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Recognition.– Moreover, his power of recognition, especially before 1910, that is, the power to grant or withhold the right of discussion, enabled him to a large degree to prevent consideration of measures to which he was opposed and to cut off debate by members of the minority party, joined with the Democrats and brought about several amendments to the rules, one of which is designed to do away with the chief source of complaint in regard to the power of recognition.

Committee on Rules.– Still another source of the speaker's power until 1910 was his control of the committee on rules. The committee consisted of five members, two from the majority, two from the minority, and the speaker, who was the fifth member. The speaker appointed his four associates on the committee and thereby controlled its decisions. If he wished at any time to have the house take up a bill at the bottom of the calendar instead of one at the top, or in any other respect depart from the established order of procedure, he could call the committee together (it was the one committee that had the right to meet when the house was in session) and have it report what was called a "special order," to that effect – an order which the house usually adopted. The opposition to the power of this committee and more especially to its domination by the speaker led in 1910 to the adoption of a rule depriving the speaker of membership on the committee, increasing its size from five to eleven, and taking the appointment of the committee out of his hands. Since then it has been elected by the house, and is, it is asserted, a more representative committee.

Caucus Methods.– It is a common practice for the representatives of each party to hold a caucus before the beginning of the debate upon an important measure, especially one of a political character, for the purpose of deciding what shall be the policy of the party toward the measure. Sometimes a rule is adopted by the caucus binding the members of the party to vote for or against the bill on the floor. Thus in 1913 caucuses of Democratic and representatives declared the tariff and currency bills to be party measures and pledged the members to vote for the bills without amendment. This practice has been criticized on the ground that where members have bound themselves to vote for a bill before it has been discussed on the floor, debate is useless since their minds are no longer open to argument. Perhaps a better procedure would be to hold the caucus after the discussion has terminated but before the final vote is taken.

Final Stages of Procedure.– The rules of the house of representatives restrict the time which may be occupied by any member in debating a measure to one hour, and this cannot be exceeded except by unanimous consent. If he chooses, he may yield a portion of his time to some other member. The chairman who reports the bill usually opens the discussion. He is followed by the ranking member of the minority on the committee, and these are followed by other members of the committee in their turn.

The Previous Question.– After the discussion has proceeded for a time, debate may be terminated and the house brought to a vote by means of the previous question, which is moved in the form, "Shall the main question now be put?" When ordered by the house it ends debate and brings the house directly to a vote. This is an effective method for putting an end to useless discussion of a measure and taking the sense of the house on its passage. It is a common form of procedure in legislative bodies, though the senate, until 1917, had no way of limiting debate.

Voting on Bills.– Questions on the passage of bills are put by the speaker as follows: "As many as are in favor say aye"; "As many as are opposed say no"; the speaker determining the result by the sound of the voices. If there is a doubt as to which side has prevailed, a "division" is called for, in which case those in favor rise and are counted after which those who are opposed rise and are counted. If there is still doubt as to the result, "tellers" may be appointed to determine the vote, in which case those in favor of the measure file between the two tellers, who make a careful count, after which those opposed pass between them and are similarly counted. If one fifth of the members demand that a yea and nay vote be taken, the clerk must call the roll and record each member's vote, and the result is published in the journal so that the way in which a member votes may be known to his constituents and all others who may be interested.

Passage by the Second House.– When a bill is passed by one house, it is signed by the presiding officer, after which it is transmitted to the other house, where it goes through practically the same stages of procedure as described above. If the bill is passed by the other house without amendment it is "enrolled," after which it is ready for the signature of the President. If, however, a bill as passed by one house is amended by the other, it is customary to appoint a conference committee, consisting usually of three members from each house, to discuss the differences and suggest a basis of compromise. The committee usually recommends that each house recede from its position on certain points, and the result is reported to each house, which usually accepts the agreement and the bill is passed. Many important bills are finally passed in this way, though occasionally the two houses fail to reach an agreement and the bill fails.

Approval of the President.– When the bill is presented to the President he is allowed ten days to make up his mind as to whether he will sign or disapprove it. If he refuses to sign it, he usually returns it to the house in which it originated, with a statement of his objections, after which the house must proceed to reconsider it, and if it is passed by a two-thirds vote it is sent to the other chamber and if repassed by it by a two-thirds vote it becomes a law notwithstanding the veto of the President. But in such cases the yeas and nays must be entered on the journal of each house so that the record may show that the bill was properly passed. In case the President does not approve the bill and neglects to return it within ten days to the house in which it originated, it becomes law in the same manner as if he had signed it, unless Congress should adjourn in the meantime so that it cannot be returned, in which case it does not become law. As a large number of bills are usually sent to the President during the last ten days of the session, an opportunity is thus afforded him for defeating bills by neither signing nor vetoing them. This method of defeating bills is popularly described by the term "pocket veto," a procedure sometimes resorted to where the President does not approve a bill and yet does not wish to take the responsibility for positively vetoing it.

