[DECEMBER, 1836. The sur

in other countries, when opportunity tempted ambi- | port, contributes to the accumulating mass. tion.

plus collected there, must, therefore, be made up of To collect it merely for distribution to the States, moneys or property withdrawn from other points and would seem to be highly impolitic, if not as dangerous other States. Thus the wealth and business of every as the proposition to retain it in the Treasury. The region from which these surplus funds proceed, must shortest reflection must satisfy every one that, to be to some extent injured, while that of the place require the people to pay taxes to the Government where the funds are concentrated and are employed merely that they may be paid back again, is sporting in banking are proportionably extended. But both with the substantial interests of the country, and no in making the transfer of the funds which are first system which produces such a result can be expected necessary to pay the duties and collect the surplus, to receive the public countenance. Nothing could and in making the re-transfer which becomes necessary be gained by it, even if each individual who contrib- when the time arrives for the distribution of that uted a portion of the tax could receive back promptly surplus, there is a considerable period when the funds the same portion. But, it is apparent, that no system cannot be brought into use; and it is manifest that, of the kind can ever be enforced, which will not besides the loss inevitable from such an operation, absorb a considerable portion of the money to be dis- its tendencies is to produce fluctuations in the busitributed in salaries and commissions to the agents em- ness of the country, which are always productive of ployed in the process, and in the various losses and speculation, and detrimental to the interests of regudepreciations which arise from other causes; and the lar trade. Argument can scarcely be necessary to practical effect of such an attempt must ever be to show that a measure of this character ought not to burden the people with taxes, not for purposes bene-receive further legislative encouragement. ficial to them, but to swell the profits of deposit banks, and support a band of useless public officers. A distribution to the people is impracticable and unjust in other respects. It would be taking one man's property, and giving it to another. Such would be the unavoidable result of a rule of equality, (and none other is spoken of, or would be likely to be adopted,) inasmuch as there is no mode by which the amount of the individual contributions of our citizens to the public revenue can be ascertained. We know that they contribute unequally; and a rule, therefore, that would distribute to them equally, would be liable to all the objections which apply to the principle of an equal division of property. To make the General Government the instrument of carrying this odious principle into effect, would be at once to destroy the means of its usefulness and change the character designed for it by the framers of the constitution.

By examining the practical operation of the ratio for distribution adopted in the deposit bill of the last session, we shall discover other features that appear equally objectionable. Let it be assumed, for the sake of argument, that the surplus moneys to be deposited with the States have been collected and belong to them in the ratio of their federal representative population-an assumption founded upon the fact that any deficiencies in our future revenue from imposts and public lands must be made up by direct taxes collected from the States in that ratio. It is proposed to distribute the surplus, say $30,000,000, not according to the ratio in which it has been collected and belongs to the people of the States, but in that of their votes in the colleges of electors of President and Vice President. The effect of a distribution of that ratio is shown by the annexed table, marked A.

By an examination of that table, it will be perceived that in the distribution of the surplus of $30,000,000 upon that basis, there is a great departure from the principle which regards representation as the true measure of taxation; and it will be found that the tendency of that departure will be to increase whatever inequalities have been supposed to attend the operation of our federal system in respect to its bearings upon the different interests of the Union. In

But the more extended and injurious consequences likely to result from a policy which would collect a surplus revenue for the purpose of distributing it, may be forcibly illustrated by an examination of the effects already produced by the present deposit act. This act, although certainly designed to secure the safe-keeping of the public revenue, is not entirely free in its tendencies from any of the objections which apply to this principle of distribution. The Govern-making the basis of representation the basis of taxament had, without necessity, received from the people a large surplus, which, instead of being employed as heretofore, and returned to them by means of the public expenditure, was deposited with sundry banks. The banks proceeded to make loans upon this surplus, and thus converted it into banking capital; and in this manner it has tended to multiply bank charters, and has had a great agency in producing a spirit of wild speculation. The possession and use of the prop-mises which established a rule of taxation so just and erty out of which this surplus was created belonged to the people; but the Government has transferred its possession to incorporated banks, whose interest and effort it is to make large profits out of its use. This process need only be stated to show its injustice and bad policy.

