the fund-holder may say, "No, my friend, it is not. Your money you can loan to your neighbor at six per cent. interest, and the law enables you to collect the principal at pleasure; I have already paid for this privilege by deducting one sixth of my income; I have surrendered the principal sum loaned by me for an annuity for thirty-six years, and my share of the taxes will pay off every dollar of the debt within one generation." He may refer to the report of Mr. Hayes showing that the average tax in the United States is one per cent., and that sum, annually applied with the consent of the fund-holder, and paid by him alone, would pay the debt.

I accept the justice of the principle. I say that we can not go before the people and preserve the exemption from local tax unless we show that the United States will get some benefit from it; and by surrendering this one per cent. the fund-holders will be stronger and more secure than they were before. They will feel safer in the payment of the principal; they will know that the one per cent. thus saved is laid aside under the operations of this law and applied to the payment of the principal of the public debt; that it will pay off the principal of that debt in due time and without any danger of the misapplication of the fund, for it will be applied each year, thus adding to the value of the remaining funds.

The passage of this bill is now an imperative necessity. It is not my bill; it is not my idea. I think it is too favorable to the fundholders. I think that a ten-forty five per cent. loan might be put upon the market at par; but the Secretary of the Treasury says that, without the two stipulations to which I have referred, he does not think that he can, to use the ordinary language of the day, float a five per cent. loan. I am therefore willing to give these stipulations to him, hoping that next winter we can repeal the clause exempting the bonds from income tax, and then let him issue a clear five per cent. loan. I do not think he will be able to issue over a hundred millions before that time. Perhaps next winter we may shorten the period during which the principal may be redeemable; and perhaps in a few years, if our country goes on prospering as it is now prospering, we may reduce the rate of interest as England has done, first one half per cent., then another half, keeping the body of the bonds always within our reach. The position of our public debt is just in that condition now, under the established policy of those who have regulated our finances, that it is within our reach, so that we can soon fund the whole of the public debt and reduce the rate of interest on all or nearly all of it.

There is another collateral advantage which will be derived from this bill. I refer to the provision in the fourth section. It will be remembered that the holders of the seven-thirty notes have the right by the terms of the option printed on the back of those notes to convert them into five-twenty six per cent. bonds at maturity, or to demand the money. Two hundred and forty millions of these notes come due in the month of August next year, and six hundred millions in the May following. Under the condition of the present laws, the Secretary of the Treasury will be compelled to accumulate and hold in hand two hundred and forty millions in order to meet the possible option of the holders of the seven-thirties.

What would be the effect? The withdrawal of $240,000,000 of money from the circulation of the country, when it is now being reduced under the operations of the recent law, would be disastrous. It would be withdrawing one half of the circulating medium in order to meet an obligation when every particle of that money is necessary for the use of the people. Section four of this bill provides that the holders of the seven-thirty notes shall give a reasonable notice of their choice to take either the money or the bonds. They have the right to make that choice, and nobody proposes to abridge that right. They have the right to do it at the time stated, and nobody proposes to deprive them of it. What is proposed is simply to require them to give a reasonable notice of their choice of the alternative which they have, and that is put at six months. Some think that is too long and may complain of it. I do not think it is, for the large amount involved. It works no injury, because the bill provides that, in case they do not give their notice of the option, they get their money and the Secretary can provide for it. The probability is that the great mass of those notes will be converted into five-twenty bonds without cost; and one effect of having a five per cent. loan upon the market would be to float this large mass of indebtedness into the five-twenties as the holders have a right to do, while if you issue six per cent. bonds none of these holders will avail themselves of the option until the last moment, and then by demanding the money will greatly embarrass the Government.

