Browsing "Financing Lincoln’s War"

“Force of a Most Formidable Character”

In early March 1861, the new Confederate States government adopted a virtual free tariff, which quickly brought Northern merchants to their economic senses. Moses Kelly of the US Department of the Interior overheard many Southerners state that Southern ports planning direct trade with Europe “promised to deprive northern merchants of their position as middlemen and to eject northern manufacturers from the southern market in favor of European competitors.”

Further, the Philadelphia Press asked rhetorically: “If South Carolina is permitted to establish a free port with impunity, and to invite to her harbor all the ships of foreign nations, would not disaster in that event fall upon all our great northern interests?” It accurately predicted “an early reawakening of the Union sentiment in New York.” Thus true reason for total war against the South and destruction of her economic base was clearly revealed.

“Force of a Most Formidable Character”

“[By March 1861] it was evident that northern businessmen had carefully measured the consequences of disunion and the collapse of central authority and decided that they were intolerable. They had called for appeasement, but when that failed they were soon reconciled to the use of force.

Many of them concluded that property had received about as much damage from the crisis as it could, that “no new phase which the [secession] movement may take can have any further effect.”

Stocks had reached their lowest average quotations in December when the government seemed weakest, and even the approach of war failed to depress them that much again. As one commercial writer saw it, business was already suffering “all it could from a state of actual war.” And when war finally came the northern men of property united behind Lincoln to save the Union and restore the prestige of the national government.

When Yankee capitalists finally endorsed the use of military force against secessionists, they accepted the final remedy for a solemn threat to their property and future profits. Inevitably the holders of government securities looked upon disunion as a menace to their investments.

One conservative nervously declared: “So long as the right of secession is acknowledged, United States bonds must still be denounced as entirely unsafe property to hold . . .” To permit States to leave the Union at will, he warned, would mean that the “United States stocks are really worth no more than old Continental money.” With this in mind, when another government loan was offered in January, an observer shrewdly predicted: “Every dollar [New] York takes binds her capitalists to the Union, and the North.”

A basic tenet of the northern middle classes was that the value of property depended upon political stability. In effect, secessionists had made an indirect attack upon the possessions of every property holder. They had invited property-less Northerners, the revolutionary “sans culottes,” “the unwashed and unterrified,” to precipitate the country into “rough and tumble anarchy.” This “social and moral deterioration” might easily infect the lower classes with the radical idea “that a raid upon property can be justified by the plea of necessity.”

Conservatives looked apprehensively at the “immense foreign element” in northern cities and feared that revolution was “nearer our doors than we imagine.” From these recent immigrants could come the mobs to set aside all law and order and, with “revolver and stiletto,” sink the nation “into confusion and riotous chaos.” The only alternative, it was repeatedly argued, was to enforce respect for the Federal government everywhere.

[Northern] businessmen gradually became convinced that Southern independence would be almost fatal to northern commerce. American maritime power in the Caribbean and Gulf . . . would vanish . . . exclude the North from their trade . . . Even trade with the Pacific would be at the mercy of the South.

The northern monopoly in the coasting trade was a further casualty of the disunion movement. Vowing that he had “an interest and proprietorship in the Union of all these States,” [a] New Yorker concluded that secession would have to be checkmated by “force of a most formidable character.”

(And the War Came: The North and the Secession Crisis, 1860-1861 Kenneth M. Stampp, LSU Press, 1950, excerpts pp. 223-230)

General Scott’s Fearful Foreboding

General Winfield Scott’s (1786-1866) view of peacefully allowing the American South pursue independence aligns with that of Thomas Jefferson’s regarding State sovereignty and newer States formed out of Louisiana.

In a letter to John C. Breckinridge in August 1803, Jefferson wrote: “[We] see their happiness in the union, and we wish it. Events may prove otherwise . . . God bless [both old and new States], and keep them in union, if it be for their good, but separate them, if it be better.”

Scott’s war cost estimates below were very low. The direct financial cost of the war’s operation was about $8 billion, which, eventually increased to $30 billion factoring in the destruction of property, derangement of the labor power, the Northern pension system and other economic losses. In human cost: one soldier, North and South, died for every six slaves freed and for every ten white Southerners saved for Lincoln’s union.

In addition, “The money spent to field the two armies would have purchased the liberty of the four million slaves five times over. (Tombee, Portrait of a Cotton Planter, Theodore Rosengarten, Morrow & Company, 1986, page 212.)

