Front Page Titles (by Subject) R.J. Walker, Report from the Secretary of the Treasury on the State of the Finances, etc. (December, 1845) - State Papers and Speeches on the Tariff
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R.J. Walker, Report from the Secretary of the Treasury on the State of the Finances, etc. (December, 1845) - Frank William Taussig, State Papers and Speeches on the Tariff 
State Papers and Speeches on the Tariff, with an Introduction by F.W. Taussig (Cambridge, Mass.: Harvard University, 1892).
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R.J. Walker, Report from the Secretary of the Treasury on the State of the Finances, etc. (December, 1845)
Treasury department, December 3, 1845.
In obedience to the “Act supplementary to the act to establish the Treasury Department,” the undersigned respectfully submits the following report: —
The receipts and expenditures for the fiscal year ending the 30th June, 1846, were as follows: —
As appears in detail by accompanying statement A.
The estimated receipts and expenditures for the fiscal year ending 30th June, 1846, are as follows: —
But this balance is subject to be decreased by such additional appropriations as Congress shall make, to be expended during the fiscal year ending the 30th June, 1846, and to be altered by the sums which may be presented for payment of the old funded and unfunded debt and old treasury notes.
The estimated receipts, means, and expenditures for the fiscal year commencing 1st July, 1846, and ending 30th June, 1847, are as follows, viz.: —
The receipts for the first quarter of this year are less, by $2,011,885.90, than the receipts of the same quarter last year. Among the causes of decrease is the progressive diminution of the importation of many highly-protected articles, and the substitution of rival domestic products. For the nine months ending June 30, 1843, since tLe present tariff, the average of duties upon dutiable imports was equal to 37.84 1/10;% for the year ending June 30, 1844, 33.85 9/10; and for the year ending June 30, 1845, 29.90%; showing a great diminution in the average percentage, owing in part to increased importation of some articles bearing the lighter duties, and decreased importation of others bearing the higher duty.
The revenue from ad valorem duties last year exceeded that realized from specific duties, although the average of the ad valorem duties was only 23.57%, and the average of the specific duties 41.30%; presenting another strong proof that lower duties increase the revenue. Among the causes tending to augment the revenue are increased emigration and the annexation of Texas. The estimates for the expenditures of 1846 are based chiefly upon appropriations made by Congress. The estimated expenditures of 1847 are founded upon data furnished by the several departments, and are less by $4,108,238.65 than those of the preceding year.
These estimates are submitted in the full conviction that, whenever Congress, guided by an enlightened economy, can diminish the expenditures without injury to the public interest, such retrenchment will be made, so as to lighten the burden of taxation and hasten the extinguishment of the public debt, reduced on the 1st of October last to $17,075,445.52.
In suggesting improvements in the revenue laws, the following principles have been adopted: —
1st. That no more money should be collected than is necessary for the wants of the government, economically administered.
2d. That no duty be imposed on any article above the lowest rate which will yield the largest amount of revenue.
3d. That below such rate discrimination may be made, descending in the scale of duties; or for imperative reasons, the article may be placed in the list of those free from all duty.
4th. That the maximum revenue duty should be imposed on luxuries.
5th. That all minimums, and all specific duties, should be abolished, and ad valorem duties substituted in their place, — care being taken to guard against fraudulent invoices and under-valuation, and to assess the duty upon the actual market value.
6th. That the duty should be so imposed as to operate as equally as possible throughout the Union, discriminating neither for nor against any class or section.
No horizontal scale of duties is recommended; because such a scale would be a refusal to discriminate for revenue, and might sink that revenue- below the wants of the government. Some articles will yield the largest revenue at duties that would be wholly or partially prohibitory in other cases. Luxuries, as a general rule, will bear the highest revenue duties; but even some very costly luxuries, easily smuggled, will bear but a light duty for revenue; whilst other articles of great bulk and weight will bear a higher duty for revenue. There is no instance within the knowle’dge of this department of any horizontal tariff ever having been enacted by any one of the nations of the world. There must be discrimination for revenue, or the burden of taxation must be augmented, in order to bring the same amount of money into the treasury. It is difficult, also, to adopt any arbitrary maximum to which an inflexible adherence must be demanded in all cases. Thus upon brandy and spirits, a specific duty, varying as an equivalent ad valorem from 180% to 261$, yields a large revenue; yet no one would propose either of these rates as a maximum. These duties are too high for revenue, from the encouragement they present for smuggling these baneful luxuries; yet a duty of 20% upon brandy and spirits would be far below the revenue standard, would greatly diminish the income on these imports, require increased burdens upon the necessaries of life, and would revolt the moral sense of the whole community. There are many other luxuries which will bear a much higher duty for revenue than 20%; and the only true maximum is that which experience demonstrates will bring, in each case, the largest revenue at the lowest rate of duty. Nor should maximum revenue duties be imposed upon all articles; for this would yield too large an income, and would prevent all discrim-i nation within the revenue standard, and require necessaries to be taxed as high as luxuries. But, whilst it is impossible to adopt any horizontal scale of duties, or even any arbitrary maximum, experience proves that, as a general rule, a duty of 20% ad valorem will yield the largest revenue. There are, however, a few exceptions above, as well as many below this standard. Thus, whilst the lowest revenue duty on most luxuries exceeds 20%, there are many costly articles of small bulk, easily smuggled, which would bring, perhaps, no revenue at a duty as high as 20%; and even at the present rate of 7J%, they yield, in most cases, a small revenue; whilst coal, iron, sugar, and molasses, articles of great bulk and weight, yielded last year six millions of revenue, at an average rate of duty exceeding 60% ad valorem. These duties are far too high for revenue upon all these articles, and ought to be reduced to the revenue standard; but if Congress desire to obtain the largest revenue from duties on these articles, those duties, at the lowest rate for revenue, would exceed 20% ad valorem.
There are appended to this report tables, prepared with great care and labor, showing the rates of duty each year on each of these four articles, and the equivalent ad valorem from the organization of the government down to the present period, with the revenue collected every year upon each; from which tables Congress will be enabled to judge how far the present rates exceed the lowest revenue duties, and how much they must be reduced so as to yield a revenue equal to that now obtained from these articles.
