Dallas Tariff - The Federal Deficit and The Tariff Debate

The Federal Deficit and The Tariff Debate

In December 1815, Treasury Secretary Alexander J. Dallas presented a federal budget report to Congress projecting a substantial government deficit by the end of 1816. Though his budget figures were not in dispute, the means of raising the funds were, and proposals for direct or excise taxes were generally unpopular. Secretary Dallas called for a limited protective tariff on manufactures to forestall the deficit. His proposal provoked opposition from two economic sectors: commerce and agriculture.

Commercial maritime centers in New England and the Mid-Atlantic states had anticipated a lucrative import and export exchange with the post-war reopening of European and global markets. A protective tariff might provoke retaliatory measures, impeding free trade and profits.

Agrarians in most regions of the US were also advocates of open markets. Northerners, like most Southerners, were still farmers (84% for the whole country). The North, however, was increasingly industrial, with 20 percent of its workforce engaged in manufacturing, compared to 8 percent in the South. Southerner planters, committed to a pastoral slave-based culture and economy, were net consumers of manufactured goods – goods which would cost more under a tariff regime. The South expressed hostility to the measure throughout the debates, but a substantial number ultimately were compelled to consider its protective advantages.

Support for the duties was strongest in manufacturing centers, the immediate beneficiaries of the protection, particularly in Pennsylvania and New York. The tariff was also popular in the Kentucky, among those who hoped to develop new textile industries weaving locally grown hemp. Economic interests aside, “both protectionists and freetraders were in agreement that the country needed more revenue”