Amount of public debt, October 31, 1866... $2,681,636,966 34 Add amount of old funded and unfunded debt included in debt of June 30, 1866, not in statement..... 114,115 48 $2,629,100 00 6,150 00 Bonds, 6 per cent., acts July 21, 1841, and April 15, 1842.. Bonds, 6 per cent., act March 31, 1848.. Bonds, 5 per cent., act September 9, 1850 (Texas indemnity). Bonds, 5 per cent., act March 3, 1864 (Ten-forties)... Treasury notes, 6 per cent., acts December 23, 1857, and March 2, 1861. Certificates of indebtedness, 6 per cent., acts March 1, 1862, and March 3, 1863.. Treasury notes, Seven-thirty, act July 17, 1861.. Compound-interest notes, 6 per cent., act June 30, 1864. Treasury notes, Seven-thirty, acts June 30, 1864, and March 3, 1865. United States notes, acts July 17, 1861, and February 12, 1862.. Temporary loan, 4, 5, and 6 per cent., acts February 25, March 17, July 11, 1862, and June 30, 1864.. United States notes, acts February 25, July 11, 1862, and March 3, 1863.. Postal currency, act July 17, 1862.. Gross decrease... 75,172,997 76 26,209,000 00 500,000 00 11,200 00 10,500,000 00 82,237,250 00 3,804 00 10,691,779 00 691,031 75 $208,652,312 51 From which deduct for increase of debt and decrease of cash in Treasury: Bonds, 6 per cent., act July 17, 1861.. $7,050,000 00 Bonds, 6 per cent., act March 3, 1865. 101,738,500 00 Bonds, 6 per cent., acts July 1, 1862, and July 2, 1864, issued to Central Gold certificates, act March 3, 1863.. Fractional currency, acts March 3, 1863, and June 31, 1864.. Net decrease... The following table (see page 292) shows the indebtedness of the United States on the 30th of June, 1866. The reduction of the paper circulation under the legislation of Congress above mentioned was limited to. $10,000,000 for the six months ending October 12th, and $4,000,000 per month bereafter. In the mean time the reduction of these notes and of the notes of the State banks was nearly balanced by the increase of the cirelation of the National Banks, and the prenium on specie was about the same at the close as at the beginning of the year. The Secretary, therefore, devoted his attention to measures looking to an increase of the efficiency of the collection of the revenues, to the conversion of the interest-bearing notes into fivetwenty bonds and to a reduction of the public debt. At the same time he endeavored to use such means within his control, as were best calculated to keep the business of the country as steady as possible, while conducted on the uncertain basis of an irredeemable currency. He therefore held a handsome reserve of coin in the Treasury, being convinced by observation and experience that, in order to secure steadi ness in any considerable degree, while business was conducted on a paper basis, there must be power in the Treasury to prevent successful combinations to bring about fluctuations for purely speculative purposes. The Secretary expressed his conviction that specie payments were not to be restored by an accumulation of coin in the Treasury, to be used at a future day to redeem Government obligations, but by quickened industry, increased productions, and lower prices. Coin was therefore permitted to accumulate when the use or sale of it was not necessary for paying Government obligations, or to prevent commercial panics, or successful combinations against the national credit; and it has been sold whenever sales were necessary to supply the Treasury with currency, to ward off financial crises, or to save the paper circulation of the country, as far as practicable, from unnecessary and damaging depreciation. The importance of specie payments is urged by the Secretary, and in his remarks on the subject, he thus incidentally describes the condition of the country: "When a paper currency is an inconvertible currency, and espe cially when, being so, it is made by the sovereign power a legal tender, it becomes prolific of mischief. Then specie becomes demonetized, and trade is uncertain in its results, because the basis is fluctuating; then prices advance as the volume of currency increases, and require as they advance further additions to the circulating medium; then speculation becomes rife, and the few are enriched at the expense of the many; then industry declines, and extravagance is wanton; then, with a diminution of products and consequently of exports, there is an increase of imports, and higher tariffs are required on account of the general expansion, to which they in their turn give new stimulus and supports, while the protection intended to be given by them to home industry is in a great measure rendered inoperative by the expansion. This, notwithstanding our large revenues and the prosperity of many branches of industry, is substantially the condition of the United States." The paper circulation of the country on December 1st, consisted of United States notes, National and State bank-notes and certificates of the Government divided as follows: United States