It is believed that sufficient means can be obtained, at the lowest revenue duties on the articles now subjected to duty; but if Congress desire a larger revenue, it should be procured by taxing the free articles, rather than transcend, in any case, the lowest revenue duties. It is thought, however, that, without exceeding that limit in any case, an adequate revenue will still be produced, and permit the addition to the free list of salt and guano. In one of his annual messages, Mr. Jefferson recommended to Congress “the suppression of the duties on salt.” A large portion of this duty is exhausted in heavy expenses of measuring salt, and in large sums paid for fishing bounties and allowances in lieu of the drawback of the duty, both which expenditures would fall with a repeal of the duty; which repeal, therefore, can cause no considerable reduction of the revenue. Salt is a necessary of life, and should be as free from tax as air or water. It is used in large quantities by the fanner and planter; and to the poor, this tax operates most oppressively, not only.in the use of the article itself, but as combined with salted provisions. The salt made abroad by solar evaporation is also most pure and wholesome, and, as conservative of health, should be exempt from taxation.
The duty on cotton-bagging is equivalent to 55.20% ad valorem on the Scotch bagging, and to 123.11% on the gunny-bag; and yet the whole revenue from these duties has fallen to $66,064.50. Nearly the entire amount, therefore, of this enormous tax makes no addition to the revenue, but inures to the benefit of about thirty manufacturers. As five sixths of the cotton crop is exported abroad, the same proportion of the bagging around the.bale is exported, and sold abroad at a heavy loss, growing out of a deduction for tare. Now, as duties are designed to operate only on the domestic consumption, there ought to be a drawback of the whole duty on cotton-bagging reexported around the bale, on the same principles on which drawbacks are allowed in other cases. The cotton planting is the great exporting interest, and suffers from the tariff in the double capacity of consumer and exporter. Cotton is the great basis of our foreign exchange, furnishing most of the means to purchase imports and supply the revenue. It is thus the source of two thirds of the revenue, and of our foreign freight and commerce; upholding our commercial marine and maritime power. It is also a bond of peace with foreign nations, constituting a stronger preventive of war than armies or navies, forts or armaments. At present prices, our cotton crop will yield an annual product of $72,000,000, and the manufactured fabric $504,000,000, furnishing profits abroad to thousands of capitalists, and wages to hundreds of thousands of the working classes; all of whom would be deeply injured by any disturbance, growing out of a state of war, to the direct and adequate supply of the raw material. If our manufacturers consume 400,000 bales, it would cost them $12,000,000 whilst selling the manufactured fabric for $84,000,000; and they should be the last to unite in imposing heavy taxes upon that great interest which supplies them with the raw material out of which they realize such large profits. Accompanying the drawback of the duty en cotton-bagging should be the repeal of the duty on foreign cotton, which is inoperative and delusive, and not desired by the domestic producer.
The condition of our foreign relations, it is said, should suspend the reduction of the tariff. No American patriot can desire to arrest our onward career in peace and prosperity; but if, unhappily, such should be the result, it would create an increased necessity for reducing our present high duties in order to obtain sufficient revenue to meet increased expenditures. The duties for the quarter ending the 30th September, 1844, yielded $2,011,885.90 more of revenue than the quarter ending 30th September, 1845; showing a very considerable decline of the revenue, growing out of a diminished importation of the highly-protected articles and the progressive substitution of the domestic rivals. Indeed, many of the duties are becoming dead letters, except for the purpose of prohibition, and, if not reduced, will ultimately compel their advocates to resort to direct taxation to support the government. In the event of war, nearly all the high dxities would become prohibitory, from the increased risk and cost of importations; and if there be, indeed, in the opinion of any, a serious danger of such an occurrence, it appeals most strongly to their patriotism to impose the lowest revenue duties on all articles, as the only means of securing, at such a period, any considerable income from the tariff.
The whole power to collect taxes, whether direct or indirect, is conferred by the same clause of the Constitution. The words are, “The Congress shall have power to lay and collect taxes, duties, imposts, and excises.” A direct tax or excise, not for revenue, but for protection, clearly would not be within the legitimate object of taxation; and yet it would be as much so as a duty imposed for a similar purpose. The power is “to lay and collect taxes, duties, imposts, and excises.” A duty must be laid only that it may be collected; and if it is so imposed that it cannot be collected, in whole or in part, it violates the declared object of the granted power. To lay all duties so high that none of them could be collected would be a prohibitory tariff. To lay a duty on any one article so high that it could not be collected would be a prohibitory tariff upon that article: If a duty of 100% were imposed upon all or upon a number of articles, so as to diminish the revenue upon all or any of them, it would operate as a partial prohibition. A partial and a total prohibition are alike in violation of the true object of the taxing power. They only differ in degree, and not in principle. If the revenue limit maybe exceeded 1%, it may be exceeded 100%. If it may be exceeded upon any one article, it may be exceeded on all; and there is no escape from this conclusion, but in contending that Congress may lay duties on all articles so high as to collect no revenue, and operate as a total prohibition.
The Constitution declares that “All bills for raising revenue shall originate in the House of Representatives.” A tariff bill, it is conceded, can only originate in the House, because it is a bill for raising revenue. That is the only proper object of such a bill. A tariff is a bill to “lay and collect taxes.” It is a bill for “raising revenue,” and whenever it departs from that object, in whole or in part, either by total or partial prohibition, it violates the purpose of the granted power.
In arranging the details of the tariff, it is believed that the maximum revenue duties should be imposed upon luxuries. It is deemed just that taxation, whether direct or indirect, should be as nearly as practicable in proportion to property. If the whole revenue were raised by a tax upon property, the poor, and especially those who live by the wages of labor, would pay but a very small portion of such tax; whereas, by the tariff, the poor, by the consumption of various imports or domestic articles enhanced in price by the duties, pay a much larger share of the taxes than if they were collected by an assessment in proportion to property. To counteract as far as possible this effect of the tariff, — to equalize its operation, and make it approximate as nearly as may be to a system of taxes in proportion to property, — the duties upon luxuries, used almost exclusively by the rich, should be fixed at the highest revenue standard. This would not be discriminating in favor of the poor, however just that might be within the revenue limit; but it would mitigate, as far as practicable, that discrimination against the poor which results from every tariff, by compelling them to pay a larger amount of taxes than if assessed and collected on all property in proportion to its value. In accordance with these principles it is believed that the largest practicable portion of the aggregate revenue should be raised by maximum revenue duties upon luxuries, whether grown, produced, or manufactured at home or abroad.
