The seventeenth President of the United States, Andrew Johnson, is perhaps an unlikely figure which proponents of free markets would be inclined to consider. Upon assuming the role of Chief Executive after Lincoln’s assassination, Johnson inherited the crony economic arrangements which had developed during the Civil War period, and which would characterize much of the following Gilded Age. Some of this cronyism included centralization of the banking industry with the National Banking Acts, the issuance of unbacked paper currency under the Legal Tender Acts, special privileges to railroads, and various other wartime measures. Yet, one noteworthy episode from Johnson’s tumultuous presidency offers a meaningful (if ultimately unsuccessful) challenge to protectionism and crony capitalism.
On February 22, 1869, President Andrew Johnson vetoed a tariff bill which was geared towards American copper miners. Frank W. Taussig, in his classic Tariff History of the United States, explained how copper mines operating near Lake Superior were expanding their production at the time, which led to reduced prices for copper ore. As copper prices fell, beginning in 1867 and 1868, the owners of the mines came before Congress and requested an increase in protective tariffs to ward off foreign imports of the metal and help artificially boost the sagging prices for the domestic market.
Both houses of Congress were still overwhelmingly led by the Republicans at this time, and they agreed to increase the tariff rates on behalf of the domestic copper mine interests. In the bill which followed, rates on copper ore jumped from the previous rate of 5 percent ad valorem to 3 cents per pound, an increase of 25 to 30 percent. Additionally, the bill doubled rates on ingot copper to five cents per pound from the previous two-and-a-half cents per pound.
When the bill arrived on President Johnson’s desk, he vetoed it and issued a message explaining his reasons. As Taussig documented, the veto message itself was written by David A. Wells—head of the US Revenue Commission and a prominent economist who was interested in the work of European free traders Richard Cobden and Frederic Bastiat. Wells, on behalf of Johnson, explained in the veto message that the proposed tariff increases would shrink federal revenue, owing to the likely decrease in imported copper which would follow the higher tariff rates. He further explained, “While thus impairing the resources of the Government, it imposes an additional tax on an already overburdened people, who should not be further impoverished that monopolies may be fostered and corporations enriched.”
The veto message continued by calling attention to the harm higher tariff rates on copper would have on shipping and the domestic industry of copper smelting. Much of the American copper smelting relied upon cheap ore from places such as Chile, as well as from the burgeoning copper mines near Lake Superior. This industry stood to be greatly hindered if shut out from the foreign raw materials and compelled to pay higher prices for the domestic ores, which the tariffs were inclined to cause.
Wells—writing on behalf of President Johnson—asserted that “the industry which this legislation is designed to encourage is actually less than that which will be destroyed by the passage of this bill.” Furthermore, the veto included strong statements against the type of special interest fervor which characterized the wartime period and would largely define the ensuing decades:
Legislation can neither be wise nor just which seeks the welfare of a single interest at the expense and to the injury of many and varied interests at least equally important and equally deserving the consideration of Congress. Indeed, it is difficult to find any reason which will justify the interference of Government with any legitimate industry, except so far as may be necessary by the requirements of the revenue.
As Johnson (and Wells) viewed the situation, the fact that “certain mining interests upon Lake Superior” were in “a greatly depressed condition” was no excuse to provide them with special favors from the government. As Johnson’s veto declared, the increased tariff on copper was,
...a tax for the exclusive benefit of a single class…imposed upon the consumers of copper throughout the entire country, not warranted by any need of the Government, and the avails of which would not in any degree find their way into the Treasury of the nation.
It followed that,
If the miners of Lake Superior are in a condition of want, it cannot be justly affirmed that the Government should extend charity to them in preference to those of its citizens who in other portions of the country suffer in like manner from destitution.
The 1869 copper tariff bill marked a clear case of special interest legislation via protectionism. The bill stood to benefit domestic copper mining operations by excluding foreign competition, and Andrew Johnson’s veto essentially threw a wrench into the protectionists’ plans. As with much of Johnson’s administration by this point, however, Congress overrode his veto and enacted the law with the necessary votes in both houses. Taussig aptly summarized that by 1869, in the aftermath of his near-miss with impeachment the prior year, “The President was then perhaps the most unpopular man in the country; Congress had got a habit of overriding his vetoes, and the copper bill…became law.”
What followed, as Taussig detailed in his Tariff History, was that the American copper smelting industry declined, as it was unable to source its cheaper, foreign ores as it once did. Although the American copper mines themselves became quite productive, Taussig further noted that, “With the aid of the duty, the mining companies were able to form a combination which fixed the price of copper within the country at a higher price than that ruling abroad.” The productivity of the copper mines would likely have boosted their success regardless, but the protective tariff added artificial help to the mine owners’ prospects.
Even though Andrew Johnson was ultimately unsuccessful in stopping the protectionists in his day, he demonstrated a willingness to oppose them and to provide (with the aid of David A. Wells) a firm position against special interest legislation. His veto message concluded with a rebuke of economic intervention which is still worthy of our consideration, even over 150 years after its writing:
Special or class legislation can not remedy the evils which this bill is designed to meet. They can only be overcome by laws which will effect a wise, honest, and economical administration of the Government, a reestablishment of the specie standard of value, and an early adjustment of our system of State, municipal, and national taxation (especially the latter) upon the fundamental principle that all taxes, whether collected under the internal revenue or under a tariff, shall interfere as little as possible with the productive energies of the people.
