June 30, 1862, were insufficient for the payments expected to be made from them. The receipts were $51,935,720 76, while the disbursements for the civil service, for Pensions and Indians, and for interest, were $37,701,801 11; leaving only $14,233,919 65 for the War and Navy Departments, the expenditures of which in the last year of peace had been $27,922,917 24, and nothing at all for extraordinary expenditures or a sinking fund.

In his report at the December session, 1862, the Secretary, considering this deficiency and assuming the correctness of the estimate of $150,000,000 as the amount of receipts from internal duties, and taking double the expenses of the War and Navy Departments in the last year of peace as the amount likely to be annually required after the suppression of the rebellion, expressed the opinion that the probable receipts under the legislation of the preceding session would meet all ordinary expenditures for the fiscal year 1863, and interest, and leave a large surplus to be applied, for the present, to the extraordinary disbursements of the war, or, after its close, to the reduction of debt. In that report, there fore, and in his subsequent communications to the proper committees, the Secretary suggested no increase of taxation, but confined his recommendations to other measures for the improvement of the public credit, among which those relating to loans and to uniformity of currency held the foremost place.

Congress gave effect to these recommendations by the loan act and the national banking act, but at the same time somewhat diminished the expectation of income by modifications of the internal revenue act.

Notwithstanding this diminution, however, and notwithstanding uch arger diminution caused by the failure of receipts expected from intenties unaffected by this legislation, the Secretary has now the satisfaction being able to show that the actual receipts of the last fiscal year did pay the whole interest, the whole amount of ordinary expenditures, estimated for the army and navy at double those of the last year of peace, and a portion of the extraordinary expenditures which, under the circumstances, was equivalent to a payment into a sinking fund.

Thus the total amount of receipts during the fiscal year

Leaving difference between receipts and ordinary expenditures applicable to extraordinary expenditures or a sinking fund.

16,397,189 33

Had it been possible, therefore, to suppress rebellion and restore expenditures to a peace basis after one year of war, and before the 1st of July, 1862, there would have been a balance on the 1st of July, 1863, of more than sixteen millions of dollars applicable to the reduction of debt.

So, assuming as correct the estimates of receipts and disbursements for the current year 1864, based on actual receipts and expenditures of one quarter, and making the total amount of receipts $161,568,500 35, and taking the disbursements for the Civil Service, Pensions, and Indians, to be $42,108,126 33, for interest $59,165,136 38, and for the ordinary expenses of the army and navy, as before, to be double those of the last year of peace, or $55,845,834 48, and deducting the total of these disbursements, $157,119,097 19, from the total of receipts, there will remain an unexpended balance of $4,049,403 16. Had it been possible to suppress rebellion after two years of war, and before July, 1863, this sum would have been applicable to the purposes of a sinking fund.

So, also, assuming again as correct the general estimates of receipts and expenditures for the next fiscal year, 1865, the total receipts for the year will be $206,836,539 93; while the expenditures for the Civil Service, and Pensions and Indians, will be $37,604,499 54; for interest, $85,387,676 15; and for the army and navy, observing the rule already stated, $55,845,834 48; making a total of $178,838,010 17, which sum, if deducted from the total of receipts, will give a remainder of $27,998,529 76. Should the rebellion be suppressed after three years ar, and before the first of July, 1864, that remainder will be applicable to ent of debt.

These statements are subject to some modifications besides those which may result from errors of estimates; but these cannot reduce, though they may increase, the applicable balances, and therefore cannot affect unfavorably any deductions from the figures which have been given.

These statements illustrate the great importance of providing, beyond all contingency, for ordinary expenditures and interest on debt, and for the largest possible amount of extraordinary expenditures, by taxation. In proportion to the amount raised above the necessary sums for ordinary demands will be the diminution of debt, the diminution of interest, and the improvement of credit. It is hardly too much-perhaps hardly enough-to say that every dollar raised for extraordinary expenditures or reduction of debt is worth two in the increased value of national securities, and increased facilities for the negotiation of indispensable loans.