An appeal has been made to the poor, by the friends of protection, on the ground that it augments the wages of labor. In reply, it is contended that the wages of labor have not augmented since the tariff of 1842, and that in some cases they have diminished.
When the number of manufactories is not great, the power of the system to regulate the wages of labor is inconsiderable; but as the profit of capital invested in manufactures is augmented by the protective tariff, there is a corresponding increase of power, until the control of such capital over the wages of labor becomes irresistible. As this power is exercised from time to time, we find it resisted by combinations among the working classes, by turning out for higher wages, or for shorter time; by trades-union; and in some countries, unfortunately, by violence and bloodshed. But the government, by protective duties, arrays itself on the side of the manufacturing system, and by thus augmenting its wealth and power, soon terminates in its favor the struggle between man and money, — between capital and labor. When the tariff of 1842 was enacted, the maximum duty was 20%. By that act, the average of duties on the protected articles was more than double. But the wages of labor did not increase in a corresponding ratio, or in any ratio whatever. On the contrary, whilst wages in some cases have diminished, the prices of many articles used by the working classes have greatly appreciated.
A protective tariff is a question regarding the enhancement of the profits of capital. That is the object, and not to augment the wages of labor, which would reduce those profits. It is a question of percentage, and is to decide whether money vested in our manufactures shall, by special legislation, yield a profit of 10, 20, or 30%, or whether it shall remain satisfied with a dividend equal to that accruing from the same capital invested in agriculture, commerce, or navigation.
The present tariff is unjust and unequal, as well in its details as in the principles upon which it is founded. On some articles the duties are entirely prohibitory, and on others there is a partial prohibition. It discriminates in favor of manufactures and against agriculture, by imposing many higher duties upon the manufactured fabric than upon the agricultural product out of which it is made. It discriminates in favor of the manufacturer and against the mechanic, by many higher duties upon the manufacture than upon the article made out of it by the mechanic. It discriminates in favor of the manufacturer and against the merchant, by injurious restrictions upon trade and commerce; and against the ship-building and navigating interest, by heavy duties on almost every article used in building or navigating vessels. It discriminates in favor of manufactures and against exports, which are as truly the product of American industry as manufactures. It discriminates in favor of the rich and against the poor, by high duties upon nearly all the necessaries of life and by minimums and specific duties, rendering the tax upon the real value much higher on the cheaper than upon the finer article.
Minimums are a fictitious value assumed by law, instead of the real value; and the operation of all mini-mums may be illustrated by a single example. Thus, by the tariff of 1842, a duty of 30% ad valorem is levied on all manufactures of cotton; but the law further provides that cotton goods “not dyed, colored, printed, or stained, not exceeding in value twenty cents per square yard, shall be valued at twenty cents per square yard.” If, then, the real value of the cheapest cotton goods is but four cents a square yard, it is placed by the law at the false value of twenty cents per square yard, and the duty levied on the fictitious value, — raising it five times higher on the cheap article consumed by the poor, than upon the fine article purchased by the more wealthy. Indeed, by House document No. 306, of the 1st session of the 28th Congress, this difference, by actual importation, was 65% between the cheaper and the finer article of the 20% minimum, 131% on the 30% minimum, 48£% on the 35% minimum, 84% on the 60% minimum, and 84% on the 75% minimum. This difference is founded on actual importation, and shows an average discrimination against the poor on cotton imports of 82% beyond what the tax would be if assessed upon the actual value. The operation of the specific duty presents a similar discrimination against the poor and in favor of the rich. Thus, upon salt: the duty is not upon the value, but it is eight cents a bushel, whether the article be coarse or fine, — showing by the same document, from actual importation, a discrimination of 64% against the cheap and in favor of the finer article; and this, to a greater or less extent, is the effect of all specific duties. When we consider that $2,892,621.74 of the revenue last year was collected by minimum duties, and $13,311,085.46 by specific duties, the discrimination against the cheaper article must amount, by estimates founded on the same document, to a tax of $5,108,422 exacted by minimums and specific duties annually from the poorer classes, by raising thus the duties on the cheaper articles above what they would be if the duty were assessed upon the actual value. If direct taxes were made specific, they would be intolerable. Thus, if an annual tax of $30 were assessed on all houses without respect to their actual value, making the owner of the humble tenement or cabin pay a tax of $30 and the owner of the costly mansion a tax of but $30 on their respective houses, it would differ only in degree, but not in principle, from the same unvarying specific duty on cheap as on fine articles. If any discrimination should be made, it should be the reverse of the specific duty, and of the minimum principle, by establishing a maximum standard above which value the duties on the finer article should be higher, and below which they should be lower on the cheaper article. The tax upon the actual value is the most equal, and can only be accomplished by ad valorem duties. As to fraudulent invoices and under-valuations, these dangers are believed to be arrested effectually by the stringent provisions and severe penalty of the 17th section of the tariff of 1842; and now one half the revenue is collected from ad valorem duties.
At least two thirds of the taxes imposed by the present tariff are paid, not into the treasury but to the protected classes. The revenue from imports last year exceeded $27,000,000. This in itself is a heavy tax; but the whole tax imposed upon the people by the present tariff is not less than $81,000,000, — of which $27,000,000 are paid to the government upon the imports, and $54,000,000 to the protected classes, in enhanced prices of similar domestic articles.
