The National Finances.--Debt when the Civil War began.--Deadly Blow
to Public Credit.--Treasury Notes due in 1861.--$10,000,000 required.
--An Empty Treasury.--Recommendation by Secretary Dix.--Secretary
Thomas recommends a Pledge of the Public Lands.--Strange Suggestions.
--Heavy Burdens upon the Treasury.--Embarrassment of Legislators.
--First Receipts in the Treasury in 1861.--Chief Dependence had
always been on Customs.--Morrill Tariff goes into Effect.--It meets
Financial Exigencies.--Mr. Vallandigham puts our Revenue at
$50,000,000, our Expenditures at $500,000,000.--Annual Deficiency
under Mr. Buchanan.--Extra Session in July, 1861.--Secretary Chase
recommends $80,000,000 by Taxation, and $240,000,000 by Loans.--
Loan Bill of July 17, 1861.--Its Provisions.--Demand Notes.--Seven-
thirties.--Secretary Chase's Report, December, 1861.--Situation
Serious.--Sales of Public Lands.--Suspension of Specie Payment.--
The Loss of our Coin.--Its Steady Export to Europe.
When the civil war began, the Government of the United States owed
a less sum than it owed under the administration of Washington
after the funding of the debt of the Revolution. The population
in 1861 was nine times as large, the wealth thirty times as great
as in 1791. The burden therefore was absolutely inconsiderable
when contrasted with our ability to pay. But there had been such
gross mismanagement of the Treasury, either from incompetency or
design, under the administration of Howell Cobb, that the credit
of the government was injured. There was embarrassment when there
should have been security; there was scarcity when the most ordinary
prudence would have insured plenty. So much depended at that moment
on the ability of the government to raise money by pledging its
faith, that Mr. Cobb perhaps thought he was dealing the deadliest
blow at the nation by depriving it of the good name it had so long
held in the money markets of the world. With unblemished credit
at the opening of the war, the government could have used its
military power with greater confidence, and consequently with
greater effectiveness.
THE NATIONAL CREDIT INJURED.
At the beginning of the year 1861 it was necessary for the government
to raise about $10,000,000 to meet Treasury notes outstanding and
the interest secured upon them. Congress had passed, on the 17th
of December, 1860, a law authorizing the issue of new Treasury
notes for this amount, bearing interest at the rate of six per
cent., and redeemable after one year; but the Secretary of the
Treasury was authorized to issue them, upon public notice, at the
best rates of interest offered by responsible bidders. Before the
close of the month negotiations were completed, after unusual
effort, and it was found that the notes were issued at various
rates, only $70,200 at six per cent., $5,000 at seven per cent.,
$24,500 at eight per cent., $355,000 at rates between eight per
cent. and below ten per cent., $3,283,500 at ten per cent. and
fractions below eleven per cent., $1,432,700 at eleven per cent.,
and by far the larger share, $4,840,000 at twelve per cent. The
average for the whole negotiation made the rate of interest ten
and five-eighths per cent.
The Treasury was empty, for the nominal balance was only $2,233,220
on the 1st of January. Obligations were accruing to such an extent
that General John A. Dix, as Secretary of the Treasury, informed
the Committee on Ways and Means of the House of Representatives,
that the revenue exhibited, on the 1st of February, a deficit of
$21,677,524. The committee estimated that the sum needed to carry
on current operations was at least $5,000,000 in addition. A loan
of $25,000,000 was proposed, to meet these demands. Secretary Dix,
who felt the pulse of the financial centres, recommended in a letter
to the Ways and Means Committee that the several States be asked
to pledge the United-States "deposit funds" in their hands for the
security of the loan. His immediate predecessor, Philip F. Thomas,
had, in his annual report in the preceding December, urged that
the "public lands be unconditionally pledged for the ultimate
redemption of all the Treasury notes which it may become necessary
to issue."
