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HEN the Republican party came to power in March, 1861, the treasury of the United States was empty, its credit was impaired, the navy was scattered over the waters remote from our own coasts, and the army was only sufficient for the protection of the frontier against the Indian tribes.

As "money is the sinews of war," it was only possible to create an army and to reconstruct the navy by first establishing the public credit.

In 1860 there had been a long period of peace with foreign nations. For eight years the government had been in the control of the Democratic party. At the close of the Mexican war the debt was a trifle more than sixty-three million dollars, and the annual interest charge was less than three million and six hundred thousand. The Indian wars, the war in Utah, and the troubles in Kansas had so absorbed the revenues that the public debt the 30th of June, 1860, was about two million dollars more than it had been the 30th of June, 1849. This circumstance was of small moment in itself, but it indicates a lack of administrative faculty when considered in presence of the fact that the population of the country had risen from twenty-three million in 1850 to thirty-one million in 1860.

The public debt was equal only to two dollars for each inhabitant, with an annual interest charge of twelve cents. In 1791 the public debt exceeded seventy-five million dollars. This amount, distributed upon a population of less than four million, was equal to about twenty dollars for each inhabitant. That sum, so vast in comparison with the debt of 1860, had been paid in the year 1835, together with the cost of the war of 1812, which amounted to the sum of seventyfive million dollars in addition to the debt then remaining unpaid.

From the day when the State debts were assumed under the administration of Hamilton and Washington, the nation had exhibited a wise and resolute good faith in everything relating to the public credit; yet, in September, 1860, that credit was so impaired that the Secretary of the Treasury was only able to borrow seven million dollars under an authority to make a loan of twenty-one million and upon a call for bids to the amount of ten million dollars.

The impairment of the public credit is attributed, usually, to the apprehensions then existing in the public mind as to the result of the pending elections and the consequent fate of the country. This may have been so, but whether so or otherwise, the cause of the impairment of the public credit is to be found in the position of the Democratic party in reference to the threats and doctrines of the secession members of that party, or in its avowed or well-known opinions concerning the right of secession, or in the apparent indifference of its representative men, and especially of the President and his Cabinet, to maintain the Union by force, whenever it should be necessary to use force for that purpose.

The act of the 22d of June, 1860, which authorized a loan of twenty-one million dollars, was designed to provide the means of redeeming a like amount of Treasury notes then outstanding and soon to be due and payable. The failure of this loan compelled the Secretary of the Treasury to ask for authority to issue new Treasury notes to the amount of eleven million dollars with which to redeem the old notes then outstanding. As security for the payment of these notes he recommended a pledge of the public lands. This pledge Congress refused to give, but the bill authorizing an issue of Treasury notes to the amount of ten million dollars was approved the 17th of December, 1860. The notes were to be issued or sold at par, but at such rates of interest as might be agreed upon by the bidders and the Secretary. Under this license bids were received and the notes were sold at par and varying rates of interest, averaging between eleven and twelve per cent.

There was a balance in the Treasury the first day of January, 1861, of two million, two hundred and thirty-three thousand, two hundred and twenty dollars; a sum inadequate for the safe management of a first-class bank.

The deficiency for the fiscal year, estimated on a peace basis, amounted to twenty-four million dollars. By an act approved the 8th


of February, 1861, Congress authorized a loan of twenty-five million dollars. The bonds were to bear interest at a rate not exceeding six per cent., payable semi-annually. The principal was payable after

ten and within twenty years.

The Secretary of the Treasury advised Congress to tender to the purchasers of bonds a pledge of the claim against the several States for the surplus revenue deposited with them a quarter of a century before. This advice Congress did not follow. Only eighteen million of the bonds were taken and these were sold at an average price of 89.03 per cent. of their par value.

Such was the condition of the national treasury and such the credit of the government when the Republican party came to power in March, 1861.

If at that moment the Republican party was in any degree responsible, that responsibility proceeded from one or all of three facts: Its election of a president through the divisions in the Democratic party; or in its refusal to submit to the claim that a State could secede from the Union; or, waiving the question of the right of a State to secede, upon its refusal to sanction the doctrine of Mr. Buchanan that the general government had no power, under the Constitution, to prevent by force the secession of a State.

On the 4th day of March, 1861, Mr. Buchanan, as the representative of the Democratic party, transferred to Abraham Lincoln a dissevered Union, a government in form only, whose treasury was empty, whose credit was broken, whose navy was dispersed, whose army was weak in numbers and led in part by untrustworthy officers, with an impending war whose magnitude at the end was to be estimated by the loss of hundreds of thousands of lives and the expenditure of thousands of millions of treasure.

