The Sun.
London, England, 1869-01-07 00:00:00

THE FINANCES OF AMERICA.

WASHINGTON, Dec. 7.—The following is the
annual report of the Secretary of the Treasury :
TREASURY DEPARTMENT, Dee. 1, 1868.

In compliance with the requirements of law, the
Secretary of the Treasury has the honour to make to
Congress the following report. In former commu-
nications the Secretary has expressed so fully his
views upon the great subjects of the currency, the
revenues, and the public debt, that it may be
thought quite unnecessary for him to press them
upon the attention of Congress. These subjects,
however, have lost none of their importanne--on
the contrary, the public mind, during the past year,
has been turned to their consideration with more
absorbing interest than at any former period. The
Secretary will, therefore, he trusts, be pardoned for
restating some of the views heretofore presented by
him. If there is any question in finance or politi-
cal economy which can be pronounced settled by
argument and trial, it is that inconvertible and de-
preciated paper money is injurious to public and
private interests, a positive political and financial
evil, for which tht.re can be but one justification or
excuse, to wit : a temporary necessity, arising from
an unexpectel and pressing emergency, and it fol-
lows, consequently, that such a circulation should
only be tolerated until, without a financial shock, it
can be withdrawn or made convertible into specie.
If an irredeemable bank note circulation is an evi-
dence of bankrupt or badly managed banking insti-
tutions, which should be deprived of their franchises
or compelled to husband and make available their
resources, in order that they may be prepared at
the earliest day practicable to take up their dis-
honoured obligations, why should not an irredeem-
able Government currency be regarded as au evi-
dence of bail management of the national finances,
if not national bankruptcy ? and why should not
such wise and equal revenue laws be enacted, and

such economy in the use of the public moneys be
effected as will enable the Government either Judi-
. Iciously to fund or promptly to redeem its broken
promises ? The United States notes, although de-
elated by law to be ]awful money, are nevertheless
a dishonoured and disreputable currency. The fact
that they are a legal tender, possessing such attri-
butes of money as the statute can give them, ad Is
nothing to their real value, but makes them all the
;more dishonourable to the Government, and sub-
versive of good morals. The people are compelled
to take as money what is not money, and, becoming
demoralized by its constantly changing value, they
are in danger of losing that sense of honour in
their dealings with Government and each other
which is necessary for the wellbeing of society. It
is vain to expect on the part of the people a faithful
fulfilment of their duties to the Government as
long as the Government is false to its own obliga-
tions, nor will those who do not hesitate to defraud
the public revenue long continue to be scrupulous
in their private business. Justifiable and necessary
as the measure was then regarded, it is now appa-
rent that one unfortunate step was taken when ir-
redeemable promises were issued as lawful money,
and especially when they were made a valid tender
in payment of debt contracted when specie was the
legal as well as the commercial standard of value.
The legal-tender notes enabled debtors to pay their
debts in a currency largely inferior to that which
was alone recognized as money at the time they
were incurred, and thus the validity of contracts was
' virtually impaired. If all creditors had been com-
pe•lled by law to pay into the public Treasury 50
per cent. or 10 per cent., or indeed any portion of
the amounts received by them from their debtors,
such a law would have been con letnned as unequal
and unjust, and yet the effect of it would have been
to lessen to the extent of the -receipts from- this
source the necessity for other kinds of taxation, and
thus to relieve in some measure the class unjustly,
because unequally, taxed. By the Legal-Tender Acts
a portion of the property of one class of citizens was
' virtually confiscated for the benefit of another with-
out an increase thereby of the public revenues, and
consequently without any compensation to the in-
jured class. There can be no doubt that these Acts
,have tended to blunt and deaden the public con-
' science, not that they are chargeable in no small de-
cree with the demoralization which so generally