Procedure in the Senate.– In the senate, partly by reason of its small size, partly by reason of its permanence, and partly by reason of the tradition of senatorial courtesy, the procedure is somewhat different from that of the house of representatives. For example, the senate rules are permanent, that is, they continue from one Congress to another and do not have to be adopted anew every two years.

The President of the Senate is little more than a moderator; indeed, he may belong to a different political party from that which is in control of the chamber – a situation that never happens in the house. He does not appoint the committees of the senate, and so has no power of predetermining the character of legislation. Moreover, he has no power to control debate through the power of recognition. The traditions of the senate require that he shall recognize the first senator who rises to speak, and that he shall treat the members of both parties impartially in according recognition for purposes of debate.

Unlimited Debate.– Until 1917 one of the usages of the senate was the right of unlimited debate. Owing to the small size of the senate, much greater freedom of discussion is possible than in the house of representatives, where there are more than four times as many members. Debate can also be conducted with much more ease and is much more effective, since the size of the hall is smaller and members are not under the necessity of speaking at the top of their voices. While a member of the house can rarely get an opportunity to deliver a speech and then only for a few minutes, a senator may usually speak as long as he pleases. Advantage of this privilege is frequently taken by senators to deliver long speeches, not so much to convince their colleagues, as to get their views before the country at large or to make an impression on their constituents at home. Under the rules as they were before 1917, there was no limit to a senator's right to debate. The privilege was made use of occasionally near the close of a session for "filibustering" purposes. Thus a few senators with strong lungs, large vocabularies, and a liberal supply of documents from which to read, might consume the time of the senate for weeks and prevent it from acting on measures to which they were opposed. Many times in our history a single senator has forced the senate to abandon the consideration of important measures, by threatening to consume the remaining time of the session by speech making. In the last days of one session of Congress, a senator from Wisconsin spoke continuously for more than seventeen hours in an effort to prevent action on a currency bill. Near the end of the 64th Congress (March, 1917) a small group of senators filibustered to prevent the senate from taking a vote on a bill to give the President authority to arm American merchant vessels for defensive purposes, notwithstanding the fact that nearly all the other senators desired to pass the bill. Shortly thereafter the senate adopted a new rule which makes it possible, by a two-thirds vote, to limit the debate on any measure to one hour for each senator. The rule was applied in November, 1919, to bring to an end protracted discussion of the treaty of peace with Germany.

References.– Beard, American Government and Politics, ch. xiv. Bryce, The American Commonwealth (abridged edition), chs. xiii-xv. Hart, Actual Government, ch. xiv. Harrison, This Country of Ours, ch. iii. Reinsch, American Legislatures and Legislative Methods, ch. i.

Documentary and Illustrative Material.– 1. The Congressional Directory. 2. The House and Senate Rules. 3. Precedents of the House of Representatives, published as a public document in 1909. 4. The Congressional Record. 5. Specimen copies of bills and resolutions. 6. The last annual message of the President. 7. Copies of committee reports. 8. Veto messages of the President. 9. Diagrams of the house and senate chambers.

Research Questions

1. Why are rules of procedure necessary in legislative bodies?

2. For what purpose does the Constitution require each house to keep a journal of its proceedings?

3. Which do you think the better practice, the American rule, by which each house of Congress settles election contests of its own members, or the English rule, which places that power in the hands of the courts?

4. What is the reason for allowing a small number of members of each house to compel the attendance of absent members?

5. Under what conditions may each house punish outsiders?

6. What is your opinion of the English rule which allows forty members out of a total of six hundred and seventy members to constitute a quorum?

7. Why should senators and representatives be privileged from arrest for any but serious offenses?

8. What are the principal differences between the rules of procedure of the senate and the house of representatives?

9. Do you think it would be a wise provision to permit the members of the cabinet to occupy seats in Congress without the right to vote?

10. Trace a bill through Congress, showing the various stages through which it must pass before becoming a law.

11. Of what committees is your representative a member? Is he chairman of any committee?

12. Do you think the minority party should be given a larger representation on the committees of Congress and larger privileges of debate?

