with their bills. Speaking generally, therefore, the people of the United States had all the circulating medium which they required, or would receive. And how much was it? Under this free system, the utmost ever called for (and that in the fevered summer solstice of 1857) was less than two hundred and fifteen millions. Now the existing circulation exceeds seven hundred millions. What circumstances in the condition of the country, of its population or business, can be adduced to justify this enormous increase? It is not necessary to go into nice comparisons to show that there are no such justifying circumstances, and it is very probable that the pecular condition of the country since the war demands a permanent addition to the circulating medium. Shortened credits, the increase of sales for cash, the opening up of new territories in the west, and the introduction of paid labor at the south, are all new influences added to the general effect of national growth. But Congress has provided for these influences by authorizing an issue of national bank notes to the extent of three hundred millions of dollars, an advance of fifty per cent. beyond the highest circulation which the country ever sustained on a specie basis. This provision would seem to be ample for all present wants, and for the future also, so far as it is now necessary to legislate for it. The tendency of all commercial peoples is toward economy in the use of currency. The circulating medium does not advance in the same ratio with the exchanges which it serves to carry on. In the State of New York, in the ten years from 1850 to 1860, the capital of banks increased one hundred and one per cent.; loans and discounts seventy-five per cent.; deposits one hundred and thirteen per cent., and specie one hundred and forty-one per cent.; while the circulation increased only fifteen per cent. The explanation is, that bank deposits and other economical expedients had largely taken the place of bank notes in domestic exchanges.

It has been urged, that by allowing the present volume of currency to remain unaltered, the increase in business and in the development of the country, would gradually diminish and finally remove all difficuliies growing out of the acknowledged present redundancy. To this, however, it may be replied, that the retaining of the present amount of currency in circulation tends to increase no business except what is speculative, and to check the very development which is expected to prove remedial. There is much that is peculiar and seemingly abnormal in the economic history of the United States, and it is fashionable and comfortable to believe that the experience of older countries is no criterion for our own; but this is a grave error. The difference in our favor is one merely of productive and recuperative power; we cannot set scientific principles at defiance; and the laws of trade and of national development are as truly laws as those which regulate the course of the planets or the alternation of the

seasons.

Specie payments, in short, can be resumed in only one way, viz: by lifting the paper money of the government to an equality with gold; and as no one doubts, at the present, that behind every national promise to pay there is both the national will and ability so to do, the enhancement of the credit of the government, therefore, can but be regarded as an adjunct to this end, and as entirely subordinate to the more important work of bringing the existing relations of gold and currency into more harmonious proportions. Reduce the quantity of any article in demand, and an increase of value follows; reduce the quantity of paper money to be redeemed, and the value of the remainder and the ability to redeem it will be increased in a geometrical proportion. In view, moreover, of the fact that no nation issuing paper money has ever succeeded in maintaining its circulation at par, or has redeemed it dollar for dollar, in gold; and also that the permanent use of paper money by the government cannot be contemplated ; whatever measures are now taken looking to the resumption of specie payments should also look to the complete withdrawal of every form of national currency issued directly by the treasury.

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If it be objected that the conversion of the existing amount of non-ïnterestbearing notes into interest-bearing securities would largely increase the annual burden of national interest, we reply that the gain in the diminution of interest would poorly compensate for the evils of fluctuations and depreciations which our own experience, and the experience of all other nations, have shown to be the invariable accompaniments of the adoption, on the part of a state, of any other than a metallic currency.

THIRD REMEDY.

The remedy for the third cause to which we have attributed the present inflation of prices, viz: the extent of the national taxation lies wholly within the control of the legislative department of the government, and as regards application, admits of but little theoretical difference of opinion. The only question to be considered is, in what manner and to what extent can a reduction of existing taxes be now made compatible with the requirements of the treasury for administrative expenditures, interest, and a desirable and certain reduction in the principal of the public debt.

NATIONAL RECEIPTS AND EXPENDITURES FOR 1867-'68.

To aid in the formation of an opinion on this subject, the commissioner presents the following estimates of the revenue likely to accrue for the fiscal year 1867-'68 under the operation of the existing laws; which estimates, it will be observed, differ somewhat from those presented by the Secretary of the Treasury: From internal revenue. From customs..

Miscellaneous-From public lands, premium on gold, &c..

$275, 000, 000

150, 000, 000 30, 000, 000

455, 000, 000*

The above estimates are believed to be as large as the present condition and prospects of the industry of the country will warrant. According to the estimates of the Secretary of the Treasury, there will be required for the year ending June 30, 1868, to meet the expenditures of the government, and to provide for the interest on the public debt, a revenue of two hundred and eighty-six millions of dollars, and for the payment of bounties sixty-four millions of dollars, leaving a probable available surplus of one hundred and five millions of dollars. From this surplus we assume fifty millions of dollars as the amount to be appropriated for the reduction of the principal of the public debt-a sum which we believe should constitute the maximum to be set aside for this purpose at the present time; leaving fifty-five millions of dollars as the amount applicable for the reduction of taxation.

