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been made in them, that their destruction would involve consequences of a very serious character. Whether or not the country would have been more prosperous without them—whether the stimulus they have given to enterprise and the facilities they have extended to trade have or bave not been counterbalanced by the artificial prices which they have created, and the actual losses which the people have sustained by the crisis they have occasioned, and by their suspensions and failures—it is too late to consider. When the National Currency Act was passed by Congress, State Banks were in full operation, and not less than four hundred millions of dollars were invested in them as cap. ital. In some States, by judicious legislation and careful management, they had afford ed a local circulation satisfactory and safe. In other States, where no reliable security, or insufficient security, had been required for the protection of the public, and their management had been confided to incompetent or dishonest hands, there had been numerous failures, and heavy losses had been sustained by the holders of their potes.

Soon after the commencement of the rebellion, it became apparent that a heavy national debt was to be created, the interest and principal of which could only be paid by a general system of internal taxes, involving a necessity for a circu. lating medium equal in value throughout the country, and safe for the Government to receive in payment of dues. This subject, of course, demanded and received the earnest and careful consideration of the distinguished gentelman at that time the financial minister of the Government, who caused to be prepared and submitted to Congress a bill “ to provide a national currency secured by a pledge of United States bonds, and to provide for the circulation and redemp tion thereof,” wbich, after having been carefully considered and thorougbly discussed, became a law on the 25th of February, 1863. Prior to the passage of this act, issues by the Government had been authorized, and a large amount of Government potes had been put in circulation. But there is nothing in the acts authorizing their issue, or in the communications of the Secretary, or in the discussions in Congress, to justify the opinion that they were intended to be a permanent cir culation. On the contrary the provisions in the law for their conversion into bonds, and the arguments of the advocates of their issue, afford ample evidence that they were regarded as merely temporary, and justifiable only by an emergency which it was supposed nothing else could adequately meet. Had it been proposed that these notes should be a permanent circulation and take the place of bank notes, there is good reason to suppose that the propositioa would have had few. if any, advocates. Nor was the National Binking system prepared by its author, nor adopted by Congress, to destroy the State Bunks, por lo divert capital fromr. banking, but rather to compel all banking institutions issuing notes as money to secure thein, beyout any conceivable contingency, by deposits with the Treasurer of the United States thus, without the ag .ncy of a National Bank, providing a national currency which would save the Givernment and people from losses, of which there was constant danger, from a local and unsecured circulation. The national banking system was intended, while not invading the rights of the States, nor damaging private interests, to furnish the people with a permanent paper circulation. The United States notes were intended to meet a temporary emergeucy, and to be retired wlen the emergency bad passed.

The present Secretary was not the advocate of the National Banking System, and claims only the credit of having used his best efforts, as Controller. to put it into successful operation. But he has po hesitation in pronouncing it a vast improvement upon the systems which it superseded, and one ad uirably adapted to our peculiar form of Government. There are substantia objections to all banks of issue, and if none existed in the United States, it might be very questionable if any should be introduced ; but having taken the place of the State Banks, and survished as they do a circulation as free from objection as any that s likely to be provided, the secretary is of the opinion that the National Baoks hould be sustained, and that the paper circulation of the country should be reduced, not by compelling them to retire their potes, but by the withdrawal of the United States notes.

