C3 
 
BANCROFT 
 LIBRARY 
 
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 THE LIBRARY 
 
 OF 
 
 THE UNIVERSITY 
 OF CALIFORNIA 
 

 EXPENSES OF THE WAR. 
 
 i BY ALBERT GALLATIN. 
 
 1295 CALiF. U. BANQiQF 
 
 I. There are in political economy many debatable, doubtful, and complex propositions, some of 
 which it may be impossible, most of which it would be extremely difficult, to discuss in a popular 
 and generally intelligible manner. But there are some which every member of the community may 
 bring home to himself and clearly understand. Among these may be counted the acquisition and 
 application of capital. 
 
 Every man who enjoys a certain income knows that he will grow poorer if he spends more, and 
 richer if he spends less, than the amount of that annual income. In the first case, he loses part of 
 his capital : in the other he acquires a new capital. Every man who earns his living by his indus 
 try and labor, whatever this may be, knows perfectly well that if he spends annually less than he 
 earns, the difference is an acquisition of capital. The journeyman who in the course of the year is 
 able to .put forty dollars in a Savings Bank understands this as well as the most profound political 
 economist. 
 
 In every instance capital is produced by labor,'and is equal to the excess of that which is pro 
 duced over and above the amount which is consumed. It is obvious that, since this is true of every 
 .individual, it is equally true of the aggregate of individuals who compose the nation. The acqui 
 sition of capital, or increase of wealth, of the United States is, in any one year, equal to the excess 
 of the value of the productive labor of the people, over and above the value of that which they have 
 consumed during that year. The whole capital of the United States has been produced by the ac 
 cumulated aggregate of that annual excess of value produced over value consumed. 
 
 However great this may be, it has generally been inadequate to the demand. In order that land 
 may be productive, labor must be applied to it. In the forest land, which constitutes probably nine 
 teenth-twentieths of that which has as yet been cultivated, it is in the first place necessary to clear the 
 land of trees and to enclose it. The average price of this amounts to four or five dollars rer acre. It 
 is clear that this first outlay, the cost of the humblest dwelling, and of absolutely necessary agricul 
 tural buildings, as well as that of horses and cattle, require a previously existing capital. It must 
 moreover be recollected that the ordinary products of agricultdre are not realised till after the 
 crop. The laborer, who has no capital whatever, must be supported, and his wages advanced 
 to him by his employer. The population of the United States has heretofore increased at the rate 
 of about thirty-three per cent, in ten years ; and there has been therefore a proportionate and an 
 nually increasing demand for capital for agricultural purposes alone. 
 
 At the time when America was first settled by British colonists the lands in England were en 
 closed, fitted for cultivation, stocked with horses and cattle, and the country covered with every 
 species of necessary buildings, including dwelling houses. America, in every such respect, was 
 a blank. The first colonists brought with them but a very small amount of capital, and pro 
 portionate to their numbers. All that large amount of fixed and personal capital, of which England 
 was possessed, the product of the surplus labor or capital accumulated during centuries, the Ameri 
 can colonists had to create by their own industry and labor. 
 
 A single item may be adverted to. The number of dwelling houses has necessarily been in 
 creased, in proportion to the increase of population. In the city of New York, for instance, where 
 the population has been increased tenfold in fifty years, the number of houses which were built more 
 than fifty years ago is extremely small, and much less in value than that of houses built since that 
 date, which have been subsequently pulled down or destroyed. The whole cost of the dwelling- 
 houses now existing in New York, which, alter deducting the nominal value of the lots, may be 
 estimated at about one hundred millions of dollars, has been defrayed by the capital acquired during 
 the last fifty years. The same process has taken place not only in every town and village, but 
 throughout the whole country. As a whole, the general result has been much less in proportion 
 than in New York, since, during that period, the population of the United States at large has only 
 -been quadrupled. It seems probable that the whole amount of capital absorbed in the United States 
 in that way, during that period of fifty years, does not fall much short of $1500,000,000. 
 
 The whole of that capital, whatever its amount may be, has not been yet actually expended, 
 since the houses do exist ; but it has been applied to an unproductive object. It is clear that no 
 man who lives in his own house derives any revenue from it. It is a portion of that which he 
 snds for his own comfort, and which, independent of wear and tear, is equal to the interest 
 o^t the capital laid out in building the house. If a man lets his house, instead of enjoying it for 
 his\T\vn use, he receives a rent equivalent to that interest. But the person who occupies the 
 house^nr part of it, and who pays that rent, does not derive the means of paying it from the house 
 itself, buvfrcm his own income or labor. Thus in every instance, though forming an important and 
 necessary potion of the fixed capital of the nation, dwelling houses are unproductive, and a portion 
 of the consumption, and not of the income of the nation. 
 
 Tower sprinter, opposite A < ncer office. 
 
 
Taking all these facts into consideration, it will be easily understood why the acquisition of 
 Circulating capital has been so slow in the United States, and why they were obliged to depend 
 so long on the aid afforded by foreign capital. At the time when independence was declared, 
 and for more than thirty years after, America was always in debt to Great Britain. Even now 
 the amount of accumulated circulating capital is comparatively small and inadequate to supply 
 the ordinary demand for it. In almost every instance the funds necessary to carry into effect ex 
 tensive plans o f improvement, whether rational or wild, have been borrowed abroad ; and there 
 is now a large debt due to foreigners, principally to British subjects, due not by individuals, but 
 y several of the States. It is doubtful whetjier, pending the war with Mexico, the Government 
 of the United States, notwithstanding their unimpeached credit, could obtain any considerable 
 loan at par for a six per cent, stock. Hence it is that the destruction of circulating capital,, 
 caused by the war expenses, is already sensibly felt. 
 
 A merchant, having full' confidence in the probity and skill of a man who has no property, 
 Bells him on credit merchandise worth five thousand dollars; the goods are delivered, and on the 
 same day are burnt, or otherwise destroyed, by some uifforseen accident. In this case there is no 
 capital left which represents the debt. There remains only a promise to pay, from a man who 
 has no property whatever. In order to discharge the debt, he must, by his subsequent labor and 
 frugality, acquire a new capital. 
 
 The same result attends war expenses, and for the same reason; the capital thus expended has 
 been destroyed. 
 
 The public debt of Great Britain may amount to about eight hundred millions sterling ; and 
 there is no existing capital which represents that debt. The creditors hold only a promise to pay,. 
 the interest of which they receive regularly. This payment of interest, and general confidence in 
 the good faith of Government, give current value to the public stocks or promises to pay. But the 
 Government has no capital wherewith to pay either the principal or interest. In order to do either, 
 taxes must be laid on the people at large. The people must, by their own labor and industry, 
 create a new capital for that purpase. The amount of the public debt is equivalent, not to the 
 whole, but to the most considerable portion of the capital which has been destroyed by the wars 
 in which Great Britain has been involved. Yet not to the whole, since, in order to include 
 the whole amount of capital destroyed by those wars, there must be added to the public debt incurred 
 all the war taxes raised and expended for the same purpose. 
 
 The preceding observations, though illustrated by the example of Great Britain, are equally 
 applicable to the United States. Almost the whole capital applied to war expenses is destroyed , 
 because it is expended on unproductive objects. The munitions of war, horses, aud a multitude 
 of other articles, are actually destroyed ; a variety of other expenses, such as those of transport 
 ing, and afterwards of moving an army with all its apparatus, particularly if in a foreign coun 
 try, are entirely lost. The great bulk of the moneys raised for carrying on war is expended in 
 feeding, clothing, and supporting men whom the war has converted into unproductive consumers;, 
 all of whom, before that, earned enough by their labor at least to subsist ; and most of whom 
 did produce a surplus over and above their personal expenses. At the end of the war, nothing 
 remains but the artillery, muskets, and tents. Ail the rest of the capital expended for the land 
 forces has been annihilated. 
 
 I do not p'erceive that any deduction can be made from that aggregate, other than the profits 
 of contractors, and in some cases those of persons employed in producing or manufacturing that 
 part of the supplies which is drawn from home. 
 
 But whatever may be the case in other countries, it does not appear that any deduction should be 
 made in the United States on account of the moneys earned by men who may have been employed 
 in furnishing certain supplies. There is, in the United States, a constant demand for capital and 
 labor, to b applied to productive purposes. Every able-bodied man, whether cultivator of the soil,. 
 mechanic, or laborer, can, in the United States, obtain remunerating wages; and therefore every 
 man employed in preparing war supplies, for instance, in building war steamers, or olher ves 
 sels, ha* been diverted from some analogous employment which would have been applied to 
 productire objects. 
 
 It it not without a painful feeling that we are compelled to admit that these consequences of 
 the Mtxiean war on the fiscal arid commercial concerns of the nation have heretofore been 
 greatlf ailefimted by the dreadful calamity which has effected Europe, and especially the British 
 Islea. A famine, caused by the failure of one important crop, and by a diminution in those of" 
 other article* of food, suddenly increased our exports to an unparalleled amount, far exceeding 
 in valu* tfc* foreign merchandise usually wanted by the United States, and causing, accordingly, 
 not onlf an increase of dutiable imports and .revenue, but also an extraordinary influx of specie. 
 Thifl gentral increase of wealth had, among other effects, enabled Government to carry on the 
 war vrithout it* erils being immediately felt. 
 