prevails.
The Secretary still adheres to the opinion so fre-
quently expressed by him that a reduction of the
paper circulation of the country until it appreciated
to the specie standard was the true solution of our
financial problem. But as this policy was empha-
tically condemned by Congress, and it is now too
late to return to it, he recommends the following
measures as the next best calculated to effect the
desired result.
Agreements for the payments of coin seem to be
the only ones not contrary to good morals, the per-
formance of which cannot be enforced in the courts.
Coin contracts executed before the passage of the
Legal-tender Acts, as well as those executed since,
are satisfied in all the States except California by
the payment of tlje auiounts called for in depreciated
notes. This shackle upon commerce, this check upon
' our national progress, this restriction up .0 indivi-
dual rights, should no longer be continued. If it be
; admitted that the condition of the country during
the war, an for a time after its close, created a ne-
cessity for laws and decisions making promissory
notes, fluctuating iu value according to the result of
battles and of speculative combinations, the medium
in whieh contracts should be discharged, this
necessity no longer exists. S;eps should now
be taken to give stability to business and-secu-
rity to enterprise, and to this end specific con-
tracts to be executed in coin should at once be
legalized. Perhaps no law could be passed which
would be productive of better results with so
little private or public inconvenience. Such a law
would simply enable the citizen to do what the Go-
vernment is doing in its receipts for Custo!ris, and
in the payment of its bonded debt—it would merely
authorise the enforcement of contracts voluntarily
entered into according to their letter. The effect
of such a law would be to check the outflow of
specie to other countries by creating a necessity for
the use of it at home, to encourage enterprises ex-
tending into the future by rewoviug all uncertainty
in regard to the value, and show how groundless is
the apprehension so generally existing that a with-
drawal of depreciated notes on the appreciation of
these notes to par would produce a scarcity of
money, by proving that specie expelled from the
country by au inferior circulating medium will re-
' turn again when it is made a basis of contracts, and
theis
t ri
t s
eocnreet sehs'yjai y needed
di
nCurrency,t speculative,et ihr ougperformance, a
by
n
a
future value, h usually ssne
nth e
of B
basisu
it Business is now
in is
u l)
uncertaincities
plentifuls
and readily obtained there at low rates, or short
time, with ample collaterals, is comparatively scarce
and dear in the agricultural districts, where longer
loans on
commercialto
lendpaperor
are
trequired.
o
creust-
bo th
borr oNv o r any Price lentn
hesitatemen -
snerable period, by reason of their inability to de-
termine the value of the medium in which the loans
are to be paid with currency now worth 70 cents on
the dollar, and which within six months may advance
to 80 or decline to 60. It is strange that the flow
is to the business centres, where it can be loaned
"on call," leaving the interior without proper sup-
plies at rea:onable rates for moving the crops, and
conducting other legitimate business. It is strange
that in such an unsettled condition of the currency
gambling is active, while enterprise halts, trade
stagnates, and distrust and apprehension exist in
regard to the future ? It is not supposed that such
a measure as is recommended will cure the financial
evils which now afflict the country, but it will be
a decided movement in the right direction, and
the Secretary indulges the hope that it will re-
ceive the early and favourable consideration of
Congress.
The Legal-Tender Acts were war measures.
By reference to the debates upon their passage it
will be perceived that by all who advocated them
they were expected to be temporary only. It was
feared that irredeemable Government notes in
the unfortunate condition of the country would
only be saved from great depreciation by being made
a legal tender. The great fact not being sufficiently
considered, that by possessing this character their
depreciation would not be prevented, but merely
disguised. Hence it was declared that they should
be " Lawful money and a legal tender in payment
of all debts, public or private, within the United
States,
except duties on imports and interest on the
public debt." They were issued in an emergency
for which it then seemed that no other provision
could be made. They were in fact a forced loan,
justified only by the condition of the country, and
they were so recognized by Congress and the
people. By no member of Congress, and by no pub-
lic journal was the issue of those notes as lawful
money advocated on any other ground than that of
necessity ;
and the question arises, should they not
not now or at an early date be divested of the cha-
racter which was conferred upon them, in a condi-
tion of the country so different from the present?
The Secretary believes that they could, and he
therefore recommends, in addition to the enactment
by which contracts for the payments of coin can be
forced, that it be declared, that after the Ist day, of
January, 1870, United States notes shall cease to
be a legal tender in payment of all private debts
subsequently contracted, and that after the Ist day
of January, 1871, they shall cease to be a legal
tender on any account, or for any purpose what-
ever, except Government dues for which they are
now receivable. The law should also authorize the
conversion of these notes, at the pleasure of the
holders, into bonds bearing such rate of interest as
may be authorised by Congress on the debt on
which the present outstanding bonds may be funded.
The period for which they would continue to be a
legal tender would be sufficient to enable the people
and the banks to prepare for the contemplated
change, and the privilege of their conversion would
save them from depreciation. What has been said
by the Secretary, in his previous reports on the per-
nicious effects upon business and the public morals
of inconvertible legal-tender notes, and what is said
in this report upon the advantages which would re-
sult from legalizing coin contracts, sustain this re-
commendation. It may not be improper, however,

to suggest another reason for divesting theFe notes
of their legal-tender character by legislative action.
Although the decisions of the Court have been ge-
nerally favourable to the constitutionality of the
Acts by which they were authorized, grave doubts
are entertained by many of the ablest lawyers of
the country as to the correctness of these decisions,
and it is to be borne in mind that they have not yet
been sustained by the Supreme Court of the United
States.

