which declares that "all duties, imposts, and excises" shall "be
uniform throughout the United States" to make the burdens of taxation
fall equally upon the people in what ever State of the Union they may
reside. But what would be the value of such a uniform rule if the
moneys raised by it could be immediately returned by a different one
which will give to the people of some States much more and to those of
others much less than their fair proportions? Were the Federal
Government to exempt in express terms the imports, products, and
manufactures of some portions of the country from all duties while it
imposed heavy ones on others, the injustice could not be greater. It
would be easy to show how by the operation of such a principle the
large States of the Union would not only have to contribute their just
share toward the support of the Federal Government, but also have to
bear in some degree the taxes necessary to support the governments of
their smaller sisters; but it is deemed unnecessary to state the
details where the general principle is so obvious.
A system liable to such objections can never be supposed to have been
sanctioned by the framers of the Constitution when they conferred on
Congress the taxing power, and I feel persuaded that a mature
examination of the subject will satisfy everyone that there are
insurmountable difficulties in the operation of any plan which can be
devised of collecting revenue for the purpose of distributing it.
Congress is only authorized to levy taxes "to pay the debts and provide
for the common defense and general welfare of the United States". There
is no such provision as would authorize Congress to collect together
the property of the country, under the name of revenue, for the purpose
of dividing it equally or unequally among the States or the people.
Indeed, it is not probable that such an idea ever occurred to the
States when they adopted the Constitution. But however this may be, the
only safe rule for us in interpreting the powers granted to the Federal
Government is to regard the absence of express authority to touch a
subject so important and delicate as this as equivalent to a
prohibition.
Even if our powers were less doubtful in this respect as the
Constitution now stands, there are considerations afforded by recent
experience which would seem to make it our duty to avoid a resort to
such a system. All will admit that the simplicity and economy of the
State governments mainly depend on the fact that money has to be
supplied to support them by the same men, or their agents, who vote it
away in appropriations. Hence when there are extravagant and wasteful
appropriations there must be a corresponding increase of taxes, and the
people, becoming awakened, will necessarily scrutinize the character of
measures which thus increase their burdens. By the watchful eye of
self-interest the agents of the people in the State governments are
repressed and kept within the limits of a just economy.
But if the necessity of levying the taxes be taken from those who make
the appropriations and thrown upon a more distant and less responsible
set of public agents, who have power to approach the people by an
indirect and stealthy taxation, there is reason to fear that
prodigality will soon supersede those characteristics which have thus
far made us look with so much pride and confidence to the State
governments as the main-stay of our Union and liberties. The State
legislatures, instead of studying to restrict their State expenditures
to the smallest possible sum, will claim credit for their profusion,
and harass the General Government for increased supplies.
Practically there would soon be but one taxing power, and that vested
in a body of men far removed from the people, in which the farming and
mechanic interests would scarcely be represented. The States would
gradually lose their purity as well as their independence; they would
not dare to murmur at the proceedings of the General Government, lest
they should lose their supplies; all would be merged in a practical
consolidation, cemented by wide-spread corruption, which could only be
eradicated by one of those bloody revolutions which occasionally
over-throw the despotic systems of the Old World.
In all the other aspects in which I have been able to look at the
effect of such a principle of distribution upon the best interests of
the country I can see nothing to compensate for the disadvantages to
which I have adverted. If we consider the protective duties, which are
in a great degree the source of the surplus revenue, beneficial to one
section of the Union and prejudicial to another, there is no corrective
for the evil in such a plan of distribution. On the contrary, there is
reason to fear that all the complaints which have sprung from this
cause would be aggravated. Everyone must be sensible that a
distribution of the surplus must beget a disposition to cherish the
means which create it, and any system, therefore, into which it enters
must have a powerful tendency to increase rather than diminish the
tariff. If it were even admitted that the advantages of such a system
could be made equal to all the sections of the Union, the reasons
already so urgently calling for a reduction of the revenue would never
the less lose none of their force, for it will always be improbable
that an intelligent and virtuous community can consent to raise a
surplus for the mere purpose of dividing it, diminished as it must
inevitably be by the expenses of the various machinery necessary to the
process.