notes, legal tender...... $385,441,849 Circulation issued to National Banks... $753,266,911 To this should be added a considerable por- Total......... It was also estimated that there were amounts of specie in circulation, as follows: Specie in actual circulation on the Pacific Specie in actual circulation in the Atlantic States.... Copper and nickel. $25,000,000 15,000,000 3,000,000 $48,000,000 is almost as light as any paper which can be produced, even by the genius of the hydrostatic power at the Treasury Department, and it once more rises and floats triumphantly over the dirty sea of paper currency in vulgar fractions." The gold certificates of deposit were conveniently and daily used by millions for many purposes, especially to pay for exchange in the liquidation of foreign accounts and among gold operators. Bills of exchange became a currency, and an enormous amount was afloat. The compound-interest notes were largely used, and almost universally, though without authority, took the place of the United States legal tender notes in the reserve required to be held by the national banks. In some instances the seven-thirties took the place of lawful money, and were given and taken in financial transactions at their current value. To some extent also the coupon bonds of the United States were used as money, and remitted to pay balances due-especially balances of trade due abroad. (See BANKS.) Such was the state of the public debt and the circulating medium at the close of the year. It remains, therefore, to present the operation of the internal revenue system, of the tariff, and the commercial condition, to have a complete view of the problem presented for solution to the Government and the people. Previous to the year 1861, the United States presented the unusual spectacle of a great nathe measures required for the maintenance of tion with comparatively no debt. Since then the Government have entailed upon the nation $19,638,500 a debt rivalling or exceeding in magnitude the 147,887,140 accumulated debts of any of the old states of $167,025,640 Europe, and rendering necessary the collection $920,292,551 of an annual revenue, which may be safely stated as unequalled by the collections of any other nations excepting Great Britain and France. While the accumulation of this debt was in progress the present system of internal revenue was adopted to aid in obtaining the money necessary for military and naval operations. The pressing nature of the circumstances under which it was framed was such as to afford but little opportunity for any careful and accurate investigation of the sources of revenue, and the most suitable measures of developing them. The old methods of taxation in this country, by assessments on real and personal property or capital, were chiefly allowed to remain undisturbed in the States which had hitherto applied them for their own support, and the plan was adopted to obtain this branch of the national revenue from the fruits of capital, or of capital and industry combined. One of the greatest defects which was immediately felt in the system thus put in operation, was its diffuseness, wherein the exemption of an article from taxation was the exception rather than the rule. A system so diffuse necessarily entailed a duplication of taxes, which in turn led to an undue enhancement of prices; a decrease both of production If this is added to the paper currency, it makes the whole amount of the circulating medium $963,290,551. West of the Rocky Mountains, on the Pacific slope, gold and silver maintained its ascendency, and very little paper was circulated. Indeed, throughout the whole country, and particularly where merchandise was distributed at wholesale, many articles were bought and sold exclusively for gold-no other prices were quoted for them. Instead of coin, gold bars and bullion were largely used by banks and by importers to pay for foreign merchandise. The copper and nickel coinage has been depreciated, so that a five-cent token contains about one cent of real value, or, in the words of the chairman of Ways and Means in the House of Congress (Mr. Morrill), "until it and consumption, and consequently of wealth, a restriction of exportations and of foreign commerce, and a large increase in the machinery and expense of collection. The duplication of taxes threatened the very existence, even with the protection of inflated prices and a high tariff, of many branches of industry, and, under a normal condition of the trade and currency of the country, would become extremely disastrous. Its tendency to sustain prices was illustrated very forcibly in the manufacture of umbrellas and parasols. The sticks, when of wood, were made in Philadelphia, and in some parts of Connecticut; part of native and part of foreign wood, on which last a duty may have been paid. If the supporting rod was of iron or steel it was the product of another establishment. In like manner the handles of carved