Lincoln Unmasked

by Thomas DiLorenzo

  12

  The Great Railroad Lobbyist

  Senator John Sherman, chairman of the powerful U.S. Senate Finance Committee during the Lincoln administration and brother of General Sherman, explained why the Republican Party nominated and elected Abraham Lincoln: “Those who elected Mr. Lincoln,” the senator said, expected him “to secure to free labor its just right to the Territories of the United States; to protect … by wise revenue laws, the labor of our people; to secure the public lands to actual settlers …; to develop the internal resources of the country by opening new means of communications between the Atlantic and Pacific.”1

  From the perspective of the Republican Party, Lincoln was elected for four reasons: first, to preserve the territories for the white race and to ensure that white laborers would not have to compete for jobs with either slaves or free blacks; second, to sign into law high protectionist tariffs that would benefit Northern manufacturers while harming all consumers, and especially those in the South; third, to give away free land under a Homestead Act, the biggest political patronage program ever; and fourth, to use taxpayer dollars to subsidize railroad corporations, the important financial backbone of the Republican Party. They decided that Abraham Lincoln—the wealthy, skilled trial lawyer/politician/lobbyist from the railroad industry—was the man for the job.

  The Whig Party was always the party of the moneyed elite, and Lincoln was a Whig much longer than he was a Republican. As a member of the Illinois legislature in the 1830s he led his local delegation in a successful Whig Party effort to appropriate some $12 million in taxpayer dollars for subsidies to road-, canal-, and railroad-building corporations. In his book Lincoln and the Railroads, first published in 1927, John W. Starr, Jr., noted how one of Lincoln’s legislative colleagues in Illinois commented that “he seemed to be a born politician” and so “we followed his lead.” Lincoln had grandiose plans, writes Starr. There was to be “a railroad from Galena in the extreme northwestern part of the state”; north of St. Louis “three roads were to radiate”; and “there was also a road to run from Quincy … through Springfield” and “another one from Warsaw … to Peoria”; and yet another “from Pekin … to Bloomington.”2 Unfortunately for Illinois taxpayers, this “leadership” led to a huge financial debacle, with literally no projects being completed and all of the money being either wasted or stolen.

  The whole mess was a disaster for the state government and the taxpayers, but it was a boon to Lincoln’s political and legal careers, catapulting him into position as one of the top railroad industry lobbyists, even before the word lobbyist was coined.

  By 1860 the Illinois Central Railroad was one of the largest corporations in the world. In a company history (cited by Starr), author J. G. Drennan noted that “Mr. Lincoln was continuously one of the attorneys for the Illinois Central Railroad Company from its organization [in 1849] until he was elected president.”3 He was called upon by the company’s general counsel to litigate dozens of cases and was such a corporate insider that he traveled throughout the Midwest in a private rail car with a free pass and was often accompanied by an entourage of Illinois Central executives. This was the real Lincoln, a man diametrically opposed to the false image of the poor, humble, backwoods “railsplitter” that has been presented to generations of American schoolchildren.

  In one case Lincoln successfully defended the Illinois Central against McLean County, Illinois, which wanted to tax the corporation’s property. After winning the case he sent the company a bill for $5,000, an incredible sum for a single case in the 1850s. The man who Lincoln presented his bill to was George B. McClellan, the vice president of the Illinois Central who later became the commanding general of the Army of the Potomac (until Lincoln fired him) and, in 1864, Lincoln’s opponent in the presidential election.

  Starr explains an underhanded scheme that was apparently hatched by Lincoln and McClellan to get Lincoln his fee. McClellan initially refused to pay the fee, stating that his New York City board of directors would never condone paying such a hefty sum to an Illinois “country lawyer.” Lincoln then sued the Illinois Central for his fee. When he appeared in court, however, armed with depositions from other Illinois lawyers swearing that such a fee seemed perfectly appropriate to them, no lawyers for the company showed up. Lincoln was awarded his exorbitant fee by default.

  Lincoln and his friend General George B. McClellan were consummate railroad industry insiders.

