Thirty Years' View (Vol. II of 2)

CHAPTER LIII.

REFINED SUGAR AND RUM DRAWBACKS: THEIR ABUSE UNDER THE COMPROMISE ACT OF 1833: MR. BENTON'S SPEECH

Mr. Benton rose to make the motion for which he had given notice on Friday last, for leave to bring in a bill to reduce the drawbacks allowed on the exportation of rum and refined sugars; and the bounties and allowances to fishing vessels, in proportion to the reduction which had been made, and should be made, in the duties upon imported sugars, molasses and salt, upon which these bounties and allowances were respectively granted.

Mr. B. said that the bill, for the bringing in of which he was about to ask leave, proposed some material alteration in the act of 1833, for the modification of the tariff, commonly called the compromise act; and as that act was held by its friends to be sacred and inviolable, and entitled to run its course untouched and unaltered, it became his duty to justify his bill in advance; to give reasons for it before he ventured to submit the question of leave for its introduction; and to show, beforehand, that here was great and just cause for the measure he proposed.

Mr. B. said it would be recollected, by those who were contemporary with the event, and might be seen by all who should now look into our legislative history of that day, that he was thoroughly opposed to the passage of the act of 1833; that he preferred waiting the progress of Mr. Verplanck's bill; that he opposed the compromise act, from beginning to end; made speeches against it, which were not answered; uttered predictions of it, which were disregarded; proposed amendments to it, which were rejected; showed it to be an adjournment, not a settlement, of the tariff question; and voted against it, on its final passage, in a respectable minority of eighteen. It was not his intention at this time to recapitulate all the objections which he then made to the act; but to confine himself to two of those objections, and to those two of them, the truth and evils of which TIME had developed; and for which evils the public good demands an immediate remedy to be applied. He spoke of the drawbacks and allowances founded upon duties, which duties were to undergo periodical reductions, while the drawbacks and allowances remained undiminished; and of the vague and arbitrary tenor of the act, which rendered it incapable of any regular, uniform, or safe execution. He should confine himself to these two objections; and proceed to examine them in the order in which they were mentioned.

At page 208 of the Senate journal, session of 1832-33, is seen this motion: "Moved by Mr. Benton to add to the bill a section in the following words: 'That all drawbacks allowed on the exportation of articles manufactured in the United States from materials imported from foreign countries, and subject to duty, shall be reduced in proportion to the reduction of duties provided for in this act.'" The particular application of this clause, as explained and enforced at the time, was to sugar and molasses, and the refined sugar, and the rum manufactured from them.

As the laws then stood, and according to the principle of all drawbacks, the exporters of these refined sugars and rum were allowed to draw back from the Treasury precisely as much money as had been paid into the Treasury on the importation of the article out of which the exported article was manufactured. This was the principle, and this was the law; and so rigidly was this insisted upon by the manufacturing and exporting interest, that only four years before the compromise act, namely, in 1829, the drawback on refined sugars exported was raised from four to five cents a pound upon the motion of General Smith, a then senator from Maryland; and this upon an argument and a calculation made by him to show that the quantity of raw sugar contained in every pound of refined sugar, had, in reality, paid five instead of four cents duty. My motion appeared to me self-evidently just, as the new act, in abolishing all specific duties, and reducing every thing to an ad valorem duty of twenty per centum, would reduce the duties on sugar and molasses eventually to the one-third or the one-fourth of their then amount; and, unless the drawback should be proportionately reduced, the exporter of refined sugars and rum, instead of drawing back the exact amount he had paid into the Treasury, would in reality draw back three or four times as much as had been paid in. This would be unjust in itself; and, besides being unjust, would involve a breach of the constitution, for, so much of the drawback as was not founded upon the duty, would be a naked bounty paid for nothing out of the Treasury. I expected my motion to be adopted by a unanimous vote; on the contrary, it was rejected by a vote of 24 to 18;2 and I had to leave it to Time, that slow, but sure witness, to develope the evils which my arguments had been unable to show, and to enforce the remedies which the vote of the Senate had rejected. That witness has come. Time, with his unerring testimony, has arrived. The act of 1833 has run the greater part of its course, without having reached its ultimate depression of duties, or developed its greatest mischiefs; but it has gone far enough to show that it has done immense injury to the Treasury, and must continue to do it if a remedy is not applied. Always indifferent to my rhetoric, and careful of my facts – always leaving oratory behind, and laboring to establish a battery of facts in front – I have applied at the fountain head of information – the Treasury Department – for all the statistics connected with the subject; and the successive reports which had been received from that department, on the salt duties and the fishing bounties and allowances, and on the sugar and molasses duties, and the drawbacks on exported rum and refined sugar, and which had been printed by the order of the Senate, had supplied the information which constituted the body of facts which must carry conviction to the mind of every hearer.