CUSTOMS' RECEIPTS OF THE UNI7ED

S 7 A I'ES.

The receipts for customs for the last three years
have been as follows : —For the fiscal year ending
June 30, 1866, $179,046,651 58 ; for the fiscal
year ending June 30,1867,076,417,810 88; for the
fiscal year ending June 30, 1868, £164,464,599 56.
While it appears from these figures that customs
receipts since the commencement of the fiscal year,
1865, have been, on a revenue point of view, en-
tirely satisfactory, the question naturally arises,
what do these large receipts under a high tariff in-
dicate in regard to our foreign trade and our finan-
cial relations with foreign nations? It is impos-
sible to ascertain with precision the amount of our
securities held in Europe. Nor is there any per-
fectly trustworthy data for ascertaining even what
amount has gone there annually since the first
bonds were issued for the prosecution of the war.
In his report of 1866, the Secretary connotes
the amount of United States securities of diffe-
rent kinds, including railroad and other stock held
in Europe, at $600,000,000. He soon after became
satisfied that this estimate was too low by from
$100,000,000 to $150,000,000. It would be safe
to put the amount so held at the present time, ex-
clusive of stocks, at $5.59,000,000,. of which not less
than $600,000,000 are United'States Bond-s., nearly
all of which have left the United States within .the
last six years. The amount is formidable, and little
satisfaction is derived from the consideration that
these securities have been transferred in payment of
interest and for foreign commodities; and just as
little from the consideration that probably not over
$500,000,000 in gold values have been received for
these $800,000,000 of debt. In this estimate of
our foreign indebtedness, railroad, and other stocks
are not included, as they are not a debt, but the
evidence merely of the ownership of property in
the United States. Fortunately for some years past
individual credits have been curtailed, and our
foreign and domestic trade in this particular has
not been unsatisfactory. In addition, then, to the
stocks referred to, and the individual indebtedness,
of the particular amount of which no accurate esti-
mate can be made, Europe holds not less than
$850,000,000 of American securities, on nearly all
of which interest, and on the greater part of which
interest in gold, is being paid. Nor under the pre-
sent revenue systems, and with a depreciated paper
currency, is the increase of our foreign debt likely
to be stayed. With wide and abundant harvests,
and a large surplus of agricultural productions of
all descriptions, thsired States Bonds are still creat-
ing to no small extent the exchange with which our
foreign balances are being adjusted. We are even
now increasing our debt to Europe at the rate
of $60,000,000 or $70,000,000 per annum, in the
form of gold-bearing bonds. The gold and sil-
ver product of California with the Territories
since 1818 has been upwards of $1,300,000,000.
Allowing that $100,000,000 have been used in
manufactures, and that the coin in the country has
increased to an equal amount, the balance of this
immense sum, $1,100,000,000, has gone to other
countries in excnangp.for their productions. Within
a period of 20 years, in addition to our agricultural
produce, and to our manufsctures, which have
been exported in large quantities, we have parted
with $1,100,000,000 of the precious metals, and are
nevertheless confronted with a foreign debt of some
$550,000,000, which is steadily increasing, and all
this has occurred under tariffs its a good degree
framed with the view of protecting American
against foreign manufacturers. But this is not all.
During the recent war most of our vessels engaged
in the foreign trade were either destroyed by rebel
cruisers or transferred to foreigners. Oar exports
as well as our imports are now chiefly in foreign
bottoms. The carrying trade between the United
States and Europe is almost totally in the hands of
Europeans. Were it not for the remnant of ships
still employed in the China trade and the stand we
are making by the establishment of a line of
