WAYS AND MEANS.

APRIL 9, 1866.

THE Senate proceeded to the consideration of the bill (H. R. No. 207) to amend an act entitled "An act to provide ways and means to support the Government," approved March 3, 1865.

Mr. Sherman said:

I REGRET very much that I differ from the Committee on Finance in regard to this bill. This is the only bill on the subject of the public debt on which I have not been able to concur with that Committee. I do not perceive the necessity for conferring on the Secretary of the Treasury, in the present condition of our finances, the vast powers proposed to be conferred in this bill. It is true that the bill, as it now comes before us, is very different from the one first reported in the House of Representatives. That bill contained a clause which authorized the Secretary of the Treasury, not only to sell the bonds of the United States abroad, but to make them payable in the currency of foreign countries. Under it the Secretary could make our bonds payable in pounds, shillings, and pence, guilders, francs, or any of the various forms of currency known in any European country. That provision was stricken out by the House of Representatives. After the bill was defeated in the House a clause was added, on reconsideration, intended to limit the power of the Secretary of the Treasury over the legal tenders; but this clause, although wise in itself, will not accomplish the purpose designed by the House. It is on this ground, chiefly, that I object to the bill as it now stands.

If Senators will read the bill, they will find that it confers on the Secretary of the Treasury greater powers than have ever been conferred since the foundation of this Government upon any Secretary of the Treasury. Our loan laws heretofore have generally been confined to the negotiation of a single loan, limited in amount. As the war progressed the difficulties of the country became greater, and we were more in the habit of removing the limitations on the power of the Secretary of the Treasury; but generally the power conferred was confined to a particular loan then in the market. This bill, however, is more general in its terms. It authorizes the Secretary of the Treasury to sell any kind of bonds without limit, except as to the rate of interest. It does not limit him to any form of security. The security may run for any period of time within forty years. He may sell the securities at less than par, without limitation as to rate. He may sell them in any form he chooses. He may put them in the form of Treasury notes or bonds, the interest payable in gold or in paper money. He may undertake, under the provisions of this bill, to fund the whole debt of the United States. The only limit as to amount is the debt itself, now $2,700,000,000. The power conferred on the Secretary of the Treasury is absolute, and is to continue until the act shall be repealed. The description of the bonds in the act of March 3, 1865, referred to here, would probably limit the rate of interest to six per cent.

in coin and seven and three tenths per cent. in currency; but with this exception there is no limitation.

The people are not generally aware of the favorable condition of our finances. The statement of the public debt laid on our tables the other day does not show it fully. But a small portion of the debt of the United States will be due prior to August, 1867, that will give the Secretary any trouble. But little of the debt which he will be required to fund under the provisions of this bill matures before that time. The temporary or call loan, now over one hundred millions, may readily be kept at this sum even at a reduced rate of interest. The certificates of indebtedness, amounting to sixty-two millions, may easily be paid from accruing receipts, or, if necessary, may be renewed or funded at the pleasure of the Secretary. None of the compound-interest notes or the seven-thirty notes mature until August, 1867.

It is idle, therefore, to say that there is now at this moment, or will be within a year, a pressing necessity to confer on the Secretary of the Treasury this enormous power. It is only in view of a change of policy, either by a reduction of the currency or some other measure in the mind of the Secretary, that he can claim that this power is necessary. Nor is there necessity to contract debt to pay current expenditures, because the present income exceeds our expenditures. In his annual report he estimated that there would be a deficit of $112,000,000 at the close of the present fiscal year. It is now admitted that there will be no deficit, and that the amount on hand together with the current receipts will be sufficient to pay the expenses of the Government up to the 1st of July next. The estimated expenditures during the next year are stated by him at $280,000,000. Those estimates have been reduced somewhat by the bills sent to us by the House of Representatives, and it is scarcely possible that the expenditures during, the next year can reach $275,000,000 on the present basis. We have a current revenue now of nearly $500,000,000 during this year. The amount of the gold receipts during the first three quarters of the year were $140,000,000, and for this quarter will not fall below $20,000,000; it is supposed that the internal revenue will yield during the current year not less than $320,000,000; so that, including the profits realized on the sale of surplus gold, we have an income of not less than $500,000,000 this year, and some authorities place it higher. Thus it is evident that we have $200,000,000 more income this year than we will have expenditures next year.