This estimate is based upon the position that the duty is added to the price of the import, and also of its domestic rival If the import is enhanced in price by the duty, so must be the domestic rival; for, being like articles, their price must be the same in the same market The merchant advances in cash the duty on the import, and adds the duty, with a profit upon it, and other charges, to the price, — which must therefore be enhanced to that extent; unless the foreign producer had first deducted the duty from the price. But this is impossible; for such now is, and long has been, the superabundance of capital and active competition in Europe, that a profit of 6% in any business is sufficient to produce large investments of money in that business; and if, by our tariff, a duty of 40% be exacted on the products of such business, and the foreign producer deducts that duty from his previous price, he must sustain a heavy loss. This loss would also soon extend beyond the sales for our consumption to sales to our merchants of articles to be reexported by them from our ports with a drawback of the duty, which would bring down their price throughout the markets of the world. But this the foreign producer cannot afford. The duty, therefore, must be added to the price, and paid by the consumer, — the duty constituting as much a part of the price as the cost of production.
If it be true that, when a duty of 40% is imposed by our tariff, the foreign producer first deducts the duty from the previous price on the sale to our merchant, it must be equally true with a duty of 100%, which is exactly equal to the previous price, and, when deducted, would reduce the price to nothing.
The occasional fall in price of some articles after a tariff is no proof that this was the effect of the tariff; because, from improved machinery, diminished prices of the raw material, or other causes, prices may fall even after a tariff, but they would in such cases have fallen much more but for the tariff. The truest comparison is between the present price of the same article at home and abroad; and to the extent that the price is lower” in the foreign market than in our own, the duty, if equal to that difference, must to that extent enhance the price, and in the same ratio with the lower duty. The difference in price at home or abroad is generally about equal to the difference in the cost of production, and presents in a series of years the surest measure of the effect of the duty,—the enhancement in price being equal to that difference if the duty be higher than that difference or equal to it; or if the duty be lower, then the enhancement is equal to the duty;. and if the article is produced, like cotton, more cheaply here than abroad the duty is inoperative. The great argument for the tariff is that, foreign labor being cheaper than our own, the cost of foreign productions, it is said, is lessened to that extent; and that we must make up this difference by an equivalent duty, and a corresponding enhancement of price in our own market both of the foreign article and of its rival domestic product, — thus rendering the duty a tax on all consumers, for the ben-fit of the protected classes. If the marshal were sent by the federal government to collect a direct tax from the whole people, to be paid over to manufacturing capitalists to enable them to sustain their business, or realize a larger profit, it would be the same in effect as the protective duty, which, when analyzed in its simplest elements, and reduced to actual results, is a mere subtraction of so much money from the people, to increase the resources of the protected classes. Legislation for classes is against the doctrine of equal rights, repugnant to the spirit of our free institutions, and, it is apprehended by many, may become but another form for privileged orders under the name of protection instead of privilege — indicated here not by rank or title, but by profits and dividends extracted from the many by taxes upon them for the benefit of the few.
No prejudice is felt by the Secretary of the Treasury against manufacturers. His opposition is to the protective system, and not to classes or individuals. He doubts not that the manufacturers are sincerely persuaded that the system which is a source of so much profit to them is beneficial also to the country. He entertains a contrary opinion, and claims for the opponents of the system a settled conviction of its injurious effects. Whilst a due regard to the just and equal rights of all classes forbids a discrimination in favor of the manufacturers by duties above the lowest revenue limit, no disposition is felt to discriminate against them ty reducing such duties as operate in their favor below that standard. Under revenue duties, it is believed, they would still receive a reasonable profit — equal to that realized by those engaged in other pursuits; and it is thought they should desire no more, at least through the agency of governmental power. Equal rights and profits, so far as laws are made, best conform to the principles upon which the Constitution was founded, and with an undeviating regard to which all its functions should be exercised, — looking to the whole country and not to classes or sections.
Soil, climate, and other causes vary very much, in different countries, the pursuits which are most profitable in each; and the prosperity of all of them will be best promoted by leaving them unrestricted by legislation, to exchange with each other those fabrics and products which they severally raise most cheaply. This is clearly illustrated by the perfect free trade which exists among all the States of the Union, and by the acknowledged fact that any one of these States would be injured by imposing duties upon the products of the others. It is generally conceded that reciprocal free trade among nations would best advance the interest of all. But it is contended that we must meet the tariffs of other nations by countervailing restrictions. That duties upon our exports by foreign nations are prejudicial to us, is conceded; but whilst this injury is slightly felt by the manufacturers, its weight falls almost exclusively upon agriculture, commerce, and navigation. If those interests which sustain the loss do not ask countervailing restrictions, it should not be demanded by the manufacturers, who do not feel the injury, and whose fabrics, in fact, are not excluded by the foreign legislation of which they complain. That agriculture, commerce, and navigation are injured by foreign restrictions, constitutes no reason why they should be subject to still severer treatment by additional restrictions and countervailing tariffs enacted at home. Commerce, agriculture, and navigation, harassed as they may be by foreign restrictions, diminishing the amount of exchangeable products which they could otherwise purchase abroad, are burdened with heavier impositions at home. Nor will augmented duties here lead to a reduction of foreign tariffs; but the reverse, by furnishing the protected classes there with the identical argument used by the protected classes here against reduction. By countervailing restrictions we injure our own fellow citizens much more than the foreign nations at whom we propose to aim their force; and in the conflict of opposing tariffs, we sacrifice our own commerce, agriculture, and navigation. As well might we impose monarchical or aristocratic restrictions on our own government or people because that is the course of foreign legislation. Let our commerce be as free as our political institutions. Let us, with revenue duties only, open our ports to all the world, and nation after nation will soon follow our example. If we reduce our tariff, the party opposed to the corn laws of England would soon prevail, and admit all our agricultural products at all times freely iuto her ports, in exchange for her exports. And if England would now repeal her duties upon our wheat, flour, Indian corn, and other > agricultural products, our own restrictive system would certainly be doomed to overthrow. If the question is asked, who shall begin this work of reciprocal reduction? it is answered by the fact, that England has already abated her duties upon most of our exports. She has repealed the duty upon cotton, and