11
In 1907 the Knickerbocker Trust Company, a banking institution in New York City, went bankrupt, triggering a financial panic that sent shock waves around the country. Knickerbocker’s collapse caused a sharp drop in stock values, closed dozens of banks, and induced national banks in the major cities to suspend the redemption of customer deposits. This freeze on financial assets triggered a severe depression in 1908, a slump that was not fully corrected until World War I. The demise of Knickerbocker, the ensuing panic, and the economic slowdown jarred the nation’s banking system, whose weaknesses were widely known. The country possessed a decentralized array of 25,000 national banks, state banks, and trust companies, plus state-chartered savings and loan institutions. No effective mechanism oversaw this disjointed matrix or facilitated the movement of funds between regions when seasonal demands peaked or panic struck.
The Panic of 1907 galvanized a movement to repair the country’s financial structure. Congress enacted a stopgap currency act in 1908 that created a National Banking Commission to study banking practices, including those in Europe. The commission submitted its findings in an eighteen-volume report, but its proposed reforms, which kept the control of banking and the issuance of currency in private hands, failed to win congressional support. The legislative logjam was broken by the 1912 election, which elevated Democrats to a majority in Congress and put their presidential candidate, Woodrow Wilson, in the White House.
Pressure for banking reform received a boost from the House Banking Committee (the Pujo Committee), which alleged that the money supply was controlled by a small group of powerful bankers who were closely allied with big insurance companies and corporate trusts. Resisting pressure from the financial industry, President Wilson supported a plan that placed national banks under minimal federal control. Pushed through by congressional Democrats in 1913, the Federal Reserve Act created twelve regional reserve banks that would issue a new national currency called Federal Reserve notes—today’s dollar bills. The system reflected the traditional American opposition to a single central bank (the European model) in favor of a decentralized banking scheme, but in this case, some supervisory authority over member banks was granted to the Federal Reserve Board.1
Four years later another tragedy struck New York. In March 1911 a fire rapidly engulfed the Triangle Shirtwaist Company, which occupied the top three floors of a ten-story building in Manhattan. The firm manufactured ladies’ blouses, relying primarily on young female immigrants to make the garments. Company officials on the tenth floor evacuated safely, and workers on the eighth floor were able to flee as the flames approached. But people on the ninth floor were trapped. Flames from a barrel of oil blocked one stairwell; the other exit had been locked to prevent employee pilfering. The fire escapes on the exterior of the building failed, plummeting to the ground under the weight of the panicked workers. The sprinklers did not activate, and the valve for the fire hose was rusted shut. Neither the fire department’s ladders nor water from its hoses could reach the top floors of the building. A few fortunate individuals on the ninth floor used two small elevators to escape, but scores of workers were engulfed in flames, which swept through a workshop strewn with fabric. In all, 146 women died, many by jumping from the ninth-floor windows.
Reported in newspapers nationwide, the Triangle fire was a shocking tragedy that dramatized unsafe working conditions and the negligence of company owners. The New York legislature established a Factory Investigation Commission to gather evidence on workshop safety and recommend reforms. Over the next several years, and after extensive study, the commission recommended numerous measures to improve the health and safety of factory employees. Republican control of the state government stymied most of the bills in the 1912 session, but Democrats gained the majority in 1913, opening the way for dozens of bills. Lawmakers imposed new fire safety regulations and strengthened the agencies that enforced them, policies that became a model for other states. The commission’s recommendations to reduce the hours of work for women and children and to regulate sweat-shop manufacturing (in homes) were adopted. The horrific Triangle fire had set the stage for a coalition of Democratic lawmakers, labor leaders, and middle-class reformers to increase the state’s responsibility for the health and safety of workers.2
The Triangle fire and the economic slowdown following the 1907 panic illustrate the impact of crises in stimulating new civic responsibilities. Neither the Federal Reserve System nor New York’s new safety rules were adopted solely because of these unforeseen events. Each issue had been discussed for decades. But political systems tend to settle into inertia, which sustains the status quo. Dramatic events can shock the polity out of complacency and present opportunities for policy innovation, often facilitated by electoral change, as occurred in 1912. Much of the expansion of government during the Progressive Era followed such a historically contingent pathway.3
PROGRESSIVISM IN THE NATION
Progressivism is the customary name for a burst of reform activity at all levels of government in the early twentieth century. Narrowly construed, the Progressive Era ran between 1901 and 1916, during the presidencies of Theodore Roosevelt and William Howard Taft and the first term of Woodrow Wilson. Progressivism was also a sentiment and an attitude of distrust of conventional politics and a preference for civic actions to address problems in society. By this latter definition, the roots of progressivism were visible in the Gilded Age, sometimes triggered by economic crises. In the 1890s a deep depression, bitter and brutal labor strikes, business mergers that spawned huge corporations, and political tensions arising from the challenge of Populists and other third parties buffeted the country. The midterm elections of 1894 and the presidential election of 1896 established the Republicans as the clear majority at the national level until 1913. World War I, which the United States entered in 1917, sapped most of the energy from the progressives’ domestic reform agenda.
Although reformers were commonly called progressives, no progressive movement existed in terms of a single organization. Individuals supportive of reform could be found in the existing political parties, in public administrative capacities, and in nongovernmental settings. The major exception to this pattern was the Progressive Party, which had a brief history and was created largely as a vehicle for Theodore Roosevelt’s run for the presidency in 1912. Progressivism was more a mood than a cohesive body of activists who subscribed to a single credo. As journalist William Allen White put it, “reform was in the air.”