steamers on the Pacific, the coastwise trade, which
is retained by the exclusion of foreign competition,
would seem to be about all that can, under exist-
ing legislation, be relied upon for the employment
of American shipping. There arc many intelligent
persons who entertain the opinion that the country
has been benefited by the transfer of our bonds
to Europe, on the ground that capital has been
received in exchange for them which has been
profitably employed in the development of
our national resources, and that it matters little
whether the interest upon the debt is received by
our own people or by the people of other countries.
This opinion is the result of misapprehension of
facts, and is unsound in principle. It is not to a
large extent true, that capital which is being used
in developing the national resources has been re-
ceived in exchange for the bonds which are held in
Europe, while many articles, such as railroad iron,
machinery, and raw materials used in manufactur-
ing, the value of which to the country is acknow-
ledged, have been scereceived, a large proportionof
the receipts have been of a different description.
Our bonds have been largely paid for in articles
for which no nation can afford to run in debt—for
articles which have neither stimulated industry nor
increased the productive powers of the country—
which have, in fact, added nothing to the national
wealth. A reference to the Custom-House entries
will substantiate the correctness of these statements.
Two-thirds of the importations of the United States
consist of articles which in economical times would
be pronounced luxuries. The war and a redundant
currency have brought about unexampled extrava-
vagance, which can only he satisfied by the most costly
productions of foreign countries. No exception
could be taken to such importations if they were
paid for in our own productions. This, unfortu-
nately, in not the fact. They are annually swelling
our foreign debt without increasing our ability to
pay it. How disastrous such a course of trade, if
long continued, must be, it requires no spirit of
prophecy to predict. Nor is it an unimportant
matter that the interest upon a large portion of our
securities is received by citizens of other countries
instead of our own. If the interest upon a public
debt is paid out, where the taxes to provide for it
are collebted, the debt, although a burden upon the
mass of taxpayers who are not holders of securities,
may be so managed as not to be a severe burden
upon the nation. The money which goes into the
Treasury by means of taxes will flow out into the
same community in the payment of interest, and
were it not for the expenses attending it, the pro-
cess would not, in a purely economical view, be an
exhausting one. If the bonds of the United States
were equally distributed among the people of the
different States there would be less complaint of
the debt than is now heard. Anti-tax parties will
attain strength only in those States in which few
bonds are held. If the people of the West are more
sensible of the burdens of Federal taxation than
are those of the Eastern States, it is because they
are not holders to the same extent of national secu-
rities. This inequality cannot, of course, be pre-
sented by legal or artificial process. The securities
will be in >re equally distributed among the respec-
tive States, if not among the people, as the new
States approach the older ones in wealth. These
manifest truths indicate how important it is that
the debt of the United States should be a home
debt, so that the money which is collected for taxes
may be paid to our own people in the way of iute •
rest. In fact, a large national debt to be tolerable
must of necessity be a home debt. A nation that
owes heavily must have its own people for credi-
tors. If it does not the debt wilt be a dead
weight upon its in !ustry, and will be quite likely to
force it eventually into bankruptcy. The United
States are not only able to pay the interest on their
debt, but to set a :rood example to other nations by
steadily and rapidly reducing that debt. What is
now required, as has been already attempted, are