 But th* ause* *hich had produced that state of thing have, at least for the present, ceased to operate. 
 
 II. Tht preceding observations are of a general nature. The first subject of special inquiry is. 
 the amount of the actual receipts and expenditures since the commencement of the war. 
 
 All the receipts, whether arising from revenue, loans, or any other source, are paid into the 
 Treasury, and therefore known to the Secretary of that Department. He is also responsible for 
 the disbursements by his own Department, the most important of which are those which relate 
 to the public debt. But with respect to the moneys expended by the other Departments, the 
 
3 
 
 statements of the Secretary of the Treasury on!y show the amount received by each from the 
 Treasury. These never can exceed that for which appropriations have been made. The Sec 
 retary is bound, provided the receipts are adequate, to pay to each Department the sum appro 
 priated for its use, and under the several h^eads of the respective appropriations. But he is in 
 no degree responsible for the manner in which the moneys have been expended by any other de- 
 , partment than his own. 
 
 In ordinary times, in times of peace, the expenses of each Department corresponds so nearly 
 with the appropriations that the statement of the Secretary of the Treasury of the moneys paid 
 by him to each, gives to the public a very approximate view of the actual expenditures. The 
 deficiencies for which additional appropriations may be asked from Congress are generally incon 
 siderable. But in time of war it. becomes necessary, in order to ascertain the real amount of 
 expenditures, to recur to the reports of the War and Navy Departments. Neither can, indeed, pay 
 more than the amount appropriated ; but more may be expended, and for the difference a debt 
 may have been incurred. 
 
 The Secretary of the Treasury is in the same manner responsible for the correctness of his esti 
 mates of receipts. But with respect to those of expenditures by any other Department than his, 
 own, he only transmits those prepared by each Department, for the correctness of which each is res 
 pectively responsible. 
 
 Fiscal year ending June 30, 1847. f 
 
 '1 his is almost identic with the first year of the war. The Secretary of the Treasury had, in his 
 report of December 9, 1846, estimated the war expenses for that year 
 
 Paid during first quarter $ 8,153,659 
 
 Estimates for the three last quarters 19,579,438 
 
 $27,733,097 
 
 In his report of December 8, 1847, he states the receipts and expenditures for the same year as 
 follows, viz : 
 
 RECEIPTS. 
 
 From customs $23,747,864 66 
 
 From public lands 2,498,355 20 
 
 From miscellaneous sources 100,570 51 
 
 From avails of Treasury notes and loans. 25,679,199 45 
 
 Total receipts 52,025,989 82 
 
 Add balance in the Treasury July 1, 1846. 9,126,439 08 
 
 Total means 61,152,428 90 
 
 The expenditures during the same fiscal year were 59,451,177 65 
 
 Leaving a balance in the Treasury July 1, 1847, of. $1,701,251 25 
 
 as appears in the detail by accompanying statement A. 
 
 I have used in vain every endeavor to obtain a copy of this statement A, in order to ascertain the 
 details of the expenditure, of which the gross amount alone is given in the text of the report. It 
 will be found in that volume of the documents which contains the report of the Secretary of the 
 Treasury, with the documents relative thereto, and which, at the latest dates from Washington, 
 was yet in the hands of the printer. Having seen the corresponding statement for some former 
 years, it appears to me that the substance may, without adding more than eight or ten lines, and 
 should, therefore, be inserted in the text of the report of the Secretary. This is always published 
 immediately > inserted in all the principal newspapers, and read by every body. The explanatory 
 statement A, is found among the mass of documents which are printed several weeks later, have a 
 very limited circulation, and are hardly read by any body. 
 
 The report of the Secretary of War, dated December 2, 1847, contains no general statement of 
 the expenses incurred in his Department. It is only from the voluminous documents annexed to the 
 report that the necessary information can be extracted. The reports of the Quartermaster General, 
 of the Paymaster General, of the Ordnance department, of the Adjutant Genera), are documents of 
 great merit, of perspicuous, condensed, and apparently as correct as could possibly have been ex 
 pected. The Commissary General of Subsistence may be entitled to the same praise ; but I have 
 not discovered any document stating the amount of his receipts and expenditures for the year end 
 ing 30th June, 1847. I have indeed been supplied from a respectable source with the amount of his 
 expenditures for the year in question ; but I have not been able to discover the document from 
 whic\this amount was extracted. / 
 
 The \nort of the Quartermaster General is the most important. The receipts were 
 
 Balance o\handon July 1, 1846 $380357 72 
 
 Remittances^ .'.V.V.'.'.V.V.20,724;555 32 
 
 Miscellaneous ;v. 96,511 14 
 
 Gross amount,. ,,,.V ; , < 21,701,424 18 
 
Expenditures occurred in the preceding fiscal year 28,012 98 
 
 Money refunded to the Treasury and cancelled drafts 25,017 00 
 
 Expenditures during the year for which accounts rendered 12,327,348 74 
 
 Lieut. Col. Hunt's accounts for 3d and 4th quarters 2,414,039 00 
 
 Balance to be accounted for 6,897,006 46 
 
 $21,701,424 18 
 
 Of this balance, between three and four millions of dollars were not received by the disbursing 
 officers till some time after the close of the fiscal year, though the whole was for accounts and 
 claims accrued within the year. 
 
 Apparent balance, as above stated t $6,897,006 46 
 
 Deduct on this account, say 3,497,006 46 
 
 Leaves to be accounted for only $3,400,000 00 
 
 And this must have been absorbed by the following items of expense, of which, as stated by the 
 Quartermaster General, no accounts had as yet been rendered, viz. the expenses of General Scott's 
 army for more than two months after leaving Vera Cruz ; similar expenses of the Deputy Quarter 
 master attached to General Taylor's army for the whole year, and those at the St. Louis depot for 
 three quarters. 
 
 The tofal expense for this branch was, therefore, during the year ending 30th of June, 1847 
 
 Total amount received $21,701,424 18 
 
 Deduct, applied to the payment of old accounts $38,012 98 
 
 Refunded to the Treasury 25,017 00 
 
 63,029 98 
 
 Apparent expenditure , 21,648,394 20 
 
 The Quartermaster General observes that the estimates presented for the service of the next year 
 are minimum estimates ; and he thinks they might be reduced by cutting off North Jrom South 
 Mexico, erecting the States of the North into a separate confederacy, under the protection of the 
 United States; and by organizing South Mexico, as conquered, into Governments under officers of 
 the United States. 
 
 General Jesup is a most capable, energetic, and efficient Quartermaster. He had prodigious dif 
 ficulties to encounter in transporting an army of 30,000 men, with so little previous preparation, 
 across the sea to a distant country : and he has surmounted all the obstacles. It is not necessary 
 to discuss his politico-military plans, which do not seem to coincide with the avowed declarations 
 of the President ; and I differ widely from him as to what would be a peace glorious to the country 
 and the age. 
 
 The Paymaster General reports : 
 
 Balance on hand on July 1, 1846 $938,047 40 
 
 Received from the Treasury and othex sources 8,578,209 12 
 
 , 
 
 9,516,256 52 
 
 Expended, paying regular troops $1,941,756 84 
 
 Do. do. volunteers 5,723,273 51 
 
 7,665,030 35 
 
 Do. do. Military Academy 87,35999 
 
 7,752,290 34 
 
 Balance on 1st July, 1847, to be applied to future payments 1,763,866 18 
 
 As .the balance on hand amounted, on 1st July, 1846, to 938,047 40 
 
 The unexpended balance had increased $825,818 78 
 
 The Paymaster General further states that the deputy paymasters with the armies of Generals 
 Scott and Taylor had, in the month of October, reported that those troops had been paid to August 
 31. From the tenor of the report, it is presumed that this payment was not included in the above- 
 mentioned sum of $7,665,030 35 ; but that this has been sufficient for the entire pay of the regulars 
 and volunteers for the whole fiscal year. 
 
 The reports from the Ordnance Department are very complete. But a great portion of the sup 
 plies for the use of the army in the field consisted of articles such as a park of artillery (150 pieces) and 
 37,000 muskets, which will not be consumed. The whole of the ammunition, a variety of accoutre 
 ments, and probably a deficiency or deterioration of muskets and some other species of arms, con 
 stitute the portion of ordnance supplies which has been consumed. The value of these articles ic 
 not given. 
 
 The peace establishment of the Navy authorized the employment of 7,500 petty officers, seamen, 
 and boys. The number has been increased to 10,000 during the continuance of the war with Mex 
 ico ; and the gross amount of expenses has increased in about the same ratio. But a great 
 
portion of the increased expenditure has been applied to the building or purchasing steam and other 
 vessels, and to other items of permanent value. The pay and subsistence of the additional men, the 
 wear and tear of a greater number of vessels in actual service, and the loss of some small vessels, 
 seem to be the only items which may be fairly charged to the Mexican war. 
 
 Without pretending to give anything more than a rough approximation, I should think that the 
 additional annual expenses for ordnance supplies and in the Navy Department do not together ex 
 ceed two millions of dollars. 
 