It has been said in some of the public prints that this provision is a violation of the contract. It is no more a violation of the contract than the notice which is required by law in the case of a tenancy from year to year. If I am renting a house for a year or more, I am bound to give notice of my intention to retain it. It is a power, substantially, that Governments have always exercised. Take the original convertibility clause; we did not repudiate that clause, but we provided that the right of conversion should be exercised before a given time. There was some complaint made in the New York papers that this was a violation of the public faith, that we were repudiating our obligations; but it was not general. There are several precedents for this provision; but the most striking case was the one just alluded to, which was adopted after full debate and consideration. The United States notes originally issued, and still outstanding, had printed on the face of them, "The holder of this note may convert it into a bond bearing six per cent. interest in coin, and payable after five years and within twenty years." It was found that this privilege or option attached to the notes prevented the sale of the bonds, because no one would avail himself of that option, having the right to do it at any time; and therefore we provided that he should exercise that option by the 1st of July following or he should cease to have it. I have now one of these notes. The privilege printed on the face of it does not now exist; yet no one complains, as the right was not exercised at the time stated. It is a general principle of law that, wherever a party has a right to do or not to do a particular thing, a reasonable notice of his choice may be required. That is a principle of municipal law as well as of public law. It is required by nations generally, and inserted in many treaties.

And now, Mr. President, I have thus, without any preparation except the few figures and papers before me, presented the reasons for my earnest support of this bill. This is like most financial questions, which attract but little attention though they deeply affect the nearest interest of every citizen, his food, his clothing, his home, and, more important than all else, the honor of his country. Our attention has been so occupied with political questions affecting more keenly the interests of parties and partisans, that all the complicated problems of finance thrust upon us by the war have not occupied as much of the time of this Senate as some unimportant political measures. I almost owe you an apology for occupying your time so long, but I trust in a short time the waves of the recent war will settle in peace and quiet, and that all of us will look to the material interests of a great country, all of which are in our hands. I am so hopeful of the future, after escaping all the perils of the past, that I may not see the clouds that others see. War is apt to be followed by financial distress, and we may be affected by the impending war in Europe. Our bonds now held abroad may, and no doubt will, come back to us, and for a time will depress our securities. But war in Europe will open to us new markets. It will restore our commerce. We can well afford to redeem our bonds with the superabundant produce of the West. Our cotton crop will yield us exchange enough to absorb all the securities held abroad. Who can say that after the first panic the timidity of money may not cause it to flee from war in Europe and seek safety in our national securities?

Sir, what we need now is confidence in ourselves, in our resources, and in our destiny. Our country has been for years the refuge of the laboring man, where he has found employment, independence, and freedom. It will soon be the refuge of capital. It may become the place of deposit of the wealth of the world. Why should it not be? We as a nation have always observed our obligations. We have twice paid off a national debt. We have unexampled resources in men, in land, in iron, gold, coal, and in all the elements of wealth. Why, then, should we talk about taxing our national debt? Why place it in the power of every village corporation to affect our national credit? Why enter the money market offering usurious interest? Why pay now more than any good merchant in New York will pay? Why traffic our loans, a mortgage on all our industry, on worse terms than bankrupt nations of Europe offer? Go, backed by your resources, your unclouded and undisputed empire, the love and faith of your people, the respect of all nations-go, I say, with all these, and with confidence in yourselves, to the people, who hold your bonds, and you will be able to borrow money at five per cent., yea, before long, at four per cent. Go not to the money-changers. If they are allowed to fix the rate of your interest, they will continue it as it is with all its exemptions, until the people, fired at an injustice, will do wrong to correct it. I conclude as I commenced, that to compel the Secretary of the Treasury, by denying him this legislation, to issue more six per cent. bonds is a political crime.

THE TARIFF.

IN THE SENATE, JANUARY 23, 1867,

The Senate having under consideration the bill to provide increased revenue from imports, Mr. Sherman said:

Mr. PRESIDENT: Before the vote is taken on the amendment of the Senator from Rhode Island, I think it right that I should state the general views which have controlled my action as a member of the Committee on Finance, and which will control my vote on this and the various propositions of amendment that will be submitted to the Senate.

I listened yesterday with great pleasure to the speech of my honorable friend from New Jersey [Mr. Cattell], and was generally pleased with its tenor and scope. It sounded like a good old-fashioned Whig protective speech-the school in which I was educated, the faith in which I was taught, and in which I yet have confidence. But, sir, it seems to me that the Senator from New Jersey, in his zeal for protection, forgets that we are now legislating under peculiar circumstances, and are compelled to look at a state of facts far different from those that existed before the recent war.

