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Woodrow Wilson, a progressive Democrat, won the election of 1912. While in office, he supported lower tariffs, more regulation of business, and the creation of the Federal Reserve System.

The Election of 1912

How was the election of 1912 different from previous presidential elections?

The 1912 presidential campaign featured a current president, a former president, and an academic who had entered politics only two years earlier. The election’s outcome determined the path of the Progressive movement.

Picking the Candidates

Believing that President William Howard Taft had failed to live up to progressive ideals, Theodore Roosevelt informed seven state governors that he was willing to accept the Republican nomination. “My hat is in the ring!” he declared. “The fight is on.”

The struggle for control of the Republican Party reached its climax at the national convention in Chicago in June 1912. Conservatives rallied behind Taft. Most progressives supported Roosevelt. When it became clear that Taft’s delegates controlled the nomination, Roosevelt decided to leave the party and campaign as an independent.

Declaring himself “fit as a bull moose,” Roosevelt became the presidential candidate for the newly formed Progressive Party, which quickly became known as the Bull Moose Party. Because Taft had alienated so many groups, the election of 1912 became a contest between two progressives: Roosevelt and the Democratic candidate Woodrow Wilson.

After a university teaching career that culminated in his becoming the president of Princeton University, Woodrow Wilson entered politics as a firm progressive. As the governor of New Jersey, he pushed through many progressive reforms. He introduced the direct primary, established utility regulatory boards, and allowed cities to adopt the commissioner form of government. In less than two years, New Jersey became a model of progressive reform.

Wilson Versus Roosevelt

The election of 1912 was a contest between two progressives with different approaches to reform. Roosevelt accepted large trusts as a fact of life and set out to create proposals to increase regulation. He favored laws to protect women and children in the labor force and supported workers’ compensation for those injured on the job. Roosevelt called his program the New Nationalism.

Wilson countered with what he called the New Freedom. He criticized Roosevelt’s New Nationalism for supporting “regulated monopoly.” Wilson argued that Roosevelt’s approach gave the federal government too much power in the economy and did nothing to restore competition. Wilson believed that freedom outweighed efficiency.

As expected, Roosevelt and Taft split the Republican voters. Wilson won the Electoral College with 435 votes. He won the election even though he received less than 42 percent of the popular vote. For the first time since Grover Cleveland’s election in 1892, a Democrat was elected president.

Wilson’s Reforms

 

How did Wilson earn the respect of progressives?

As the new Chief Executive, Wilson lost no time in embarking on his program of progressive reform. During his eight years as president, Wilson demonstrated his executive power as he crafted reforms affecting tariffs, the banking system, trusts, and workers’ rights.

Income Taxes and the 16th Amendment

Article 1, section 2 of the Constitution states that "Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers..." A direct tax is a tax imposed directly on a person or their property. If the federal government wants to tax property, it has to make sure the tax is proportionate among the states based on their population. If a state has 20 percent of the people in the country, it has to pay 20 percent of the taxes, regardless of whether the state is poor or wealthy. This requirement makes it very difficult for Congress to pass direct taxes.

An indirect tax is a tax that someone pays, but the tax burden falls on someone else. For example, if a company pays a tax for each car it makes, it simply includes that tax in the price of the car. The person who really pays the tax is the consumer, but they pay it indirectly. Sales taxes, excise taxes, and tariffs are all indirect taxes. An income tax on wages is also an indirect tax. It is actually an indirect tax on an employer. Employers know workers have to pay income taxes. So they have to pay high enough wages that workers will still take the job knowing they will pay income taxes. If there were no income taxes, employers could pay workers less and still get them to take the job.

Up until the early 1900s, the federal government had raised most of its money using sales taxes, excise taxes, and tariffs. As the progressive movement began, many progressives began to argue that income taxes were the best way to fund the federal government. An income tax could be graduated. You could tax wealthy people at a  higher percentage than poor people. A graduated income tax is sometimes called a progressive tax.

