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

by Larry Schweikart

  Cleveland’s image has enjoyed a revival in the late twentieth century because of new interest by conservative and libertarian scholars who see in him one of the few presidents whose every action seemed to be genuinely dictated by Constitutional principle. He was the last president to answer the White House door himself or to write the checks to pay the White House bills. Displaying a willingness to completely disregard either public opinion or Congressional influence to do what he thought morally and Constitutionally right, Cleveland supported the Dawes Severalty Act—which turned out to be disastrous—and alienated many in his own party through his loyalty to the gold standard. A man whose personal character, like that of his friendly New York rival, Theodore Roosevelt, stood above all other considerations, Cleveland repeatedly squelched attempts by outsiders to influence his policies for political favors.

  Above all, Cleveland saw himself as the guardian of the people’s money. He fought to reduce the tariff and to whittle down the pension system that had bloated government balance sheets. Cultivating a reputation in New York as “the veto governor,” Cleveland peppered every veto, whether to the legislators in Albany or, later, to their counterparts in Washington, with principled reasons for not acting based on a Beardian class-based reading of the Constitution. It must be remembered, however, that the federal government of Cleveland’s era, leaving aside the pensioners and the Post Office, was tiny by modern comparisons. Congress did not have even a single clerk in 1856, and fifteen years later Grant operated the executive branch of government with a staff of three assistants. The total federal bureaucracy, even including the Post Office and customs inspectors, numbered only about fifty thousand.74

  In the election of 1884, Cleveland won a narrow victory over Republican James G. Blaine of Maine (219 to 182 electoral votes and 4.875 million to 4.852 million in the popular vote). A mere 600 votes in crucial New York would have given the election to Blaine. The campaign had been one of the dirtiest in American history: Blaine supporters accused Cleveland of coming from the party of “Rum, Romanism and Rebellion” (referring to the perceived affinity between immigrants and alcohol, the Catholicism of many Democratic voters, and the Confederacy). The charges backfired on the Republicans by propelling Irish and Italians to the polls in large numbers. Blaine’s troops also sought to tar Cleveland with the charge that he had fathered an illegitimate child, generating the slogan, “Ma, Ma, Where’s my pa?” This related to a child named Oscar born to Maria Halpin, who she said belonged to Cleveland. The governor had never denied possibly fathering the child, but the woman’s record of promiscuity allowed for any of several men to be the father. At any rate, Cleveland agreed to provide for the boy, and eventually arranged for the child’s adoption after the mother drifted into drunkenness and insanity. He never maintained contact with the boy, or even met him again after the adoption. In any event, the charges had failed to gain traction with the voters.

  Blaine, a notorious spoilsman, “wallowed in spoils like a rhinoceros at a pool,” complained New York Evening Post editor Lawrence Godkin.75 In contrast, when a man approached the Cleveland camp about purchasing documents that proved Blaine had had an affair, Cleveland bought the documents—then promptly destroyed them in front of the man, who nevertheless tried to peddle the story to the papers. Cleveland was not perfect. Like Rockefeller, he had purchased a substitute during the Civil War, making him the first draft-dodger president, no matter the legality of the purchase. Nevertheless, draft evasion never seemed to damage Cleveland.

  Once in office, Cleveland announced he would enforce the Pendleton Act scrupulously, finding allies in the new reform wing of the Republican Party. If anyone appreciated Henry Adams’s criticisms of legislators—“You can’t use tact with a Congressman! A Congressman is a hog! You must take a stick and hit him on the snout!”—it was Cleveland.76 When he assumed office, he found a system corrupt to the core. Temporary employees were shifted from job to job within the administration in what was called rotation, rather than eliminate unneeded positions. (This put a completely new twist on the Jacksonian concept of rotation in office!) Customs collectors, postal officials, and other federal bureaucrats recycled thousands of people through the system in this manner: when one clerk making $1,800 was released, three more temporary employees making $600 each were hired, while the original employee went into a queue to be rehired.