General Scott’s Fearful Forebodings

“[Scott’s] opinion on the 3rd of March [1861 was sent by letter] to Secretary [William] Seward. In this he exclaims: “Conquer the seceded [cotton] States by invading armies. No doubt this might be done in two or three years by a young and able general – a Wolfe, a Dessaix, a Hoche, with three hundred thousand disciplined men, estimating a third for garrisons, the loss of yet a greater number by skirmishes, sieges, battles and Southern fevers.

The destruction of life and property on the other side would be frightful, however perfect the moral disciple of the invaders. The conquest completed, at that enormous waste of human life to the North and the Northwest, with at least $250,000,000 added thereto, and cui bono [who benefits]?

Fifteen devastated provinces! [Not] to be brought into harmony with their conquerors, but to be held for generations by heavy garrisons, at an expense quadruple the net duties or taxes it would be possible to extort from them, followed by a protector or emperor.” In view of these fearful forebodings, we are not surprised that he should have despaired of the Union, and been willing to say to the cotton States, “Wayward sisters, depart in peace.”

Nor that he should have fallen back on his opinion in the “Views” (29 October 1860), that “a smaller evil [than such a civil war] would be to allow the fragments of the great Republic to form themselves into new Confederacies.” [Scott] advises Mr. Lincoln’s administration “to throw off the old [sectional Republican party] and assume a new designation – the Union party; adopt the conciliatory measures proposed by Mr. Crittenden, or the Peace Convention, and my life upon it, we shall have no new cases of secession, but, on the contrary, an early return of many if not all of the States which have already broken off from the Union.”

(Mr. Buchanan’s Administration on the Eve of Rebellion, James Buchanan, D. Appleton and Company, 1866, excerpts pp. 172-173)

Resisting Lincoln’s Draft

The New York City draft riot of mid-1863 was the desperate result of dwindling Northern enlistments after a bloody 1862, little Northern military success to show for its invasion of the South, and Lincoln’s conversion of the war to one of emancipation, which few in the North were willing to die for. With Lincoln’s conscription implemented, Northern governors feared losing the next election and began raising monies to fund exemptions for their constituents as well as bounty money to attract the poor, released prisoners and foreigners into the army of emancipation.

Further, Massachusetts Governor John Andrew sent his State agents into the occupied South to acquire black “recruits” who would count against his State’s troop quota established by Lincoln.

In New York’s Oswego County, “the Republican Times advocated the recruitment of Negroes to fill the ranks and delay the draft” (Oswego County’s Response to the Civil War, New York History, Jan. 1961, pg. 79). Oswego County later sent a delegation to occupied Newport News, “for the purpose of procuring substitutes among the freedmen,” and expecting they could be hired cheaply.

Resisting Lincoln’s Draft

“July 21. Tuesday [1863].

The N.Y. Herald of 16th had been received, & its accounts quoted by today’s papers. The riot had continued through third day, (Wednesday, 15th,) without abatement. Several severe conflicts had taken place between the military & “the people” . . . “Negroes greatly persecuted, & 3 hung.” A great flight of Negroes from the city — & also many of the superior inhabitants . . . “The (City) Council has appropriated $2,500,000 for conscripts.”

This last incident is the most important of all. The city government has by this action completely submitted to the mob, & agreed to pay, out of the property of those citizens who possess property, for the exemption from military service of all conscripts of the city who have no property. This is a far more signal victory to the rioters than was the suspension of the draft.

It [the draft] may now be safely resumed & carried out, without annoyance to the conscripts, as the payment for their exemption is fixed in advance & at the expense of other people . . . The procedure is equivalent to offering a reward of $300 (the price for exemption) to every rioter who would have been liable to conscription.

This is enough to induce like riots in every other Yankee town. And before the operation of this additional incentive, like riots, or disturbances, but less violent & destructive than in New York, had broken out in sundry other places – at Brooklyn, Troy, Newark, Yorkville, Harlem, Jamaica, Westchester, & elsewhere.

July 25. Saturday [1863].

The [New York City] draft is not to be renewed for a week . . . waiting until a full force of 35,000 men shall be arrayed in the city to restrain the populace, & enforce the execution of the draft. Then, I think, there will be more serious & bloody work than before . . . the army, with artillery and grape-shot in every street, may restrain important outbreaks in the city . . .

