Browsing "Aftermath: The Gilded Age"

The War for Tariffs, Taxes and Astonishing Profits

The war commenced by Lincoln in 1861 immediately presented his administration with the problem of a conflict the United States could simply not afford. In April 1861, federal spending was only about $172,000 a day, raised by tariffs and land sales. By the end of July 1861, Lincoln had caused this to increase to $1 million, and by the end of December it was up to $1.5 million per day. Also in December 1861 Northern banks had to stop paying their debts in gold, with the federal government doing the same shortly after and resorting to printing money. The country had gone off the gold standard, Wall Street was in a panic, and Lincoln would lament, “The bottom is out of the tub, what shall I do?” The cost of the war would eventually reach $8 billion, enough to have purchased the freedom of every slave five times over – and provided each with the proverbial 40 acres, and the mule.

Bernhard Thuersam, www.Circa1865.com

 

The War for Tariffs, Taxes and Astonishing Profits

“By May 1864 [financier Jay] Cooke was selling [Northern] war bonds so successfully that he was actually raising money as fast as the War Department could spend it, no mean feat for that was about $2 million a day at this point. Altogether, the North raised fully two-thirds of its revenues by selling bonds. If Abraham Lincoln must always be given the credit for saving the Union, there is also no doubt that the national debt was one of the most powerful tools at his disposal for forging victory.

Although the [Northern] people were willing to endure very high taxes during the war, peacetime was another matter altogether. Immediately after the war the cry for repeal of the wartime taxes became insistent. With military expenses quickly dropping, the problem, was what taxes to cut. American industrialists, who had prospered greatly thanks to wartime demand and wartime high tariffs, naturally did not want the tariffs cut.

Because the Civil War had broken the political power of the South, the center of opposition to the tariff, they got their way. The tariff was kept at rates far above the government’s need for revenue as the North industrialized at a furious pace in the last three decades of the nineteenth century and became the greatest – and most efficient – industrial power in the world.

Of course, no matter how large, efficient, and mature these industries became, they continued to demand [tariff] protection, and, thanks to their wealth and political power, get it.  As Professor William Graham Sumner of Yale explained as early as 1885, “The longer they live, the bigger babies they are.” It was only after the bitter dispute between Andrew Carnegie and Henry Clay Frick caused the astonishing profits of the privately held – and highly protected – Carnegie Steel Company to become public knowledge, in 1899, that the political coalition behind high tariffs began to crack.

Before the Civil War there had been little advocacy of an income tax in this country, at least at the federal level, although by the war six States had implemented such taxes for their own revenue purposes. But once a federal income tax was in place, thanks to the Civil War, it quickly acquired advocates, as political programs always do.

These advocates pushed the idea relentlessly . . . Republican Senator John Sherman . . . said during a debate on renewing the income tax in 1872, that “here we have in New York Mr. Astor with an income of millions derived from real estate . . . and we have along side of him a poor man receiving $1000 a year. [The law] is altogether against the poor man . . . yet we are afraid to tax Mr. Astor. Is there any justice in it? Why, sir, the income tax is the only one that tends to equalize these burdens between the rich and the poor.”

(Hamilton’s Blessing, John Steele Gordon, Penguin Books, 1997, pp. 79-83)

Roosevelt’s “New Nationalism”

“Roosevelt the First,” as Mencken referred to Theodore, seemed unaware that his own party was responsible for the national malady he spoke against – it was the Republican Party’s marriage of government and business in the 1860s that unleashed the Gilded Age as the conservative South was no longer there to resist the government corruption and scandal. As he asserted new powers for the president, Roosevelt was creating new authority beyond what the United States Constitution confers upon the executive branch, his New Nationalism was indeed a refuge for “presidential lawbreakers.”

Bernhard Thuersam, www.Circa1865.com

 

Roosevelt’s “New Nationalism”

“[Former President Roosevelt] arrived in New York on June 18 [1910], after visiting courts and other interesting scenes in Europe. In all these places he received great honor, and his landing in New York called forth a demonstration worthy a world hero.

The public was curious to see whether Roosevelt would side with his old friend [William H. Taft], now the President . . . Shortly after landing he visited Taft and outwardly all seemed harmonious. In all he said openly he did not criticize Taft, but he did not abate his opposition to big business in politics.