What reformers did share was a desire to remedy “problems” in society. At the top of this list was the rigid partisanship that characterized politics, followed by the expanded power of big business. The political challenge of the age, according to Massachusetts governor Eugene Foss, was “the dictatorship by the political bosses and by the special interests”; the latter referred to the “monopoly interest” and the corporate “trusts.” The Progressive Party’s 1912 platform condemned “the invisible government,” which it identified as a “corrupt” alliance between political parties and special interests. White remembered that “the people were questioning the way every rich man got his money.” These and other problems demanded “affirmative action” from the government, as President Theodore Roosevelt phrased the solution. Woodrow Wilson said the federal government “must be positive, not negative.” Both men used the power of the presidency to highlight social and economic problems, the hallmark of a progressive reformer.4
Progressivism also resulted in a substantial expansion of government. Between 1901 and 1916 lawmakers authorized a broad range of new programs and expanded existing policies, primarily through legislative action. Most of these laws concerned four issues: regulation of the political process, including political parties; regulation of business practices; provision of new services and assistance to individuals and economic groups; and rules defining unacceptable social behavior. In addition, the government authorized new sources of public revenue and modernized methods of managing public finance, such as budgets. Out of these actions came a substantial enhancement of governmental power. Moreover, these reforms dovetailed with changes in how the polity operated: elected executives gained greater influence and were expected to be policy leaders; the administrative capacity of government expanded, especially through the creation of nonpartisan agencies and commissions; and shifts in governmental relations produced greater state supervision of local governments and a modest gravitation of power toward the national government. This latter trend increased the centralization of political decisionmaking and administration.
Identifying the wellsprings of progressive reform has long intrigued scholars. This search is likely to continue because of the difficulty of pinpointing the causes of complex historical developments. It is possible, nonetheless, to identify the likely influences underlying progressivism. Socioeconomic change heads this list. Industrialization altered economic life between the 1870s and early 1900s—a period that witnessed a host of important developments: the formation of big businesses (i.e., trusts), urbanization, mass migration, discoveries in science and technology, and the creation of new institutions such as universities and organizations serving particular professions, economic interests, and cultural groups. These and other facets of socioeconomic change not only improved the standard of living but also undermined older assumptions about business, politics, and social behavior.
Changes in the socioeconomic environment also bred new problems and aggravated old ones. The two most publicized maladies were corporate monopolies, which restricted commercial competition and raised prices, and civic corruption, which undercut an equitable and transparent politics. New business management techniques undermined the autonomy of craft workers, stimulating labor union protests over working conditions.5 Other irritants included tax avoidance, rising consumer prices, threats to morality (e.g., prostitution, dance halls, saloons), child labor, and denial of the franchise to women. The appearance of motor vehicles illustrates how technology and commercialism spawned new threats to public health and safety. Cars and trucks produced traffic jams and were involved in accidents that caused property damage, injuries, and fatalities. One may not see automobile registration, driver’s licenses, and the enforcement of speed limits as progressive reforms, yet such laws imposed new constraints on individuals.6
The evolution of medical science—particularly bacteriology, which identified microscopic organisms as the source of numerous diseases—represented another significant socioeconomic change. As the germ theory gained acceptance and researchers tracked the dissemination of toxins, pressure grew to ensure the availability of clean water and safe methods of disposing of wastewater. Public health agencies responded to this new knowledge by employing bacteriologists, medical doctors, and sanitary engineers. The increased reliance on expert advice to create a disease-free environment gave health agencies greater authority.7
The rise of public health was part of a broader expansion of science and intellectual pursuits. Institutions that nurtured and disseminated knowledge-based subjects included universities, corporate and government laboratories, public libraries, publications such as books and technical journals, and professional associations that represented academics, business interests, civic groups, and government.8 Lawyers, doctors, teachers, economists, and engineers formed associations around their specialties in the Gilded Age and Progressive Era. Governments hired more professionals, such as accountants, chemists, and food and drug experts, who formed associations to promote discussion and publish research about their specialties. Commercial publishers reached out to the broader public through popular magazines such as McClure’s, Cosmopolitan, and World’s Work. Some magazines specialized in muckraking, publishing exposés of political corruption and business scandals. Ida Tarbell’s claims about Standard Oil’s strong-arm tactics against competitors and David Graham Phillips’s Treason of the Senate, a 1906 book that alleged an unholy alliance between US senators and economic titans, suggest the temper of this type of journalism.9
Muckraking journalism was directed largely at the “new” middle class, another strategic factor that shaped the political context of progressivism. The shift away from agriculture to urban and commercial employment enlarged the middle class. Several attributes of middle-class life were particularly relevant to a new political consciousness. Middle-class individuals were increasingly better educated (many had graduated from high school), were homeowners (which entailed property tax obligations), and identified with their occupations as much as (or perhaps more than) they did with their locales and ethnic-cultural backgrounds. And because they bought food and other items rather than producing them, the urban middle class was especially sensitive to consumer prices. They also furnished the lion’s share of members of professional associations, such as those for librarians, municipal engineers, bankers, and social workers. Robert Wiebe summed up their role by pointing to the new middle class as “the heart of progressivism.”10