These statements illustrate equally the importance of an economical and vigorous prosecution of the war. No prudent man will recommend economy at the expense of efficiency. Such nominal economy is real extravagance. But efficiency is not promoted by profusion, or waste, and least of all by misuse of public money or public property. Every dollar and every man are freely offered by a generous people. How sacred the obligation that not one man should be wasted, and not one dollar misapplied. Nor is rashness, in war, vigor. But the vigilance that misses no opportunity, the energy that relaxes no effort, the skill that utilizes all resources, and the perseverance that never grows weary—

these make true vigor. If by such vigor the rebellion can be suppressed and the war ended before the 1st of July next, the country will be saved from the vast increase of debt which must necessarily attend its continuance during another year, and the debt itself can at once be placed in a course of steady reduction. And whenever progressive payment shall begin, the value of national securities will rapidly rise, and reduction in rates of interest will gradually diminish the burdens of debt.

While the Secretary thus earnestly urges that the largest possible proportion of expenditure be provided by direct contributions from the property and incomes of the people, he is aware that a still larger proportion must, as yet, be provided by loans

In the creation of debt, by negotiation of loans or otherwise, the Secretary has kept four objects steadily in view: (1) moderate interest; (2) general distribution; (3) future controllability; and (4) incidental utility.

Towards the accomplishment of the first object, the nearest approach that seems possible has been made. The earliest negotiations were at the highest rates of interest; for it is a distinguishing characteristic of our financial history in this rebellion that the public credit, which was at the lowest ebb in the months which preceded its breaking out, has steadily improved in the midst of the terrible trials it has brought upon the country. The first loans were negotiated at seven and thirty hundredths per cent.; the next at seven; the next at six; more re-¦ cently large sums have been obtained at five and four; and the whole of the debt which is represented by United States notes and fractional currency bears, of course, no interest.

The interest on the debt which exists in the form of treasury notes and certificates of indebtedness or of deposits, and is called temporary debt, is paid in United States notes; while the interest on debt which exists in the form of bonds, and is called funded debt, is paid in coin-a discrimination which is intended to bring the payments of coin interest within moderate compass, and at the same time to offer special inducements to investments in bonds, in order to avoid a too rapid increase of circulating notes and consequent depreciation.

The average rate of interest on the whole debt, without regard to the varying margin between coin and notes, was on the first day of July, 1862, 4.36 per centum; on the first day of January, 1863, 4.02 per centum; on the first day of July, 1863, 3.77 per centum; and on the first day of October, 1863, 3.95 per

centum.

It will not escape observation that the average rate is now increasing, and it is obvious that it must continue to increase with the increase of the proportion of the interest-bearing to the non-interest-bearing debt. And as the amount of the latter, consisting of United States notes and fractional currency, cannot be materially augmented without evil consequences of the most serious character, the rate of interest must increase with the debt, and approach continually the highest average. That must be greater or less in proportion to the duration and cost of the war.

The general distribution of the debt into the hands of the greatest possible number of holders has been the second object of the Secretary in its creation

This has been accomplished by the universal diffusion of United States notes and fractional currency, by the distribution of certificates among great numbers of contract creditors and temporary depositors, and by arrangements to popularize the loans by giving to the people everywhere opportunities to subscribe for bonds. These subscription arrangements have been especially useful and successful. They have been adopted as yet with reference to only two descriptions of bonds-the two commonly known as seven-thirties and five-twenties; so named, the first from their rates of interest, and the second from their periods of payment. The plan of distributing the seven-thirties was that of employing a large number of agents in many places, and directing their action from the Department. It worked well for a time, but was soon found inadequate to the financial necessities of the government. For the distribution of the five-twenties, therefore, a different plan was adopted. After ascertaining, by inquiry, that they could not be disposed of to capitalists in amounts sufficient for prompt payment of the army and navy, and for the satisfaction of the just claims of public creditors generally, without serious loss, the Secretary determined to employ a general agent, under adequate bonds, and confide the whole work of distribution, except so far as it could be effected by the Treasurer, Assistant Treasurers, and Designated Depositaries, to him and to sub-agents designated by him and responsible immediately to him. Under this plan, and chiefly through the indefatigable efforts of the general agent and his sub-agents, five-twenty bonds to the amount of nearly four hundred millions of dollars, in denominations of fifty, one hundred, five hundred, and one thousand dollars, were distributed throughout the whole country not controlled by the rebellion, and among all classes of our countrymen. The history of the world may be searched in vain for a parallel case of popular financial support to a national government. The Secretary is unable to perceive in what better or more effectual mode the important object of distribution could be accomplished, and he proposes no departure from it, except such as considerations of economy, harmonized with efficiency, may suggest.