The like policy of buying exemptions of the poor, is under discussion in the public councils of Philadelphia, & $2,000,000 is the appropriation proposed. It will operate like the policy of the sinking western Roman empire in buying the mercy & the retreat of the invading hosts of barbarians, when threatening to enter to sack and burn the city of Rome.

In the meantime, [editor Horace] Greeley, through the [New York] “Tribune,” (the organ of the thorough abolitionists,) is calling upon the federal power to carry out the draft, & to crush all opposition by overwhelming military force.”

(The Diary of Edmund Ruffin, Volume III, A Dream Shattered: June 1863-June 1865, William K. Scarborough, editor, 1989, LSU Press, excerpts pp. 74-75; 83)

Lincoln’s Broad Economic Revolution

In the four prewar years 1856-1860, total federal expenditures were a mere $274 million, and financed by tariffs (disproportionately paid by the South), and the sale of public lands. The direct costs of the Northern war effort 1861-1865 is estimated at $2.3 billion; when indirect costs such as outright destruction and soldier pensions are included the estimate rises to $8 billion. “[The] Union’s expenditures on the war were equivalent to more than 70% of the North’s share of the 1859 gross domestic product. Lincoln’s war economy enabled Philip Amour to make $2 million selling pork to the Northern army; Clement Studebaker amassed a fortune providing wagons to Northern forces, and Andrew Carnegie grew rich as an iron merchant.

Lincoln’s Broad Economic Revolution

“First . . . the [Northern] citizenry remained passionately resistant to any form of federal income tax. A second option was to turn to borrowing. The great advantage of this choice was that it would pass some of the cost of the war on to future generations (in the form of interest and debt). A final choice was to print money and declare it legal tender – a policy not without cost. The printing of currency not backed by specie would raise prices, thus financing the war through inflation.

As soon as the war began, President Lincoln ordered Treasury Secretary Salmon P. Chase to begin taking steps to fund the war. Chase faced an economy that had barely recovered from the Panic of 1857 before being thrown into recession by the secession crisis. Chase initially turned to increase import fees, excise taxes and the sale of government land, but he soon shifted his attention to the sale of [war] bonds [hoping] to fund its war effort through a form of borrowing.

Congress [passed] the revolutionary Legal Tender Act [in] February 1862 [which] provided for the issuance of $150 million in non-interest bearing notes. Although not backed by gold or silver, these “greenbacks” were legal tender for all debts except import duties and interest on government loans. By issuing notes without the backing of specie, the government risked serious inflation.

In August 1861 Congress passed a 3 percent tax on incomes of more than eight hundred dollars, but it was a year before those funds were collects. The following July a new revenue measure expanded income taxes and added an assortment of other levies.

In late summer 1862 bond sales had dwindled [and] Secretary Chase turned to Philadelphia broker Jay Cooke to orchestrate a massive campaign to stimulate them. This strategy [of 2500 agents nationwide] anticipated the patriotic war bond drives of World Wars I and II. [Roughly] one in four Northern families [purchased them,] Yet it appears most war bonds ended up in the hands of banks and wealthy investors.

The final piece of Chase’s financial program did not fall into place until midway through the war. The National Banking Act of February 1863 (and legislation of June 1864) established a new system of banks. Finally, in March 1865, Congress passed a 10 percent tax on all notes issued by State banks [which was sufficient to] drive most State banks into the new banking system.

When all was said and done bond sales funded two-thirds of the North’s military expenses. Various forms of wartime taxation funded 21 percent of the war’s cost, and the remaining costs were financed through inflation. By printing greenbacks the federal government caused an increase in prices, which had a measurable impact on the Northern economy. At their peak, prices rose to 80 percent above antebellum levels.

The funding legislation passed by the war Congress raises a broader issue. How did wartime measures reshape the American economy?

One long-standing interpretation is that the war was a triumph of industrial capitalism. With for decades the intellectual heirs of Thomas Jefferson and Alexander Hamilton had battled over the constitutionality of federal measures to assist economic development.

With the [Southern] congressmen safely out of the way [in 1861] – so the interpretation goes – Republicans were free to pursue an agenda which features protective tariffs and strong banking legislation. The Civil War provide the perfect excuse for imposing a broad economic revolution.”

