Volume I Part 43 (2/2)
The total amount of the public debt on October 1, 1864, on the books of the Register of the Treasury, was $1,147,970,208, of which $530,340,090 were funded debt, bearing interest, and $283,880,150 were Treasury notes of the new issue, and the remainder consisted of the former issue of Treasury notes which were converted into other forms of debt, and ceased to exist on December 31st. In consequence, however, of the absence of certain returns from distant officers, the true amount of the debt was less by $21,500,000 than appeared on the books of the Register; so that the total public debt, on October 1st, might have been fairly considered to have been $1,126,381,095. Of this amount, $541,340,090 consisted of funded debt, and the balance unfunded debt, or Treasury notes. The foreign debt is omitted in these statements. It amounted to 2,200,000, and was provided for by about two hundred and fifty thousand bales of cotton collected by the Government.192
The aggregate appropriations called for by the different departments of the Government for the six months ending on June 30, 1865, amounted to $438,416,504. It was estimated that the remains of former appropriations would, on January 1, 1865, amount to a balance of $467,416,504. No additional appropriations were therefore required for the ensuing six months.
A system of measures by which to obtain a revenue from direct taxes and duties was commenced at the first session of Congress under the provisional Government. The officers who, at the time of the adoption of the provisional Const.i.tution, held [pg 494] any office connected with the collection of the customs, duties, and imposts in the several States of the Confederacy, or as a.s.sistant treasurers intrusted with the keeping of moneys arising therefrom, were continued in office with the same powers and subject to the same duties. The tariff laws of the United States were continued in force until they might be altered. The free list was enlarged so as to embrace many articles of necessity; additional ports and places of entry were established; restrictive laws were repealed, and foreign vessels were admitted to the coasting-trade. A lighthouse bureau was organized; a lower rate of duties was imposed on a number of enumerated articles, and an export duty of one eighth of one cent per pound was imposed on all cotton exported in the raw state. At the second session, in May, a complete tariff law was enacted, with a lower scale of duties than had previously existed. On August 19, 1861, a war-tax of fifty cents on each hundred dollars of certain cla.s.ses of property was levied for the special purpose of paying the princ.i.p.al and interest of the public debt, and of supporting the Government. The different cla.s.ses of property on which the tax was levied were as follows: real estate of all kinds; slaves; merchandise; bank-stocks; railroad and other corporation stocks; money at interest, or invested by individuals in the purchase of bills, notes, and other securities for money, except the bonds of the Confederate States, and cash on hand, or on deposit; cattle, horses, and mules; gold watches, gold and silver plate, pianos, and pleasure-carriages. There were some exemptions, such as the property of educational, charitable, and religious inst.i.tutions, and of a head of a family having property worth less than five hundred dollars. An act was pa.s.sed for the sequestration of the property of alien enemies, as a retaliatory measure, to offset the confiscation act of the United States.
On April 24, 1863, a new act was pa.s.sed relative to internal or direct taxes. It was designed to reach, as far as practicable, every resource of the country except the capital invested in real estate and slaves, and, by means of an income-tax and a tax in kind on the produce of the soil, as well as by licenses on business occupations and professions, to command resources sufficient [pg 495] for the wants of the country. On February 17, 1864, an amendment to this last-mentioned act was pa.s.sed. It levied additional taxes on all business of individuals, of copartners.h.i.+ps and corporations, also on trades, sales, liquor-dealers, hotel-keepers, distillers, and a tax in kind on agriculturists. On June 10, 1864, an act was pa.s.sed which levied a tax equal to one fifth of the amount of the existing tax upon all subjects of taxation for the year.
Within six months after the pa.s.sage of the war-tax of August 19, 1861, the popular aversion to internal taxation by the General Government had so influenced the legislation of the several States that only in South Carolina, Mississippi, and Texas were the taxes actually collected from the people. The quotas of the remaining States had been raised by the issue of bonds and State Treasury notes. The public debt of the country was thus actually increased instead of being diminished by the taxation imposed by Congress.
