Evening star., 1901-12-04
Secretary Gage Submits a Plan to
Congress.
ANOTHER BASIS FOR CIRCULATION
Thirty Per Cent of Bonds and
Twenty of Greenbacks.
REPEAL OF THE WAR TAXES

Secretary Cages annual report to Con-
gress, submitted today, was of unusual in
terest because of recommendations regard
ing the reduction of the surplus revenues
and for changes in the national banking
laws that will permit an expansion in the
issuance of bank notes.
On the subject of reducing the surplus
Secretary Gage says:
The estimates for the fiscal year ending
June 80, 1902, indicate surplus of $4,000
600. For the next fiscal year, 1902-1903,
there is to be an estimated surplus of lit
tie more than $23.OOOeOO. 1t will be noticed
that the estimates Of expenditures for such
year, 1902-1903, are more than $s30OO.OoO
in excess Of the probable expenditures for
the current fiscal year. 19O1-1902. It Is fur
ther to be observed that estimates coming
In from the several departments for a year
not yet entered upon are not conclusive
that the sums so estimated will be appro-
priated by Congress. or. If appropriated, ac-
tually disbursed from the treasury
A table is presented which shows that in
the eleven years 1t includes, with one ex-
ception, expenditures have been below both
the estimates of the departments and the
sums appropriated. Therefore, 1t may rea-
sonably be assumed that in the next fiscal
year a similar result will ensue, which will
operate to increase the now estimated sur
plus of s23 100000.
1T is apparent that absolute accuracy in
future estimates concerning receipts and
disbursements cannot be reached. Enough
appears, however, to justify a conservative
reduction In taxes.
Repeal of the War Taxes.
hA f1,o R,,o1 i,,Ir 10
what particular objects Of taxation and in
what degree reduction in rates shall apply.
In my opinion, 1t would be within conserva-
tive limits to reduce revenue to the extent
of $500 900. AS a first step in that direc-
ton, l recommend for consideration the
repeal of all the miscellaneous taxes known
as war taxes. These items exclusive of the
increased tax on fermented liquors, tobac-
co, tea and mixed fiour) are estimated to
produce s27, 100000 They are in their ma
ture vexatious in some instances oppressive
and. separately considered, yield but small
revenue
On the subject of banking Secretary Gage
makes the following statement and recon-
mendations:
Admirable in many respects, experience
shows that our banking system is devised
for fair weather, not for storms. This can
stand isolated and apart, separated units,
with no tie Of mutually between them.
There is no obligation of duty from the
strong to the weak or exposed nor any
method of legal association for common pro-
lection or defense in periods Of adversely
and depression.
In Time of Financial Distress.
mo sooner do the symptoms of financial
and business trouble appear than the
banks, under the ruling principle of self
preservation, suspend to the farthest limit
possible their operations of loaning and
discounting They cease to give credit
upon their books in exchange for debt obli-
cations from their dealers. The daily crea-
tions of the necessary medium of exchange,
bank credits, cease, or become entirely in
adequate to commercial requirements. The
daily natural liquidation of credits con-
tinues. resulting in contraction Business
men, carrying goods and securities by the
aid of bank credit. are obliged to sell with
little regard to cost Contemplated en-
terprises abandoned; orders for fu-
ture delivery Of goods are rescinded, and
as these successive steps mark the down.
ward movement, the banker becomes the
more reluctant to perform his important
function of loaning his credit for COM
mercial and industrial uses. We thus per-
ceive that the bracing support which had
promoted and sustained business progress
without which, indeed, such progress would
have been impossible--is withdrawn at the
very moment when support is the most
needful. What should be. under such cir
cumstances, an orderly. conservative move
ment to more secure conditions becomes a
diSorderly flight. an unreasoning panic, in
which at last the entire business public is
helplessly involved
The Principle of Federation.
Argument has been put forward for a
system which contemplates a large central
bank with multiplied branches. That sys-
TEN does, indeed afford the elements which
would give the highest assurance of protec-
tion against the present evil of individual
banks, each an Independent unit, with no
bond of cohesion, no power of cooperative
action, no ability to coordinate for the
general good or for mutual defense. But
the proposition for large central banks.
with broad powers for the establishing Of
branches, offends the common instincts Of
our people, and may fairly be looked upon
at present impossible of realization.
Cannot the advantages Of such a system
be gained In an entirely different form ?
Cannot the principle Of federation be ap-
piled, under which the banks as individual
units, preserving their independence of
action in local relationship, may yet be
united in a great central institution? Form
ed by some certain percentage of capital
contributed by the banks themselves, and
it's management created through the suf-
frage of all, it would represent the inter-
ests of the whole country. With limit ed
powers of control over it's membership in
the interest of common safety, confined in
it's dealings to the banks and to the gov
ernment, it could become the worthy OBJ
ject of a perfect public confidence BY the
concentration of unemployed reserves from
sections where such reserves were not
needed, 1t could redistribute them in part
as loans where most needed, and thus bind
together for a common strength and pro-
lection the loose unrelated units. in whose
separation and isolation the greatest weak
ness of our banking system Is now to be
found.
The Existing Currency.
Having presented as above the defects
Of our banking system in their larger as
poets, venture now to speak Of that i'm
portant medium of exchange designated the
currency, meaning by that word paper
money. whether issued by the government
or by the banks under the powers conferred
upon them by the law. Excluding treasury
notes of 1890, now in course Of extinction,
silver certificates and gold certificates,
which represent actual coin held for their
redemption, there are now extant in the
public service 346, 100000 of government
notes (greenbacks) and little more than
$50, 900, 600 of national bank notes. Neither
of these can with economic propriety be
called money-real money. They are alike
promises to pay, and their value rests upon
ha q of he nolr Of h. %