 As far, therefore, as may be inferred from the statements furnished, it would appear that the total 
 amount expended during the fiscal year ending June 30, 1847, for the army proper, including both 
 regulars and volunteers, is nearly as follows, viz : 
 
 Quartermaster General $21,648,394 20 
 
 Paymaster 7,665,000 00 
 
 Subsistence, estimated 3,870.890 56 
 
 Surgeons 65,000 00 
 
 Ordnance and navy, estimated ..' '.. 2,000,000 00 
 
 $35,249,284 76 
 
 The approximate correctness of this estimate is corroborated by the amount of the appropriations 
 for the same object and the same year, which were as follows, independent of those for ordnance, viz : 
 
 By the act of May 13, 1846 $10,000,000 00 
 
 Do. May 19, 1846 89,000 00 
 
 Do. July 20,1846 11,616,015 00 
 
 Do. August 8, 1846 5,545,128 00 
 
 Do. March.2, 1847 7,120,968 00 
 
 $34,371,111 00 
 Deduct increased balance of unexpended appropriation in hands of Paymaster General 825,819 00 
 
 $33,545,292 00 
 Ordnance and navy, estimated as per above 2,000,000 00 
 
 Total $35,545,292' 00 
 
 The true amount of the expense actually incurred during that fiscal year cannot be fully ascertain 
 ed until the several accounts mentioned in the Quartermaster General's report shall have been receiv 
 ed and settled. 
 
 Although the whole amount which shall be found to have been thus expended has been destroyed 
 by the war, yet the whole is not the result of the Mexican war. It appears by former official state 
 ments that the expense for the army proper amounted, during the fiscal year eiading June 30, 1845, 
 to $3,155,000, and during the year ending June 30, 1846, to $3,947,000. There is, therefore, an 
 annual sum of about three millions and a half, which, though making part of the army expenditure, 
 cannot justly be charged to the war with Mexico. 
 
 The next subject of inquiry is the average number of the troops in actual service during that year. 
 This cannot be ascertained with any degree of precision. The Adjutant General gives the number 
 of regulars recruited and of volunteers mustered during the year, and the probable estimate of the 
 nominal amount in actual service of both at the end of the fiscal year. But he does not state, and 
 had not probably the means of stating, the time and times at which they respectively did actually 
 become a part of the troops in the field. .It is certain that this was done gradually. The number 
 of effective men did not when the war broke out exceed eight thousand ; and it was hardly forty 
 thousand at the end of the fiscal year. It appears to me to be fair to estimate the average amount 
 at twenty-five thousand. This, however, is only a conjecture, and it is possible that the average 
 may have been thirty thousand. 
 
 . The estimate of the Quartermaster General is about three millions less for the fiscal year ending 
 June 30, 1848, than had been expended during the preceeding year. This difference may be con 
 sidered as the amount of extra expenses incurred during the first year of the war in organizing at 
 once such an extensive system of operations and in transporting the main body of the army to Vera 
 Cruz. This would reduce the annual expense necessary for supporting an army of twenty-five or 
 thirty thousand men abroad to thirty-two millions of dollars. 
 
 Fiscal year ending June 30, 1848. 
 
 The Secretary of the Treasury had, in his report of December 10, 1846, estimated the expenses 
 jhis year for the army proper and volunteers at $24,302,544. 
 
 his report of December 8, 1847, he estimates the receipts and expenditures for the same year 
 as iolf^ws : 
 
 RECEIPTS. 
 
 From cusWis, first quarter, by actual returns $11,106,257 41 
 
 From custofhc for second, third, and fourth quarters, as estimated 19,893,742 59 
 
 $31,000,000 00 
 
Fromsalesof public lands 3,500,000 00 
 
 From miscellaneous sources 400,000 00 
 
 Total receipts $34,900,000 00 
 
 From avails of Treasury notes and loans 6,285,294 55 
 
 Add balance in the Treasury July 1, 1847... 
 
 $41,185,294 55 
 .. 1,701,251 25 
 
 Total means as estimated , $42,886,545 80 
 
 EXPENDITURES. 
 The actual expenditure for the first quarter, ending September 30, 1847, were (as 
 
 appears in detail by accompanying statement B.) $16,469,194 69 
 
 The estimated expenditures during the other three quarters, are 
 
 Army proper, including volunteers 19,080,865 58 
 
 Naval establishment 10,241,072 47 
 
 All other expenses 12,824,527 33 
 
 From which substracting the means, as per above. 
 
 58,615,660 07 
 42,886,545 80 
 
 Leaves a deficit of. $15,729,114 27 
 
 If we were to suppose that twelve millions out of the $16,469,164, expended during the. quarter 
 ending 30th September, had been spent for the reguar army and volunteers, this, added to the 
 $19,080,865, estimated for the same object during the last three quarters, would make the aggregate 
 less by several millions than the amount already appropriated, or which must be appropriated, in order 
 to cover ascertained deficiencies. 
 
 But'the observation made" with respect to the statement A applies equally to B, the substance of 
 which should have been embodied in the report of the Secretary of the Treasury, instead of being 
 thrown in the mass of documents printed several weeks later. I have equally failed in my attempt 
 to procure a copy of it. As the matter now stands, the report does not exhibit the details of the 
 expenditure of the first quarter, which the Secretary did know ; and it does give the estimated 
 details of the last three quarters, which he did not and could not know. 
 
 The estimate of the war expenses, for the year ending June 30, 1848, derived from the appropria 
 tions already made, and from the estimates of additional appropriations asked for by the Secretary 
 of the Treasury, by his letter of November 24, 1847, is as follows : 
 
 Appropriated by act of March 2, 1847, deducting ordnance $23,335,275 
 
 Additional appropriations to cover deficiencies, deducting ordnance 9,602,439 
 
 Additional appropriations by act of December, 1847 4,000,000 
 
 Ordnance and Navy Department, estimated by me 2,000,000 
 
 The expenses are for the following objects respectively : 
 
 $38,937,714 
 
 
 Act of March 
 2, 1847. 
 
 Deficiencies. 
 
 Total. 
 
 Pay of the armv 
 
 '$3,365,462 
 2,815,595 
 2,211,626 
 150,000 
 12,314,400 
 
 832,192 
 974,000 
 110,000 
 12,000 
 50,000 
 500,000 
 
 |3,937,939 
 64,500 
 5,600,000 
 
 4,000,000 
 
 $6,181,057 
 
 6,149,565 
 214,500 
 17,917,400 
 
 2,478,192 
 4,000,000 
 
 Do. volunteers...., 
 
 Subsistence of both . .... 
 
 Medical do. do 
 
 Quartermaster General 
 
 Commutation of subsistence, &c 
 To officers 
 
 Clothing 
 
 Recruiting . . 
 
 Three months' extra pay 
 
 Contingencies 
 
 Relief to discharged volunteers 
 
 Appropriation of December, 1847 
 
 Ordnance and Navy Department estimated 
 
 023,335,275 
 
 $13,602,439 
 
 $36,937,714 
 2,050,000 
 
 Total ... 
 
 38,937,714 
 
 
 The number of men on the rolls at the commencement of this fiscal year is rstimated by the 
 Secretary of War at forty-three thousand, or at least thirty-three percent, mor- than the highest 
 average number that can possibly have been employed in the preceding year. Considering that 
 
the number of recruits wanted to fill the regular regiments already authorised by law is estimated 
 by the Adjutant General to have amounted, on the 30th of September, 1847, to 10,764 ; that these 
 are daily recruiting, and that an additional volunteer force has lately been called into service from 
 the States of Michigan, Alabama, and Mississippi, it can hardly be doubted that the average force 
 employed, during the fiscal year ending June 30, 1843, will be fifty per cent, greater than in the 
 preceding fiscal year. 
 
 The Paymaster General observes that " more volunteers have been called into service the present 
 iiscal year than were appropriated by Congress ; and I shall have to estimate for an arrearage, so 
 -soon as the official return?, showing the average strength of the several regiments, are received, 
 enabling me to ascertain the amount that will be required." Pie had on the Ifst of July, 1847, a 
 balance on hand of $1,763,000 ; the appropriations already made for pay of regulars and volun 
 teers, for the present fiscal year ending the 30th June, 1848, amount to $6,181,000, and he an 
 nounces arrears besides those sums. Other deficiencies may be expected, and it is highly probable 
 that the total expense for that year will not fall short of forty-five to fifty millions of dollars, for the 
 support of thfcj .troops alone which are now authorized by law. 
 
 Fiscal year ending June 30, 1849. 
 
 It appears to me impossible that the expenses for that year should not be equal those for the year 
 
 ending 30th June,' 1848. The Secretary estimates them at only $31,856,758 50, to which, adding 
 for Navy and ordnance my estimate of $2,000,000, they would still amount to less than $34,000,000. 
 
