millions of dollars, of which five millions were to be paid immediately to the Assistant Treasurers, in coin, and the residue, also in coin, as needed for disbursement. The Secretary, on his part, agreed to issue three years 7.30 bonds or treasury notes, bearing even date with the subscription, and of equal amount; to cause books of subscription to the National Loan to be immediately opened; to reimburse the advances of the banks, as far as practicable from this national subscription; and to deliver to them 7.30 bonds or treasury notes for the amount not thus reimbursed. It was further understood that the Secretary of the Treasury should issue a limited amount of United. States notes, payable on demand, in aid of the operations of the treasury, and that the associated institutions, when the first advance of fifty millions should be expended, would, if practicable, make another, and when that should be exhausted, still another advance to the government of the same amount, and on similar terms.

The objects of this arrangement were, (1st) to place at the command of the government the large sums immediately needed for the payment of maturing treasury notes, and for other disbursements, ordinary and extraordinary; (2d) to secure to the people equal opportunity, with the banks, for participation in the loan; (3d) to avoid competition between the government and the associated institutions in the disposal of bonds; (4th) to facilitate and secure further advances to the government by the associates, if required; and, (5th) to insure, if possible, the maintenance of payments in specie, or its actual equivalents and representatives.

All these objects were, happily, accomplished. Fifty millions of dollars were immediately advanced by the banks. The Secretary caused books of subscription to be opened throughout the country, and the people subscribed freely to the loan. The amounts thus subscribed were reimbursed to the banks, and the sum reimbursed, though then covering but little more than half the amount, enabled those institutions, when a second loan was required, to make a second advance of $50,000,000.

Thus two loans of $50,000,000 each have been negotiated for three years 7.30 bonds, at par. The first of these loans was negotiated, and the first issue of bonds bears date, on the 19th of August; the second on the 1st of October, 1861.

On the 16th of November a third loan was negotiated with the associated institutions, under the authority given to the Secretary to borrow a sum not exceeding one hundred millions, in Europe or the United States, at a rate of interest not exceeding seven per cent. As no reasonable prospect appeared of obtaining terms equally advantageous by advertisement, and as it was manifestly for the interest of the government to negotiate at home rather than incur the expense and hazard of negotiation abroad, the Secretary, under the authority of the seventh section of the act of August 5, 1861, arranged this third loan, also, with the associates, by agreeing to issue to them fifty millions of dollars in six per cent bonds, at a rate equivalent to par for the bonds bearing seven per cent interest, authorized by the act of July 17th. This negotiation, though less advantageous to the government,

considered under the light of a simple money transaction, than the two prior loans, was, in some respects at least, more so. It was coupled with no arrangement for reimbursement, and entailed no immediate expense on the treasury, beyond that of preparing and issuing the bonds. It was coupled, also, with an understanding in the form of an option to the associates, that on or after the first of January a fourth advance of fifty millions should be made, on the same terms with the first and second, if practicable and required by the Secretary.

In addition to the loans thus made, the Secretary has issued United States notes, payable on demand, in denominations of five, ten, and twenty dollars, of which there were in circulation, according to the last returns, on the 30th day of November, 1861, $21, 165, 220; and there remained in the treasury at the same date, $3,385, 105. The amount thus issued, so far as it enters into the circulation of the country, may be regarded as a loan from the people, payable on demand, without interest.

........

$14,019,034 66

A brief recapitulation will exhibit the general result: There were paid to creditors, or exchanged for coin at par, at different dates in July and August, six per cent two years' notes, to the amount of.... There was borrowed, at par, in the same months, upon sixty days' six per cent notes, the sum of.. There was borrowed, at par,on the 19th of August, upon three years' 7.30 bonds, issued for the most part to subscribers to the National Loan. There was borrowed, on the 1st of October, upon like securities.... There was borrowed, at par for seven per cent, on the 16th of November, upon twenty years' six per cent bonds, reduced to the equivalent of sevens, including interest.... ... There have been issued, and were in circulation and on deposit with the Treasurer, on the 30th of November, of United States notes, payable on demand

12,877,750 00

50,000,000 00

50,000,000 00

45,795,478 48

24,550,325 00

197,242,588 14

While success thus complete has so far attended the measures relating to loans, the Secretary regrets to say that the receipts of revenue from duties have not, as yet, fulfilled the expectations indulged at the date of his July report.

