Woodrow Wilson: The First Administration


 A. Wilson’s “New Freedom” vs. Roosevelt’s “New Nationalism”

I. The election of 1912 was a decisive turning point in the direction of Progressive reform.

II. Roosevelt, a known reformer, proposed a new approach he billed as “New Nationalism.” Woodrow Wilson called his approach the “New Freedom.”

          a. The New Nationalism was an extension of Roosevelt’s earlier beliefs—

i. Roosevelt accepted the idea of trusts and economic concentration—but he wanted to control their impact on society and the economy through regulation

ii. The government, Roosevelt believed, should be the great “centralizing force”—he envisioned a centrally organized economy and a forceful federal government

iii. Roosevelt’s vision was a “melting pot” vision of America’s future and he was committed to “100% Americanism.”

iv. In his later years, Roosevelt wanted to put limits on immigration and displayed irrational fear of “foreign” radicalism.

b. The New Freedom represented a very different view of reform and of the future of American society.

i. Wilson, unlike Roosevelt, believed that trusts and monopolies of any kind were inherently inefficient and unjust—they stifled competition and slowed economic progress.

ii. The New Freedom promised not to regulate the trusts but to destroy them—to break them up.

iii. Wilson believed that Roosevelt’s approach would simply license big corporations to continue their dominance and offered no hope for the small entrepreneur. The New Freedom, in contrast, meant that government should work to destroy economic privilege and ensure opportunities for entrepreneurs and small business.

iv. The New Freedom was also an alternative view of American society—where Roosevelt believed that unity had to be at the core of American society, Wilson was among the first to embrace diversity—he wanted to use the power of government not to control economic activity but to unleash the talent’s and energies of all Americans.

v. Wilson was not a champion of ethnic minorities by any means. He was, however, a person who recognized that the US was a diverse, pluralistic society and could no longer be viewed as a society of transplanted Englishmen.

II. In the election of 1912, ¾ of Americans voted for reform. Wilson received 42% of the vote, Roosevelt 27%, and Taft only 23%. In the electoral college, the Wilson plurality turned out to be a landslide—Wilson carried all but 8 states and received 435 of 531 electoral college votes.

III. As President, Wilson’s first triumph was the fulfillment of a long-time Progressive/Democratic goal—a significant reduction in tariffs.

a. On the first day of office, Wilson called a special session of Congress and when it met, he did what no President since Jefferson had done—he appeared before it in person and delivered an address.

b. Working with Republican Progressives and using the powers of the presidency to keep the Democrats unified, Wilson guided the bill through the House of Representatives and fought off conservative attempts to weaken it in the Senate.

c. The Underwood-Simmons Tariff lowered tariff rates by an average of 8% and added many imports to the tariff-free list.

IV. To compensate for the revenue lost to the government from tariff reductions, Cordell Hull (Tennessee) proposed the creation of an income tax (Made possible by the earlier passage of the 16th Amendment to the US Constitution.). It passed, and was the first step in a totally reformed system that would, over time, shift the burden of supporting the government much more to the wealthy.

V. Wilson did not want to lose momentum in his reform agenda, so he immediately pushed forward with significant banking reform—to attack what he called “the money monopoly.”

a. The US banking system was viewed by many as being to centralized, with too much power in the hands of too few men.

i. Small banks were depositing their surpluses into larger banks, which were depositing their surpluses into a small number of Wall Street banks.

ii. Thus, a very small group of men on Wall Street were able to control the aggregate savings of millions—and control financing for America’s corporate and business sectors.

iii. A Congressional study reported, for example, that the Morgan-Rockefeller banking empire held 341 directorships in 112 corporations representing 10% of the national wealth ($22 billion).

b. Others, however, saw the banking system as too decentralized. There were many small, independent banks that didn’t have access to adequate financial resources—so that in the event of local economic downturns, banks in many regions could do nothing.

i. Banks in rural areas lacked the ability to extend credit to farmers, for example, who were facing short=term difficulties such as a drought or pest-ravaged crop.

ii. There was no way to expand the currency supply in regions hit by hard times or to shift assets to where they were needed.

             c. Wilson dealt with both of these problems simultaneously by accepting a  complex plan for banking reform and pushing hard for its passage by the Congress.

d. The Federal Reserve Act (23 December 1913) created 12 regional banks, each to serve and to be owned by the individual banks in its district.

i. The Reserve bank would hold a certain percentage of the assets of the member banks, holding them in reserve and using the reserves to support loans to private banks at a discounted interest rate.

ii. The Reserve bank would issue currency and have total control over the currency supply, both regionally and nationally.

iii. Despite initial resistance by the banking community, the Federal Reserve System proved to be a flexible and very stable mechanism, and by the 1920’s most banks in the US had signed on.

VI. The heart and soul of Wilson’s first term were his efforts to break up economic concentrations.

          a. Busting up the large trusts had been a key campaign promise that Wilson had made.

          b. Wilson began changing his position after his first year in office, moving in the direction of Roosevelt’s New Nationalism position—trusts, where not clearly harmful, should be allowed to continue to exist.

          c. In 1914, Wilson proposed two pieces of legislation that reflected this view—The Federal Trade Commission Act and the Clayton Anti-trust Act.

          d. The Federal Trade Commission Act was a proposal to strengthen the government’s power to regulate industry and to look for and mitigate “unfair trade practices.” The FTC was a powerful new weapon against abusive corporations, but it reflected Roosevelt’s ideas about their management than Wilson’s original ideas.

          e. The Clayton Anti-Trust Act was basically an updated, strengthened version of the Sherman Anti-Trust Act. It was weakened significantly in Congress before reaching Wilson’s desk and in the end, had many of the same flaws as the earlier legislation

VII. By the end of 1914, Wilson viewed the goals of the New Freedom as largely accomplished. He retreated somewhat from his reform urgency—refusing to support Women’s Suffrage and rescinding Roosevelt’s executive order that had eliminated segregation in the agencies of the federal government.

          a. Wilson would suffer politically from this—the Congressional elections of 1914 showed that the Democrats had lost considerable popularity and that the Progressives that had voted for Roosevelt in 1912 were returning to the Republican Party rather than supporting Wilson and the Democrats.

VIII. In 1915, Wilson became more assertive ion his reform efforts once again.

          a. Roosevelt appointed Louis Brandeis, a Jew, to the Supreme Court in 1916, supported and pushed for the Keating-Owen Act (regulating child labor), and undertook numerous efforts use the powers of the federal government to improve the well being of farmers, small town communities, and undertook a major national highway construction program.

IX. In his first term. Wilson had accomplished a lot, and in the process had transformed the role of the federal government in American society.

The Wilson Scoreboard:

1. Corporations: Had been forced to change their most egregious abuses, but basic power had not been assaulted.

2. Labor—had received some additional protections, but continued to lack bargaining power relative to corporations.

3. Farmers—had received some additional security, but were still vulnerable to market fluctuations.

4. Blacks had been largely ignored and their position had actually deteriorated.

5. Urban immigrants had not gained much either.