A Patriot's History of the United States: From Columbus's Great Discovery to the War on Terror (104 page)

For several decades, the tariff (and land sales) had provided most of the revenue for running the operations of the government, which was adequate as long as the government remained small. However, tariffs carried tremendous political baggage. They pitted one group of Americans against another, usually by section. Northern manufacturers, who obtained a tariff on manufactured imports, received artificially higher prices for their goods at the expense of all other Americans; southern sugar planters, who obtained a tariff on sugar, could raise prices for all sugar consumers; and so on. While some argued that the tariff burdens balanced out—that in one way or another everyone was hurt, and everyone benefited—each tariff bill focused the debate on specific groups who gained and lost. In this regard, the substitution of income taxes for tariffs “efficiently conserved legislative energies: Life became simpler for Congress [because] the battle against tariffs had always involved direct, urgent, and threatening lobbies.”
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The proposed income tax, on the other hand, only affected a small group of the wealthy.

Proponents also designed the first proposed tax with two features that would reduce resistance to it. The tax rates would be extremely low, even for wealthy groups, and the filing process would be absurdly simple—only a few pages were required for the first income tax. Since people had become convinced that equal taxes meant proportional taxes—which was surely untrue—then the income tax promised to “equalize tax burdens borne by the various classes…and to ensure it was paid by the wealthiest classes.”
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To underscore this fact, the income tax had “little to do with revenue and everything to do with reform.”
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There was one small hurdle—the Constitution. Since income taxes were unconstitutional, imposing the new tax demanded the Sixteenth Amendment, which was ratified in 1913. Reformers gained support using three major strategies: (1) they emphasized the extremely low nature of the tax and the fact that many Americans would pay no tax at all; (2) they stressed its simplicity; and (3) they pointed to the problems and controversies surrounding tariffs. The original tax exempted anyone earning less than $3,000 per year or married couples earning less than $4,000 per year; whereas those earning between $20,000 and $50,000 paid only 2 percent. For the richest of the rich, those earning over $500,000, the top rate was 7 percent. Contrasted with taxes in the twenty-first century, the
state
tax rates alone in many states exceeds the
top rates
exacted by the federal government in 1913. Although some liberal historians claimed that the income tax was a “conservative measure designed to placate the lower classes with a form of pretend punishment of the rich,” it certainly did not help the workingman by any stretch of the imagination. By the year 2000 the average American worked until
May
of every year to pay just his federal taxes; whereas that same American worked only nineteen days to purchase all the food he would eat in a year!
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Income taxes introduced a significant danger to American life, especially through the hidden growth of the federal government. Minor rate changes in the tax would be enacted without any public reaction; then, after World War II, they were deducted directly from workers’ paychecks so that they never saw the damage. Moreover, during an emergency, rate increases became substantial, and even if lowered later, never returned to the preemergency levels. Economist Robert Higgs described this as a “ratchet effect” in which government power grew with each crisis.
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At the end of World War I, the top tax rate would rise by a
factor of ten,
illustrating the grave danger inherent in the structure.

Wilson’s reduction of tariff rates was inconsequential and irrelevant after passage of the income tax. He was a big-government Progressive, and his inclinations were on display in numerous other policies, especially the creation of the Federal Trade Commission, a group appointed by the president to review and investigate business practices. Ostensibly, the FTC was to prevent the formation of monopolistic combinations, using its cease-and-desist orders, augmented by the 1914 Clayton Antitrust Act. A follow-up to the Sherman Antitrust Act, it prohibited interlocking directorates and tying clauses, whereby a producer could tie the sale of a desired product it made to another product the buyer did not particularly want.

Both the FTC and Clayton, in the truest style of Teddy Roosevelt, targeted big business and trusts. Unfortunately, like taxes, the burden of regulations fell on unintended groups, whereas those usually targeted by the regulations and taxes escaped. Such was the case with the Clayton Act. A study of antitrust laws and their effect on overall business activity revealed that the antitrust actions against large firms coincided with business downturns, suggesting that the downturns
resulted
from the attacks on a few large firms.
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(These results were repeated in the 1990s when an antitrust suit against Microsoft sparked a massive sell-off in tech stocks, adding support to the argument that antitrust law had done little to encourage competition and had inflicted substantial damage to the U.S. economy for more than a century.)
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While creation of the Fed and the passage of the income tax amendment characterized Progressivism at home, events in Mexico gave a brief glimpse of Wilson’s vision for Progressivism abroad.