13. Give the names of the five most distinguished speakers of the house of representatives since 1789.

14. Why is debate more effective in the senate than in the house of representatives?

15. Which of the two houses exerts the greater influence in determining national legislation? Give your reasons.

16. What are some of the so-called "usurped" powers now exercised by the senate?

CHAPTER XII
FEDERAL FINANCE, TAXATION, AND MONEY

The National Taxing Power.– The lack of the power of Congress to levy taxes was, as we have seen, one of the chief weaknesses of the Articles of Confederation, voluntary contributions by the states being the chief source of revenue for the national government. When, therefore, the framers of the Constitution came to deal with this subject, they wisely provided that Congress should have power to levy and collect its own revenues. The power conferred is almost absolute, the only limitations being that no duties shall be levied upon exports; that excises and duties levied on imports shall be uniform throughout the United States, that is, they shall be the same in amount on a given article everywhere; and that where direct taxes are levied, they shall be apportioned among the states on the basis of population.

Forms of Federal Taxes.– The two general forms of taxes recognized by the Constitution are direct and indirect taxes. The only direct taxes, in the sense of the Constitution of the United States, are poll taxes, and taxes on real or personal property, all of which are required to be apportioned among the states on the basis of population, whenever they are levied.

On account of the obvious injustice of levying a tax on the states on the basis of population, inasmuch as there might easily be twice as much property in one state as in another having the same population, this method has fallen into general disuse. Indeed, it has been resorted to by Congress only five times in our history, and then only for very short periods in each case. It does not seem likely that this method of federal taxation will ever again be resorted to.

Until recently the two principal sources of federal revenue have been duties on imports, and internal revenue, or excise taxes, on certain articles produced in this country.

Customs Duties.—Specific and Ad Valorem.– Customs duties are taxes levied on articles imported into the United States from abroad. They are of two kinds, specific and ad valorem. Specific duties are those levied on the articles according to their weight or measurement without regard to their value. Thus a duty of one and a half cents a pound on imported tin plate, or five cents a pound on dyestuffs, or ten cents a yard on silk would be specific. An ad valorem tax is one levied with reference to the value of the article. Thus a duty of 50 per cent on the value of imported woolen goods is an example of an ad valorem duty. Sometimes both forms of duty are levied on the same article.

In favor of the specific duty is the ease of collection, since the article has only to be weighed or measured and then assessed. But it is often inadequate, since one yard of cloth or one pound of dye may be many times more valuable than another, and so with many other articles. One practical objection to the ad valorem method is the opportunity which is afforded for fraud in the matter of valuation, since in many cases it is difficult to ascertain the real value of the article taxed.

The Protective Tariff.– From the beginning of our existence as a nation, reliance upon customs duties as a chief source of revenue has been a part of our established policy. In 1921 the receipts from this source were $308,025,102; and in many earlier years they were nearly half of the entire ordinary income of the national government. Great diversity of opinion, however, has existed in regard to what articles should be taxed and the amount that should be imposed. The Republican party has always insisted upon a tariff not only for revenue but also for protection to American industries and American labor against the cheap labor of the Old World. The Democratic party, on the other hand, has generally opposed the protective feature and insisted upon a tariff primarily for revenue.³⁵

The Preparation of a Tariff Bill devolves upon the ways and means committee of the house of representatives, where all revenue bills must originate.³⁶ In 1916 Congress provided for the creation of a bi-partisan Tariff Commission to investigate the operation of tariff laws and to make reports with a view to furnishing Congress with information for its guidance in the preparation of tariff bills.

The Maximum and Minimum Principle.– In 1909 Congress adopted for the first time the maximum and minimum principle of fixing tariff rates. The law provided for a maximum and a minimum rate on many articles and authorized the President to apply the minimum rate to goods imported from countries which extend the same concession to articles imported by their citizens from the United States and to apply the maximum rate to others.

Reciprocity Treaties.– At various times in the past reciprocity treaties have been negotiated with foreign countries by which it was provided that lower rates should be levied on articles imported from such countries in return for reciprocal concessions of a similar kind from them; or that there should be free admission of articles by one country from the other.

Collection of Customs Duties.– The collection of the customs duties is part of the work of the treasury department. The country is divided into collection districts, in each of which there are one or more ports of entry and customhouses at which all imported goods must be landed. In each district there are a collector and a corps of appraisers, weighers, gaugers, naval officers, surveyors, and the like.