At the first and second sessions of Congress in 1862 no means were provided by taxation for maintaining the Government. The legislation was confined to authorizing further sales of bonds and issues of Treasury notes. An obstacle had arisen against successful taxation. About two thirds of the entire taxable property of the Confederate States consisted in land and slaves. Under the provisional Const.i.tution, which ceased to be in force on February 22, 1862, the power of Congress to levy taxes was not restricted by any other condition than that ”all duties, imposts, and excises should be uniform throughout the States of the Confederacy.” But in the permanent Const.i.tution, which took effect on the same day (February 22d), it was specially provided that ”representatives and direct taxes shall be apportioned among the several States according to their respective numbers, which shall be determined by adding to the whole number of free persons-including those bound to service for a term of years, and excluding Indians not taxed-three fifths of all slaves.” According to the received construction of the Const.i.tution of the United States, which had been acquiesced in for sixty years, taxes on lands and slaves were direct taxes. In repeating, without modification, in our [pg 496] Const.i.tution this language of the United States Const.i.tution, our Convention necessarily seems to have intended to attach to it the meaning which had been sanctioned by long and uninterrupted acquiescence-thus deciding that taxes on lands and slaves were direct taxes. Our Const.i.tution further ordered that a census should be made within three years after the first meeting of Congress, and that ”no capitation or other direct tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken.”
So long as there seemed to be a probability of being able to carry out these provisions of the Const.i.tution fully, and in conformity with the intentions of its authors, there was an obvious difficulty in framing any system of taxation. A law which should exempt from the burden two thirds of the property of the country would be as unfair to the owners of the remaining third as it would be inadequate to meet the requirements of the public service. The urgency of the need, however, was such that, after great embarra.s.sment, the law of April 24, 1863, above mentioned, was framed. Still, a very large proportion of these resources was unavailable for some time, and, the intervening exigencies permitting of no delay, a resort to further issues of Treasury notes became unavoidable.
The foreign debt of the Confederate States at the close of the war was twenty-two hundred thousand pounds. The earliest proposals on which this debt was contracted were issued in London and Paris in March, 1863. The bonds bore interest at seven per cent. per annum, in sterling, payable half-yearly. They were exchangeable for cotton on application, at the option of the holder, or redeemable at par in sterling, in twenty years, by half-yearly drawings, commencing March 1, 1864. The special security of these bonds was the engagement of the Government to deliver cotton to the holders. Each bond, at the option of the holder, was convertible at its nominal amount into cotton at the rate of sixpence sterling for each pound of cotton-say four thousand pounds of cotton for each bond of a hundred pounds, or twenty-five hundred francs; and this could be done at any time not later than six months after the ratification of a treaty of peace between the belligerents. Sixty days after the notice, [pg 497] the cotton was to be delivered, if in a state of peace, at the ports of Charleston, Savannah, Mobile, or New Orleans; if at war, at points in the interior of the country, within ten miles of a railroad, or a stream navigable to the ocean. The delivery was to be made free of all charges, except the export duty of one eighth of one cent per pound. The quality of the cotton was to be the standard of New Orleans middling. An annual sinking fund of five per cent. was provided for, whereby two and a half per cent. of the bonds unredeemed by cotton should be drawn by lot half-yearly, so as finally to extinguish the loan in twenty years from the first drawing. The bonds were issued at ninety per cent., payable in installments. The loan soon stood in the London market at five per cent. premium. The amount asked for was three million pounds. The amount of applications in London and Paris exceeded fifteen million pounds.
Great efforts had previously been made by agents of the United States Government to reflect upon the credit of the Confederate States, by resuscitating an almost forgotten accusation of repudiation against the State of Mississippi, and especially by an emissary sent to Great Britain, than whom no one knew better how false were the attempts to implicate my name in that charge. The slanderous tongues of Northern hatred even went so far as to style me ”the father of repudiation.” How unjust all such a.s.sertions were, will be manifest by a simple statement of the case.193
[pg 498]
We should not omit to refer once more to the most prolific source of sectional strife and alienation, which is believed to have been the question of the tariff, or duties upon imports. Its influence extended to and affected subjects with which it was not visibly connected, and finally a.s.sumed a form surely [pg 499] not contemplated in the original formation of the Union. In the Articles of Confederation, the first Const.i.tution of the United States, the theory was that of direct taxation, and the manner was to impose upon the States an amount which each was to furnish to the common Treasury to defray expenses for the common defense and general welfare.
