FEDERAL FINANCE, TAXATION, AND MONEY
=The National Taxing Power.=--The lack of the power of Congress to levy
taxes was, as we have seen, one of the chief weaknesses of the Articles
of Confederation, voluntary contributions by the states being the chief
source of revenue for the national government. When, therefore, the
framers of the Constitution came to deal with this subject, they wisely
provided that Congress should have power to levy and collect its own
revenues. The power conferred is almost absolute, the only limitations
being that no duties shall be levied upon exports; that excises and
duties levied on imports shall be uniform throughout the United States,
that is, they shall be the same in amount on a given article everywhere;
and that where direct taxes are levied, they shall be apportioned among
the states on the basis of population.
=Forms of Federal Taxes.=--The two general forms of taxes recognized by
the Constitution are direct and indirect taxes. The only direct taxes,
in the sense of the Constitution of the United States, are poll taxes,
and taxes on real or personal property, all of which are required to be
apportioned among the states on the basis of population, whenever they
are levied.
On account of the obvious injustice of levying a tax on the states on
the basis of population, inasmuch as there might easily be twice as much
property in one state as in another having the same population, this
method has fallen into general disuse. Indeed, it has been resorted to
by Congress only five times in our history, and then only for very short
periods in each case. It does not seem likely that this method of
federal taxation will ever again be resorted to.
Until recently the two principal sources of federal revenue have been
duties on imports, and internal revenue, or excise taxes, on certain
articles produced in this country.
=Customs Duties.=--_Specific and Ad Valorem._--Customs duties are taxes
levied on articles imported into the United States from abroad. They are
of two kinds, specific and _ad valorem_. Specific duties are those
levied on the articles according to their weight or measurement without
regard to their value. Thus a duty of one and a half cents a pound on
imported tin plate, or five cents a pound on dyestuffs, or ten cents a
yard on silk would be specific. An _ad valorem_ tax is one levied with
reference to the value of the article. Thus a duty of 50 per cent on the
value of imported woolen goods is an example of an _ad valorem_ duty.
Sometimes both forms of duty are levied on the same article.
In favor of the specific duty is the ease of collection, since the
article has only to be weighed or measured and then assessed. But it is
often inadequate, since one yard of cloth or one pound of dye may be
many times more valuable than another, and so with many other articles.
One practical objection to the _ad valorem_ method is the opportunity
which is afforded for fraud in the matter of valuation, since in many
cases it is difficult to ascertain the real value of the article taxed.
_The Protective Tariff._--From the beginning of our existence as a
nation, reliance upon customs duties as a chief source of revenue has
been a part of our established policy. In 1921 the receipts from this
source were $308,025,102; and in many earlier years they were nearly
half of the entire ordinary income of the national government. Great
diversity of opinion, however, has existed in regard to what articles
should be taxed and the amount that should be imposed. The Republican
party has always insisted upon a tariff not only for revenue but also
for protection to American industries and American labor against the
cheap labor of the Old World. The Democratic party, on the other hand,
has generally opposed the protective feature and insisted upon a tariff
primarily for revenue.[35]
[35] But in 1916 a Democratic Congress laid a protective tariff on
imported dyestuffs to encourage a home industry.
_The Preparation of a Tariff Bill_ devolves upon the ways and means
committee of the house of representatives, where all revenue bills must
originate.[36] In 1916 Congress provided for the creation of a
bi-partisan Tariff Commission to investigate the operation of tariff
laws and to make reports with a view to furnishing Congress with
information for its guidance in the preparation of tariff bills.
[36] The senate, however, has the right to propose amendments. Thus the
tariff bill of 1894 was amended by the senate in nearly a thousand
particulars. Again, the tariff bill of 1909 was so altered by the
senate that it was in many respects a new bill, and the differences
between the two houses were settled by a conference committee.
_The Maximum and Minimum Principle._--In 1909 Congress adopted for the
first time the maximum and minimum principle of fixing tariff rates. The
law provided for a maximum and a minimum rate on many articles and
authorized the President to apply the minimum rate to goods imported
from countries which extend the same concession to articles imported by
their citizens from the United States and to apply the maximum rate to
others.