Mr. B. said he would take up the sugar duties first, and show what had been the operation of the act of 1833, in relation to the revenue from that article, and the drawbacks founded upon it. In document No. 275, laid upon our tables on Friday last, we find four tables in relation to this point, and a letter from the Register of the Treasury, Mr. T. L. Smith, describing their contents.

These tables are all valuable. The whole of the information which they contain is useful, and is applicable to the business of legislation, and goes to enlighten us on the subject under consideration; but it is not in my power, continued Mr. B., to quote them in detail. Results and prominent facts only can be selected; and, proceeding on this plan, I here show to the Senate, from table No. 1, that as early as the year 1837 – being only four years after the compromise act – the drawback paid on the exportation of refined sugar actually exceeded the amount of revenue derived from imported sugar, by the sum of $861 71. As the duties continued to diminish, and the drawback remained the same, this excess was increased in 1838 to $12,690; and in 1839 it was increased to $20,154 37. Thus far the results are mathematical; they are copied from the Treasury books; they show the actual operation of the compromise act on this article, down to the end of the last year. These are facts to pause at, and think upon. They imply that the sugar refiners manufactured more sugar than was imported into the United States for each of these three years – that they not only manufactured, but exported, in a refined state, more than was imported into the United States, about 400,000 lbs. more the last of these years – that they paid duty on these quantities, not leaving a pound of imported sugar to have been used or duty paid on it by any other person – and not leaving a pound of their own refined sugar to be used in the United States. In other words, the whole amount of the revenue from brown and clayed sugars was paid over to 29 sugar refiners from 1837: and not only the whole amount, but the respective sums of $861 71, and $12,690, and $20,154 37, in that and the two succeeding years, over and above that amount. This is what the table shows as far as the act has gone; and as we know that the refiners only consumed a small part of the sugar imported, and only exported a part of what they refined, and consequently only paid duty on a small part, it stands to reason that a most enormous abuse has been committed – the fault of the law allowing them to "draw back" out of the Treasury what they had never put into it.

The table then goes on to show the prospective operation of the act for the remainder of the time which it has to run, and which will include the great reductions of duty which are to take place in 1841 and 1842; and here the results become still more striking. Assuming the importation of each succeeding year to be the same that it was in 1839, and the excess of the drawback over the duties will be, for 1840, $37,343 38; for 1841, the same; for 1842, $114,693 94; and for 1843, the sum of $140,477 45. That is to say, these refiners will receive the whole of the revenue from the sugar tax, and these amounts in addition, for these four years; when they would not be entitled, under an honest law, to more than the one fortieth part of the revenue – which, in fact, is more than they received while the law was honest. These will be the bounties payable out of the Treasury in the present, and in the three succeeding years, provided the importation of sugars shall be the same that it was in 1839; but will it be the same? To this question, both reason and experience answer in the negative. They both reply that the importation will increase in proportion to the increased profit which the increasing difference between the duty and the drawback will afford; and this reply is proved by the two first columns in the table under consideration. These columns show that, under the encouragement to importation already afforded by the compromise act, the import of sugar increased in six years from 1,558,971 pounds, costing $72,336, to 11,308,561 pounds, costing $554,119. Here was an enormous increase under a small inducement compared to that which is to follow; so that we have reason to conclude that the importations of the present and ensuing years, unless checked by the passage of the bill which I propose to bring in, will not only increase in the ratio of the past years, but far beyond it; and will in reality be limited only by the capacity of the world to supply the demand: so great will be the inducement to import raw or clayed sugars, and export refined. The effect upon our Treasury must be great. Several hundred thousand dollars per annum must be taken from it for nothing; the whole extracted from the Secretary of the Treasury in hard money; his reports having shown us that, while paper money, and even depreciated paper, is systematically pressed upon the government in payment of duties, nothing but gold and silver will be received back in payment of drawbacks. But it is not the Treasury only that would suffer: the consumers of sugar would come in for their share of the burden: the drawback will keep up the price; and the home consumer must pay the drawback as well as the government; otherwise the refined sugar will seek a foreign market. The consumers of brown sugar will suffer in the same manner; for the manufacturers will monopolize it, and refine it, and have their five cents drawback, either at home or abroad. Add to all this, it will be well if enterprising dealers shall not impose domestic sugars upon the manufacturers, and thus convert the home crop into an article entitled to drawback.

