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holder of Government notes had the right to convert them at any time at par into those five-twenty bonds. When Congress again assembled, the Treasury was again much straightened in its means. Nearly the same situation presented itself as in the previous year, The debt now amounted to 1,400 million dollars. There were large arrears pressing for payment, without the apparent means of meeting them. Early in January, 1863, Congress again authorized the issue of one hundred million dollars of paper money, to meet immediate.wants. The Secretary then desired Congress to amend the law authorizing the sale of the five hundred million dollars five-twenty bonds, so as to restrict the right of converting greenbacks into them at par, to the 1st of July, 1863, and to remove the restriction upon selling them at market value. A new law was also passed, authorizing the issue of five hundred million dollars of six per cent, stock, redeemable after ten and within forty years; also, four hundred million dollars of notes, of denominations as low as ten dollars, to be legal tenders, or convertible into legal tenders, bearing six per cent. interest in paper, and redeemable in three years. There were authorized one hundred and fifty million dollars more legal tenders, into which to convert those small interest-bearing notes. The fractional paper currency was now limited to fifty million dollars. In addition to these provisions, a new National Banking Law was enacted, by which banks were to be authorized in all the States to circulate notes, redeemable in Government paper, and secured on Government stocks. The aggregate circulation was not to exceed three hundred million dollars. It was also provided that the one year certificates were to have their interest paid in paper, and also all future certificates of deposit.

Between the passage of this act and the close of the fiscal year 1863, fifty million dollars of one year certificates fell due, and were paid off. The proceeds were deposited with the Government at ten days' notice at five per cent. interest in paper, and new claims on the Government were met by the issue of new certificates, on which, however, gold was no longer paid for interest. The continued issue of the paper money had promoted a great rise in prices, and much speculative action in goods and specie. Gold rose to a premium of seventytwo in February, 1863. This rise had a twofold effect: it caused a great diminution in the consumption of goods, on account of their dearness, and also a conversion of old stocks of goods into paper money. The money seeking investment filled the bank vaults, and was employed in the Government five per cent. deposits, filling up the limit to one hundred million dollars. The Treasury Department then organized a system of agencies, or commissions, which effected considerable conversions of paper money into the five-twenties, before the expiration of the limit for conversion fixed by law. That limit was, however, not observed by the Secretary, who extended the time for conversion indefinitely, under the power granted by Congress to sell stocks at his own discretion. A number of banks were also organized under the new banking law, and prepared to issue notes secured upon the five-twenties. The deposits on five per cent. certificates, and the conversion during April, May, and June, nearly met the expenses of the

Treasury during that period. The effect of this change of plan was to cause a contraction of the currency, and gold fell from seventy-two to thirty-two, causing a corresponding decline in general prices, and great losses to the holders of goods. At the close of the fiscal year, 1863, the debt stood as follows:

Stocks, 5 per cent., due 1865 to 1874.

" 6 " " " 1868 to 1881. os 6

5.20. Bonds, 7.30 h " 1864... Treasury Notes to 1863........ Deposits 4 per cent., 10 days...

a 5** " 10 " Certificates, 6 per cent., 1 year... Legal Tender...................

16 i Fractions.........................

$30,483,000

87,871,391 185,684,141 139,920,500

717,100 28,059,295 70,815,639 157,093,241 387,646,589 20,192,459

Total debt, July, 1863............................................$1,097,274,355

The appropriations, for two years, were as follows:

July 1, 1861, to July 1, 1862.......

1862, “ “ “ 1863.....

...........

$313,261,629
882,238,800

Total..................................................... $1,195,500,429

-3

The amount actually borrowed up, to July, 1863, was about equal to the actual appropriation of the two years. The amount of debt contracted from July, 1861, to July 1, 1863, or seven hundred and thirty days, was at the rate of one million five hundred thousand dollars. The large expenditures of the Government, as a matter of course, afforded a great substitute for the legitimate demands of commerce which the war had annihilated, and many sections of the country, particularly New England, enjoyed an uninterrupted prosperity, with greater profits and wages, than in times of peace.