 The great diminution is in the Quartermaster General's estimate, which is reduced to $13, 187,000, 
 instead of $17,914,000 expended in the year ending 30th June, 1848. On this subject the Quarter 
 master General writes to the Secretary of the War Department, under date of November 15th, 1847; 
 
 " SIR : The estimates which I submitted for your consideration on the 4th instant, for the service 
 of the next fiscal year, were made out from data derived from the experience of the last year. In 
 compliance with your suggestions, I have carefully re-examined every item ; and in all, depending 
 in any degree upon my own action, or that of the officers of the Department, I have made conside 
 rable reductions. Whether those reductions be judicious time must determine. I would not have 
 ventured to make them but for the fact that two sessions of Congress will have terminated before 
 the expiration of the fiscal year for which the estimates now submitted have been made. The 
 sums asked for arrearages for the present fiscal year are not more, I am persuaded, than will be 
 required. I am, however, making every effort to reduce expenditures of every description to the 
 lowest point possible." 
 
 It is therefore clear that the estimate was under-rated, contrary to the Quartermaster General's 
 opinion ; that he would not have made the reduction, had he not relied on Congress making up 
 the deficiency before the whole of the money was wanted ; and that the attempt is now delibe 
 rately made to under-rate the expenses which must necessarily be incurred. 
 
 III. It hns already been observed that the causes which had heretofore prevented the evils of the 
 war from being felt, had, at least for a while, ceased to operate. A total derangement has taken 
 place in England, which appears to have affected almost every branch of business connected with 
 the commercial and manufacturing concerns of the country. The causes generally assigned are, 
 the extraordinary imports of provisions, and the magnitude of the investments in railroads, which 
 have converted circulating into a fixed capital not immediately productive. There may be other 
 more remote and recondite causes. Whatever these may be, the results are well known. Most 
 numerous and extensive failures have destroyed confidence, and caused a general pressure, followed 
 ,by a fall of prices affecting almost every species of commodity, and by a great demand for specie. 
 
 The effects of that commercial catastrophe were immediately felt in the United States. There 
 was and still is a reciprocal want of confidence. Hence, the usual mode of consigning produce to 
 England, accompanied by bills drawn on the consignees for a large portion of its value, has been 
 considejably impeded. The low prices of cotton abroad induced the planters to keep it back ; and 
 every arrival from England brought large parcels of American stocks ordered to be sold for what they 
 -would fetch. The reaction took place in the early part of November, when it was manifested by 
 its infallible index, a rise in the rate of exchange and a consequent exportation of specie. 
 
 The amount of specie in the vaults of the banks of the city of New York was lessened near two 
 millions and a half of dollars during the month of November. Yet it does not appear to me that 
 there is any great danger to be apprehended from a long continued exportation. There was, in. 
 the course of the present crisis in Great Britain, in the first place, a large exportation of specie prin 
 cipally to the United States, in payment for the articles of food she was obliged to purchase, and 
 subsequently a great demand for specie. This has been amply supplied, and, for ths present at 
 least, England wants no more. If any continues to be exported there, this is principally due te the 
 want of confidence, and those other causes which created a scarcity of bills of indubitable credit 
 on Europe, and raised the price of these two per cent, above the true par. 
 
 There is yet scattered in the interior a large portion of the specie imported during the preceding 
 year ; and this will, as is always the case, naturally flow to the place or places where it is most 
 needed. In point of fact, this has already taken place ; and, notwithstanding the continued expor 
 tation/the amount of specie in the vaults of the banks has, during the last three weeks, been in 
 creased several hundred thousand dollars. As soon as the internal navigation shall be open, large 
 
 quantities of maize, pork, and other articles of food, will be exported to Europe ; and cotton cannot 
 
8 
 
 be held back much longer. Thus far every thing is yet sound ; but the high rate (at least one per 
 cent, a month) at which money is borrowed on paper of undoubted credit, would alone be suffi 
 cient to show that great caution is required on the part not only of the banks, but of all those who 
 are engaged in active business. Notwithstanding the great increase of national wealth, there is 
 still a perpetual demand for capital. The circulating capital of the country is clearly the fund out 
 of which the public revenue and loans must be raised ; and the effect produced by a demand of 
 thirty millions within the next six months requires serious consideration. 
 
 Five-eighths of the revenue derived from customs are collected in New York, and nine-tenths in 
 five or six Atlantic seaports. These duties are payable the moment the merchandise is landed or 
 withdrawn from the public warehouses. This substitution of immediate payment, for the former 
 system of bonds and credit, was a sacrifice imposed on commerce, the importance of which has not 
 been sufficiently appreciated. It has, among other effects, thrown a considerable portion of the import 
 ing business in the hands of foreign, to the prejudice of American houses. Still commerce, left to the 
 operation of the natural laws of trade, knows how to adapt itself to existing circumstances ; and 
 notwithstanding this change, things went on smoothly enough so long as peace continued. 
 
 The necessary effect of a war carried on in a foreign country, of our war with Mexico, is that 
 the money thus collected in a feW seaports, and in fact advanced by commerce, instead of being ex 
 pended with some degree of uniformity in the country, must be immediately transferred by the 
 Treasury Department of the United States to the places where it is wanted and expended. The 
 great mass goes to Mexico and New Orleans, whence it does not return to New York, or to any 
 other Atlantic seaport, since it is absorbed and destroyed by war expenses. 
 
 In these transfers from the places where the revenue is collected, the Secretary has done nothing 
 more than that which was absolutely necessary ; and he has done it cautiously, skilfully, and with 
 as much regard for local and commercial concerns as was practicable. The city of New York has 
 had also its full share of the moneys expended for local purposes, or for the purchase of supplies. 
 
 This city is not only the port where the greater part of the revenue is collected, but it has also 
 become the centre of all the great moneyed operations of the country. It is accordingly the place 
 also where a considerable share of the most disposable portion of the circulating capital of the coun 
 try is concentrated. This most disposable portion is that which is deposited in the banks of the 
 several States. And, exclusively of the deposites due to individuals, the banks out of this city have 
 always a large amount deposited in the city banks. Including both items, it would seem .from the 
 general returns from all the banks that the amount deposited in those of the city of New York does 
 not exceed one-fourth part of the total amount deposited in all the banks of the United States. But 
 experience has shown that, with the exception of South Carolina and of Louisiana, the deposites in 
 the banks of the Southern and Western States are available only for local purposes, and contribute 
 but very little to the loans which maybe wanted by the United States. The same observation is 
 generally applicable to the deposites in the country banks of New England, New York, and Penn 
 sylvania. Those Atlantic seaports, in which nine-tenths of the revenue are collected, are also the 
 places which contribute in the same proportion to the national loans. Although varying from year 
 to year, the amount of deposites in all the banks of the United States which are truly available for 
 general purposes may estimated at twice that which is deposited in the city banks of New York. 
 According to the last official report, the following was the situation of both the city and country 
 "banks of New York on the 1st of November, 1847 : 
 
 
 
 City. 
 
 Country. 
 
 Total. 
 
 Liabilities. 
 Capital 
 
 $24 002 000 
 
 $19278 000 
 
 $43,280,000 
 
 Profits 
 
 2 878 000 
 
 3,165000 
 
 6,043,000 
 
 Circulation 
 
 6 964 000 
 
 19 273 000 
 
 26,237,000 
 
 Deposites. .. 
 
 25 766 000 
 
 9 331 000 
 
 35/)97,000 
 
 .Due to banks 
 
 11 512 000 
 
 5 522 000 
 
 17,034000 
 
 Other debts . ..... 
 
 674 000 
 
 3 884 000 
 
 4,558,000 
 
 
 
 
 
 * 
 
 
 71,796,000 
 
 60,453,000 
 
 132,249,000 
 
 Resources. 
 Tjoans and discounts 
 
 $44 003 000 
 
 $36 887 000 
 
 $80,890,000^ 
 
 Stocks and promissory notes 
 
 5 2119 000 
 
 8 262 000 
 
 13,471,060 
 
 Notes of solvent banks 
 
 1,018000 
 
 1,402,000 
 
 2,420,00tt 
 
 Mortgages 
 
 155 000 
 
 2 558 000 
 
 2,713,00a 
 
 Due from banks 
 
 3 207 000; 
 
 7 519,000 
 
 10,726,000 
 
 Loss and expense 
 
 364 000 
 
 388,000 
 
 752,000 
 
 Heal estate 
 
 1,946,000 
 
 1,519,000 
 
 3,465,000 
 
 Specie . 
 
 8 002 000 
 
 1,106,000 
 
 9,108,000 
 
 Cash items 
 
 7,892,000 
 
 812,000 
 
 8,704,000 
 
 
 
 
 
 
 71,796,000 
 
 60,453,000 
 
 132,249,000 
 
9 
 
 The deposites in the city banks consist of two items, those due to individuals and those due to 
 banks out of the city ; that is to say, the difference between the sums due to and from those banks., 
 which on the 1st of November last amounted to $8,300,000, and added to the deposites due to indi 
 viduals made an aggregate of more than thirty-four millions. But it must be observed that these 
 items, " due to bank?," and "due from banks," indicate only the relative position of the city banks 
 compared with those out of the city, whether within or without the State. It shows that banks out 
 of the city have found it convenient to have a large credit in the banks of this city. But in consider 
 ing the United States at large, since the amount clue to all the banks is identic with the amount due 
 from all the banks, both items will disappear altogether, and do not constitute a real resource. 
 
