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Government Finance on the Eve of the Civil War

Published online by Cambridge University Press:  03 February 2011

Robert T. Patterson
Robert T. Patterson
Affiliation:
Washington, D.C.
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Extract

Financially, the Federal Government was more poorly prepared for war in the early months of 1861 than it had been since its establishment. The financial policies of the government in the period preceding the war weakened its credit; and this, along with the urgency of the conflict, was to make short-term borrowing and the printing of paper money attractive but costly wartime expedients. Although the failure to finance the war on a sound basis cannot be ascribed merely to prewar financial conditions and policies, the stage was set by them. The regression to earlier methods of war finance began even before the war.

Type
Articles
Information
The Journal of Economic History , Volume 12 , Issue 1 , Winter 1952 , pp. 35 - 44
Copyright
Copyright © The Economic History Association 1952

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References

1 Dewey, Davis R., Financial History of the United States, 12th ed. (New York: Longmans, Green & Co., New York, 1934), pp. 34–59.Google Scholar

2 Ibid., pp. 119–42.

3 Cf., Annual Report of the Secretary of the Treasury on the State of the Finances (hereinafter referred to as Treasury Report), 1867, pp. iii–iv.

4 Mitchell, Wesley Clair, A History of the Greenbacks (Chicago: The University of Chicago Press, 1903), p. 419Google Scholar; and Barrett, Don C., The Greenbacks and Resumption of Specie Payments (Cambridge: Harvard University Press, 1931), p. 72.CrossRefGoogle Scholar

5 Average annual expenditures, 1857–61, were $68.1 million, compared with expenditures of $69.6 million in 1856. Treasury Report, 1946, pp. 367, 369.

6 Estimate based on data in idem; and Report of the Secretary of the Treasury, July 4, 1861, Sen. Ex. Doc. No. 2, 37th Cong., 1st Sess., p. 18.

7 Taussig, F. W., The Tariff History of the United States, 8th ed. (New York: G. P. Putnam's Sons, 1931), p. 157.Google Scholar

8 Bayley, Rafael A., The National Loans of the United States, from July 4, 1776 to June 30, 1880, 2d ed. (United States Government Printing Office, 1882), pp. 74–75.Google Scholar

9 11 Stat. 365 (June 14, 1858).

10 Treasury Report, 1858, p. 15.

11 Ibid., 1859, pp. 10, 21.

12 Bayley, The National Loans, p. 74.

13 Bolles, Albert S., The Financial History of the United States from 1789 to 1860, 3d ed. (New York: D. Appleton & Co., 1891), p. 599.Google Scholar

14 Treasury Report, 1858, p. 16.

15 12 Stat. 79.

16 Treasury Report, 1860, pp. 8, 22.

17 Ibid., p. 8.

18 The amount sold was $7,022,000. Secretary of the Treasury to the Chairman of the Committee of Way and Means, January 18, 1861, H. Misc. Doc. No. 20, 36th Cong., 2d Sess., pp. 4–5.

19 Treasury Report, 1860, p. 8.

20 Idem.

21 Under the Independent Treasury Law the Treasury acted as its own banker. It received and disbursed only specie. The Treasury and sub-treasuries were like a great money reservoir into which funds flowed from all parts of the country. The outward course of funds was directed by the appropriations and authorizations of Congress and the policies of the Secretary of the Treasury. Thus the fiscal operations of the government were a major direct influence in the money market, for currency drawn into the Treasury reduced the supply, and Treasury disbursements increased it.

22 Treasury Report, 1860, p. 8. See also, Sherman, John, Recollections of Forty Years in the House, Senate, and Cabinet (Chicago: The Werner Co., 1895), I, 214, 251–53.Google Scholar

23 Treasury Report, 1860, p. 9.

24 Ibid., pp. 8–9.

25 Congressional Globe, 36th Cong., 2d Sess., December 10, 1860, pp. 41–45.

26 Ibid., December 5, 1860, p. 14.

27 12 Stat. 121 (December 17, 1860).

28 H. Misc. Doc. No. 20, 36th Cong., 2d Sess., p. 3.

29 Secretary Cobb had resigned on December 8, 1860. He was succeeded for a brief period by Philip F. Thomas. Cobb felt that his duty to the state of Georgia required his withdrawal from die Treasury Department. John Sherman, who was at that time Chairman of the House Committee on Ways and Means, and who was sometimes strongly partisan in his views, long afterward maintained that Cobb “had aided in every possible way to cripple the department while in charge of it.” Sherman, Recollections, I, 251.

30 Knox, John Jay, United States Notes (New York: Charles Scribner's Sons, 1884), pp. 76–77.Google Scholar

31 H. Misc. Doc. No. 20, 36th Cong., 2d Sess., p. 2.

32 Ibid., pp. 6–7.

33 Harper's Weekly, February 23, 1861, V, 114; and Sherman, I, 251–52.

34 12 Stat. 129.

35 Sen. Ex. Doc. No. 2, 37th Cong., 1st Sess., p. 11.

36 12 Stat. 178.

37 Idem. Eventually, under this Act, $35,364,450 of Treasury notes were issued. Of them, $22,468,100 were redeemable in two years, and $12,896,350 were redeemable in sixty days. Many of the notes were paid out directly to creditors. Bayley, National Loans, pp. 76–77; and Knox, United States Notes, p. 79.

38 Knox, United States Notes, p. 83; and Bolles, Albert S., The Financial History of the United States from 1861 to 1885 (New York: D. Appleton & Co.), 1886, pp. 6–10.Google Scholar

39 12 Stat. 79, 129, and 178, respectively.

40 Sen. Ex. Doc. No. 2, 37th Cong., 1st Sess., pp. 11–12; Bolles, Financial History of the United States from 1861 to 1885, pp. 6–10; and Knox, United States Notes, pp. 80, 83.

41 Sen. Ex. Doc. No. 2, 37th Cong., 1st Sess., pp. 11–12.

42 Knox, United Sates Notes, p. 83.

43 12 Stat. 259.

44 It has been well established that the use of special inducements in government borrowing has frequently been detrimental to the public credit and to the national economy and has been at the root of many subsequent problems of government finance. For a definitive study of this aspect of public finance, see Love, Robert A., Federal Financing (New York: Columbia University Press, 1931).Google Scholar

45 Between 1837 and 1847 there were numerous instances in which one- and two-year note issues were authorized by Congress. See Bayley, National Loans, pp. 67–75.