The safest and simplest mode of obviating all the difficulties which
have been mentioned is to collect only revenue enough to meet the wants
of the Government, and let the people keep the balance of their
property in their own hands, to be used for their own profit. Each
State will then support its own government and contribute its due share
toward the support of the General Government. There would be no surplus
to cramp and lessen the resources of individual wealth and enterprise,
and the banks would be left to their ordinary means. Whatever
agitations and fluctuations might arise from our unfortunate paper
system, they could never be attributed, justly or unjustly, to the
action of the Federal Government. There would be some guaranty that the
spirit of wild speculation which seeks to convert the surplus revenue
into banking capital would be effectually checked, and that the scenes
of demoralization which are now so prevalent through the land would
disappear.
Without desiring to conceal that the experience and observation of the
last two years have operated a partial change in my views upon this
interesting subject, it is never the less regretted that the
suggestions made by me in my annual messages of 1829 and 1830 have been
greatly misunderstood. At that time the great struggle was begun
against that latitudinarian construction of the Constitution which
authorizes the unlimited appropriation of the revenues of the Union to
internal improvements within the States, tending to invest in the hands
and place under the control of the General Government all the principal
roads and canals of the country, in violation of State rights and in
derogation of State authority.
At the same time the condition of the manufacturing interest was such
as to create an apprehension that the duties on imports could not
without extensive mischief be reduced in season to prevent the
accumulation of a considerable surplus after the payment of the
national debt. In view of the dangers of such a surplus, and in
preference to its application to internal improvements in derogation of
the rights and powers of the States, the suggestion of an amendment of
the Constitution to authorize its distribution was made. It was an
alternative for what were deemed greater evils--a temporary resort to
relieve an over-burdened treasury until the Government could, without a
sudden and destructive revulsion in the business of the country,
gradually return to the just principle of raising no more revenue from
the people in taxes than is necessary for its economical support.
Even that alternative was not spoken of but in connection with an
amendment of the Constitution. No temporary inconvenience can justify
the exercise of a prohibited power not granted by that instrument, and
it was from a conviction that the power to distribute even a temporary
surplus of revenue is of that character that it was suggested only in
connection with an appeal to the source of all legal power in the
General Government, the States which have established it. No such
appeal has been taken, and in my opinion a distribution of the surplus
revenue by Congress either to the States or the people is to be
considered as among the prohibitions of the Constitution.
As already intimated, my views have undergone a change so far as to be
convinced that no alteration of the Constitution in this respect is
wise or expedient. The influence of an accumulating surplus upon the
credit system of the country, producing dangerous extensions and
ruinous contractions, fluctuations in the price of property, rash
speculation, idleness, extravagance, and a deterioration of morals,
have taught us the important lesson that any transient mischief which
may attend the reduction of our revenue to the wants of our Government
is to be borne in preference to an over-flowing treasury.
I beg leave to call your attention to another subject intimately
associated with the preceding one--the currency of the country.
It is apparent from the whole context of the Constitution, as well as
the history of the times which gave birth to it, that it was the
purpose of the Convention to establish a currency consisting of the
precious metals. These, from their peculiar properties which rendered
them the standard of value in all other countries, were adopted in this
as well to establish its commercial standard in reference to foreign
countries by a permanent rule as to exclude the use of a mutable medium
of exchange, such as of certain agricultural commodities recognized by
the statutes of some States as a tender for debts, or the still more
pernicious expedient of a paper currency.
The last, from the experience of the evils of the issues of paper
during the Revolution, had become so justly obnoxious as not only to
suggest the clause in the Constitution forbidding the emission of bills
of credit by the States, but also to produce that vote in the
Convention which negatived the proposition to grant power to Congress
to charter corporations--a proposition well understood at the time as
intended to authorize the establishment of a national bank, which was
to issue a currency of bank notes on a capital to be created to some
extent out of Government stocks. Although this proposition was refused
by a direct vote of the Convention, the object was afterwards in effect
obtained by its ingenious advocates through a strained construction of
the Constitution. The debts of the Revolution were funded at prices
which formed no equivalent compared with the nominal amount of the
stock, and under circumstances which exposed the motives of some of
those who participated in the passage of the act to distrust.
The facts that the value of the stock was greatly enhanced by the
creation of the bank, that it was well understood that such would be
the case, and that some of the advocates of the measure were largely
benefited by it belong to the history of the times, and are well
calculated to diminish the respect which might otherwise have been due
to the action of the Congress which created the institution.
On the establishment of a national bank it became the interest of its
creditors that gold should be superseded by the paper of the bank as a
general currency. A value was soon attached to the gold coins which
made their exportation to foreign countries as a mercantile commodity
more profitable than their retention and use at home as money. It
followed as a matter of course, if not designed by those who
established the bank, that the bank became in effect a substitute for
the Mint of the United States.