Such suggestions seem strange to the ears of those who were afterwards
accustomed to the unbounded credit of the Republic. But these
secretaries were called to hear from capitalists the declaration
that the national debt had increased from $28,460,958 on the 1st
of July, 1857, to $64,640,838 on the 1st of July, 1860, and that
the figures were still mounting upward. In the mean time the
revenues were falling off, the sales of public lands were checked,
and the estimates of customs for the current year were practically
overthrown by the secession of the Southern States and the denial
of the authority of the Union.
The task of Congress might well strike some thoughtful legislators
as that of making bricks without straw. As the Rebellion took form
and organization, it became clear that the ability and willingness
of the people to raise large sums of money were vital factors in
the problem of the maintenance of the Union. It was well that no
one knew just how great were the burdens which the loyal people
must bear. It is no disparagement to the leading statesmen of that
era, that they did not at first propose measures adequate to the
emergency, because no standards existed by which the magnitude of
that emergency could be estimated. If Congress had understood on
the 1st of July, 1861, that the ordinary expenditures of the
government would be, within the fiscal years 1863 and 1864, more
than the entire expenditures of the National Government from the
foundation of the nation to that day, paralysis would have fallen
upon the courage of the bravest. If the necessity had been proclaimed
of raising by loans before the 1st of July, 1865, two thousand
millions of dollars more than the National Treasury had ever received
from loans and revenue combined, the audacity of the demand would
have forbidden serious consideration. If the Ways and Means
Committee had been notified that before the end of 1865, the annual
charge for interest on the national debt, for which provision must
be made, would reach $150,977,697, much more than twice the total
expenditure of the preceding year, skill and energy would have
undergone the crucial test. But the surprise of legislators would
have been equally great if they could then have unrolled the future
records of the Treasury, and have seen that in the year in which
the Rebellion would be suppressed, the receipts from customs would
attain the vast sum of $179,046,651, while from internal revenue,
a source not yet drawn upon, the enormous aggregate of $309,226,813
would be contributed to maintain the public credit.
We are so familiar with the vast sums which the war against the
Rebellion caused the National Government to disburse, that it is
difficult to appreciate the spirit with which the legislators of
1861 approached the impending burdens. They knew that their task
was great. They were in imminent peril, not only from open hostility,
but from doubt and fear. The resources of the Republic had not
been measured, the uprising of popular patriotism had not yet
astonished foreign foes and even the most sanguine of domestic
participants. With the information which was then before the world,
it may be questioned whether a complete scheme for providing the
money necessary for the struggle could have been passed through
Congress, or rendered effective with capitalists. The needs of
each crisis were supplied as each arose. Congress did not try to
look far into the future. It exerted itself to give daily bread
to the armies of the Union, to provide munitions of war, to build
and equip the navy.
NATIONAL FINANCES IN 1861.
The first receipts into the Treasury in 1861, other than from the
ordinary revenues under preceding statutes, came from the loan of
February 5, which authorized the issue of bonds bearing six per
cent. interest, payable within not less than ten, or more than
twenty years. The amount authorized was $25,000,000, and the
secretary was able to negotiate $18,415,000 at the average rate of
eighty-nine and three one-hundredths (89.03) per cent.
The Congress which closed its session of the 4th of March, 1861,
among its final acts provided for a loan of $10,000,000 in bonds,
or the issue of a like sum in Treasury notes; and the President
was also empowered to issue Treasury notes for any part of loans
previously authorized. Under this statute, notes were issued to
the amount of $12,896,350, payable sixty days after date, and
$22,468,100 payable in two years. This measure indicated the
disposition to provide for pressing exigencies by devices which
covered only the present hour, and left heavier responsibilities
to the future. An incident of this period was the settlement of
the debt incurred in the war in Oregon against the Indians, by
giving to the claimants or their representatives six per cent.
bonds redeemable in twenty years. The bonds were taken to the
amount of $1,090,850, showing that such securities were welcome to
claimants even at par.