No man can tell the future, and it is possible, perhaps probable, that during the next year there will be a considerable falling off in revenue. I do not think the internal revenue will fall off materially, because there are many sources of revenue that will come in next year which we have not yet felt. No one doubts that the tax on spirits will yield two or three times as much as it has during the current year. No doubt, however, other taxes will be diminished. I hope that the duties received from imported goods will be diminished by a diminution of importations. But neither the Secretary of the Treasury nor the head of the Internal Revenue Bureau contemplates any very material reduction, and on the basis of the present law as it now stands we

shall next year probably have a revenue of $400,000,000, or at least $100,000,000 more than the expenditure.

There is therefore no immediate necessity for these vast powers. It is true we may repeal this law next year, but we know very well that when such powers are granted they are seldom recalled; they are made precedents for further grants. It seems to me that the whole object of the passage of this bill is to enable the Secretary to contract the currency, and thus, as I think, to produce an unnecessary strain upon the people. The House of Representatives did not intend to give him this authority. They debated the bill a long time, and it was defeated on the ground that they would not authorize him to reduce the currency; and finally it was only passed with a proviso contained. in the bill, which I will now read:

Provided, That of United States notes not more than $10,000,000 may be retired and canceled within six months from the passage of this act, and thereafter not more than $4,000,000 in any one month.

The purpose of the House of Representatives was, while giving the Secretary the most ample power over the debt by funding it as it matured or even before maturity, to limit his power over the currency, lest he might carry to an extreme the view presented by him in his annual report. If this proviso would accomplish the purpose designed by the House of Representatives, I would cease all opposition to the bill; but I know it will not, and for this very obvious reason: that there is no restraint upon the power of the Secretary to accumulate legal-tender notes in the Treasury. He may retire $200,000,000 of legal-tender notes by retaining them in his possession without cancellation, and thus accomplish the very thing the House of Representatives did not intend to permit. He may sell the bonds of the United States at any rate he chooses for legal tenders, and he may hold those legal tenders in his vaults, thus retiring them from the business of the country, and producing the very contraction which the House of Representatives meant to prevent. Therefore, this proviso, which only limits the power of canceling securities or notes, does not limit his power over the currency; and he may, without violating this bill, in pursuance of the very terms of the bill, contract the currency according to his own good will and pleasure.

My own impression is that the Secretary of the Treasury, in carrying out his known policy, will do so. He says he will not contract it unreasonably or too rapidly, but I believe he will contract the currency in this way. He has now in the vaults of the Treasury $60,000,000 in currency and $62,000,000 in gold-a larger balance, I believe, than was ever before kept in the Treasury until within the last two or three months; a larger balance than was ever found in the Treasury during the war. What is the object of accumulating these vast balances in the Treasury? Simply to carry out his policy of contraction. With this power of retaining in the Treasury the money that comes in, what does he care for the limitation put upon this bill by the House of Representatives? That says that he shall not retire and cancel more than $10,000,000 of United States notes within six months, and not more

than $4,000,000 in any one month thereafter; but why need he retire and cancel them when he can retain them in the vaults of the Treasury, and thus contract the currency?

That brings me to the only material objection that I have to this bill. I do not think it wise now to place in the power of the Secretary of the Treasury or any mortal man this absolute and extreme control over the currency of the country. We have never done it before. In the bills that were passed when my honorable friend from Maine [Mr. Fessenden] was Secretary of the Treasury, and when Mr. Chase was Secretary of the Treasury, we authorized them to retire legal-tender notes, but only by issuing other notes of the same character.

I do not doubt in the least either the integrity or the capacity of the present incumbent of the Treasury Department; I have as much confidence in him as any one; but this question of the currency is one that affects so intimately all the business relations of life, the property of every man in this country, his ability to pay taxes, his ability to earn food and acquire a living, that no man ought to have the power to vary the volume of currency. It ought to be regulated by law, and the law ought to be so fixed and so defined that every business man may transact his business with full knowledge of the amount of the currency, with all its limits and qualifications.