Women played an instrumental role in middle-class progressivism. Although barred from voting in general elections and largely excluded from holding public office, many women participated in public affairs through volunteer organizations that addressed urban problems such as garbage collection, utilities, education, child welfare, and social morality. Bringing a “materialist” perspective to civic reforms that originated in the “prism of the home,” women’s view of the urban community was usually broader than that of men, who were more narrowly focused on business. Many female activists worked within the General Federation of Women’s Clubs, which advocated improved working conditions, especially for women; mothers’ “pensions” (an early form of welfare assistance); minimum wages; improved sanitation; and safer foods, among other issues. The campaign for female suffrage was spearheaded by women. Fourteen states allowed women to vote in general elections by 1914, and eight of them adopted women’s suffrage during the peak of progressive reform (1910–1914).11
Not all middle-class adults supported progressive reforms, nor were progressives drawn exclusively from the middle class. An important dimension of support for governmental action came from workers, especially “new stock” immigrants (from eastern, central, and southern Europe). Labor organizations were chiefly interested in legislation that improved working conditions and pay. They had less interest in reforming the political process and far less interest in most moral reforms, such as Sunday restrictions. Most urban workers had little sympathy for the Protestant activists who crusaded to board up saloons and ban alcoholic beverages. Working-class voters provided substantial support for progressive candidates by the second decade of the twentieth century. Generally, state and municipal reform lagged in rural areas. Yet members of Congress from the South and other rural regions provided considerable support for the regulation of banking and corporations and aid for rural programs, such as agricultural education and roads. The Democratic monopoly in the South was critical to the formation of a reform coalition in Congress after 1910.12
Locating progressive reformers is complicated by the shifting membership in coalitions that formed around specific issues. Sometimes these alignments tracked closely with political party affiliation. The election of Republican governors in California, New Hampshire, and elsewhere in the years around 1910 testifies to the old parties’ capacity to rally around progressive issues. In other cases, temporary alliances of Republicans and Democrats carried progressive reforms. The traditional partisan tendencies of ethnic groups did not evaporate, but they were modulated by increased cross-class and nonpartisan alliances in support of progressive-oriented candidates. Progressive Era reform, in short, unfolded within the traditional matrix of partisan competition, but with frequent deflections over specific issues. The precise form of these ad hoc coalitions varied from place to place and over time.13
Reform impulses in the United States had important global connections. By the 1890s the United States participated in an international economic arena in which trade, technology and science, and social ideas circulated around the world. Labor militancy and waves of strikes were common throughout North America and Europe in the 1890s and early twentieth century. Policy innovations in Europe, such as social welfare in Germany and municipal transportation in Glasgow, Scotland, captured the imagination elsewhere. Civic developments in Europe, Australia, and New Zealand were common knowledge to American progressives, many of whom had studied abroad or traveled to see them firsthand. At home they pointed to these precedents as a way of framing American reforms. Jane Addams, an active social reformer and world traveler, noted in her speech seconding Theodore Roosevelt’s presidential nomination at the Progressive Party’s 1912 convention, “The United States lagged behind other great nations” in achieving social justice.14
The campaign for female suffrage in the United States became part of the international reform movement. Carrie Chapman Catt, who became president of the National American Woman Suffrage Association in 1900, spearheaded the creation of an international suffrage alliance in 1902. The 1908 meeting hosted delegates from twenty-one countries. Catt and her American colleagues subsequently reported on the progress of women’s rights around the world, noting that nine countries had granted women the right to vote by 1919. Although Catt favored a more conventional state-by-state strategy to advance female suffrage, the militancy of British suffragettes influenced the confrontational tactics of Alice Paul and her colleagues.15
An additional spur to progressivism arose from downturns in the economy, especially the depression of the 1890s. The numerous strikes during this tumultuous decade, particularly the Pullman strike (1894), unnerved many and ignited fears of a revolution. The Populist Party, largely agrarian in composition and situated primarily in the South and West, briefly challenged established politics. Populists and others blamed corporate arrogance for the economic debacle, and they criticized self-interested political bosses’ ineffective governance. Tax revolts forced retrenchment of public accounts around the country and sparked efforts to increase taxes on business. Historian David Thelen argues that the stresses of the depression provoked a “new civic consciousness” (at least in Wisconsin), weakening older laissez-faire attitudes. The economic crisis was apparently a wake-up call for civic-minded individuals.16
Less appreciated in the historical literature is how later economic difficulties triggered similar misgivings about governance. The Panic of 1907 provoked a sharp depression in 1908; the economy had partially recovered by 1909, only to dip again in 1910–1911, followed by another recession in 1914–1915. This sequence of economic fluctuations kept wages flat while prices rose, twin maladies that stressed the budgets of urban households, especially those headed by blue-collar workers. City governments, the states, and the United States all experienced budget deficits during these recession years. Businesses, especially new and smaller firms, were forced to scramble to stay solvent, and many did not succeed.