The chief dependence of the United States for revenue had always
been upon customs. But no real test had ever been made of the sum
that might be collected from this source. The aim had been to see
with how small an amount the National Government could be supported,
not how large an amount might be collected. The time was now upon
us when this critical experiment was to be tried, and the initial
step in that direction was the Morrill Tariff which went into effect
on the first day of April. It radically changed the policy of our
customs duties from the legislation of 1846 and 1857, and put the
nation in the attitude of self-support in manufactures. Although
introduced before secession attained its threatening proportions,
it was well adapted to the condition in which the country was placed
at the time of its enactment. It was a measure carefully elaborated,
and based upon principles which were applied with studious accuracy
to all its parts. Under it the imposts which had averaged about
nineteen per cent. on dutiable articles, and fifteen per cent. on
the total importations, mounted to thirty-six per cent. on dutiable
articles, and to twenty-eight per cent. on the total importations.
Thus, although the goods brought into the country fell off unavoidably
by reason of the war, and especially of the difficulties encountered
by our vessels from the rebel privateers, the customs duties rather
increased than diminished, and something was thus secured in the
way of a basis of credit for the immense loans which became necessary.
The measure, Mr. Sherman of Ohio stated, would in ordinary times
produce an income of $65,000,000 a year to the Treasury.
The Morrill Tariff was found to meet the exigencies of the situation
to such a degree that when Congress came together in response to
the call of President Lincoln, Mr. Thaddeus Stevens, as head of
the committee charged with the subject, informed the House that it
had been determined not to enter upon a general revision. He
reported a measure to extend the schedule of dutiable articles with
the view of adding immediately to the revenue about $22,250,000
annually. After disagreement with the Senate his bill with slight
alteration was enacted and became the tariff on Aug. 5, 1861. In
Dec. 24, 1861, the duties on tea, coffee, and sugar were increased
directly as a war measure. During the consideration of this bill,
Mr. Morrill presented estimates showing that the revenue would be
increased by about $7,000,000, and Mr. Vallandigham of Ohio took
occasion to dwell on the falling off of importations, asking, "How
are you to have revenue from imports when nothing is imported?
Your expenditures are $500,000,000, your income but $50,000,000."
He was much nearer the actual figures than political rhetoric is
apt to be. Mr. Morrill's response was only to hope that the
gentleman from Ohio had some proposition to offer more acceptable
than the pending bill. That bill was indeed a reasonable, and, so
far as it went, an effective measure, and Mr. Vallandigham had no
substitute to offer.
NATIONAL FINANCES IN 1861.
In his annual report as Secretary of the Treasury, Howell Cobb had,
on the 4th of December, 1860, estimated that the receipts of the
Treasury for the fiscal year ending with June, 1862, would amount
to $64,495,891, while he reckoned that the expenditures would be
$68,363,726. With the prospect of peace and national unity he
predicted a deficiency of $3,867,834 for that year. His figures
were so preposterously incorrect as to justify the suspicion of
intentional misstatement. The deficiency for the four years of
Mr. Buchanan's administration had been, according to a statement
by Mr. Sherman of Ohio in the House of Representatives, almost
exactly $20,000,000 a year. This deficiency had been met by
continual borrowing. On the 11th of February Secretary Dix reported
to the Committee of Ways and Means that provision must be made
before the 4th of March for a final deficiency of $9,901,118. This
necessity was provided for by a clause in the Morrill Tariff Act;
and the authority to issue Treasury notes to the full amount of
loans previously permitted, gave to the administration of President
Lincoln the means to start upon its difficult career.
With a revenue which no one estimated beyond $5,000,000 a month,
with a credit at the low ebb which the sales of its bonds had
already exhibited, the nation was to prepare for a war of untold
magnitude. Mr. Chase, as Secretary of the Treasury, began to try
the fruitfulness of the loan laws under which he must proceed.
