Wilsonian Reform
President Woodrow Wilson was a leading force in the Progressive Movement, bolstered by his Democratic Party's winning control of both the White House and Congress in 1912.
In office, Wilson reintroduced the spoken State of the Union, which had been out of use since 1801. Leading the Congress, now in Democratic hands, he oversaw the passage of progressive legislative policies unparalleled until the New Deal in 1933. Included among these were the Federal Reserve Act, Federal Trade Commission Act, the Clayton Antitrust Act, and the Federal Farm Loan Act. Having taken office one month after ratification of the Sixteenth Amendment, Wilson called a special session of Congress, whose work culminated in the Revenue Act of 1913, reintroducing an income tax and lowering tariffs. Through passage of the Adamson Act, imposing an 8-hour workday for railroads, he averted a railroad strike and an ensuing economic crisis. During his first term as President, Wilson focused on three types of reform: tariff reform, business reform, and banking reform.
Tariff Reform
Wilson's tariff reform was largely achieved through the passage of the Underwood Tariff Act of 1913. This act lowered tariffs for the first time since the American Civil War, despite the protectionist lobby.
In April 1913, President Wilson summoned a special joint session of Congress in order to confront the perennial tariff question. He brought special attention to the matter by making his appeal before Congress in person. Wilson spoke only briefly, but made it clear that, in order to avoid repeating the embarrassment of the thwarted reform of 1894, tariff reform was essential. The burden was clearly on Democratic shoulders, since they controlled both houses of Congress for the first time in over eighteen years. On September 9, 1913, Oscar W. Underwood of Alabama guided the Revenue Act of 1913 through the House (where it passed, 281 to 139) and the Senate (where it passed, 44 to 37). Contemporaries considered the Revenue Act a political triumph for Wilson.
The 1913 Act established the lowest rates since the Walker Tariff of 1857. Most schedules were put on an ad valorem basis (that is, X% of the dollar value of the item). The duty on woolens, for instance, went from 56% to 18.5%. Steel rails, raw wool, iron ore, and agricultural implements had zero rates. The reciprocity program favored by Republicans was eliminated. Congress rejected proposals for a tariff board to scientifically fix rates, but did set up a study commission to monitor them.
The Act also provided for the re-institution of a federal income tax as a means of compensating for anticipated lost revenue due to the reduction of tariff duties. The most recent effort to tax incomes (Wilson-Gorman Tariff of 1894) had been declared unconstitutional by the Supreme Court because the tax on dividends, interest, and rents was not a direct tax apportioned by population. That obstacle, however, was removed by the ratification of the Sixteenth Amendment on February 3, 1913, and the Revenue Act. Within a few years after the Revenue Act was implemented, the federal income tax replaced tariffs as the chief source of revenue for the government.
Banking Reform
Wilson's banking reform was most notably accomplished by the 1913 creation of the Federal Reserve System. It was also aided through the passage of the Federal Farm Loan Act, (1916), which set up Farm Loan Banks to support farmers.
President Wilson secured passage of the Federal Reserve Act in late 1913, as an attempt to carve out a middle ground between conservative Republicans, led by Senator Nelson W. Aldrich, and the powerful left wing of the Democratic party, led by William Jennings Bryan over the banking issue. In contrast to the Republicans, the liberal Democrats opposed all banking schemes and strenuously denounced private banks and Wall Street. Instead, Democrats advocated for a government-owned central bank that could print paper money as Congress required, a measure that Aldrich and the Republicans vigorously opposed.
The compromise, based on the Aldrich Plan but sponsored by Democratic congressmen Carter Glass and Robert Owen, allowed the private banks to control twelve regional Federal Reserve Banks and placed controlling interest in a central board to be appointed by the president with Senate approval. Moreover, Wilson convinced Bryan's supporters that because Federal Reserve notes were issued by the government, the plan met their demands for an elastic currency. The decision to create twelve regional banks was meant to weaken the influence of the powerful New York banks, a key demand of Bryan's allies in the South and West. The final Federal Reserve Act passed in December 1913, and most bankers criticized the plan for giving too much financial control to Washington, while liberal reformers claimed that it allowed bankers to maintain too much power.
Wilson named Paul Warburg and other prominent bankers to direct the Federal Reserve. The new system began operations in 1915, playing a significant role in financing the Allied and American war effort. Despite the fact that the Act intended to diminish the influence of the New York banks, the New York branch continued to dominate the Federal Reserve until the New Deal reorganized and strengthened the Federal Reserve in the 1930s.
Business Reform
In addition to the Underwood tariff, which seemed to finally resolve the political debate over tariff rates, and the creation of the Federal Reserve, Wilson also supported anti-trust legislation. This legislation fulfilled both the Progressive aims of Roosevelt and Taft while deviating from their approach to breaking monopolies. Wilson deviated from his presidential predecessors, who relied on lawsuits to break trusts and monopolies, by founding a new trustbusting approach through encouraging competition through the Federal Trade Commission. The Federal Trade Commission effectively restricted unfair trade practices and enforced the 1914 Clayton Antitrust Act.
The Clayton Antitrust Act was a law that specified and outlined "unfair and illegal" certain business practices such as price discrimination, agreements prohibiting retailers from handling other companies' products, and agreements to control other companies.
It was a stronger piece of legislation than other antitrust laws because it held individual officers of corporations responsible if their companies violated the laws. It also included a clear set of guidelines that corporations had to follow to ensure legal business practices. This was seen as a dramatic improvement over the more ambiguous language of previous antitrust legislation. Rather than the piecemeal success of Roosevelt and Taft in targeting certain trusts and monopolies in lengthy lawsuits, the Clayton Antitrust Act effectively defined unfair business practices and created a common code of sanctioned business activity.
Conclusion
By the end of Wilson's first term, a significant amount of progressive legislation had been passed, affecting not only economic and constitutional affairs, but also farmers, labor, veterans, the environment, and conservation. The reform agenda of Wilson's "New Freedom," however, did not extend as far as Theodore Roosevelt's proposed New Nationalism in relation to the latter's calls for a standard 40-hour work week, minimum wage laws, and a federal system of social insurance. Despite this, Wilson did much to extend the power of the federal government in social and economic affairs, and paved the way for future federal reform programs such as the New Deal.
Wilson Inauguration
Woodrow Wilson being sworn into the office of the Presidency in 1913