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that adequate provision by taxation for ordinary expenditures, for the prompt payment of interest on the public debt, and for the gradual extinction of the principal, is indispensable to a sound system of finance.


Provisions Con

The provision made at the last session of Congress was of two descriptions: (1.) A direct tax of gress had already twenty millions; and, (2.) An internal duty of three per cent. on all annual incomes, with certain exceptions and deductions. The secretary proceeds to consider the expediency of farther provisions of a similar character.

In his judgment, it is necessary to increase the direct New provisions tax so as to produce from the loyal states recommended. alone a revenue of at least twenty millions, and to lay such duties on stills and distilled liquors, on tobacco, bank-notes, carriages, legacies, evidences of debt, and instruments for conveyance of property, as will produce an equal additional sum. He supposes that the income tax may produce ten millions more, making an ag gregate of fifty millions of dollars.

That sum is large, but there is no probability that the revenue from ordinary sources will exceed forty millions of dollars; and to meet even economized disbursements, to pay the interest on the debt, and provide a sinking fund for the gradual reduction of the principal, not less than ninety millions will be necessary.

But, if the sum be large, the means of the people are also large-the object to be attained price.


to meet these de- less. The real property of the loyal states is valued in round numbers at seven and a half thousands of millions, the personal property at three and a half thousands of millions, and the annual surplus earnings of the loyal people at not less than three hundred millions of dollars. The whole sum proposed to be



raised by taxation is little more than one sixth of the surplus earnings of the country.

But the amount to be derived from taxation forms but a small proportion of the sums required for war expenses. For the rest reliance must be placed on loans.

Necessity of additional loans.


Cheerful support

the banks people.

Already, beyond the expectations of the most sanguine, the country has responded to the appeals of hitherto given by the secretary. The means adopted for se curing the concurrence of all classes of citi zens in financial support to the government have been already explained. It remains only to be said here that, while the action of the banking institutions in assuming the immediate responsibility of all the advances hitherto required, as well as the final responsibility of much the largest portion of these merits high eulogium, the prompt patriotism with which citizens of moderate means, and workingmen, and workingwomen, have brought their individual offerings to the service of their country, must command even warmer praise.

To enable the government to obtain means for the prosecution of the war without unnecessary cost, the secretary offered the following suggestions:

The circulation of the banks of the United States on the 1st day of January, 1861, was computed to be about two hundred millions of dollars. This constitutes a loan, without interest, from the people to the banks, costing them nothing except the expense of issue and redemption, and the interest on the specie kept on hand for the latter purpose; and it deserves consideration whether sound policy does not require that the advantages of this loan be

Nature of the bank circulation.

Its advantages may

be transferred to transferred, in part at least, from the banks,

the government.

representing only the interests of the stock



holders, to the government, representing the aggregate interests of the whole people.


He shows that Congress may constitutionally, and with Methods by which great advantage to the people, exercise the this may be done. necessary authority, and points out two plans by which the object may be effected: (1.) The grad ual withdrawal from circulation of the notes of private corporations, and the issue in their stead of United States notes, payable in coin on demand, in amounts sufficient for the useful ends of a representative currency; (2.) The preparation and delivery, to institutions and associations, of notes prepared for circulation under national direction, and to be secured, as to prompt convertibility into coin, by the pledge of United States bonds, and other needful regulations.

For reasons considered to be satisfactory, he declines the first of these plans, and examines in detail the second, stating that its principal features are, (1), a circulation of notes bearing a common impression, and authenticated by a common authority; (2), the redemption of these notes by the associations and institutions to which they may be delivered for issue; (3), the security of that redemption by the pledge of United States stocks, and an adequate provision of specie.

Advantages of a na

In this plan, the people, in their ordinary business, would find the advantages of uniformity in tional circulation. currency; of uniformity in security; of effectual safeguard, if effectual safeguard is possible, against depreciation; and of protection from losses in discounts and exchanges; while in the operations of the government the people would find the farther advantage of a large demand for government securities, of increased facilities for obtaining the loans required by the war, and of some alleviation of the burdens on industry through a diminution in the rate of interest, or a participation in the profit

CHAP. LXIII.] ADVANTAGES OF A NATIONAL CIRCULATION. 565 of circulation without risking the perils of a great money monopoly. A farther and important advantage to the people may be reasonably expected in the increased security of the Union springing from the common interest in its preservation, created by the distribution of its stocks as the basis of their circulation to associations throughout the country.

The notes thus issued would, in the judgment of the secretary, form the safest currency which this country has ever enjoyed, while their receivability for all government dues, except customs, would make them, wherever payable, of equal value as a currency in every part of the Union. The large amount of specie now in the United States, reaching a total of not less than two hundred and seventy-five millions of dollars, will easily support payments of duties in coin, while these payments and ordinary demands will aid in retaining this specie in the country, as a solid basis both of circulation and loans.

Its advantages to the people,

the government.

The plan thus submitted, if adopted, with the limita and advantages to tions and safeguards which the experience and wisdom of senators and representatives will doubtless suggest, will probably impart such value and stability to government securities that it will not be difficult to obtain the additional loans required for the service of the current and the succeeding year at fair and reasonable rates.

The secretary then shows that the amount of loans required for the fiscal year 1862, in addition to the amount already authorized, will not exceed two hundred millions of dollars.

On the 4th of December, 1862, Mr. Chase again made his customary financial report. From this it appeared that the aggregate receipts for

Report of December, 1862.





the fiscal year 1862, from all sources, were ditures of the past about five hundred and eighty-four millions ($583,885,247 06), and the aggregate expenditures about five hundred and seventy-one millions ($570,841,700 25), leaving a balance in the treasury, on the 1st of July, 1862, of $13,043,546 81.

for 1863,

He estimates that for the fiscal year 1863, the receipts, Estimate of receipts actual and anticipated, under existing laws, will be more than five hundred and eleven millions ($511,646,259 96). The aggregate of expendiand of expendi- tures he placed at more than seven hundred and eighty-eight millions ($788,558,777 62). There must therefore be provided by Congress for this The provision re- year about two hundred and seventy-seven millions ($276,912,517 66).



Considering in like manner the probable receipts and expenditures of the next following fiscal and that for 1864. year, 1864, though with less certainty, he conjectures that the necessary provision for that year will be upward of six hundred and twenty-two millions ($622,388,183 56), and that therefore the whole amount to be provided by Congress beyond resources available under existing laws will be nearly nine hundred millions ($899,300,701 22).

The measures al

With a view to the necessary provision for the antici pated expenditures, the secretary had proready recommended posed to Congress at its last session such. measures as seemed to be suitable. These were: (1.) An increase of duties on various imports; (2.) An increase of the direct tax; (3.) The levying of internal duties; (4.) A limited emission of United States notes convertible into coin; (5.) The negotiation of loans, facilitated by the organization of banking associations, whose circulation should consist only of notes uniform in character, furnished by the government, and secured as



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