Then suddenly he hurled a thunderbolt. Speaking on August 31 at Osawatomie, Kansas, he announced a political program, which he called “New Nationalism.” Government by the people, he said, was threatened by wealth in national politics, and the power of the nation should be so extended over it that it could not do what it is doing.

To reach this end he would give the federal government all needed power. If the Constitution was not strong enough he would amend it. He denounced what he called the “twilight zone” between federal and State authority, “a refuge for lawbreakers, and especially for lawbreakers of great wealth, who can hire the vulpine legal cunning which will teach the way to avoid both jurisdictions.”

“New Nationalism,” he added, regards the executive power as the steward of the public welfare. It demands of the judiciary that it shall be interested primarily in human welfare, rather than in property, just as it demands that the representative body shall represent all the people rather than one class or section of the people.” From the individualism of [Grover] Cleveland to the “New Nationalism” of Roosevelt was a long step.”

(Expansion and Reform, 1889-1926, John Spencer Bassett, Kennikat Press, 1971 (original 1926), pp. 175-176)

 

War Profiteering in the North

Published as a textbook well before America’s cultural revolution of the 1960’s, John Hicks “The Federal Union” can be trusted as a fairly accurate source of United States history and free of cultural Marxist revisionism. Below, he touches on the North’s generous government supply contracts, child labor and general wartime prosperity while its bounty-enriched blue-clad soldiers devastated Americans in the South to preserve a territorial Union.

Bernhard Thuersam, www.Circa1865.com

 

War Profiteering in the North

“When the Civil War broke out the North had not fully recovered from the depression that had followed the panic of 1857, and for a time business interests were more frightened than stimulated by the clash of arms. By the summer of 1862, however, a surge of prosperity had put in its appearance that was to outlast the war.

With millions of men under arms the [Northern] government was a dependable and generous purchaser of every kind of foodstuff, and its equally great need of woolen goods and leather strengthened the market also for raw wool and hides. Probably the sales of the farmers made directly or indirectly to the government more than offset the losses sustained by wartime interference with sales to the South.

[And] with the South out of the Union, a homestead law, so long the goal of believers in free land, was speedily enacted (1862). Thereafter any person who was head of a family, or had arrived at the age of twenty-one years, whether a citizen of the united States or an alien who had declared his intention of becoming a citizen, might take up a quarter section of public land, and, after having lived upon it for five years and improved it, might receive full title to it virtually free of charge.

What came in later years to be called “heavy industries” profited enormously from the war. Purchases of munitions abroad practically ceased after the first year because of the rapidity with which American factories supplied the government’s needs . . . the government itself went deeply into the business of manufacturing war materials as public opinion would permit.

High tariffs ensured the northern manufacturers against the dangers of foreign competition. A protectionist policy had been demanded by the Republican national platform of 1860, and a higher schedule of tariffs . . . was placed upon the statute books two days before [President James] Buchanan left office. This speedy answer to the prayers of the protectionists was made possible by the withdrawal from Congress of the delegations from the seven seceding States of the lower South, and by the fact that President Buchanan was no longer unmindful of the wishes of the manufacturers of his home State [of Pennsylvania].

The original Morrill Tariff Act was repeatedly revised upward during the war, until by 1864 the average of duties levied on imports had reached forty-seven per cent, the highest thus far in the history of the nation. The significance of this development can scarcely be overemphasized. A policy which the South had persistently blocked in the years preceding the war became an actuality during it, and as subsequent events were to prove, remained as a permanent fixture in American political and economic life.

The profits of war bred a spirit of extravagance and frivolity among the non-combatants of the north that contrasted oddly with the long casualty lists displayed as a regular part of the daily news. Social life reached a dizzying whirl, with more parties and dances, theaters and circuses, minstrel shows and musicales than ever had been known before.

According to a statement published by the Springfield Republican in 1864, many of the factories whose profits during the war had been “augmented beyond the wildest dreams of their owners” paid their laborers only from twelve to twenty per cent more than before the war. “There is absolute want in many families, while thousands of young children who should be in school are shut up at work that they may earn something to eke out the scant supplies at home.”