_Reciprocity Treaties._--At various times in the past reciprocity
treaties have been negotiated with foreign countries by which it was
provided that lower rates should be levied on articles imported from
such countries in return for reciprocal concessions of a similar kind
from them; or that there should be free admission of articles by one
country from the other.
=Collection of Customs Duties.=--The collection of the customs duties is
part of the work of the treasury department. The country is divided into
collection districts, in each of which there are one or more ports of
entry and customhouses at which all imported goods must be landed. In
each district there are a collector and a corps of appraisers, weighers,
gaugers, naval officers, surveyors, and the like.
By far the most important port of entry in the United States is the city
of New York, where the aggregate receipts for the year 1910 were two
thirds of the entire amount received from customs duties in the United
States. Until recently a number of the collection districts, however,
were unimportant, and in a few the expenses of administration exceeded
the receipts. Thus the receipts of the Georgetown (S. C.) district in
1910 were only $49.38, while the expenses were $265; the receipts of the
Rock Island (Ill.) district were $51.79 and the expenses $660; the
receipts of the Saco (Me.) district were $9.08 and the expenses $753.92.
In pursuance of an act of Congress passed in 1912, the President has
recently abolished or consolidated many of these districts, so that the
number is now only 49, whereas formerly it was 120. For a long time the
secretary of the treasury had urged Congress to authorize this reform,
mainly in the interest of economy, but it acted tardily.
When goods are purchased abroad to be imported into the United States,
the importer files with the United States consul at the foreign port
from which they are to be exported an invoice containing a list of the
goods and a statement of their value at the place where manufactured or
produced. The consul certifies to the correctness of the invoice and
sends a copy to the collector of the port at which the goods are to be
landed.
_Appraisals._--Upon arrival in the United States, the cargo is examined
by the customs officers to see that it corresponds with the description
contained in the invoice. If it is found that the goods are undervalued
the value will be raised by the appraiser. If there is evidence of
fraud, the goods will be confiscated or a heavy fine imposed on the
importer.[37]
[37] If the importer for any reason does not desire to remove his goods
immediately and pay the duty thereon, he may store them in a government
warehouse by giving a bond for double the amount of their value. He may
then withdraw them at any time within a year upon the payment of the
duties. If they are reëxported the payment of duties is not required.
There is a general board of appraisers to which appeals may be taken by
the importer on questions of valuation, and recently there has been
created a United States court of customs appeals for the determination
of various questions arising in the administration of the tariff laws.
=Internal Revenue Taxes.=--The second important source of federal income
is excise taxes, or what are popularly known as internal revenue duties,
that is, taxes on commodities produced in the United States.
_The Receipts_ from internal revenue taxes as compared with those from
customs duties were inconsiderable before the Civil War. In 1862,
however, Congress passed a comprehensive internal revenue law which
increased the tax on liquors and levied a tax on tobacco, besides
license taxes on various trades and occupations. So many articles were
taxed that the revenue from this source in 1866 amounted to more than
$309,000,000, the largest sum collected in one year from internal
revenue taxes until 1915. In 1917, in consequence of the war, the rates
of many taxes were increased and new taxes were levied on freight and
passenger transportation, express charges, telegrams, insurance
policies, theater tickets, automobiles and many other articles, and a
great variety of business transactions, such as stock transfers, bond
issues, etc. For some purposes the taxes on incomes, profits, and
inheritances (page 224) are called internal revenue. The following are
the principal items of internal revenue in the year ending June 30,
1921:
Income and profits tax $3,228,137,673
Distilled spirits 82,623,428
Tobacco 255,219,385
Estate inheritance tax 154,043,260
Tax on sales 282,222,065
Tax on tickets of admission 95,890,650
Tax on corporations 81,525,652
Tax on bonds, stock issues and transfers, etc. 72,468,013
Tax on transportation, telegraph and telephone 301,512,413
=Collection of Internal Revenue Taxes.=--For convenience in collecting
internal revenue taxes, the country is divided into some sixty
districts, not by act of Congress as is the case with customs districts,
but by the order of the President. Sometimes several states are grouped
into one district; sometimes a state is divided into several districts.