 No official statement of the situation of the banks subsequent to the month of November 'has as 
 yet been published. But, from accounts obtained from several of the most respectable of the city 
 banks, it appears that during the month of November and the first weeks of December, the amount 
 of their deposites (including those due both to individuals and to banks) has lessened at least twenty- 
 five percent. This is, in reference to the fiscal and commercial concerns of the nation, the most 
 important and pregnant fact which has taken place since the commencement of the war, inasmuch 
 as it shows in a tangible manner to what extent the war expenses and the consequent destruction of 
 capital have affected the circulating capital of the country. 
 
 That the deposites in banks are the most dispo^ble circulating capital of th* United States is indu 
 bitable for the simple reason that they bear no interest. They constitute, therefore, evidently the fund 
 most likely to supply the means of subscribing to the loans of the United States. Is there any other 
 similar fund, any other amount of dormant unemployed circulating capital, which may, to any consid 
 erable extent, contribute to the public loans ? There may still be some superrlous specie in the interior, 
 some small amounts hoarded up and waiting for an eligible investment ; but the total amount that can 
 be derived from that source will be but a most insignificant item compared with the amount of the 
 loan which is required. 
 
 There may be many persons desirous of converting State or other local stocks, houses or any other 
 marketable property into stocks of the United States. The only consequence is, that, in this case, the 
 purchasers of such objects must, instead of the money-lenders, find the means of raising the money ; 
 and this must likewise be supplied by the same fund, by the circulating capital of the country. 
 
 Whatever view of the subject may be taken the conclusion is the same. The circulating capital 
 must supply the loans and all the other means of carrying on the war. The portion of that capital 
 which is the least actively employed, is naturally that which, in the first instance, supplies the means ; 
 and the ability of the banks to discount is lessened to an extent equal to the reduction in the amount 
 of their deposites. 
 
 It may, indeed, be assumed that the ordinary returns, in payment of the gales of imported goods, 
 will enable commerce to pay, not however without some pressure, the fifteen millions of custom-house 
 duties expected to be collected during the first six months of the calendar year 1848. But it is im 
 possible that the effect of a loan of eighteen millions and a half, a considerable portion of which must 
 be supplied by the bank deposites, should not be most seriously felt. The bank deposites must neces 
 sarily be more or less diminished ; the banks must, curtail their discounts to the same extent, and the 
 merchants be deprived to a considerable extent of the usual accommodations on which they rely in 
 order to carry on their business. The city banks understand their position ; they will make no unne 
 cessary curtailment, but they will resist the demands and the clamors for what is very improperly cal 
 led a liberal course, that is to say, discounting beyond their means. '1 he recollection of the incidents 
 of the last suspension and resumption of specie payments, a sense of their duty to the public, and the 
 danger of annihilation, will all combine in making them pursue with firmness the only safe course. 
 A suspension of specie payments would forfeit their charters, and there ij; now no hope of legislative 
 relief; for it is provided by the new constitution of the State that " the Legislature shall have no 
 power to pass any law sanctioning in any manner, directly or indirectly, the suspension of specie pay 
 ments by any person, association, or corporation, issuing bank notes of any description." 
 
 For ail this there is no remedy. '1 he war expenses for the fiscal year ending June 30, 1848, are 
 in a great degree already incurred, at all events unavoidable. According to all appearances the evil 
 will be prolonged at least one year longer. There is hardly any hope that peace shall be concluded 
 by the present Administration. Unless relief should come from some unexpected contingency, it is 
 impossible that the pressure should not become more and more intense, and be felt through the whole 
 country as long as the war continues. 
 
 I have spoken more particularly of the city of New York, because I know it best, and because it 
 is by far the most important point, in reference not only to commerce and revenue, but also to cur 
 rency. It has been proved by experience that the banks of this city may resume and sustain specie 
 payments alone, and, on the other hand, that their suspending such payments is attended with a simi 
 lar failure by almost all the other banks in the United States. And the same causes which will pro 
 duce a pressure in New York will operate directly and in the same manner on Boston, Philadelphia, 
 Baltimore, and all the other important seaports. 
 
 It has already been observed that the deposites in the banks of the Western States were wanted 
 and available only for local purposes. But that was not saying enough. The Western States have 
 not as yet accumulated a sufficient circulating capital for their local demands. Possessed of the 
 richest soil in the Union, that is their only want. In all their undertakings, whether successful or 
 irrational, they have always relied on a foreign capital. It is impossible that every portion of the 
 
10 
 
 Union should not be, to a greater or less extent, affected by any considerable diminution and des 
 truction of the national circulating capital. 
 
 IV. We must submit to that which is unavoidable. In order to defray expenses already incurred 
 a loan is necessary ; for, even if taxation were deemed preferable, it could not be made productive 
 in time, since the question now is only with respect to expenses incurred or to be incurred prior to 
 the 30th of June next. Whether the war be approved cr condemned, public faith must be main 
 tained, and the necessary loan be negotiated on the most favorable terms that can be obtained, and 
 in the most eligible form that can be devised. 
 
 It is impossible for any Government to pretend to prescribe the rate of interest and other condi 
 tions on which money shall be lent to them. This will depend on the confidence placed in the good 
 faith and resources of Government, on the general rate of interest in the country, on the probability 
 of a longer or shorter war, and on several other variable considerations. There is, however, one 
 general and apparently invariable law. As the war continues, and as new annual loans are required, 
 Governments are compelled to pay dearer every successive year for the money borrowed ; or, which 
 is the same thing, the marketable price of their stocks is lessened every successive year. This has 
 taken place every where, and is most striking in the instance of Great Britain, because ever since 
 the beginning of the^Sth century perfect confidence has always been placed in the good faith of 
 the Government, and in its ability to pay at least the*interest. Yet in every successive war, and 
 particularly in those of more recent dale, the process has been regularly the same, selling a three 
 per cent, stock nearly at par at the beginning of the war, and finally the value gradually decreasing 
 every year at the rate of about fifty per cent. 
 
 In the present case, the terms of the loan will in a great degree depend on the opinion which the 
 money lenders may entertain respecting the prospect of a speedy peace, or rather respecting the pro 
 bability of another, and a series of other loans. Most of those who subscribe to a loan expect to 
 sell it with a profit, and are therefore apprehensive of the effect produced on the market by new 
 issues of stock, which must necessarily depreciate its value. Was it not for that apprehension it is 
 probable that a loan in six per cent, stock might be obtained at a price very little below par. 
 
 Whatever the rate of interest or the price of stock issued may be, I am clearly of opinion that a 
 simple and direct loan, for which nothing but stock shall be issued, is the most eligible mode of bor 
 rowing. Whether this will be effected by giving a six per cent, stock at a less price than its nomi 
 nal value, or by giving a stock bearing a higher interest than six percent, at par, will depend in some 
 degree on the opinions of the money lenders. All other things being equal, although I was, from par 
 ticular circumstances, compelled during the last war to pursue a different course, I think the last 
 mode to be preferable. 
 
 In arranging the terms it must always be recollected that there is an important difference between 
 Great Britain and the United States. Entertaining no expectation of ever reimbursing the capital, 
 the sole object of the British Chancellor of the Exchequer is to obtain the money at the lowest pos 
 sible rate of interest. We must never lose sight, in the United States, of the fundamental principle, 
 heretofore so constantly adhered to, that Government will pay the capital of the debt as soon as 
 practicable. On that principle the loans, reimbursable within the shortest possible time, are always 
 preferable. If it were practicable, and supposing, for instance, that both could be sold for the same 
 price, a seven per cent, stock, redeemable within ten years, would appear to me more eligible than 
 one bearing six per cent, interest and redeemable in twenty years. 
 
 The preceding observations apply only to details ; but there is an important point to which I wish 
 to call the public attention. 
 
 Treasury notes were first introduced by me ; they are but a mere transcript of the British Exche 
 quer bills, and were intended to perform the same ofiice. At the commencement of a war they 
 afford a convenient mode of anticipating a portion of the annual revenue, equal to the amount of 
 notes which may be kept in circulation at par or above par. They afford the means of convenient 
 investment for a short period ; and the extent to which they may circulate at par depends on the de 
 mand for such investments. They are made payable at the end of a short period, generally one year 
 from their date ; and they bear an interest generally lower than that which prevails at the time. So 
 long as they bear those characters they never can become part of the currency. No species of paper, 
 by whomsoever issued, can become a currency as long as specie payments are maintained, unless it 
 can be exchanged at once for specie at its nominal value. This is the character of bank notes ; and 
 it is wanted.in the Treasury notes, the value of which necessarily fluctuates according to demand and 
 to the rate at which money may be borrowed. If above par, no debtor will give them in payment of 
 his debt ; if beloW par, no creditor will accept them. If, in order to increase the demand, they are 
 made receivable in payment of custom-house duties, or any other debt due to Government, they are 
 still subject to the same general law. If above par they never will be used for the purpose of effecting 
 such payment. If below par, Government will be compelled to receive them in payment; whilst, 
 on the' other hand, it is obliged to make all its payments in specie, or in drafts equal in value to specie. 
 This is precisely the state of things at this moment. In order to increase their circulation the Trea 
 sury notes have also been made convertible at any time into a six per cent, stock ; which would have 
 answered a good purpose if the price of the six per cent, stock could have been maintained at par. 
 