Such was the origin of a national bank currency, and such the beginning
of those difficulties which now appear in the excessive issues of the
banks incorporated by the various States.
Although it may not be possible by any legislative means within our
power to change at once the system which has thus been introduced, and
has received the acquiescence of all portions of the country, it is
certainly our duty to do all that is consistent with our constitutional
obligations in preventing the mischiefs which are threatened by its
undue extension. That the efforts of the fathers of our Government to
guard against it by a constitutional provision were founded on an
intimate knowledge of the subject has been frequently attested by the
bitter experience of the country. The same causes which led them to refuse
their sanction to a power authorizing the establishment of incorporations
for banking purposes now exist in a much stronger degree to urge us to
exert the utmost vigilance in calling into action the means necessary
to correct the evils resulting from the unfortunate exercise of the
power, and it is hoped that the opportunity for effecting this great
good will be improved before the country witnesses new scenes of
embarrassment and distress.
Variableness must ever be the characteristic of a currency of which the
precious metals are not the chief ingredient, or which can be expanded
or contracted without regard to the principles that regulate the value
of those metals as a standard in the general trade of the world. With
us bank issues constitute such a currency, and must ever do so until
they are made dependent on those just proportions of gold and silver as
a circulating medium which experience has proved to be necessary not
only in this but in all other commercial countries. Where those
proportions are not infused into the circulation and do not control it,
it is manifest that prices must vary according to the tide of bank
issues, and the value and stability of property must stand exposed to
all the uncertainty which attends the administration of institutions
that are constantly liable to the temptation of an interest distinct
from that of the community in which they are established.
The progress of an expansion, or rather a depreciation, of the currency
by excessive bank issues is always attended by a loss to the laboring
classes. This portion of the community have neither time nor
opportunity to watch the ebbs and flows of the money market. Engaged
from day to day in their useful toils, they do not perceive that
although their wages are nominally the same, or even somewhat higher,
they are greatly reduced in fact by the rapid increase of a spurious
currency, which, as it appears to make money abound, they are at first
inclined to consider a blessing.
It is not so with the speculator, by whom this operation is better
understood, and is made to contribute to his advantage. It is not until
the prices of the necessaries of life become so dear that the laboring
classes can not supply their wants out of their wages that the wages
rise and gradually reach a justly proportioned rate to that of the
products of their labor. When thus, by depreciation in consequence of
the quantity of paper in circulation, wages as well as prices become
exorbitant, it is soon found that the whole effect of the adulteration
is a tariff on our home industry for the benefit of the countries where
gold and silver circulate and maintain uniformity and moderation in
prices. It is then perceived that the enhancement of the price of land
and labor produces a corresponding increase in the price of products
until these products do not sustain a competition with similar ones in
other countries, and thus both manufactured and agricultural
productions cease to bear expectation from the country of the spurious
currency, because they can not be sold for cost.
This is the process by which specie is banished by the paper of the
banks. Their vaults are soon exhausted to pay for foreign commodities.
The next step is a stoppage of specie payment--a total degradation of
paper as a currency--unusual depression of prices, the ruin of debtors,
and the accumulation of property in the hands of creditors and cautious
capitalists.
It was in view of these evils, together with the dangerous power
wielded by the Bank of the United States and its repugnance to our
Constitution, that I was induced to exert the power conferred upon me
by the American people to prevent the continuance of that institution.
But although various dangers to our republican institutions have been
obviated by the failure of that bank to extort from the Government a
renewal of its charter, it is obvious that little has been accomplished
except a salutary change of public opinion toward restoring to the
country the sound currency provided for in the Constitution.
In the acts of several of the States prohibiting the circulation of
small notes and the auxiliary enactments of Congress at the last
session forbidding their reception or payment on public account, the
true policy of the country has been advanced and a larger portion of
the precious metals infused into our circulating medium. These measures
will probably be followed up in due time by the enactment of State laws
banishing from circulation bank notes of still higher denominations,
and the object may be materially promoted by further acts of Congress
forbidding the employment as fiscal agents of such banks as continue to
issue notes of low denominations and throw impediments in the way of
the circulation of gold and silver.