The Secretary is not unmindful of the saving of interest which results to the Government by the use of its own currency, nor of the favor with which this currency is regarded by the people; but all considerations of this nature are more than counterbalanced by the discredit which attaches to the Government by failing to pay its notes according to their tenor, by the bad influence of this volun. tary discredit upon the public morals, and the wide departure which a continued issue of legal tender notes involves, from past usages, if not from the weachings of the Constitution itself. The Government cannot exercise powers not conferred by its organic law or necessary for its own preservation, nor dishonor its own engagements when able to meet them, without either shocking or demoralizing the sentiment of the people ; and the fact that the indefinite continuance of the circu. lation of an inconvertiblebut still legal tender currency is so generally advocated, indicates how far we have wandered from old landmarks, both in finance and ethics. T'he views of the Secretary on this point were so fully expressed in his former report that it is not necessary to restate them. It is suffi cient to say that his opinions are unchanged. and that reflection and observation during the past year hive assured him of their correctness. Aoxious as he is to lighten the punile burdens and reduce the public debt, he does not hesitate to advise that these notes be withdrawn from circulation, and that the furnishing of what parer currency may be required be left to corporations, under existing laws, and such amendments of these laws as experience may dictate for the better protection and advancement of the public interest. How rapidly they may be retired must depend upon the effect which contraction may have upon business and industry, and can be better determined as the work progresses. The reduction could probably be increased from four millions per month, as contemplated by the act of April 12, 1866, to six millions per month for the present fiscal year, and to ten millions per month thereafter, without preventing a steady conversion of the interestbearing notes into bonds, or injuriously affecting legitimate business. No determinate scale of reduction would, bowever, in the present condition of our affairs, be advisable. The policy of contracting the circulation of Government notes should be definitely and unchangeably established, and the process should go on just as rapidly as possible without producing a financial crisis, or seriously embarrassing those branches of industry and trade upon wbich our revenues are dependent. There is a great adaptability in the business of the United States, and it will easily accommodate itself to any policy which the Government may adopt. That the policy indicated is the true and safe one, the Secretary is thoroughly convinced. If it shall not be speedily adopted and rigidly, but judiciously enforced, severe financial troubles are in store for us.

The Secretary cordially approves what is said by the Acting Comptroller of the Currency, in his report, in regard to the importance of furnishing the people of the South with the bank-note circulation which their business may require, and agrees with him in the opinion which he expresses of the beneficial results, political, financial and social to be effected by the organization of Na. tional Banks in the Southern States, but be cannot recommend an increase of the bank-note circulation of the country beyond three hundred millions of dol. lars, and hopes that the necessities of those States may be supplied rather by a reduction of the amount awarded to other States, than by an increase of the volume of currency.

The third remedy suggested is a revision of the tariff for the purpose of harmon. izing it with internal taxes, a reduction of taxes upon raw material, &c., &c.

The 66th section of the act entitled, An act to reduce internal taxation,” &c., approved July 13, 1866, provides : " That the Secretary of the Treasury is here by authorized to appoint an officer in his department, who shall be styled "Special Comunissioner of the Revenue," whose office shall terminate in four years from the 30th day of Jupe, 1866. It shall be the duty of the Special Commissioner of the Revenue to inquire iuto all the resources of national revenue, and the best method of collecting {the revenue; the relation of foreign trade to domestic iddustry; the mutual adjustment of the system of taxation by customs and escise, with the view of insuring requisite revenue with the least disturbance or inconvenience to the progress of industry and the development of the resourcs of the country; and to inquire, from time to time, under the direction of the Secretary of the Treasury, into the manner in which officers charged with the administration and collection of the revenues perform their duties. And the said Special Commissioner of the Revenue shall, from time to time, report, through the Seeretary of the 'Treasury, to Congress, either in the form of a bill or otherwise, such modifications of the rates of taxation, or of the methods of collecting the revenues, and such other facts pertaining to the trade, industry, commerce, or tas ation of the country, as be may find, hy actual observation of the operation of the law, to be conducive to the public interest.”.

On the 16th of July last, Mr. David A. Wells was appointei Special Commissioner of the Revenue. under the authority above recited, and he was in. structed to proceed at once to perform the contemplated work, giving his chief attention to the tariff, wi h the view of ascertaining what modifications are required to adjust it to the system of internal taxes, stimulate industry, and make labor more productive.

The ability displayed by Mr. Wells in the performance of his duties as one of the commissioners for the revision of the internal revenue laws, and the beartiness with which he is prosecuring his investigations, give the best assurance that he will perform the work in a manner creditable to bimself, and satisfactory to Congo ress and the people. The Secretary addressed to him on the 14th day of September, 1866, a letter , from which the following is extracted : “ In view of the fact that the revision of the tariff is certain to engage the attention of Congress at its next session, I consider it especially desirable that the Treasury Department should be prepared to furnish as much information pertinent to the subject as can be obtained and collected within the limited time available for the necessary investigations. You are, therefore, hereby requested to give the subject of the revision of the tariff especial attention, and to report a bill which, if approved by Congress, will be a substitute for all acts imposing customs duties, and wbich will render the administration of this branch of the revenue system more simple, economical, and effective.

