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1868] Financial reorganisation. 631 before its entire completion the presidential election of 1868 would place the whole subject before the voters. And into this election another issue beside that of Reconstruction necessarily entered, namely, the question of the government credit. McCulloch, Secretary of the Treasury in 1865, set out to restore the finances to a peace footing as soon as possible; and in this he was at first aided vigorously by Congress. From the year 1866 onward war taxes were rapidly reduced, being with- drawn mainly from manufactures and internal trades, until, by the summer of 1868, the revenue had been reduced by $140,000,000. The enormous debt, attaining in 1865 a maximum of $2,800,000,000, was dealt with in a similar spirit. McCulloch, acting under authorisation of April, 1866, had exchanged, by the year 1868, nearly all temporary obligations for long-term bonds, and managed at the same time to reduce the debt by over $200,000,000. Finally, as to the legal tender notes, McCulloch urged a policy of contraction, and was authorised by Congress in April, 1866, to retire the " greenbacks " at a rate not exceeding $10,000,000 in six months, and subsequently at a rate not exceeding $4,000,000 in a month. In this way, by 1868, he had reduced the legal tender circulation by $66,000,000 ; but during this process there suddenly appeared in the Western States signs of unmistakable inflationist sentiment. Such an outcry began against the retirement policy that in February, 1868, Congress, alarmed by an apparent shrinkage in prices, abruptly forbade further contraction. At the same time proposals to pay the principal of United States bonds in paper, and to tax the bond- holders, were freely made in Congress and in the newspapers; and a Refunding Act, providing for coin bonds, was successfully vetoed by Johnson in July, 1868. This vital question, it was evident, as well as that of Reconstruction, would have to be decided by the presidential election. At the outset the prospect for the Radicals seemed doubtful In 1867 a revulsion of feeling in the North had thrown New York, Connecticut, Pennsylvania, and California into Democratic hands, and had caused an alarming shrinkage in Republican majorities. Clearly the "War Democrats'" were returning to their old ranks on the negro- suffrage issue. The days for a Unionist party were past. When the Republican National Convention met in June, 1868, the doubts of the party leaders were reflected in their platform, which, while pledging the party to the fulfilment of the Reconstruction measures in the South, added that "the question of suffrage in all the loyal States properly belongs to the people of those States." On the financial issue the plat- form, less timid, demanded the payment of the public debt "in the uttermost good faith." General Ulysses S. Grant, the hero of the war, who had taken an active part in reconstruction, was unanimously chosen as Republican nominee for the Presidency. On the other side the Democratic party, much infected with inflationist feeling, settled its CH. XX.