During the Panic of 1893, President Grover Cleveland attempted to protect dwindling US gold reserves by making the unpopular decision to repeal the Sherman Silver Purchase Act of 1890. Cleveland called for a special session of Congress and on August 8, 1893, delivered a message arguing that the law was contributing heavily to the depletion of the US gold supply. Cleveland called upon Congress to enact gold and silver standards that were reflective of the policies of other countries, thereby stabilizing gold and silver sales on the international stage.
Summary Overview
During the Panic of 1893, President Grover Cleveland attempted to protect dwindling US gold reserves by making the unpopular decision to repeal the Sherman Silver Purchase Act of 1890. Cleveland called for a special session of Congress and on August 8, 1893, delivered a message arguing that the law was contributing heavily to the depletion of the US gold supply. Cleveland called upon Congress to enact gold and silver standards that were reflective of the policies of other countries, thereby stabilizing gold and silver sales on the international stage.
Defining Moment
During the late 1880s, concerns arose about the sustainability of the explosive economic growth the United States had experienced following the Civil War. Farmers sought debt relief, calling for cheaper paper currency to pay their bills, especially when droughts wiped out much of their crops. By this period, the nation had gained more states, many of which were in mineral-rich areas of the Midwest and mountain regions. The increased number of silver mines from those states was flooding the market with their product, thus lowering the price of silver both in the United States and worldwide.
In 1890, the so-called Free Silver movement spurred a push in Congress for a solution to the country’s rampant deflation. Ohio senator John Sherman, along with fellow Ohio senator and future president William McKinley, produced a bill known as the Sherman Silver Purchase Act, which was signed into law in June of that year. The bill required the government to purchase millions of ounces of silver using paper money that would be redeemable for either silver or gold coins. The government’s purchases would, in theory, drive up the price of silver and spur inflation, thereby serving the interests of both mine owners and farmers. The government had already been required to purchase millions of ounces of silver by the 1878 Bland-Allison Act, which had been passed in a similar attempt to reinvigorate the American economy, and advocates of the act saw the need to expand greatly upon this premise.
By 1893, however, it had become clear to many that the Sherman Silver Purchase Act was not as effective as its proponents had hoped. Most notably, Americans preferred to redeem their paper money for gold rather than silver, thus drawing heavily on American gold reserves. Meanwhile, a crisis was brewing in the American economy. Railroads, which had been built throughout the country, were by that point overextended. Some fell to bankruptcy and receivership, and many banks, whose gold supplies had dwindled, also closed their doors. The Panic of 1893, as it was known, spurred a depression that would last until 1897.
President Cleveland and others believed that the Sherman Silver Purchase Act was one of the major causes of the panic. During the summer of 1893, he called a special session of Congress to debate the law’s repeal. The move would be widely unpopular, as the law had the support of some of the most powerful industries in the United States, so Cleveland needed to tread lightly but deliberately. With the aid of his advisers, particularly Attorney General Richard Olney, Cleveland issued a carefully worded message to the members of Congress, calling for repeal but attempting to avoid offending the law’s many supporters.
Author Biography
Stephen Grover Cleveland was born in Caldwell, New Jersey, on March 18, 1837. His father died when Cleveland was sixteen, so he opted not to attend college and instead worked to support his large family. After working as a law clerk in Buffalo, New York, Cleveland was admitted to the bar at twenty-two, despite having no college education. During the Civil War, he served as assistant district attorney in Erie County, New York. In 1870, he was elected sheriff of that county, and he was later elected mayor of Buffalo. In light of his success as a reformer, the Democratic Party nominated him for governor of New York, a position he assumed in 1883. The following year, Democrats and reform Republicans (known as Mugwumps) collectively helped Cleveland win the presidency. He was defeated by Republican challenger Benjamin Harrison in the presidential election of 1888 but returned to office in 1893, becoming the only US president to serve two nonconsecutive terms. Despite winning a second term, his hard stance with organized labor and the ongoing economic depression cost him favor in his own party. He left the White House in 1897 and retired in Princeton, New Jersey, where he died on June 24, 1908.
Document Analysis
Cleveland’s message to Congress, delivered in August 1893, was designed to identify the economic crisis and its causes as well as prompt Congress to react appropriately. He begins his message by explaining that the special session was called to enact true reform and not what he dubs “unsound” fiscal policies, such as the Sherman Silver Purchase Act. The act, in Cleveland’s opinion, had done more damage than good. Cleveland therefore urges Congress to take bipartisan action to repeal the 1890 law.
Through his message, Cleveland reminds senators and representatives of the ongoing fiscal crisis. Banking institutions and business enterprises once considered juggernauts on the open markets were closing their doors. Unemployment was spiking, and gold reserves were depleted. However, this crisis was, according to Cleveland, not the product of some catastrophic event, nor was it some natural retraction that would be expected after a long period of explosive growth. Rather, Cleveland argues, the panic was the result of the Sherman Silver Purchase Act of 1890. This law was creating unnecessary parity between gold and silver, rapidly draining gold reserves and fostering a general sense of fear among investors and business enterprises. The law, he explains, was introduced to settle the “long struggle” between Free Silver advocates and conservatives. However, the act’s provisions had major implications for the Treasury Department, on whose discretion (which the law hampered, according to Cleveland) the country relied to guard against fiscal instability.
The main problem with the act, according to the president, was the shortage of gold it caused. Because people were redeeming the newly issued paper money for gold, the country’s gold reserves were being depleted at an alarming rate. Even if substantial investment in gold returned the reserves to their previous levels, the act would only continue to drain these reserves. The only course of action, he states, was to repeal the Sherman Silver Purchase Act.
Cleveland also uses the message to criticize lawmakers for putting the United States at a disadvantage in comparison to the rest of the world. The US government, he urges, should eschew “financial experiments” such as the Sherman Silver Purchase Act and instead enact “sound and stable” currency reform. Repealing the law would likely prove unpopular, he notes, as some business owners and speculators profited during the years it was in force. Despite this, Cleveland argues that Congress must act quickly to prevent the act from causing any further harm to the American economy.
Essential Themes
In his message to Congress, Cleveland focuses on identifying the crisis at hand and establishing the Sherman Silver Purchase Act of 1890 as its cause. He understood that its repeal would not be a popular move, but in his estimation, the depletion of the nation’s gold reserves and the continuation of the developing fiscal depression required immediate action, regardless of the political consequences.
Cleveland’s original message allegedly contained much more pointed and critical language, but he reportedly toned down that verbiage in order to appeal to both sides of the political aisle. Still, his address to Congress nevertheless refers to the law as an “experiment” and notes that no other nation in the world shared the view that such an experimental move should be taken. Indeed, he suggests, this experiment was ill-conceived, removing the Treasury’s typical discretion over gold and silver prices. The perceived benefits were never realized, he argues, but the risks were clear.
In admitting to Congress that there would be many influential parties who would oppose the repeal of the law, Cleveland revealed that he had a clear understanding of the multifaceted nature of the issue. At the same time, he was solidly in favor of repealing the Silver Purchase Act, having weighed the benefits of the law against their harmful effects on the nation and found them lacking. He was ultimately successful in convincing Congress of the law’s dangerous financial consequences, and the Sherman Silver Purchase Act was repealed in October of 1893.
