Volume Iv Part 20 (1/2)
The interest-bearing legal tender notes were first paid off. Greenbacks, or non interest-bearing legal tenders were still, October 1, 1894, outstanding to the amount of $346,681,000; yet this division of the debt, too, had been vastly reduced, having stood at $433,160,569 on August 31, 1865.
To the bonded obligations of the country the policy of refunding was early applied, bonds of high rates being called in so soon as callable, and replaced by others bearing lower rates. The income of the Government was so immense that it proved unfortunate to have set so late a date as 1891 for the time at which the 4-1/2's could be paid off. To fix the date of maturity for the 4's in 1907 was, of course, worse still. The three per cents. of 1882, which supplanted earlier issues, were fortunately made payable at the Government's option, and on May 20, 1887, the Secretary of the Treasury issued a call for the last of them, amounting to $19,717,500, interest to cease with the first of the next July.
From this time there were no bonds subject to par payment at the discretion of the Government, and as revenues were vast the surplus began to pile up in the treasury. December 1, 1887, after every possible obligation of the Government had been provided for, $55,258,701 remained, a sum increased by the end of that fiscal year, namely, June 30, 1888, spite of considerable amounts in long bonds purchased at high rates, to $103,220,464, There was no method at once legal and economical for paying this out. The Secretary could of course buy 4's and 4-1/2's in the open market, and during 1888 this was to some extent done.
Obviously, if entered upon in a large way, it must have greatly carried up the price of those bonds. The question how to limit the surplus, how to keep the money of the country from becoming locked up in the treasury and sub-treasuries of the United States, was thus a grave one, and entered hotly into the political campaign of the last-named year.
[1890]
On June 30, 1890, $109,015,750 in the 4-1/2 per cent. bonds, redeemable September 1, 1891, were still outstanding. By April 1, 1891, they had, by redemption or purchase, been reduced to $53,854,250, of which one-half in value was held by national banks, to sustain their circulation. To avoid contracting this circulation the Secretary of the Treasury permitted holders of these bonds to retain them and receive interest at two per cent. About $25,364,500 was so continued. Interest on the remainder ceased at their maturity, and nearly all were soon paid off. The bonds continued at two per cent. were all along quoted at par, though payable at the will of the Government, revealing a national credit never excelled in history. The national debt, less cash in the treasury, stood on July 1, 1894, after an increase during the previous fiscal year of $60,000,000, at $899,313,381.
The old tariff issue had emerged again soon after the end of the war.
The Morrill tariff of 1861 about restored the rates of 1846, and even those rates had, on many things, been very decidedly increased during the war. Still further protective duties had been laid in the course of the war, called compensating duties, to offset the internal revenues which burdened manufacturers in various ways. After the war the internal taxes were nearly all swept away at the earliest possible moment, until, after July 1, 1883, only spirits, fermented liquors, tobacco, banks and bankers yielded internal revenue. Customs duties were also removed from nearly all so-called revenue articles, as spices, tea, and coffee, not produced in this country--the tax, therefore, not being of a protective nature. Slight reductions were, indeed, made in protective duties, first in 1872--replaced, however, almost entirely in 1875--and again in 1883.
The act of 1883 lowered protection less than appeared, and its rates on woollens, high grade cottons, iron ore, steel, and a few other articles, were now made even higher than the same had previously borne. It will be seen that our policy during the years under survey was to limit national income sufficiently without lowering or removing any protective duties.
In the republican platform of 1888 this policy was explicitly avowed. At that time, as next to nothing could at present be done to pay off the national indebtedness, both parties had to admit that some measure was needed to lessen the revenue. The republican plan was to effect the reduction mainly by lowering or removing the remaining internal taxes, the democratic to secure the same result by changes in customs duties, cutting down rates and enlarging the free list. President Cleveland's message to Congress in December 1887, stated the issue with great clearness, and this issue was the main one which divided the two parties in the presidential election of the ensuing year.
Antic.i.p.ating a little we may remark in this place that the Republicans, having acquired control of all three legislative branches of the Government, pa.s.sed, in 1890, the McKinley Tariff Act, considerably raising rates, though somewhat enlarging the free list. It removed the duty from raw sugar, affixing a bounty to the production of sugar in the United States. But in 1892 the Democrats again acquired power, electing Mr. Cleveland and controlling the Senate. In 1894 they pa.s.sed the Wilson-Senate Tariff Act, greatly reducing rates in general, and free-listing the important commodities of wool, salt, and lumber. Raw sugar was now taxed again, and the bounty upon its production abolished.
[1873]
The revenue question in this campaign was not a little complicated by the existence of numerous and powerful Trusts, which anti-protectionists believed to be fostered by our high tariff. The Trust System arose about 1876, and in the course of a few years almost every great enterprise in the land was carried on under the form of a trust. The princ.i.p.al corporations or men engaged in an industry would enter into combination, more or less informal, for the regulation of production and prices.
Usually the result was an elevation of prices, and where the trust const.i.tuted a necessary monopoly this rise might be indefinitely perpetuated. High tariff as well as low tariff newspapers made great outcry against these monopolies. The latter urged that a reduced tariff, forcing these businesses more into compet.i.tion with corresponding producers abroad, was the only thing needful to break their solidarity and consequent power. Advocates of high tariff denied this.
[1878]
The old silver dollar, ”the Dollar of the Fathers,” had, until 1873, never ceased to be full legal tender, although it had since 1853 been too valuable as compared with the gold dollar to circulate much. In 1873 a law was pa.s.sed demonetizing it, and making gold the exclusive form of United States hard money. The new German Empire did the same this very year. There at once began a great apparent depreciation of silver in comparison with gold at the historic ratio. For a long time this change involved no decrease in the value or purchasing power of silver even in the form of bullion, but consisted rather in a rise of the value of gold.