(The Federal Union, A History of the United States to 1865, John D. Hicks, Houghton Mifflin Company, 1948, pp. 660-665)

The War to Create Many Large Fortunes

After the departure of conservative Southern congressmen in 1861, the old Whigs in the Republican party went unrestrained in their merger of government and corporations. Historian Charles Beard would later write of the War that it was not easy to tell “where slavery as an ethical question left off and economics – the struggle over the distribution of wealth – began.”

Bernhard Thuersam, www.Circa1865.com

 

The War to Create Many Large Fortunes

“As the election of 1872 approached, the tax and tariff issues were potent enough for [President Ulysses] Grant to take at least some action. Trying to shore up support among farmers and others, Congress approved a 10 percent reduction in tariffs on most items including cotton and wool textiles, iron, steel, paper, glass and other items. But these were baby steps with marginal impact, designed to preserve the whole protectionist system.

Throughout the assault on the [Civil War] income tax, opponents had considered the step of going to court to challenge the tax’s constitutionality. Some suits were filed, and parts of the tax were upheld by various courts, including the Supreme Court. But as the expiration of the tax approached, there did not seem to appear much sentiment in Congress to continue it anyway. Senator [John] Sherman [brother of General Sherman] fought once again to keep the tax alive. He asserted that one of the most solemn obligations of the federal government was to protect the property of Americans. It was therefore only proper “to require property to contribute to their payment.”

Sherman’s appeal was to no avail. Congress was more sensitive to the demands of the growing number of wealthy entrepreneurs, investors, and tycoons, who were at their moment of maximum influence. The power of the new wealthy rested on the newly consolidated railroads and the many large fortunes create by the Civil War.

The landscape of wealth had changed. Whereas New York City had had a handful of millionaires before the conflict, there were hundreds of millionaires afterward. Their fortunes were in the tens of millions of dollars. A.T. Stewart, the dry goods magnate, was worth $50 million, and other millionaires, such as William B. Astor, Cornelius Vanderbilt, and the banker Moses Taylor, were not far behind.

Before Congress abolished the publication of income tax returns, it was reported that Astor had paid more than $1 million in income tax, while Vanderbilt and Taylor had paid more than $500,000. After the war, many millionaires routinely engaged in tax evasion or tricks to hide their income. What they did not bother to hide was their vast influence.

In 1869, Grant’s friend Jim Fisk worked with [Northern financier] Jay Gould to monopolize the market in gold, driving up its price so they could make a killing. Instead, on “Black Friday,” September 24, 1869, a collapse in gold prices engulfed a vast number of speculators and investors.

Fisk and Gould managed to bribe enough officials to avoid prosecution, and Fisk remained close to his trusting friends in the White House. Years later the Credit Mobilier scandal revealed that the construction company owned by stockholders of the Union Pacific Railroad had ensnared many prominent members of the Grant administration and Congress.

As tax the historian Sidney Ratner notes, the Civil War debt “became one of the most powerful instruments in America for the enrichment of the rentier class, the leading capitalists. For the next forty years, farmers, workers, small merchants and other working-class Americans carried this debt burden, to the benefit of the rich.”

(The Great Tax Wars, Lincoln to Wilson, Steven R. Weisman, Simon & Schuster, 2002, pp. 99-101)

Watching Richmond with a Cold Profiteering Eye

“Diamond Jim” Fisk, was a Vermonter who by 1864 had made a fortune through shrewd dealing with army contracts and smuggling cotton northward through Union lines. Allied with the notorious New York political boss Boss Tweed, his buying of judges and bribery of legislatures was the stuff of legend.

Bernhard Thuersam, www.Circa1865.com

 

Watching Richmond With a Cold, Profiteering Eye

[Losing a large sum in stocks, Fisk] saw an opportunity to recoup his losses by capitalizing in a similar way on victory. Confederate bonds had fallen on the London exchange with Southern losses but were still selling at some eighty cents on the dollar. Grant now had Richmond in a vise. Victory seemed certain, and when the Confederacy met defeat her bonds would plummet in value.

Not yet was there an Atlantic cable, so it would take more than a week for news of the war’s end to reach England by fast steamship.  If anyone could get to London before the news, he could sell Confederate bonds short like mad at eighty cents on the dollar and reap a harvest when they sank. Fisk resolved to get there first.