During the period of our colonial existence, the policy of the British Government had been to suppress the growth of manufacturing industry. It was forcibly expressed by Lord North in the declaration that ”not a hobnail should be made in the American colonies.” The consequence was that in the War of the Revolution our armies and people suffered so much from the want of the most necessary supplies that General Was.h.i.+ngton, after we had achieved our independence, expressed the opinion that the Government should by bounties, encourage the manufacture of such materials as were necessary in time of war.
In the Convention which framed the Const.i.tution for a ”more perfect Union,” one of the greatest difficulties in agreeing upon its terms was found in the different interests of the States, but, among the compromises which were made, there prominently appears the purpose of a strict equality in the burdens to be borne, as well as the blessings to be enjoyed, by the people of the several States. For a long time after the formation of [pg 500] the ”more perfect Union,” but little capital was invested in manufacturing establishments; and, though in the early part of the present century the amount had considerably increased, the products were yet quite insufficient for the necessary supplies of our armies in the War of 1812. Government contracts, high prices, and to some extent, no doubt, patriotic impulses, led to the investment of capital in the articles required for the prosecution of the war. With the restoration of peace and the renewal of commerce, prices naturally declined, and it was represented that the investments made in manufacturing establishments were so unprofitable as to involve the ruin of those who had made them. The Congress of the United States, in 1816, from motives at least to be commended for their generosity, enacted a law to protect from the threatened ruin those of their countrymen who had employed their capital for purposes demanded by the general welfare and common defense. These good intentions, if it be conceded that the danger was real which it was designed to avert, were most unfortunate as the beginning of a policy the end of which was fraught with the greatest evils that have ever befallen the Union. By the Const.i.tution of 1789 power was conferred upon Congress-
”To lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts, and excises shall be uniform throughout the United States.”
In the exercise of this delegated trust, tariff laws were enacted, and had been in operation to the satisfaction of all parts of the Union, from the organization of the Government down to 1816; but throughout that period all of those laws were based upon the principle of duties for revenue. It was true, and of course it was known, that such duties would give incidental protection to any industry producing an article on which the duty was levied; but, while the money was collected for the purposes enumerated, and the rate kept down to the lowest revenue standard, the consumer had no cause to complain of the indirect benefit received by the manufacturer, and the history of the time shows that it produced no discontent. Not so [pg 501] with the tariff law of 1816: though sustained by men from all sections of the Union, and notably by so strict a constructionist as Mr. Calhoun, there were not wanting those who saw in it a departure from the limitation of the Const.i.tution, and sternly opposed it as the usurpation of a power to legislate for the benefit of a cla.s.s. The law derived much of its support from the a.s.surance that it was only a temporary measure, and intended to s.h.i.+eld those whose patriotism had exposed them to danger, thus presenting the not uncommon occurrence of a good case making a bad precedent. For the first time a tariff law had protection for its object, and for the first time it produced discontent. In the law there was nothing which necessarily gave to it or in its terms violated the obligation that duties should be uniform throughout the United States. The fact that it affected the sections differently was due to physical causes-that is, geographical differences. The streams of the Southern Atlantic States ran over wide plains into the sea; their last falls were remote from ocean navigation; and their people, almost exclusively agricultural, resided princ.i.p.ally on this plain, and as near to the seaboard as circ.u.mstances would permit. In the Northern Atlantic States the highlands approached more nearly to the sea, and the rivers made their last leap near to harbors of commerce. Water-power being relied on before the steam-engine had been made, and s.h.i.+ps the medium of commerce before railroads and locomotives were introduced, it followed that the staples of the Southern plains were economically sent to the water-power of the North to be manufactured. This remark, of course, applies to such articles as were not exported to foreign countries, and is intended to explain how the North became the seat of manufactures, and the South remained agricultural. From this it followed that legislation for the benefit of manufacturers became a Northern policy. It was not, as has been erroneously stated, because of the agricultural character of the Southern people, that they were opposed to the policy inaugurated by the tariff act of 1816. This is shown by the fact that anterior to that time they had been the friends of manufacturing industry, without reference to its location. As long as duties were imposed for revenue, so that the object was [pg 502] to supply the common Treasury, it had been cheerfully borne, and the agriculture of one section and the manufacturing of another were properly regarded as handmaids, and not unfrequently referred to as the means of strengthening and perpetuating the bonds by which the States were united. When duties were imposed, not for revenue, but as a bounty to a particular industry, it was regarded both as unjust and without warrant, expressed or implied, in the Const.i.tution.