Thus there are four districts in Illinois, six in New York, and five in
Kentucky. In each district there is a collector who acts under the
supervision of the United States Internal Revenue Commissioner. The
collection of internal revenue taxes is a much more simple task than the
collection of customs duties, and is done for the most part by the sale
of stamps to the manufacturer, who is required to affix them on the
articles taxed. In assessing the tax on most articles their value is not
taken into consideration, and hence there is less opportunity for
arbitrary action on the part of the government officials and of course
less likelihood of controversy, than is the case with the administration
of the customs laws.
=Other Sources of Federal Revenue.=--Besides the receipts obtained from
tariff duties and internal revenue taxes, there are a number of other
sources of revenue such as those from the sale of public land, the tax
on national banks, fines and penalties for violations of the laws of the
United States, profits on coinage, naturalization, immigration, patent
office and other fees, etc.
_Income Taxes._--In very recent years (since 1918), the income tax, in
its various forms, has become the greatest of all the sources of revenue
for the federal government.
It was in 1862 that Congress levied for the first time a tax on incomes,
the rate varying from five to ten per cent according to the amount of
the income, all incomes below $600 being exempt from the tax. In 1872,
the law was repealed; but a demand for reviving this method of taxation
gradually increased, and it came to be a standing part of the national
platform of the Democratic party. Accordingly when the Democrats got
control of Congress in 1894, they enacted a law providing that all
incomes in excess of $4,000 a year should be taxed at the rate of two
per cent on the amount in excess of that figure. Shortly after the law
went into effect, however, the Supreme Court, overruling its former
decisions, decided, by a vote of five to four, that the law was
unconstitutional, mainly on the ground that a tax on income from
property was a direct tax in the sense of the Constitution, and not
having been apportioned among the states according to their population
was null and void. Sentiment in favor of such a tax, however, steadily
grew, and in 1913 the constitutional impediment was removed by the
sixteenth amendment.
Later in the year Congress levied an income tax, in connection with an
act to reduce tariff duties. The income tax is one per cent on each
individual's annual net income in excess of $3000 (or $4000 for husband
and wife living together), plus an additional tax of one per cent on net
income over $20,000 and not exceeding $50,000, two per cent on net
income over $50,000 and not exceeding $75,000, and so on up to six per
cent on net income over $500,000.
_The Corporation Tax._--Congress in 1909 passed a law imposing a tax on
corporations, joint-stock companies, and associations, to the extent of
one per cent on the net income of each in excess of $5,000 a year. In
the year 1912 the tax yielded $28,583,259. The next year the exemption
of $5,000 was removed, thus making the entire net income of corporations
liable to the tax.
_Inheritance Taxes._--During the Civil War and the war with Spain,
Congress levied a tax on inheritances, and the permanent adoption of
this form of taxation was strongly recommended by President Roosevelt in
his annual messages, but owing largely to the fact that many of the
states have passed laws of this kind, the idea has never commended
itself to Congress.
[Illustration: CUSTOMHOUSE, NEW YORK]
[Illustration: IN THE MINT AT PHILADELPHIA]
=Deposit of United States Funds.=--The taxes collected by the national
government, together with its other funds, are kept partly in the
treasury and partly in the nine subtreasuries located at Baltimore,
Boston, Chicago, Cincinnati, New Orleans, New York, Philadelphia, St.
Louis, and San Francisco. In addition the secretary of the treasury is
authorized to designate national banks as depositories and to deposit
certain of the funds therein. In times of financial stringency or
threatened crises, this authority may be used by the secretary to
relieve the money market, by distributing the public funds among the
depositories.