The political significance of the stagflation (a business slowdown coupled with rising prices) that occurred between 1907 and 1915 is tied to the emergence of a consumer society. Millions of people left the farm for the city during the Gilded Age and Progressive Era; incomes trended away from rural-based activities to industrial and service employment. By the early twentieth century half the nation’s households were dependent on consumer purchases for everyday life, with food being the primary item. A chorus of complaints about the rising cost of living was heard between 1910 and 1914, challenging political leaders to identify its causes and provide remedies. A collection of policy innovations followed in the wake of this economic squeeze. Depression, wage stagnation, and rising prices were not the sole causes of these responses. But the sequence of economic irritants helped create opportunities for policymakers to enact solutions.17
The adoption of income taxes illustrates the political fallout from the recession and stagflation. Proposals to tax the income of individuals predated the 1910s. Congress levied an income tax during the Civil War and again in 1894, although the Supreme Court declared the latter law unconstitutional. Theodore Roosevelt put the income tax back on the national agenda in his 1906 annual presidential message. The fiscal crisis of 1907 sidetracked the proposal but also put many governmental accounts in deficit. The idea of budgeting, wherein systematic accounting would provide an efficient solution to overspending, arose in this context.18
Democrats seized the opportunity presented by the economic squeeze. They blamed the Republican Party for supporting high tariff rates, contending that excessive customs duties allowed big business to charge monopoly prices. The tactic worked in 1910, contributing to major Democratic victories in races for northern state legislatures and Congress, gains that were expanded two years later. In fact, 1912 was the only year that Democrats held a majority of gubernatorial seats in the North and enjoyed unified party control of the national government between 1896 and 1933. Republican defections to the Progressive Party, with its national ticket headed by Theodore Roosevelt, aided the election of a Democratic president in 1912. The enlarged Democratic presence in state legislatures and cross-party coalitions with Progressives and progressive-oriented Republicans were critical in ratifying the Sixteenth Amendment to the Constitution, authorizing a federal income tax. Economic stagnation had upset conventional politics and opened the door to passage of the Income Tax Act of 1913, as well as other measures enacted during the first Wilson administration.19
PROGRESSIVISM IN THE STATES AND CITIES
Historian Richard P. McCormick has observed, “Progressivism brought major innovations to almost every facet of public and private life in the United States.”20 His assessment succinctly sums up the extraordinary breadth of governmental actions adopted in the early twentieth century. Cities and states continued to be the civic workhorses in America, contributing the largest output of such policies. Most segments of society were affected, though not necessarily in ways that everyone approved of, such as the segregation and disfranchisement of African Americans in the South and the prohibition of alcoholic beverages. Regardless of the nature of these actions, subnational governments, especially the states, broadened and deepened statebuilding.
The outpouring of new state laws peaked between 1911 and 1913, largely at the hands of Democratic lawmakers, with occasional assistance from progressive Republicans. The plethora of statutes can be sorted into four broad categories: the political process (e.g., election laws), public finance, the economy, and moral regulations and assistance for specific groups.21 The timing and appeal of issues varied among the states, depending on the subject matter. Some ideas caught fire among policymakers and were adopted by most states within a short time span. These popular policies included direct primaries, workers’ compensation, health regulations for milk, and the registration of automobiles (adopted in forty-eight states between 1901 and 1914). A classic case of the contagion effect was the enactment of gasoline taxes, which swept through the states in the 1920s.22
Other matters proved more contentious, leading to a slower pace of enactment and fewer state adoptions. This pattern characterized the acceptance of civil service requirements for government employees, the coordination of state highway networks, personal income taxes, and executive budgets, although some states took halfway steps toward this last reform. Other issues, such as compulsory education, protection of children and women working in factories, and antimonopoly statutes, all of which first appeared in the late nineteenth century, won passage in some laggard states after 1900. The nature of the issue affected the rate and scope of policy diffusion across jurisdictions. Opponents of change became adept at using federalism to block or weaken disfavored proposals, especially those concerning the regulation of business, the recognition of workers’ rights, and taxation. Critics argued that such actions would weaken the economy by driving businesses out of their states.23
The success of reform was partially a consequence of a state’s socioeconomic makeup. Urban, industrial states in the Northeast and the Midwest, the most affluent regions of the country, led the nation in enacting progressive reforms, especially concerning labor and workplace standards, the regulation of utilities, and financial support of education and institutions caring for special populations. States in the South, plains, and mountains lagged behind the leaders; the Pacific coast states had a mixed record. These regional tendencies were not rigid, suggesting that reform impulses were also linked to political and historical conditions. New York, Massachusetts, Illinois, and, to a lesser degree, Ohio and California took the lead in labor and regulatory matters, setting policy models for lawmakers in other states. New York, for example, was a leader in regulating utilities through a nonpartisan commission, establishing a program of workers’ compensation for on-the-job injuries, requiring the registration of motor vehicles and the licensing of nurses, and limiting work hours for women and children. Reforms adopted in New York and other major industrial states frequently diffused horizontally across the federal system.24
Large cities radiated a similar influence, providing policy models for smaller municipalities and channeling reform cues to their state capitals. Such a pathway occurred with the use of budgets to improve the management of public finances. Several trends gave birth to the budgeting movement. First, municipalities increased their expenditures during the Gilded Age and Progressive Era (see chapter 10), as greater outlays followed expanding civic agendas. Revenue to pay for these higher municipal costs derived primarily from a levy on real estate, which fell disproportionately on urban homeowners, many of them in the middle class. Second, city councils had traditionally voted on appropriations with little control from mayors. Reform-oriented citizens charged that city bosses spent these monies capriciously, padding city payrolls to reward supporters and pocketing bribes for the awarding of utility franchises. Critics believed their rising tax bills were a consequence of machine politics. Third, the economic slump that followed the Panic of 1907 saddled many public treasuries with deficits. To citizens who habitually interpreted overspending and indebtedness as cardinal sins, deficits fed a call for fiscal retrenchment and better money management.25
The path to budgeting began with accounting, a process developed by railroads and corporations after the Civil War. Close, systematic tracking of costs and revenue became a staple of corporate management by the turn of the century.26 A key step in this direction was the classification of finances by a uniform accounting system, a proposal pushed by the Committee on Uniform Municipal Accounts and Statistics (established in 1901) of the National Municipal League (created in 1894). The proposal caught on in several cities, especially New York, where a citizens’ group sponsored the formation of the Bureau of Municipal Research in 1907. Run by nonpartisan experts, the bureau pushed to put city finances under the direction of the mayor, a reform adopted in 1908.27