 There is, however, a state of things during which the amount of Treasury notes may be indefi 
 nitely increased, and be occasionally used as a currency. This takes place when there is a general 
 suspension of specie payments. When this catastrophe takes place in England there is at least uni- 
 
11 
 
 formity of depreciation. The notes of the Bank of England are substituted for specie ; and the 
 price of all commodities of public stocks and of exchequer bills is regulated by the market value of 
 those notes in specie. And this generally, though not with perfect uniformity, will depend on the 
 contraction or expansion of the bank issues. But there is not in tne United States any such general 
 paper standard. During a suspension of specie payments the amount of issues in bank notes is regu 
 lated in each State by its laws or by public opinion. At such time there are twenty or thirty species 
 of currency, according to locality ; and each of these varies in each place, according to public opin 
 ion, which in some instances has been sufficient to restrain the depreciation within very narrow 
 limits. It is during such a state of things that the payment of Treasury notes may be postponed, 
 and the issues be increased indefinitely. In that case they become pure paper money, and may 
 compete, perhaps advantageously, with the other paper currencies in circulation. Such was the 
 -case in the United States from the time of the general suspension of specie payments in September, 
 1811, till these were resumed in 1816-17. 
 
 I believe that it was in 1837, and after another general suspension of specie payments had taken 
 place, that Treasury notes were again resorted to ; and they made also a part of the loans of 1841 
 and 1842. The amount must have been, however, very inconsiderable, and I never saw one of them. 
 But they have been the foundation of the two war loans of July, 1846, and January, 1847, in which 
 the issuing of stock is but a supplementary incident. 
 
 The amount authorized by the act of July 22, 1846, is ten millions, and that by the act of Janua 
 ry 28, 1847, tweiity-th.ee millions ; together thirty-three millions, including both the notes and stock, 
 which may be issued by virtue of the said acts. 
 
 The six per cent, stock of the United States is now below par, and the Secretary of the Treasury 
 sees clearly that a direct loan, for which such stock would be issued, could not in all probability be 
 effected at par. He thinks it may be done by substituting Treasury notes for stock. But I do not 
 see in what manner he can attain his object. It is true that Treasury notes are sold now at a higher 
 price than six per cent, stock. To what cause is this owing? Not certainly on account of their 
 convertibility into stock ; nor because there is a greater demand for shortfnvestrnents, which is im 
 possible, whilst the best secured paper, bearing an interest of twelve per cent, a year, may be pur 
 chased at par. The only cause ot the market price of the Treasury notes being higher than that of 
 the six per cent, stock is because they are by law received at par in payment of custom-house duties, 
 and of any other debt due to Government. The necessary consequence is, that, as long as they are 
 ever so little below par, they must continue to form the greater part of the receipts of the Treasury. 
 The Secretary has a right to re-issue them ; he can compel no one to receive them ; but, if he has 
 nothing else to give, will not the disbursing officers, the Paymaster General, the Quartermaster Gene 
 ral, &.C., be obliged to take them, and would not a depreciated paper currency be thus forced on the 
 country ? If, on the contrary, the Secretary thinks himself bound, as he is in fact by the law, to pay 
 all the expenses of Government in specie, and he receives but a very small portion of the revenue in 
 coin, he must purchase the specie ; and, as he has nothing to pay it with but his Treasury notes, he 
 must sell these at what price they will fetch. Such is the state of things at present ; and he asks to 
 be allowed to make, in addition to the notes which he has a right to re-issue, a new series of notes to 
 an amount equal to the loan he may want. It is self-evident that, if he thus increases the amount 
 of the notes, be it fifty or one hundred per cent., there will be a much greater amount than is wanted 
 for the object to which they are .now applied, that they will necessarily depreciate, and that the Secre 
 tary would be obliged to sell his notes at a still lower rate, in order to pay for the specie wanted. 
 This he would have no right to do, if forbidden to borrow at a higher rate than six per cent. ; and 
 this is in truth that which cannot be avoided. The Government of the United States must submit to 
 the general law, according to which it must, for the money which it is obliged to borrow, pay dearer 
 and dearer every year, as the war continues. It is an unavoidable consequence, which no legerde 
 main can prevent or conceal. 
 
 Moreover, there is incompatibility between the receiving Treasury notes, or any other species of 
 paper not always and immediately convertible into specie, and the obligation imposed by the Subtrea- 
 sury act to discharge all the public expenses in specie. It is clear that, in order to comply with that 
 provision, it is necessary that the receipts should likewise be collected in specie. 
 
 It is true that the Subtreasury act is an experiment which no one State has ever attempted to try 
 for itself. But I wish that it may have fair play ; for I am clearly of opinion that it is equally neces 
 sary for Government, for the public at large, and for the banks themselves, that they should never be 
 permitted to use the public moneys for the purpose of increasing their discounts. 
 
 Since both the Subtreasury act and the obligation to receive Treasury notes in payment of debts 
 due to the United States cannot subsist together, either the one or the other should be repealed. This 
 cannot be done with respect to the notes already issued and outstanding, since it is a privilege already 
 granted, a condition which the United States are bound to fulfil. But, although the Secretary of the 
 Treasury has a right to re-issue an amount of notes equal to that which has been paid in {or duties or 
 other debts, he is under no obligation to do it. The fact is that, in order to extricate the Treasury 
 from the difficulties resulting from the incompatibility alluded to, it is necessary, instead of ex 
 tending, to contract the amount of notes in circulation. 
 
 On the other hand, if the Subtreasury act was repealed, modified, or suspended, nothing would be 
 gained by it. Government is bound by the constitutional provision which enacts that nothing 
 shall be a legal tender but gold or silver. It cannot be permitted to substitute, in payment of 
 
12 
 
 
 
 its own debts or for defraying current expenses, any spcciea of paper, the value of which is not 
 equal to specie; or, in other words, which cannot be instantaneously converte'd at par into specie. 
 If, therefore, the Subtreasury act was repealed, modified, or suspended, the necessary consequence 
 would be that Government wbuld be compelled to receive in payment and pay in the notes of 
 solvent banks. 
 
 Treasury nates never become a currency, unless they be vested with that attribute. This could 
 not be effected otherwise than by converting the Treasury into a bank issuing notes, bearing no in 
 terest, but bound to pay them on demand in gold or silver. It is hoped that such a plan will not 
 find a single advocate. 
 
 The attempt to borrow at a lower rate, by substituting Treasury notes for stock, is in every res 
 pect impracticable ; any effort to conceal the truth from the people will prove equally futile. The 
 resort to any species of paper money, that is to say, the attempt to convert into currency a simple 
 promise to pay at a future date, is dangerous, liable to be grossly abused, and calculated to destroy 
 confidence ; for, whenever issued to an amount much greater than the demand for it, a doubt may 
 arise whether such promises to pay shall be actually discharged when they come to maturity. That 
 which has happened, both in other countries and at home, may happen again ; and immoderate issues 
 have a tendency to engender a flood of irredeemable paper money. 
 
 It is undoubtedly desirable that the amount of the loan should be reduced as far as practicable, 
 and, with that object in view, the. Secretary of the Treasury has recommended a duty on tea and 
 coffee. The propriety of a direct tax has also been suggested for the same purpose. 
 
 As an abstract proposition it is certain that a direct tax on property is more just than taxes on 
 consumption. These, if levied on articles of first necessity, such as provisions, or on those articles 
 which, like sugar, tea, and coffee, have become almost articles of first necessity, impose almost the 
 same amount of duty on every individual, whatever that of his property may be. 
 
 But, according to the Constitution, a direct tax imposed by the United States is apportioned among 
 the several States, not in proportion to their respective wealth, but according to what may be called 
 their federal population. ^ The States of Indiana and Massachusetts, both free labor States, have an 
 equal number of representatives in Congress ; and their quota of a direct tax imposed by the United 
 States would be nearly the same under the census of 1840. Under that of 1850 the quota of Indi 
 ana will probably be fifty per cent, greater than that of Massachusetts.- Under existing circumstances 
 a direct tax of only two hundred thousand dollars would be hardly felt in Massachusetts and be op 
 pressive in Indiana. As the population of this State is about one-twenty-fifth part of that of the 
 United States, five millions of dollars would be the total amount of the direct tax. Generally, the 
 amount of a direct tax levied by the- United States must be regulated by the ability to pay of those 
 States which have the least wealth in proportion to their population ; and it will always bear most 
 unequally and oppressively on the States more recently settled. 
 
 .V. Yet in a defensive war the people would cheerfully bear every species, of taxation, and Gov 
 ernment might call forth all the resources of the country. It is quite otherwise in a war of invasion 
 and conquest. The Administration says that their object is to conquer peace ; that is to say, a 
 peace which will give, according to the common vague form, "indemnity for the past and security 
 for the future." It is not intended here to inquire what right the United States have to ask any in 
 demnity from Mexico. Justice is out of the question ; we have to deal with expediency. But to 
 say that we must have security or guaranty for the future is really too ridiculous. No one can sup 
 pose that Mexico will ever invade the United States. But the Mexicans may think that they want 
 some security against a Government which dismembers and threatens subjugation. 
 
