CHAPTER TWENTY-TWO
 “The Square Deal”

• Reform not priority during first years as president, more concerned w/ winning reelection by not alienating conservative Republicans, winning support of businessmen and using patronage—won 1904 election
• First targeted RR industry by asking Congress to increase fed power to oversee rates- Hepburn Railroad Regulation Act of 1906 restored some govt regulatory power
• Supported Congress passing Pure Food and Drug Act, after Upton Sinclair’s 1906 The Jungle supported Meat Inspection Act. Also favored 8 hour work day for labor, workmen’s compensation, and inheritance and income taxes

Roosevelt and Conservation

• Concerned w/ unregulated exploitation of resources and wilderness- used executive power to restrict private development on govt land, saw goal of “conservation” to carefully manage development and to apply same scientific method of management being used in cities
• President supported public reclamation and irrigation projects- 1902 Newlands Act funded dam construction, reservoirs, canals in West to open new lands for irrigation, cultivation and power development

Roosevelt and Preservation

• Pres also sympathized w/ naturalists who wanted to protect land, wildlife from human intrusion- expanded National Forest System for “rational” lumbering, but also grew National Park System to protect lands from any development

The Hetch Hetchy Controversy

• Hetch Hetchy Valley in Yosemite seen as beautiful land by naturalists, but San Francisco residents + Roosevelt’s head of National Forest System Gifford Pinchot wanted land to build dam + reservoir for city’s growing water needs
• Pinchot saw needs of city more important than claims of preservation; issue placed in 1908 referendum, dam approved by large margin in election

The Panic of 1907

• Despite reforms govt still had little control over industrial economy; in 1907 production outgrew domestic + foreign demand, speculation + poor management led to panic.
• JP Morgan pooled assets of NY banks to prop up banks, made deal with Pres to allow US Steel to purchase Tennessee Coal and Iron Company shares
• B/c of Panic of 1907 and promise made in 1904 to step down four years later, did not seek renomination and reelection for 1908 bid

Payne-Aldrich Tariff(Taft)

• Taft called Congress into session to lower protective tariff rates - progressive demand.
• However, made no effort to overcome congressional Old Guard republicans (argued that it would violate separation of powers if he intervened in legislation)
• Resulting tariff (Payne Aldrich) was feeble and barely reduced rates.

Progressives resented Presidents passivity.

Ballinger-Pinchot Debate (Taft)

• Destroyed Taft’s popularity with reformers
• Taft replaced Roosevelt’s secretary of the interior, James R Garfield (aggressive conservationist) with Richard A Balinger (more conservative corporate lawyer)
• Ballinger attempted to invalidate Roosevelt’s removal of 1mil acres of forests and mineral reserves from the public lands available for private development
• Louis Glavis(interior Deparment investigator) charged Ballinger with selling public Alaska land for private profit
• Evident taken to Pinchot who took charges to the president
• Taft said charges were groundless
• Pinchot not satisfied (particularly after Taft fired Glavis)
• Pinchot leaked story to press and asked Congress to investigate
• Taft fired Pinchot and congressional committmente exonerated Ballinger
• Progressives around country supported Pinchot

Election of 1912
Republicans:

• Roosevelt expected that his successor, William Howard Taft, would continue his progressive reforms, but Taft soon alienated Roosevelt’s progressive supporters
• When the Rep convention renominated Taft, Roosevelt formed the new Progressive or Bull Moose Party

Democrats:

• Sensed an opportunity to defeat the divided Reps → nominated NJ’s popular reform governor Woodrow Wilson

1912 election turned into a contest between 2 contrasting legislative programs: Roosevelt’s New Nationalism and Wilson’s New Freedom

• New Nationalism: insisted that America needed a strong federal government to regulate large corporations
• New Freedom: insisted that the federal government needed stronger antitrust laws to break up large corporations into smaller, more competitive units

Wilson won the election with just 42% of the popular vote. However, he did win an overwhelming victory in the electoral college (Wilson: 435; Roosevelt: 88; Taft: 8)

• Wilson became the second Democrat to win the White House since the Civil War

Underwood-SImmons Tariff (1913)
Wilson called a special session of Congress

• Wilson read the message in person rather than by a clerk, which had been the custom since Jefferson’s day
• Tariff Bill passed by the House
• Wilson appealed to the people to demand their Senators to pass the bill

Provisions:

• Substantially reduced the tariff from 37 - 40% (under the Payne-Aldrich Tariff) to 29%
• Enacted a graduated income tax under authority granted by the recently ratified 16th Amendment (landmark provision)
• Rate of 1% on incomes over $4,000
• Rate of 7% on incomes over $500,000
• 1917: the revenue from the income tax exceeded tariff revenues (this gap has widened since then)

Federal Reserve Act (1913)
Legislation under Wilson concerning the nation’s banking system (called the Federal Reserve System)

• The nation’s existing National Banking Act (enacted during the Civil War) showed its weaknesses during the Panic of 1907 with its inflexibility of money
• Reserves were concentrated in NY and a few other large cities
• They couldn’t be mobilized in times of financial stress to areas that were hurting
• The Rep solution: a huge national bank (in effect, a “third Bank of the US”)
• Owned and run by bankers
• Central bank would issue its own currency
• The Dem solution: Pujo Committee
• Committee stated that the money monopolies’ power rested in hidden vaults of US banking & business, esp. Wall Street
• Conservative Dem’s ~ favored a decentralized system privalety owned and controlled, but free from Wall Street

Louis Brandeis: Other People’s Money and How the Bankers Use It (1913)

• Further inspired reform of the banking industry
• Drew heavily on Pujo Committee findings

