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Extract of a Rehort of the late Secretary of the Treasury, to the President of the United States; accompanying a Message from the President, to both Houses of Congress, made December 3, 1816.
The Secretary of the Treasury has the honour to submit to the President of the United States the following general sketch of the finances, with reference to the 1st of August, 1816, comprehendIngI. A view of the sources of revenue, and the objects of public expenditure. II. A view of the fiscal measures during 1816.
I. A view of the sources of revenue, and the objects of fublic exsienditure. Rev Enue. The return of peace enabling the legislature to alleviate the burdens imposed by the necessities of the war, congress, during the last session, discontinued, or reduced, the following duties and taxes: 1. The acts imposing duties upon articles of domestic manufacture, were repealed. 2. The acts imposing duties on furniture and watches, were repealed. 3. The duties imposed on licenses to retailers of foreign merchandise, &c. were repealed. 4. The duties imposed on spirits, distilled within the United States, were reduced, and the collection modified. 5. The rates of postage, were reduced. 6. The direct tax was reduced from 6,000,000 of dollars to 3,000,000 of dollars, and was imposed for one year only.
7. The double duties on merchandise imported were discontinued, and a new tariff established. The discontinuance and reduction of the duties and taxes, (independent of the impost,) may be estimated at the annual amount of 38,000,000; with the contingent diminution of 3,000,000 more, if the direct tax should not be continued after the year 1816. But, the remaining sources of revenue were ample for the maintenance of the public credit, and the prosecution of a liberal and provident policy. They consist— 1. Of the customs, including the duty upon salt, according to the new tariff of duties. 2. Of the direct tax imposed for 1816. 3. Of the internal duties on stamps; on licenses to retail; on spirits distilled; on refined sugar; on carriages and harness; on sales at auction. 4. Of postage. 5. Of the product of fines, penalties, and forfeitures, and other miscellaneous receipts. 6. Of the proceeds of the sales of public lands. To these sources of revenue, must be added the auxiliary authority to issue treasury notes of various denominations, and to receive money upon loan. The authority was necessary, in anticipation of the revenue, throughout the year 1815, to meet the arrearages of the war expenditures; to discharge
the floating public debt of treasury notes and temporary loans, and to pay the instalments of the principal and the interest of the funded public debt. But the treasury would no longer require the aid of loans, or treasury notes, if the facilities of transferring its funds, from place to place, had not been destroyed when the national currency became extinct. The committee of ways and means have heretofore estimated the annual product of the customs, according to the new tariff of duties, at about the sum of 17,000,000 dollars, and although, for the present year, the amount will be much greater, in consequence of the late excessive importations, the estimate of the committee may be accepted as a just measure of the permanent annual product of the customs, for the purposes of a peace establishment. The annual product of the direct tax, the internal revenues, and the sales of public lands, has, in like manner, been estimated at about the sum of 7,000,000, dollars; making, upon this general view, and supposing a continuance of the direct tax, a permament annual revenue of about 24,000,000 dollars.
It is not intended, in this preliminary view of the objects of public expenditure, to embrace the temporary objects, arising from the war, but those only of a permanent nature, upon a peace establishment; and which have heretofore been estimated at an annual aggregate of about 24,000,000 dollars.
1. For civil, diplomatic and mis
cellaneous expenses. . 2. For military expenses, inclu
ding the Indian department and the armament of the , militia. 3. For the naval expenses, including the annual appropriations for the purchase of timber, and the gradual increase of the navy. 4. For the instalments and interest payable on the funded public debt. It is proper to remark, that temporary loans and treasury notes, issued under the authority of acts passed prior to December, 1814, were charged on the sinking fund; but as the current revenue will afford the means to satisfy those demands, in the course of a few months, the floating debt is not enumerated with the objects of annual expenditure. It is also proper to remark, that the principal of the Louisiana stock is reimburseable at the treasury of the United States, in four annual instalments, commencing in 1818; and that, by the operation of the sinking fund, the old six per cent. stock will be extinguished in 1818; the deferred stock in 1824; and the Louisiana stock in 1822. The stock created on account of the war debt is charged upon the sinking fund, and becomes redeemable at various periods, between the years 1825 and 1828. For the details connected with this general view of the sources of revenue, and the objects of public expenditure, it is sufficient to refer to the annual report from the treasury department, dated the 6th of December, 1815; the report on the subject of the new tariff of duties, dated the 12th of February, 1816; and the report of the committee of ways and means, dated the 9th day of January, 1816. The sequel of the present sketch of the finances will, likewise, serve the purposes of explanation and illustration.