' measures which will tend not only to prevent far.
ther exportation of our bonds, and in the regular
course of trade to bring back to the country those
that have been exported, but which will also tend
to restore these important interests that are now
languishing as the result of the war and adverse
legislation. The first and most important of these
measures are those which shall bring about without
unnecessary delay the restoration of the specie
standard. The financial difficulties under which the
country is labouring may be traced directly to the
issue and continuance in circulation of irredeemable
promises as lawful money. The country will not
be really and reliably prosperous until there is a
return to specie payments, the (petition of a solvent
convertible currency underiies all other financial and
economical questions. It is in fact a fundamental
question, and until it is settled, and settled in accord-
ance with the teachings of experience, all attempts
at other financial and economical reforms will either
fail absolutely or be but partially successful. A
sound currency is the life-blood of a commercial
nation ; if this is debased, the whole current of its
commercial life must be disordered and irregular.
The starting-point in reformatory legislation must
be here. Our debased currency must be retired, or
raised to the par of specie, or cease to be lawful
money before substantial progress can be made with
ocher reforms. Next in importance to the subject
of the currency is that of the revenues. Taxes are
indispensable for the support of the Government,
for the maintenance of the public credit, and the
payment of the public debt. To tax heavily, not
only without impoverishing the people, but without
checking enterprise or putting shackles upon in-
dustry, requires the most careful study, not only of
the resources of the country and its relations with
other nations, but a:so of the character of the people
-as affected by the- nature of their institutions.
While much may be learned by the study of the
revenue systems of European nations, which have
been perfected by years of experience and the em-
ployment of the highest talent, it must be obvious
that these systems must undergo very considerable
modifications before they will be fitted to the poli-
tical and physical condition of the United States.
In a popular Government like ours, where the
people virtually assess the taxes as well as pay them,
the popular will, if not the popular prejudice, must
be listened to in the preparation of revenue laws.
Justice must in some instances yield to expediency,
and some legitimate source of revenue may be un-
available, because a resort to them might be odious
to a majority of tax-payers. The people of the
United States are enterprising and self-reliant.
Most of them are the architects of their own for-
tunes, few the inheritors of wealth ; engaged in
various enterprises with constantly varying results,
and in sharp competitions with each other, they
submit reluctantly to inquisitions of tax-gatherers,
which might not be obnoxious to people less
independent and living under less liberal institu-
tions. Then, too, the United States are a new
country of large extent and diversified interests,
with great natural resources in the early process of
development. Not only may systarns of revenue
which are suited to England, or Germ tny, or France
he unsuited to this country, but careful arid judi-
cious observation and study are indispensable to
the preparation of tax bills suited to the peculiar
interests of its different sections. It was with a
view of supplying Congress with such information
as was needed to secure the passage of equal and
wise excise and tariff laws, which would yield the
largest revenue with the least oppression and in-
convenience to the people, that the Revenue Com-
mission was created in 1865. The creation of this
Commission was the first practical movement to-
ward a careful examination of the business and re-
sources of the country, with a view to the adoption
Of a judicious revenue system. The reports of this
Commission were interesting and valuable, and
they exhibited so clearly the necessity for further
and more complete investigations that by the Act
of July 13, 1866, the Secretary of the Treasury was
authorized to appoint an officer in his department
to be styled the Special Commissioner of Revenue,
whose duty it should be to inquire into all the
sources of National Revenue and the best method
of collecting the revenue ; the relation of foreign
trade to domestic industry : the mutual adjustment
of the systems of taxes by Customs and Excise,
with a view of insuring the requisite revenue with
the least disturbance and inconvenience to the pro-
gress of industry and the development of the re-
sources of the country, &c. Under this Act Mr.
David A. Wells was appointed Special Commis-
sioner of the Revenue. With what energy and abi-
lity he has undertaken the very difficult duties de-
volved upon Lim has been manifested by the reports
which he has already submitted to Congress. That
which accompanies or will soon follow this commu-
nication will prove more fully than those which
have preceded it have done the importance of the
investigations in which lie is engaged, and the judi-
cious labour which he is bestowing upon them. The
facts which he presents, and the recommendations
based upon them, are entitled to the most careful con-
sideration of Congress. These reports of the Com-
missioner's are so complete that they relieve the
Secretary from discussing elaborately the questions
of which they treat. His remarks, therefore, upon
the Internal Revenue and the tariff will be general
and brief. The following is a statement of receipts
from Internal Revenue for thelast three fiscal years:
For the year endingJune3o, 1866, $309,226,813 42;
for the year ending June3o, 1867, $266,027,537 43;
for the year ending June 30, 1868, $191,087,589 41.
It thus appears that the Internal Revenue receipts
for the year ending June 30, 1867, fell below the
receipts for the year ending June 30, 1866,
$43,199,275 99; the receipts for the year ending June
30, '6B fellshort of the receipts for '67, $74,939,948 02.
The receipts for the four first months of the present
fiscal year were $48,736,348 33. If the receipts
for those months are an index of those for the re-
maiuing eight, the receipts for the present fiscal
year will be $146,209;044. This large reduction of
internal revenue receipts is attributable both to in-
efficient collections and to a reduction of taxes. It
is quite obvious that the receipts from customs can-
not be maintained without an increase of exports or
of our foreign debt; if the receipts from customs
should be diminished even with a large re luction
of the expenses of the Government our internal •
revenues must necessarily be increased. The first
thing to be done is to introduce economy into all
branches of the public service, not by reduced at'
propriations to be made good by deficiency bills,
but by putting a stop to all unnecessary demands
upon the Treasury. There is no department of the
Government which is conducted with proper eco-
nomy; the habits formed during the war are still
strong, and will only yield to the requirements of
inexorable laws. The average expenses of the ne%t
ten years for the civil service ought not to exceed
$40,000,000 per annum. Those of the War De'
partment after the bounties are paid should be
brought down to $30,000,000, and those of the
Navy to $20,000,000. The outlays for Pensions
and Indians cannot for some years be considerably
reduced, but they can doubtless be brought within
$30,000,000.

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