In the report of the revenue commission, presented February, 1866, the opinion was expressed that at that time not one-half of the legitimate internal revenue was collected under existing laws. The experience of another year has afforded no evidence which tends to induce the commissioner to believe that the above statement was exaggerated. If, therefore, more efficient measures for the prevention of such losses could be provided for, and if the appropriation of money for the payment of bounties could be deferred, a much larger amount of surplus revenue and a much larger reduction of taxation for the next fiscal year could be anticipated.

* The receipts of the treasury, from all sources, of the first five months of the present fiscal year, July 1st to December 1st, 1866, were as follows: Internal revenue, $146,355,715 73, currency; customs (actual and estimated) $78,843,774 26, gold; making a total (reducing gold at forty per cent. premium to currency) of $256,736,999, currency.

REDUCTION OF THE PUBLIC DEBT.

A careful study of the whole subject of the national revenues, and an extended inquiry into the industrial condition of the country, has, however, led the commissioner unhesitatingly to the conclusion, that a rapid reduction of taxation, rather than a rapid reduction of the principal of the public debt, is at present the true policy of the government; and that the adoption of this course, so far from protracting the time at which the national debt can be discharged, will, on the contrary, greatly accelerate it.

The experience of another year has but strengthened the convictions which in the report of the revenue commission were expressed in the following language:

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Looking to the past, we find that, while our population has duplicated itself in every twenty four years, our production has been supposed to increase twice as rapidly, or to quadruple itself in the time required for the duplication of the other. While looking to the future, in view of this fact, we have reason to believe that the power of national production ten years hence will be more than twice as great as it is at present. That it will be so, provided that we remove all those taxes that now tend to impede national development, cannot be doubted; and if so, the revenue system which may now be framed to yield three hundred millions of dollars per annum, cannot fail to yield in 1875 at least double that amount.

"The more completely, therefore, that we now give our attention to the adoption of measures tending to increase the productive power of the country, and to reduce the rate of interest payable on public and private liabilities, the more rapid will be the increase in the money value of the landed property of the Union, the more readily will all the local taxes be paid, and the sooner shall we arrive at that condition of affairs in which it will be possible to boast that the war debt, local and general, whether held at home or abroad, has been once again extinguished."

PROSPECTIVE INCREASE OF REVENUE FROM AN INCREASE OF NATIONAL

WEALTH.

In discussing the question of the reduction of taxation some allowance should be made for a continued and certain gain which will undoubtedly accrue to the national revenue under any circumstances, from the continued increase of the wealth and population of the country. The amount of this increase in Great Britain is estimated by the chancellor of the exchequer to have averaged, for the six years prior to the years 1865-'66, £1,780,000, ($8,900,000.)

The increase in the value of the real and personal property of the United States, in the decade between 1850 and 1860, was 129.7 per cent., and from 1840 to 1850, 64 per cent.

The average annual increase in the value of the real and personal property of Great Britain, from 1841 to 1863, is estimated at three and a half per cent. Estimating the average in the United States as seven per cent. per annum, we are warranted in assuming the amount of increase of revenue due to the increased wealth of the country as not less than fifteen millions of dollars per annum.

RECOMMENDATIONS FOR REDUCTION OF INTERNAL TAXATION.

The commissioner, therefore, in view of the probable surplus of revenue likely to accrue, even under the present administrative condition of the law and the prospective large payments on account of bounties, would recommend the following specific reductions of taxation:

FIRST.-A reduction of the present general tax of five per cent. on the products and sales of manufacturing industry to three per cent., and a corresponding reduction in specific taxes levied on analogous branches of industry.

The amount of such reduction, as reckoned on the basis of receipts from this source for the last fiscal year, would be about thirty-one million dollars. As, however, a reduction of at least fifty millions of dollars was made, in this department of the revenue, by the amended law of July 13, 1866, which has already been allowed for in the estimates presented, and as, in the opinion of the commissioner, a portion of this tax is already evaded through a feeling, on the part of the manufacturers, that it is excessive, unjust, and that its evasion is justifiable, the falling off from the reduction in question will not, probably result in as large a diminution of the receipts as a superficial examination would appear to indicate; more especially when the stimulus which manufacturing industry is likely to receive from an abatement of the tax is also taken into consideration.

SECONDLY.—An entire removal of all direct internal taxes now levied upon the production of bar, plate, and sheet iron, and of such additional taxes as are yet leried upon the elements of the manufacture of steel.

