Woodrow Wilson’s greatest financial responsibility was funding World War I. The unprecedented sums required to finance the war effort of the US and its allies forced the federal government to transform the ways it taxed and borrowed. Cautious of the challenges faced by Lincoln and Chase, Wilson and Treasury Secretary William Gibbs McAdoo struggled with the issues of how much to borrow, and how much and whom to tax.
Wilson’s Democratic and Populist political base opposed excise tariffs and borrowing (through bonds), the former because they fell disproportionately on lower income Americans and the latter because they unduly benefited the most affluent who could afford to purchase more bonds and therefore collect more interest. Republicans in Congress countered that it was unfair and inadvisable to tax the rich too heavily. Facing the reality that the nation would have to rely heavily on the support of the wealthy, Wilson and McAdoo struck a balance by implementing a graduated income tax, inheritance taxes and business taxes, and by selling war bonds. These measures would also limit inflation by decreasing the spending power of the working classes, keeping prices down in the face of rising demand. Despite their best efforts to keep inflation in check, however, prices jumped by double digits from 1917 through 1920.
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Specimen $100,000 gold note bearing the image of Woodrow Wilson. On loan from the curating section, Federal Reserve Bank of New York.