greatly reduced the tariff upon our breadstuff s, provisions, and other articles; and her present bad harvest, if accompanied by a reduction of our tariff, would lead to the repeal of her corn laws, and the unrestricted admission, at all times, of our agricultural products. The manufacturing interest opposes reciprocal free trade with foreign nations. It opposes the Zoll-Verein treaty; and it is feared that no other treaty producing a reciprocal reduction of our own and foreign tariffs will receive its support. If that interest preferred a reciprocal exchange of our own for foreign fabrics, at revenue duties, it would not have desired a tariff operating, without exception, against all nations that adopted low as well as high tariffs; nor would it have opposed every amendment proposing, when the tariff of 1842 was under consideration, a reduction of our duties upon the exports of such nations as would receive, free of duty, our flour and other agricultural products. If that interest desired reciprocal free trade with other nations, it would have desired a very different tariff from that of 1842. It would have sought to confine the high duties to those cases where the foreign importer would sell his imports for cash only; and admitted a drawback of one half of the duty where American exports would be taken abroad in exchange, — not an actual barter of foreign imports for an equal amount in value of our products, but without any barter, where a sum equal to the value of their exports was used in purchasing here an equal amount in value of any of our products; and the shipment made abroad of these products, upon the same principle under which a drawback of duties is now allowed on the reexportation of foreign imports. This would be less simple, and is not recommended in lieu of that absolute reduction of the duties which will accomplish the same object of unrestricted exchange. But such a provision would be a self-executing reciprocity law, and should be desired by those believing in countervailing tariffs against foreign nations, but in reciprocal free trade with all, — thus enabling our farmers and planters to sell their products for cheaper foreign manufactures, getting more for what they sell, and paying less for what they purchase in exchange. It seems strange, that while the profit of agriculture varies from 1$> to 8%, that of manufactures is more than double. The reason is, that whilst the high duties secure nearly a monopoly of the home market to the manufacturer, the farmer and planter are deprived to a great extent of the foreign market by these duties. The farmer and planter are, to a great extent, forbidden to buy in the foreign market, and confined to the domestic articles enhanced in price by the duties. The tariff is thus a double benefit to the manufacturer, and a double loss to the farmer and planter, a benefit to the former in nearly a monopoly of the home market, and in enhanced prices of their fabrics; and a loss to the latter in the payment of those high prices, and a total or partial exclusion from the foreign market. The true question is, whether the fanner and planter shall, to a great extent, supply our people with cheap manufactures, purchased abroad with their agricultural products, or whether this exchange shall be forbidden by high duties on such manufactures, and their supply thrown, as a monopoly, at large prices, by high tariffs, into the hands of our own manufacturers. The number of manufacturing capitalists who derive the benefit from the heavy taxes extracted by the tariff from 20,000,000 of people does not exceed 10,000. The whole number (including the working classes engaged in our manufactures) deriving any benefit from the tariff does not exceed 400,000, of whom not more than 40,000 have been brought into this pursuit by the last tariff. But this small number of 40,000 would still have been in the country, consuming our agricultural products; and in the attempt to secure them as purchasers, so small in number, and not consuming one half the supply of many counties, the fanner and planter are asked to sacrifice the markets of the world, containing a population of 800,000,000, disabled from purchasing our products by our high duties on all they would sell in exchange. The farmer and planter have the home market without a tariff; and they would have the foreign market also to a much greater extent, but for the total or partial prohibition of the last tariff.
We have more fertile lands than any other nation, can raise a greater variety of products, and, it may be said, could feed and clothe the people of nearly all the world. The home market, of itself, is wholly inadequate for such products. They must have the foreign market, or a large surplus, accompanied by great depression in price, must be the result. The States of Ohio, Indiana, and Illinois, if cultivated to their fullest extent, could of themselves raise more than sufficient food to supply the entire home market. Missouri or Kentucky could more than supply it with hemp; already the State of Mississippi raises more cotton than is sufficient for all the home market; Louisiana is rapidly approaching the same point as to sugar; and there are lands enough adapted to that product in Louisiana, Texas, and Florida, to supply with sugar and molasses nearly all the markets of the world. If cotton is depressed in price by the tariff, the consequence must be a comparative diminution of the product, and the raising in its place, to a great extent, hemp, wheat, corn, stock, and provisions, which otherwise would be supplied by the teeming products of the West. The growing West in a series of years must be the greatest sufferers by the tariff, in depriving them of the foreign market and that of the cotton growing States. We demand, in fact, for our agricultural products, specie from nearly all the world, by heavy taxes upon all their manufactures; and their purchases from us must therefore be limited, as well as their sales to us enhanced in price. Such a demand for specie, which we know in advance cannot be complied with, is nearly equivalent to a decree excluding most of our agricultural products from the foreign markets. Such is the rigor of our restrictions that nothing short of a famine opens freely the ports of Europe for our breadstuffs. Agriculture is our chief employment; it is best adapted to our situation; and, if not depressed by the tariff, would be the most profitable. We can raise a larger surplus of agricultural products, and a greater variety, than almost any other nation, and at cheaper rates. Remove, then, from agriculture all our restrictions, and by its own unfettered power it will break down all foreign restrictions, and, ours being removed, would feed the hungry and clothe the poor of our fellow men throughout all the densely peopled nations of the world. But now we will take nothing in exchange for these products but specie, except at very high div ties; and nothing but a famine breaks down all foreign restrictions, and opens for a time the ports of Europe to our breadstuffs. If, on a reduction of our duties, England repeals her corn laws, nearly all Europe must follow her example or give to her manufacturers advantages which cannot be successfully encountered in most of the markets of the world. The tariff did not raise the price of our breadstuffs; but a bad harvest in England does, — giving us for the time that foreign market which we would soon have at all times by that repeal of the corn laws which must follow the reduction of our duties. But whilst breadstuffs rise with a bad harvest in England, cotton almost invariably falls; because the increased sum which, in that event, England must pay for our breadstuffs, we will take, not in manufactures, but only in specie; and not having it to spare, she brings down, even to a greater extent, the price of our cotton. Hence the result that a bad harvest in England reduces the aggregate price of our exports, often turns the exchanges against us, carrying our specie abroad, and inflicting a serious blow on our prosperity. Foreign nations cannot for a series of years import more than they export; and if we close our markets against their imports by high duties, they must buy less of our exports, or give a lower price, or both.
