft suffered a fatal heart attack at his home in Washington. His last words are lost to history.

President Taft is often wrongly viewed as a conservative; perhaps there is some merit to this if one is looking at his career on the Supreme Court, but, if one considers only his presidency (as we are here), he is a hard-line progressive through and through. As we’ve seen, Taft worked hard (and with great success) to increase federal oversight of business, increase taxes, and increase American involvement in foreign countries, none of which is even remotely conservative. President Taft once described himself as a faithful disciple of Alexander Hamilton and John Marshall, and there’s really nothing for it but to take him at his word: that is exactly what he was, and that is exactly how he governed. This is William Howard Taft’s legacy: the wolf in sheep’s clothing — the man who sold the American people big, powerful government and somehow left them thinking they’d gotten small, weak government.

May 19th, 2016 Posted by | Liberty | no comments