Dallas Tariff - The Panic of 1819 and The End of Southern Protectionism

The Panic of 1819 and The End of Southern Protectionism

The tariff of 1816 supplied comfortable federal surpluses from 1817 to 1819; even with the scheduled reduction in duty rates for 1819, the tariff was expected to provide sufficient revenue.

The Panic of 1819 caused an alarming, but temporary drop in the projected federal revenue for 1820. Manufacturers and other protectionists, as well as agrarian anti-protectionists, agreed that the existing tariff of 1816 would perform adequately during the economic recovery. Secretary Dallas warned that any increase in customs on cotton, wool and iron during the economic crisis would actually depress revenues further.

Protectionists were eager to distance themselves from the revenue issue – if revenues were adequate, they could hardly argue for an increase in duties. Manufacturers sought a new argument to support higher tariffs – economic distress due to the downturn. In reality, the Panic had benefited manufacturing by causing a drop in the price of raw materials; even as the retail sales of the cotton goods plummeted, so did the wholesale cost of raw cotton - textile producers could still turn a profit. The primary producers in the agricultural South, however, saw the value of their goods decline and sell at a loss.

By 1820, the support for higher tariffs was less an argument for government revenue, than an effort by Western and Northern interests to establish protection as a principal of economic national well-being. Unlike the tariff in 1816, the tariff legislation in 1820 included higher duties and a long list of new items, and the duties were to be permanent. No longer a mere expedient, this tariff reflected the new loose constructionist principles of the National Republicans, deviating from the strict constructionist requirements of the Democratic-Republican wing of the party. This the Southern agrarians could not abide, when no external threat to the nation at large remained.

Historian Norris W. Preyer summarized the shift in Southern opinion this way:

By 1820 the South realized that the earlier arguments and appeals of protectionism were no longer valid. In 1816 it was not a desire for manufacturing, but a combination of prosperity, patriotism, and promises that had swayed Southerners. None of these factors now existed to influence them. One consideration, however, which had always been a strong influence on the thinking of Southerners still remained – the need to defend their economic interests. Now, with no other views to challenge or obscure this desire, the South turned almost unanimously against the tariff bill of 1820. The brief Southern experiment in supporting protection had come to an end, and from then on that section would consistently oppose all protective tariffs.