By far the most important port of entry in the United States is the city of New York, where the aggregate receipts for the year 1910 were two thirds of the entire amount received from customs duties in the United States. Until recently a number of the collection districts, however, were unimportant, and in a few the expenses of administration exceeded the receipts. Thus the receipts of the Georgetown (S. C.) district in 1910 were only $49.38, while the expenses were $265; the receipts of the Rock Island (Ill.) district were $51.79 and the expenses $660; the receipts of the Saco (Me.) district were $9.08 and the expenses $753.92. In pursuance of an act of Congress passed in 1912, the President has recently abolished or consolidated many of these districts, so that the number is now only 49, whereas formerly it was 120. For a long time the secretary of the treasury had urged Congress to authorize this reform, mainly in the interest of economy, but it acted tardily.

When goods are purchased abroad to be imported into the United States, the importer files with the United States consul at the foreign port from which they are to be exported an invoice containing a list of the goods and a statement of their value at the place where manufactured or produced. The consul certifies to the correctness of the invoice and sends a copy to the collector of the port at which the goods are to be landed.

Appraisals.– Upon arrival in the United States, the cargo is examined by the customs officers to see that it corresponds with the description contained in the invoice. If it is found that the goods are undervalued the value will be raised by the appraiser. If there is evidence of fraud, the goods will be confiscated or a heavy fine imposed on the importer.³⁷

There is a general board of appraisers to which appeals may be taken by the importer on questions of valuation, and recently there has been created a United States court of customs appeals for the determination of various questions arising in the administration of the tariff laws.

Internal Revenue Taxes.– The second important source of federal income is excise taxes, or what are popularly known as internal revenue duties, that is, taxes on commodities produced in the United States.

The Receipts from internal revenue taxes as compared with those from customs duties were inconsiderable before the Civil War. In 1862, however, Congress passed a comprehensive internal revenue law which increased the tax on liquors and levied a tax on tobacco, besides license taxes on various trades and occupations. So many articles were taxed that the revenue from this source in 1866 amounted to more than $309,000,000, the largest sum collected in one year from internal revenue taxes until 1915. In 1917, in consequence of the war, the rates of many taxes were increased and new taxes were levied on freight and passenger transportation, express charges, telegrams, insurance policies, theater tickets, automobiles and many other articles, and a great variety of business transactions, such as stock transfers, bond issues, etc. For some purposes the taxes on incomes, profits, and inheritances (page 224) are called internal revenue. The following are the principal items of internal revenue in the year ending June 30, 1921:

Collection of Internal Revenue Taxes.– For convenience in collecting internal revenue taxes, the country is divided into some sixty districts, not by act of Congress as is the case with customs districts, but by the order of the President. Sometimes several states are grouped into one district; sometimes a state is divided into several districts. Thus there are four districts in Illinois, six in New York, and five in Kentucky. In each district there is a collector who acts under the supervision of the United States Internal Revenue Commissioner. The collection of internal revenue taxes is a much more simple task than the collection of customs duties, and is done for the most part by the sale of stamps to the manufacturer, who is required to affix them on the articles taxed. In assessing the tax on most articles their value is not taken into consideration, and hence there is less opportunity for arbitrary action on the part of the government officials and of course less likelihood of controversy, than is the case with the administration of the customs laws.

Other Sources of Federal Revenue.– Besides the receipts obtained from tariff duties and internal revenue taxes, there are a number of other sources of revenue such as those from the sale of public land, the tax on national banks, fines and penalties for violations of the laws of the United States, profits on coinage, naturalization, immigration, patent office and other fees, etc.

Income Taxes.– In very recent years (since 1918), the income tax, in its various forms, has become the greatest of all the sources of revenue for the federal government.

It was in 1862 that Congress levied for the first time a tax on incomes, the rate varying from five to ten per cent according to the amount of the income, all incomes below $600 being exempt from the tax. In 1872, the law was repealed; but a demand for reviving this method of taxation gradually increased, and it came to be a standing part of the national platform of the Democratic party. Accordingly when the Democrats got control of Congress in 1894, they enacted a law providing that all incomes in excess of $4,000 a year should be taxed at the rate of two per cent on the amount in excess of that figure. Shortly after the law went into effect, however, the Supreme Court, overruling its former decisions, decided, by a vote of five to four, that the law was unconstitutional, mainly on the ground that a tax on income from property was a direct tax in the sense of the Constitution, and not having been apportioned among the states according to their population was null and void. Sentiment in favor of such a tax, however, steadily grew, and in 1913 the constitutional impediment was removed by the sixteenth amendment.

