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Outline Finish Internal Improvements Madison, Calhoun, Clay Introduction to 19th C. Tariff Policy © 2001 J. Douglass Klein Madison Vetoes Projects 1815: “…great importance of establishing throughout our country the roads and canals which can best be executed under the national authority.” “…it is a happy reflection that any defect of constitutional authority which may be encountered can be supplied in a mode which the Constitution itself has providently pointed out.” Note support of tariffs on second page. 1817: “I am constrained by the insuperable difficulty I feel in reconciling the bill with the Constitution…” © 2001 J. Douglass Klein Calhoun’s Position What arguments does Calhoun make for internal improvements? (see p, 437) 1. “An article must be the subject of demand, and the better the means of commercial intercourse, the larger is the sphere of demand.” 2. “In the event of another war, the saving [from having good roads and canals would more than pay for them].” 3. Good roads will assist in raising taxes in times of peace and war. 4. “What can be more important than a perfect unity in every part, in feelings and sentiments?” © 2001 J. Douglass Klein Clay’s American Plan (1818) Strong support for federal funding of internal improvements. To be funded by protective tariffs. "Laid up for Winter" on the East River in New York City, from Harper's Weekly, February 16, 1884 http://www.union.edu/PUBLIC/GALLERY/ERIE/erieex.htm © 2001 J. Douglass Klein Some Principles drawn from political economists “I concur in this as a general maxim ... and I also concur with him that there are exceptions to it.” (p. 133) What is the maxim, and what are the exceptions? © 2001 J. Douglass Klein Some Principles drawn from political economists “I think it very possible that the capitalist who should invest his money in one of these objects, might not be reimbursed three percentum annually upon it; and yet society … might acutally reap fifteen or twenty percentum. The benefit … is divided between the capitalist who received his tolls, the lands through which it passes, and which are augmented in their value, and the commodities whose value is enhanced by the [lower transport cost].” (133) © 2001 J. Douglass Klein Public Goods Price Marginal Social Cost MSB P1 Marginal Social Benefit Market Price Marginal Private Benefit Q2 Quantity Q1 Everyone in society benefits, and none can be excluded. There is likely to be a free rider problem. © 2001 J. Douglass Klein Some Principles drawn from political economists “A combination … of all those interests to effect the improvement is impracticable. And if you await the arrival of the period when the tolls alone can produce a competent dividend, it is evident that you will have to suspend its execution long after the general interests of society would have authorized it.” (134) © 2001 J. Douglass Klein Introduction to 19th C. Tariff Policy Tariffs were the major source of U.S. government revenue throughout the 19th C. © 2001 J. Douglass Klein Image source: http://bermuda-online.org/abcbda2.htm Introduction to 19th C. Tariff Policy Percent of government revenue derived from the tariff, 1791-1936 100 90 80 70 60 50 40 30 20 10 © 2001 J. Douglass Klein 1931 1921 1911 1901 1891 1881 1871 1861 1851 1841 1831 1821 1811 1801 1791 0 Introduction to 19th C. Tariff Policy Level of total revenue and tariff revenue, 1791-1862 80000 Land Boom 70000 60000 50000 Total 40000 30000 20000 10000 Tariff © 2001 J. Douglass Klein 1861 1851 1841 1831 1821 1811 1801 1791 0 Introduction to 19th C. Tariff Policy Level of total revenue and tariff revenue, 1791-1936 5000000 4500000 4000000 Income Tax 3500000 3000000 2500000 Civil War 2000000 1500000 1000000 500000 © 2001 J. Douglass Klein 1931 1911 1921 1901 1891 1881 1871 1861 1851 1841 1831 1811 1821 1801 1791 0 Tariffs - Assignment Work on your paper. Begin reading tariff section. (Callender readings, pp. 486-514, top) QUESTIONS: Post a serious, original question: 1 point. Post a serious, useful answer: 2 points. You may not answer your own question. You may earn a maximum of 4 points to be added to your quiz score. You must post by midnight Sunday. © 2001 J. Douglass Klein