In 1894, Congress imposed income taxes on wealthy Americans. The following year, the Supreme Court struck down the income tax law because it was not just a tax on wages, but a tax on all types of income. If a person earned income because they rented property, or because they owned stocks that paid dividends, they still had to pay the income tax. The Supreme Court declared that an income tax that included income from property was a direct tax, not an indirect tax, and since it had not been divided proportionately among the states, it was unconstitutional.

The Court's decision frustrated progressives. It meant that income taxes could be put on wages, and fall on working class Americans, but that rich people who earned most of their income from property could not be taxed on that income. Soon afterward, progressives began pressing for a Constitutional amendment that would allow the federal government to tax income, no matter its source, and without having to divide it proportionately among the states. Both President Roosevelt and President Taft supported the amendment as did many political leaders in both parties. In February 1913, the Sixteenth Amendment allowing for taxes on incomes was ratified by the states.

A little over two months later, and only five weeks after taking office, President Wilson appeared before Congress, the first president to do so since John Adams. He had come to present his bill to reduce tariffs and introduce a federal income tax. Wilson personally lobbied members of Congress to support the tariff reduction bill. Not even Roosevelt had taken such an active role in promoting legislation. In 1913 Congress passed the Revenue Act of 1913, also known as the Underwood-Simmons Act, and Wilson signed it into law. This law reduced the average tariff on imported goods to about 30 percent of the value of the goods and provided for levying a federal graduated income tax. The income tax was intended to replace the revenue lost by the tariff reductions.

Reforming the Banks

The United States had not had a central bank since the 1830s. Periodic economic depressions that had occurred after that time had destroyed numerous small banks, wiping out many of their customers’ life savings.

To restore public confidence in the banking system, Wilson supported a federal reserve system. Banks would have to keep part of their deposits in one of 12 reserve banks, providing a cushion against unexpected financial losses. The Federal Reserve Act of 1913 created the regional reserve banks, supervised by a Board of Governors appointed by the president. The Board could set the interest rates the reserve banks charged other banks, thereby indirectly controlling the nation’s interest rates and the amount of money in circulation.

The Federal Reserve Act became one of the most significant pieces of legislation in American history. It created an independent agency that began to use monetary policy to manage the nation's economy. Monetary policy refers to policies that adjust a nation's money supply in order to regulate the economy. If the Federal Reserve sets interest rates low, businesses and individuals will generally borrow more money. This increases the amount of money in circulation and causes the economy to grow. If interest rates are raised, people borrow less, which slows the economy, but also reduces inflation. Generally speaking, the goal of monetary policy is to contract the money supply if inflation is too high, and expand the money supply if the economy is in a recession and unemployment is too high.

Antitrust Action

During his campaign, Wilson had promised to restore competition to the economy by breaking up monopolies. After the election, he realized that Roosevelt had been right: big businesses were more efficient and unlikely to be replaced by smaller, more competitive firms. Wilson decided against pursuing the monopolies. Progressives in Congress, however, continued to demand action against big business. In 1914, at Wilson’s request, Congress created the Federal Trade Commission (FTC) to monitor American business. The FTC had the power to investigate companies and issue “cease and desist” orders against those it found to be engaging in unfair trade practices, or practices that hurt competition. If a business disagreed with its rulings, it could take the FTC to court.

Wilson did not want the FTC to break up big business. Instead, it was to work toward limiting unfair trade practices. He deliberately appointed conservative business leaders as the FTC’s first commissioners. Unsatisfied by Wilson’s approach, progressives in Congress responded by passing the Clayton Antitrust Act in 1914. The act outlawed certain practices that restricted competition such as price discrimination, or charging different customers different prices. The passing of the Clayton Antitrust Act corrected deficiencies in the Sherman Antitrust Act of 1890.

Before the law passed, labor unions lobbied Congress to exempt unions. As a result, the Clayton Antitrust Act stated that its provisions did not apply to labor organizations or agricultural organizations. When the bill became law, Samuel Gompers, the head of the American Federation of Labor, called the act the workers’ “Magna Carta” because it gave unions the right to exist.

