which was to be regarded as a permanent investment by the Union for its own defense, might fairly be made a charge upon posterity. To meet these he urged the creation of a sufficient bonded debt.

The Thirty-seventh Congress (1861-63) had been more ready to borrow than to tax. In all its experience until 1861 the United States had met no crisis in which large revenues had been required. In the thirty preceding years its total annual receipts had ranged from $20,000,000 to $81,000,000, while in the fiscal year in which the war began the total had reached $83,000,000, of which $41,000,000 were loans rather than revenue. Since the panic of 1857 the Treasury had faced a deficit at the end of each year, and had been compelled not only to spend its accumulated surplus on current needs, but to borrow heavily. The tariff duties, collected at the custom-houses, were, as they always had been, the mainstay of the revenue. But these had not met the needs of the three lean years before the war.

Had there been no war, the disordered finances of the United States might, in 1861, have called for corrective measures and new taxes, and these could not have become effective before 1862 or 1863. As it was, loans were resorted to for first-aid. In 1862 they alone were more than six times as great as the total receipts of 1861; in 1865 they were nearly three times as great as in 1862. Taxes were authorized more reluctantly than loans, they became profitable more slowly, and did not, until the last year of war, reveal the fiscal capacities of the United States.

The favorite national tax of the United States had always been the tariff. Supplemented by miscellaneous items which included no internal revenue after 1849, and no direct tax after 1839, it carried most of the financial burdens. Whether parties preferred it high or low, or levied it for protection or for revenue, they had continued to cherish it as a fiscal device, and had acquired no experience with alternate sources of supply. Like the army of the United States, which in time of war had to break in its volunteer levies before it could win victories, the Treasury and Congress had to learn how to tax before they could bring the taxable resources of the United States to supplement the loans.

The tariff was revised and increased several times between 1861 and 1865, and yielded its greatest return, $102,000,000, in 1864. The result was due to both the swelling volume of imports and the higher rates. Like all panics, that of 1857 had lessened the buying capacity of the American people. In hard times luxuries were sacrificed and treasury receipts were thereby greatly curtailed. A return to normal conditions of business would have been visible by 1861 had not war obscured it. Steadily through the war a prosperous North and West bought more foreign goods regardless of the price.

The rate of tariff was based upon the probable revenue, the protective principle, and the tax burdens already imposed upon American manufacturers. Not until 1863 were the internal or direct taxes noticeable, but in 1864 these passed the tariff as a source of revenue, with a total of $116,000,000. In 1866 this total was swollen to $211,000,000. Like the tariff, the income, excise, and direct taxes were often revised and raised, and many of the tariff increases were dependent upon them. When the American manufacturer, who already declared that he could stay in business only because the tariff protected him from European competition, found himself burdened with a tax on his income and with others upon his commercial transactions and his output, he complained bitterly of the disadvantage at which he was placed. To equalize his burdens, the import rates were repeatedly raised against the foreigner. By the end of the war, the tariff exceeded anything known in American experience, and was fixed less with the intention of raising revenue than of enabling the American producer to pay his internal tax. Less than $85,000,000 were collected from the customs in 1865; while $211,000,000 came from internal sources.

By taxing and borrowing the United States accumulated $88,000,000 in 1861, $589,000,000 in 1862, $888,000,000 in 1863, $1,408,000,000 in 1864, and $1,826,000,000 in 1865. The Treasury, unimportant in the world's affairs before 1861, suddenly became one of the greatest dealers in credit. Its debt of $2,808,000,000, outstanding in October, 1865, affected the interests and solidity of international finance, and indicated, as well, resources of which even boastful Americans had been unaware in 1861. One item in the debt, however, was a menace to the security of the whole, which was but little stronger than its weakest part.

The physical currency in which the debt was to be created and the expenses paid was as difficult to find in 1861 as the wealth which it measured. After Jackson destroyed the second Bank of the United States there had been no national currency but coin, and too little of that. Gold and silver had been coined at the mint, and the former had given the standard to the dollar. In intrinsic worth the gold dollar, as defined in 1834 at the ratio of sixteen to one, was slightly inferior to its silver associate, and by the law of human nature, which induces men to hold the better and pass the cheaper money, the value of the gold coin had become the measure of exchange.

The coined money did not circulate generally. It was devoted to a part of the business of government, and to the needs of the banks which provided the actual circulating medium. Scattered over all the States, hundreds of state and private banks issued their own notes to serve as money. At best, and in theory, these were exchangeable for gold at par; at worst, they were a total loss; yet as they were, variant and depreciated since the panic of 1857, they were the money of the people when the Civil War began. Before the end of 1861 the banks gave up the pretense of redeeming their notes in coin. The United States Treasury suspended the payment of specie early in 1862, and thereafter for seventeen years the paper money in circulation depended for its value on the hope that it would some day be redeemed.

The needs of the Treasury, in the crisis of suspension, induced Congress to authorize the emission of $150,000,000 of legal-tender paper money. These notes, soon known as the "greenbacks," became the measure of the difference between standard money and coin. Issued at par, they sank in value and fluctuated until in the darkest days of 1864 a dollar in gold could be exchanged for $2.85 in greenbacks. Yet they were called dollars, and the creditor was forced to accept them in payment of his debts. They were themselves a forced loan, borrowed by compulsion from the people, and constituting $433,000,000 in the total debts of the United States in 1865.

The greenback element in the national debt threatened the integrity of the whole. Should redemption take place at par, and at once, the credit of the United States could not fail to be strengthened. But should the greenbacks be allowed to remain below par, should more of them be issued, or should the United States avail itself of its technical privilege to pay off part of the bonded debt in "lawful money" manufactured by the printing-press, the weakest item in the total might easily depress the whole.

The future of American politics after 1865 was largely determined by the methods through which the revenue had been increased and by the fate of the greenbacks, but more important for the immediate future than either of these was the great fact that in five years the United States had been able to incur its net debt of $2,808,000,000, and had raised in addition more than $700,000,000 through taxation. It was a prosperous Union that emerged from the Civil War, and