And the same observations apply to the influence which is produced by the steps necessary to collect as well as to distribute such a revenue. About threefifths of all the duties on imports are paid in the city of New York; but it is obvious that the means to pay those duties are drawn from every quarter of the Union. Every citizen in every State, who purchases and consumes an article which has paid a duty at that

tion, the framers of the constitution intended to equalize the burdens which are necessary to support the Government; and the adoption of that ratio, while it accomplished this object, was also the means of adjusting other great topics arising out of the conflicting views respecting the political equality of the various members of the confederacy. Whatever, therefore disturbs the liberal spirit of the compro

equitable, and which experience has proved to be so well adapted to the genius and habits of our people, should be received with the greatest caution and distrust.

A bare inspection, in the annexed table, of the differences produced by the ratio used in the deposit act compared with the results of a distribution according to the ratio of direct taxation, must satisfy every unprejudiced mind that the former ratio contravenes the spirit of the constitution, and produces a degree of injustice in the operation of the Federal Government which would be fatal to the hope of perpetuating it. By the ratio of direct taxation, for example, the State of Delaware, in the collection of $30,000,000

SENATE.]

The President's Message.

zation which are now so prevalent through the land would disappear.

The facts that the value of the stocks was greatly enhanced by the creation of the bank, that it was well understood that such would be the case, and that some of the advocates of the measure were largely benefited by it, belong to the history of the times, and are well calculated to diminish the re

[DECEMBER, 1836. foreign countries, by a permanent rule, as to exclude the use of a mutable medium of exchange, such as Without desiring to conceal that the experience of certain agricultural commodities, recognized by and observation of the last two years have operated the statutes of some States as a tender for debts, a partial change in my views upon this interesting or the still more pernicious expedient of a paper subject, it is, nevertheless, regretted that the sugges- currency. The last, from the experience of the evils tions made by me, in my annual messages of 1829 of the issues of paper during the Revolution, had and 1830, have been greatly misunderstood. At become so justly obnoxious, as not only to suggest that time, the great struggle was begun against that the clause in the constitution forbidding the emislatitudinarian construction of the constitution which sion of bills of credit by the States, but also to proauthorizes the unlimited appropriations of the reve- duce that vote in the convention which negatived nues of the Union to internal improvements within the proposition to grant power to Congress to charthe States, tending to invest in the hands, and place ter corporations; a proposition well understood at under the control, of the General Government, all the time, as intended to authorize the establishment the principal roads and canals of the country, in vio- of a national bank, which was to issue a currency lation of State rights, and in derogation of State of bank notes, on a capital to be created to some authority. At the same time the condition of the extent out of Government stocks. Although this manfacturing interest was such as to create an appre- proposition was refused by a direct vote of the conhension that the duties on imports could not, without vention, the object was afterwards in effect obtained, extensive mischief, be reduced in season to prevent by its ingenious advocates, through a strained conthe accumulation of a considerable surplus after the struction of the constitution. The debts of the payment of the national debt. In view of the dangers Revolution were funded, at prices which formed of such a surplus, and in preference to its application no equivalent, compared with the nominal amount to internal improvements, in derogation of the rights of the stock, and under circumstances which exand powers of the States, the suggestion of an posed the motives of some of those who participated amendment of the constitution to authorize its distri- in the passage of the act, to distrust. bution was made. It was an alternative for what were deemed greater evils-a temporary resort to relieve an over-burdened treasury, until the Government could, without a sudden and destructive revulsion in the business of the country, gradually return to the just principle of raising no more revenue from the people, in taxes, than is necessary for its econom-spect which might otherwise have been due to the ical support. Even that alternative was not spoken of but in connection with an amendment of the constitution. No temporary inconvenience can justify the exercise of a prohibited power, or a power not granted by the instrument; and it was from a conviction that the power to distribute even a temporary surplus of revenue is of that character, that it was suggested only in connection with an appeal to the source of all legal power in the General Government, the States which have established it. No such appeal has been taken, and, in my opinion, a distribution of the surplus revenue by Congress, either to the States or the people, is to be considered as among the prohibitions of the constitution. As already intimated, my views have undergone a change, so far as to be convinced that no alteration of the constitution, in this respect, is wise or expedient. The influence of an accumulating surplus upon the legislation of the General Government and the States, its effect upon the credit system of the country, producing dangerous extensions and ruinous contractions, fluctuations in the price of property, rash speculation, idleness, extravagance, and a deterioration of morals, have taught us the important lesson, that any transient mischief which may attend the reduction of our revenue to the wants of our Government is to be borne in preference to an overflowing treasury.

