398 



FINANCES OF THE UNITED STATES. 



the war had begun to be developed, and the 

 vast sums which would be required to create 

 all the appliances of immense armies and 

 fleets made manifest; the decline in the or- 

 dinary sources of revenue designed to support 

 the daily existence and credit of the Govern- 

 ment, was an evidence of weakness ; the loans, 

 thus far being largely temporary discounts 

 of banks, and the limited amount to which 

 the subscriptions to the national loan had 

 as yet reached, showed that the Govern- 

 ment had not so far got the command of the 

 resources of the country. At the same time 

 the Secretary was obliged to ask Congress to 

 give him nearly 214 millions additional to carry 

 him to the end of the year on June 30th, 1862, 

 and the War and Navy Departments asked for 

 the ensuing year, beginning July 1st, 1862, 

 more than 410 millions. The banks of the 

 country now suspended specie payments. It was 

 the most formidable picture they had ever 

 looked upon ; but the Secretary met the emer- 

 gency with perfect calmness. In addition to 

 the sums necessary for the current year, he 

 was required to furnish estimates for the fiscal 

 year beginning July 1st, 1862, and terminating 

 June 30th, 1863. He proposed to meet these 

 unusual demands by retrenchment and reform, 

 taxation and loans. This taxation, he proposed 

 as before, should yield adequate provision for 

 ordinary expenditures, prompt payment of in- 

 terest on the public debt, and for a gradual ex- 

 tinction of the principal. By way of revenue 

 from imports he only urged increased duties on 

 tea, coffee and sugar, and with a sanguine spirit, 

 hoped for an improvement from other articles 

 in future. For the increase of the amount of* 

 direct taxes, the Secretary recommended that 

 the law of the previous session should be so 

 amended as to raise from the loyal States 20 

 millions of dollars ; that a tax should be laid 

 on stills, liquors, tobacco, bank notes, carriages, 

 evidences of debt, &c., that would yield 20 

 millions; also, that the income tax should be 

 eo amended as to yield 10 millions ; making a 

 total of 50 millions. The real property of the 

 loyal States the Secretary estimated at 7 thou- 

 sands of millions, and the personal property at 

 3 thousands of millions, and the annual sur- 

 plus earnings of the people at 300 millions. 



For the rest of the money needed, the Sec- 

 retary said, " the reliance must be placed on 

 loans." The amount required he thus stated : 



For the fiscal year 1862, under existing laws $75,449,675 



For the fiscal year 1862, under laws to be enacted 200,000,000 

 For the fiscal year 1863, under laws also to be en- 

 acted 879,581,245 



Total required $654,980,920 



This was the estimated amount required 

 through loans on December 9th, 1861, to the 

 close of the fiscal year, ending June 30th, 1863. 

 The Secretary suggested two plans " to enable 

 the Government to obtain the necessary means 

 for prosecuting the war to a successful issue 

 without unnecessary cost." The first contem- 

 plated the gradual withdrawal from circula- 



tion of the notes of the banks by a tax on their 

 issue, and the extension of the provisions au- 

 thorizing him to issue demand notes payable 

 in coin, until they reached the average circula- 

 tion of the country. Of the advantages and 

 disadvantages of this plan the Secretary said : 

 " The Secretary contents himself with observ- 

 ing that, in his judgment these possible disas- 

 ters so far outweigh the probable benefits of the 

 plan, that he feels himself constrained to for- 

 bear recommending its adoption." The several 

 plans contemplated the negotiation of loans, 

 facilitated by the organization of banking asso- 

 ciations, whose circulation should consist only 

 of notes uniform in character, furnished by the 

 Government, and secured as to convertibility 

 into coin by United States bonds deposited in 

 the Treasury. On the 30th of December, the 

 banks, as above stated, suspended specie pay- 

 ments. At the same time the delay in military 

 operations, increased expenditures, diminished 

 confidence in public securities, rendering it 

 impossible for the banks and capitalists to ne- 

 gotiate the bonds they had previously taken ex- 

 cept at a serious loss, and making it impossible 

 for the Government to negotiate new loans of 

 coin except at a like loss, the Government sus- 

 pended also on the demand notes in circulation. 

 If the Secretary went into the market'now for 

 more loans on his bonds or Treasury notes, all 

 he got for them would be the irredeemable paper 

 of the local banks. The only choice left to him 

 was either to take this bank paper or to issue 

 Government demand notes ; for the credit of the 

 Government was not now staunch enough to 

 command coin, except at a high premium. If 

 he looked to the experience of the past to guide 

 him in this extremity, he saw in the Treasury 

 Department millions of bank paper which had 

 become worthless in the war of 1812 ; if he 

 looked still further back he saw the history of 

 " Continental paper " written in blazing* char- 

 acters. Here were the rocks of Scylla on the 

 one side, and the whirlpool of Charybdis on 

 the other. Yet a passage could be made over 

 the boisterous future if the pilot was capable of 

 commanding the resources of the country. Gov- 

 ernment paper could be made both useful and 

 safe, if it was sustained by high taxes, and kept, 

 within reasonable limits by constant funding, 

 with a measure for its withdrawal. This was 

 the chart now boldly adopted by the Secretary 

 for the future. That he has constantly urged 

 high taxes upon Congress, the language of hiu 

 reports bears witness. His success at funding 

 the currency will presently be stated. Another 

 measure was also steadily proposed, which wa* 

 designed to secure ultimately the entire with- 

 drawal of Government currency by substituting 

 ihe currency of National banks. 



At the time when the banks suspended, tho 

 Secretary had issued $33,460,000 demand note* 

 of 50 millions previously authorized. Anothe : 

 issue of 10 millions was authorized in February, 

 and both issues amounting to 60 millions, wen) 

 made receivable for all public dues, including 