  Starr suggests that this whole episode was a ruse used to essentially swindle money out of the company’s board of directors, evidenced by the fact that McClellan continued to employ Lincoln. “Lincoln continued to handle the [Illinois Central’s] litigation afterwards, the same as he had done before.”4

  By the late 1850s it was widely known that “Lincoln’s close relations with powerful industrial interests” were “always potent and present in political counsels.”5 In today’s language, Lincoln was the equivalent of a rich and powerful “K Street lobbyist.” In a great understatement, Starr remarked that “Lincoln’s rise [in politics] was coincident with that of the railroads.”6

  Indeed, in addition to representing the Illinois Central, Lincoln also represented the Chicago and Alton, Ohio and Mississippi, and Rock Island railroads. As soon as the Chicago and Mississippi Railroad was built, he was appointed the local attorney for that corporation. By 1860 he was probably the most sought-after attorney in the entire industry. He was so prominent that the New York financier Erastus Corning offered him the job of general counsel to the New York Central Railroad at a starting salary of $10,000 a year, a huge salary at the time; he turned down the offer.

  Lincoln was a political tool of rich and powerful corporations. Today he would be called a “lobbyist.”

  Lincoln’s insider status allowed him to engage in some very lucrative real estate speculation. On one of his trips by private rail car to participate in litigation on behalf of the Illinois Central, he and his entourage “decided to go to Council Bluffs, Iowa, where he had some real estate investments.”7 “Shortly before that trip,” writes Starr, “Abraham Lincoln had purchased several town lots from his fellow railroad attorney, Norman B. Judd, who had acquired them from the Chicago and Rock Island Railroad.” Council Bluffs at that time was a frontier town, containing about fifteen hundred people. To this day, the parcel of land there that once belonged to Abraham Lincoln is called “Lincoln’s Hill.”

  Why did he invest in real estate in Council Bluffs, Iowa, of all places, when he was surely more familiar with Chicago or Springfield, Illinois, which were larger and more rapidly growing cities? A likely reason is that, as a political and industry insider, Lincoln knew there was a high likelihood that the government would eventually subsidize a transcontinental railroad, and that Council Bluffs would be a good starting point for such a railroad. An acquaintance of his, the renowned railroad industry engineer Grenville Dodge, had told him so.

  When he took office as president, Lincoln called a special session of Congress in July 1861 to propose “emergency” legislation to create the taxpayer-subsidized Union Pacific Railroad. Time was of the essence, for if the war ended quickly and the Southern Democrats returned to Congress, such a project might not fly. “There was no firmer friend of the Union Pacific bill than the president himself,” writes Starr. The bill was passed in 1862 and it gave the president the power to appoint all the directors and commissioners and, more important, it gave him the power “to fix the point of commencement” of the Union Pacific Railroad. Not surprisingly, Lincoln chose Council Bluffs, Iowa, as the eastern terminus of the railroad and, coincidentally, Grenville Dodge became chief engineer for the railroad.

  Lincoln chose Council Bluffs, Iowa, where he had personally invested in real estate, as the eastern terminus for the government-subsidized transcontinental railroad.

  The Pacific Railroad bill was a gigantic political payoff to the Northern business interests that supported Lincoln’s political career and the Republican Party. As Dee Brown wrote in hi
s classic history of the transcontinental railroads, Hear That Lonesome Whistle Blow, when Lincoln signed the bill he “assured the fortunes of a dynasty of American families … the Brewsters, Bushnells, Olcotts, Harkers, Harrisons, Trowbridges, Lanworthys, Reids, Ogdens, Brad-fords, Noyeses, Brooks, Cornells, and dozens of others.”8

  Lincoln had been associated with a powerful clique of New England/New York/Chicago businessmen, including Thomas Clark Durant, Peter Day, Grenville Dodge, and Benedict Reed. These men all had experience in canal and railroad building and financing, and when, in 1857, they were looking for a lawyer to represent their Rock Island and Pacific Railroad, they settled on Abraham Lincoln. These men would later go on to fame and fortune as notorious “robber barons” involved in the government-subsidized transcontinental railroad industry after the war.

