(4) To secure the proper re-adjustment and equalization of tariff rates rendered necessary by modified business conditions, improvements in methods of production, radical changes in prices, or by new elements or sources of competition.

(5) To give relief and protection to many industries which are now suffering on account of the inadequate rates levied on competing products.

The public demand for a reduction of revenue is more urgent on account of the inexcusable retention in the national Treasury or on deposit in national banks of vast sums of money in excess of the amount required to pay the current demands upon the Treasury and to meet the maturing obligations of the Government. This sum, with the additions which will accrue within the next four months and before any legislative action reducing the revenues can be effective, will be suf ficient to pay in full the outstanding 44 per cent. bonds due in 1891, $221,000,000.

The existence of this immense surplus furnishes occasion for constant anxiety and apprehension of possible financial disaster. The failure to prevent this dangerous accumulation, inciting, as it does, extravagant expenditures, and constituting an ever-present menace to the prosperity and enterprise of all our people, can not be too severely coudemned; but it is a failure for which the executive department of the Government is alone responsible.

This accumulation could and should have been profitably avoided, and the possibility of business disaster averted, by a prompt return of the money collected from the people to the channels of trade through the purchase of United States bonds that could at all times have been obtained for prices which, to the Government, would have been equal to an investment, of otherwise unprofitable funds, at a rate of interest of not less than 2 per cent. per annum.

It is probably true that the $60,000,000 deposited in national banks can not now be withdrawn without peril to the business interests of the respective communities where the banks are located, and that this sum must remain, for an indefinite period, a permanent loan to favored institutions without interest. This unfortunate situation, however, must have been foreseen when the deposits were made, and it should not be aggravated by further deposits, nor should it furnish an excuse for the failure to promptly dispose of the much larger sum remaining in the Treasury in the manner indicated.

To amend the provisions of law which enforce the collection of excessive revenue, and to remedy the defects which we have enumerated, are within the scope of legislative relief, and Congress may properly be held responsible for any evils resulting from a continuance of existing conditions. It may, however, be fairly said that responsibility for delay in the adoption of legislative remedies rests upon the party in control of the House of Representatives, which by the Constitution has sole power to originate revenue bills. The participation of the Senate

in any effort to cure existing evils by proper legislation has not been possible, from the fact that the bill under consideration is the first that has reached the Senate in more than five years giving them jurisdiction over the subject.

In view of the universal demand for relief from the unsatisfactory condition in which we find ourselves, the inaction of those whose anxiety for reform has been manifested by repeated declarations is remarkable. It would have been easy at any time when Congress has been in session since the 3d of March, 1885-and its sessions have covered at least twenty months of that period-to have secured the concurrence of the two Houses upon a measure which would have reduced the revenue, and amended the administrative features of our customs laws in a satisfactory manner.

The refusal to adopt or even to consider a measure of this kind has been publicly declared by a leading member of the House of Representatives (Hon. Samuel J. Randall) to have been "owing to the fact that a majority of the Committee on Ways and Means seem to have determined that unless their own peculiar views can be incorporated into law in regard to customs taxation, and the continuance of the internal revenue system without reduction or modification, they will prevent any reform in this direction."

It has been the evident purpose of those who have controlled the policy of the party in power to delay action, to magnify causes for uneasiness, and to multiply and intensify evils until the people of the country should imperatively demand relief, and then to assume that the evils and embarrassments from which we are suffering are the necessary incidents of the protective system, and that relief can only be found in the emasculation or destruction of that system.

The known attachment of the great mass of the wage earners of the country to a system which has been productive to them of unexampled prosperity prevented the adoption of a policy of open attack, and made it necessary that some plausible reason should be found for the stealthy accomplishment of their destructive designs.

Your committee, after a thorough examination of the provisions of the bill (H. R. 9051) referred to them by the Senate, have become convinced of its inadequacy as a remedial measure in view of the condition which confronts us.

(1) Its adoption would probably result in an increase, instead of a reduction, of the revenue from customs.

It is claimed by the friends of the bill that the reduction of revenue from this source would amount to $49,486,240.75, but we are confident that the large reduction in rates proposed would result in greatly increased importations. When American producers supply a considerable portion of our market with articles in general use and the rates on these are reduced below the protective point, both importations and revenue must increase.

By the acts of July 14, 1870, May 1 and June 6, 1872, important reductions in tariff rates were made and the free list greatly enlarged. It was officially estimated at the time of the passage of the various acts that these changes would result in a reduction of the revenue from customs of $57,227,510. The revenue from this source in 1869 was $176,114,904, and in 1873 it was $184,929,542, or an increase of $8,814,138, instead of a reduction of $57,227,510. This increase took place notwithstanding the fact that free importations increased in value $157,707,264 between 1869 and 1873. Similar results may be reasonably expected should the House bill become a law.

If foreign manufacturers should, through the changes made in the cotton and woolen schedules, secure a quarter of the market now held by our cotton and woolen manufacturers-and this is certainly a very conservative estimate-the additional amount of duty collected from increased importations would amount to at least $60,000,000 annually. The expansion of imports which would surely follow the reduction of rates on china, porcelain, common window-glass, manufactures of iron and steel, flax, jute, hemp, and a large number of minor manufactures, would greatly augment the revenue.

(2) It provides no remedy for undervaluations, but, on the contrary, it invites and gives immunity to unlimited fraud by the substitution of ad valorem for specific duties.