  What made his reforms stick was the fact that Cleveland imposed the same standards on his own party as on the Republicans, who had just been kicked out of office. Only once did a delegation of Democrats approach Cleveland about tossing a capable Republican from a position in order to fill it with a member of their own party, and the president dismissed them.

  No battle demonstrated more clearly Cleveland’s determination to combat corruption in government than the fight over pensions, in which he took on a key part of the Republican voting bloc, the Grand Army of the Republic (GAR). Founded by B. F. Stephenson in 1866, this veterans’ organization had quickly become the most powerful special interest lobbying group in the United States. Membership was limited to those who had served during the Civil War, and although the GAR had built soldiers’ homes and managed to have Memorial Day declared a national holiday, the organization’s main raison d’être consisted of increasing the value of pensions and expanding the number of those eligible for Civil War pensions.77 Although eligibility for the pensions was supposedly restricted to those suffering from disabilities in military service, congressmen encouraged fraud by introducing private pension bills for constituents.

  Presidents, not wishing to alienate voters, simply signed off on the legislation—until Cleveland, who not only inspected the claims but also rejected three out of four. One claimant had broken his leg picking dandelions, yet wanted a government pension; another had a heart problem fourteen years after the war’s end; and another wanted recompense for injuries received twenty-three years before the war from the explosion of a Fourth of July cannon. Still others had deserted or mustered out with no evidence of disability until long after the war, when Congress opened the federal Treasury.

  By confronting the pension question head on, Cleveland addressed an outrageous scandal, but one cloaked in the rhetoric of the war. In 1866 just over 125,000 veterans received pensions accounting for an annual total of $13.5 million from the Treasury. But seven years later the numbers had risen to 238,411, despite the fact that many of the pensioners were getting older and should have been dying off!78 Supported by—indeed, agitated by—the GAR, pensioners lobbied Congress for ever-widening definitions of who was a veteran, and to make provisions for widows, orphans, and ultimately even Confederate veterans. When the pension numbers finally began to decline (which should have occurred in the 1870s), Congress introduced the Arrears of Pensions Act, which allowed claimants to discover wounds or diseases, then file retroactively for pension benefits that had been granted when they served. “Men who suffered an attack of fever while on active duty became ‘convinced’ the fever was in fact the root cause of every ill they suffered since separation from the service,” observed Cleveland’s biographer.79 New claims shot up from 19,000 per year to 19,000 per month.

  Cleveland would have none of it. He had no reluctance to give legitimate pensioners what was due them, but he considered most of the claims an outrage. Congress had learned to enact special pension bills late on Friday nights—on one night alone the Senate enacted four hundred special pension grants. Worse, each “bill” required that Cleveland sign or veto it personally. This absorbed monumental amounts of the president’s time and energy. Cleveland had enough and vetoed as many as he could, finally delivering the death blow to the bogus pension system in 1887. His veto of the so-called Blair bill, which represented a massive expansion of federal benefits, was sustained. After that, a chastened Congress submitted no more pension legislation.

  In 1888 the Republicans nominated Benjamin Harrison, the grandson of William Henry Harrison and the second of four pairs of family presidents (the A
damses, the Harrisons, the Roosevelts, and the Bushes). “Little Ben” stood five feet six inches tall, was strong yet chubby, and grew up on a farm. He attended Miami University in Ohio, the “Yale of the West,” then settled with his wife, Carrie, in Indianapolis. There he practiced law and worked a second job as a court crier that paid $2.50 a day. The couple had a son and daughter (a third child died in infancy), and Harrison made important political connections. When the Civil War came, Harrison was a colonel in the infantry, fighting at Atlanta and Nashville and earning a promotion to brigadier general. Returning as a war hero, Harrison nevertheless lost a race for the governorship of Indiana in 1876, but four years later he was elected by the state legislature to the U.S. Senate.

  Garfield offered him a cabinet spot, but he declined because he had just taken his seat as a senator. From the floor of the upper house, he impressed the Republican hierarchy with his stinging criticisms of Cleveland. When James G. Blaine refused to be the Republican candidate in 1888, Harrison’s name came forward as having the prerequisite military and political experience.