(The North Fights the Civil War: The Homefront, J. Matthew Gallman, Ivan R. Dee, 1993, excerpts pp. 96-99)

Republican Rule in Indiana

Though Lincoln initially acted unilaterally to launch his war against Americans in the South, he did seek absolution when Congress convened in July 1861 – though the threat of arrest and imprisonment became common for those who opposed his will. In his treatment of what he or his minions believed to be “disloyal” practices, Lincoln carried his authority far beyond the normal restraints of civil justice, and in violation of fundamental concepts of Anglo-Saxon jurisprudence.

Republican Tyranny in Indiana

“Before Abraham Lincoln ordered a national draft, which would cause insurrections throughout the North, the President put into law the involuntary call-up of each State’s militia. Indiana inducted 3,090 men into the national army this way, but this caused a major backlash of violent resistance. More significantly, the Democrats won substantial victories in both houses of the Indiana Assembly in the fall of 1862.

With the loss of Republican power, [Governor] Oliver P. Morton became more emotionally unbalanced. He saw treason everywhere, and expected a revolution at any moment. At the beginning of 1863, Indiana’s Democrats voted for peace negotiations with the Confederacy. Simultaneously, many Republican army officers, appointed by Morton, resigned their commissions over Abraham Lincoln’s Emancipation Proclamation, and the governor’s support of this radical document, which would destroy State sovereignty. Army recruitment stagnated and desertions increased.

[Morton] blamed “organized conspirators” — meaning Democrats. Under his orders, Indiana soldiers threatened Senator Thomas Hendricks and Daniel Voorhees, both leading Democrats. Then these troops destroyed Democratic newspapers in Rockport and Terre Haute.

On January 8, 1863, amidst military failures and malignant partisanship, the Indiana legislature began its bi-annual session. Morton telegraphed Secretary of War [Edwin] Stanton that the legislature intended to recognize the Confederacy, implying that the federal army’s interference was required to arrest the “traitors” in the Assembly, as had been done in Maryland [in April 1861].

The Republican members determined to withdraw from the House . . . thus the legislature came to an end . . . [and] Morton would administer the State all alone. His first problem was to secure the money to rule as a tyrant for the next two years [and] with the President’s approval collected $90,000 “for ammunition for the State arsenal.” The Republican Indiana State Journal triumphantly announced that this money would really be used to carry on the functions of government.

Governor Morton quickly exhausted these funds. Once again he met with . . . Lincoln . . . An appropriation of 2.3 million dollars had need made by Congress in July 1862, to be expended by the President “to loyal citizens in States threatened with rebellion,” and in organizing such citizens for their own protection against domestic insurrection.

When Stanton placed [Lincoln’s] order in Morton’s hands, both men appreciated the great risk they were incurring. “If the cause fails, we shall both be covered in prosecutions,” Morton said. Stanton replied, “if the cause fails, I do not wish to live.”

(Northern Opposition to Mr. Lincoln’s War, D. Jonathan White, editor, Abbeville Institute Press, 2014, excerpts pp. 217-221)

Total War, Confiscation and Sheer Theft

Author Clyde Wilson asserts that “The triumph in 1861-65 of the Republican Party over the will of the American people and the invasion, destruction and conquest of the Southern States, like a foreign territory has somehow, strangely, gotten mixed up with the idea of government of, by and for the people.” The Republican president crowned his revolutionary actions with the creation of a nationalist mythology which we still live under today. The Union was preserved by Lincoln and his party in a territorial sense, but not the Founders’ Union.

Bernhard Thuersam, www.Circa1865.org

 

Total War, Confiscation and Sheer Theft

“Another great moral cost of the War, as Richard Weaver pointed out, was inauguration by the Republicans of the “total war” concept, reversing several centuries of Western progress in restraining warfare to rules.

General Sherman himself estimated that in his march across Georgia and the Carolinas, only 20 percent of the destruction had any military value. The rest was sheer wanton terrorism against civilians – theft and destruction of their food, housing, and tools. One egregious example was the burning and sack of Columbia – a city which had already surrendered and was full of women and children and wounded soldiers – a looting which marked the emancipation of black women by their wholesale rape.

Along with destruction went immense confiscation and theft, much of it under cover of a Confiscation Act which was enforced without ever being legally passed. The Republican Speaker of the House of Representatives simply declared the bill passed and adjourned. This high-handed legislative practice continued throughout the War and Reconstruction.