South of the Border

Even before Wilson assumed office, in 1910, Mexico had entered a period of constant chaos. That year the Mexican dictator of thirty-three years, Porfirio Díaz, was overthrown in a coup led by Francisco Madero, ostensibly a democrat. Within three years, however, Madero was in turn unseated by General Victoriano Huerta, who promised a favorable climate for American businesses operating in Mexico. Huerta received support from the U.S. ambassador, Henry Lane Wilson. Aside from the protection of American firms’ operations and personnel, the United States really had little interest in the internal affairs of Mexico.

Taft had expressed a willingness to recognize Huerta, but Huerta’s forces killed Madero just before Wilson took over, whereupon the president stated that he would not recognize “a government of butchers.”
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Wilson’s idealism took over as he openly supported Venustiano Carranza and Francisco (Pancho) Villa, two rebel generals who opposed Huerta. In April 1914 a Mexican officer in Tampico arrested American sailors from the USS
Dolphin
, when they disturbed the public peace on shore leave. When the American naval officers protested, the Mexicans immediately released the sailors, but did not apologize sufficiently to please the admiral.

Wilson saw an opportunity to intervene against Huerta. He dispatched a fleet to Vera Cruz, purportedly to intercept a German vessel delivering munitions to Huerta’s army. Events spun out of control, and American warships shelled the city. Carranza soaked all this in and recognized that an overt alliance with Wilson would taint his regime in the eyes of the Mexican people. From that point on, he continued to buy arms from the U.S. government, but he otherwise kept his distance. When the fighting at Vera Cruz weakened Huerta, Carranza took over in August, then promptly gave the cold shoulder to Wilson’s overtures to assist in forming the new Mexican administration.

Having failed to woo Carranza, Wilson turned to the other revolutionary general, Villa, whose army held much of northern Mexico. By that time, Villa was something of a celebrity in America, gaining notoriety among journalists and filmmakers as the personification of the “new democrat” in Mexico. He was also now Carranza’s enemy, and government troops defeated Villa in April 1915, whereupon the rebel leader lost much of his luster. This victory forced Wilson to reconsider Carranza’s legitimacy. In frustration, he recognized Carranza as the de facto leader of Mexico without offering official recognition, which, in turn, outraged the jilted Villa. Seeing his hopes of running Mexico melt away, Villa launched a series of revenge raids directed at Americans across northern Mexico. He killed eighteen Americans on a train and then crossed the border in 1916 at Columbus, New Mexico, murdering another seventeen U.S. citizens.

The president of Mexico lacked the resources (as well as the will) to pursue Villa in his own territory. Wilson did not. He sent American troops under General John “Black Jack” Pershing on a punitive expedition into Mexico to capture Villa. Entering Mexico in the spring of 1916 with more than 15,000 men, armored cars (one commanded by a young cavalry officer named George Patton), and reconnaissance aircraft, Pershing hunted Villa across more than three hundred miles of Mexican desert. Although Patton’s lead units engaged some of the Villistas, Pershing never truly came close to the main body of Villa’s troops, and he finally informed Wilson that the best course of action would be to occupy all of northern Mexico.

The Pershing invasion revived fears of the “Colossus of the North” again marching on Mexican soil, causing Villa’s forces to grow and turning the bloodthirsty killer into a cult hero in parts of Mexico. And while Carranza certainly wanted Villa dead, he did not intend to let the Yankees simply walk into sovereign Mexican territory. In June 1916, Carranza’s and Pershing’s forces clashed, bringing the two nations to the precipice of war. The president considered Pershing’s recommendation for an American occupation of parts of Mexico, and even drafted a message to Congress outlining the proposed occupation, but then scrapped it.