The amount of such reduction, computed on the basis of receipts from this source for the last fiscal year, would be about one million eight hundred thousand dollars. It seems almost unnecessary to assert, so self-evident is the proposition, that the interest of the country requires that all tools, including in that word all machinery, engines, railroads, and implements of every kind, should be furnished at the lowest possible cost, in order that the largest amount of machinery or implements be applied to increase the value of our products, with the least outlay of capital or earnings. As iron and steel are, moreover, the essential components of nearly every form of machinery and implement, it is for the interest of the whole country that this production should be as free from the burden of taxation as possible. A certain and limited amount of capital or earnings can be invested each year in factories, railroads, machine shops, or machines and implements for the cultivation of the soil; and it is certainly desirable that this limited amount of capital should give the largest result, either in miles of railroad, number of spindles, or in mowers, reapers, ploughs, or implements in general. The entire removal of the tax, then, from these articles, instead of favoring, as it may at first appear, any special business or section of the country, is really legislation in favor of every producing interest, and of all consumers.

THIRDLY.-A reduction of the tax of two and a half per cent. on the gross receipts of sugar refiners to one and a half or one per cent.

Owing more especially to improvements recently introduced into the manufacture of raw sugars, the present tax of two and a half per cent. on the refiners' sales is equivalent to a direct protection to the foreign producer, and threatens to seriously impair, if not destroy, the prosperity of the great industry of refining sugar in the United States. This abatement would amount to about one million two hundred thousand dollars, computed on the basis of the receipts of the last fiscal year.

FOURTHLY.—An entire removal of the internal revenue duty on sulphuric acid, and on the mining and manufacture of emery.

The reasons which lead to the recommendation in respect to the first article, are, that it is an essential element in the manufacturing of many other articles which are subjected to taxation in their finished condition; and in respect to emery, for the reason that it is now an exception to the legislation adopted in regard to all other crude ores, as well as to encourage the development of an entirely new branch of industry in the country.

Ex. Doc. 2-3

FIFTHLY.-The entire removal of the internal revenue tax upon the manu facture of salt.

The amount of revenue obtained from this source for the last fiscal years (1865-66) was four hundred and fifty-six thousand one hundred dollars.

The total amount of reduction of the revenue consequent upon the adoption of the above recommendations, taking the receipts of the last fiscal year as the basis of calculation, may be estimated at about thirty-five million of dollars, leaving a surplus available for other purposes of about twenty million of dollars.

DUTIES ON RAW MATERIALS.

In the department of the tariff the commissioner further recommends the distinct recognition and adoption, as the basis of present and future legislation, of the principle of abating the duty on raw materials to the lowest point consistent with the requirements of revenue; and of placing upon the free list such raw materials-the product mainly of tropical countries-as are essential elements in great leading branches of manufacturing industry, and do not come in competition with any domestic products. Of these latter dye woods, crude dye stuffs, India-rubber, gutta-percha, bamboos and ratans, sulphur, sumac, raw silk, and ivory may be cited as illustrations.

This principle, as thus annunciated, and which is almost entirely disregarded under the existing tariff, although of late years engrafted on the commercial policy of almost every other civilized state, has been truly defined as the very "essence of protection," and its adoption is believed to be essential to the prosperity of the manufacturing industry of the United States: Give to the manufacturer his raw material cheap, and you enable him to manufacture cheap and sell cheap; and all experience, and all the laws of political economy, teach that with every reduction in the price of manufactured commodities in ordinary use, consumption and production increase in a far greater ratio.

THE TRUE PROTECTION OF THE AMERICAN AGRICULTURIST.

If this principle should seem to militate against the agricultural interest, which, in point of numbers engaged and capital invested, is the great interest of the country, and as such has a right to demand precedence in protective legisla tion, we reply that our whole national experience proves that there can be no practical protection to the American agriculturist, except what he receives from the existence and extension of American manufactures. Out of the one hundred million pounds of wool now grown annually in the United States, not one single pound, under ordinary circumstances, can be sold at a profit in any foreign market, while the statistics of prices for the thirty years prior to 1862 show, beyond a question, that the periods when the wool-growers of the United States and of France alike received the maximum price for their products, have been coincident with those in which the manufacturers of both countries have been least interfered with in the selection of their raw materials. Flax, in the flaxgrowing districts of New York, was formerly of slow sale at a low price; when flax manufactories came to be established in these same districts the price, with quick demand, rose nearly one hundred per cent., although the tariff during the same period on imported flax was not materially altered. Again, the grower and crusher of linseed grow and crush their products solely to supply the demands of the American painter, and the manufacturers of oil and enamelled cloths, of enamelled leather, oil silk, printers' ink, and varnish; and if, by the increase in the prices of these commodities, their consumption is restricted or annihilated, the restriction or annihilation comes home as surely to the grower and crusher as to the manufacturer.

Furthermore, the renewing of high or prohibitory rates of duty on the pork,