Such are the mischiefs of the act of 1833 in relation to this article; they are great already, and still greater are yet to come. As early as 1837, the whole amount of the sugar revenue, and $861,71 besides, was delivered over to some twenty odd manufacturers of refined sugars! At this day, the whole amount of that revenue goes to these few individuals, and $37,343,38 besides. This is the case this year. Henceforth they are to receive the whole amount of this revenue, with some hundreds of thousands of dollars besides, to be drawn from other branches of revenue, unless this bill is passed which I propose to bring in. This is the effect of the act, dignified with the name of compromise, and hallowed by the imputed character of sacred and inviolable! It turns over a tax levied from seventeen millions of people on an article of essential comfort, and almost a necessary; it turns over this whole tax to a few individuals; and that not being enough to satisfy their demand, they receive the remainder from the National Treasury! It violates the constitution to the whole extent of the excess of the drawback over the duty. It subjects the Treasury to an unforeseen amount of undue demands. It deprives the people of the whole benefit of the reduction of the sugar tax, provided for by the act itself; and subjects them to the mercies of those who may choose to monopolize the article for refinement and exportation. The whole number of persons into whose hands all this money and power is thrown, is, according to a statement derived from Gov. Wolf, the late collector of the customs at Philadelphia, no more than own the 29 sugar refineries; the whole of which, omitting some small ones in the West, and three in New Orleans, are situate on the north side of Mason and Dixon's line. Members from the South and West complain of the unequal working of our revenue system – of the large amounts expended in the northeast – the trifle expended South and West. But, why complain? Their own improvident and negligent legislation makes it so. This bill alone, in only one of its items – the sugar item – will send millions, before 1842, to the north side of that famous line: and this bill was the concoction, and that out of doors, of one member from the South and one more from the West.