II. A view of the fiscal measures during 1816. In various communications from this department to congress, the injurious effects of the suspension . payments in coin, upon the administration of the finances, have been anxiously represented. For the immediate object of the present statement, it is proper to repeat some of them. 1. The treasury has been compelled to accept the payment of duties and taxes in the local currency of the respective places of payment. The comparative value of the local currencies appeared, in some degree, to render this course of payment unequal; but the alternative was either to adopt it, or to abandon the hope of collecting the revenue in any convertible medium, for satisfying the public engagements. The rule was, there. fore, declared that the treasury would receive and pay, in the notes of banks circulating at par, at the respective places of receiving and paying. For a time, the test of the fact, that the notes did circulate at par, was the agreement of the banks employed as the depositories of the revenue, to credit them as cash in the treasurer’s accounts. But when the principal banks withdrew that accommodation, and refused to credit as cash any bank notes but those which they had themselves respectively issued, the fact of the circulation at par, was necessarily left to its own notoriety, and to the official responsibility of the collectors. Few notes, except the notes of the local banks, continued to circulate at par; and such as did
so circulate were received by the banks, upon special deposit, for safe keeping: constituted a discredited fund, upon which the treasurer could only occasionally draw. The operation of this measure was, undoubtedly, severe in many of the collection districts; particularly in the States where the banks, preparing for the resumption of coin payments, had so reduced the issues of their paper, as to render the circulating amount insufficient for the demand. But it was not in the power of the treasury to dispense with the general rule. If notes not circulating at par had been received in one district, they must have been received in every district; and there existed no mode of discriminating between notes to be received, and notes to be rejected, either as to the bank, or the place at which they were issued. The inevitable consequences must have been, that the duties and taxes would every where be paid in the most depreciated paper; and that the medium, thus received, could never be employed to discharge the demands upon the treasury, even at the places of receiving it. The revenue would accumulate in the treasury, only to perish there; while the expedient of substituting treasury notes to meet the public engagements, led to an indefinite augmentation of the national debt. o 2. The treasury has been compelled to augment the amount of the national debt, both funded and floating, by issues of treasury notes to meet the public engage. ments, at places where it could not command the local currency. Throughout the eastern States, the treasury has hitherto failed to command an amount of the local currency, equal to the amount of
the local demands. The banks of those States, fettered by the stipulations of their charters, could not follow the example of the banks of the other States, in the suspension of coin payments; but their issues of notes have been very limited, and the necessities for a circulating medium, have been, principally, supplied by treasury notes, and, partially, by the notes of the banks of New-York. Under these circumstances, the revenue, in the eastern section of the Union, has been almost entirely collected in treasury notes. Inferior difficulties, from similar causes, have occurred in some of the southern States; where, also, the accruing revenue was less in proportion to the demands, which the arrearages of the war, as well as the current expenditures, pressed upon the treasury. From these considerations, it is obvious that the public credit could only be maintained, and the public service could only be effected, (even with an ample revenue,) by the use of the auxiliary means afforded to the treasury, in the authority to borrow money, and to issue treasury notes. Little use, however, has been made of the authority to borrow, since the closing of the loan of 1815; but the warrants of the war and the Navy Departments, as well as the dividends payable on the public funded debt, have required a considerable issue of treasury notes. The treasury notes bearing interest, and fundable at six per cent., have been generally disbursed in paymentsfor services and supplies; and the treasury notes, not bearing interest, but fundable at seven per cent., have been generally disbursed in payments on account of the funded debt, and the compensation of the members of congress.
The effect of these measures will be more particularly stated hereafter. Thus, it cannot escape observation, that a cause, unconnected with the late war, and which exists without the agency or the authority of the government, will probably, so augment the amount of the funded and floating debt, as to render nugatory the estimates and calculations which have been made on other occasions, in relation to that subject. The restoration of an uniform national currency, can alone terminate this evil. 3. The treasury has been involved in the difficult and delicate task of designating the medium, in which the warrants drawn by the heads of Department, should be respectively paid. The revenue is collected throughout the Union, but the amount of the collection is very different in different places; and it has happened not unfrequently, that the demand for payment was the greatest when the means of payment were the least. The rule which has already been mentioned, was applied, wherever it was practicable, by directing warrants to be paid at the places of rendering the services, or furnishing the supplies, for which they were respectively granted. But if the treasury possessed no funds at those places, the differences of exchange rendered it extremely difficult to locate the payment of the warrants in a manner equitable, impartial, and satisfac
|tory. For some months after the
war, the treasury was scantily supplied with the local currency of every place, except the district of Columbia, and the city of Baltimore; and consequently, during that period, the warrants which could not be discharged, at the seat of the original transaction, werepaid in the currency of the district or of Baltimore. The progressive accumulation of the revenue, opened a wider scope for payments, enabling the treasury to draw next upon the banks of Philadelphia, and more recently, upon the banks of New York. The public funds in the banks of the southern and western states, having also become generally adequate to the local demands, it may now be considered that the active resources of the treasury are co-extensive with the Union, excepting always the eastern section. The difficult task of locating the payment of warrants, still, however, continues, and must continue, as long as the differences of exchange shall operate. It is fiscally impossible to pay all the demands upon the treasury at one place; and every holder of a warrant is naturally desirous to be paid at the place where the medium is of the highest current value. Under such circumstances, it is to be expected that individuals will sometimes feel disappointment, and express dissatisfaction; but it has been the constant and anxious endeavour of the treasury to perform its arduous task, with the exercise of a sound discretion, guided by the requisitions of the departments, by the origin and nature of the debts, and by the state of the public funds. 4. The treasury has been compelled to increase the number, and extend the range of banks employed as the depositories of the public revenue, with consequences unavoidably inconvenient and injurious. As soon as the differences of the current value of bank notes were introduced, and particularly
when one bank refused to credit, as cash, a deposit of the notes of another, the treasury was driven to a choice of expedients; that is, either to take the hazard of the accumulation of masses of revenue in the hands of the individual collectors and receivers, or to recognize, as places of deposit, the banks (being, however, banks of unquestioned solidity,) established in the districts which were most affected by the course of exchanges. Many powerful reasons, led to an adoption of the latter measure; instructions were issued to the collectors and receivers to act accordingly; and the number of banks thus necessarily employed by the treasury, from Maine to Louisiana, may be stated at ninetyfour. To the inconveniences incident to this multiplication of the places of deposit, was added the complexity inevitably arising from the various kinds of paper in circulation as money, upon some of which minute calculations were required. Generally speaking, the treasury has with each bank four accounts: An account of cash, meaning (in the absence of coin) the local currency. An account of special deposits of bank notes, being notes issued by banks, other than the depository. An account of special deposits of treasury notes, bearing interest. An account of deposits of small treasury notes, not bearing Interest. Owing to this untoward condition of the machinery for the collection, custody, and distribution of the revenue; to the great extension of the business of receipts and expenditures; and to several accidental causes; the punctual