President Grover Cleveland’s handling of the depression only made a bad situation worse. Railroad executive James J. Hill warned the president, “Business is at a standstill and the people are becoming thoroughly aroused. Their feeling is finding expression about as it did during the War of the Rebellion [Civil War].” With talk of civil war in the air, the Cleveland administration faced protest marches and labor strife. In the spring of 1894, Jacob Coxey, a wealthy businessman and Populist reformer from Ohio, and his associate, Carl Browne, led a march on Washington, D.C., demanding that Cleveland and Congress initiate a federal public works program to provide jobs for the unemployed. Coxey had previously supported the Greenback Party, which advocated inflating the money supply with paper currency to stimulate the economy and help those in distress. Though highly critical of the favored few who dominated the federal government, Coxey had faith that if “the people . . . come in a body like this, peaceably to discuss their grievances and demanding immediate relief, Congress . . . will heed them and do it quickly.” For him, “relief ” meant both creating jobs and increasing the money supply. After traveling for a month from Ohio, Coxey led a parade of some five hundred unemployed people into the nation’s capital. Attracting thousands of spectators, Coxey’s army attempted to mount their protest on the grounds of the Capitol building. In response, police broke up the demonstration and arrested Coxey for trespassing. Cleveland turned a deaf ear to Coxey’s demands for federal relief and also disregarded protesters participating in nearly twenty other marches on Washington.
In the coming months, Cleveland’s political stock plummeted further. He responded to the Pullman strike in the summer of 1894 by obtaining a federal injunction against the strikers and dispatching federal troops to Illinois when the workers disobeyed it. The president’s action won him high praise from the railroads and conservative business interests, but it showed millions of American workers that the Cleveland administration did not have a solution for ending the suffering caused by the depression. From the outset of his term, the president had made his intentions about government assistance clear: “While the people should patriotically and cheerfully support their Government, its functions do not include the support of the people.” In normal times, these words reflected the prevailing philosophy of self-help that most Americans shared, but in the midst of a severe depression they sounded heartless.
Making matters worse, Cleveland convinced Congress to repeal the Sherman Silver Purchase Act. This angered western miners, who relied on strong silver prices, along with farmers in the South and Great Plains who were swamped by mounting debt. At the same time, the removal of silver as a backing for currency caused private investors to withdraw their gold deposits from the U.S. Treasury. To keep the government financially solvent, Cleveland worked out an agreement with a syndicate led by J. P. Morgan to help sell government bonds, a deal that netted the businessmen a huge profit. In the midst of economic suffering, this deal looked like a corrupt bargain between government and the rich designed to ensure that the rich got richer as the poor got poorer.
See Document 17.5 for one cartoonist’s depiction of the debt crisis.
In 1894 Congress also passed the Wilson-Gorman Act, which raised tariffs on imported goods. Intended to protect American businesses by keeping the price of imported goods high, it also deprived foreigners of the necessary income with which to buy American exports. This drop in exports did not help economic recovery. The Wilson-Gorman Act did include a provision that the Populists and other reformers endorsed: a progressive income tax of 2 percent on all annual earnings over $4,000. No federal income tax existed at this time, so even this mild levy elicited cries of “socialism” from conservative critics, who challenged the tax in the courts. They found a receptive audience in the Supreme Court. In Pollack v. Farmers Loan and Trust (1895), the justices, who had already struck down a number of attempts to regulate business, declared the income tax unconstitutional and denounced it as the opening wedge in “a war of the poor against the rich; a war constantly growing in intensity and bitterness.”
With Cleveland’s legislative program in shambles and his inability to solve the depression abundantly clear, the Democrats suffered a crushing blow at the polls. In the congressional elections of 1894, the party lost an astonishing 120 seats in the House. This defeat offered a preview of the political shakeup that loomed ahead.