  Lincoln’s cherished Pacific Railroad Bill became the mother of all political payoffs.

  In Hear That Lonesome Whistle Blow Dee Brown wrote of how this Northern clique of slick political operators and businessmen “aroused the suspicions of the South” when they lobbied for huge sums of tax dollars—paid for in part with Southern taxes—to be allocated by Congress for the building of a transcontinental railroad across the Northern states.9

  Virtually all of the leading lights of the Republican Party were involved in the scheme. John C. Fremont, who would be a general in Lincoln’s army, was a wealthy Northern California engineer who conducted an extensive engineering survey “to make certain that the most favorable route would end up not in San Diego but in Northern California” where he owned large land holdings.10 Congressman Thaddeus Stevens “received a block of [Union Pacific] stock in exchange for his vote” on the Pacific Railroad bill. He also demanded, as a condition of his “yes” vote, insertion of a clause (in the law) requiring that all iron used in the construction and equipment of said railroad to be American manufacture.11 Stevens was an iron manufacturer from Pennsylvania. At the time, British steel was cheaper than American steel, and Stevens’s “restrictive clause” cost the American taxpayers millions, while likely lining the congressman’s pockets very handsomely indeed.

  Republican congressman Oakes Ames, “who with his brother Oliver manufactured shovels in Massachusetts, became a loyal ally [of the Union Pacific] and helped to pressure the 1864 Pacific Railway Act through the war-corrupted Congress,” Dee Brown wrote.12 It must have taken a lot of shovels to dig railroad beds from Iowa to California.

  Many of the leading lights of the national Republican Party profited very handsomely from the government-subsidized transcontinental railroad.

  During the postwar Grant administration, writes Brown, the Republican Speaker of the House of Representatives, Schuyler Colfax (later Grant’s vice president), visited the western railroad routes to attend a ceremony in his honor. But he wasn’t interested in being honored. “He preferred cash above honors, and back in Washington he eagerly accepted a bundle of Credit Mobilier stock from his fellow congressman Oakes Ames, and thus became a loyal friend of the Union Pacific,” says Dee Brown.13

  Another one of Lincoln’s generals, John Dix, “spent most of his time strutting about Washington in a general’s uniform,” but was in reality the Washington, D.C., lobbyist for the railroads.14 General Sherman himself was sold land at below-market prices by the railroad, and after the war would conduct a decades-long campaign of ethnic genocide against the Plains Indians, admittedly to make way for the government-subsidized railroads.

  After the war Lincoln’s old business associate, Grenville Dodge, the railroad’s chief engineer, proposed making slaves of the Indians instead of killing them, forcing them “to do the grading, with the Army furnishing a guard to make the Indians work, and keep them from running away.”15 In the end, it was apparently decided to kill as many Indians as possible instead, and place the rest on reservations “where they can be watched,” as Sherman once said.

  It is not an exaggeration to say that one of the primary reasons—if not the primary reason—for the creation of the Republican Party was to establish the largest political patronage program in the history of government. This was always the pipe dream of the old Whigs like Abraham Lincoln, who understood that such a system could cement them in power for generations (which of course it did). This dream was achieved beginning with the government-subsidized transcontinental railroads, and no one was more important and influential in achieving this dubious accomplishment than was Abraham Lincoln, the old railroad industry lobbyist.

  13

  The Great Protectionist

  If there is one thing that creates hysteria among the gatekeepers of the Lincoln legend, it is the suggestion that among the causes of the War between the States were economic issues besides slavery in the territories. Usually, the idea is loudly denounced, sneered at, labeled an “old chestnut” (as it has been by “Civil War” historian William C. Davis),1 a “red herring,” or some other kind of strange plant or animal. Searching through the modern literature of the war, one finds relatively little mention of economic issues despite the fact that North and South were consumed for the previous half century by conflicts over tariffs, banking, internal improvements, land policy, and other economic issues. Both Jefferson Davis and Abraham Lincoln mentioned the tariff issue very prominently in their respective first inaugural addresses. They obviously thought it was an important issue of the day. There is a conspiracy of silence over this issue, which should pique the curiosity of any student of American history.2

  The conspiracy is beginning to crumble, helped by the publication of my book, The Real Lincoln, When in the Course of Human Events by Charles Adams, and Tariffs, Blockades, and Inflation by Mark Thornton and Robert B. Ekelund. Thornton and Ekelund argue quite forcefully that “economics is necessary to understand the causes, course, and consequences” of the war, and they cite contemporary economic research showing that a major cause of civil wars throughout the world has been conflicts over international trade policy. The American Civil War of 1861–1865 was no different.