June 1913: Wilson appeared dramatically for 2nd time in Congress, pushing for a sweeping reform of the banking system

• Endorsed Dem proposals for a decentralized bank in gov’t hands instead of a huge private bank with 15 branches (the Rep idea)

1913: Federal Reserve Act signed into law

• Most significant economic legislation between the Civil War and the New Deal
• Carried US through financial crises of WWI
• Without it, the nation’s progress toward the modern economic age would have been seriously compromised
• Yet it failed in its most central purpose: preventing economic depressions (i.e. the Great Depression occurred less than 20 years later)

Provisions:

• Established a system of 12 regional reserve districts, each with its own district bank
• The regional banks ~ actually bankers’ banks owned by member financial institutions
• Yet, final authority of Federal Reserve Board guaranteed a substantial measure of public control
• Coordinated by a Federal Reserve Board (appointed by the President)
• The “Fed” had the power to raise/lower interest rates and issue paper money
• These financial tools enabled the FRB to control both credit and the supply of money
• Board ~ empowered to issue paper money (“Federal Reserve Notes”)

FTC and Clayton Antitrust Act

• 1914 Wilson began to deal w/ monopoly, Congress passed Federal Trade Commission Act and Clay Antitrust Act
• FTC was regulatory agency to help business determine whether their actions were legal
• Gov had power to prosecute “unfair trade practices” (not defined by law) and investigate corporate behavior
• Significantly increased federal government’s regulatory and supervising power
• Clayton Antitrust Bill to allow break up of trusts weakened by conservative opposition
• Greatly weakened by conservative assaults
• Ultimately administration decided that government supervision and regulation by FTC sufficient

Louis Brandeis

• Wilson supported appointment of progressive Louis Brandeis to Supreme Court; supported measured expanding role of federal govt
• By 1914 Wilson believed the program of New freedom complete - no more need for reform
• Began rejecting progressive legislation
• Election: Democrats begin suffering major losses in the House of Reps (people are returning to Republican party)
• He could no longer rely on divided opposition to win reelection
• By the end of 1915 Wilson supports new reforms to revitalize his popularity
• Wilson supported appointment of progressive Louis Brandeis to Supreme Court
• Brandeis was the first Jew and the most advanced progressive to serve there
• Supported measured expanding role of federal government by
• ie. Supported a measure to make it easier for farmers to receive credit and one creating a system of workers’ compensation for federal employees

1916: Keating-Owen Act

• Regulated child labor
• Prohibited the shipment of goods produced by underage children across state lines
• Greatly expanded importance of Congress regulating interstate commerce
• Struck down by Supreme Court because of interstate commerce clause
• Tried to pass another law to heavily tax goods made by children → struck down by supreme court as well

Foreign Policy

• Roosevelt was an activist when it came to foreign policy.
• Believed in the value of using American power but there was a distinction between civilized and uncivilized power.
• Civilized nations were white, Anglo-Saxon or Teutonic. They produced industrial goods.
• Uncivilized nations were nonwhite, Latin, or Slavic. This countries were suppliers of raw materials and markets.
• This distinction also depended on the economic standing of a country. For example, Japan was considered a civilized nation.
• Civilized nation could intervene to preserve order of stability

TR Russo Japanese War

• 1904 - Japan attacks Russian fleet at Port Arthur in S. Manchuria, China.
• 1905 - Peach conference in Portsmouth, New Hampshire. Roosevelt convinced Russia to recognize Japan territorial gains in the event that Japan stopped fighting. Roosevelt made secret pact with Japanese to ensure US could continue to freely trade.
• 1906 - Roosevelt won Nobel Peace Prize.
• Japan emerges as the powerful naval power in the Pacific and began to challenge US trade.
• Roosevelt sends 16 fleets “Great White Fleet” to regain recognition.

TR Corollary to Monroe Doctrine

• Latin America was US’s special interest. US ‘protected’ it from military control and keep exclusive trading rights.
• Roosevelt established a pattern of US intervention.
• 1802 - Venezuela began to withdraw from it’s debts. Britain, Italy, and Germany sent their Navy to blockade Venezuelan coasts. Rumors that Germany planned to establish a permanent base there unsettled the US.
• 1904 - the Roosevelt Corollary to the Monroe Doctrine
• Roosevelt claimed that US had the right to oppose European intervention in the Western Hemisphere as well as intervene in the domestic affairs of its neighboring countries that were unable to maintain order and national sovereignty.
• 1903 - Revolution in Dominican Republic had ended the corrupt government. However, the new regime was not successful. The US assumed control of Dominican customs and distributing.
• 1902 - political independence in Cuba if government agreed to Platt Amendment which gave the US the right to prevent any foreign power from intruding into new nation.
• 1906 - domestic uprising in Cuba attracted US troops to stop internal fighting.

TR Panama Canal

• Most celebrated accomplishment, linked the Atlantic to the Pacific.
• The French had made earlier attempts at the Isthmus of Panama but had given up.
• John Hay, secretary of state, was sent to negotiate an agreement with Colombian diplomats to allow construction to begin in Panama.
• Tomas Herren signed agreement giving US rights to canal zone in return that US would pay Colombia $10 million.
• When they later demanded $20 million, Roosevelt began to look for ways to circumvent Colombian government. He was supported by Philippe Bunau-Varilla, a engineer.
• November 1903 - finance a revolution in Panama. Roosevelt sent troops from the U.S.S. Nashville in Panama to “maintain order”. The presence of US troops led to success by the revolutionists. Panama was recognized as an independent nation. New government agreed to US terms.
• 1914 - Canal opened.

Taft Dollar Diplomacy
Wilson Mexico
Did Progressive Movement have a class problem?