Later in the year Congress levied an income tax, in connection with an act to reduce tariff duties. The income tax is one per cent on each individual's annual net income in excess of $3000 (or $4000 for husband and wife living together), plus an additional tax of one per cent on net income over $20,000 and not exceeding $50,000, two per cent on net income over $50,000 and not exceeding $75,000, and so on up to six per cent on net income over $500,000.

The Corporation Tax.– Congress in 1909 passed a law imposing a tax on corporations, joint-stock companies, and associations, to the extent of one per cent on the net income of each in excess of $5,000 a year. In the year 1912 the tax yielded $28,583,259. The next year the exemption of $5,000 was removed, thus making the entire net income of corporations liable to the tax.

Inheritance Taxes.– During the Civil War and the war with Spain, Congress levied a tax on inheritances, and the permanent adoption of this form of taxation was strongly recommended by President Roosevelt in his annual messages, but owing largely to the fact that many of the states have passed laws of this kind, the idea has never commended itself to Congress.

Deposit of United States Funds.– The taxes collected by the national government, together with its other funds, are kept partly in the treasury and partly in the nine subtreasuries located at Baltimore, Boston, Chicago, Cincinnati, New Orleans, New York, Philadelphia, St. Louis, and San Francisco. In addition the secretary of the treasury is authorized to designate national banks as depositories and to deposit certain of the funds therein. In times of financial stringency or threatened crises, this authority may be used by the secretary to relieve the money market, by distributing the public funds among the depositories.

Federal Appropriations and Expenditures.– Having studied the sources of federal revenues, we come now to the subject of expenditures. Revenue bills are prepared, as we have seen, by the ways and means committee of the house of representatives. At first the appropriations of Congress were embodied in a single bill prepared by the committee on appropriations, but as the operations of the government expanded, the appropriations came to be embodied in a number of bills, sixteen in 1920, prepared by nine different committees. The committee on appropriations was responsible only for the half dozen more general appropriation bills, while other committees prepared the the bills appropriating large amounts for the army, navy, diplomatic service, post office, Department of Agriculture, District of Columbia, Indian service, and improvement of rivers and harbors. In 1921, however, the committee on appropriations was enlarged and again entrusted with the preparation of all the various appropriation bills, the house thus returning to the earlier system of a single committee responsible for all expenditures.

The growth of national expenditures has been rapid. The appropriations for 1916 reached the unprecedented amount of $1,637,583,682; those for the period of the war (1917-1918), $32,427,000,000, including $9,000,000,000 loaned to European allies. In 1921, the appropriations were reduced to about $5,500,000,000.

The National Debt.– Whenever the revenues of the government are insufficient to pay its expenses recourse must be had to increased taxes or loans. In time of peace the ordinary revenues ought to be sufficient to meet expenses, but when extraordinary expenses must be incurred as is the case when war breaks out, or foreign territory is purchased, or some great public work is to be constructed such as the digging of the Panama Canal, the government must have recourse to the borrowing power. The Constitution of the United States expressly confers upon Congress the power to borrow money on the credit of the United States, and no limitations whatever are placed on the exercise of the power, such as are generally imposed on state legislatures by the state constitutions.

United States Bonds.– The usual mode by which the government borrows money is by the issue of its bonds, obligations similar in most respects to promissory notes made by individuals. A government bond is simply a promise to pay a certain sum at a particular time and with interest at a certain rate. The bonds issued by the United States government are of two kinds: "registered" and "coupon" bonds. A registered bond is made out to the person who purchases it; a record is kept of it at the treasury department, and when it is transferred to another person the record must be changed so as to show the new owner.

The advantage of such a bond is that if it is accidentally destroyed or lost the owner suffers no loss. The chief disadvantage is the difficulty in transferring it. A coupon bond is one which has interest coupons attached to it, which may be clipped off and presented to the treasury for payment as the interest becomes due. The government keeps no record of the owner and it may be transferred as any other personal property. If a coupon bond is lost or destroyed, however, the owner cannot collect the amount of the bond. United States bonds are issued in various denominations and for periods of time which vary widely. Usually bonds are sold to the highest bidder, but occasionally they are disposed of by negotiation with capitalists on the best terms that can be secured. During President Cleveland's administration $262,000,000 of bonds were sold to New York capitalists in this way.

Rate of Interest.– The rate of interest which United States bonds pay has varied from time to time. The Revolutionary War debt bore six per cent, and so did most of the civil war bonds. After the Civil War, however, the rate at which the government was able to borrow steadily declined, largely because of the desire of national banks to secure United States bonds (page 232). The rate of interest on bonds now outstanding ranges from two to five per cent.