Budgeting spread to other cities, including Boston, one of the numerous Massachusetts municipalities that had experienced financial deficits. Following a mandate from the state to review tax procedures, Boston created a finance commission in 1907. The city’s report blamed fiscal difficulties on the “city council dominated by spoilsmen” and recommended that the mayor control the budget process. The state legislature followed up in 1909 by voting for a new city charter that gave the mayor the power to create a finance commission to draft a budget. Other cities around the nation also adopted “businesslike” management of their finances; Chicago’s budgetary reform (1910) utilized a bureau of public efficiency.28
The appeal of budget reform percolated up to the states. Additional pressure came from the Taft administration in Washington, which formed the National Commission on Economy and Efficiency in 1910. That body was headed by accounting experts hired to find a more efficient manner of managing national finances. Numerous states formed their own efficiency commissions, which went on to recommend state budgets. By 1917 nearly half the states had instituted budget systems; by 1921 virtually all the states had signed on. Congress was among the last holdouts, delaying the adoption of an executive budget (housed in the Treasury Department) until 1921. Political complaints about the traditional partisan management of government, the rise of professional accountants and academic researchers, and alarm over recession-induced deficits had transformed the way governments approached financial policy.29
As a rule, budget reform was not a highly partisan issue in the state legislatures. An exception was Democratic opposition in 1909 to Boston’s new city charter, which a unified Republican delegation passed. The Connecticut senate recorded sharp partisan division in 1911 over electing members of the public utility commission, abolishing property qualifications for voting in local elections, and strengthening the power of the governor. Measures to allow citizen policy initiatives and referenda, establish workers’ compensation, and prohibit child labor in dangerous places—all classic progressive reforms—did not generate sharp partisan conflict, largely due to division among Republicans. Many prominent progressive reforms, such as workers’ compensation, limited hours for female factory workers, and improved railroad and mine safety, produced little conflict. Less partisan than members of Congress, state lawmakers responded to most of the progressive agenda with minimal disagreement along party lines.30
Party was, however, the key to some policy outcomes. Election victories in 1910 and 1912 gave Democrats a majority or a sizable minority in many northern state legislatures. This Democratic resurgence proved to be a critical factor in ratification of the Sixteenth Amendment (federal income tax) in New York and Massachusetts. Northern Democrats displayed less unity, however, on social regulations, such as limiting the sale of alcoholic beverages, licensing dance halls, gambling, and restricting Sunday activities. On these issues, urban-rural and ethnic divisions underlay much of the disagreement.
ADMINISTRATIVE REFORM IN THE STATES
Effective administration to implement legislative goals became increasingly common during the Progressive Era. Policymakers created units staffed with experts to oversee the technical dimensions of policy, such as tax and public utility commissions and highway and agricultural departments. These reforms underscored the growing consensus that nonpartisan experts made better policy administrators than patronage appointees. A second strand of administrative reform increased state supervision of local governments. These steps were visible in the certification of teachers (most schools were run locally) and the regulation of financial activities, such as the assessment of property taxes, the use of standardized accounting methods, and the imposition of limits on taxation and indebtedness.31
A consensus also crystallized around the notion that better administration required greater authority for executives. This sentiment was visible in the extension of new powers to mayors and later by efforts to give governors managerial responsibility for state administration. Influenced by a model proposed by the New York Bureau of Municipal Research, the New York Constitutional Convention of 1915 recommended a state reorganization plan that gave the governor greater authority; voters rejected it in a popular referendum. But Illinois legislators enacted a similar reform by a bipartisan vote in 1917. The Illinois Reorganization Act consolidated half of Illinois’ one hundred state boards, agencies, and commissions into nine executive departments, each with a director appointed by the governor. The Department of Finance was charged with preparing a state budget for the governor, who submitted it to the legislature. Similar state reorganizations continued in the 1920s after World War I.32
Administrative reform was partially a response to an enlarged public workforce. Piecemeal data suggest that the number of state government workers grew as much as 100 percent between 1900 and 1915. This rate far exceeded the increase in the general population. City employees followed a similar growth trajectory; Milwaukee doubled its workforce during this period, while New York City’s workforce increased by 80 percent, giving it more employees than any single state government.33
The hiring of additional public workers increased state and local expenditures, which rose about 50 percent between 1900 and 1916 (in per capita, inflation-adjusted dollars), with city spending still outpacing state outlays. Rising public costs placed a greater burden on property tax revenue, which accentuated criticisms about methods of assessing property values and the tax’s inelastic response to economic ups and downs. Consequently, lawmakers looked for alternative revenue sources, such as the taxation of corporations and public utilities (e.g., gas and electric companies), the adoption of or increase in inheritance taxes, and the imposition of fees, such as for motor vehicle registration. Some reformers saw personal income taxes as a logical fiscal accompaniment to a workforce that was increasingly paid in wages and salaries and wealth that was generated from the ownership of stocks and bonds. Wisconsin enacted the first modern income tax in 1911, with Massachusetts and Virginia following in 1916 and New York in 1919.34
The expansion of civic programs, the reform of public administration, and the adoption of new revenue sources substantially enhanced the capacity of cities and states to govern. Numerous scholars have characterized these trends as the beginning of bureaucratic government in the United States, yet the reach of improved administration was still limited. Labor reformers lamented faulty factory inspections. Industrial accidents among miners and railroaders—very dangerous occupations—occurred at substantially higher rates in the United States than in Europe. Cotton dust and open machinery made work in textile mills hazardous to workers’ health. Consumers continued to battle public utilities. Child labor laws in the South were ignored. Determined opposition stymied many progressive proposals, especially those concerning the regulation of business, the rights of labor unions, and social justice issues. Progressive reform developed incrementally; improvements came gradually, not by revolution.35
FEDERAL POLICY INNOVATIONS
Progressivism’s pattern of enlarging the role of government also expanded the national agenda. Washington lawmakers enacted new business regulations (e.g., railroad rates, antimonopoly restrictions, practices of national banks), offered new services and assistance (e.g., aid to states for highways, loan assistance to farmers for irrigation, subsidized agricultural research and education, expanded rural mail delivery), and tapped new revenue sources (e.g., adoption of the Sixteenth Amendment, authorizing a personal income tax). Congress joined the states in enacting new social controls, such as prohibiting interstate traffic in prostitution and banning illiterate immigrants. The US Supreme Court had upheld racial segregation by the states in its 1896 ruling (Plessy v. Ferguson) and added to this legal permissiveness in subsequent rulings.
