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Rh supported the McKinley Tariff Act in spite of the wave of opposition shown in the elections of 1890. But, fearing party divisions, they, like the Democrats, made an ambiguous declaration on the currency. The result of the election of 1892 was to

return the Democrats under Cleveland to power by a plurality of over 380,000 and an electoral plurality of 132. Congress in both branches was to be Democratic in 1893, and the way was open for the first time in a generation for that party to carry out a policy unchecked by any legislative or executive branch of government.

366. But before Cleveland was fairly started in his second administration the disastrous panic of 1893 swept the nation,

nor did prosperity return during the four years that followed. The panic is not, directly at least, to be traced to the silver purchases, but was the result of various causes, including the agricultural depression, farm mortgages, reckless railway financiering and unsound banking in the United States, as well as to Argentine and European financial troubles. The panic began in the spring with the failure of the Reading railway (which had undertaken the acquisition of coal land and an extension of activity beyond its resources) and the collapse of the National Cordage Company, one of the numerous examples of reckless trust financiering into which large banks had also been drawn. Clearing-house certificates were resorted to by the New York banks in June, followed in August by partial suspension of specie payments. Currency remained at a premium for a month; deposits in national banks shrank enormously; national bank loans contracted more than 14.7%; failures were common; 22,000 m. of railways were under receiverships, and construction almost ceased. The interruption to business is indicated by the decline of iron production by one-fourth.

367. The panic of 1893 was in many ways a turning-point in American history. It focused attention upon monetary questions, prostrated the silver-mining states, embittered the already discontented farming regions of the West, produced an industrial chaos out of which the stronger economic interests emerged with increased power by the absorption of embarrassed companies, and was accompanied by renewed labour troubles. Most noteworthy of these was the Pullman Car Company strike near Chicago in 1894, which led to sympathetic strikes by the American Railway Union, extending over twenty-seven states and Territories from Cincinnati to San Francisco. Mobs

of the worst classes of Chicago burned and looted cars. The refusal of Governor John P. Altgeld of Illinois to call out the militia, and the interference with the United States mails, led President Cleveland to order Federal troops to the scene, on the constitutional ground that they were necessary to prevent interference with interstate commerce and the postal service and to enforce the processes of the Federal courts. The latter issued a sweeping injunction requiring that the members of the American Railway Union or other persons desist from interference with the business of the railways concerned. The president of the striking organization, Eugene V. Debs, was imprisoned for contempt of court and conspiracy.

368. The most immediate political effect of the panic was upon the silver issue. Soon after the outbreak of the financial crisis, the gold reserve, which protected the greenbacks and the treasury notes issued under the Silver Purchase Act, shrank ominously, while foreigners returned their American securities instead of sending gold. To sell bonds in order to replenish the gold reserve, and to repeal the Silver Purchase Act without substituting free coinage, would aggravate western discontent and turn away the promise of recruits to the Democratic party from the Populists of the prairie and silver-mining states; to carry out the Democratic platform by a tariff for revenue only while mills were shutting down would be hazardous in

the East. The fruits of victory were turning to ashes; but Cleveland summoned a special session of Congress for August, while the panic was acute, and asked his party to repeal the Silver Purchase Act without accompanying the repeal with provisions for silver.

Not until the last of October 1893 was repeal carried, by a vote in which the friends of repeal in the House were about equally divided between Democrats and Republicans, and nearly two-thirds of its opponents Democrats.

369. By this time the surplus had disappeared and the gold reserve was drawn upon for ordinary expenses. Early in 1894 the administration, failing to secure legislation from Congress to authorize the sale of gold bonds on favourable terms to protect the reserve, sold under the Resumption Act of 1875 $50,000,000 5% bonds, redeemable in ten years. Part of this very gold, however, was withdrawn from the reserve by the presentation of legal tender notes for redemption, and the “endless chain” continued this operation to the verge of extinguishing the reserve, so that another loan of $50,000,000 in 1894 was followed in 1895 by a dramatic meeting between Cleveland and some of his cabinet with the important Wall Street banker, J. Pierpont Morgan, who agreed on behalf of his syndicate to sell the government $65,166,000 of gold for $62,315,000 of bonds, equivalent to 4% bonds for thirty years at a price of 104. In return the syndicate agreed to use its influence to protect the withdrawals of gold from the treasury. These securities were over-subscribed when offered to the public at 112¼. President Cleveland had protected the treasury and sustained the parity of gold and silver, but at the cost of disrupting his party, which steadfastly refused to authorize gold bonds. Again, in the beginning of 1896, the treasury was forced to sell bonds, but this time it dealt directly with the public and easily placed $100,000,000 in bonds at about 111, affording a rate of interest about equal to 3.4%.

370. Before the political harvest of the monetary issue was reaped, the Democrats had also found party ties too weak to

bear the strain of an effective redemption of the party pledges on the tariff. The Wilson Bill prepared as the administrative measure was reported late in 1893, while the panic was still exerting a baneful influence. Its leading features were the substitution of ad valorem for specific duties in general, the extension of the free list to include such materials of manufacture as iron ore, wool, coal, sugar and lumber, and the reduction of many prohibitory rates. The loss in revenue was partly provided for by an income tax, significant of the new forces affecting American society, and an increase in the duty on distilled liquors. Although the bill passed the House by an overwhelming majority, it met the opposition in the Senate of the representatives, Democratic as well as Republican, of those states whose interests were adversely affected, especially the iron ore and coal producing states of the Southern Appalachians, the sugar producers of Louisiana, the wool growers and manufacturers of Ohio, and the regions of accumulated property in the East, where an income tax was especially obnoxious. Led by Senators Arthur P. Gorman, of Maryland; Calvin S. Brice, of Ohio; and David B. Hill, of New York, the bill was transformed by an alliance between Democratic and Republican senators, on the plea that it would otherwise result in a deficit of $100,000,000. Coal, iron ore and sugar were withdrawn from the free raw materials and specific duties replaced ad valorem in many cases, while many other individual schedules were amended in the direction of protection. The House, given the alternative of allowing the McKinley Act to remain or to accept the Senate's bill, yielded, and the Wilson-Gorman Tariff Act became a law without the president's signature, on the 27th of August 1894. He called upon his followers still to fight for free raw materials, and wrote bitterly of “the trusts and combinations, the communism of pelf, whose machinations have prevented us from reaching the success we deserved.” Even the income tax was soon (1895) held by the Supreme Court to be unconstitutional.

371. Toward the close of his administration Cleveland's brusque message on the Venezuelan boundary question (see later) aroused such excitement and so rallied the general public (though not the more conservative) that the war spirit, shown soon afterwards against Spain, might have been a potent factor