providing Walker with an apt retort, did not prevent the total for the year ending with June, 1847, from coming short of his estimate by more than four millions. Without waiting to acquire this unwelcome fact, however, the government found itself compelled in June, 1846, to revise at a sharp angle upward its predictions of the expenditures. Over and above their calculations of the previous December the war and navy departments now called for $23,952,904, which Polk informed Congress was "the largest amount which any state of the service" would require up to July 1, 1847. The secretary of the treasury had expected to find on July 1, 1847, a surplus (virtually that estimated for the previous year minus half a million) of at least $4,332,441, and had confidently hoped for a substantial gain in revenue; but he admitted that it was now requisite, since a working capital of four millions for the treasury and the mints had to be kept on hand, to provide $12,586,406 of additional income.[1]
The proper method of handling our war finances was, in the first place, to increase the existing taxes — not only to obtain funds promptly, but as a firm support for the nation's credit and a basis for those temporary loans which are a wise expedient at the beginning of a war; and Walker expected the proposed tariff to answer this purpose. But the question how to raise these twelve and a half millions remained. Excise and direct taxes, the administration believed, would not be prompt enough, and would not seem to the public warranted by the circumstances. It was therefore recommended to Congress that both treasury notes and a loan should be resorted to; and on July 22, 1846, without much debate, the issue of ten millions in such obligations, to be sold at not less than par, was authorized.[2]
Treasury notes could not really serve the government's purpose well, for they were soon to be paid, the expense of handling them fell upon the treasury, and, as they were receivable for duties, they were sure to pour into the customhouses instead of real money whenever they should be cheaper than specie. The treasury, bound by law to pay out only the latter, would then have to buy coin at the market price — presumably, as Gallatin said, with depreciated notes. These would then fall still more, and so the process appeared certain to continue.