=Federal Appropriations and Expenditures.=--Having studied the sources
of federal revenues, we come now to the subject of expenditures. Revenue
bills are prepared, as we have seen, by the ways and means committee of
the house of representatives. At first the appropriations of Congress
were embodied in a single bill prepared by the committee on
appropriations, but as the operations of the government expanded, the
appropriations came to be embodied in a number of bills, sixteen in
1920, prepared by nine different committees. The committee on
appropriations was responsible only for the half dozen more general
appropriation bills, while other committees prepared the the bills
appropriating large amounts for the army, navy, diplomatic service, post
office, Department of Agriculture, District of Columbia, Indian service,
and improvement of rivers and harbors. In 1921, however, the committee
on appropriations was enlarged and again entrusted with the preparation
of all the various appropriation bills, the house thus returning to the
earlier system of a single committee responsible for all expenditures.
The growth of national expenditures has been rapid. The appropriations
for 1916 reached the unprecedented amount of $1,637,583,682; those for
the period of the war (1917-1918), $32,427,000,000, including
$9,000,000,000 loaned to European allies. In 1921, the appropriations
were reduced to about $5,500,000,000.
=The National Debt.=--Whenever the revenues of the government are
insufficient to pay its expenses recourse must be had to increased taxes
or loans. In time of peace the ordinary revenues ought to be sufficient
to meet expenses, but when extraordinary expenses must be incurred as is
the case when war breaks out, or foreign territory is purchased, or some
great public work is to be constructed such as the digging of the Panama
Canal, the government must have recourse to the borrowing power. The
Constitution of the United States expressly confers upon Congress the
power to borrow money on the credit of the United States, and no
limitations whatever are placed on the exercise of the power, such as
are generally imposed on state legislatures by the state constitutions.
_United States Bonds._--The usual mode by which the government borrows
money is by the issue of its bonds, obligations similar in most respects
to promissory notes made by individuals. A government bond is simply a
promise to pay a certain sum at a particular time and with interest at a
certain rate. The bonds issued by the United States government are of
two kinds: "registered" and "coupon" bonds. A registered bond is made
out to the person who purchases it; a record is kept of it at the
treasury department, and when it is transferred to another person the
record must be changed so as to show the new owner.
The advantage of such a bond is that if it is accidentally destroyed or
lost the owner suffers no loss. The chief disadvantage is the difficulty
in transferring it. A coupon bond is one which has interest coupons
attached to it, which may be clipped off and presented to the treasury
for payment as the interest becomes due. The government keeps no record
of the owner and it may be transferred as any other personal property.
If a coupon bond is lost or destroyed, however, the owner cannot collect
the amount of the bond. United States bonds are issued in various
denominations and for periods of time which vary widely. Usually bonds
are sold to the highest bidder, but occasionally they are disposed of by
negotiation with capitalists on the best terms that can be secured.
During President Cleveland's administration $262,000,000 of bonds were
sold to New York capitalists in this way.
_Rate of Interest._--The rate of interest which United States bonds pay
has varied from time to time. The Revolutionary War debt bore six per
cent, and so did most of the civil war bonds. After the Civil War,
however, the rate at which the government was able to borrow steadily
declined, largely because of the desire of national banks to secure
United States bonds (page 232). The rate of interest on bonds now
outstanding ranges from two to five per cent.
_Growth of the National Debt._--When the Constitution went into effect,
the national debt, including the war debts of the states which were
assumed by the national government, amounted to about $127,000,000; but
by 1836 the debt was extinguished and there was a surplus in the
treasury which was distributed among the states. The enormous expenses
of the Civil War, however, had to be met largely by loans, and at the
close of the conflict (1866) the interest-bearing debt was more than
$2,000,000,000. During the next twenty years the debt was reduced to
about $600,000,000, but this amount was increased between 1895 and 1899
to about $945,000,000 on account of bond issues to replenish the gold
reserve and to meet a portion of the expenses of the war with Spain. On
June 30, 1915, the interest-bearing debt stood at $969,759,090. In
1917-19 five bond issues aggregating more than $21,000,000,000 were made
on account of the war with Germany.
In addition there is also a non-interest-bearing debt of $389,407,800,
of which $346,681,016 consists of treasury notes issued during the Civil
War, and popularly known as "greenbacks" from their color. The national
interest-bearing debt of the United States on June 30, 1921, amounted to
about $24,000,000,000. The total debt of England is now about
$40,000,000,000, that of France about $46,000,000,000, and that of
Germany over $30,000,000,000.