April 2, 1861, he offered $8,000,000, but the prices were not
satisfactory to him, and he sold only $3,099,000 at the rate of
94.01. Nine days later he received bids for $1,000,000 of Treasury
notes bearing six per cent. interest, and with considerable exertion
he secured the increase of this sum to $5,000,000 at par. A
committee of the New-York Chamber of Commerce led in a movement,
representing the banks of some of the chief cities, to assist the
Treasury in borrowing the means required for its pressing exigencies.
By this co-operation Mr. Chase raised in May $7,310,000 on bonds
at rates from eighty-five to ninety-three per cent. and $1,684,000
by Treasury notes at par.
When Congress met in special session under the call of Mr. Lincoln
July 4, Secretary Chase found it necessary to declare that while
the laws still permitted loans amounting to $21,393,450, the
authority was unavailable because of the limitation that the
securities, whether bonds or Treasury notes, should be issued only
at par, on the basis of six per cent. interest. Practically
therefore no power existed to borrow money. While, on the first
of the month then current, there was a nominal balance in the
Treasury of $2,355,635, charges by reason of appropriations for
the account of the preceding fiscal year were outstanding to the
extent of $20,121,880. The short loans already made, constituted
also an immediate claim, and these amounted to $12,639,861. All
these burdens were to be borne in addition to the demands of the
year, which, as already demonstrated, would be one of extended
military operations and of costly preparations and movements at
sea. The total for which the secretary asked that Congress might
provide resources, reached according to his estimates the sum of
$318,519,581 for the fiscal year. Far-seeing men believed that
even this enormous aggregate would fall short of the actual demand.
Mr. Chase proposed that $80,000,000 be raised by taxation, and
$240,000,000 by loans. The suggestion was already urged that even
a larger proportion of the money needed, should be raised by
taxation. But unwillingness to create friction and opposition
doubtless entered into the considerations which determined the
recommendations of the secretary. He proposed to rely upon the
tariff for a large share of the basis of credit, and, while adding
to its provisions, to impose a direct tax, and to levy duties upon
stills and distilled liquors, on ale and beer, on tobacco, spring-
carriages, bank-notes, silver ware, jewellery, and legacies.
Congress made haste to consider and substantially to carry out the
recommendations of Secretary Chase. The legislators were not
inclined to go farther than the head of the Treasury suggested.
No practical proposition was made for a broader scheme of taxation.
The tariff, as has been indicated, was enlarged. A bill was passed,
levying a direct tax of $20,000,000, to be apportioned among all
the States, of which the sum of $12,000,000 was apportioned among
the States which had not seceded from the Union. Instead of the
scheme of internal taxes which Mr. Chase had proposed, an income
tax was substituted, to be collected on the results of the year
ending April 1, 1862, and assessed at three per cent. on all incomes
in excess of $800; but before any collections were made under it,
the broader internal-revenue system went into effect. Direct taxes
had been tried in 1800 and again in 1814, but the receipts had
always been disappointing. The results under Secretary Chase's
proposition were altogether unsatisfactory; and on the 1st of July,
1862, an Act was passed limiting the tax to one levy previous to
April 1, 1865, when the law should have full force. The estimates
of collections were set at $12,000,000 annually, or very near that
sum. For four years, 1862-1865 inclusive, the receipts were only
$4,956,657: in 1867 they became $4,200,233, and then dribbled away.
THE NATIONAL LOAN ACT OF JULY, 1861.
Inadequate as is now seen to be the legislation of 1861 with
reference to actual revenue, the receipts fell far below the
calculations of experts. For the fiscal year 1862 the customs
amounted to only $49,056,397, and the direct tax to $1,795,331;
and the total receipts, excluding loans, were only $51,919,261
instead of $80,000,000, as expected under the estimates of the
Treasury. The plea may perhaps be pressed in defense of Congress,
that financial legislation, laggard as it was, ran before popular
readiness to raise money by taxes. There was a wide-spread opposition
among the strongest advocates of the war, to all measures which
would, at an early stage, render the contest pecuniarily oppressive,
and hence make it unpopular.