The annual export trade of the country, in time of peace, was equal to a sale of three hundred and seventy-three million one hundred and eighty-nine thousand two hundred and seventy-four dollars of domestic produce abroad. Of this amount nearly two hundred million dollars was cotton. On the outbreak of the war the export trade fell to two hundred and twenty-one million nine hundred and twenty thousand dollars; but this included an unusual sale of breadstuffs to Eng. land. That country imported, in 1862, the unprecedented quantity of ninety-seven million bushels of wheat. Of this, more than half was sold by the United States, because the stoppage of the sale of food to the South threw upon the Eastern States an unusual surplus, at such prices as enabled the United States to undersell the corn-growing countries of Europe. In this state of affairs the Federal Government came forward as the employer of one million men, and the purchaser of goods to the amount of seven hundred and fifty million dollars per annum. It did not extract the money for the expenditure from the people with one hand, while disbursing with the other, but, using its credit, it emitted paper that was received as money. Thus the ex

port trade of the country and the Southern markets were supplanted by the war custom of the Government. It may be expressed thus :

1860. Esport Trade................$373,189,274 Southern " .......

.......... 500,000,000 Total amount sales............$873,189,274

1863. Export.............$212,000,000 War Exports. ....... 750,000,000

$962,000,000

It would appear from this that the war was a gain to business, and there was a semblance of prosperity which was not real. The pay. ments of the Government were promises yet to be made good from the earnings of future industry to be taxed. It had taken the labor and merchandise of the people, and given them promises which were to be made good only by taxing the people that held them. The export trade, of course, was paid for in substantial equivalents, but the Government expenses were an actual consumption of the national capital. It was probably the case that this Government consumption of capital was to some extent compensated by greater economy practised by the people, as a consequence of the high prices which goods commanded in the paper money of the day. For this reason exhaustion was far less rapid than would otherwise have been the case. The close of the second year of war then presented the following result:

Appropriation Fiscal year, 1861............$ 81,578,834

1862............ 313,261,629 " 1863............ 882,238,800

1864.. ..... 973,055,670

Debt at close. July 1, 1861, $ 60,189,406

of 1862, 514,211,372

" 1863, 1,097,274,366 Estimate " 1864, 1,744,685,586

The debt of July, 1863, did not include the sixty days' pay of the army and navy then due, and many other large sums, which carried the amount to one billion three hundred million dollars. The debt of 1864 is the estimate of the Secretary of the Treasury. The aggregate interest on the funded public debt amounted to forty-two million eight hundred thousand dollars per annum, mostly in gold. The paper money did not bear interest; but inasmuch as its effect was to enhance the prices of all commodities bought by the Government, an average of thirty-five per cent., and which was payable upon all contracts, the interest actually paid was nearly thirty per cent. average on the expenditure other than salaries, and may be estimated at one hundred and eighty million dollars per annum. This would give an annual interest of two hundred and twenty-two million dollars paid by the Government, or twenty per .cent. on its whole debt. The interest-bearing debt was as follows:

Interest Funded 4 per cent................$ 28,059, 295.49 $ 1,122,371.81

.. 101,297,638.91

5,064,881.94 6 16 • 431,275,874.71

25,876,552.48 7.30 .... 138,920,500.00

10,214,196.50

Total........

$700,553,319.11 " Unfunded .......

......396,721,056.88

$42,278,002.73 180,000,000.00

The average rate of interest on the funded debt is 6.038 per cent. The unfunded costs a great deal more; but, if funded on as favorable terms as the first loans, would bear $32,803,263, making together $75,081,265 of annual interest on the actual debt to July 1, 1863.

The annual charge of the British debt is $127,965,701, or $4.36 to each person. The United States debt is three-fifths of the British debt in annual charge, and $3.79 per head. The charge on the French debt is $110,000,000 per annum, or $3.05 per head.

Tbe actual increase of the debt for the year 1862 was $1,450 each working day; for the year 1863, it was $1,862,800 each working day; for the last six months of 1862, it was $2,418,000 per day. This was the most extraordinary instance in the history of the world of the lavish expenditure of means for national objects. No country ever before manifested such resources, and no people ever before offered them up so freely to the service of the Government. It may here be remarked, that in the two years in which these marvels occurred, the Northern States sent nearly 1,000,000 bushels of grain to supply the wants of she people of England and Europe.