  Republican Interlude

  Whereas Grover Cleveland had antagonized many Democrats in his first term, Harrison ran a remarkably error-free campaign. Running from his front porch in Indianapolis, where he granted interviews and spoke to the more than 300,000 people who came to see him, Harrison emphasized the tariff. As had been the case four years earlier, the margin of victory in 1888 was remarkably slim. For example, Harrison received only 2,300 more votes in his home state than had Cleveland, who lost Connecticut by 336 votes. In the end Cleveland learned the hard way that America is a republic, not a democracy: he won the popular vote, but Harrison became president with a majority in the electoral college (this also happened in 1824, 1876, and 2000).

  The electoral situation in America was quite simple: the two parties geographically split the nation east of the Mississippi. Whereas Republicans could count on the votes of freedmen—a shrinking vote because of intimidation, literacy tests, and poll taxes in the South—the Democrats in the North drew support from city immigrants, debtor groups angry at hard money, and from labor. Cleveland had offended the second group of Democratic voters with his monetary policies, throwing a wild card into the deck. With this sectional division, from 1876 to 1896, the West, including parts of the Old Northwest as well as the new plains areas and Pacific states, became the fulcrum on which elections swung. Historian Paul Kleppner has pinned down the swing areas to specific counties within some of these states, and further identified the source of change as essentially religious, between Catholics and two variants of Lutherans.80 No doubt these ethnocultural factors existed, but probably they shaped, and were shaped by, other important views. The fact was, white Southerners wanted nothing to do with the party of emancipation, and freedmen and veterans of the Union Army would never vote for the Democrats. That put each election into the hands of farmers and immigrants who saw much to applaud and condemn in each party. Republicans still stood for the tariff and the gold standard, which seemed oppressive to low-income groups. Democrats wanted cheap money, which frightened eastern businessmen. Each party contained advocates of patronage reform. Thus, the elections were close, contested, and often came down to which candidate had the best party machine in key states on election day.

  Harrison, therefore, entered the presidency as had many of his immediate predecessors—without a clear mandate. In 1889 the Republicans had a ten-seat advantage in the Senate and a bare twelve-seat majority in the House. Harrison’s cabinet—entirely Presbyterian, with four Missourians and several war heroes—was politically obscure. Worse, he had ignored the party bosses, touching off an immediate battle between Congress and the president over spoils. When considering John Hay, Lincoln’s private secretary, for an appointment, Harrison observed, “This would be a fine appointment,…but there isn’t any politics in it.”81 Seeking to sustain the patronage reforms, Harrison placed Theodore Roosevelt on the Civil Service Commission, whereupon the New Yorker promptly irritated and aggravated his fellow members with his energetic but abrasive style. As president, Harrison hoped to restrain the growth of government. But his administration overall constituted a remarkable inversion of the parties’ positions. He signed the inflationary Sherman Silver Purchase Act and enthusiastically supported the Sherman Antitrust Act (both signed in July 1890). This was ironic, in that Grover Cleveland, Harrison’s Democratic opponent, essentially supported the gold standard and was more favorable toward business than Harrison. Yet neither bill’s passage came as a surprise.

  Sherman’s antitrust legislation had overwhelming support (52 to 1 in the Senate, and passed without dissent in the House). The bill lacked specifics, which was common in state antitrust law and corporate regulation, but it played to the public’s demand that government “do something” about unfair business practices. Yet backers of the Sherman Act, with language prohibiting combinations “in restraint of trade” and its focus on the trust as a business organization, unwittingly placed more power than ever in the hands of big business. Since the railroad age, businesses had grown by attracting capital through sales of stocks. Multiplying the number of stockholder-owners, in turn, required that professional managers take over the operations of the companies. Obsessed with efficiency and cost control (which then meant profits), the managers looked for ways to essentially guarantee prices. They tried a number of unsuccessful forms, including pools, whereby competitors would jointly contribute to a member who agreed to maintain a higher price, but who lost money doing so, and territorial enforcement of markets, in which members would agree not to compete past certain geographic boundaries. Then there was the famous horizontal combination, which is the form of business most people associate with monopoly control. Under a horizontal combination a competitor seeks to eliminate all other firms in the field. Rockefeller’s Standard Oil was accused of acquiring competing refineries to achieve such a monopoly.