Prior to the 30th of June, 1842, a credit was given for the payment of duties; since which date they have been collected in cash. Before the cash duties and the tariff of 1842, our trade in foreign imports reexported abroad afforded large and profitable employment to our merchants, and freight to our commercial marine, both for the inward and outward voyage; but since the last tariff this trade is being lost to the country, as is proved by the tables hereto annexed. The total amount of foreign imports reexported during the three years since the last tariff, both of free and dutiable goods, is $33,384,394, — being far less than in any three years (except during the war) since 1793, and less than was reexported in any one of eight several years. The highest aggregate of any three years was $173,108,813, and the lowest aggregate $41,315,705, — being in the years 1794,1795, and 1796. Before 1820 the free goods are not distinguished in this particular from the dutiable goods; but since that date the returns show the following result: During the three years since the tariff of 1842, the value of dutiable imports reexported was $12,590,811, — being less than in any one of seven years preceding since 1820, the lowest aggregate of any three years since that date being $14,918,444, and the highest $57,727,293. Even before the cash duties, for five years preceding the high tariff of 1828, the value of dutiable goods reexported was $94,796,241; and for the five years succeeding that tariff, $66,784,192, — showing a loss of $28,012,049 of our trade in foreign exports after the tariff of 1828. The diminution of this most valuable branch of commerce has been the combined result of cash duties and of the high tariff of 1842. If the cash duties are retained, as it is believed they should be, the only sure method of restoring this trade is the adoption of the warehousing system, by which the foreign imports may be kept in store by the government until they are required for reexportation abroad, or consumption at home — in which latter contingency, and at the time when, for that purpose, they are taken out of these stores for consumption, the duties are paid, and if reexported, they pay no duty, but only the expense of storage. Under the present system, the merchant introduces foreign imports of the value of $100,000. He must now, besides the advance for the goods, make a further advance in cash, in many cases, of $50,000 for the duties. Under such a system but a small amount of goods will be imported for drawbacks; and the higher the duty the larger must be the advance, and the smaller the imports for reëxportation.
The imports, before payment of duties, under the same regulations now applied to our imports in transit to Canada, may be taken from warehouse to warehouse — from the East to the lakes, and to Pittsburg, Cincinnati, and Louisville; from New Orleans to Natchez, Vicks-burg, Memphis, and St. Louis — and warehoused in these and other interior ports, the duties remaining Unpaid until the goods are taken out of the warehouse, and out of the original package at such ports, for consumption; thus carrying our foreign commerce into the interior, with all the advantage of augmented business, and cheaper supplies throughout the country. It will introduce into our large ports on or near the seaboard, assorted cargoes of goods to be reexported with our own, to supply the markets of the world. It will cheapen prices to the consumer, by deducting the interest and profit that are now charged upon the advance of duty, — building up the marts of our own commerce, and giving profitable employment to our own commercial marine. It will greatly increase our revenue by augmenting our imports, together with our exports; and is respectfully recommended to Congress, as an important part of the whole system now proposed for their consideration.
The act of the 3d of March last, allowing a drawback on foreign imports exported from certain of our ports to Canada, and also to Santa Fé and Chihuahua, in Mexico, has gone to some extent into effect under regulations prescribed by this department, and is beginning to produce the most happy results, especially in an augmented trade in the supply of foreign exports to Canada from our own ports. Indeed, this law must soon give to us the whole of this valuable trade during the long period when the St. Lawrence is closed by ice, and a large proportion of it at all seasons. The result would be still more beneficial, if Canada were allowed to carry all her exports to foreign nations in transitu through our own railroads, rivers, and canals, to be shipped from our own ports. Such a system, whilst it would secure to us this valuable trade, would greatly enlarge the business on our rivers, lakes, railroads, and canals, as well as augment our commerce; and would soon lead to the purchase, by Canada, not only of our foreign exports, but also, in many cases, of our domestic products and fabrics, to complete an assortment. In this manner our commercial relations with Canada would become more intimate, and more and more of her trade every year would be secured to our people.
Connected with this department and the finances is the question of the sales of the public lands. The proceeds of these sales, it is believed, should continue to constitute a portion of the revenue, diminishing to that extent the amount required to be raised by the tariff. The net proceeds of these sales paid into the treasury during the last fiscal year, was $2,077,022.30; and from the first sales in 1787 up to the 30th of September last, was $118,607,335.91. The average annual sales have been much less than 2,000,000 of acres; yet the aggregate net proceeds of the sales, in 1834; 1835, 1836, and 1837, was $51,268,617.82. Those large sales were almost exclusively for speculation; and this can only be obviated, at all times, by confining the sales to settlers and cultivators in limited quantities, sufficient for farms or plantations. The price at which the public lands should be sold is an important question to the whole country, but especially to the people of the new States, living mostly remote from the seaboard, and who have scarcely felt the presence of the government in local expenditures, but chiefly in the exhaustion of their means for purchases of public lands and for customs. The public lands are not of the same value; yet they are all fixed at one unvarying price, which is far above the value of a large portion of these lands. The quantity now subject to entry at the minimum price of $1.25 per acre is 133,307,457 acres, and 109,035,345 in addition, to which the Indian title has been extinguished, —being an aggregate of 242,342,802 acres, and requiring a century and a quarter to complete the sales at the rate they have progressed heretofore, without including any of the unsold lands of Texas or Oregon, or of the vast region besides to which the Indian titte is not yet extinguished. It is clear, then, that there is a vast and aunually-increasing surplus of public lands, very little of which will be sold within any reasonable period at the present price, and in regard to which the public interest would be promoted, and the revenue augmented by reducing the price. The reduction of the price of Che public lands in favor of settlers and cultivators would enhance the wages of labor. It is an argument urged in favor of the tariff, that we ought to protect our labor against what is called the pauper labor of Europe. But whilst the tariff does not enhance the wages of labor, the sales of the public lands at low prices, and in limited quantities, to settlers and cultivators, would accomplish this object. If those who live by the wages of labor could purchase 320 acres of land for $80, 160 acres for $40, or 80 acres for $20, or a 40 acre lot for $10, the power of the manufacturing capitalist in reducing the wages of labor would be greatly diminished; because, when these lands were thus reduced in price, those who live by the wages of labor could purchase farms at these low rates, and cultivate the soil for themselves and families, instead of working for others twelve hours a day in the manufactories. Reduce the price which the laborer must pay for the public domain; bring thus the means of purchase within his power; prevent all speculation and monopoly in the public lands; confine the sales to settlers and cultivators, in limited quantities; preserve these hundreds of millions of acres, for ages to come, as homes for the poor and oppressed; reduce the taxes, by reducing the tariff, and bringing down the prices which the poor are thus compelled to pay for all the necessaries and comforts of life, and more will be done for the benefit of American labor than if millions were added to the profits of manufacturing capital by the enactment of a protective tariff.
