In 1873 a commercial panic occurred result ' ing in prolonged industrial depression. The treasury endeavored to relieve the situation by reissuing $26,000,000 of legal tender notes and Congress passed a bill for a permanent increase to $400,000,000. This inflation bill was vetoed by President Grant in a notable state paper, 22 April 1874. The Republican party, then spurred on by the repeated victories of the Democrats, by' Grant's firm stand and the insistence of Secretary Bristow, finally determined to make resumption effective. In the Act of 14 Jan. 1875, it was provided that resumption of specie payments should he entered upon 1 Jan. 1879, and authority was given to the Secretary of the Treasury to sell bonds in order to acquire the necessary amount of gold. In 1877 John Sher man (q.v.) was appointed Secretary of the Treasury and vigorously undertook a policy of gold accumulation; $138,000,000 ingold was re garded as sufficient to win confidence in the ability of the government to redeem all notes presented and for this Sherman sold $95,500,000 of bonds. Resumption was accomplished on the date set.
In the meantime a new financial question . had arisen. In 1873 silver was demonetized by Congress; a variety of causes led to a fall in the bullion value of silver, among which were its demonetization by Germany in 1871; the limitation of coinage in the Latin Union in 1873, and the discovery of new supplies of silver in the United States. The depression following the panic of 1873 started a new clamor for an increased supply of currency and it was bitterly asserted that the United States had joined in a conspiracy to disown silver and limit • the volume of legal tender money, in the interest of the creditor class. A struggle ensued to secure the free and unlimited coinage of sil ver, and in 1878 the Bland-Allison Act was passed over the veto of President Hayes .pro viding for the monthly purchase of not less than $2,000,000 and not more than $4,000,000 of silver . bullion at the market price. The Bland-Allison Act of 1878 continued in operation until 1890. Under its provisions 378,000,000 silver dollars were coined, at a purchase value of only $308, 000,000, thus yielding a seignio:age of about $70,000,000. As the country had become ac customed to paper money, it was difficult to put the new coins in circulation; authority was consequently given for the issue of silver cer tificates in denominations as low as $1 for the deposit of coin. There was a more serious ob jection to continuing coinage in the fear that it would be impossible to maintain a gold standard. Secretary McCulloch in 1884 and Secretary Manning in 1885 endeavored to arouse Congress to a repeal of the act. The demand, however,
for an enlarged currency, represented both by the greenback movement of the period and by those who advocated still freer coinage of silver, made it impossible to secure this legislation.
After the Civil War sweeping changes were made in internal revenue taxes. In 1870 there were left only those on distilled spirits, fer mented liquors, tobacco, banks and bankers, adhesive stamps and certain manufactured arti cles and the income tax; the latter was repealed in 1872. There was less readiness to change tariff duties; protectionism had gained in strength through the growth of manufactures and the Republican party from its origin had been committed to the principle. Slight reduc tions were made, but the system as a whole was maintained with little change. The country recuperated from the crisis of 1873 and begin ning with 1880 large surpluses were turned into the treasury. The Refunding Act of 1870 ham:. pered the government in the redeeming of bonds, except at a premium, and in 1883 Con gress was forced to overhaul the tax system. All internal revenue duties were repealed except those on spirits, fermented liquors and tobacco. Rates on tobacco were reduced one-half. A tariff commission recommended a substantial reduction in customs, but Congress paid little heed and enacted a protective tariff in which a harmonious framework was sacrificed to the pressure of conflicting interests. The Demo crats repeatedly endeavored, particularly during President Cleveland's administration, 1885-89, to enact tariff measures, but protectionist sym pathies within the party defeated every at tempt. In 1889 the Republicans regained con trol and in 1890 enacted a measure, the McKin ley Bill, in which protectionism was developed to a point hitherto unknown. Increased duties were laid upon a great number of articles and in some cases the rates practically prohibited importation. The act also introduced twd new principles—a bounty on the domestic produc tion of sugar and commercial reciprocity under executive proclamation.
In 1890 silver sentiment affecting both par ties was so strong that further concessions had to be made in order to prevent unlimited coin age. An act was passed known as the Sherman Silver Purchase Act, providing for the purchase of 4,000,000 *dunces of silver buillion monthly, and the issue in payment thereof of treasury notes of full legal tender. This increased the monthly purchases of silver and authorized treasury notes of full legal tender in place of silver certificates which were of only partial legal tender quality. Treasury notes were re deemable either in gold or silver coin at the discretion of the secretary.