selves are the basis of our bank circulation; and if this gold is forced into sale, the effect of that forced sale may bring the price of gold to the paper standard; but the inevitable result would be that we could not for a moment maintain the resumption of specie payments, because we would have no specie on hand to redeem the notes that would be presented.

Now, Mr. President, there is a very exaggerated idea of the amount of gold in the Treasury. I have here an official statement made within a day or two, which shows the precise nature and character of this "enormous mass of gold." If Senators will look at the last statement. of the public debt, they will find that on the 1st of January, 1871, the coin in the Treasury amounted to $107,802,280.95, and there were outstanding coin certificates to the amount of $26,149,000; showing a remainder, the actual property of the Government, of $81,653,280.95. The gold certificates are merely deposits of private individuals, and by the very terms of the certificates the gold must be kept on hand. There was a coin liability at that date (January 1, 1871), for interest previously due and unpaid, of $6,327,196.16; and the interest becoming due on that day amounted to $28,479,635. There remained unpaid and due on the 1st of January, 1871, on the principal of the loan of 1860, $4,119,000, and interest thereon amounting to $107,775; showing a net balance in the Treasury of $42,619,674.79. That is the precise amount. This does not include either accruing interest or notes and bonds. It is complained that while this $42,000,000 of gold is lying idle in the Treasury we lose the interest on it. So we do; but why is it maintained there? If it was not there, we would soon find out the reason. That gold is the only steadying balance-wheel of our whole financial system. It is remarkable that our paper money now varies scarcely the shadow of a shade. The gradual appreciation in the value of our paper money has been almost imperceptible, but as sure as the falling of the snow upon the earth. Suppose that $40,000,000 of surplus gold had not been on hand; the bulls and bears of New York could at any moment toss the value of all commodities upon the waves of speculation. There is no power in the Government to prevent at any moment a combination, either for the hoarding of greenbacks or for forced sales of gold, except that fulcrum resting in the vaults of the Treasury, by which any attempt to interfere with the natural order of things and the business of this country may at once be put a check to.

Why, sir, the Secretary of the Treasury saved more to this country in September, 1869, by the mere threat to sell $3,000,000 of gold, than all the gold in the Treasury. The business men of this country and its business interests would have been sacrificed by that speculation to a greater extent by far than all the gold in the Treasury. It is only that great balance-wheel that enables the Secretary to keep those speculators in check.

But it is said we lose the interest on this gold. So we do. Does not a bank lose interest on its reserves? It is illogical for us to complain of the loss of interest on this gold when we are by means of that gold maintaining at a reasonable price over three hundred and ninety million dollars of forced paper money. The only reserve now on hand

to maintain the credit of that $390,000,000 is the gold in the Treasury, after paying the balances that are chargeable against it. We require of every bank in the United States to maintain a reserve of from fifteen to twenty-five per cent., not only on its circulation but on its deposits. Why do we do that? Why do we compel them to hoard idle in their vaults one fourth of their entire capital, deposits, and circulation? Merely in order that they may be able to redeem, if they are called upon for redemption. There is no right to maintain paper money in circulation, either by banks or individuals, unless there is an absolute, demonstrable ability at any time to redeem that circulation. The only reserve that has been retained by the Government to steady the market price of this paper money, to appreciate its value, and ultimately to reach specie payments, is that $42,000,000 of gold lying idle in the Treasury; and that gold does not bear so large a proportion to our circulation as the feeblest and most insignificant bank in the most remote Western State is compelled to maintain day by day, to guard against the uncertainty of the redemption of its notes, although they may be secured by United States bonds. Therefore, I say it is illogical to complain about the hoarding of this gold merely because we lose interest on it, when we gain interest on $390,000,000 of paper money. We gain $32,000,000 and we lose $2,500,000.

The true policy of specie payments, in my judgment, is to offer in exchange for our notes such a bond as can probably be maintained at par with gold, and with such an ample reserve of gold that dissentients can be paid in coin if demanded. In this way the United States can cease to make money, except the standard coin at the mints, and the business of banking, like any other business, may be left to private individuals under general law. The United States can protect the noteholder with the most absolute security, and the amount of paper money may be left to the laws which limit the amount of other productions; and each producer and consumer will, in an imperceptible way, affect its quantity just as he does the quantity of wheat, corn, or cotton produced and consumed. The vast benefit conferred upon the United States by the national banking system will then be fully realized. It combines private capital and enterprise with Government security and uniform value, and will never be jeopardized by State banks or the impracticable idea of an exclusive metallic currency.

