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offices of state-executive, legislative, and even judicial? What has brought about such a woeful, anti-republican condition of affairs? Is it not plainly the continuance of the extravagances of the war times, when the foundations of most of the present colossal fortunes were laid in great contracts and cemented with the blood, tears, and cruel taxations of the people? One would think that the American people, with an ancestry providentially guided here, with an inheritance so splendid, and with the example set them by the generations of patriotic men who have passed away, would still retain the freshness and purity of virtuous power. All the bounteous elements of sea and earth and sky would seem to beckon business men, legislators, judges, executives, and ministers of official grace and honor, away from the base fascination of hoarded pelf which dishonors to destroy our institutions. There must be more concern for the national character.

The recent election gives hope of better days and much reformation. America in her fresh hemisphere, in her first cycle of unity, with the vote, with the numbers, with the added wisdom and practical sagacity of her people, must clarify the political and social atmosphere, and declare for the new order of administration, else the light of her liberties may be extinguished. Let not progress and poverty march abreast in this, as in the older hemisphere. The American Republic must become an exemplar for all future republics which may be created by the achievements of free men. Now that the world is adapting itself to new developments of physical forces and moral resources, now that new boundaries are being made between the nations, now that new elements are startling kings and kaisers, and giving fleet coursers to civilization by the vapor of water and the spark of lightning, let progress and prosperity march hand in hand on this continent. Let us not prove recreant to the demands of this new order. National wealth is not always the evidence of national prosperity, nor does great industrial progress always imply corresponding happiness among those who develop it. If negro slavery was an unjust appropriation of the rewards due to labor, it behooves the people to learn wisdom from the overthrow of that institution.

Let progress be in the paths of peace, humanity, and justice, and toward the advancement of real liberty and mutual industry. Let the torch of patriotism shine out upon the shoals and reefs where the wreckers would despoil the Ship of State, so that free, unbiased as the winds and waves, she may sail on forever, freighted with the hopes and the happiness of an upright people. Let those who shall hereafter direct her course, be as the elect of God-yea, even the salt of the earth.

CHAPTER VII.

THE FINANCES FOR THE WAR-THE

LUTIONARY WAR FINANCES

MEXICAN WAR FINANCES -THE REVOSTATE AND CONTINENTAL BILLS OF CREDIT EARLY REVENUE RESOURCES- CUSTOMS, EXCISES AND DIRECT TAXES THE CIVIL WAR DEBT THE ISSUES OF BONDS AND TREASURY NOTESUNITED STATES NOTES- -LEGAL TENDER NOTES - DUTIES ON IMPORTS UNDER THE MORRILL TARIFFS THE INTERNAL REVENUE SYSTEM -THE PLAN FOR A NATIONAL PAPER CURRENCY - ITS ORIGIN AND CONSTITUTIONALITY - AMERICAN ABILITY TO SUSTAIN TAXATION.

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RIOR to the war for the preservation of the Union, the country had suffered no considerable strain upon its resources for a period of forty-five years. Almost two generations of men had come and gone since the government had found it necessary to meet the demands upon the treasury by a resort to direct or internal taxation. The war with Mexico had imposed no such necessity. It was sufficient for that emergency to borrow money in anticipation of ordinary taxes. We then issued some millions of treasury notes. These were afterwards funded, or received back in payment of duties on imports. The receipts under the Democratic revenue tariff of 1846, during the ten years following, were almost sufficient to pay the current expenses of the government and reduce the debt incurred in that war to less than a fifth of its original amount. In 1846, before the war commenced, the public debt was $15,550,000. In 1849, the year after its close, the debt was $63,000,000; and in 1851 it had risen, probably as a consequence of the war, to $68,304,000. It may therefore be assumed that the cost of the Mexican War, over and above the current revenue which was paid out in that period, was not in excess of $52,754,000. In 1857 the public debt was reduced to $28,700,000; or only $13,149,000 more than it was in 1846. These figures afford evidence of good financial management.

In 1846 it became necessary, in order to carry on the war with Mexico, either to increase the taxes or borrow money. The party then in power, true

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to its traditions and policy, preferred the latter mode. In this it displayed wisdom. The resources of the country were being rapidly developed, notwithstanding the apparent embarrassments of the Federal treasury. Population was steadily increasing. Money was in demand in all the industries, and employment was open for labor in every field. Under these conditions, it was deemed better statesmanship to discount the income of the future, which must grow with the general prosperity of the people, rather than to retard enterprise by taxation. Taxes, like governments, are necessary evils. It has always been a favorite maxim with the writer, that the less the people have of either evil, consistently with the general welfare, the better it will be for themselves and their industries. It is not to be understood that the theory that a public debt is a public blessing is here admitted. Circumstances will, at times, render a mean course between debt and taxation the better policy; but this course should always be steered on a line where the industries- the life-blood of the nation-will be safe from wreck, and where no man's goods shall be jettisoned for another's. In a government like ours, intended as it is to secure to all citizens equal civil, political, and industrial rights, privileges, and opportunities, it must be apparent to every one possessed of sound reason, that the legislative fostering of any one industry or private enterprise must correspondingly retard all other means of progress and prosperity. Forced plants are seldom vigorous. Unnecessary taxation is a burden that should be avoided. This is a Democratic maxim of Federal administration. Acting on this maxim, Congress, instead of increasing the taxes to carry on the Mexican War, passed an act on July 22,1846, authorizing the issue of ten millions in notes, accompanied by a loan act at six per On the 28th of January, 1847, an act was passed authorizing the issue of twenty-three millions in notes at six per cent. This act was accompanied by authority to redeem them by the issue of stock running for a term of years, at the same rate of interest. In March, 1848, a sixteen million loan was authorized, at six per cent.