The Secretary of the Treasury, on coming into office, found the revenues deposited with banks. The law establishing the Independent Treasury was repealed, and the secretary had no power to reestablish that system. Congress had not only repealed that law, but, as a substitute, had adopted the present system of deposit banks, and prohibited changing any one of those for another bank, except for specified reasons. No alternative was left but to continue the existing system until Congress should think proper to change it. That change, it is hoped, will now be made by a return to the treasury of the Constitution. One of the great evils of banks is the constant expansion and contraction of the currency; and this evil is augmented by the deposits of the revenue with banks, whether State or national. The only proper course for the government is to keep its own money separate from all banks and bankers, in its own treasury, — whether in the mint, branch mints, or other government agencies, —and to use only gold and silver coin in all receipts and disbursements. The business of the country will be more safe when an adequate supply of specie is kept within our limits, and its circulation encouraged by all the means within the power of the government. If this government and the States and the people unite in suppressing the use of specie, an adequate supply, for want of a demand, cannot be kept within our limits, and the condition of the business and currency of the country will be perilous and uncertain. It will be completely within the power of the banks, whose paper will constitute the exclusive circulation of the whole community. Nor will it be useful to establish a constitutional treasury, if it is to receive or disburse the paper of banks. Separation from banks in that case would only be nominal, and no addition would be made to the circulation of gold and silver.
Various forms of paper credit have been suggested, as connected with the operations of the constitutional treasury; but they are all considered as impairing one of the great objects of such a treasury, namely, an augmented circulation of specie. If paper, in whatever form, or from whatever source it may issue, should be introduced as a circulation by the constitutional treasury, it would, precisely to that extent, diminish its use as a means of circulating gold and silver.
The constitutional treasury could be rendered a most powerful auxiliary of the mint in augmenting the specie circulation. The amount of public money which can be placed in the mint is now limited by law to $1,000,000; and to that extent it is now used as a depository, and as a means of increasing our coinage. It is suggested that this limitation may be so modified as to permit the use of our mint and branch mints for a much larger sum, in connection with the constitutional treasury. The amount of public money received at New York greatly exceeds that collected at all other points, and would of itself seem to call for a place of public deposit there; in view of which, the location of a branch of the mint of the United States at that city would be most convenient and useful. The argument used against a constitutional treasury, of the alleged insecurity of the public funds in the hands of individuals, and especially the vast amount collected at New York, will be entirely obviated by such an establishment The mint of the United States has now been in existence fifty-two years. It has had the custody of upwards of $114,000,000, and during this long period of time there never has been a loss of any of its specie in the mint by the government. The mint at Philadelphia is now conducted with great efficiency, by the able and faithful officer at the head of that establishment, whose general supervisory authority, without leaving the parent mint, might still be wisely extended to the branch at New York. Besides the utility of such a branch as a place for keeping safely and disbursing the public money, it is believed that the coinage might be greatly augmented by the existence of a branch of the mint at that great city. It is there that two thirds of the revenue is annually collected,— the whole of which, under the operation of the constitutional treasury, would be received in specie. Of that amount, a very large sum would be received in coin of other countries, and especially in foreign gold coins, — all which could be speedily converted upon the spot into our own coins of gold and silver. The amount also of such foreign coin brought by emigrants to the city of New York is very considerable; a large portion of which would find its way to the branch of the mint for re-coinage. The foreign gold coins do not, and it is feared will not, circulate generally as a currency, notwithstanding they are made a tender by lav. The rate at which these coins are fixed by law is not familiar to the people; the denomination of such coin is inconvenient; the parts into which it is divided are not decimal; the rates at which it is taken vary in different parts of the Union. It is inconvenient in the way of ready transfer in counting; it is more difficult, in common use, to distinguish the genuine from the counterfeit foreign coin; and the stamp upon it is not familiar to the people, — from all which causes, a foreign gold coin does not, and will not, circulate generally as a currency among the people. In many of the banks, nearly the whole of their specie is kept in every variety of foreign gold coin; and when it is tendered by them in payment of their notes, the great body of the people, not being familiar with these coins, do not receive them; and thus the circulation of a gold currency is, to a great extent, defeated. If these coins were converted at our mint, or branch mints, into the eagle, the half eagle, and quarter eagle, we should speedily have a large supply of American gold coin, and it would very soon be brought into common use as a currency, and thus give to it greater stability, and greater security to all the business of the country. A considerable amount of foreign gold coin has, during the present year, under the directions of this department, been converted into American gold coin; but the process would be much more rapid if aided by the organization of the constitutional treasury, and the establishment of a branch of the mint at the great commercial emporium of the Union. With the mint and branch mints as depositories, the sum remaining in the hands of other receivers of public money, whether of lands or customs, would be inconsiderable, and the government could be readily protected from all losses of such sums by adequate bonds, and the power by law to convict and punish as criminals all who embezzle the public moneys.
It is believed, under such a system, that no defaults would take place, and that the public moneys would be safely kept and disbursed in gold and silver. This government is made, by the constitution, the guardian of a specie currency. That currency can only be coined, and its value regulated, by this government. It is one of its first duties to supply such a currency, by an efficient mint, and by general regulations of the coinage; but in vain will it attempt to perform that duty, if, when coin is made or regulated in value, this government dispenses with its use, and expels it from circulation, or drives it out of the country, by substituting the paper of banks in all the transactions of the government.