Regulating Big Business

In 1916 Wilson signed the first federal law regulating child labor. The Keating-Owen Child Labor Act prohibited the employment of children under the age of 14 in factories producing goods for interstate commerce. Although the Supreme Court declared the law unconstitutional in 1918, Wilson’s effort helped his reputation among progressives. He also supported the Adamson Act, which established the eight-hour workday for railroad workers, and the Federal Farm Loan Act, which helped provide low-interest loans to farmers.

Progressivism’s Legacies and Limits

What do you believe were progressivism’s most important success and biggest failure?

During his presidency, Wilson built upon Roosevelt’s foundation. He expanded both the federal government and the power of the president.

New Roles for Government

Progressivism made important changes in the political life of the United States. Before this era, most Americans did not expect the government to pass laws protecting workers or regulating big business. In fact, many courts had previously ruled the passage of such laws unconstitutional. By the end of the Progressive Era, however, both legal and public opinion had shifted. Increasingly, Americans expected the government, particularly the federal government, to play a more active role in regulating the economy and solving social problems.

The Limits of Progressivism

The most conspicuous limit to progressivism was its failure to address racial and religious discrimination. African Americans themselves, however, were absorbing the reform spirit, which fueled their long-standing desire for advancement. In 1905 W.E.B. Du Bois and 28 other African American leaders met at Niagara Falls to demand full rights for African Americans. There they launched what became known as the Niagara Movement.

Du Bois and other African American leaders believed that voting rights were essential to end lynching and racial discrimination. “The power of the ballot we need in sheer self-defense,” Du Bois said, “else what shall save us from a second slavery? Freedom too, the long-sought we still seek,—the freedom of life and limb, the freedom to work and think, the freedom to love and aspire. Work, culture, liberty,—all these we need, not singly, but together.”

In 1908 race riots in Springfield, Illinois, shocked many people, including Mary White Ovington, a settlement house worker. She had been studying African Americans in New York, determined to do something to improve their situation. Other progressives, including Jane Addams of Hull House and muckrakers Ida Wells-Barnett and Lincoln Steffens, joined Ovington in calling for change. Capitalizing on Springfield as Abraham Lincoln’s hometown and on the centennial of his birthday on February 12, 1909, they organized a national conference in Springfield to take stock of the progress in emancipation. At a second conference the following year, the National Association for the Advancement of Colored People (NAACP) was born. Through Du Bois, the members learned of the Niagara Movement, and the two groups eventually merged.

African Americans were not the only minority group facing discrimination. Jewish people also lived in fear of mob violence. In 1913 Leo Frank, a Jew being tried in Atlanta for a murder that the facts proved he did not commit, was sentenced to death. Although his sentence was changed to life imprisonment, a mob lynched him two years later.

In this context, lawyer Sigmund Livingston started the Anti-Defamation League (ADL) to combat stereotypes and discrimination. According to its 1913 charter, the ADL’s “ultimate purpose [was] to secure justice and fair treatment to all citizens alike and to put an end forever to unjust and unfair discrimination against and ridicule of any sect or body of citizens.” The ADL worked to remove negative portrayals of Jews in movies, in print, and on stage. For example, the League protested a World War I army manual that claimed Jews were likely to pretend to be sick to escape work or battle. When the ADL complained, President Wilson had the manual recalled.

Analyzing PRIMARY SOURCES
Wilson's New Freedom
“I am perfectly willing that [a business] should beat any competitor by fair means. . . . But there must be no squeezing out the beginner . . . no secret arrangements against him. All the fair competition you choose, but no unfair competition of any kind . . .”

—from The New Freedom, 1918

 

Reviewing Vocabulary

TEKS: 15B

 

Using Your Notes

TEKS: 15B, 15E

 

Answering the Guiding Questions

 

 

 

Writing Activity

TEKS: 15B, 26A