President Lincoln in his message at the opening of the special
session had called upon Congress for $400,000,000 in money, and
400,000 men. Mr. Chase's figures were $320,000,000. He doubtless
deemed it wise to ask for no more than Congress would promptly
grant. As the struggle proceeded, it was demonstrated that those
calculated most justly who relied most completely on the popular
purpose to make every sacrifice to maintain the national integrity.
This was however the period of depression after the first battle
of Bull Run, of hesitation before casting every thing into the
scale for patriotism.
The eloquent fact about the Loan Bill is that Congress made haste
to enact it. It was introduced into the House of Representatives
on the 9th of July. On the next day Mr. Stevens, chairman of the
Ways and Means Committee, called up the bill, and, upon going into
committee of the whole, induced the House to limit general debate
to one hour. In the committee the entire time was occupied by Mr.
Vallandigham of Ohio, in criticism on the President's message and
on the general questions involved in the prosecution of the war.
Mr. Holman of Indiana addressed to the gentleman from Ohio two
inquiries bearing on the purpose of the latter to aid in maintaining
the Union. No response was made to the speech of Mr. Vallandigham.
The committee rose, and the bill was passed by a vote of 105 to 5.
In the Senate no discussion took place, certain amendments looking
to the perfection of the measure were adopted, and the bill was
passed without division. The House at once concurred in the Senate
amendments, and the act was consummated by which the first of the
great war loans was authorized.
This Act became law on the 17th of July. Its provisions created
a system by which the Secretary of the Treasury might offer bonds
not exceeding $250,000,000 in the aggregate at seven per cent.
interest, redeemable after twenty years; or he might issue Treasury
notes payable three years after date, and bearing seven and three-
tenths per cent. interest,--the notes not to be of less denomination
than fifty dollars. A separate section permitted the secretary to
offer not more than $100,000,000 abroad, payable in the United
States or in Europe. The same Act authorized for a part of the
sum not exceeding $50,000,000, the exchange for coin or the use in
payment of salaries or other dues, of notes of less denomination
than fifty dollars but not less than ten dollars, and bearing
interest at the rate of three and sixty-five one-hundredths per
cent. payable in one year; or these might be payable on demand and
without interest. This loan might therefore be in bonds for sale
in this country or in a different form for sale abroad; or, second,
it might be in Treasury notes of not less than fifty dollars each,
bearing seven and three-tenths per cent. interest; or, third, a
part of the loan not exceeding $50,000,000 might be in notes of
even as low denomination as ten dollars at three and sixty-five
one-hundredths per cent.; and, finally, this latter part might be
in notes without interest payable on demand. The bonds were to
run at least twenty years; the seven-thirties three years; and the
three-sixty-fives were payable in one year, and exchangeable into
seven-thirties at the pleasure of the holder. A supplementary Act
was passed Aug. 5, 1861, which permitted the secretary to issue
six per cent. bonds, payable at the pleasure of the United States
after twenty years, and the holders of seven-thirty notes were
allowed to exchange their notes for such bonds. The minimum of
the denominations of Treasury notes was reduced to five dollars,
and all the demand notes of less denomination then fifty dollars
were receivable for payment of public dues. By Act of Feb. 12,
1862, the limit of demand notes was raised to $60,000,000. In this
modified form the statute directed the movements of the Treasury
during the autumn of the first year of the Rebellion.
SECRETARY CHASE'S REPORT, 1861.
In his report, dated December 9, 1861, the Secretary of the Treasury
related the steps which he had taken to raise money under these
laws. Mr. Chase informed Congress that "his reflections led him
to the conclusion that the safest, surest, and most beneficial plan
would be to engage the banking institutions of the three chief
commercial cities of the seaboard to advance the amounts needed
for disbursement in the form of loans for three years' seven-thirty
bonds, to be reimbursed, as far as practicable, from the proceeds
of similar bonds, subscribed for by the people through the agencies
of the national loan; using, meanwhile, himself, to a limited
extent, in aid of these advances, the power to issue notes of
smaller denominations than fifty dollars, payable on demand."