There is nothing which will advance so surely the prosperity of the country as an adequate supply of specie, diffused throughout every portion of the Union, and constituting, to a great extent, the ordinary circulation everywhere among the people. It is a currency that will never break nor fail; it will neither expand nor contract beyond the legitimate business of the country; it will lead to no extravagant speculations at one time, to be followed by certain depression at another; nor will labor ever be robbed of its reward by the depreciation of such currency. There is no danger that we shall have too much gold and silver in actual circulation, or too small an amount of bank paper, or that any injury ever will be inflicted upon the business of the country, by a diminution of the circulation of the paper of banks, and the substitution in its place, to that extent, of gold and silver. Even their most ardent advocates must admit that banks are -subject to periodical expansions and contractions, and that this evil would be increased by giving them the funds of the government to loan, and by receiving and disbursing nothing but their paper.
It is believed that the permanent interest of every class of the people will be advanced by the establishment of the constitutional treasury, and that the manufacturers especially will derive great benefit from its adoption. It will give stability to all their operations, and insure them, to a great extent, against those fluctuations, expansions, and contractions of the currency so prejudicial to their interests. By guarding against inflations of the currency, it will have a tendency to check periodical excesses of foreign importations purchased in fact upon credit; while loans from banks or dangerous enlargements of their business, and excessive issues of their paper will be greatly diminished. Whilst a sound and stable currency guards the manufacturer against excessive importations from abroad, it protects him from disasters at home, and from those ruinous revulsions in which so many thousands are reduced to bankruptcy. The tariff, if followed, as in the absence of adequate checks it certainly soon will be, by an inflated currency, whilst it thus enhances the expenses of manufacturing at home, will speedily and certainly raise prices up to the whole amount of the duty, so as to repeal the operation of that duty in favor of the manufacturer, and enable the foreign importer again to flood the market at the enhanced prices arising from an inflated currency. But soon the revulsion comes, and all are overwhelmed in a common ruin. The currency is reduced below the wants of the country by a sudden and ruinous contraction; and the labor and industry of years are required to repair the mischief. Stability, both in the tariff and the currency, is what the manufacturer should most desire. Let the tariff be permanently adjusted by a return to reasonable and moderate revenue duties, which, even when imposed truly and in good faith for that purpose, will yield sufficient advantage to afford reasonable profits; and let this permanent system (and none other can be permanent) be established, and accompanied by a stable <jur-rency, and the manufacturer in a series of years will derive the greatest benefits from the system. The present system cannot be permanent. It is too unequal and unjust, too exorbitant and oppressive, and too clearly in conflict with the fundamental principles of the Constitution. If the manufacturer thinks that this system can be permanent, let him look to the constant changes which have attended all attempts to establish and continue a protective tariff. The first tariff was based in part upon the principle of very moderate protection to domestic manufactures; and the result has been, as appears by the table hereto annexed, that the tariff has been changed and modified thirty times since that period, — being more than once, on an average, for every Congress since the government was founded; and one of these tariffs was in itself a system of successive biennial changes, operating through a period of ten years. Of these changes, fourteen have been general, and sixteen special. From 1816 onward, these changes have been most frequent; and it is vain to expect permanency from anything but a revenue tariff. Stability is what the manufacturer should desire, and especially that the question should be taken out of the arena of politics by a just and permanent settlement. A great number of tables illustrative of the effects of the tariff, compiled from official documents, accompany this report. Some of these tables exhibit the operation of each of our tariffs from the organization of the government to the present period. In order to enable the Secretary to comply with the direction of the acts of Congress, requiring him in his annual report to suggest “plans for improving or increasing the revenues,” and to give “information to Congress in adopting modes of raising” the revenue, two circulars were issued, published and generally distributed, propounding various questions connected with this subject, and requesting replies. Some answers have been received from friends as well as opponents of the tariff; but the Secretary regrets that the manufacturers, with very few exceptions, have declined answering these questions, or communicating any information as regards their profits and surplus, or in relation to the wages of labor. An abstract of all that is deemed useful in these replies, together with a copy of both the circulars, is appended to this report.
The coast survey is rapidly progressing, having been extended eastward to the eastern coast of Massachusetts, and southward nearly to the dividing line of Maryland and Virginia, on the Chesapeake. Two new-centres of operation have been opened under the sanction of this department, in North Carolina, and on the Gulf of Mexico, from which the work may be spread until the parts unite. Important positions for forts, navy yards, harbors, and lighthouses, present themselves along this interesting portion of the coast of Louisiana, Mississippi, and Alabama, and the islands guarding the interior channel between Mobile and New Orleans. Great economy exists in the administration of the fund appropriated for the coast survey; and every effort is made by the superintendent to press the work onward to a completion; and his report in detail will be hereafter submitted to Congress. Three charts, resulting from the survey, have been published within the past year, and five more are nearly ready for publication. This great work is most honorable to the science of our country, most useful to our navy and commercial marine, and, in connection with our lighthouses, must decrease the cost of freight and insurance, as well as the risk of life and property. Great attention has been given by this department to the very important subject of our lighthouse system. The various improvements suggested by experience at home or abroad; the relative advantages of gas or oil, of reflectors, lenticular and revolving lights; the location and construction of the buildings, as well as the mode of keeping the lights, are all being fully and carefully investigated, and a report, it is believed, will be ready during the present session of Congress. From the Chesapeake to the capes of Florida, and thence westward, our coast is badly lighted, as well as the great lakes of the Northwest; and numerous wrecks, often accompanied with loss of life and property, seem to require the interposition of Congress.
Such portions of the charts of the exploring expedition as were placed under the charge of this department were distributed for the benefit of our whale ships. These valuable charts embrace the survey of many hitherto almost unexplored regions and islands of the Pacific, as well as a part of the coast of Oregon, and must be eminently useful for many purposes, but especially to our seamen and merchants engaged in the whale fishery. In pursuance of a resolution of Congress, a report is in progress of preparation as regards the banks and currency, and also in relation to statistics; and these, with all other reports required from this department, will be presented at the earliest practicable period of the present session.
In presenting his annual report, in obedience to the law, the Secretary of the Treasury submits his views with undissembled diffidence, consoled by the reflection that all his errors of judgment will be corrected by the superior wisdom of the two Houses of Congress, guided and directed by that overruling Providence which has blessed the unexampled progress of this great and happy Union.
E. J. WALKER,
Hon. JOHN W. DAVIS,