=The Monetary System.=--The coining of money is now regarded everywhere
as a proper if not a necessary function of government. Under the
Articles of Confederation, this power was possessed by the states as
well as by Congress, though in fact it was exercised by neither. The
framers of the Constitution decided that the most effective way of
securing a uniform system of money would be to place the whole matter
under the control of the national government, and so Congress alone was
given the power of coinage. At the same time, remembering how the states
had before 1789 flooded the country with paper money which in some
instances had become worthless, the framers of the Constitution wisely
decided to prohibit them from issuing bills of credit, that is, paper
designed to circulate as money. Likewise they were forbidden to make
anything but gold and silver coin a legal tender in the payment of
debts.
_The Acts of 1792 and 1834._--As soon as the new government under the
Constitution had gone into operation, steps were taken to provide a
system of metallic currency. In 1792, an act was passed providing for
the establishment of a mint at Philadelphia and for the striking of both
gold and silver coins.[38] The gold coins were to be the double eagle,
the eagle, the half eagle, and the quarter eagle; the silver coins were
to be the dollar, the half dollar, the quarter, the dime, and the half
dime.[39] As the market value of a given quantity of gold bullion was
then about fifteen times that of silver, the weight of the silver coins
was made fifteen times that of the corresponding gold coins. But as the
value of gold bullion presently began to increase in comparison with
silver, it was necessary to readjust the ratio so as to keep both in
circulation, and so in 1834 the weight of gold coins was reduced and the
ratio made sixteen to one.
[38] Later mints were established at Denver, San Francisco, and New
Orleans. Assay offices for refining and determining the purity of
bullion have been established at New York, St. Louis, Deadwood, Helena,
Boise, Carson City, Salt Lake, Seattle, and Charlotte, North Carolina.
To give strength and hardness to gold and silver coins an alloy of
copper equal to one tenth of their weight is added.
[39] In addition to the gold and silver coins mentioned above are the
five cent piece (nickel) and the one cent piece (copper).
_Demonetization of the Silver Dollar._--But soon the increase in the
supply of gold again disturbed the ratio, making the silver coins worth
more as metal than as money; and as the difficulty of keeping up the
adjustment seemed insuperable, Congress decided to abandon the attempt
and so in 1873 the silver dollar was practically "demonetized," that is,
was dropped from the list of coins, and other silver coins were made
subsidiary, that is, their weight was decreased so that the metal in
them was worth less than their face value, and they were made legal
tender for small sums only.[40]
[40] At the present time all gold coins and the silver dollar are legal
tender for all sums. The smaller coins, however, are legal tender for
small sums only, the amount ranging from twenty-five cents in the case
of the nickel and copper pieces to $10 in the case of the silver coins.
_Later Acts._--The opposition to the demonetization of the silver
dollar, however, became so great that it was restored by the act of
1878 and made full legal tender. But the free coinage of silver was not
restored; the act required the government to purchase and coin not less
than $2,000,000 nor more than $4,000,000 worth of silver bullion per
month. In the mean time the market value of silver had declined until
the amount of silver in a silver dollar was worth less than eighty cents
in gold, and it was believed that the act of 1878 by increasing the
demand for silver would restore its market value. This, however, did not
happen, and the market value of silver went on decreasing until at one
time the amount of silver in a dollar was worth only about forty-six
cents in gold. In 1890 Congress increased the use of silver by requiring
the secretary of the treasury to purchase monthly four and one half
million ounces of silver and pay for it with treasury notes which were
redeemable in coin at the option of the secretary and which were to be
canceled or destroyed when so redeemed. This act was repealed in 1893,
since which date the government has purchased very little silver bullion
for coinage purposes.