Mr. President, the financial success of this Administration has been wonderful indeed, and we who are its agents to some extent can with pride congratulate ourselves upon the beneficial effects of the Administration upon the finances of our country. Let us look at it for a moment. When General Grant came into power a paper dollar was worth only seventy-one cents in gold; to-day it is worth ninety-one cents in gold, or an advance of nearly twenty-seven per cent., without any distress and without any contraction. The same amount of greenbacks is now afloat, and yet the steady, advancing credit of our country has appreciated their value twenty-seven per cent. Our five-twenty bonds when General Grant came into power were worth eighty-three cents in gold; now they are worth ninety-seven in gold, without any considerable diminution of their amount, and by the simple appreciation

of our public credit; and, in my judgment, within a very short time they will be at par, and will be paid off.

The banks have not been disturbed in their loans to the people, but have increased them. Everybody believed that when we approached specie payments the banks would be compelled to contract; and yet, during all this time, while we are approaching specie payments so rapidly, the banks have enlarged their loans. On the 1st of March, 1869, they were $658,000,000, and now they are $712,000,000.

Not only that; the debt has been reduced, not by an increase of taxes, but by a saving in expenditures of nearly two hundred million dollars. I admit that much of the expenditure incurred during Mr. Johnson's administration was for floating and unsettled debts of the late war. I am not now making any political allusion at all, nor seeking to arraign that Administration. I only speak of it as a fact that, with diminished taxes, increased value of our paper money, and increased value of our bonds, we have paid off nearly two hundred million dollars of indebtedness, and are now within a few cents of specie payments.

While this process was going on we were able at the last session to reduce our taxes over eighty-two million dollars a year, by a carefully adjusted system, in which nearly all the obnoxious taxes, and two thirds of the income tax, about which we are now talking, were swept away. We confidently expect at the next session not only again largely to reduce taxes, but to so adjust them that those that remain will fall more lightly on our people. These things may play but a small part in the political debates of the day, but they are the strength of this Administration.

This tax affects, it is true, about eight hundred office-holders of the United States-certainly not over a thousand, including officers of the army. It is said that it affects some officers in some of the States. How many? How many officers of States have salaries of over $2,000 after their taxes and other things are paid? Very few indeed. If they want to appeal to the constitutionality of the law, let them do it, and I have no fear of the result. It affects some fifty or sixty thousand people who are able to pay it. To say that this is a discriminating tax against them, is to say that the English Government, in the adjustment of their taxes, have levied upon themselves the same kind of tax since the time of Sir Robert Peel.

Mr. President, I have been threatened in every way about this matter. I will read what the "Brooklyn Union" has to say about those who insist on maintaining the income tax-a paper published in the very town where the population is in arms against the whisky tax, I am told. Here is what the editor of the "Brooklyn Union "-who is also the editor of the New York "Independent," and no doubt has an excellent income, and I am glad of it-says: "The people mean to have this tax out of the way, even if they have to put the men out of the way who are responsible for its continuance."

Sir, there are sixty thousand, all told, who have to pay this tax. We are all in that favored sixty thousand, because the people of the United States give us over $2,000 a year. We are compelled to pay

this tax. And now every man who thinks it is better to retain this tax a while longer is threatened with the indignation of the people. I am inclined to think that we shall be able to endure and survive it.

Sir, the same threats were made against Sir Robert Peel when he proposed to renew the income tax. The politicians of that day denounced him, and were able after a while to punish him to some extent; but it did not deter him. It was the reorganization and reinstitution of the income tax in England that led to that revision of taxes which changed the whole current of affairs in England; and I believe now that if the property-holders of this country, who are compelled to pay the income tax, will bear with it a little while longer, for the two years during which it is to exist, they will never have cause to regret it.