Federal lawmakers acted on issues concerning consumers and workers, especially if public opinion had been aroused over an issue. Congress passed the 1906 Pure Food and Drug Act, the 1916 Railroad Labor Act (mandating eight-hour days for railroad workers), and the 1914 Anti-Narcotics Act. Congress approved a statute in 1916 that limited child labor, which the Supreme Court subsequently declared unconstitutional. Progressive Era presidents expanded national forest reserves, and Congress created the National Park Service in 1916. Sentiment for political reform was visible in congressional approval of the Seventeenth Amendment, whose ratification mandated the popular election of US senators in every state.
Similarities between reforms at the national and subnational levels occurred in part because municipal and state actions provided policy models, and sometimes lobbying pressure, for federal lawmaking. Limits on workers’ hours, child labor restrictions, antimonopoly actions, and budgeting practices illustrate the flow of policy ideas up the federal ladder. The Pure Food and Drug Act (1906) and the Federal Highway Act (1916), areas pioneered by the states, provide further examples.36 State politics influenced congressional action through constituent pressure and referenda on controversial issues.37 Influence worked in the opposite direction too, such as the federal mandate (1916) that states create highway departments in order to qualify for national highway funds. President Taft’s Commission on Economy and Efficiency was widely replicated in the states. Headed by the former director of New York’s Bureau of Municipal Research, the national commission recommended that states institute executive-based budgeting. Increasingly, the federal system had become a two-way conduit for policy development.
The economic disturbances of 1907–1912 created conditions that advanced fiscal reform in Washington. The stagnation of commerce produced deficits in the US Treasury in 1908, 1909, and 1910, shortfalls that were unacceptable to fiscal conservatives. President Taft acknowledged the impact of the recession in his inaugural address of 1909, when he predicted that the search for tariff reform would require “new kinds of taxation.” The president cautioned against a major cut in expenditures because “the scope of a modern government . . . has been widened far beyond the principles laid down by the old ‘laissez faire’ school.” He supported an excise tax on corporations to raise additional revenue, which Congress enacted in 1909, and he urged lawmakers to approve an income tax amendment to the Constitution, which lawmakers also accepted.38
Growing unemployment and rising consumer prices between 1909 and 1913 provoked wide discussions of the causes and cures. The Democrats pointed to the tariff as the source of inflation. The party endeavored to convince voters that high customs duties drove up prices by fostering corporate monopolies. Because the tariff was the federal government’s main tool for fine-tuning the economy, the Democratic indictment provided a rationale to levy income taxes. Democratic victories in 1910 were instrumental in ratification of the Sixteenth Amendment by the state legislatures. The Democrats’ successes continued in 1912 when they captured the presidency and a congressional majority. Democrats fulfilled their pledges by passing the Underwood Tariff Act on straight party-line votes in both the House and the Senate. The law included a tax on personal income that was designed to cover the shortfall from the reduction in the tariff.39
Levying federal income taxes on individuals and businesses was the most significant legislative reform in the Progressive Era. The income tax not only gave the national government a potent fiscal instrument that tapped the growing affluence of the American economy; it also provided a tool to achieve other policy objectives, such as allowing individuals to purchase homes and donate to charity (via deductions from taxable income). Along with the creation of the Federal Reserve System (another policy related partially to stagflation), the federal government was authorized to implement fiscal and monetary policy. The Democratic majority in Congress also pushed through the Clayton Act, which prohibited interwoven corporate directories (an amendment to the Sherman Antitrust Act) and created the Federal Trade Commission. Both these 1914 measures reflected the widespread animus toward big business, an issue that had festered during the early twentieth century and was accentuated after 1907 by stagflation. At the state level, regulation of banking and public utilities, the creation of tax commissions and workers’ compensation plans, laws limiting the work hours of women and children, and increased state oversight of local finance also had links to the economic climate (see table A.3 in the appendix).