In view of this, as all the Government bonds outstanding in 1873 had been made payable in coin, it was as good as universally believed in most sections of the Union that the demonetizing of silver, if persisted in, would work hards.h.i.+p to taxpayers in liquidating the national debt. A bill was therefore brought forward, and in 1878 pa.s.sed, restoring to the silver dollar its full legal tender character. In this legislation, however, so great was the then disparity in value between gold and silver at the ratio of 16 to 1, Congress did not venture to give back to the white metal the right of free coinage, but instead required the Secretary of the Treasury to purchase monthly not less than $2,000,000 worth of silver and coin it into dollars.
The act was disapproved by President Hayes, but immediately pa.s.sed over his veto, February 28, 1878. The advocates of gold monometallism believed that the issue of these dollars would speedily drive gold from the country. Owing to the limitation of the new coinage no such effect was experienced, and the silver dollars, or the certificates representing them, floated at par with gold, which, indeed, far from leaving the country, was imported in vast amounts nearly every year.
After 1880 the money in circulation in the United States was gold coin, silver coin gold certificates, greenbacks or United States notes, and the notes of the national banks. The so-called Sherman Law, of 1890, added a new category, the treasury notes issued in payment for silver bullion. It stopped the compulsory coinage of full-tender silver, though continuing and much increasing the purchase of silver bullion by the Government. The repeal of the purchase clause of this law, in 1893, put an end to the acquisition of silver by the United States.
[1879]
January 1, 1879, the next year after the silver bill was pa.s.sed, the United States, under the Resumption Act of January 14, 1875, began again the payment, which had been suspended ever since 1862, of specie in liquidation of greenbacks. The possibility of this had been under discussion for some years, and was disbelieved in by many thoughtful financiers and public men. The credit of the momentous step was mostly due to John Sherman, Secretary of the Treasury in the cabinet of President Hayes. He believed resumption to be as possible as it was important. By the sale of 4-1/2 per cent. bonds redeemable in 1891, he had acc.u.mulated before the appointed day $ 138,000,000 of coin, nearly all in gold, amounting to about forty per cent. of the greenbacks then outstanding.
Resumption proved easier than even he antic.i.p.ated. The greenbacks had risen to par--the first time in seventeen years--December 18th, thirteen days before the date fixed for beginning gold payments, and when the day arrived only straggling applications for coin were made, less in amount than was asked for in greenbacks as interest by bondholders, who could have demanded coin. During the entire year only $11,456,536 in greenbacks were offered for redemption, while over $250,000,000 in them were paid out in coin obligations. It was found that people preferred paper to metal money, and had no wish for gold instead of notes when a.s.sured that the exchange could be made at their option. Notwithstanding our acceptance of greenbacks for customs--$109,467,456 during 1879--the treasury at the end of that year experienced a dearth of these and a plethora of coin, having actually to force debtors to receive hard money.
[1876-1877]
Such popularity of the greenbacks stimulated to fresh life the ”fiat greenback” theory, long in vogue and very influential in many parts of the country. Its pith lay in the proposition that money requires in its material no intrinsic value, its worth and purchasing power coming entirely from the ”fiat” of the government issuing it, so that paper money put forth by authority of a solvent and powerful government will be the peer of gold. This idea was the rallying point of the National Labor Greenback Party, organized at its Indianapolis convention, May 17, 1876, when Peter Cooper was put in nomination for President. At the subsequent presidential election in November, he received 82,640 votes.
The next year his party polled 187,095 votes; in 1878, 1,000,365.
From the moment of its issue, there had been in the country many who went to the opposite extreme with reference to the greenback. They believed it unconst.i.tutional and pernicious, a menace to the nation's credit and financial weal. The question came to the Supreme Court during the war, and this form of contracting debt on the part of the Government was then justified as a war measure. When the war was over the question whether the greenback's legal tender quality could still be maintained, also had to be pa.s.sed upon by the court. The first decision was in the negative, but it was subsequently reversed. Still a third question was whether a man could be forced to take greenbacks in liquidation of debt after the resumption of specie payments. This was tried out in the famous case of Juilliard vs. Greenman, and the decision was, as on the other two occasions, in favor of the greenback. In spite of all this, however, the zeal for the fiat or non-promissory theory and practice of paper money almost totally died away after about 1880.
The most desperate and extensive strike that had yet occurred in this country was that of 1877, by the employees of the princ.i.p.al railway trunk lines, the Baltimore and Ohio, the Pennsylvania, the Erie, the New York Central, and their western prolongations. At a preconcerted time junctions and other main points were seized. Freight traffic on the roads named was entirely suspended, and the pa.s.senger and mail service greatly impeded. When new employees sought to work, militia and United States troops had to be called out to preserve order. Baltimore and Pittsburgh were each the scene of a b.l.o.o.d.y riot. At the latter place, where the mob was immense and most furious, the militia were overcome and besieged in a roundhouse, which it was then attempted to burn by lighting oil cars and pus.h.i.+ng them against it. Fortunately the soldiers escaped across the river. The torch was applied freely and with dreadful effect. Machine-shops, warehouses, and 2,000 freight-cars were pillaged or burnt. The loss of property was estimated at $10,000,000. In disturbances at Chicago nineteen were killed, at Baltimore nine, at Reading thirteen, and thrice as many wounded. One hundred thousand laborers were believed to have taken part in the movement, and at one time or another 6,000 or 7,000 miles of road were in their power. The agitation began on July 14th and was serious till the 27th, but had mostly died away by the end of the month, the laborers nearly all returning to their work.
Hosts of Pennsylvania miners went out along with the railroad men. The railway strike itself was largely sympathetic, the ten per cent.