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The New Freedom
Even though Woodrow Wilson won the vast majority of electoral votes in the election of 1912, he received only 41 percent of the popular vote, ostensibly leaving him with little mandate. Despite this handicap, Wilson managed to accomplish every one of his major domestic goals on his progressive New Freedom agenda. In just four years, Wilson reduced the tariff, passed more anti-trust legislation, and reformed the banking system.
Wilson began in 1913 by pushing Congress to pass the Underwood Tariff, which drastically reduced duties on foreign goods from an average rate of 40 percent to an average rate of 25 percent. Congress compensated for the loss of revenue by creating a national income tax under the Sixteenth Amendment, another major progressive achievement of 1913.
Banking Reform
Next, Wilson took on the banking industry, which despite industrialization and the population boom had remained essentially unchanged since the Civil War. In 1913, Wilson and Congress passed the Federal Reserve Act to create a decentralized national bank comprising twelve regional branches. Collectively, all the private banks in each region owned and operated that respective region’s branch. However, the new Federal Reserve Board had the final say in decisions affecting all branches, including setting interest rates and issuing currency. This new banking system helped stabilize national finances and credit and helped the financial system survive two world wars and the Great Depression.
Other Progressive Legislation
Wilson also continued to crack down on trusts, most notably by convincing Congress to pass the Clayton Anti-Trust Act in 1914. Unlike the Sherman Anti-Trust Act, the Clayton Anti-Trust Act actually gave lawmakers the power to punish monopolistic corporations. Furthermore, it legalized labor unions and their right to strike peacefully.
Congress passed a wide variety of other progressive legislation during Wilson’s first term. The La Follette Seaman’s Act of 1915, for example, protected sailors’ rights and wages on merchant ships, while the Federal Farm Loan Act and the Warehouse Act of 1916 gave farmers access to easy credit. That same year, Congress also passed the Workingmen’s Compensation Act to help support temporarily disabled federal employees and the Adamson Act to establish an eight-hour workday for all employees on interstate railroads. With the ratification of the Seventeenth Amendment in 1913, Americans won the right to elect U.S. senators directly.
Wilson’s Foreign Policy
In foreign affairs, Wilson flatly rejected Roosevelt’s Big Stick Diplomacy and Taft’s Dollar Diplomacy in favor of a more moralistic approach to international relations. He immediately withdrew federal support for American investors abroad and pressured Congress to give increased (but not complete) control of the Panama Canal to Panama. In 1916, he signed the Jones Act, which made the Philippines an official U.S. territory and promised Filipinos independence once they established a stable government. Wilson did, however, send troops to Haiti, the Dominican Republic, and Cuba and purchased the U.S. Virgin Islands from Denmark in 1917.
Conflict with Mexico
Wilson’s greatest foreign policy challenge of his first term came from south of the border, after revolutionaries killed Mexico’s president and replaced him with General Victoriano Huerta in 1913. Even though Wilson refused to bow to public pressure and declare war, he also refused to acknowledge Huerta’s claim to power. However, when Mexican officials illegally arrested American sailors in 1914, Wilson ordered the navy to seize the port of Vera Cruz, Mexico.
Huerta’s regime crumbled later that year, but another revolutionary, Venustiano Carranza, replaced him. In retaliation for the U.S. incursion at Vera Cruz, yet another rebel, Pancho Villa, took a small band of men and killed 16 Americans while raiding a small town in New Mexico in 1916. Villa also hoped to start a war between his enemy Carranza and the United States. Under Wilson’s orders, General John J. Pershing and several thousand army regulars invaded Mexico and crushed Villa’s forces in 1916.
Events
1913
Sixteenth and Seventeenth Amendments are ratified
Congress passes Federal Reserve Act and Underwood Tariff
1914
Panama Canal is completed
Congress passes Clayton Anti-Trust Act, establishes Federal Trade Commission
United States occupies Vera Cruz, Mexico
1915
Congress passes La Follette Seaman’s Act
United States invades Haiti
1916
Congress passes Workingmen’s Compensation Act, Federal Farm Loan Act, Warehouse Act, Adamson Act, and Jones Act
Pancho Villa attacks New Mexico
United States invades Dominican Republic
1917
United States buys the Virgin Islands
Key People
Woodrow Wilson
28th U.S. president; outlined New Freedom domestic policies to lower protective tariff and tame big business
Venustiano Carranza
General who took power in Mexico after 1914 coup ousted revolutionary leader Victoriano Huerta
Pancho Villa
Mexican rebel who tried to provoke war between the United States and Mexico in order to oust Venustiano Carranza from power
John J. Pershing
General sent by Wilson to pursue Villa’s band of Mexican rebels into Mexico in 1916