wood, bone, or ivory; the brass runners, the tips, the elastic band, the rubber of which the band is composed, the silk tassels, the buttons, and the cover of silk, gingham, or alpaca, were all distinct products of manufacture, and each of these constituents, if of domestic production, paid a tax, when sold, of six per cent. ad valorem, or its equivalent. The umbrella manufacturer then aggregated all these constituent parts previously taxed, into a finished product, and then paid six per cent. on the whole. Thus all the parts of the umbrella were taxed at least twice, and in some instances three times-thus adding from twelve to fifteen per cent to the direct cost, while each separate manufacturer doubtless made the payment of the six per cent. tax on his special product an occasion for adding from one to three or more per centum additional to its cost price. Similar illustrations existed in other branches of compound manufactures, showing the sustaining influence on prices, and making the taxes neither definite in amount, equal in application, nor convenient in collection. Another serious defect of the internal revenue system in its bearing upon the industry of the country was the lack of equalization or adjustment between it and the tariff. Thus the cover of the umbrella or parasol, as a constituent element of construction, represents from one-half to two-thirds of the entire cost of the finished article. The silk, the alpaca, and the Scotch gingham, of which the covers were made, were all imported at a duty of sixty per cent. for the former, and fifty per cent. ad valorem for the two latter. But the manufactured umbrella, covered with the same material, whose constituent parts were not taxed, either on the material used in their fabrication or in the sale, were imported under a duty of thirty-five per cent. ad calorem; or at a discriminating duty against the American, and in favor of the foreign producer of from fifteen to twenty-five per cent. Imported umbrellas were sold in New York and Boston with the original cost, duty, freight, and charges, paid in gold, for a less price than the American article could be manufactured. Other illustrations of the lack of adjustment between the excise and the tariff existed in other branches of domestic manufactures. Notwithstanding these and other imperfections in this system so hastily prepared, it very successfully attained the end designed of raising a revenue greater than was necessary for its legitimate expenditures, and, near the close of the war, Congress, on March 3, 1865, took immediate steps for its revision, by authorizing the appointment of a commission to report upon the subject of raising revenue by taxation. In June, Messrs. David A. Wells, Stephen Colwell, and Samuel S. Hayes, were organized as such commission, and their first report was made to Congress in January, 1866. In this report they take the ground that the increase of the country in population and wealth is without a parallel among nations, being from 1840 to 1850 thirty-five per cent. in population, and eighty-nine per cent. in wealth; and from 1850 to 1860 thirty-five and five-tenths per cent. in population, and one hundred and twenty-six per cent. in wealth. If the developinent in any approximate degree can be maintained and continued, the extinguishment of the national debt in a comparatively brief period becomes certain. To secure this development, both by removing the shackles from industry, and by facilitating the means of rapid and cheap communication, they regarded as effecting a solution of all the financial difficulties pressing upon the country. The future revenue policy of the country, they therefore recommended to be, the abolition or speedy reduction of all taxes which tend to check development, and the retention of all those which, like the income tax, fall chiefly upon realized wealth. Asserting this principle as a suitable policy for the Government, it be came necessary to inquire into the nature and capacity of the sources of revenue available to the Government, in order to determine the manner and extent to which this policy could be carried out, and insure adequate revenue. Briefly stating the extent of revenue derived from duties on foreign imports, the attention of this commission was chiefly devoted to the capacity of the country to bear internal taxation. The facts brought forward in this connection are too important in the history of the country to be passed over. The aggregate receipts of internal revenue for the fiscal years 1863 (ten months), 1864, 1865, and 1866, were as follows: 1863 (ten months).. 1864.. 1865. 1866.. $41,003,192 93 116,850,672 44 211,129,529 17 809,226,813 42 The following table shows the amount derived from the principal specific sources of internal revenue in the years 1863, 1864, 1865, and 1866, the aggregate annual amounts, and the percentage ratio of the amount derived from each specific source to the whole for the same periods: |