Forming a pool with three capitalists, he furnished the scheme while they supplied the money. Chartering a fast steamer, he sent it to Halifax, the nearest North American port to England with orders to keep up steam for instant departure. Aboard the ship was his agent, a knowing New York broker named Hargreaves, who had instructions to speed to England when given the signal.

One obstacle was the telegraph, which then fell fifty miles short of reaching Halifax. Fisk had the last fifty miles strung at his colleagues’ expense, then watched Richmond with a cold, profiteering eye.

On the historic day when Lee surrendered, the word sped over the wires to Hargreaves: “Go!”  Hargreaves went.

He reached Liverpool in six days and a half — two days ahead of the arrival of the first ship from New York with the news. Speeding to London, he kept mum about defeat and dutifully sold Confederate bonds short to all buyers.

Alas! — one of Fisk’s partners, a conservative man, had privately telegraphed Hargreaves not to sell more than five millions in bonds, so he limited his sales to that amount. When the news of the surrender reached London, the bonds tumbled to $22.  Hargreaves therefore collected the difference between $22 and $80, making a handsome profit for his employers but missing the downright killing that would have been possible.”

(Jim Fisk The Career of an Improbable Rascal, W.A. Swanberg, Scribner’s Sons, 1959, pp. 20-21)

 

 

Sheridan Hastens the Indians’ Demise

Grant, Sherman and Sheridan applied the same hard hand of war used on the American South to the Plains Indians. Sheridan endorsed the slaughter of western buffalo herds as a way to subjugate the Indians and break their will to fight – the same as he had done earlier in the Shenandoah Valley. Notably, one of the most successful western hunters was “New England Yankee Josiah W. Mooar, who killed nearly 21,000 buffalo in three years . . .”

Bernhard Thuersam, www.Circa1865.com

 

Sheridan Hastens the Indians’ Demise

“At the same time they were going hungry [on reservations], the Indians watched with impotent disgust as growing numbers of white hunters set up their forked rifle sticks on ancestral hunting grounds and slew the animals in staggering numbers with their .50 caliber Sharps buffalo guns.

In 1872-73 alone, 1,250,000 hides were shipped east to fashionable furriers. By the end of 1874, an estimated 4,373,730 buffalo had been slain, of which a grand total of 150,000 had been taken by the Indians.

The hunters’ intrusion on tribal lands was patently illegal, but the army did little to stop it. Despite the Medicine Lodge Treaty, which had outlawed white intrusion on Indian land, the unofficial attitude of the government toward the hunters was one of de facto cooperation.

Secretary Columbus Delano, whose department was charged with looking out for the Indian’s welfare, stated bluntly in his annual report, “I would not seriously regret the total disappearance of the buffalo from our western prairies, in its effects upon the Indians, regarding it as a means of hastening their sense of dependence upon the products of the soil.”

Sheridan, who had rather less confidence in the farming capabilities of the Indians, nevertheless looked upon the slaughter of the buffalo as an effective means of subjugating the tribes and breaking their wills.

When the Texas legislature briefly considered passing a bill outlawing buffalo poaching on native lands, Sheridan made a personal appearance before the lawmakers in Austin. Rather than penalize the hunters, he said, the legislature ought to give them each a medal, engraved with a dead buffalo on one side and a discouraged-looking Indian on the other.

In an attempt to keep closer watch on the wide-ranging Sioux, Sheridan received permission from Grant in late 1873 to mount an expedition into the Black Hills to scout locations for a new fort in the area. Custer and the Seventh Cavalry spent the better part of eight weeks exploring the sacred territory. As usual, Custer turned the expedition into a combination picnic, big-game hunt, and public relations extravaganza, sending back glowing reports of the region’s vast animal and mineral resources.

Injudiciously, he also fanned the flames of public greed by claiming, with some exaggeration, that pieces of gold could be plucked up from the very ground one walked on. At the first mention of gold, hundreds, then thousands, of ears pricked up. It was, after all, the Gilded Age, and fortune-making was the national sport.

[Though the 1868 treaty with the Sioux] “virtually deeds this portion of the Black Hills to the Sioux,” [Sheridan suggested] that miners and homesteaders try their luck further west in the unceded lands of Wyoming and Montana. The Sioux had hunting rights there, too, but Sheridan hoped to nullify these rights by encouraging the further depopulation of buffalo and other game. When there was nothing left to hunt, he reasoned, the Indians would have no more hunting rights to lose. Needless to say, the Sioux were unamused by this line of reasoning.”