 Whatever species of peace may be contemplated, it is necessary, in the first place, to find a 
 Government with whom to treat ; and that in a country entirely conquered or occupied is impossible. 
 In order to make a real treaty of peace, that Government must be a free agent : and no such one 
 can be formed if we extend our occupatfon over the ( whole or the greater part of the country. That 
 free agency is the only guaranty that the United States want for a solid and real peace. A treaty 
 made under duress would be but the phantom of a peace. 
 
 But the Administration, in order to attain the object they have in view, ask for more men and 
 money. It must be admitted that the army which, under General Scott, after a series of extraordi 
 nary victories, penetrated into the heart of the Mexican dominions, aiid took possession of their 
 metropolis, was apparently incompetent for such a bold enterprise; and that, with a greater force the 
 success would have been more certain, and attended with a less lamentable loss of men. But it is 
 nevertheless true that an army of less than ten thousand effective men did perform that wonderful work, 
 defeated forces three times as numerous as themselves, defended by fortresses and strong positions, 
 and annihilated or dispersed, all the troops of the enemy ; and now that our effective force from Vera 
 Cruz to Mexico has been more than doubled, and that, with the exception of some miserable guerrillas, 
 there is no enemy to encounter, the number of troops authorized by law is declared to be insufficient, 
 and fifty thousand regulars, with a reserve of twen y thousand volunteers, are said to be necessary, in 
 order to occupy that which has been conquered, and to extend that occupation over a greater extent of 
 territory. The only avowed object is to conquer peace ; but would not this course inevitably lead to 
 that subjugation and annexation for which the war party is so anxious ? 
 
 This magnificent plan, whether effected by the annihilation of the native population or by enslav 
 ing it, will promote their welfare, and is also called a pacification. "Ubi solitudinem (seu servitutem) 
 faciunt, pacera appellant." But if this extravagant project, suggested by the most unbounded ambi- 
 
13 
 \ 
 
 tion, should be carried into effect, I will not simply say that it would inflict a mortal wound on onr 
 institutions I assert that it would break down our own Union into separate communities, and de 
 stroy our nationality. 
 
 For the object avowed by the Administration there is not the slightest necessity to increas? the 
 number of troops now authorized by law. The only effect would be to perpetuate a large standing 
 army ; to increase indefinitely the Executive patronage, and to appoint greedy proconsuls over the 
 several Mexican Departments which might be occupied. 
 
 I cannot understand the policy of those, who, originally opposed to the annexation of Texas, and 
 to this moment decidedly averse to conquest, are of opinion that, simply because we are at war, we are 
 bound to adopt the views of the President, to sustain him in his course, and to grant him all the rrioney 
 and all the men he requires. Every one has undoubtedly the right to act according to his own notions 
 of right and wrong, and I only claim the same privilege for myself. But let it be recollected that 
 this is not a question of money alone. The President asks formore men. Very lately new regiments 
 of volunteers have been called for and marched to that country, where, exclusively of those who may 
 fall in battle, the climate alone destroys a frightful proportion of the natives of the United States 
 who are subject to the ordinary fatigue and duties of a soldier. Read with attention the reports of 
 the Adjutant General, and the daily accounts of the losses in special corps ; and you will be satisfied 
 that this loss is not less, for the first year, than the 'sacrifice of one-fourth part of the men you are 
 coolly asked to grant to the Administration. And for what purpose I 
 
 It has already been stated that, as no money can, according to the Constitution, be drawn from the 
 Treasury but in consequence of appropriations made by law, the statement of the Secretary of the 
 Treasury shows only, under the head of expenditures, the amount paid by him for the several depart 
 ments, which never can exceed the amount appropriated by law for each service. The question has 
 often been agitated, whether the disbursing departments had the right, for defraying the expense in 
 cident to an object authorized by law, to expend more than the money appropriated for such object. 
 This is a question altogether distinct from that of specific appropriations respe3ting which, it had been 
 contended that moneys appropriated for one object authorized by law might be diverted to another 
 object likewise authorized by law. In this case, even if this construction had b?en admitted, the 
 total amount expended could not have exceeded the total amount appropriated. But in the case now 
 under consideration, the question is, whether the disbursing departments can expend more than the 
 total amount of appropriations. And, as the Treasury never pays them more than that amount, it is 
 clear that, if more is expended by any department, it must fall in debt for the difference. An ap 
 plication for deficient appropriations, or arrears, is then made to Congress ; and, as the debt has been 
 incurred, the necessary appropriation is never refused, if the money has been honestly disbursed and 
 accounted for. The extent to which the expense incurred may exceed the appropriation is exhibit 
 ed in the following sentence, in the report of the Secretary of War : 
 
 " The Department has presented estimates for considerable deficiencies in some of the war ap 
 propriations for the current fiscal year. Provision was made in these appropriations for continuing 
 in service, besides the regular troops, then thousand volunteers ; but it was subsequently deemed 
 important greatly to augment this volunteer force. The excess of volunteers called out beyond 
 that number is over fifteen thousand, for which no appropriation was made." 
 
 Whether the practice be correct or not, it is publicly avowed ; and it follows that Congress must 
 not act under the belief that the actual expense is regulated by the amount appropriated. It is a 
 positive fact, that whenever it does authorize any one object of expenditure, the practical power of de- 
 terming the actual expense which shall be incurred will be determined by the Head of the Depart 
 ment. It is therefore absolutely necessary, whenever an additional object of expenditure is recom 
 mended, previously to examine critically, and without much regard to estimates, generally underrated, 
 what the actual expense will amount to. 
 
 Yet the framers of the Constitution thought otherwise ; for, when it was enacted by the Constitu 
 tion that " the Congress shall have power to raise and support armies, but no appropriation of money 
 to that use shall be for a longer term thnn two years," it was. clearly intended to prevent the danger 
 of large standing armies, and not less clearly implied that armies could not be supported constitution 
 ally without an appropriation to that use. The framers of the Constitution anticipated the danger, 
 and provided the constitutional remedy. 
 
 Indeed, in every representative Government, wherever a certain share of power is enjoyed by 
 the people, it is that over the purse, which has ever been deemed the most impprtant.and of itself 
 almost sufficient to prevent excessive oppression. To this day, in England, in France, and in every 
 other country in which a representative form of Government has been introduced, it is by far the 
 most substantial and efficient attribute of the popular branch of the legislature. It is true, that in Eng 
 land the power, though claimed to its fullest extent, is very rarely exercised. Amilder practice has pre 
 vailed. Wher.evei'a truly important question is decided in the House of Commons against the Ministry, 
 the king must either dissolve the Parliament and appeal to the people,or yield to the will of the majority 
 of the House. It was in this way that the obstinacy of George III. was conquered, and an end put 
 to the war waged by Great Britain against the independence of the United States. But our elective 
 monarch, for the very reason that he is elected by the people, is, during his brief term of office, more 
 powerful than the British King, and would not probably be deterred from his course by a mere decla 
 ratory resolution, such as was that moved by General Conway in the House of Commons. He has, 
 indeed, by his own act, and without having consulted Congress, placed the country in a state of war. 
 
14 
 
 Thifi having been effected, neither of the two Houses of Congress, nor both together, are vested with 
 any constitutional power of compelling him to make a peace, or even to open negotiations for that 
 purpose. There is no other efficient constitutional power by which he can be checked but that of 
 withholding supplies to the extent necessary for effecting the intended purpose. 
 
 POSTSCRIPT. 
 
 FEBRUARY 1, 1848. 
 
 This essay, with the exception of the estimates for the years ending respectively 30th June, 1848 
 and 1849, and of some verbal alterations, was written within the month of December. Its publica 
 tion was postponed in the hope of obtaining more correct information respecting the estimates of 
 receipts and expenditures contained in the second section of the essay. I wanted specially copies 
 of the tables A and B therein alluded to. It has no^ been printed ; and it is only this day that I 
 have received the copy of the annual report of the Secretary of the Treasury on the state of the finan 
 ces, addressed to the House of Representatives. From this I have extracted the substance of the 
 tables in question, which will explain, in that respect, the deficiencies in the text. 
 
 In the mean while, an incident has taken place which would seem to derange all the calculations 
 made respecting the amount of the loan wanted at this time, which were founded on the Report of 
 the Secretary of the Treasury to the Senate. We are now informed that there was an omission in 
 that report of four items, amounting together to $6,915,078, the receipts for Treasury notes and 
 loans which had been disposed of during the quarter ending September 30, 1847 : whence the acting 
 Secretary of the Treasury concluded that a loan of only eleven or twelve millions of dollars would 
 be wanted. 
 
 It appeared extraordinary that the Secretary of the Treasury, who was indeed seriously indisposed. 
 at the time of his report, should, on an aggregate of thirty-three millions of notes and loans author 
 ized by law, find himself near seven millions richer than he thought. 
 In his report aforesaid he reckons, among the receipts for the fiscal year ending 
 
 June 30, 1847, the following sum from avails of Treasury notes and loans $25,679,199 45. 
 