CHAPTER XXXI.

Thirty-Seventh Congress.—Foreign Relations.-Public Anxiety.--Surrender of Com. missioners.- War Conduct.-Executive Action.-President's Message.--Co-operation.-Hunter's Order.—Border State Delegation.-Kentucky Legislature.-Presi. dent's Letter.—His Position.- Western Delegation.--Emancipation Action of Congress.

No more Slave Territory.- District of Columbia.--Co-operation Resolution.Military not to Surrender Fugitives.-Troops Authorized.-Conscription.-Work of the Thirty-Seventh Congress.

On the 2d December, 1861, the second session, or first regular session of the Thirty-Seventh Congress, convened at Washington under the most extraordinary circumstances. The war had continued with varying fortunes, and grave complications seemed to be surrounding our foreign relations. The capture of the English majl steamer Trent, by Captain Wilkes, of the American navy, having on board the Confederate Commissioners, Messrs. Mason and Slidell, on their way to Europe, had caused profound excitement at home and abroad. England complained of it as a violation of the rights of neutrals. Her attitude was so hostile as to render war imminent, and the action of the Federal Government was looked for with the most profound anxiety. The House, on assembling, immediately adopted a joint resolution of Mr. Lovejoy, of Illinois, voting the thanks of Congress to Captain Wilkes for the arrest of Messrs. Mason and Slidell. This resolution was rejected in the Senate. Two resolutions were then passed: one to request that Mr. Mason be held as a hostage for the treatment of a Union prisoner in the hands of the Confederates; and the other, that Mr. Slidell be also so held to answer for the treatment of another. The passage of these resolutions was, however, immediately followed by the action of the Government in surrendering

Messrs. Mason and Slidell to the English, and the war cloud passed over.

The most important phase which Congressional action now assumed was in reference to the general war powers which the Government was authorized to assert, and of which the chief one was manifestly the control of slavery. The strict constructionists, in their zeal to prevent any infraction of the Constitution, denied to President or Congress the power, even in the exigencies which war created, to touch the peculiar institution of the South, or indeed to exercise any rights not directly conferred by the Constitution. General McClellan illustrated this policy when he wrote to President Lincoln from Harrison's Landing, on July 7th : “ Neither confiscation of property, political executions of persons, territorial organization of States, or forcible abolition of slavery should be contemplated for a moment;" and others, entertaining similar views, went so far as to assert that unless the war could be conducted with a precise observance of every legal and political right to which the rebels bad been entitled in time of peace, à compromise had better be effected with them, or the rebellious States be allowed to secede quietly. With them the Constitution was an instrument of so sacred a character, that it was regarded as superior to that Union for whose government it had been framed. The Union thus became the creature of the Constitution.

Fortunately for the country, this class, though possessing no lack of talent, was without much influence, and the great body of the loyal people recognized the fact that no such state of affairs existed as should prevent that reciprocal influence and harmonious co-operation of the Union and the Constitution which was intended by the founders of the nation. As the Constitution was “ ordained and established," among other things, to “insure domestic tranquillity, provide for the common defence, promote the general welfare,” it was assumed, with reason, that it contained ample provisions for accomplishing these several objects. Such provisions are in fact fully detailed in Article I., Section VIII., of that instrument; and in accordance with them were the war powers from time to time exercised by the President and Congress, against which the sticklers for strict construction so vehemently protested. Among these powers the confiscation of slave property, or the emancipation of slaves, was early recognized; but such was the tenderness in approaching this vexed subject, and so strong the hope that the rebellion might be crushed without resort to it; so great also the reluctance, in the early stages of the war, to offend the sensitiveness of the loyal Border Slave States on the subject, that the Thirty-seventh Congress forbore, at its first session, to interfere with slavery further than to declare confiscated any slave property employed in military service in aid of the rebellion. This, however, was sufficient to enunciate a general principle, which, it will be seen, was soon carried to its extreme limit.

With the progress of the war it became evident to those who were in favor of carrying it on with all the means at the disposal of the Government, that a more vigorous policy on the subject of interfering with slavery was necessary. The forbearance of the Government had

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