action of the Congress which created the institution.

On the establishment of a national bank, it be came the interest of its creditors that gold should be superseded by the paper of a bank as a general currency. A value was soon attached to the gold coins, which made their exportation to foreign countries as a mercantile commodity, more profitable than their retention and use at home as money. It followed, as a matter of course, if not designed by those who established the bank, that the bank became, in effect, a substitute for the mint of the United States.

Such was the origin of a national bank currency, and such the beginning of those difficulties which now appear in the excessive issues of the banks incorporated by the various States.

Although it may not be possible, by any legisla tive means within our power, to change at once the system which has thus been introduced, and has received the acquiescence of all portions of the country, it is certainly our duty to do all that is consistent with our constitutional obligations, to prevent the mischiefs which are threatened by its undue extension. That the efforts of the fathers of our Government to guard against it by a constitutional provision were founded on an intimate knowledge of the subject, has been frequently attested by the bitter experience of the country. The same causes which led them to refuse their sanction to a power authorizing the establishment of incorporaIt is apparent from the whole context of the con- tions for banking purposes, now exist in a much stitution, as well as the history of the times which stronger degree to urge us to exert the utmost vigigave birth to it, that it was the purpose of the con- lance in calling into action the means necessary to vention to establish a currency consisting of the correct the evils resulting from the unfortunate exprecious metals. These, from their peculiar proper-ercise of the power; and it is to be hoped that the ties, which rendered them the standard of value in opportunity of effecting this great good will be imall other countries, were adopted in this, as well to proved before the country witnesses new scenes of establish its commercial standard, in reference to embarrassment and distress.

I beg leave to call your attention to another subject intimately associated with the preceding onethe currency of the country.

Variableness must ever be the characterestic of a currency, of which the precious metals are not the chief ingredient, or which can be expanded or contracted without regard to the principles that regulate the value of those metals as a standard in the general trade of the world. With us, bank issues constitute such a currency, and must ever do so, until they are made dependent on those just proportions of gold and silver, as a circulating medium, which experience has proved to be necessary, not only in this, but in all other commercial countries. Where those proportions are not infused into the circulation, and do not control it, it is manifest that prices must vary according to the tide of bank issues, and the value and stability of property must stand exposed to all the uncertainty which attends the administration of institutions that are constantly liable to the temptation of an interest distinct from that of the community in which they are established.