The act modifying the rates of duties which received the final sanction of Congress, differed, in several respects, from the measure which he had the honor of submitting to their consideration. In most of these particulars, especially in the diminished duties on tea, coffee, and sugar, and in the exemption, from the operations of the act, of goods in warehouse and on shipboard, the difference, how

ever warranted by considerations of general policy, was certainly disadvantageous to the revenue; while another, and perhaps more potential cause of reduced receipts, may be found in the changed circumstances of the country, which have proved, even beyond anticipation, unfavorable to foreign commerce.

At the date of his report, the Secretary counted on a revenue from customs, for the financial year 1862, of fifty-seven millions of dollars, but the circumstances to which he has just adverted now constrain him to reduce this estimate to $32, 198, 602 55.

The receipts from customs for the first quarter, ending on the 30th September, were $7, 198, 602 55; while the receipts for the three remaining quarters cannot be safely estimated at more than $25,000,000, making the aggregate for the year the sum just mentioned, of $32, 198, 602 55.

The estimates of receipts from lands and miscellaneous sources must also be reduced from $3,000,000 to $2,354,062 89, of which $354,062 89 were received during the quarter ending 30th September, 1861, and $2,000,000 are the estimated receipts of the three remaining quarters.

The only other source of revenue which promises an addition to the resources of the year is the direct tax authorized by Congress, from which, if increased to the limit proposed by the Secretary, and assumed by the States, the further sum of $20,000,000 may be expected.

The aggregate of revenue from all sources may, therefore, be estimated at $54,552,665 44, which is less by $25,447,334 56 than the estimate of July.

This reduction, however, though large, would not have compelled the Secretary to ask any additional powers for the negotiation of loans, beyond those asked for in his July report, had appropriations and expenditures been confined within the estimates then submitted.

These estimates, it will be remembered, contemplated expenditures in all departments, and for all objects, to the amount of $318,519,581 87. Of this sum $185,296,397 19 were for additional appropriations required by the Department of War; and $17,652, 105 09 for appropriations already made for that department. The basis of the estimates for these additional appropriations was the understanding that it would be necessary to bring into the field, for the suppression of the rebellion, two hundred and fifty thousand volunteers in place of the seventy-five thousand drafted militia originally called out, and to increase the regular army by the addition of eleven new regiments; making a total force, including the regular army already organized, of about three hundred thousand men. After estimates for this force had been furnished to the Secretary, in accordance with law, and his own report, founded upon them, had been closed, the President thought it expedient, in order to make the contest short and decisive, to ask Congress to place at the control of the government at least four hundred thousand men, and four hundred millions of dollars. In the number thus called for the regulars were included. Congress, animated

12 INCREASED APPROPRIATIONS-RETRENCHMENT AND REFORM.

by the same desire for a short and decisive contest, went beyond this recommendation of the President, and authorized the acceptance of volunteers in such numbers, not exceeding five hundred thousand, as he might deem necessary. Congress also authorized the whole increase of the regular army estimated for by the department, and provided further for additional companies and for new officers in several branches of the military service.

The action of Congress, therefore, contemplated the employment, if necessary, of a force, including the existing regular army, of about five hundred and fifty thousand men. To insure its efficiency, the President was authorized to appoint any number of major generals and brigadier generals he might think necessary, and to increase the staff of major generals in the field by discretionary appointments of aids-de-camp, with various rank, from captain to colonel.