 And he states, as the still available amount from Treasury notes and loans on 1st 
 
 October, 1847, the sum of. 6,285,294 55 
 
 Together $31,964,494 00 
 
 If to this be added the four items of. 6,915,078 00 
 
 The total would amount to $38,879,572 00- 
 
 or near six millions more than authorized by law, which is impossible. 
 
 This must be explained. But, until the explanation shall have been given, it is very clear that the 
 Bum of $5,879,572, being the excess of the apparent receipts and amount still available from Treasu 
 ry notes and loans, beyond the amount authorized by law, must be carried to the other side of the- 
 account. 
 
 If, therefore, adopting all the other statements and estimates of receipts and expenditures, as given 
 by the Secretary of the Treasuey in his original report, he is credited with the four omitted items, 
 
 amounting together to $6,915,078 
 
 He must, on the other hand, be debited with the excess aforesaid, amounting to 5,879,572 
 
 Making a difference in his favor of. $1,035,506 
 
 So that it would appear that the loan wanted, instead of being reduced near seven millions below 
 the original estimate, would be only lessened little more than one million. I am very far from *aying 
 that this is the fact, but only that it is the apparent result, until the subject shall have been investiga 
 ted and explained. 
 
 It appears also to me that there is, among the various documents appended to the report, a want of 
 precision in the expressions used, and particularly in the words redeemed and reimbursed. 
 ' The Secretary of the Treasury is permitted to reissue notes only in lieu of those which have been 
 actually redeemed and reimbursed. And these terms do not at all include the amount of notes which 
 have been converted into stock ; since it is most expressly provided that the aggregate amount of Trea 
 sury notes and stock shall never exceed the sum of thirty-three millions of dollars. There are but 
 three descriptions of notes that are actually paid and reimbursed, and in lieu of which the Secretary 
 has -a right to reissue new notes: 1st, such as may have been purchased by the Secretary; and the 
 acting Secretary, in his report of December 13, 1847, to the Senate, states that none have been thus 
 purchased ; 2dly, those which may have been paid in payment of duties, taxes, and other debts to the 
 United States ; 3dly, those which, coming to maturity, are actually paid and reimbursed. Of this 
 last class, there can as yet be but few that have already become payable, since none were issued paya 
 ble at a shorter date than one year, and the first law authorizing the issue was passed on the 22d July, 
 1846. 
 
 I do not, therefore, understand what is meant in the table A, by the following item : 
 Redemption of Treasury notes, deducting $3,103,200 which were funded under the 
 
 act of January28, 1847 $2,361,397 07 
 
 Nor in table B, the item 
 Redemption of Treasury notes and interest , $2,385,329 63- 
 
15 
 
 There have been no such amounts of Treasury notes paid in payment of duties and debts to the 
 United States, or which have come to maturity and been paid oft'. 
 
 The same remark applies to some other statements, such as that (M) of reimbursement of Treasury 
 notes from December 1, 1846, to December 1, 1847, amounting together to $8,971,791 66. 
 
 In all those cases it is clear that Treasury notes are included which have not been reimbursed, but 
 converted into stock. 
 
 On the other hand, the Register of the Treasury has, in the statements of the public debt, (F,,) and 
 of the amount available on 1st December, 1847, (H,) given a very perspicuous and satisfactory state 
 ment of the situation, on the 1st December, 1847, of the thirty-three millions of Treasury notes and 
 debts authorized by law : 
 
 Loans of 1846 $4,999,149 45 
 
 Do 1847 9,173,772 00 
 
 $14,172,921 45 
 
 Outstanding Treasury notes of 1846 984,750 
 
 Do. do. 1847 13,639,500 
 
 14,624,250 00 
 
 Amount available under act of 1846 902,950 55 
 
 Do. do. act of 1847 3,299,87800 
 
 4,202,828 55 
 
 $33,000,000 00 
 
 The aggregate of loans obtained, and of outstanding Treasury notes, is thus pre 
 cisely ascertained, and amounts to $28,797,171 45' 
 
 But according to the estimates from which the amount of the necessary loan is de 
 duced, the avails of loans and Treasury notes, during the year ending 30th June, 
 1847, amounted to $25,679,199 45 
 
 And those during the quarter ending 30th September, 1847 6,915,078 00 
 
 Together 32,594,277 45 
 
 Making a difference of. $3,797,106 00 
 
 Which seems to prove decisively that there is somewhere an error in the estimates or calculations, 
 and that a loan several millions of dollars greater than has been asked was wanted. 
 
 It will be seen by the table A that the war expenses of the year ending June 30, 1847, under the 
 heads of " Army proper" and "Mexican hostilities," amounted to $36,246,360 94, which is beyond 
 the amount that I had estimated. 
 
 Notwithstanding the difficulty of explaining the statements, from which the inference has been 
 drawn that the loan might be reduced to twelve millions, the Secretary of the Treasury appears to be 
 satisfied for the present with that sum . In the meanwhile, the Secretary of War has applied for a 
 further appropriation of four millions of dollars, almost altogether on accouut of the arrears which had 
 been announced by the Paymaster General. The loan now asked amounts, therefore, to sixteen mil 
 lions. A sum of about four millions, for deficiencies in the estimates in the Quartermaster General's 
 department, will most probably be wanted. And Congress must, before they adjourn, provide for the 
 expenses of the last six months of the calendar year, 1843. That a further loan will be wanted in the 
 course of this year is most certain. I do believe that no greater service can be rendered to the Ad~ 
 ministration than by refusing to grant any increase of troops. 
 
 We are as yet in a sound state. The country is in a flourishing situation. The Mexican war alone 
 arrests or impedes the indefinite progress of the further improvement and prosperity of the United 
 Statea. 
 
16 
 
 TABLE A. Receipts and Expenditures of the year ending June 30, 1847. 
 
 The receipts are, as in the report $61,152,428 90 
 
 [But the total amount of the expenditures was alone given.] 
 The details are as follows : 
 
 Civil list, foreign intercourse, and miscellaneous $6,715,854 9S 
 
 Army proper $17,8811.842 91 
 
 Mexican hostilities 16,001,226 42 
 
 $33,882,069 33 
 
 All other expenses of the War Department 7,399,537 29 
 
 41,281,606 62 
 
 NAVY DEPARTMENT. 
 
 Mexican hostilities $2,364,291 61 
 
 All other expenses 5.567,342 07 
 
 7,931,633 68 
 
 PUBLIC DEBT. 
 Redemption of Treasury notes, deducting $3,193,200, which were 
 
 funded under the act of January 28, 1847 $2,361,397 07 
 
 All other expenses of public debt 1,160,685 30 
 
 __1 3,522,082 37 
 
 59,451,177 65 
 Balance in the Treasury 1st July, 1847 1,701,251 25 
 
 $61,152,428 90 
 
 TABLE B. Receipts and Expenditures for the year ending June 30, 1848. 
 
 RECEIPTS. 
 
 First quarter, I Last 3 quarters, 
 ascertained. estimated. 
 
 Total. 
 
 Customs 
 
 Dollars 
 11,106,257 
 
 896,883 
 58,533 
 
 DolUfM' 
 
 41 19,893,742 
 47 i 2,603,116 
 47 341,466 
 
 Jjollars. 
 59 31,000,000 00 
 53 3,500,000 00 
 53 400,000 00 
 
 Lands 
 
 Miscellaneous ... 
 
 Treasury notes and Loans . 
 
 12,061,674 
 6,915,078 
 
 35 22,838,325 
 00 6,285,594 
 
 65 
 55 
 
 34,900,000 00 
 13,200,372 55 
 
 Balance in the Treasury July 1 1847 
 
 18,976,752 
 
 35 
 
 29,123,620 
 
 20 
 
 i 48,100,372 55 
 1,701,251 25 
 
 19,801,623 80 
 
 
 EXPENDITURES. 
 
 
 
 1,116,680 
 8,717,583 
 1,853,108 
 2,384,805 
 2,385,329 
 11,687 
 
 44 
 60 
 08 
 45 
 63 
 49 
 
 5,486,180 
 19,080,865 
 4,820,630 
 10,241,072 
 267,139 
 2,250,577 
 
 42 
 58 
 42 
 47 
 31 
 18 
 
 6,602,860 86 
 27,798,449 18 
 6,673,738 50 
 12,625,877 92 
 2,652,468 JF4 
 2,262,264 67 
 
 Army proper 
 
 Other war expenses 
 
 Navy.. . 
 
 Redemption of Treasury notes and loans 
 Other payments for public debt 
 
 Deduct total means as per above . . 
 
 16,469,194 
 
 69 
 
 42,146,465 
 
 38 
 
 58,615,660 07 
 49,801,623 80 
 
 Excesi of expenditures 
 
 8,814,036 27 
 
 
 Nothing can show more clearly how delusive these estimates were than the fact that a loan 
 of sixteen millions is actually wanted, and that the probability of this being insufficient amounts 
 almost to a certainty. 
 
 CORRECTION. 
 
 In the estimate of Expenditures for this year, the appropriation on account, made by act of 
 December, 1847, was one million of dollars, and not four millions, as inserted in the text. 
 
 Printed by JOHN T. TOWERS, opposite National Intelligencer Office, at $lper 100.