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Rh Underwood, chairman of the Committee of Ways and Means, gave to the new measure his name and large experience. The purpose of the statute was to enlarge the free list of raw materials, foodstuffs, and some manufactures, to make a moderate reduction of the protective duties, and to correct some of the things which made the Payne-Aldrich Act unpopular. It was with but one exception the first measure for tariff reduction enacted since the Civil War. Included in the statute was an income-tax, at last made possible by the adoption of the 16th Amendment (Feb. 25 1913), which was expected to supply any revenue which might be lost by the reduction of duties (see, United States). The tax was low: 1% on incomes from $3,000 to $20,000 a year, and a sliding scale on larger incomes, with 6% as a maximum. A Tariff Commission was created to make researches into the workings of the Act and try to find out what was the actual difference between the cost of labour in the United States and in foreign countries. The Republicans naturally fought the bill throughout, but it became a law, Oct. 3 1913.

The powerful influence of the President was again exerted to secure a systematic banking system, with the result that (Dec. 23 1913) the Owen-Glass Federal Reserve Bank Act was added to the statutes (see ). The principle was no longer to rely on separate national banks, each chartered as a separate entity and having no official connexion with other banks, but to create a national institution, which was to be divided into 12 regional banks, in each of which was a body of directors, besides the central organization in Washington. In these 12 subdivisions clustered such banks, whether national or state-chartered, as chose to accept; but pressure was put upon national banks to go into the new system. The Federal Reserve banks were authorized and expected to rediscount commercial paper discounted by the local banks. The new institution was also to issue a new form of paper money. Federal Reserve banks were authorized to act as depositories and fiscal agents for the Government. It was about a year before the system could be put into operation, but it was from the start recognized as a great improvement and a large national asset. At the same time a Rural Credits Act was passed (July 17 1916), which created a special group of banks to lend money to farmers on the security of their farms. Both banking systems worked smoothly. The Federal Reserve banks greatly increased the elasticity of the currency; the effect of their operations up to 1920 was virtually to add an immense sum to the circulating medium of the country.

Transportation, 1914-6.—Experience showed that it was much easier to secure regulation of the railways than of other corporations. In 1914 the Interstate Commerce Commission began for the first time to sanction small increases in rates. Under a statute of March 1 1913 the Commission was authorized to enter on an elaborate valuation of the railway property throughout the country as the basis of a judgment as to what was a reasonable profit (see : United States). The Supreme Court supported recent legislation by compelling the pipe-lines to accept the status of common carriers, and by breaking up some of the railway combinations, particularly that of the New York, New Haven and Hartford, which had tried to monopolize the steam, trolley, and steamship lines in southern New England. Down to the middle of 1916 the railways were doing well on the prevailing low rates for passengers and freight.

A new transportation problem developed as the Panama Canal approached completion; for this was the first great agency of transportation which was owned and managed by the U.S. Government. President Wilson undid the work of the previous Congress so far as it gave special privileges in the canal to American vessels. He used to the utmost his personal influence in supporting a bill repealing the discrimination in favour of American-owned vessels, of which the British Government had complained; it became an Act, June 15 1914. On Aug. 15 the first steamer passed through the Canal from sea to sea and in a few months the Canal was paying its own way. Temporary slides closed it for a few months; but in 1916 traffic was resumed and by the close of the fiscal year 7,046,407 tons of shipping had made use

of the new international waterway since its completion. The success of the Panama Canal called attention to the possibilities of water transportation. A canal across Cape Cod, constructed by private capital, was opened July 29 1914. The state of New York spent a hundred million dollars in enlarging the Erie Canal which was then allowed to remain almost unused. Various plans were urged for an artificial waterway from the Great Lakes to the Gulf, ignoring the fact that the Ohio and Mississippi rivers had almost ceased to be used for traffic. Internal canals were all subject to the difficulty that they could not compete with the railways which received freight at any place in the United States for delivery at any other place; while in the northern part of the country ice prevented winter traffic on canals.

A new question of transportation was arising through the rapid development of motor vehicles. At first a plaything, then a luxury, by 1908 they were spreading throughout the country, for pleasure, for convenience, for professional work; then, as the motor-truck developed, for general transportation. These machines could not well be operated on the ordinary country roads or on some of the city streets; and the attention of the whole country was called to the absolute necessity of good roads. The old system of privately owned toll roads and bridges had almost disappeared, and the only way to accommodate this new traffic was to build roads at the public expense. Some of the states had for years been aiding the rural localities in this process. As soon as good roads were built, however, the public discovered to its consternation that they would soon wear out unless kept in order at great expense. In 1916 Congress passed an Act appropriating approximately $85,000,000 to be paid in about five years to such states as would contribute equal sums for good roads.

The Trusts, 1914.—Just before President Wilson took office, an investigation was begun of the so-called shipping trust, composed of some American and various foreign companies, which was charged with a monopoly of a large part of the business of marine transportation by steamers. A few hours before the end of President Taft's term a congressional committee reported against the “great and rapidly growing concentration of the money control and credit in the hands of a few men.” The Supreme Court in its decisions followed this spirit of opposition to the growth of combinations. President Wilson urged successfully a radical amendment of the Sherman Act and the result was the Clayton Anti-Trust Act (Oct. 15 1914) against discriminating freight agreements, interlocking directorates and holding corporations. The field of governmental action was thereby very much enlarged. In June 1914 in a suit involving the International Harvester Company, one of the largest of the manufacturing corporations, the U.S. Supreme Court upheld state anti-trust laws. The ring of law and justice seemed to be drawing closer round the great offenders; yet these offenders still flourished, and huge corporations, such as the U.S. Steel Corp., paid dividends on thousands of millions in stock and bonds.

Another branch of the same attack on the money power was the Federal Trade Commission, created Sept. 26 1914, which was an attempt to find means of dealing with corporations engaged in interstate commerce other than banks and common carriers. It received large powers of investigation, and the very important authority to institute hearings as a preliminary to suits. In the same direction were the “blue sky laws” passed in this period by many states, to break up the practice of floating the stock of companies which had no property more substantial than the atmosphere. By these statutes and active prosecutions the Democratic party was put on record as the enemy of the enemies of the people. Unfortunately, the more the laws, the more the need for laws; while there was still what Roosevelt called the “twilight zone” of business action, an area in which neither state nor national laws were operative.

Labour 1913-7. The example of capital, in rolling itself into masses too great to be controlled by ordinary means, was followed by labour, which during this period took the field most successfully. The American Federation of Labor was a loosely woven council of representatives from the great trade organizations; it did not undertake to call strikes, though it was likely to support