So far as my own State is concerned, I am impartial in this matter. The State of Ohio pays her full proportion of the income tax according to her population. I have here the statement. Most of the Western States pay but little income tax, but Ohio pays dollar for dollar, according to her population. The old tax was just about a dollar an inhabitant. Ohio pays her share; and I have it to say, for the men of Ohio who pay this income tax, that, with very rare exceptions, such as I do not wish to name, they have not complained of the tax, but are willing to bear their share of it. But, impelled by a sense of duty, in the interest of the whole people, I feel bound, without any regard either to my own interest or that of my State, to maintain this and all other taxes until I can see daylight ahead and a better time to repeal them.

INTERNAL TAXES AND TARIFF.

IN THE SENATE, MARCH 15, 1872.

THE Senate, as in Committee of the Whole, having resumed the consideration of the bill (H. R. No. 173) to repeal the duties on salt, Mr. Sherman said:

MR. PRESIDENT: I am sorry that, even for a moment, the evil shadows of our long political debates are cast upon a purely business discussion, which affects the interests of all the people of the United States, and yet need not excite any political feeling, or any division of opinion except upon questions of dry political economy. I take it that it will be most agreeable to Senators if I confine my remarks this morning to a general statement of the condition of the country, to such facts as in my judgment authorize us to enter, for the sixth time since the close of the war, upon a repeal of taxes, and also to state the general principles upon which this reduction is proposed, rather than to burden you with elaborate details. These will be more properly stated as the debate progresses.

The taxes already repealed yielded $233,000,000. But our revenues still largely exceed our expenditures, and we are justified by several reasons in continuing the repeal of taxes. Those which remain yield

largely more than in former years, and more than was estimated by the most sanguine person. The production of the country has greatly increased. Industry in almost every department has been actively employed. The consumption of our people, which under our system of revenue is chiefly the basis of taxation, has by the prosperity of our industry been also largely increased. At the same time the national expenditures are diminishing. Our financial condition is improving in every particular. We are slowly but surely, without contraction or expansion, but by the increasing uses of our paper money, approaching a specie standard. The interest of our debt is daily diminishing, through the diminution of the principal and the reduction of the rate on that which remains. All these favorable circumstances enable us to approach the question of the further reduction of taxes with more system and better information than formerly, and, I trust, with the sincere desire to make the reduction in such manner as to yield the largest possible relief to our people.

The only questions to be considered are, how much and what taxes ought to be repealed?

Let me first state how the subject now comes before us. On the 14th of March, 1871, the House of Representatives passed three bills: A bill to repeal the duty on coal; a bill to repeal the duty on salt; and one to repeal the duty on tea and coffee. The duties thus proposed for repeal yielded last year $21,000,000. The Committee on Finance was of the opinion that it was not wise to consider these bills, except in connection with the whole subject of revenue reduction. On the 12th of April, 1871, the Senate passed the following resolution:

Resolved, That the Committee on Finance is hereby instructed, during the recess of Congress, to carefully examine the existing system of taxation by the United States, with a view to propose such amendments to the bills of the House of Representatives repealing certain taxes, now pending in the Senate, as will simplify, revise, and reduce both the internal taxes and the duties on imported goods now in force; and so that the aggregate of such taxes shall not exceed the sums required to execute the laws relating to the public debt, and to pay the current expenditures of the Government, administered with the strictest economy; and so that such taxes may be distributed as to impose the least possible burden upon the people.

In obedience to these instructions the Committee on Finance did during the recess examine in detail the laws imposing taxation, and agreed upon amendments to both the tariff and internal revenue laws. But in reporting to the Senate our action, we had to consider the power of the Senate over revenue bills. The powers of the two Houses in this respect are regulated by article one, section seven, clause one, of the Constitution of the United States, as follows:

All bills for raising revenue shall originate in the House of Representatives, but the Senate may propose or concur with amendments, as on other bills.

This provision has often been the subject of controversy between the two Houses. We had before us three bills of the House, with the unquestioned power to propose amendments to either of them. It was clear that, if the House proposed to repeal or modify certain taxes, the Senate could propose instead to repeal or modify other taxes. But as all the taxes proposed for repeal by the House were customs duties,