The Republican Governor of Indiana suspended the legislature and acted as dictator for two years. Republicans continually agitated for an open dictatorship under Fremont or some other trustworthy Radical; all of this is known but seldom acknowledged.

In addition to the Confiscation Act, for rebel property there was a mechanism for the government to collect taxes in the occupied regions of the South to finance the War. At last $100,000,000 in cotton (the most valuable commodity in North America) was seized — $30,000,000 more or less legally under the confiscation and tax acts, the rest sheer theft. The rest was stolen by Republican appointees.

A Secretary of the Treasury commented that he was sure a few of the tax agents he sent South were honest, but none remained so very long. We know, for instance, of that great war hero Admiral [David] Porter, who with General [Nathanial] Banks was badly beaten by vastly inferior Confederate forces in the Red River campaign, yet emerged from that campaign with $60,000 worth of stolen cotton for his personal profit.

The confiscation and theft continued in full force until at least 1868; they did not end with the hostilities.”

(State Rights Revisited: War, Reconstruction and the End of the Union, Clyde N. Wilson; Defending Dixie, Essays in Southern History and Culture, Foundation for American Education, 2006, excerpts pp. 142-143)

Profiteering in Arkansas

With Lincoln’s approval, former Illinois Congressman William Kellogg advanced a cotton-trading scheme at Northern occupied Helena, Arkansas, which would reap millions for himself and provide slave-produced cotton for hungry Northern mills. Though Secretary of the Treasury Salmon Chase opposed the idea, Kellogg was later appointed chief justice of the Nebraska Territory in early 1865 for his patriotic efforts.

Bernhard Thuersam, www.Circa1865.org

 

Profiteering in Arkansas

“Upon occupying Helena, Arkansas, in mid-July 1862, Union General Samuel Curtis complained that his camp was “infested with Jews, secessionists and spies.” By issuing orders that restricted trade to a few people he could control under military law as sutlers, Curtis adopted a policy that made him vulnerable to charges of improper monopolization.

Shortly, a steady stream of rumored abuses percolated up to Chicago and the department headquarters for Curtis’s army at St. Louis. Illinois Senator Orville Browning’s diary records Chicago rumors that Curtis deposited $150,000 with a Chicago financier less than three months after occupying Helena. By October 1862, [an] officer said, Curtis had already seized several million dollars worth of [cotton] and “converted it to his own use.”

Later, Curtis wrote Lincoln directly to explain that the complaints originated out of envy from unsavory characters who were unworthy of trade privileges. Nonetheless, within a few months, the general was transferred to St. Louis to become the new department commander, and rumors of his possible fraud trailed along.

An investigating Treasury agent concluded that Helena’s trade “diverted soldiers to become agents and brokers of cotton buying [and had] thrown thousands of dollars into the hands of our enemies.” Corruption flourished at Helena, where the army had little to do during twelve months of idle occupation before invading central Arkansas in late summer of 1863.

Federal soldiers even purchased cotton from slaves with counterfeit Confederate money.

Lincoln’s military governor of Arkansas complained late in 1862 that the idle troops at Helena were principally engaged in profiting from cotton trade. They raided neighboring plantations to confiscate whatever cotton they could get. As an afterthought, they would often destroy the plantation homestead.

Helena’s steady occupation led to deplorable sanitary conditions, particularly among the freed slaves . . . [and] disease, malnutrition, and lack of clothes and shelter took a toll on the blacks who sought refuge in the town.

Before the end of 1862, the inland navy began to get involved. [Admiral David Dixon Porter’s] crews became covetous of cotton as a prize of war . . . [and] 50 percent of a captured cargo was subject to a reward for the crew of the ship making the capture. By the end of the war, Porter had become so aggressive at stealing cotton . . . [he was dubbed] “Thief of the Mississippi.”

His sailors would seize bales and stencil “C.S.A” on them, thereby falsely representing the cotton as property of the Confederate government and therefore subject to prize law.”