The progress of an expansion, or rather a depreciation of the currency, by excessive bank issues, is always attended by a loss to the laboring classes. This portion of the community have neither time nor opportunity to watch the ebbs and flows of the money market. Engaged from day to day in their useful toils, they do not perceive that, although their wages are nominally the same, or even somewhat higher, they are greatly reduced, in fact, by the rapid increase of a spurious currency; which, as it appears to make money abound, they are at first inclined to consider a blessing. It is not so with the speculator, by whom this operation is better understood, and is made to contribute to his advantage. It is not until the prices of the necessaries of life become so dear that the laboring classes cannot supply their wants out of their wages, that the wages rise and gradually reach a justly proportioned rate to that of the products of their labor. When thus, by the depreciation in consequence of the quantity of paper in circulation, wages as well as prices become exorbitant, it is soon found that the whole effect of the adulterations is a tariff on our home industry for the benefit of the countries where gold and silver circulate and maintain uniformity and moderation in prices. It is then perceived that the enhancement of the price of land and labor produces a corresponding increase in the price of products, until these products do not sustain a competition with similar ones in other countries, and thus both manufactured and agricultural productions cease to bear exportation from the country of the spurious currency, because they cannot be sold for cost. This is the process by which specie is banished by the paper of the banks. Their vaults are soon exhausted to pay for foreign commodities; the next step is a stoppage of specie payment—a total degradation of paper as a currency -unusual depression of prices, the ruin of debtors, and the accumulation of property in the hands of creditors and cautious capitalists.

[SENATE.

of several of the States prohibiting the circulation of small notes, and the auxiliary enactments of Congress at the last session, forbidding their reception or payment on public account, the true policy of the country has been advanced, and a larger portion of the precious metals infused into our circulating medium. These measures will probably be followed up in due time by the enactment of State laws, banishing from circulation bank notes of still higher denominations; and the object may be materially promoted by further acts of Congress, forbidding the employment, as fiscal agents, of such banks as continue to issue notes of low denominations, and throw impediments in the way of the circulation of gold and silver.

The effects of an extension of bank credits and over-issues of bank paper have been strikingly illustrated in the sales of the public lands. From the returns made by the various Registers and Receivers in the early part of last summer, it was perceived that the receipts arising from the sales of the public lands were increasing to an unprecedented amount. In effect, however, these receipts amounted to nothing more than credits in bank. The banks let out their notes to speculators; they were paid to the Receivers, and immediately returned to the banks, to be sent out again and again, being mere instruments to transfer to speculators the most valuable public land, and pay the Government by a credit on the books of the banks. Those credits on the books of some of the western banks, usually called deposits, were already greatly beyond their immediate means of payment, and were rapidly increasing. Indeed, each speculation furnished means for another; for no sooner had one individual or company paid in their notes, than they were immediately lent to another for a like purpose; and the banks were extending their business and their issues so largely, as to alarm considerate men, and render it doubtful whether these bank credits, if permitted to accumulate, would ultimately be of the least value to the Government. The spirit of expansion and speculation was not confined to the deposit banks, but pervaded the whole multitude of banks throughout the Union, and was giving rise to new institutions to aggravate the evil.

The safety of the public funds, and the interest of the people, generally, required that these operations should be checked, and it became the duty of every branch of the General and State Governments to adopt all legitimate and proper means to produce that salutary effect. Under this view of my duty, I directed the issuing of the order which will be laid before you by the Secretary of the Treasury, requiring payment for the public lands sold to be made in specie, with an exception until the fifteenth of the present month in favor of actual settlers. This measure has produced many salutary consequences. It checked the career of the Western banks, and gave them additional strength in anticipation of the It was in view of these evils, together with the pressure which has since pervaded our Eastern as dangerous power wielded by the Bank of the United well as the European commercial cities. By preventStates, and its repugnance to our constitution, that ing the extension of the credit system, it measurably I was induced to exert the power conferred upon me cut of the means of speculation, and retarded its by the American people to prevent the continuance progress in monopolizing the most valuable of the of that institution. But although various dangers public lands. It has tended to save the new States to our republican institutions have been obviated by the from a non-resident proprietorship, one of the greatfailure of that bank to extort from the Government est obstacles to the advancement of a new country, a renewal of its charter, it is obvious that little has and the prosperity of an old one. It has tended been accomplished except a salutary change of public to keep open the public lands for entry by emigrants, opinion, towards restoring to the country the sound at Government prices, instead of their being comcurrency provided for in the constitution. In the actspelled to purchase of speculators at double or treble