Representatives of the banks of New York, Boston, and Philadelphia
united to give moneyed support to the government. The secretary
opened books of subscription throughout the country. The banks
subscribed promptly for $50,000,000, paying $5,000,000 at once in
coin, and agreeing the pay the balance, also in coin, as needed by
the government. For this loan the banks received seven-thirty
notes, and the proceeds of the popular loan were transferred to
them. The sales to the public amounted to little more than half
that sum; but the banks, when called upon, made a second advance
of $50,000,000. By these and other agencies, Mr. Chase was able
to present an encouraging summary of the Treasury operations.
He stated that "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 $14,019,034.66; there was borrowed
at par. in the same months, upon sixty days' six per cent. notes,
the sum of $12,877,750; there were borrowed at par, on the 19th of
August, under three years' seven-thirty bonds, issued for the most
part to subscribers to the national loan, $50,000,000; there were
borrowed at par for seven per cent., on the 10th of November, upon
twenty years' six per cent. bonds, reduced to the equivalent of
sevens, including interest, $45,795,478.48; 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,
$24,550,325,--making an aggregate realized from loans in various
forms of $197,242,588.14." The loan operations had therefore been
fairly successful, for they were still in progress; and President
Lincoln was justified in stating in his message that "the expenditures
made necessary by the Rebellion are not beyond the resources of
the loyal people, and the same patriotism which has thus far
sustained the government will continue to sustain it, till peace
and union shall yet bless the land."
But the shadows were growing thick, and the situation was very
serious. Mr. Chase was compelled to report that his estimates of
revenue must be reduced below the figures which he gave in July by
$25,447,334: at the same time the expenditures must be reckoned at
an increase of $213,904,427. Predictions as to the speedy close
of the war had ceased. Provision must be made, not only for the
deficiencies presented, but for the ensuing year, during which the
secretary estimated that the expenditures would be $475,331,245.
He proposed to amend the direct tax law, so as to collect under it
$20,000,000; to establish a system of internal revenue as he had
suggested in July, and to increase some of the customs duties.
From these sources, united with the receipts from the public lands,
the revenue would be $95,800,000. With this basis, reliance must
be placed on loans for the enormous sum of $654,980,920, and under
existing laws he could borrow only $75,449,675.
The sale of public lands had furnished some part of the resources
of the nation from an early day. The annual product had not been
large as a rule. In 1834 and 1835 the sales had been abnormal,
amounting in the latter year to $24,877,179, and only about
$10,000,000 less in the preceding year. They were $11,497,049 in
1855, but they had fallen until they were less than $2,000,000 in
1859. It was natural to consider whether any help could be derived
from this quarter in the hour of national necessity. A forced sale
of lands was impossible to any such extent as to affect the receipts
of the Treasury in the ratio of its demands. The pledge of the
domain as security for loans was suggested only to be rejected.
As was natural, purchases of the public domain ceased almost entirely
while the young men of the country were summoned to the national
defense, and the better strength went into the field of battle.
From the public lands therefore the Treasury could hope for little,
and very little was in fact received from them during the Rebellion.
Secretary Chase had estimated in July that $3,000,000 might be
annually derived from this source; but the receipts from the sales
of lands never reached even $1,000,000 a year until two years after
the Rebellion had been suppressed. Practically the public lands
passed out of consideration as a source of revenue. Unfortunately
also the attempt to levy a direct tax was received by the people
with grave manifestations of disapproval. Its enforcement was
likely to prove mischievous. The close of the year 1861 was
therefore heavy with discouragement to the government. The military
reverses at Bull Run and Ball's Bluff had outweighed in the popular
mind the advantages we had gained elsewhere; the surrender of
Slidell and Mason, though on every consideration expedient, had
wounded the national pride; and now the report of the Secretary of
the Treasury tended to damp the ardor of those who had with sanguine
temperament looked forward to an easy victory over the Rebellion.