“ In the discharge of this duty, you will consider the necessity of providing for a large, certaiu and permanent revenue, recollecting the fact that the existing tariff has proved most effective in this direction. You will therefore ende vor, first, to secure for the Government a revenue commensurate with its necessities ; and, secondly, to propose such modifications of the tariff laws now in force as will better adjust and equalize the duties upon foreign imports with the internal taxes upon home productions. If this last result can be obtained without detriment to the revenue, by reducing taxation upon raw materials and machinery of home productions, rather than by increasing the rates of imports, it would, in my opinion, by decreasing the cost of production and increasing the purchasing power of wages, greatly promote the interests of the whole country."

There is no subject which has in times past provoked so much discussion, and in regard to which opinions have differed so widely, as the tariff It has been a standing matter of sectional and political strife for nearly half a century, and the sentiment of the people in regard to it is still quite as much divided as when the discussion of it commenced. Always a complex and difficult question, it is particularly so at the present time. Prior to the rebellion it bad no relation to internal taxes, for this form of federal taxation was then unknown to our people. It had little connectiou with the currency, for, until the year 1862, although the banks had repeatedly suspended specie payments, specie was the only legallyrecognized standard of value in the United States. Now the qnestion of the tariff is to be considered in connection with a permanent systein of internal taxes and a depreciated, but it is hoped a temporary legaltender currency. It is obvious that a scale of duties upon imports which might have been sufficient, judicious,

and beneficial, when there were no internal federal taxes and business was conducted upon a specie basis, may be josufficient, injudicious and injurious now. A large revenue is at present indispensable for the payınent of the ordinary ex. penses of the Government, the interest upon the public debt, and for a gradual and regular reduction of the principal. Free trade, although in accord with the principles of the Government and the instincts of the people, cannot be adopted as a policy as long as the public debt exists in anything like its present magni. tude. The long boped-for period wben there shall be po legal obstructions to a free exchange of commodities between the United States and other couotries is still far in the future. Duties upon imports are not only necessary for revenue, but also for the protection of those home interests upon which heavy internal taxes are to be assessed. The question now before the country is therefore ope of adaptation, rather than principle. How shall the necessary revenue be raised under a system of internal and exterval taxes without sustaining mudopolies, without repressing industry, without discouraging enterprise, without oppressing labor? In other words. how sball the revenue be raised in a manner the least oppressive to the people, without checking the prosperity ani growth of the country? The Secretary is not disposed to discuss the question in this report. This will, it is expected, be done elaborately and thoroughly in the report of the Commissioner. He desires, however, to call attention to a few important facts in regard to some branches of business in the United States, tbe consideration of which may tend to give a proper direction to the public mind upon a question so absorbing and important.

No single interest in the United States, fostered although it may be by leg islation, can long prosper at the expense of other great interests. Nor can any important interests be crushed by unwise or unequal laws, without other inter. ests being thereby prejudiced. For illustration : the people of the United Statos are naturally a commercial and maritime people—fond of adventure, bol , enterprising, persistent. Now, the disagreeable fact must be admitted, that, with unequalled facilities for obtaining the materials and with acknowledged skill in ship-building--with thousands of miles of seacoast, indented with the fioest har. bors in the world—with surplus products that require in their exportation a large and increasing tonnage-we can neither profitably build ships por successfully compete with English ships in the transportation of our own productions. Twenty years ago it was anticipated that ere ibis the United States would be the first maritime power in the world. Contrary to our anticipations, our foreigu com. merce has declined nearly fifty per cent. within the last six years. The tonnage of American vessels engaged in the foreign carrying trade which entered United States ports was : In 1850.

tons. 5,921,285

2,943,661

8,372,060 The toppage of such vessels which were cleared from the United States was : In 1860

tons. 6,165,924

3,025, 134 In 1866

........ 3,393,176 The tonnage of foreign vessels which entered our ports was : In 1860,

tons. 2,353,911

8,216,967 In 1866...................