(Trading With the Enemy: The Covert Economy During the American Civil War, Philip Leigh, Westholme Publishing, 2014, excerpts pp. 65-66)

Bounties Fill Lincoln’s Armies with Patriots

In mid-1862 volunteering in the North had all but stopped after the carnage and high casualty numbers to date, though Lincoln desperately needed more troops to continue his war. He threatened conscription as a whip to encourage governors to fill the “troop quotas” he demanded, and the governors rightly feared retaliation from their constituents who had little interest in the war. Bounties were used to buy the services of paupers, indigents, immigrants and recently-released criminals to fill the ranks and keep Northern working men at home. Massachusetts Governor John Andrew found a workable solution in sending State agents to the occupied South to enlist captured black men who would be counted toward his State quota – and approved by Lincoln.

Bernhard Thuersam, www.Circa1865.org

 

Bounties Fill Lincoln’s Armies with Patriots

“After the first flush of patriotism had passed, one of the strong inducements to enlistment was a financial one – a bounty, and, at a later date, the advance of the first month’s pay. During the Civil War, bounties came from three sources – the federal government, local governmental units, and private subscription. (In Ohio there was no bounty offered directly from State funds.)

The federal government, at the beginning of hostilities, offered a bounty of $100, payable upon honorable discharge . . . [but] by action of Congress in July 1862, one-fourth of this sum was to be paid upon muster and the balance at the expiration of the term of enlistment.

By later acts of Congress the bounty was increased to as much as $400 in some cases, payable in installments at certain periods during the soldier’s service as well as upon his being mustered in and mustered out. By 1863, the volunteer could expect $75 from the federal government at the time he was mustered in, $13 of the amount being his first month’s pay.

To the federal bounty there came to be added bounties provided by local governmental units and private subscription. Indeed, as [Provost Marshal General James Fry] wrote, the federal bounty paled into “comparative insignificance” when compared with the “exorbitant bounties paid in advance by local authorities.”

These, he believed, were the most mischievous in encouraging desertion, bounty-jumping, and other evils connected with the system. So great was the stigma of the draft that local authorities were highly competitive in the amounts offered to volunteers. Furthermore, they paid all the sum in advance. The primary objective of these payments, as General Fry put it, came to be “to obtain men to fill quotas.”

Localities began by offering moderate bounties. In 1862 the average local bounty was estimated at $25; in 1863 it advanced to $100; in 1864 it bounded to $400; and in 1865 the average bounty was $500, although in some localities it was as high as $800. The Hamilton County Board of Commissioners levied a tax of two mills in 1863 to take care of local bounty payments. On a tax duplicate of $128,432,065 this levy yielded about $256,864. The next year the city of Cincinnati began to borrow in order to offer city bounty payments, and during that year 1,811 volunteers were paid bounties of $100 each.

After the war the adjutant-general of Ohio estimated that $54,457,575. Had been paid in local bounties throughout the State, of which amount cities and counties had paid about $14,000,000 and private subscribers, $40,457,575.

The private subscriptions represented ward or township bounties, offered to encourage volunteering to avoid the draft in a city ward or township. [Political] Ward military committees were very active in securing private contributions for this purpose, as well as in securing volunteers.”

(Relief for Soldiers’ Families, Joseph E. Holliday; Ohio History, Vol. 71, Number 2, July 1962, James H. Rodabaugh, editor, excerpts pp. 98-100)

The True Result of Appomattox

Lincoln’s war administration and deficit financing ushered in the modern American state which remains in existence today. The various Bureaus, Departments and revolutionary measures created for the purpose of increasing federal power were all linked to his total war-effort, including the restructuring of currency and banking. Author Bruce D. Porter (War and the Rise of the State, Free Press, 2002) wrote that “Appomattox thus represented not just the defeat of the South, but the defeat of the whole Southern economic and political system, and the triumph of a state-fostered industrial and financial complex in the North.”

Bernhard Thuersam, www.Circa1865.org

 

The True Result of Appomattox

“[in Herman Melville’s postwar] poems he recognized the tremendous costs, especially through the loss of freedom and the end of the founders’ dream for America as a result of the North’s victory. He viewed the construction of the new iron dome on the Capitol in Washington, DC, which replaced the wooden one, as a symbol of America’s future.

Bruce Porter’s well-documented study [of the war] relates some of the economic costs of the Civil War:

In connection with the war the Lincoln administration attempted to intervene in areas of the national life that the federal government had never touched before . . . Prior to 1861, the national government had been a minor purchaser in the American economy. During the war, it became the largest single purchaser in the country, a catalyst of rapid growth in key industries such as iron, textiles, shoe manufacturing, and meat packing . . .