(Sheridan: The Life and Times of General Phil Sheridan, Roy Morris, Jr., Crown Publishers, 1992, pp. 342-343; 348-349)

The Forces Lincoln Unleashed

By initiating war against his own people, overturning the Constitution, creating fiat money and fusing government with corporations, Lincoln destroyed the Founders’ republic and ushered in the Gilded Age.

Bernhard Thuersam, www.Circa1865.com

The Forces Lincoln Unleashed

“As a result of the war, corporations have been enthroned and an era of corruption in high places will follow and the Money Power of the country will endeavor to prolong its reign by working on the prejudices of the people until wealth is aggregated in the hands of the few and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of war.”   Abraham Lincoln.

(Collective Speeches of Louis T. McFadden, Omni Publications, pg. vi, 1970)

Taxes Only for Public Objects and Ends

In May of 1882 Delaware’s Senator Bayard recalled the meaning of the Mecklenburg Resolves and warned against the continuing expenditure of public tax dollars on projects unrelated to a strictly “public objects and ends.” Americans then were witnessing a federal government, unrestrained since 1861, complicit in subsidies to private businesses and pursuing vast imperial ambitions.

Bernhard Thuersam, www.Circa1865.com

 

Taxes Only for Public Objects and Ends

“The commemorative celebration of the Mecklenburg Declaration of Independence took place at Charlotte on May 20th [1882]. The streets were fairly decked with flags and banners, filled with citizen soldiers in bright uniforms, and at least 20,000 people from the surrounding country.

Governor [Thomas] Jarvis and his staff, Senators Vance, [Matt] Ransom, Wade Hampton and [Thomas] Bayard were present. The Mecklenburg Declaration was read by Senator Ransom, and Senator Vance introduced the orator of the occasion, Thomas F. Bayard of Delaware. The address was enthusiastically received, especially the sentiments contained in the following extract:

“I wish I could impress upon you gentlemen, and not upon you only but upon our fellow-countrymen everywhere, the fatal fallacy and mischief that underlies and inheres to every proposition to use the money of the people — drawn from them by taxation, the powers of the government, the force of their government, under any name or pretext — for any other than really public objects and ends.

I include the maintenance of the public honor, dignity, and credit, the protection of American citizenship everywhere, among the just objects for the exercise of governmental powers; but I wish to deny . . . the rightfulness of involving the welfare and happiness of the 50,000,000 men, women, and children of the country, whether by laying taxes upon them which are not needed for the support of their government, or paying bounties and subsidies to maintain lines of private business which are too unskillfully or unprofitably conducted otherwise to sustain themselves, or promising the presence of our fleets or armies, or risking the issue of peace or war, or shedding the blood of our soldiers and sailors in aid of schemes of private greed or personal ambition under the guise of claims foreign or domestic.”

(North Carolina, Appleton’s Annual Cyclopedia, 1882, New Series Vol VII, D. Appleton and Company, 1883, page 634)

Common-Sense Agrarian

Tom Watson of Georgia was old enough in 1863 to see Yankee prisoners on trains, and his father and two uncles served in defense of the American Confederacy. He remembered his grandfather’s plantation as belonging to another world, “a complete social and industrial organization, almost wholly sufficient unto itself,” and the old agrarian traditions of his childhood held sway for all his days.  He attacked those wanting to increase military appropriations for being “Afraid of your own proletariat. You are afraid of the dissatisfied workman, thrown of work by these soulless, these heartless, these insatiable trusts and combinations of capital . . .”

Watson was elected senator from Georgia in September 1920, and fought tirelessly against Woodrow Wilson’s League of Nations.

Bernhard Thuersam, www.Circa1865.com

 

Common-Sense Agrarian

“The first subject on which the new Senator delivered himself at any length was the proposed treaty with Columbia, intended to conciliate that country for the Panama affair by the payment of $25,000,000. Republican senators, rallying to the defense of [Theodore] Roosevelt, had opposed the treaty as proposed by the Wilson administration.

Now that Roosevelt was dead . . . even [Henry Cabot] Lodge had reversed himself to support the treaty . . . [and] let the cat out of the bag by his statement: “We must not only enlarge our trade, but we must enlarge our source of supply of oil wherever it is possible to do so, and we cannot do it if we take the position that it is a sin for Americans to make money and that those who are engages in foreign investment and foreign commerce are to be punished instead of sustained.”