During the Revolutionary War, the Congress had no real fiscal power. Such as it had was dependent upon the patriotism and good faith of the people. The Congress then depended on the states for the enforcement of its ordinances. It had but little legislative capacity. It could impose no taxes. Its function in this regard was but little more than a right to initiate or recommend measures. It could declare how much money was necessary to carry on the war during the ensuing year, and it could apportion the quotas of that amount among the states; but it had no power to collect them. If any state failed to pay its quota there was no remedy save entreaty. The military authority of the Congress was something more tangible. The right to call for troops and to appoint the commander-in-chief and other officers carried with it some real power; but not such power as could be legitimately used for the enforcement of legislative ordinances.

This was a defective system of government. The result was that the struggle for Independence was protracted. The war was carried on to its consummation by promises to pay, rather than with money. Great efforts were made to borrow from foreigners. The chief business of our representatives abroad was to negotiate loans. The total amount of the loans negotiated by them during the struggle was only a trifle above ten millions. It was stated by Hamilton, in his report submitted to the House of Representatives on Jan. 14, 1790, at $10,070,307. On this the arrears of interest amounted to $1,640,071.62. The domestic debt of the Union, including $13,000,000 of interest overdue, amounted to $40,414,085.94. The debts of the states were assumed to the amount of $21,500,000. Adding to these items the unliquidated part of the domestic debt, which consisted chiefly of Continental bills of credit, estimated in the report at $2,000,000, the total debt on the 31st of December, 1789, was $75,624,464.56. The actual debt a year later was reported at $75,463,476.52.

The paper currency called bills of credit, issued by Congress during the war, and before the adoption of the Constitution, amounted to the sum of nearly two hundred and fifty millions; and the aggregate of the bills issued by the states amounted to $209,524,776. Of the latter issue Virginia was responsible for $128,441,000; North Carolina for $33,325,000, and South Carolina for $33,458,926, thus leaving only $14,299,850 for the other states.

About half of the bills of credit issued by the Congress of the Confederation were redeemed by new bills, at the rate of forty of the old for one of the new issue. These last were assumed to be at par with silver, and were receivable as such by the Congress for the taxes which were apportioned among the states. Mr. Jefferson, who was in France much of the time, was mistaken in saying that "very little of the money [old bills] was brought in." He states that in 1780 the old bills had fallen in value, compared with silver, to seventy-five for one, when they went out of circulation north of the Potomac. In Virginia and North Carolina, these bills continued to circulate a year longer. By that time they had fallen to one thousand to one;" and then," Mr. Jefferson adds, "the paper expired, as it had done in other states, without a single groan. Not a murmur was heard on this occasion among the people. On the contrary," said he, "universal congratulations took place on their seeing this gigantic mass, whose dissolution had threatened convulsions which should shake their infant confederacy to its centre, quietly interred in its grave."

The act of Congress which authorized the exchange of the new for the old bills came near causing a breach with the French government. The Count de Vergennes earnestly protested against it. He authorized the French minister to this government to remonstrate against its application to French subjects who were holders of the old bills. John Adams, then an unrecognized minister, sent over to be at hand, ready to negotiate a peace, and wait

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ing in Paris for the opportune moment to arrive, gave great offence to the Count by defending the justice and necessity of the measure. Dr. Franklin, the resident minister at the French court, professed to concur with Vergennes that the repudiation should not apply to French subjects. But he was too wise not to foresee that if this were to be allowed, the effect of such a discrimination would be that Frenchmen would buy up all the bills. Dr. Franklin communicated to Congress the fact that the course of Mr. Adams, who had published his opinions in a newspaper, had given offence to the French government. Congress censured Mr. Adams for his uncalled for and pertinacious defense of its ordinance; but, nevertheless, the ordinance was adhered to. This incident was the cause of a permanent breach between

Franklin and Adams.

In order to pay off the Revolutionary debt, Hamilton devised a Federal system of internal revenue. It consisted of an excise upon liquors distilled within the United States. From this source, in the course of a dozen years, about seven millions were raised. In 1799 a direct tax was imposed by Congress upon lands and houses. This yielded about two millions of dollars, of which about one million and a half was collected in the three years following. But at this era the great and permanent reliance for a revenue was on customs. During Washington's administration these amounted to nearly six millions per annum. This was yielded from a very low tariff. Before the close of Jefferson's administration the revenue from this source had risen to sixteen millions.

The recuperation from our earlier financial embarrassments was easy and rapid. Under the long sway of the Democratic party, there was a minimum of restraint by taxation, or other measures tending to foster monopolies, which left the people free to avail themselves of the rich resources of the domain that their fathers had won and bequeathed to them as an heritage forever. They waxed great in numbers, and prosperous beyond comparison. Their fame spread abroad among the nations. Immigration poured in upon them its waves of industrious millions to partake of their freedom and to develop the fatness of the land. Peace smiled upon them, and plenty abounded.

When the Southern States appealed to the ultima ratio, the American. people had no more conception of the financial exploits they were about to perform than they had of the extent and duration of the military operations. that followed. Even their statesmen had no adequate idea of the resources of this country for raising revenue. They had not imagined that the United States excelled every country in the world in capacity to raise revenue from indirect taxes. Wherein is this capacity? The answer is now obvious: Americans consume more of the luxuries of life than any other people. No one would have believed in 1860 that in 1866, after four years of devastating war, the people of this country could pay yearly $176,000,000 in taxes, at