  Unfortunately for the monopolists—but luckily for the public—none of these arrangements ever achieved anything but the most temporary gains. At the time that Rockefeller’s Standard Oil controlled upward of 90 percent of the refining capacity, oil prices were steadily falling. If there was a theoretical monopoly price to be gained, no company in the late 1800s had successfully demonstrated it in practice, and certainly none had capitalized on one through higher prices.82

  Indeed, the best evidence that none of these arrangements worked is that firms had to constantly keep coming up with other gimmicks. One of the most hated was the trust company, the brainchild of Standard Oil attorney S.C.T. Dodd, who suggested using a standard legal fiduciary device to manage the property of another to trade stock in a voting trust. In a trust arrangement, a company creates a new business organization that exchanges shares of its trust certificates for shares in the stock of the acquired companies. Essentially, smaller businesses give 100 percent control of their company to a trust in return for trust certificates of equal value. The owners of any new firms the trust company acquires do not lose money, but do lose control. Standard Oil formed its trust in Ohio in 1879, and within three years forty companies had exchanged their stock for Standard Oil trust shares. It was all quite reasonable to Rockefeller. Soon, large-scale trusts existed in almost every manufacturing industry, including sugar, whiskey, paint, lead, and petroleum.

  To legislators this apparatus seemed dishonest and shifty—a mere paper creation to hide control by “wealthy monopolists.”83 Congress thus felt compelled to pass the Sherman Act to constrain these entities, at which time corporations merely turned to another form of organization called a holding company, which acquired special chartering legislation from the state government (that many trusts lacked) allowing one company to hold stock in another. New Jersey liberalized its general incorporation laws in 1889 permitting companies to “hold” other companies, even if the “held” companies were located in other states. Within a decade, several companies established themselves in New Jersey, including the newly
recapitalized Standard Oil.

  Long before that, however, professional managers had already started to abandon the horizontal combination and the trust in favor of yet another, far more efficient and profitable structure, the vertical combination.84 Rather than concerning themselves with competitors, the vertical combinations focused exclusively on achieving efficiencies in their own products by acquiring sources of raw materials, transportation, warehousing, and sales. Standard Oil, for example, not only had its own oil in the ground, but also made its own barrels, refined the oil itself, had its own railroad cars and ships, and literally controlled the oil from the ground to its final form as refined kerosene. Similarly, Gustavus Swift, the meatpacker, owned his own cattle ranches, transportation networks, slaughterhouses, refrigerated railroad cars, and even wholesale meat distributors.85 Managers could take advantage of the top-to-bottom control to reduce costs and, above all, plan for the acquisition of new raw materials and factories.

  In the 1890s, the Sherman Act was only marginally employed against corporations, but as it came into use, it drove firms out of the inefficient trusts and into the more efficient vertical combinations. With trusts prohibited, even those firms not inclined to adopt vertical combinations abandoned other forms of organization. Sherman, paradoxically, forced American business into an organizational structure that made it larger and more powerful than it otherwise would have been, funneling the corporation into the most efficient form it could possibly take, making the average industrial firm several times larger than if it had adopted either a horizontal combination or a trust structure. Thanks to Sherman, American industry embarked on the first great merger wave toward truly giant-sized companies. The most famous of these was Morgan’s reorganization of Carnegie Steel, which, when merged with John Warne Gates’s American Wire Company and other smaller businesses, became U.S. Steel, the world’s first billion-dollar corporation. Most of the mergers took place under the administration of McKinley, but it was the Sherman Act that had slammed shut alternative paths.86