Then arose the controversy, quadrennially renewed and with increasing provocation, in 1820, in 1824, and in 1828-each stage intensifying the discontent, arising more from the injustice than the weight of the burden borne. It was not the twenty-s.h.i.+lling s.h.i.+p-money tax, but the violation of Magna Charta, which Hampden and his a.s.sociates resisted. It was not the stamp duty nor the tea-tax, but the principle involved in taxation without representation, against which our colonial fathers took up arms. So the tariff act in 1828, known at the time as ”the bill of abominations,” was resisted by Southern representatives, because it was the invasion of private rights in violation of the compact by which the States were united. In the last stage of the proceeding, after the friends of the bill had advocated it as a measure for protecting capital invested in manufactures, Mr. Drayton, of South Carolina, moved to amend the t.i.tle so that it should read, ”An act to increase the duties upon certain imports, for the purpose of increasing the profits of certain manufacturers,” and stated his purpose for desiring to amend the t.i.tle to be that, upon some case which would arise under the execution of the law, an appeal might be made to the Supreme Court of the United States to test its const.i.tutionality. Those who had pa.s.sed the bill refused to allow the opportunity to test the validity of a tax imposed for the protection of a particular industry. Though the debates showed clearly enough the purpose to be to impose duties for protection, the phraseology of the law presented it as enacted to raise revenue, and therefore the victims of the discrimination were deprived of an appeal to the tribunal inst.i.tuted to hear and decide on the const.i.tutionality of a law.
South Carolina, oppressed by onerous duties and stung by [pg 503] the injustice of a refusal to allow her the ordinary remedy against unconst.i.tutional legislation, a.s.serted the right, as a sovereign State, to nullify the law. This conflict between the authority of the United States and one of the States threatened for a time such disastrous consequences as to excite intense feeling in all who loved the Union as the fraternal federation of equal States. Before an actual collision of arms occurred, Congress wisely adopted the compromise act of 1833. By that the fact of protection remained, but the principle of duties for revenue was recognized by a sliding scale of reduction, and it was hoped the question had been placed upon a basis that promised a permanent peace. The party of protective duties, however, came into power about the close of the period when the compromise measure had reached the result it proposed, and the contest was renewed with little faith on the part of the then dominant party and with more than all of its former bitterness. The cause of the departure from a sound principle of a tariff for revenue, which had prevailed during the first quarter of a century, and the adoption in 1816 of the rule imposing duties for protection, was stated by Mr. McDuffie to be that politicians and capitalists had seized upon the subject and used it for their own purposes-the former for political advancement, the latter for their own pecuniary profit-and that the question had become one of partisan politics and sectional enrichment. Contemporaneously with this theory of protective duties, arose the policy of making appropriations from the common Treasury for local improvements. As the Southern representatives were mainly those who denied the const.i.tutional power to make such expenditures, it naturally resulted that the ma.s.s of those appropriations were made for Northern works. Now that direct taxes had in practice been so wholly abandoned as to be almost an obsolete idea, and now that the Treasury was supplied by the collection of duties upon imports, two golden streams flowed steadily to enrich the Northern and manufacturing region by the impoverishment of the Southern and agricultural section. In the train of wealth and demand for labor followed immigration and the more rapid increase of population in the Northern than in the Southern States. I do not deny the existence of other causes, such [pg 504] as the fertile region of the Northwest, the better harbors, the greater amount of s.h.i.+pping of the Northeastern States, and the prejudice of Europeans against contact with the negro race; but the causes I have first stated were, I think, the chief, and those only which are referable to the action of the General Government. It was not found that the possession of power mitigated the injustice of its use by the North, and discontent therefore was steadily acc.u.mulating, and, as stated in the beginning of this chapter, I think was due to cla.s.s legislation in the form of protective duties and its consequences more than to any or all other causes combined. Turning from the consideration of this question in its sectional aspect, I now invite attention to its general effect upon the character of our inst.i.tutions. If the common Treasury of the States had, as under the Confederation, been supplied by direct taxation, who can doubt that a rigid economy would have been the rule of the Government; that representatives would have returned to their tax-paying const.i.tuents to justify appropriations for which they had voted by showing that they were required for the general welfare, and were authorized by the Const.i.tution under which they were acting? When the money was obtained by indirect taxation, so that but few could see the source from which it was derived, it readily followed that a const.i.tuency would ask, not why the representative had voted for the expenditure of money, but how much he had got for his own district, and perhaps he might have to explain why he did not get more. Is it doubtful that this would lead to extravagance, if not to corruption? Nothing could be more fatal to the independence of the people and the liberties of the States than dependence for support upon the public Treasury, whether it be in the form of subsidies, of bounties, or restrictions on trade for the benefit of special interests. In the decline of the Roman Empire, the epoch in which the hopelessness of renovation was made manifest was that in which the people accepted corn from the public granaries: it preceded but a little the time when the post of emperor became a matter of purchase. How far would it differ from this if const.i.tuencies should choose their representatives, not for their integrity, not for their capacity, not for their past services, but [pg 505] because of their ability to get money from the public Treasury for the benefit of their local interests; and how far would it differ from a purchase of the office if a President were chosen because of the favor he would show to certain moneyed interests?