(3) It does not remedy any of the inequalities or anomalies, or cure any of the defects of existing law. While it perpetuates existing infirmities, it creates, by its obscurities of purpose and phraseology, and by its faulty construction, doubts and ambiguities which must multiply indefinitely the confusion now existing. The bill does not preserve the classification of dutiable articles in schedules, and it is impossible to say in many instances to what clause of existing law the amendments proposed by the bill were intended to apply, or what their effect would be. Although the different paragraphs in the various schedules have been numbered for reference at the Treasury Department, they have never received any such legal designation as would permit accurate description or identification for purposes of amendment or repeal, and the difficulties which would certainly arise in the interpretation of various provisions of the bill would unavoidably lead to endless litigation and serious loss to the Treasury. Some of the defective provisions now in force have caused great injury to important industries. For instance, the paragraph fixing rates on hat materials, reads as follows:

Hats, and so forth, materials for: Braids, plaits, flats, laces, trimmings, tissues, willow-sheets and squares, used for making or ornamenting hats, bonnets, and hoods, composed of straw, chip, grass, palm, leaf, willow, hair, whalebone, or any other substance or material, not specially enumerated or provided for in this act, twenty per centum ad valorem.

This has been construed by the Treasury Department and the courts to admit silks, satins, laces, and a large variety of other expensive ar

ticles as "materials for hats," which are really used for other purposes, at the low rate of duty of 20 per cent. ad valorem, when for other uses the same articles are dutiable at 40 to 50 per cent. ad valorem. The clause in the bill under consideration which provides for the duty on hat materials reads as follows:

Hats, materials for: Braids, plaits, flats, willow-sheets and squares, fit only for use in making or ornamenting hats, bonnets, and hoods, composed of straw, chip, grass, palm-leaf, willow, hair, whalebone, or any vegetable material, not specially entimerated or provided for, twenty per centum ad valorem.

It was probably the intention of the framers of the bill to remedy the defects alluded to, but it is clear from a comparison of the two paragraphs that the provision of existing law in regard to materials for hats, composed of "any other substance or material" than straw, chip, etc., would still remain in force and unrepealed, and the practice of importing silks, laces, etc., as hat materials, at 20 per centum ad valorem would continue. Similar failures of amendments to amend are found in all parts of the bill. To illustrate cases of this kind we have appended to our report (Appendix F) a list of paragraphs of doubtful meaning, together with some of those where any probable interpretation would increase existing confusion.

The results, however, which would flow from the failures of the bill as a corrective measure would be much less disastrous to the material interests of the country than those which must surely follow the adoption of its vicious affirmative propositions.

AD VALOREM DUTIES.

The feature of the bill which most clearly indicates its purpose is the proposed substitution of ad valorem for specific duties. This substitution could have no other result than to change rates now protective for others which would not protect. The promoters of this bill must have been familiar with the testimony submitted to Congress by Secretary Manning disclosing enormous frauds upon the revenue and honest merchants through the use of ad valorem rates. The frequency and notoriety of these frauds and the wide-spread demoralization resulting from them should have prevented any attempts to extend the system.

The use of ad valorem rates has been condemned by the experience of every commercial nation in the world, by the judgment of those who have been intrusted with the responsibility of customs administration, and by honest importers and merchants, as well as by intelligent political economists and legislators of every shade of economic belief. The reasons for this general and sweeping condemnation are obvious; ad valorem rates are equally unsatisfactory and uncertain whether levied for revenue or for protective purposes; duties based on foreign market value are, even under the most favorable circumstances, with honesty of purpose on the part of the importer and the highest degree of knowledge

and unquestioned integrity on the part of the appraising officers, necessarily uncertain and unequal; but when, as now, many foreign importers deem the successful evasion of our revenue laws by unscrupulous methods the highest evidence of business capacity, ad valorem rates fail lamentably of their purpose. They greatly exaggerate variations in foreign prices. When business is depressed and foreign prices are abnorrnally low, when foreign competition is most to be dreaded, and when a defensive barrier is most needed by domestic producers, then ad valorem rates are lowest, protection is reduced, and depression is in'tensified. On the other hand, when foreign values are highest rates are highest, and restriction enlarges into prohibition.

If it is desirable that a sliding scale of duties should be adopted, rates should increase as foreign prices diminish. Ad valorem rates afford facilities for the grossest frauds upon the revenue; through undervaluations they invite evasions of the law and reward dishonest importers, while they destroy the business alike of honest importers and of domestic manufacturers. The foreign manufacturer practically fixes the duty which he is willing to pay, and in many cases the only limitation upon the amount of foreign importations is the extent to which the fear of detection influences the persons who make the invoices. The evils which flow from ad valorem rates are so great and so manifest that this plan of collecting duties has no advocates but professional and political revenue reformers and dishonest consignors.

In illustration of the effect of the House bill to increase importations and break down domestic producers, we cite the application of ad valorem rates to the manufacture of fine cotton cloths. The specific rates now levied upon cotton cloths furnish no reasonable grounds for adverse criticism, either by the producers or consumers of cotton manufactures. The inevitable effect of the substitution would be to largely increase the importation of all the finer and more expensive classes of these goods, and to produce disorganization and depression in this important industry. The uniform rate of 40 per centum proposed, bears very unevenly upon the various grades of goods. It would be, if collected upon an honest valuation protective upon the coarser and commoner kinds which are largely consumed by all classes of our people, but it would encourage the importation without restraint of those fine fabrics which may be properly designated as luxuries.

The leading cotton manufacturers of the country joined in an emphatic protest to the framers of the bill against the adoption of ad valorem rates, and submitted the following strong statement of their objections to the system:

While the ad valorem method seems to theoretically have the merits of simplicity and equity, it is in practice found to be unreliable, a prolific source of undervaluation, false invoicing, and false oaths, and a premium upou commercial disonesty, and to tend toward a transfer of legitimate business from honorable importers to the most irresponsible and unscrupulous class of foreign traders. A reference to the records of revenue from the customs department and the United States courts, or in