This statement indicates the nature of the undertaking to which the Republican party was called, but it does not disclose fully its magnitude. At the extra session of Congress, which began the 4th day of July, 1861, the President asked for authority to borrow four hundred million dollars. The Secretary of the Treasury estimated the expenses of the current fiscal year at three hundred and eighteen million dollars.

At the end of the year it appeared that the expenses, exclusive of payments on account of the public debt, had been swollen to the enormous sum of four hundred and seventy million dollars.

At the extra session of Congress acts were passed authorizing the

issue of bonds and Treasury notes to an amount in the aggregate of more than three hundred million dollars, and at a rate of interest not exceeding 7.3 per cent. per annum. Such was the effect upon the public mind of a vigorous administration of affairs, and such the confidence inspired by the purpose of the government to suppress the Rebellion and sustain the Union, that the loan was obtained and the means of prosecuting the war were secured.

The rate of interest was two-thirds only of what had been paid in Mr. Buchanan's administration and the loan was ten-fold greater. In a period of war, in an exigency, it is not possible for a nation to dictate the rate of interest that it will pay upon loans. The ability to dictate terms depends upon two concurring conditions: First, a wellestablished credit; and secondly, having tendered a loan to the public, the ability to wait until capitalists are prepared to accept the terms. In 1861 and in 1862 the credit of the government was not established, and its necessities were such that no delays were possible. When due weight is given to the circumstances then existing, it is not easy, even in this period of great fortunes and gigantic financial operations, to realize the fact that loans were made at the rate of a million dollars a day and upon moderate terms.

The financial policy of the Republican party was dictated in the outset by the exigencies of war, but it was afterwards adapted to the circumstances and conditions of peace.

The measures of that policy are divided, naturally, therefore, into two classes. As the credit of a government can neither be established nor preserved unless revenues are provided by systematic pro. cesses, it is wise in time of peace to meet every current expenditure, to which should be added payments upon the principal of any debt that may exist; and in time of war to so enlarge the revenues as to give assurance that the credit of the nation will be preserved until the return of peace.

The secession of States and the resignation of Senators and Representatives left the two houses at the end of the thirty-sixth Congress in the control of the Republican party. By an act approved the 2d of March, 1861, the customs duties were increased upon many articles of merchandise. This act was followed by the statute of the 5th of August, 1861, the statute of the 14th of July, 1862, and the statute of the 30th of June, 1864. It was the design, as it was the effect of these measures, not only to provide revenues upon the

basis of a war policy, but also to give protection to the capital and labor of the country.

The gross receipts from customs for the year ending the 30th of June, 1861, were a trifle less than forty million dollars; but for the year ending June 30th, 1864, they had risen to more than one hun. dred and two million. In the meantime labor and capital were profitably employed in all sections of the Union then free from the presence of hostile armies.

Another important measure designed to support the public credit was the act to authorize the issue of United States notes and for the funding of the public debt of the United States, approved the 25th of February, 1862. The Secretary of the Treasury was authorized to issue United States notes to the amount of one hundred and fifty million dollars, without interest. Those notes were receivable in payment of all taxes, excises, debts, and demands of every kind due to the United States, except duties on imports, and they were also endowed with the legal tender quality in payment of all debts, public and private, within the United States. The Secretary of the Treasury was required to receive such notes the same as coin and at their par value in payment of all bonds that might be thereafter sold or negotiated by him.

By the same statute, the Secretary of the Treasury was authorized to issue bonds bearing interest at the rate of six per centum per annum, payable semi-annually, to an amount not exceeding five hundred million dollars.

He was also authorized to receive deposits of money payable at any time after thirty days upon ten days' notice, and to allow interest for the use of the same at the rate of five per centum per annum. As the interest upon the bonds, so authorized, was payable in coin, it was provided that all duties should be paid in coin or in certain demand notes which had been issued to the amount of fifty million dollars under an at approved July 17th, 1861. The coin so received was pledged specifically, first to the payment of the interest on the bonds and notes of the United States, and secondly to the purchase or payment of one per centum of the entire debt of the United States, to be withdrawn each fiscal year after the first day of July, 1862. The bonds so purchased were to be set apart as a sinking fund, and the interest accruing thereon was to be paid to the credit of the sinking fund and made part of the capital thereof. The residue was to be paid into

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