Now that fanaticism can no longer inflame the prejudices of the uninformed, it may be hoped that our statesmen will review the past, and give to our country a future in accordance with its early history, and promotive of true liberty.
Footnote 192: (return) These bales were the security for the foreign cotton bonds, and were seized by the United States Government. Was it not liable to the bondholders?
Footnote 193: (return) The facts with regard to the Mississippi ”Union Bank” bonds may be briefly stated as follows:
The Const.i.tution of Mississippi required that no law should ever be pa.s.sed ”to raise a loan of money on the credit of the State, or to pledge the faith of the State for the payment or redemption of any loan or debt,” unless such law should be proposed and adopted by the Legislature, then published for three months previous to the next regular election, and finally reenacted by the succeeding Legislature. The object was to enable the people of the State to consider the question intelligently, and to indicate and exercise their will upon it by the election of representatives to the ensuing Legislature, whose views upon the subject would be known, and with such instructions, express or implied, as they might think proper to give.
In 1837 a law was pa.s.sed by the Legislature for incorporating the ”Union Bank of Mississippi,” with a capital of fifteen million five hundred thousand dollars, ”to be raised by means of a loan to be obtained by the directors of the inst.i.tution.” In order to secure this loan, the stockholders were required to give mortgages on productive and unenc.u.mbered property, to be in all cases of value greater, by a fixed ratio, than the amount of their stock. When the stock had been thus secured, as a further guarantee for the redemption of the loan, the Governor was directed to issue bonds, in the name and behalf of the State, equal in amount to the stock secured by mortgage on private property. No bonds as thus directed were ever issued.
This act was duly promulgated to the people, and duly reenacted by the succeeding Legislature on the 5th of February, 1838, in strict accordance with the Const.i.tution.
Ten days afterward, however, viz., on the 15th of February, the Legislature pa.s.sed an act supplemental to the act chartering the Union Bank, which materially changed or abolished the essential conditions for the pledge of the credit of the State. By this supplemental act the Governor was instructed, as soon as the books of subscription should be opened, to ”subscribe for, in behalf of the State, fifty thousand shares of the stock of the original capital of said bank, to be paid for out of the proceeds of the State bonds to be executed to the said bank, as already provided for in the said charter.” This act was pa.s.sed in the ordinary mode of legislation, and was not referred, published, nor reenacted, as prescribed by the Const.i.tution. As soon as the directory was organized and the books of subscription were opened, and before the mortgages required by the charter were executed, the Governor, in behalf of the State, subscribed for fifty thousand shares of the stock, and issued the bonds of the State for five million dollars, payable to the order of the bank.
These bonds were sold to Nicholas Biddle, President of the United States Bank of Pennsylvania, and by him sent to Great Britain as collateral security for a loan previously made. None of the money received for them went into the Treasury of the State of Mississippi, nor was any of it used for a public improvement. All the consideration ever received by the State was its stock in the Union Bank. The bank soon failed, and the stock became utterly worthless.
Before the bonds became due, the Governor of the State had declared them to be null and void, among other causes, in consequence of the failure to sell them at par, as required by the ”supplemental act,” under which they were issued.
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