4,410,424 The tonnage of foreign vessels which were cleared was : In 1860..

tons. 2,624,005

3,595, 123 In 1866.

4,438,384 It is true that a large proportion of this diminution of shipping and ship.build. ing was the effect of the war. The great destruction of merchant vessels by rebel cruisers not only induced sales to neutrals, but discouraged building. After

In 1865.
In 1866.

In 1865.

In 1865

In 1865.

the war, however, the scarcity of American vessels ought to bave produced, and, but for a redundant currency and bigh taxes, would have produced aetivity is our ship-yards and a rapid increase of toppage; but this bas not been the case. The prices of labor and. materials are so bigh that ship-building cappot be made profitable in the United States, and many of our ship-yards are being practically transferred to the British Provinces. It is only a few years since American ships were sought after, on account of their superiority and cheapness; and large pumbers of vessels were built in Maide and other States on foreign accoont, or sold to foreigners, while, at the same time,our own mercantile marine was being rapidly increased. Now many of our ship-yards are abandoned, and in others very little activity prevails. It is true there has recently been some increase in our foreign tonvage, but a good part of this increase is apparent only, and is the result of the dew rule of admeasurement. It is an important truth that reels can be built very much cheaper in the British Provinces than in Maine. Nay, further, that timber can be taken from Virginia to the Provinces, and from these Provinces to England, and there made into ships which can be sold at a profit ; while the same kind of vessels can only be built in New England at a loss, by the most skillful and economical builders. But the evil does not stop here; if the only loss was that which the country sustained by the discontinuance of ship.building, there would be less cause of complaint. It is a well established general fact, that the people who build ships navigate them, and that a natios which ceases to build ships ceases, of consequence, to be a commercial and maritime nation. Unless, therefore, the causes which prevent the building of ships in the United States shall cease, the foreign carrying trade, even of our own production, must be yielded to other nations. To this bumiliation and loss the people of the United States ought not to be subjected. If other branches of industry are to prosper, if agriculture is to be profitable, and manufactures are to be extended, the commerce of the country must be restored, sustained and is creased. The United States will not be a first-class power among the nations, por will her other industrial interests continue long to prosper as they ought, if her commerce shall be permitted to languish.

Tbe same causes—a redundant qurrency and high taxes that prevent shipbaild. ing, tend to prevent the building of houses and even of manufactories. So bigh are prices of every description that men hesitate to build dwellings as fast as they are required, and thus rents are so advanced as to be oppressive to lessees, and the healthy growth of towns and cities is retarded. So it is in regard to mansfactories. Mills wbich were built before the war can be run profitably, but so expensive are labor and materials that new mills cannot be erected and put into operation with any prospect of fair returns upon the investment, unless upon the expectation that taxes will remain es they are and prices be sustained, if they are pot advanced. The same causes are injuriously affecting agriculture and other interests wbicb it is not necessary to particularize. It is everywhere observed that existing high prices are not only oppressing the masses of the people, but are seriously checking the development, growth, and prosperity of the country. It is not denied that the losses wbich the country has sustained of able-bodied mea by the war is one cause of existing high prices; but mainly they are the result of a redundant currency and bigb taxes.

To raise the large revenue wbich is now required, by systems of internal and external duties, which, working in harmony, shall neither repress industry por check enterprise, and which shall be so devised as to make taxation bear most heavily upon those who are most benefitted by taxes and by the debt which repders taxatiou necessary, requires great practical koowledge and wise statesmanship. This subject, always an interesting one to the heavily indebted nations of Europe, has bec me, as one of the results of the war, deeply interesting to the people of the United States. The Secretary does not, as before stated, intend io discuss it, but be ventures to suggest that the following general priuciples, some of which bave been acted upon by Congress, and the crteciness of all of wbich bas been proved by other nations, may be safely adopted as a guide to the legislation that is now required,

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