The election of Wilson was significant in several respects. First, it brought the Democrats back to power for the first time since the Civil War. The party controlled not only the White House but both houses of Congress as well, which had happened only briefly (1893–95) under Cleveland. The election also represented the political resurgence of the South. Despite spending most of his working life in the North, Wilson was born and raised in the South. In addition to making William Jennings Bryan, who had long enjoyed strong southern support, his secretary of state, Wilson appointed a number of other southerners to the Cabinet and Colonel Edward House of Texas as his chief political advisor. Because of the seniority system, the chairs of many key House and Senate committees were southern Democrats.
Tariff and banking reform. Staying true to his campaign promises, Wilson tackled the tariff issue first. The Underwood‐Simmons Tariff (1913) was the first law to substantially lower rates in 50 years, and the free list of goods, on which no import duties were charged, was expanded to include iron, steel, raw wool, and sugar. To make up for the revenue shortfall that the reduction in rates caused, the law included a provision for implementing the federal income tax provided for in the just‐ratified Sixteenth Amendment. It levied a tax of one percent on all incomes over $4,000 (the majority of Americans made considerably less than that and therefore paid no income tax), with the tax rate going up to 7 percent for the highest earners. Wilson's most important domestic program, however, was the reorganization of the nation's banking system.
A congressional investigation found that the country's credit and money policies were largely controlled by a handful of eastern banks. The administration's response to this discovery was the creation of the Federal Reserve System. Under the Federal Reserve Act (1913), Federal Reserve banks were set up in 12 regions across the United States. These were, in effect, “banks for banks,” and they became the depositories for all national banks and those state banks that wished to join. The Federal Reserve banks took over the outstanding loans of their members in return for Federal Reserve notes, or paper money. The Federal Reserve Board, appointed by the president, oversaw the system and, by setting the interest rates charged on loans to its member banks, could seriously impact the economy. Lower interest rates tended to stimulate business by making more money available for expansion, while higher rates helped control economic growth and cap inflation.
Antitrust legislation. The cornerstone of Wilson's antitrust policy was the Federal Trade Commission (1914) which was intended to control unfair competition in interstate commerce. It was empowered to investigate individuals and corporations suspected of unfair practices, and it could issue cease‐and‐desist orders to stop a company from hindering competition. Already existing antitrust laws were strengthened with the passage of the Clayton Antitrust Act (1914). It outlawed specific business practices such as price discrimination, “tying” (an agreement that required a buyer not purchase products from a competitor of the seller), and the acquisition of stock in a competing company. Of particular importance given the way antitrust legislation had been interpreted in the past, was the Clayton Act's specific statement that farm organizations and labor unions were not “unlawful combinations in restraint of trade.” The use of injunctions against strikes was also prohibited, unless it could be shown that irreparable damage to property was likely. However, the degree of protection these provisions actually offered unions depended on court interpretations.
Wilson showed little interest in the social concerns associated with progressivism during his first term. With the Republican Party on the mend as the 1916 election approached, he began to include more reforms in his domestic agenda. For farmers, a program of low‐interest loans through Federal Reserve banks was put in place. Child labor was addressed in the Keating‐Owen Child Labor Act, which prohibited interstate commerce in products made by children under the age of 16. Although the law was declared unconstitutional by the Supreme Court in 1918, the Court did uphold legislation that set an eight‐hour day and time‐and‐a‐half pay for overtime for railroad workers handling cars in interstate traffic. In women's rights, Wilson did not openly support a constitutional amendment to give women the right to vote, but he backed action by the individual states as called for in the Democratic Party platform.
Immigrants and African‐Americans. Two groups did not benefit from the reforming zeal of the Progressive Era: immigrants and African‐Americans. Immigration to the United States reached its high tide before World War I, with immigration numbers topping the one million mark six times between 1900 and 1914. During this same period, demands for immigration restriction found growing public support. By 1903, the original list of people who could not enter the country (compiled in 1882) was expanded to include anarchists, prostitutes, paupers, and all those likely to become a public charge (in need of some type of welfare). When the San Francisco School Board ordered Chinese, Japanese, and Korean students to attend segregated schools in 1906, President Roosevelt intervened and the decision was reversed. In return, Japan agreed to voluntarily limit the number of its laborers emigrating to the United States through what became known as the Gentlemen's Agreement (1907). Americans who favored significantly reducing immigration pinned their hopes on a literacy test for those who wished to permanently settle in the United States. Presidents Cleveland (1897), Taft (1913), and Wilson (1915 and 1917) vetoed bills containing requirements for such a test. Wilson's second veto was overriden by Congress, however, and a literacy test became part of immigration law. What direct effect the test had on immigration is difficult to assess because immigration had already declined sharply because of World War I. The legislation did mark an end to the more or less open immigration policy and paved the way for the quota system that would be implemented in the early 1920s.
In 1900, the overwhelming majority of African‐Americans lived in the rural South, where segregation was established as a legal institution, and the denial of civil rights to blacks, particularly the right to vote, was an accomplished fact. Conditions in the South and economic opportunities in the North, particularly as the country began to mobilize for war, led to a significant shift in black population. The Great Migration refers to the internal movement of African‐Americans from the farms of the South to the factories of the industrial North. Organizations like the Negro Fellowship League, founded by Ida Wells‐Barnet in Chicago, and the National Urban League helped the migrants adjust to life in the cities. The North was not free from prejudice, however. Competition for jobs in defense plants and for housing were contributing factors to the violent race riots that broke out in East St. Louis in 1917 and Chicago in 1919.
Although President Roosevelt broke with precedent and invited Booker T. Washington for lunch at the White House (1901), the federal government did little to help African‐Americans. The driving forces for change were men like Washington and W. E. B. Du Bois, whose Niagara Movement (1905) pressed for political and economic equality for blacks. In 1910, his group joined with the National Association for the Advancement of Colored People (NAACP), established a year earlier by white social‐justice progressives and African‐Americans to work for equality within the system. The NAACP was most successful in mounting legal challenges aimed at making sure the Fourteenth and Fifteenth Amendments were enforced. In 1915, for example, its attorneys persuaded the Supreme Court to strike down the grandfather clause in Guinn v. United States that had been used in Maryland and Oklahoma to deny blacks the right to vote.