=Free Coinage.=--In determining its coinage policy, the government might
follow either of two methods: (1) It might coin any and all bullion
presented by its owners at the mints, or (2) it might purchase its own
bullion and coin only so much as the necessities of trade or other
considerations might require. The former policy is that of free coinage;
it is also unlimited coinage since it involves the coinage of all
bullion offered, without limit. From the very first, the practice of the
government in regard to gold has been that of free and unlimited
coinage; that is, any owner of gold bullion may take it to a mint and
have it coined without charge except for the cost of the alloy. Prior to
1873, the same policy was followed in regard to silver, thus maintaining
in theory at least a bimetallic or double standard. In 1873, however,
Congress abandoned the policy of free coinage of silver and adopted the
single gold standard. From then until now the government has coined no
silver bullion for private owners.
=Paper Currency.=--In addition to the metallic money described above
there is a vast amount of paper currency in the United States. This
currency may be classified under five different heads.
_Greenbacks._--First, there are the $346,681,016 of old United States
notes or "greenbacks," already described. They were issued during the
Civil War, they bear no interest, and are redeemable in coin upon the
demand of the holder. Since 1878 the practice of the government has been
not to retire them as they are redeemed but to reissue them and keep
them in circulation.
_Gold and Silver Certificates._--Second, there is a large amount of
currency in the form of gold and silver certificates. The law under
which such currency is issued provides that any owner of gold or silver
coin may deposit it in the treasury and receive in exchange an
equivalent amount of certificates. They are more convenient to handle
than coin, and are equally valuable for paying debts and purchasing
commodities. On the 1st of July, 1921, the amount of gold certificates
in circulation was $452,174,709; the amount of silver certificates,
$201,534,213. These two forms of currency constitute one eighth of our
entire stock of money in circulation.
_Sherman Treasury Notes._--A third form of paper money is the so-called
Sherman treasury notes issued in pursuance of the act of 1890 already
described. On July 1, 1921, there were $1,576,184 of them in
circulation. The law declares that they shall be redeemed in _coin_,
that is, either gold or silver, at the option of the government. To
prevent the threatened depletion of the gold reserve[41] and provide the
necessary gold with which to redeem the increasing issues of Sherman
treasury notes, bond issues aggregating $262,000,000 were issued during
the years 1894 and 1895. By the act of 1900 the policy of maintaining a
single gold standard was definitely adopted by Congress, and it was
provided that greenback notes, Sherman treasury notes, and other
securities of the government should be redeemable in gold.
[41] The gold reserve is a sum of money set aside for the purpose of
redeeming the old "greenbacks" or United States notes. An effort has
always been made to keep the amount above $100,000,000.
_National Bank Notes._--The fourth class of paper money is national bank
currency. A national bank, unlike other banks, not only receives
deposits and makes loans and performs the other functions of banks, but
also issues notes which circulate as money. There are about 8,200
national banks in the United States, with an aggregate capital of more
than $1,000,000,000 and with a total circulation of $729,550,513 of
notes outstanding (July 1, 1921).
_Federal Reserve Notes._--The federal reserve banks, established under
the act of 1913, not only receive deposits and make loans to other
banks, but also have power to issue federal reserve notes which
circulate as money. The amount in circulation July 1, 1921, was
$2,680,494,274. This constitutes by far the largest amount of paper
money in existence.
The total amount of money of all kinds in circulation on July 1, 1921,
amounted to $5,776,437,473, or a per capita circulation of about $53.40.
=The National Bank System.=--Any number of persons, not less than five,
may organize a national bank, the amount of capital required depending
upon the population of the town or city where the bank is located.
Prior to 1914 the organizers were obliged to purchase and deposit with
the government, bonds of the United States equal to one fourth of the
capital of the bank; now they may do so if they wish. The comptroller of
the currency then delivers to the bank notes equal in amount to the par
value of the bonds deposited. These notes when properly signed by the
president and cashier of the bank may then be loaned by the bank or
otherwise issued as currency, for though not a legal tender they are
commonly used as money. It must also be remembered that the United
States bonds deposited with the government remain the property of the
bank and it receives the interest on them just as any other owner would.