Although it was significant and historic, the new federal involvement in the economy should not be overstated. Federal management of commercial activity occurred in incremental steps, not revolutionary shifts. This was especially true for the enforcement of business regulations; gradual policy adjustments were a political necessity for such legislation to gain approval. The Federal Reserve Banking Act suggests this trend. Banking regulations had been on the agenda of state legislatures and Congress long before the Progressive Era. The 1913 act did not create a single national bank under the supervision of federal appointees, as some had wanted; instead, it provided for a dozen regional banks, with two-thirds of their boards of governors appointed by private member banks in the region. Banks with national charters were required to join the system, but state banks were not. The fragmented and decentralized history of the American polity had a potent influence on the design of national banking policy. Incrementalism also characterized the first personal income tax, which applied to only 1 percent of workers, set very low rates on incomes that qualified for taxation (most did not), and relied on employee compliance to pay the tax in the year after the income was received.40
The limits on federal penetration into business are visible in the Pure Food and Drug Act of 1906, which prohibited adulteration and misbranding of food and drugs and regulated the manufacture and sale of poisonous commodities. The law applied only to interstate commerce (as opposed to business confined wholly within one state). The act neither required a drug to be safe nor set standards for adulteration. Lawmakers failed to create an agency dedicated to enforcing the statute, nor did they adequately fund the Bureau of Chemistry, which was given oversight responsibilities. A 1912 amendment made a drug illegal if its label was both “false and fraudulent,” wording that impeded legal convictions for bogus advertising.41
Washington’s regulation of business corporations was similarly cautious and restrained. The Clayton Act made price discrimination, certain kinds of contracts, and acquisition of a rival firm illegal if the action lessened competition. But the law cited no specific practices as unlawful, putting that determination in the hands of the courts, where antitrust prosecutions were already routed. The Federal Trade Commission, drawing on state models of regulatory boards, was instructed to identify unfair methods of competition. Essentially a fact-finding body, the commission lacked enforcement powers; it could issue “cease and desist” orders to a firm, but it had to refer ongoing violations to the Justice Department for prosecution. The new antitrust laws were as much symbolic as they were an effective oversight of commercial practices. Americans disliked corporate monopolies, but their admiration for free enterprise and limited government tempered their legal rectitude about businesses. The Supreme Court shared this view. Although it broke up Rockefeller’s Standard Oil Corporation into small units because of predatory practices in 1911, the justices held that “reasonable monopolies” were legal. Nine years later the high court ruled in a suit against US Steel that the size of a firm alone was not a violation of the Sherman Antitrust Act. A partial exception to this regulatory posture were laws passed in 1906 and 1910 that allowed the Interstate Commerce Commission to set certain railroad rates.42
Despite this mixed record of regulation, federal administrative capacity expanded in the Progressive Era. The Washington establishment gained twenty-seven new departments, bureaus, and agencies between 1901 and 1916, reflecting increased administrative differentiation. New units were created for agricultural research, forestry, roads, children’s welfare, banking and business, police investigation (a forerunner of the FBI), shipping, and national parks.43 More agencies required more employees. The federal government’s workforce increased from 208,000 in 1899 to 480,000 in 1916, a rate of growth significantly exceeding that of the general population. By the end of the period a majority of the federal workforce was covered by civil service rules. The US Department of Agriculture (USDA) grew from about 2,000 employees in 1895 to nearly 19,000 in 1916. The Office of Public Roads (originally the Office of Road Inquiry) hired 53 people in 1907 and 450 in 1915, the year prior to the enactment of federal grants to states for highways. The US Post Office, the largest federal department, grew from 136,000 employees in 1901 to 212,000 in 1916, during which time rural free delivery, postal savings, and parcel post service began.44
More federal functions and more employees meant greater costs. Federal expenditures rose 42 percent between 1900 and 1916.45 The army and navy accounted for the largest share of these appropriations, and military pensions accounted for the largest single domestic outlay of funds. By 1915 virtually all surviving veterans of the Union army were enrolled as pensioners. Veterans’ benefits, much like Social Security at a later date, represented income support payments for citizens, not government workers. Expenditures for running a department offer a better gauge of administrative activity. The USDA, which had blossomed into a client agency serving farmers and agribusinesses and performed a variety of research activities, received less than $4 million in 1900, compared with $28 million in 1916. Construction of the Panama Canal consumed substantial funds. Spending to run Congress and support the presidency grew as well, reflecting new perks and staff for lawmakers and expanded Secret Service protection for the president. Despite ongoing resistance to bureaucracy and federal expansion, incremental growth in federal agencies, personnel, and expenditures is clearly visible between 1901 and 1917.46
The crystallization of a national administrative regime had its roots in the Gilded Age. Some federal departments had hired experts to direct technical tasks before 1900. The USDA, which led the national government in scientific work, illustrates this trend. Among its professional cadre was Harvey Wiley, head of the USDA’s Division of Chemistry, who became a tireless advocate for the regulation of food and drugs. He guided the Association of Official Agricultural Chemists (whose members worked for the states) in this crusade and invited other professional and interest groups, such as the General Federation of Women’s Clubs, to join this lobbying network.47
Other federal administrators replicated Wiley’s policy advocacy. Gifford Pinchot, chief forester in the USDA and a favorite of Theodore Roosevelt, actively recruited private organizations to implement his ideas about public lands. Roy Stone of the Office of Road Inquiry and his successors in the Office of Public Roads advocated federal highway aid for the states. Logan Page, appointed director in 1905, encouraged the states to create highway departments and orchestrated lobbying support for the 1916 Federal Highway Aid Act, which he helped write. Post office officials, whose inauguration of rural mail delivery sparked interest in road improvement, were active in expanding the department’s mission. The Interstate Commerce Commission, whose work made it intimately familiar with railroad economics, pushed for new legislation. One of the most conspicuous examples of a federal professional who proposed policy reforms was Frederick A. Cleveland, formerly of the New York Bureau of Municipal Research and chair of President Taft’s Commission on Economy and Efficiency. He became one of the nation’s leading spokesmen for the creation of a financial budget under executive supervision. These stories underscore how professionals in federal service acted as promoters of national statebuilding.48
PROGRESSIVISM AND STATEBUILDING
The Progressive Era, recognized as the first broad period of reform in the twentieth century, substantially advanced American statebuilding. Three key trends highlight this development. First, the scope of public authority over existing functions was expanded, as in the case of regulating business and providing assistance for economic development, agricultural research, and education. State governments continued the tradition of imposing moral restrictions, such as on liquor, gambling, boxing, cigarettes, and prostitution. Progressive actions ranged from racial segregation to female suffrage to new forms of taxation and the supervision of elections.