With the public’s attention increasingly focused on Europe, few people wanted a war with Mexico, especially under such confused circumstances (in which Villa could in no way be viewed as a legitimate agent of the official Mexican government). Given his own culpability in destabilizing the Mexican regime under the guise of promoting democracy, Wilson looked for a graceful exit, agreeing to an international commission to negotiate a settlement. The troops came home from the Mexican desert, just in time to board steamers for France.

The episode was rife with foreign policy and military lessons for those willing to learn. First, American troops had been committed with no reasonable assurance of achieving their mission, nor was there much public support. Second, Wilson had not exhausted—or really even tried—other methods to secure the U.S. border against Villa’s incursions. Third, by arbitrarily and hastily invading Mexico, twice, Wilson turned a natural ally into a wary neighbor. Last, Wilson’s insistence on American-style democracy in a primitive country—without concurrent supervision through occupation, as in post–World War II Japan or Iraq—was fraught with peril. Mexico did not have fully developed property rights or other essential concepts of government. Wilson did learn some of the lessons. The next time he had to send American forces into foreign lands, it would be for unimpeachable reasons.

He Kept Us Out of War

On September 29, 1913, Turkey, Greece, and Bulgaria signed a Treaty of Peace that many saw as an omen for world amity. Yet over the next year, Europe’s diplomats and clear thinkers sank, buried beneath a wave of war mobilizations over which they seemingly had no control.

The June 1914 assassination of Austrian Archduke Franz Ferdinand launched these forces on their course. A Serbian nationalist has been blamed for the assassination, although controversy exists as to whether he was a member of the terrorist Black Hand group. Regardless, Austria, with the full support of Germany, immediately moved to retaliate. Serbia invoked a secret agreement with Russia, mobilizing the Russian army, which in turn prompted a reaction from Germany, then a counterreaction from France, who in turn brought in the British. Within a matter of weeks, the armies of Europe were fully mobilized on enemy borders, trigger fingers itchy, and without any comprehension of why they were going to fight.

Germany’s Schlieffen Plan, however, demanded that Germany not wait for a full-scale Russian mobilization before striking the Allies. On August 3, 1914, German forces crossed the Belgian border, thereby touching off the Great War. Britain, France, and Russia (called the Triple Entente or Allies) soon declared war on Germany and Austria-Hungary (soon known as the Central Powers). Before long a host of second-tier states had been sucked into the war as well, essentially pulling the entire world into the conflict in one form or another—all except the United States.

When German guns opened their barrage against Belgium, Wilson warned Americans against that “deepest, most subtle, most essential breach of neutrality which may spring out of partisanship, out of passionately taking sides.”
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Roosevelt immediately broke with him, arguing that the nation should take the position of a “just man armed,” and he wrote angrily of Wilson’s reluctance to stand up for the wrongs Belgium had suffered. Wilson, instead, implored the nation to be “neutral in fact as well as name.” Already, in January 1915, the Central Powers had launched the world’s first zeppelin attacks against England and had finalized plans to cut off Britain’s lifeline at sea to the United States.

As is often the case, experts on both sides mistakenly foresaw a quick end to the war. British forward observers at Neuve-Chapelle were dumbfounded when their initial probing assault, led by 1,000 men, was entirely obliterated. They had another surprise when, in April 1915, the Germans used poison gas for the first time, choking French African troops who could only cough and point to their throats. The British had barely absorbed the threats posed by gas when, in July, the Germans introduced another horror—the flamethrower.

The news got worse. Seeking an end run to link up with the Russians and come at the Central Powers from the Black Sea, Britain attempted to break through the Dardanelles Strait. Even the powerful Royal Navy could not punch through the defenses of Germany’s allies, the Ottoman Turks. Underestimating the enemy and the geography, the Allies staged a massive invasion of the narrow beaches at Gallipoli at the foot of the Dardanelles. British, Australian, and New Zealand troops were staggered when, rather than running, the Turks stood their ground to repulse attack after attack up bloody hills. Over a nine-month period, British, French, Australians, and New Zealanders lost 48,000 men yet gained nothing. Only then did it begin to dawn on the military minds that the machine gun, combined with trench warfare, barbed wire, and long-range artillery, had made the massed infantry charges of the day utterly useless.