The Republican Party/Chapter VIII

MATERIAL INTERESTS

CHAPTER VIII

FINANCIAL INTEGRITY

During the period of political reconstruction occurred in 1868 the fourth presidential campaign of the Republican party, with new issues before the nation. The vagaries of President Johnson had completely alienated himself from the party which had four years before elected him to the Vice-Presidency and had so discredited him that the Democratic party did not regard him as an available candidate. He received a few votes in the Democratic convention but that body, after a long contest, finally nominated Horatio Seymour who had been Governor of New York during the latter part of the Civil War and had won unenviable notoriety by regarding the war as a failure and by cringing and catering to the criminal mobs which in New York City sought by rioting and arson to hamper the national government in its prosecution of the war. The platform was largely devoted to railing against the Republican party for its reconstruction measures in the South, declaring them to be "unconstitutional, revolutionary. and void,” and demanded the taxation of government bonds in violation of the terms on which they were issued and the regulation of the elective franchise by the states so that the former slave states would be able perpetually to exclude the negroes from the polls.

The Republican convention met at Chicago on May 20th and, on the first roll call for the purpose, unanimously nominated for the Presidency General Ulysses S. Grant. For Vice-President, on the fifth ballot. it named Schuyler Colfax of Indiana, Speaker of the House of Representatives and one of the original members of the Republican party. The platform approved the reconstruction policy of Congress and the constitutional amendments, condemned the Johnson administration and congratulated the South upon the readiness and loyalty with which its leaders were accepting the verdict of the war and were resuming their places in the life of the Republic. It then specially emphasized the need of keeping scrupulously all national obligations and paying all national indebtedness in good faith, in the spirit of the laws under which it was contracted. It urged the gradual discharge of the great war debt to be extended over a considerable period of time, with such reductions of interest from time to time as might be made possible by the willingness of capitalists, in an era of increasing prosperity, to lend money at lower rates. Another important plank declared that the doctrine of some European powers that a person once a subject must always remain so must be resisted at every hazard by the United States as a relic of feudal times” and that our naturalized citizens must be as fully protected in their rights as the native citizens. The assertion and maintenance of this great principle by the Republican party effected a most salutary change in international law under which all powers were constrained to recognize the right of expatriation.

The ensuing campaign was an animated one, but the result was never in doubt. The immense popularity of General Grant, the equivocal attitude of Mr. Seymour on issues of supreme importance and the protection afforded by the Federal government to the negro voters of the South, assured a sweeping Republican victory. In the closing weeks of the campaign there was a noteworthy movement by business men, without regard to party, in support of the Republican ticket because of the sound declarations of the Republican platform concerning national finance. The result of the election was, "with the three States of Virginia, Mississippi and Texas not yet qualified to vote and with Florida choosing Presidential electors through her legislature, that Grant carried 26 states, with 214 electoral and 3,012,833 popular votes, while Seymour carried only 8 states with 80 electoral and 2,703,249 popular votes.

Apart from the political problems of southern reconstruction, already described, the foremost issue in national life now became that of finance. This was a complicated question. There was an enormous public debt, on much of which interest must be paid, and for the ultimate payment of which provision must be made. A part of this debt was, however, in the form of treasury notes or “greenbacks" which had been made legal tender for most purposes; and which must be made and kept at par with gold and be redeemed in gold upon demand, and perhaps ultimately be thus retired from circulation. Then there was the task of “resuming specie payments,” or of bringing the value of depreciated treasury notes and bank notes back to par with gold.

To these tasks the Republican party in Congress and in the administration after the inauguration of President Grant addressed itself with courage, efficiency and consummate skill. It had to do so in the face of Democratic opposition. During the war Democrats had inveighed against the issuing of bonds saying that they never could or would be paid. They had denounced the “greenbacks” as illegal and fraudulent. Now after the war they demanded that the bonds be taxed, which obviously would have been equivalent to reducing arbitrarily the rate of interest on them; and also that the principal of the bonds be paid at once with a fresh issue of “greenbacks” which, with “greenbacks” at a discount of ten or twenty per cent or more, would obviously have been equivalent to partial repudiation of the bonds.

Against all such forms and degrees of repudiation the Republicans set their faces as a flint, insisting that the faith of the nation must be kept sacred at no matter what cost. The bonds must remain untaxed according to the understanding at their issuance; they must be paid, interest and principal, in gold or money at par with gold; and all currency must be brought back to par with gold. On March 18, 1869 a law was enacted pledging the payment of all government indebtedness in specie. In the achievement of this Herculean task the Republican government was greatly aided by other features of the policies which it had adopted. The protective tariff system, which it had adopted before the war for the sake of American industry and the rates of which had been increased during the war to provide needed revenue, proved immensely successful. It caused the establishment of great new industries and the expansion of others; the maintenance of good wages for American workingmen; the supplying of the American market with American-made goods in place of foreign, often of better quality and at lower prices than the foreign; and at the same time an abundant revenue to be applied not only to the current expenses of government but also to the extinguishment of the public debt. Another copious source of governmental income was found in the internal revenue, especially the tax upon alcoholic liquors and tobacco. This had originated as a war measure, but it was generally recognized as highly desirable for continuance in time of peace. And although it was not until 1875 that a law was enacted providing for the resumption of specie payments making “greenbacks” and national bank notes as good as gold on January 1, 1879 such action was long before anticipated and the fiscal policy of the government was early directed to that end.

It was not all easy going. Back in President Johnson's administration an attempt had been made to reduce the volume of treasury notes in circulation. This meant contraction of currency, and that had an unfavorable effect upon business; wherefore Congress enacted a law forbidding any further such attempts. Later, under President Grant, the contrary course was essayed. It was thought that business depression was due to lack of circulating medium, and a bill was passed providing for a considerable increase in the issue of “greenbacks.” This was done by the Democratic Congress which was elected in 1874, the first Democratic Congress since before the war. President Grant and his Republican advisers rightly perceived that such inflation of the currency would make more difficult if not impossible the resumption of specie payments at the appointed time and would really aggravate the trouble which it purported to be meant to relieve. He vetoed the bill, to the unmeasured gratification of business men throughout the country and of all believers in sound national finance.

Others raged against him and there arose a so-called "Greenback Party” or “Fiat Money Party” whose members held that money could be created with the printing press; and that the government, instead of seeking resumption of specie payments, which they insisted could never be effected, should print and issue vast quantities of treasury notes which were not to be redeemable in gold or silver and which were to be made compulsorily legal tender for all purposes. With these, they insisted, the government bonds should be paid off and the national debt extinguished. Some members of the Republican party became afflicted with this lunacy, but the overwhelming mass of the party remained steadfast for sound money, for resumption of specie payments and for honest payment of the national debt in gold. In this policy the Republican government was successful and at the appointed time, without the slightest appreciable disturbance of the money market or of business, specie payments were resumed. “Greenbacks" and national notes everywhere throughout the United States became automatically worth their face value in standard gold coin and exchangeable for it upon demand. The superior convenience of paper money for ordinary uses made people, however, prefer it to gold and silver, and save in a few cases out of curiosity there was no inclination to make the exchange. Meantime the principal of the debt was being reduced rapidly, and was being refunded at much lower rates of interest, until its ultimate extinction seemed sure to occur in the near future. The fiscal reorganization of the country was complete and the Republican party added to its credit a record of efficiency and public beneficence comparable with that made in the saving of the Union and the freeing of a race of slaves.