“Mr. President, are we the agents of Standard Oil Company – that and nothing more?” asked Watson. “When did that infant, protected in all its roots and branches, need our assistance in securing access to foreign oil fields?” He intimated that all the fine talk about Pan-American brotherhood turned his stomach. “Let us confess what we are doing – that we are here to buy property for the Standard Oil Company.”

If the country was in such need of oil, why did we cut ourselves off from the richest oil fields in the world – those of Soviet Russia.? “Because we did not like their form of government.” Did the senators like the form of government in Columbia any better? “What is it, by the way? “Despotism tempered by assassination.”

[Senators] who professed to be horrified at Red atrocities met with his ridicule. “Where is the consistency,” he asked, “of staying in a state of war, or at least non-intercourse, with a great nation which has always been our friend and at the same time handing out food to them as objects of charity? First we destroy their commerce and then try to replace it by gifts, by doles of food.” We had no more right to dictate Russia’s form of government than we had to dictate Germany’s.

He quoted a speech of [Daniel] Webster’s advocating recognition of Greece. “Let us not affect too much saintliness,” he admonished. “Are our skirts entirely clear of wrong in Hawaii, the Philippines, and in Santo Domingo?”

In a different connection, but in the same trend, he said: “We are hereditary revolutionists. We are so from instinct, history and tradition. We are so by sentiment.” Whence, then, all this outcry against revolutionists.”

[On questions of foreign policy Watson opposed] anything that remotely smacked of the [Woodrow Wilson’s] League of Nations, which, he said, was as much like the Holy Alliance of the nineteenth century “as two black cats are like one another.”

His most conspicuous fight was waged against the ratification of the Four-Power Treaty upon insular affairs in the Pacific. He denounced it as in reality an alliance with the dominant imperialist powers, designed to promote imperialism, and to draw the United States into the web of foreign rivalries, if not into the League itself.”

(Tom Watson, Agrarian Rebel, C. Vann Woodward, Oxford University Press, 1979, pp. 477-479

The Myth of Saving the Union

The Republican Party was the primary obstacle confronting the peaceful Christian charity which would eventually end slavery. Had the latter occurred, the Union would have been saved peacefully and no Northern citizens and editors would have been imprisoned in American bastilles for opposing Jacobin Republican hegemony and corruption. “Smiler” Colfax, Grant’s vice-president, was brought down by the Credit Mobilier scandals which bribed high government officials with cash and stocks; he was replaced as vice president in 1872 with another corrupt Republican, Henry Wilson.

Bernhard Thuersam, www.Circa1865.com

 

The Myth of Saving the Union

Letter of acceptance of the vice-presidential nomination, National Union Republican party, 29 May, 1868:

“The debt of gratitude [my acceptance] acknowledges to the brave men who saved the Union from destruction, the frank approval of amnesty based on repentance and loyalty, the demand for the most thorough economy and honesty in government, the sympathy of the party of liberty with all throughout the world who long for the liberty we here enjoy, and the recognition of the principles of the Declaration of Independence, are worthy of the [Republican party] on whose banners they are to be written in the coming contest.

Its past record cannot be blotted out or forgotten. If there had been no Republican party, Slavery would to-day cast its baneful shadow over the Republic. If there had been no Republican party, the free press and free speech would be unknown from the Potomac to the Rio Grande as ten years ago. If the Republican party could have been stricken from existence when the banner of rebellion was unfurled, and when the response of “no coercion” was heard in the North, we would have no nation to-day.

But for the Republican party daring to risk the odium of tax and draft laws our flag could not be kept flying on the field until the long-hoped for victory came. Without the Republican party the Civil Rights bill – the guarantee of equality under the law to the humble and the defenceless, as well as to the strong – would not be to-day upon our national statute book.

With such inspiration from the past, the example of the founders of the Republic, who called the victorious General of the Republic to preside over the land his triumphs had saved from its enemies, I cannot doubt that our labors with be crowned with success.”

Very truly yours, Schuyler Colfax”

(The Republican Party, 1854-1904, Francis Curtis, G.P. Putnam’s Sons, 1904, page 507)

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