FINANCES OF THE UNITED STATES. 



prepared for smoking aro brought into the 

 country, and tho article, being of small bulk 

 mnl great value, ia easily smuggled. A sim- 

 ilar article is manufactured in this country 

 from tho crude opium, and it ia difficult to do- 

 tormine whether tho product in any given 

 case is of domestic or foreign manufacture. 

 Therefore an internal tax equal to that on the 

 imported article, $6 per pound, is recommended 

 on all prepared in this country for smoking. 



The payments into the sinking fund have 

 not been kept up to the requirements of the 

 acts of Congress. Those of February 25, 

 1862, and July 14, 1870, direct the purchase or 

 payment of one per centum of the entire debt 

 within each fiscal year after July 1, 1862, to be 

 set apart as a sinking fund, and the interest to 

 be applied to the purchase or payment of tho 

 debt. The loss of revenue consequent on the 

 general depression of business during the last 

 few years rendered it impossible to comply 

 with these acts and meet the appropriations of 

 Congress. 



The resumption of specie payments, as re- 

 quired by act of Congress, took place on Janu- 

 ary 1, 1879, on United States notes, at the Assist- 

 ant Treasurer's office in New York. The reserve 

 of coin over and above all matured liabilities at 

 that date was $183,508,804. The operation of 

 the resumption act is thus described by the 

 Secretary of the Treasury in his report to Con- 

 gress : 



Previous to that time, in view of resumption, United 

 States notes and coin were freely received and paid in 

 private business as equivalents. Actual resumption 

 commenced at the time fixed by law ; without any ma- 

 terial demand for coin and without disturbance to pub- 

 lic or private business. No distinction has been made 

 since that time between coin and United States notes 

 in the collection of duties or in the payment of the 

 principal or in terest of tho public debt. The great body 

 of coin indebtedness has been paid in United States 

 notes at the request of creditors. The total amount 

 of United States notes presented for redemption, from 

 January 1 to November 1, 1879, was $11,256,678. 

 But little coin haa been demanded on the coin liabili- 

 ties of the Government during the same period, though 

 the amount accruing exceeded six hundred million 

 dollars. Meantime coin was freely paid into the 

 Treasury, and gold bullion was deposited in the assay- 

 office and paid Tor in United States notes. The aggre- 

 gate gold and silver coin and bullion in the Treasury 

 increased during that period from $167,568,734.19 to 

 $225,133,558.72, and the net balance available for re- 

 sumption increased from $133,508,804.50 to $152,737,- 

 155.48. 



To meet the local demand for coin in places other 

 than New York City, persons applying have been 

 paid silver coin for United States notes, the coin being 

 delivered to them on established express lines free of 

 expense ; and for some time gold and silver coin has 

 been freely paid out at the several sub-treasuries upon 

 current obligations of the Government. There lias 

 been, however, but little demand for coin, and United 

 States notes and the circulating notes of national banks 

 have been received and paid out at par with coin in 

 all business transactions, public or private, in all parts 

 of the country. 



The specie standard, thus happily secured, has given 

 an impetus to all kinds of business. Many industries, 

 greatly depressed since the panic of 1878, have re- 

 vival, while increased activity has been shown in all 

 branches of production, trade, and commerce. 



In his opinion the provisions of law now ex- 

 isting are ample to enable tho Department to 

 maintain the resumption. 



The question whether United States note* 

 ought still to be a legal tender in the payment 

 of debts has not escaped the notice of the Sec- 

 retary. His views are thus expressed : 



The power of Congress to make them such wan as- 

 serted oy Congress during the war, and was upheld 

 by the Supreme Court. The power to reissue them 

 in time of peace, after they are once redeemed, is etill 

 contested in that Court. Prior to 1862, only gold and 

 silver were a legal tender. Bullion was deposited by 

 private individuals in the mints and coinca in conve- 

 nient forms and designs, indicating weight and fine- 

 ness. Paper money is a promise to pay such coin. No 

 constitutional objection is raised against the issue of 

 notes not bearing interest to be used as a part of the 

 circulating medium. The chief objection to the emis- 

 sion of paper money by the Government grows out of 

 the legal-tender clause, for without this the United 

 States note would be measured by its convenience in 

 use, its safety, and its prompt redemption. In war, 

 and during a grave public exigency, other considera- 

 tions may properly prevail ; but it would seem that 



ought to stand like any other promis- 

 sory note. It should be current money only by being 

 promptly redeemed in coin on demand. The note of 

 the United States is now received for all public dues, 

 it is carefully limited in amount, it is promptly re- 

 deemed on demand, and ample reserves in coin are 

 provided to give confidence in and security for such 

 redemption. With these conditions maintained, the 

 United States note will be readily received and paid on 

 all demands. While they are maintained, the legal- 

 tender clause gives no additional credit or sanction to 

 the notes, but tends to impair confidence and to create 

 fears of over-issue. It would seem, therefore } that 

 now and during the maintenance of resumption it is a 

 useless and objectionable assertion of power, which 

 Congress might now repeal on the ground of expedi- 

 ency alone. When it is considered that its constitu- 

 tionality is seriously contested, and that from its na- 

 ture it is subject to grave abuse, it would now appear 

 to be wise to withdraw the exercise of such a power, 

 leaving it in reser% - e to be again resorted to in such a 

 period of war or grave emergency as existed in 1862. 

 The Government derives an advantage in circulating 

 its notes without interest, and the people prefer sucfi 

 notes to coin, as money, for their convenience in use 

 and their certain redemption in coin on demand. Tim 

 mutual advantage may be secured without the exer- 

 cise of questionable power ; nor need any inconve- 

 nience arise from the repeal of the legal-tender clause 

 as to future contracts. Contracting parties may stipu- 

 late for either gold or silver coin or current money. 

 In the absence of an express stipulation for coin, the 

 reasonable presumption would exist that the parties 

 contemplated pavment in current money, ana such 

 presumption might properly be declared by law and 

 the contract enforced accordingly. 



The Secretary therefore respectfully submits to 

 Congress whether the legal-tender clause should not 

 now DO repealed as to all future contracts, and par- 

 ties be left to stipulate the mode of payment. 



Since November 23, 1878, there have been 

 refunded of the bonds of the United States 

 $370,848,750 six per cent., and $193,890,250 

 five per cent, into bonds bearing interest at 

 four per cent., making an annual saving of in- 

 terest hereafter of $9,855,877.50. 



The following table shows the transactions 

 in refunding since March 1, 1877, and the an- 

 nual saving of interest therefrom : 