This large increase of the army in men and officers, and the liberal additions made by Congress to pay and rations, have augmented, and must necessarily augment, expenditure far beyond the limit indicated by the original estimates; and the limit must be still further extended by the additional sums required for the increase of the navy, and for other objects.

To meet these increased demands, arising almost wholly from the increase of the army and navy and the increase of pay and rations beyond the original estimates, large additional appropriations have been and will be necessary.

Of these additional appropriations $47,985,566 61 were authorized by acts of the last session, and $143,130,927 76 are now asked for; making an aggregate increase, including $22,787,933 31 for indefinite appropriations and redemption of temporary debt, beyond the estimates of July of $213,904, 427 68.

To provide the large sums needed for the disbursements of the current year, and the large sums which the exigencies of the succeeding year may require, will necessarily engage the most serious attention of Senators and Representatives.

The first great object of reflection and endeavor, in the judgment of the Secretary, should be the reduction of expenditure within the narrowest practicable limits. Retrenchment and reform are among the indispensable duties of the hour. Contracts for supplies to the army and navy, as well as for public work of all descriptions, should be subjected to strict supervision, and the contractors to rigorous responsibility. All unnecessary offices should be abolished, and salaries and pay should be materially reduced. In these ways the burdens. of the people, imposed by the war, may be sensibly lightened; and the savings thus effected will be worth more in beneficial effect and influence than the easiest acquisition of equal sums even without cost or liability to repayment.

While thus recommending retrenchment and the prevention of abuses, the Secretary feels himself constrained to renew the suggestion. heretofore submitted by him, that the property of rebels should be made to pay, in part at least, the cost of rebellion. Property of great value

in loyal States is held by proprietors who are actually or virtually engaged in that guilty attempt to break up the Union and overturn its government, which has brought upon our country all the calamities we now endure. That property is justly forfeited to the people, and should be subjected, with due regard for all rights and interests concerned, to sequestration or confiscation, and the proceeds should be applied to the satisfaction of claims arising from the war.

Property of rebels in rebel States should be treated in like manner. Rights to services, under State laws, must, of necessity, form an exception to any rule of confiscation. Persons held by rebels, under such laws, to service as slaves, may, however, be justly liberated from their constraint, and made more valuable in various employments, through voluntary and compensated service, than if confiscated as subjects of property.

Whatever may be saved by retrenchment, however, or exacted from rebellion, large sums must remain to be provided for by taxation and loans.

Already in a former report the Secretary has had the honor of stating the principles by which, as he conceives, the proportions of taxation and loans should be determined. Reflection has only confirmed his opinion that adequate provision by taxation for ordinary expenditures, for prompt payment of interest on the public debt, existing and authorized, and for the gradual extinction of the principal, is indispensable to a sound system of finance. The idea of perpetual debt is not of American nativity, and should not be naturalized. If, at any time, the exacting emergencies of war constrain to temporary departure from the principle of adequate taxation, the first moments of returning tranquillity should be devoted to its reestablishment in full supremacy over the financial administration of

affairs.

It is now even more apparent than at the date of the July report that duties on imports cannot be relied upon as a source of revenue sufficient for the proper objects of taxation. Some modification may, perhaps, be judiciously made of the existing tariff, and some increase of revenue may in this way be probably obtained.

But existing circumstances are not propitious to a wise and permanent adjustment of imposts to the various demands of revenue, commerce, and home industry. The most sacred duty of the American people at this moment requires the consecration of all their energies and all their resources to the re-establishment of Union on the permanent foundations of justice and freedom; and while other nations look with indifferent or unfriendly eyes upon this work, sound policy would seem to suggest not the extension of foreign trade, but a more absolute reliance, under God, upon American labor, American skill, and American soil. Freedom of commerce is, indeed, a wise and noble policy; but to be wise or noble, it must be the policy of concordant and fraternal nations.

In accordance with these views, the Secretary begs leave to recom. mend that the duties on tea, coffee, and sugar be increased to the rates heretofore proposed; that is to say, to two and one-half cents.

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