The object of future controllability has also had a prominent place in the regards of the Secretary. Under the conditions which existed at the outbreak of the rebellion, he acquiesced in the necessity which seemed to dictate the negotiation of bonds payable after twenty years; but he acquiesced with reluctance, and, as soon as permitted by circumstances, recommended the enactment of laws authorizing the issue of bonds payable after shorter periods, as well as the creation of temporary debt in other forms. In harmony with these views Congress provided for the issue of the bonds known as the five twenties; and also for the issue of treasury notes payable three years from date; for certificates of indebtedness payable in one year; and for temporary loans by deposits, reimbursable after ten days' notice. At the last session Congress repealed some embarrassing restrictions of former acts, and authorized the issue of bonds payable after ten years, and of treasury notes payable at pleasure or three years from date. These treasury notes were made legal tenders for face value, or convertible for amount and interest into United States notes.

The Secretary availed himself of this legislation by placing with he people as large an amount as possible of five-twenty bonds, and by using the other

powers so as to put the whole debt, except the long loans first negotiated, in such a shape that prompt advantage can be taken of favorable circumstances to diminish the burdens it imposes on industry. Whenever the constitutional supremacy of the nation shall be re-established over all its parts, it will be completely within the power of Congress and the Secretary to fund the whole or any part of the temporary debt in bonds bearing a very moderate interest and redeemable at the pleasure of the government, after very brief periods, or, perhaps, at any time after their issue. Nothing further seems desirable on the score of controllability.

The final object of the Secretary was to extract from the unavoidable evil of debt as much incidental benefit as possible.

To this end, he desired authority to receive temporary loans in the form of deposits reimbursable after a few days' notice. This measure was regarded by many with something less than favor at first; but Congress, after full consideration, authorized the receipt of such deposits at an interest not exceeding five per cent. to the amount of twenty-five millions of dollars; then raised the limit to fifty millions, and then to an hundred millions; and provided a reserve of fifty millions of United States notes to meet demands for reimbursements beyond other convenient means of satisfaction. It was not long before these deposits reached the highest limit, and, before the flow could be well checked, somewhat exceeded it. The utility of the measure was very conspicuous on the recent occasion of great stringency in New York, when the Secretary was able to reimburse over fifty millions of these deposits during the last weeks of the year; by which action the pressure was sensibly alleviated, with the use of only a fifth of the reserve.

In former reports the Secretary has stated his convictions, and the grounds of them, respecting the necessity and the utility of putting a large part of the debt in the form of United States notes, without interest, and adapted to circulation as money. These convictions remain unchanged, and seem now to be shared by the people. For the first time in our history has a real approach to a uniform currency been made; and the benefits of it, though still far from the best attainable condition, are felt by all. The circulation has been distributed throughout the country, and is everywhere acceptable. It is a gratification to know that a tribunal so distinguished by the learning and virtues of its members as the Supreme Court of New York has given the sanction of its judgment to the constitutional validity of the law.

So, too, real and great advantages are derived from the wide diffusion of the debt among the people, through business transactions, and through the exertions of the officers of the department and the agents for loans, already noticed.

It is impossible to estimate the advantages to national unity and national strength secured by this distribution. Every holder of a note or bond, from a five cent fractional note to a five thousand dollar bond, has a direct interest in the security of national institutions and in the stability of national administration. And it is another and no small advantage of the distribution that the burdens of debt, always heaviest when loans are held by few, and especially