The Civil War spawned a revolution in taxation that permanently altered the structure of American federalism and the relationship of the central government to the national economy. Prior to the war, over 80 percent of federal revenue had come from customs duties, but despite several upward revisions of the tariffs during the war, those could provide only a fraction of what was needed to sustain the union armies.

On August 5, 1861, the first income tax in US history came into effect, followed by the Internal Revenue Act of 1862, which levied a whole series of new taxes: stamp taxes, excise taxes, luxury taxes, gross receipt taxes, and inheritance tax, and value-added taxes on manufactured goods. The latter Act created the Bureau of Internal Revenue, perhaps the single most effective vehicle of federal power ever created . . .

Neither taxes nor paper dollars, however, came close to covering the enormous costs of the war. Dire fiscal straits forced the federal government to borrow over 80 percent of its cost, or more than $2.6 billion. [The] Lincoln administration created a captive source of credit by granting a monopoly on issuance of the new national currency to banks that agreed to purchase large quantities of federal bonds . . . [and] agree to accept federal regulation and federal charters. Thus, almost overnight, a national banking system came into being.

[Author] Eric Foner writes that the fiscal measures represented in their “unprecedented expansion of federal power . . . what might be called the birth of the modern American state . . .”

(The Costs of War, America’s Pyrrhic Victories, John V. Denson, Transaction Publishers, 1999, excerpts pp. 28-29)

Northern Prosperity at the South’s Expense

By 1860, the immigrant floods which spread westward in the 1840s and 1850s had changed the United States into two distinct cultures and political views. The South maintained its ties to the 1776 generation and its republican political character; the North had become a conglomerate of immigrant ethnic groups controlled by machine politicians eager for power and beholden to industrialists eager for cheap labor. Immigrant voters, wholly unfamiliar with American political concepts and traditions, were easily led by demagogues and money.

Bernhard Thuersam, www.Circa1865.com

 

Northern Prosperity at the South’s Expense

“The festering corruptions of the post-war period sprang up in every part of America and in almost every department of national life. Other loose and scandalous times – in [James] Buchanan’s day, in [Mark] Hanna’s, in [Warren] Harding’s – have been repellent enough; but the Grant era stands unique in the comprehensiveness of its rascality.

The cities, half of which had their counterparts in [New York’s Boss] Tweed; the legislatures, with their rings, lobbyists and bribe-takers; the South, prey of unscrupulous Carpetbaggers and Scalawags; the West, sacked by railway and mining corporations; Congress with its Credit Moblier’ [scandal], its salary-grab, its tools pf predatory business; the executive departments, honeycombed with thievery; private finance and trade, with greedy figures like Jay Cooke and Collis P. Huntington honored and typical – everywhere the scene was the same. Why?

The war explained much: its terrible strain upon all Ten Commandments; the moral exhaustion it produced; the waste and jobbery which it bred; its creation of vast new Federal responsibilities. Washington became an irresistible lodestone for crooked men.

The fecund war contracts, the tariffs, the subsidies, and [enlistment] bounties, huge appropriations for speculators and [pension] claim-agents, the opportunities for theft in both collecting and spending the swollen Federal revenues, drew them as honey draws flies.

The South was ruined, and the fine principles and traditions of its aristocracy were engulfed. The industrial revolution in the North wrought the roughest, most aggressive business elements to the front. As the West was settled with amazing rapidity, a more extensive and influential frontier than ever before gave manners a cruder cast.

Cities were filling up with immigrant communities, subservient to machine politicians. Everywhere tested standards, restraints of public opinion, the cake of custom, were broken down. Co0nditions of the day produced a new and flashier political leadership. They brought demagogues and pushing brigadiers into office; generals like Ben Butler and “Black Jack” Logan, vote getters like Oliver P. Morton and Zach Chandler, speculators like Oakes Ames.

But one fact must be emphasized. Contemporaneous with this corruption, geared to it as a motor is geared to the conglomerate machinery of a factory, was the tremendous industrial boom which followed the war. For eight years Northern business rollicked amid a flush prosperity.

With money easy, with fortunes rising on every hand, with the temptation to speculate irresistible, the whole tendency of American life conduced to greed.”

(Hamilton Fish, the Inner History of the Grant Administration, Allan Nevins, Dodd, Mead & Company, 1937, excerpts pp. 638-639)

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