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29 Finances 1816-1861

bank, tariff, government, duties, protection, treasury, notes, specie and revenue

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29. FINANCES (1816-1861). In 1816, at the close of war with England, the chief prob lem of the government was the restoration of currency to a specie basis. Dallas, upon assum ing the office of Secretary of the Treasury in 1814, vigorously endeavored to secure a charter for a second United States bank through which pressure might be exercised upon the local banks to resume specie payments. The Repub lican party as a whole had long opposed a bank founded upon a Federal charter; and notwith standing Dallas' support promptly advanced constitutional objections. The discussion ran through two years in which several plans were proposed; the principal points of difference were, first, whether the capital of the bank should be based upon treasury notes or upon government stock; second, whether the bank should be forced to loan money to the govern ment; and third, whether the bank should be given power to suspend specie payments. The bank was chartered in March 1816. Its capital was based in large part upon government stock; the government in addition subscribed to die stock and had representation in its management. The bank was obliged to transfer the public funds free of charge, and was made the de pository of government moneys. As a return for the exclusive privilege of a national char ter, the bank paid to the government a bonus of $1,500,000. The establishment of this institu tion was quickly followed by a Congressional resolve that after 20 Feb. 1817 all dues to the government should be paid only in specie, treas ury notes, notes of the Bank of the United States or in notes of local banks which were payable on demand in .the foregoing currency. This decisive action forced the State institutions to adopt sounder methods, and on the date named there was general resumption.

In 1816 the revenue system was reorganized, not for lack of revenue, but because the enor mous volume of imports rushing into the coun try upon the return of peace endangered do mestic manufactures which had been abnormally stimulated during the war. The value of im ports in 1816 was estimated at $116,000,000 as compared with $13,000,000 in 1814. Customs duties amounted to $36,000,000, far surpassing the previous estimate of Dallas of $13,000,000. Even President Madison affirmed the necessity of protection. A new tariff bill was conse quently enacted 27 April 1816; in particular the cotton industry received protection. In De cember 1817 the internal revenue duties were repealed; and in the following year supplemen tary customs duties were placed upon iron com modities, thus establishing the policy of pro tection. In these measures the South cordially joined, and Calhoun, who afterward bitterly opposed the high tariff policy, at this time sup ported higher duties.

During 1816 and 1817 the treasury was in a most favorable condition; revenue exceeded all expectation, yielding surpluses amounting in two years to nearly $30,000,000. Good fortune, however, did not continue; the new United States Bank was mismanaged and the currency was once more thrown into disorder. This, to gether with an extraordinary commercial and manufacturing expansion, led to a crisis in 1819. The revenues were severely affected and cus toms duties which yielded $26,000,000 in 1817 fell back to $13,000,000 in 1821. In 1820 and 1821 the treasury budget showed a deficit. Ex penditures for the navy and pensions were re duced; and a change in the management of the bank, with a contraction in its circulation and loans, led to a revival of business and improv ing revenues. Beginning with 1822 the treasury annually enjoyed a surplus (except in 1824 when a large payment was made on account of Span ish claims) which was applied to the reduction of the debt. In 1820 an attempt was made to increase tariff duties, partly to help the revenues at that time embarrassed, and partly in behalf of protection. The bill passed the House but failed in the Senate by one vote. Clay and John Quincy Adams championed protection and lib eral expenditures for internal improvements, cardinal points in the ((American System." The effort was renewed in 1824 and protection was sought in particular for iron, wool, hemp, glass and lead, industries of the Middle West. The contest now assumed a sectional division, the Middle Western and Southwestern States being arrayed against New England and the South. New England's chief interest at this time was in commerce, and her leading representative, Webster, made an exhaustive argument in be half of freedom of trade. The measure became law by a vote of 107 to 92; in the South there was but one vote in favor to 47 against. During the next 10 years the tariff question occupied a large place in Congressional debate and legis lation. The tariff of 1824 fell short of the demand of woolen manufacturers, and agitation for a revision with still higher rates resulted in the tariff of 1828. New England was turning more and more to protection, and Webster under instructions made a speech declaring that through the encouragement of the Act of 1824 capital had been invested which needed further protection. The woolen tariff, or Tariff of Abominations, as the measure was frequently termed, aroused the fiercest controversy, which finally led to nullification and the compromise tariff of 1833. By this latter act a horizontal reduction of duties, spreading over a number of years, was made and for a while the tariff question yielded in importance to other political issues.

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