A bank with a capital of about two millions in specie, twenty-one millions in evidences of public debt, and twelve millions in evidences of private debt, or stock-notes of the subscribers, was ex pected to perform what could have been effected only by a bank having a capital of thirty-five mil lions in specie, all paid in on the day on which it commenced operations. So unreasonable an ex pectation must necessarily have been disappointed: but, notwithstanding the manner in which the bank was constituted, the reaction which began in 1818 would not have occurred, if so large a portion of the public stocks which constituted part of the ori ginal capital of the bank, had not been exchanged for the depreciated paper in the United States treasury. NVe have seen that, when the reduction of private loans on private security was greatest, it did not equal the amount of public stock, which the bank was obliged to transfer to the govern ment in six months after it began business.
There is no intention here of casting a personal censure on the men with whom the financial policy of 1812-14 originated. But in the reprobation of the principles of that policy, all must unite, when they see it was that which led to the suspension of specie payments, to the inordinate multiplication of bank-paper, to the reaction of 1818, and the com mercial difficulties of subsequent years.
At the close of the year 1818, the balance in the treasury was reduced to S1,478,526, a great part of which was in paper, which no fiscal ingenuity could transmute into gold and silver. Appearances were at times very discouraging, but the receipts of the treasury in the whole of 1819 were sufficient to de fray the current expenses of the year, and discharge upwards of S4,000,000 of the public debt.
In 1820 the revenue from the customs was re duced to 15,000,000, and the public lands yielded but half as much as they had yielded in 1819. The bank of the United States paid 1,000,000, being the second and third instalments of its bonus: and a small amount was received for arrears of internal and direct taxes. The clear revenue of the year, independent of loans, was 17,800,000, which was sufficient, after paying current expenses, to reduce the national debt in the extent of 1,000,000. The payment of the last instalment of the Louisiana loan, and the reimbursement of a portion of the old six per cent and deferred stocks, rendered it neces sary to borrow 3,000,000 dollars: hut this was merely changing the form of debt, not increasing it. The total of the debt was actually reduced, as has already been stated, by the revenue exceeding the current expenses, in the amount of 1,000,000.
In 1821 the customs yielded 13,000,000, being one half as much as they had yielded in 1817. The whole revenue of the government, from all sources except loans, was 14,500,000 equal to one-fourth of the net revenue of 1816. It became necessary to negotiate a loan of 5,000,000, which, owing to the want of profitable employment for capital in busi ness, was obtained on very favourable terms. The money was borrowed at five per cent, and the lenders gave a premium on the average of nearly five dollars fifty-nine, one-hundredths per cent. This ren dered it necessary to issue new stock to the amount of only 4,735,296 dollars 20 cents. A portion of the old six per cent and deferred stock having been re imbursed during the year, the net increase of debt was less than 4,000,000.
Through the system of granting a credit on duties, events which diminish or increase the import trade, have not their complete effect on the revenue from the customs till some time after they have begun to operate on commerce. The demands on the trea sury in 1819 were met, to a great extent, by the re ceipt of duties which had accrued during the ceding year. The revenue in 1819 was further in creased by speculations in the public lands, which the previous abundance of money had in part occa sioned. In 1819 the receipts at the treasury on account of the public lands amounted to 3,270,000 dollars, a greater sum than has been received in any one year, either before or since. In 1820 the effect of the commercial reaction, which began in 1818, was felt in a very sensible degree by government in the reduction of the revenue both from customs and from the public lands. In the first quarter of 1821 the customs reached their lowest point of depress ion: and the utter inability of many of the pur chasers of public lands to comply with their en gagements, induced Congress to pass a law to re lieve them from a part of their obligations.
In the second quarter of 1821 the import trade began to revive. The violent effects of the reaction were over in those parts of the union where the greatest portion of the public revenue is collected.
In 1822, owing to the revival of the import trade, the revenue from the customs was increased to 17,000,000, and the balance in the treasury at the end of the year was upwards of 4,000,000. The greater part of this balance consisted of money of a kind which could be applied to any purposes the public service might require; and from this time we may date the regular and rapid reduction of the national debt.