SUSPENSION OF SPECIE PAYMENT.
It was felt by all that the National credit, which had been partially
restored under Mr. Chase's administration of the Treasury, could
not be maintained except from the pockets of the people, and that
every man must expect to contribute of his substance to the support
of the government in the great task it had assumed. Happily all
considerate and reflecting men saw that, desperate as the struggle
might be, it must be accepted with all its cost and all its woe.
They could at least measure it and therefore could face it. On
the side of defeat they could not look. That was a calamity so
great as to be immeasurable, and it left to the loyal millions no
choice. If the struggle then in progress had been with a foreign
power, popular opinion would have overthrown any administration
that would not at once make peace. But peace on the basis of a
dissevered Union, a disintegrated people, a dishonored nationality,
could not be accepted and would not be endured.
The discouragement in financial circles produced by the Treasury
report of Mr. Chase, hastened if it did not cause the suspension
of specie payment by the banks of New-York City. Many country
banks had ceased to pay specie some time before; indeed, many had
been only on a nominal basis of coin since the financial crisis of
1857. So long however as the specie standard was upheld by the
New-York banks, the business of the country was securely maintained
on the basis of coin. It was therefore a matter of serious moment
and still more serious portent that the financial pressure became
so strong in the last days of the year 1861 as to force the banks
of the metropolis to confess that they could no longer maintain a
specie standard. It had been many years since the government had
paid any thing but coin over its counters, but Treasury notes had
just been issued payable on demand, and many millions were already
in circulation. They would now be presented for redemption, and
if promptly met, the Treasury would be rapidly drained of its
specie. There were twenty-five millions less of gold coin in the
government vaults than Secretary Chase had expected. This fact of
itself enforced a larger issue of demand notes than would otherwise
have been called for, and had thus doubly complicated the financial
situation. The Treasury had disbursed a large amount of demand
notes and received a smaller amount of gold coin than the well
considered estimates of the secretary had anticipated.
The presumption was in favor of our being much stronger in coin
than we were found to be. The discovery of gold in California had
resulted in an enormous product,--surpassing any thing known in
the history of mining. But we had been encouraging the importation
of goods from Europe which were confessedly somewhat cheaper than
our own fabrics, and in amount largely in excess of our export of
cotton and cereals. We were therefore constantly paying the
difference in coin. The political economists who had been in
control of our finances insisted upon treating our gold as an
ordinary product, to be exported in the same manner that we exported
wheat and pork. The consequence was that during the decade preceding
the war our exports of specie and bullion exceeded our imports of
the same by the enormous aggregate of four hundred and fifty millions
of dollars. For that whole period there had been a steady shipment
of our precious metals to Europe at a rate which averaged nearly
four millions of dollars per month.
Advocates of protection had found the drain of our specie the
proximate cause of the financial panic of 1857. They now believed
that the same cause had produced a suspension of coin payment at
a much earlier date than the war pressure alone would have brought
it about. They did not lose the opportunity of demonstrating that
a system of protection which would have manufactured more and
imported less, and which would thus have retained many millions of
our specie at home, would have enabled us to meet the trials of
the war with greater strength and confidence. If the Morrill Tariff
had been enacted four years before, it would have been impossible
for Secretary Cobb to stab the national credit. He would have been
dealing constantly with a surplus instead of a deficit, and could
not have put the nation to shame by forcing it to hawk its paper
in the money markets at the usurious rate of one per cent. a month.
One of the wisest financiers in the United States has expressed
the belief that two hundred millions of coin, which might easily
have been saved to the country by a protective tariff between 1850
and 1860, would have kept the National debt a thousand millions
below the point which it reached. Of all the arguments with which
protectionists have arraigned free-traders, perhaps the most
difficult to answer is that which holds them responsible for the
weak financial condition of 1860-61 in that they had deliberately
driven our specie from the country for the ten preceding years.