In considering so complicated a subject as a tariff, nothing can be more deceptive than the application of such general phrases as a "protective tariff," a "revenue tariff," a "free-trade tariff." Every law imposing a duty on imported goods is necessarily a restraint on trade. It imposes a burden upon the purchase and sale of imported goods and tends to prevent their importation. The expression a "free-trade tariff" involves an absurdity. Free trade implies a trade without restriction, while any tariff is a restriction on trade. A duty of ten per cent. is a limitation on trade as well as a duty of one hundred per cent., and they differ only in degree. So the phrase a "protective tariff" may be applied to every bill imposing duties on imported goods.

The first tariff act, passed soon after the formation of the Constitution, was called a "protective tariff." One of its leading objects, as declared by Washington, was to foster and protect American manufactures, and yet the general rate of duties was but ten per cent. ad valorem. On the other hand, the tariff of 1846 is commonly known as a "freetrade tariff," and yet the rate of duty levied by it averaged twenty-four and a half per cent. Every duty on imported merchandise gives to the domestic manufacturer an advantage equal to the duty, and to that extent every tariff is a protective tariff. When the duty is so high as to prevent importation it ceases to be a "tariff" and becomes a "commercial regulation." So the general term a "revenue tariff" as descriptive of a tariff is deceptive, and is simply tautology. Every tariff bill revenue tariff." The word "tariff" implies revenue, and means a rate of taxation on imported goods. It is simply a mode of taxation adopted by all commercial nations as the most certain, convenient, and least expensive form of taxation. The common meaning attached to the phrase a "revenue tariff" is a general ad valorem tax on imported

is a

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goods, without regard to domestic manufacture. Such a tariff has never existed in any commercial country, least of all in Great Britain, where the duties are carefully levied to encourage their own manufactures. They do not now levy duties on manufactures, for the same reason that we do not care to levy a duty on anthracite coal. By a vast accumulation of capital, and by severe commercial restrictions maintained for one hundred years, they have a substantial monopoly of certain important branches of industry. They do not levy duties on such goods because none are imported into Great Britain, and the tariff on them would produce as little revenue as your duty on anthracite coal.

These general phrases, if not always deceptive, are totally inapplicable to any tariff law that any one would propose for the United States Free trade, if it means a mutual exchange of commodities with foreign nations without restrictions, is impossible. Our necessities compel us to tax every form of property or production. Every hour of domestic labor contributes some portion of its product to the wants of the nation. Under these circumstances it is the plainest principle of political economy that we should so frame our tariff laws as to produce the largest possible income from imported goods. Revenue is the first, highest, and most pressing want, and it must be so levied as to do the least harm to our own industry. It is in the application of this obvious principle that all the difficulty in framing a tariff law exists. This can not be done by applying any general rate or rule to all articles, We must discriminate between articles of luxury and articles of necessity; between articles that may be produced in our country and articles mainly produced abroad; between raw materials, necessary to domestic manufacture, and completed products of industry. The rate of duty must be modified by a multitude of circumstances as varied as human knowledge, and with details far more difficult than any subject of legislation.

Nor can we consider the question now as we should have done before the war. Then we had an opportunity to choose between imported articles; we might have thrown off the duty upon necessities, such as coffee and tea and various articles, because such duties were not necessary for revenue nor useful for protection; but now we are compelled to levy high duties upon everything, not only upon articles of absolute necessity, the duty upon which will undoubtedly add to the cost of the articles, but also upon all articles of American production, and even upon raw materials that are indispensable as the basis of our manufactures. We cannot now regard the subject in the same light or from the same stand-point that we did in olden times when the tariff was the great controversy between parties in this country. We have now to consider it in the light of facts created by the war. The first and obvious inquiry of every Senator in discussing the question is, how much is it necessary to raise by a tariff on imported goods? And here I may say that all the revenue that we are required to raise in gold must be raised by duties on imported goods. While we have a depreciated currency it would be idle to require domestic taxes to be paid in gold. It would be to legalize a paper currency and then to repudiate