The effects of an extension of bank credits and over-issues of bank
paper have been strikingly illustrated in the sales of the public
lands. From the returns made by the various registers and receivers in
the early part of last summer it was perceived that the receipts
arising from the sales of the public lands were increasing to an
unprecedented amount. In effect, however, these receipts amounted to
nothing more than credits in bank. The banks lent out their notes to
speculators. They were paid to the receivers and immediately returned
to the banks, to be lent out again and again, being mere instruments to
transfer to speculators the most valuable public land and pay the
Government by a credit on the books of the banks.
Those credits on the books of some of the Western banks, usually called
deposits, were already greatly beyond their immediate means of payment,
and were rapidly increasing. Indeed, each speculation furnished means
for another; for no sooner had one individual or company paid in the
notes than they were immediately lent to another for a like purpose,
and the banks were extending their business and their issues so largely
as to alarm considerate men and render it doubtful whether these bank
credits, if permitted to accumulate, would ultimately be of the least
value to the Government. The spirit of expansion and speculation was
not confined to the deposit banks, but pervaded the whole multitude of
banks throughout the Union and was giving rise to new institutions to
aggravate the evil.
The safety of the public funds and the interest of the people generally
required that these operations should be checked; and it became the
duty of every branch of the General and State Governments to adopt all
legitimate and proper means to produce that salutary effect. Under this
view of my duty I directed the issuing of the order which will be laid
before you by the Secretary of the Treasury, requiring payment for the
public lands sold to be made in specie, with an exception until the
15th of the present month in favor of actual settlers.
This measure has produced many salutary consequences. It checked the
career of the Western banks and gave them additional strength in
anticipation of the pressure which has since pervaded our Eastern as
well as the European commercial cities. By preventing the extension of
the credit system it measurably cut off the means of speculation and
retarded its progress in monopolizing the most valuable of the public
lands. It has tended to save the new States from a non-resident
proprietorship, one of the greatest obstacles to the advancement of a
new country and the prosperity of an old one. It has tended to keep
open the public lands for entry by emigrants at Government prices
instead of their being compelled to purchase of speculators at double
or triple prices. And it is conveying into the interior large sums in
silver and gold, there to enter permanently into the currency of the
country and place it on a firmer foundation. It is confidently believed
that the country will find in the motives which induced that order and
the happy consequences which will have ensued much to commend and
nothing to condemn.
It remains for Congress if they approve the policy which dictated this
order to follow it up in its various bearings. Much good, in my
judgment, would be produced by prohibiting sales of the public lands
except to actual settlers at a reasonable reduction of price, and to
limit the quantity which shall be sold to them. Although it is believed
the General Government never ought to receive anything but the
constitutional currency in exchange for the public lands, that point
would be of less importance if the lands were sold for immediate
settlement and cultivation. Indeed, there is scarcely a mischief
arising out of our present land system, including the accumulating
surplus of revenues, which would not be remedied at once by a
restriction on land sales to actual settlers; and it promises other
advantages to the country in general and to the new States in
particular which can not fail to receive the most profound
consideration of Congress.
Experience continues to realize the expectations entertained as to the
capacity of the State banks to perform the duties of fiscal agents for
the Government at the time of the removal of the deposits. It was
alleged by the advocates of the Bank of the United States that the
State banks, what ever might be the regulations of the Treasury
Department, could not make the transfers required by the Government or
negotiate the domestic exchanges of the country. It is now well
ascertained that the real domestic exchanges performed through
discounts by the United States Bank and its 25 branches were at least
one third less than those of the deposit banks for an equal period of
time; and if a comparison be instituted between the amounts of service
rendered by these institutions on the broader basis which has been used
by the advocates of the United States Bank in estimating what they
consider the domestic exchanges transacted by it, the result will be
still more favorable to the deposit banks.
The whole amount of public money transferred by the Bank of the United
States in 1832 was $16,000,000. The amount transferred and actually
paid by the deposit banks in the year ending the first of October last
was $39,319,899; the amount transferred and paid between that period
and the 6th of November was $5,399,000, and the amount of transfer
warrants outstanding on that day was $14,450,000, making an aggregate
of $59,168,894. These enormous sums of money first mentioned have been
transferred with the greatest promptitude and regularity, and the rates
at which the exchanges have been negotiated previously to the passage
of the deposit act were generally below those charged by the Bank of
the United States. Independently of these services, which are far
greater than those rendered by the United States Bank and its 25
branches, a number of the deposit banks have, with a commendable zeal
to aid in the improvement of the currency, imported from abroad, at
their own expense, large sums of the precious metals for coinage and
circulation.