Mr. Benton would proceed to the next article to the effect upon which, of the compromise act, he would wish to call their attention; and that article was imported molasses, and its manufacture, in the shape of exported rum. On this article, and its manufacture, the operation of the act was of the same character, though not to the same degree, that it was on sugars; the duties were reduced, while the drawback remained the same. This was constantly giving drawback where no duty had been paid; and in 1842 the whole of the molasses tax will go to these rum distillers – giving the legal implication that they had imported all the molasses that came into the United States, and paid duty on it – and then exported it all in the shape of rum – leaving not a gallon to have been consumed by the rest of the community, nor even a gallon of their own rum to have been drank in the United States. All this is clear from the regular operation of the compromise act, in reducing duties without making a corresponding reduction in the drawbacks founded upon them. But is there not to be cheating in addition to the regular operation of the act? If not, we shall be more fortunate than we have been heretofore, and that under the circumstances of greater temptation. It is well known that whiskey can be converted into New England rum, and exported as such, and receive the drawback of the molasses duty; and that this has been done just as often as the price of whiskey (and the meanest would answer the purpose) was less than the cost of molasses. The process was this. Purchase base whiskey at a low rate – filtrate it through charcoal, to deprive it of smell and taste – then pass it through a rum distillery, in company with a little real rum – and the whiskey would come out rum, very fit to be sold as such at home, or exported as such, with the benefit of drawback. All this has been done, and has been proved to be done; and, therefore, may be done again, and certainly will be done, under the increased temptation which the compromise act now affords, and will continue to afford, if not amended as proposed by the bill I propose to bring in. It was proved before a committee of the House of Representatives in the session of 1827-8. Mr. Jeromus Johnson, then a member of Congress from the city of New York, now a custom-house officer in that city, testified directly to the fact. To the question: "Are there not large quantities of whiskey used with molasses in the distillation of what is called New England rum?" He answered: "There are:" and that when mixed at the rate of only four gallons to one, and the mixture run through a rum distillery – the whiskey previously deprived of its taste and smell by filtration through charcoal – the best practised rum drinker could not tell the difference – even if appealed to by a custom-house officer. That whiskey is now used for that purpose, is clearly established by the table marked B. That table shows that the importation of foreign molasses for the year 1839 was 392,368 gallons; and the exportation of distilled rum for that quantity was 356,699 gallons; that is to say, nearly as many gallons of rum went out as of molasses came in; and, admitting that a gallon of good molasses will make a gallon of rum, yet the average is below it. Inferior or common molasses falls short of producing gallon for gallon by from 5 to 71⁄2 per cent. Now make an allowance for this deficiency; allow also for the quantity of foreign molasses consumed in the United States in other ways; allow likewise for the quantity of rum made from molasses, and not exported, but consumed at home: allow for these three items, and the conviction becomes irresistible, that whiskey was used in the distillation of rum in the year 1839, and exported with the benefit of drawback! and that such will continue to be the case (if this blunder is not corrected), as the duty gets lower and the temptation to export whiskey, under the disguise of New England rum, becomes greater. After 1842, this must be a great business, and the molasses drawback a good profit on mean whiskey.

Putting these two items together – the sugar and the molasses drawbacks – and some millions must be plundered from the Treasury under the preposterous provisions of this compromise act.

CHAPTER LIV.

FISHING BOUNTIES AND ALLOWANCES, AND THEIR ABUSE: MR. BENTON'S SPEECH: EXTRACTS

The bill which I am asking leave to introduce, proposes to reduce the fishing bounties and allowances in proportion to the reduction which the salt duty has undergone, and is to undergo; and at the threshold I am met by the question, whether these allowances are founded upon the salt duty, and should rise and fall with it, or are independent of that duty, and can be kept up without it? I hold the affirmative of this question. I hold that the allowances rest upon the duty, and upon nothing else, and that there is neither statute law nor constitution to support them on any other foundation. This is what I hold: but I should not have noticed the question at this time except for the issue joined upon it between the senator from Massachusetts who sits farthest on the other side (Mr. Davis), and myself. He and I have made up an issue on this point; and without going into the argument at this time, I will cite him to the original petition from the Massachusetts legislature, asking for a drawback of the duties, or, as they styled it, "a remission of duties on all the dutiable articles used in the fisheries; and also premiums and bounties: " and having shown this petition, I will point to half a dozen acts of Congress which prove my position – hoping that they may prove sufficient, but promising to come down upon him with an avalanche of authorities if they are not.

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1

Preamble to the act of 34th of Henry viii.

Whereas divers and sundry persons craftily obtained into their hands great substance of other men's goods, do suddenly flee to parts unknown, or keep their houses, not minding to pay or restore to any of their creditors, their debts and duties, but at their own wills and own pleasures consume the substance obtained by credit of other men for their own pleasures and delicate living, against all reason, equity, and good conscience.

2

The following was the vote:

Yeas – Messrs. Benton, Buckner, Calhoun, Dallas, Dickerson, Dudley, Forsyth, Johnston, Kane, King, Rives, Robinson, Seymour, Tomlinson, Webster, White, Wilkins, and Wright – 18.

Nays – Messrs. Bell, Bibb, Black, Clay, Clayton, Ewing, Foot, Grundy, Hendricks, Holmes, Knight, Mangum, Miller, Moore, Naudain, Poindexter, Prentiss, Robbins, Silsbee, Smith, Sprague, Tipton, Troup, Tyler – 24.