_Advantages of National Bank Currency._--If a national bank fails,
depositors may lose their money just as depositors of money in other
banks may, but the holder of a national bank note does not, for whenever
a bank is unable to redeem its notes, the comptroller of the currency
may sell the bonds which it has on deposit with him, and with the
proceeds redeem its notes. Hence a bank note is as safe as any other
form of currency. Moreover, national banks are subject to frequent and
careful examination by government examiners, and failures among them
occur with less frequency than among other banks.
=Federal Reserve Banks.=--By an important act passed in 1913 Congress
provided for the creation of a series of federal reserve banks to be
located in different parts of the country. The committee intrusted with
the matter divided the United States into twelve districts, each of
which is to have one federal reserve bank, located respectively in the
following cities: Boston, New York, Philadelphia, Cleveland, Richmond,
Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San
Francisco. In each district the national banks are required to become
members of the federal reserve association, and to subscribe for its
stock. Other banks may do so, by conforming to certain requirements.
Federal reserve banks are under the supervision and control of a federal
reserve board consisting of the secretary of the treasury, the
comptroller of the currency, and five other members appointed by the
President. The federal reserve notes which they issue are guaranteed by
the United States government, and are secured by commercial paper--notes
and drafts--deposited in the treasury. It is expected that these banks
will provide a more adequate supply of money and credit when the need is
greatest, as during the crop-moving season, and at the same time give
greater stability to the business of banking.
=Federal Land Banks.=--In 1916 Congress passed the so-called rural
credits law, which provides for the organization of a series of banks
for lending money to farmers at low rates of interest and for long
periods of time. Such banks are under the supervision of the federal
farm loan board consisting of the secretary of the treasury and four
other members.
=References.=--ANDREWS, Manual of the Constitution, pp. 81-89,
104-118. BEARD, American Government and Politics, ch. xviii. BRYCE,
The American Commonwealth (abridged edition), ch. xvi. HARRISON,
This Country of Ours, pp. 58-65. HART, Actual Government, chs.
xxi-xxii. HINSDALE, American Government, secs. 341-373. LAUGHLIN,
Elements of Political Economy, chs. xxv-xxvii.
=Illustrative Material.=--1. Copy of the present tariff law. 2.
Specimens of various kinds of money in circulation. 3. Copy of the
last annual report of the Secretary of the Treasury.
RESEARCH QUESTIONS
1. What were the sources of national revenue during the period of the
Confederation?
2. Why has the imposition of direct taxes on the states not been
resorted to with more frequency?
3. What is your opinion of the law levying taxes on incomes?
4. What is the amount paid by your state in internal revenue taxes? How
many internal revenue districts are in your state?
5. Are there any ports of "entry" or "delivery" in your state? Any
customhouses? If so, what is the amount collected by each? (See report
of the secretary of the treasury.)
6. Can you give the names of some articles now on the "free list"?
Mention some articles on which, in your judgment, the tariff rate is too
high. Mention some articles on which the tariff is levied according to
the _ad valorem_ method; the _specific_ method; both methods combined.
(See copy of the tariff law.)
7. With what countries do we have reciprocity commercial treaties? In
brief, what are the provisions of those treaties?
8. Why is an internal revenue tax imposed on such articles as
oleomargarine, filled cheese, and mixed flour?
9. What is the present rate on tobacco, cigars, distilled spirits, and
fermented spirits?
10. What was the total amount of the appropriations of Congress at the
last session? What were the largest items of expenditure?
11. What is the present mint ratio between gold and silver? the market
ratio? What is the actual weight of a silver dollar? What is Gresham's
law of coinage?
12. Which countries have a bimetallic monetary system? Which a single
silver standard? Which a single gold standard? What are the arguments
for and against free coinage of silver?
13. What would be the result of opening the mints to the free and
unlimited coinage of silver?
14. Name the different kinds of paper money.
15. What was the amount of the interest-bearing debt according to the
last report of the secretary of the treasury?
16. What do you understand by the terms "legal tender"? "fiat money"?
"seigniorage"? "suspension of specie payments"?
17. What is the penalty for counterfeiting the currency of the United
States?
[Answers to many of these questions may be found in the report of the
secretary of the treasury which may be obtained gratis from the
secretary.]