With the powers conferred by this bill the Secretary of the Treasury may at any moment put into the market a bond that will at once absorb all the legal tenders. It may be said that he will not do it ; that it will not be his interest to do it. Then why give him the power to do it when it is not necessary? If there was now an impending necessity resting upon him to raise a large sum of money within a short time, I would be willing to give him this power as cheerfully as any one; but there is no such necessity. Why, then, place it in his power to contract or expand the currency at his pleasure, and thus make fluctuations in all the business transactions of life? That this is not an idle fear I know from correspondence with some of the best business men of the country. They are alarmed, and refuse to go on and contract new obligations; they refuse to go on with their business in the manner in which it has gone on; the effect of the pendency of this bill has been to limit and contract the transactions in various operations of enterprise and business. I presume there are few Senators here but have had complaints of this kind made from business men in different parts of the country, that the uncertainty of the amount of currency on hand, and the uncertainty as to the policy to be adopted by the Government and the Secretary of the Treasury, take away from them all means of judging as to what amount of business they can transact.

I do not think that this is the time or the occasion to enter into an elaborate discussion as to the amount of currency needed in this country, or as to the various financial subjects that may be brought before the Senate at different periods. My own impression has been, and when this bill was before the Committee on Finance I believed it would be better for that Committee to report to the Senate a financial project to fund the debt of the United States. I believe that now is the favorable time to do it. If a five per cent. bond, a long bond of

proper description and proper guarantee, was now placed upon the market, with such ample powers to negotiate it as ought to be given to the Secretary of the Treasury, such a loan as was authorized two years ago, at a reduced rate of interest, to be exempt from taxation, I have no doubt whatever the Secretary of the Treasury could fund every portion of the debt of the United States as it matured.

The real difficulty of our financial position in the future grows out of the peculiar character of the seven-thirty notes. By those notes the holder, when they mature, has the option to demand the money or a five-twenty bond. It is manifest that as this option is out it can not be recalled. To recall it would be a violation of the faith of the United States, that the holder of these notes may demand either the money or a bond. It is therefore the interest of the United States so to preserve its credit that the five-twenties will be above par, and thus the seventhirty notes when due will be converted into five-twenties, which will run for five years at six per cent. ; then I think the whole debt of the United States might be funded and reduced to five per cent. I do not believe it would limit or cripple the power of the Secretary if we would grant him authority to put upon the market such a bond as I have mentioned, and limit his power over the national currency by requiring him to pay out all over a reasonable balance in the Treasury toward the liquidation of the public debt, and thus prevent the very thing the House of Representatives intended to prevent by this proviso to the bill.

I do not like to embarrass a bill of this kind with amendments, because I know it is difficult to consider amendments of this sort requiring an examination of figures and tables. I have prepared a bill very carefully, with a view to meet my idea, but I will not present it now in antagonism to this bill passed by the House of Representatives and the view taken by the Finance Committee, because I know that in the present condition of the Senate, it would not probably be fully considered. My only purpose now is to point out the fact, that is perfectly clear to the mind of every sensible man who has examined this bill, that as it stands it does not carry out the manifest intention of the House of Representatives when they passed it, and that the proviso limiting the power of the Secretary over the legal-tender currency does not accomplish the purpose which they designed, and without which I know the bill never could have passed the House of Representatives.

Mr. Fessenden, Mr. Chandler, and others briefly discussed the question, and it was then resumed by Mr. Sherman.

The chairman of the Committee on Finance has substantially admitted in his argument that there was no necessity for this bill except to endorse the policy or theory of the Secretary of the Treasury. In the present condition of our finances I do not think it wise to advance theories or to endorse them. Perhaps it was not wise in the Secretary of the Treasury to be so open in the announcement beforehand of what he intended to do, and perhaps it would be just as unwise for Congress now to endorse that policy until we see the events that will come before us.