  THE FIRST SHOT IN AMERICA’S TARIFF WAR

  The great conflict between the limited, decentralized government and free-trade Jeffersonians, and the Hamiltonian champions of a more active, centralized, and protectionist state began manifesting itself in a North-South dispute over tariff policy in the early 1820s. In 1824 Henry Clay sponsored a tariff bill that was passed into law and that approximately doubled the average tariff rate. The agricultural South was immediately alarmed, for it was well understood that protectionist tariffs almost exclusively benefited Northern manufacturers while forcing Southerners to pay more for everything from farm tools to woolen blankets. Very little was manufactured in the South at the time, so there were virtually no benefits to a protectionist tariff. To the South, it was all cost and no benefit. The South would abide by a modest “revenue tariff” of 10–15 percent, just sufficient to pay most of the expenses of running the central government, but not a protectionist tariff designed to thwart international competition. Thus, the region’s political leaders saw Henry Clay’s Tariff of 1824 as an instrument of plunder and a break with the constitutional contract that called for taxes that were uniform and proportioned to the states according to population.

  The breakdown of the vote in Congress on the Tariff of 1824 clearly shows that the boundries of a regional conflict had already been defined. Of the 107 House of Representatives votes in favor of the tariff, only three came from Southern states (2.8 percent of the vote). Sixty-four Southern congressmen voted no. In the U.S. Senate, a mere two of twenty-five yes votes came from Southern states (8 percent of the vote); fourteen Southern senators voted nay.

  Emboldened by their success with the tariff increase of 1824, the economic nationalists in Congress, led once again by Lincoln’s political idol, Henry Clay, succeeded in increasing the tariff rate even further, to an average rate of almost 50 percent in 1828. This “Tariff of Abominations” was loudly denounced throughout the South, especially in South Carolina, home of the
port of Charleston. As recounted in The Nullification Controversy in South Carolina by historian Chauncy Boucher, South Carolina’s politicians denounced the tariff as a “usurpation” and as a “system of robbery and plunder” which “made one section tributary to another,” only so that “corrupt politicians” of the North could “buy up partisans and retain power.”3 They were right, of course.

  The North began plundering the South with protectionist tariffs as early as 1824.

  There were a few Southern protectionists and advocates of “internal improvement” spending by government, but in general, the South was adamantly opposed to the whole package of protectionist tariffs, corporate welfare, and central banking that would become the keystone of the Northern-dominated Whig Party for the next twenty-five years and, after that, of the Republican Party. In 1825 the South Carolina legislature adopted a set of resolutions condemning protectionist tariffs, government subsidies to corporations, and a national bank.

  Virginia, North Carolina, and Alabama joined South Carolina in denouncing the Tariff of Abominations while Massachusetts, Ohio, Pennsylvania, Rhode Island, Indiana, and New York responded with opposing resolutions in support of it. Under the new law some items, such as woolen blankets manufactured in New England and in Europe, had tariff rates of 200 percent.

  Under the leadership of John C. Calhoun, South Carolina nullified the 1828 Tariff of Abominations, following a course of action pursued by other states’ rights advocates, including Jefferson, when fighting unconstitutional federal usurpations of power. On November 19, 1832, a political convention was convened that adopted an ordinance of nullification, declaring the tariff act was “unauthorized by the Constitution of the United States, and violate[d] the true meaning and intent thereof.” It was therefore “null, void, no law, nor binding upon this State, its officers, or citizens.” As of February 1, 1833, all enforcement of tariff collection in South Carolina was to be suspended.