Chapter 29

The Republican split became official in 1912 when Taft's conservative allies renominated him, prompting an outraged Theodore Roosevelt to bolt and form the Progressive ("Bull Moose") Party, running on a platform of "New Nationalism" that favored strong federal regulation of big business rather than its breakup.

With Republicans divided, Democrat Woodrow Wilson, the reform governor of New Jersey, campaigned on a rival progressive vision he called the "New Freedom," which favored breaking up monopolies to restore competition rather than regulating them. Wilson won a decisive Electoral College victory despite capturing only about 42 percent of the popular vote, while Roosevelt outpolled Taft for second place.

A former political science professor and president of Princeton University, Woodrow Wilson brought a scholar's temperament and a moralistic, often rigid, sense of principle to the presidency. He believed passionately in democracy and self-government, ideals that would soon shape both his domestic program and his foreign policy.

Wilson proved an unusually effective legislative leader, reviving the practice of addressing Congress in person and working closely with congressional Democrats to push through the most sweeping reform program since the Civil War.

Wilson first tackled the tariff, personally lobbying Congress to pass the Underwood Tariff (1913), which substantially lowered rates and, paired with the newly ratified Sixteenth Amendment, introduced a graduated federal income tax to make up lost revenue.

Wilson's most enduring achievement was the Federal Reserve Act (1913), which created a system of regional reserve banks overseen by a central Federal Reserve Board, giving the nation an elastic currency and a mechanism to influence interest rates — fixing the flaws that had caused repeated banking panics.

To strengthen antitrust enforcement, Wilson pushed through the Clayton Antitrust Act (1914), which outlawed specific monopolistic practices and, crucially, exempted labor unions from being prosecuted as illegal combinations under antitrust law — a major labor victory.

The same year, Congress created the Federal Trade Commission, empowered to investigate and issue "cease and desist" orders against unfair business practices, giving the government an ongoing regulatory watchdog rather than relying solely on the courts.

As his first term progressed, Wilson embraced a more expansive reform agenda. The Federal Farm Loan Act extended low-cost credit to farmers, while the Seaman's Act improved conditions for merchant sailors and the Adamson Act mandated an eight-hour day for interstate railroad workers.

Wilson also signed the Keating-Owen Act, an early attempt to restrict child labor in interstate commerce, though the Supreme Court later struck it down. These measures pushed Wilson's "New Freedom" well beyond its original limited-government roots and toward a broader progressive welfare agenda.

Wilson entered office determined to reject the "dollar diplomacy" of his predecessors, which used American investment and financial leverage to control weaker nations. Instead, Wilson promoted what he called "moral diplomacy," pledging that the United States would not seek additional territory by conquest and would promote democracy abroad.

In practice, however, Wilson repeatedly intervened militarily in Latin America and the Caribbean — sending troops into Haiti, the Dominican Republic, and elsewhere — when he judged that instability or misrule there threatened American interests, revealing the limits of his idealistic rhetoric.

Revolutionary turmoil in Mexico tested Wilson's principles severely. He refused to recognize the government of General Victoriano Huerta, who had seized power through murder, and ordered the U.S. Navy to occupy the port of Veracruz in 1914 to pressure Huerta from power, nearly provoking war.

After Huerta fell, the guerrilla leader Pancho Villa raided the New Mexico border town of Columbus in 1916, killing Americans. Wilson dispatched General John J. Pershing on a fruitless Punitive Expedition deep into Mexican territory to capture Villa, straining U.S.-Mexican relations even as war loomed in Europe.

With war raging in Europe, Wilson ran for reelection in 1916 under the slogan "He Kept Us Out of War," appealing to a war-weary electorate even as he privately doubted neutrality could last. His Republican opponent, Supreme Court Justice Charles Evans Hughes, attacked Wilson's Mexican policy and courted disaffected former Progressives.

Wilson narrowly won reelection, carried by his strength in the West and his progressive domestic record, in one of the closest elections in decades. Within months of his second inauguration, the peace he had promised would prove impossible to sustain.