While most of these enactments were incremental adjustments to older civic concerns, some actions represented bolder policy innovations. The federal income tax and Federal Reserve banks gave the national government substantial new authority over the economy. In time, income taxes became Washington’s chief revenue source. The Federal Reserve Board evolved into a tool of macroeconomic stabilization, a role only dimly foreseen in 1913. Both enactments represented practical responses to specific problems of the period, yet over time, these two mechanisms became critical levers in building a more powerful national state.
Second, progressivism forged greater centralization of government. This tendency was visible in the expansion of state oversight of local activities, such as setting standards for teachers, public health, taxation and indebtedness, and financial aid for schools and transportation. State governments copied several administrative innovations initially begun at the municipal level. The national government assumed a larger role in promoting and regulating the economy, such as its oversight of railroads, investigation of business practices, forestry preservation, and promotion of irrigation for western farms. Using its authority under the commerce clause of the Constitution, Congress restricted the interstate transportation of liquor and prostitutes (“white slavery”) and mandated an eight-hour day for railroad workers. Congress voted grants-in-aid to states for agricultural research (beginning in 1887 and later expanded), demonstration farms (1914), rural highways (1916), and vocational education (1917). In 1911 Congress mandated that states match “categoric” grants with their own contributions and required states to observe certain administrative standards as a requirement for receiving federal funds. Federal grants not only forged new cooperative linkages between Washington and the states but also created a mechanism by which Congress could circumvent traditional political impediments to legislating domestic affairs.49
Congress moved gingerly at first with its grant program, which left the framework of dual federalism intact. The ratio of federal to state and local expenditures changed little through 1916; local and state governments continued to spend the most public funds, especially for domestic functions. Yet observers sounded an alarm about cracks in the foundation of federalism. Some worried that an inevitable march toward national control was under way. They could point to a list of statutes in which Congress had blocked (preempted) state interference with national policy. Progressives such as Theodore Roosevelt, as well as business leaders involved with national markets, emphasized the limitations of traditional federalism, which had nurtured a complex matrix of state law and competitive fear of economic harm from new regulations. Prodded by attorneys and others, state lawmakers tried to counter this unevenness by adopting standardized policies in certain areas. A few “uniform state laws” were enacted, but the broader effort at legislative cooperation failed. By 1916 some constitutional experts were predicting the continued erosion of traditional federalism.50
Third, elected executives at all levels of government gained new power in the early twentieth century. Some of this additional authority was conveyed by statute: revised city charters assigned greater powers to mayors, and governors were permitted to veto specific appropriations. Beginning with Illinois’ Reorganization Act of 1917, states allowed governors to create cabinet-style departments similar to the national arrangement. But the enhanced authority of mayors, governors, and the president entailed more than just specific authorizations. The public came to expect executives to assert political leadership. Theodore Roosevelt became the model for the new executive. Always a whirlwind of activity and an instinctive politician, Roosevelt maximized the potential of the governor’s office and then the presidency. He used his national position as a “bully pulpit,” reaching out to the public on behalf of numerous causes. His 1905 State of the Union message totaled fifty pages, touching subjects from A to Z. His 1907 and 1908 messages were even bolder in staking out new directions for federal power. He skillfully courted the press in advocacy of his lengthy agendas. The press, in turn, portrayed the president as the human face of government.51
President Taft lacked Roosevelt’s political skill, but his advocacy of an executive budget and a personal income tax were major policy innovations. He sent drafts of legislation to Congress. President Wilson was an astute political practitioner and a dynamic orator. He used these abilities to cajole Democrats to support ambitious domestic reforms during his first term. All three Progressive Era presidents concurred that social and economic conditions in the United States necessitated a more activist national government, one less bound by older restrictive ideologies. While they all remained committed partisans, they also governed pragmatically. None among this presidential triad dwelled on the older ideological homilies that had impeded national governance in the past. Roosevelt had little tolerance for the observance of states’ rights.52
These three civic trends significantly enhanced the governing capacity of the national state. Some policy innovations evoked fierce opposition and modified or stalled particular reforms, yet the flow of opinion drifted away from laissez-faire toward greater tolerance for the pragmatic exercise of civic authority. Aside from some naval officers and their civilian cheerleaders, such as Roosevelt, who urged the United States to assume a greater role in world affairs, most policy proposals flowed from specific efforts to address problems at home. No grand scheme of statebuilding directed municipal, state, or national policymakers. Yet the multitude of policies adopted during the Progressive Era added block after block to an institutional base that accumulated greater governmental power over a wider scope of operation. Incremental growth within the traditional structure of republican government helps explain the paradox of American statebuilding.