The War with Mexico/Volume 2/Notes On Chapter 33
XXXIII. THE FINANCES OF THE WAR
1. On Mexican finances see also vol. ii, pp. 6-8.
2. Ho. 60; 30, 1, p. 1070, table. Sen. 14; 30, 1, pp. 138-24. 61Scott, memoir on Mexican finances received at the war dept., Jan. 6, 1848. Mexican national accounts were kept in so peculiar a way, and the officials were so much more anxious to conceal than to reveal the truth, that it would be extremely difficult and very likely impossible to state precisely all the details regarding the finances of the government.
3. Ramirez, México, 243-4. Dublán, Legislación, v, 135, 172, 211, 240, 246, 255, 261-3, 286. 80Guerra to Hacienda, Sept. 8, 1847. Diario, Dec. 31, 1846; June 17; July 6, 1847. 76Guerra, circulars, June 17; July 6, 1847. S. Anna, Apelación, 67. 28Proclam. of act'g. gov. Puebla, Nov. 30, 1847. 80Méx. state legislature, address, Apr. 26, 1847. 76S. Anna, Nov. 16, 1846. Vera Cruz state, or at least her governor, showed much zeal, but all her resources were needed for home use. See also chap. xxi, p. 9.
4. 75Report of meeting of govs., Nov., 1847. S. Anna, Apelación, 45, 67. Courrier des Etats Unis, May 22, 1847. Encarnacion Prisoners, 69. México á través, iv, 667. Apuntes, 206-7. Republicano, June 17, 1847. 76Memo., Apr. 6, 1847. Picayune, Aug. 7, 8, 1847. London Times, Sept. 6, 1847. Semmes, Service, 313. Ramírez, México, 238. Gamboa, Impug., 67. Dictamen de la Comisión, 29-30. 92Mexico ayunt., Sept. 9, 1847. 92Tornel to Mexico ayunt., Sept. 12. Ho. 60; 30, 1, p. 1063 (Scott). Ripley, War with Mexico, ii, 126, 489.
The clergy may have given something in addition to the $1,500,000. See the end of chap. xxi, p. 15. The arrangement with the bondholders was known as the "conversion of 1846." This loan gave Mackintosh a particular reason for desiring to have peace made. The loan was to have been repaid in nine months. During July and August, 1847, Santa Anna appears to have raised in one way and another, as indicated in the text, about $1,000,000. The pay of officials was reduced or withheld. For forced loans see chap. i, note 7. In July, 1847, though foreigners were exempt from forced loans, Santa Anna evaded the agreement by taking money without going through the ceremony of promising to repay it.
5. 80Lombardini to Mexico ayunt., Aug. 13, 1847. 75Meeting of govs., Nov., 1847. Diario, July 1, 1847. Ramírez, México, 260. 90Jalapa ayunt., Apr. 10, 1847. 94Canalizo to Orizaba ayunt., Apr. 4, 1847. 82Comte. milit., S. Martín, to Puebla sec. state, Mar. 31, 1847. 312Anaya to S. Anna, Apr. 9, 1847: 76Many memoranda, orders, etc. There was waste, of course, as well as injustice and peculation. This was brought out at the meeting of governors.
6. Ho. 6; 29, 1 (Walker, report, Dec. 3, 1845). Sen. 2; 29, 2 Id., report, Dec. 9, 1846). Ho. 9; 29, 1 Id., estimates, Dec. 4, 1845). Ho. 51; 29, 1 (war dept. contracts). Ho. 56; 29, 1 (Marcy, report, Jan. 9, 1846). Ho. 81; 29, 1.
7. Bankers' Mag., ii, 202-4. [1]N. Y. Herald (weekly), May 16, 23; June 6; July 3; Aug. 8, 15, 29, 1846. London Times, July 15, 1846. 198Gallatin to Everett, Dec. 16, 1847. 354Welles papers (Hist. of 29 Cong., 2 sess.). Nat. Intelligencer, Nov. 28, 1846. 8. Wash. Union, Nov. 30, 1846. N. Y. Herald (weekly), May 16; June 6, 1846; June 19, 1847. Scott, Repudiation, 37, 47, 162. Green, Repudiation, 11, 18, 15. Niles, Dec. 4, 1847, p. 218. (Sévigné) Buchanan, Works, vii, 66. London Spectator, May 30, 1846. 354Welles papers. Dewey, Financial History, 245. Bolles, Financial History, 580-2. Journ. Mil. Serv. Instit., xiv, 198.
The huge state debts were mostly due to extravagant enterprises often supported by fraudulent banking. Delinquency was in reality a salutary suspension of payments that prevented bankruptcy, but the creditors did not know this at the time, and felt little disposed to be charitable.
9. Taussig, Tariff Hist., 113-5. Niles, June 6, 1846, p. 212; Aug. 1, 1846, p. 345; Aug. 14, 1847, p. 369. Boston Atlas, Jan. 6, 1847. Ambler, Ritchie, 264. Webster, Letters, 337-9. 308Shields to Walker, Aug. 3, 1846. Sen. 105; 29, 2 (Walker to Dallas, Feb. 1, 1847). Ho. 227; 29, 1. Ho. 7; 30, 2 (Walker, report, Dec. 9, 1848). (Walker, Jarnagin) Welles papers. (Haywood) 1Allen to "Effie," July 25, 1846; 210McDuffie to Hammond, July 20, 1846. N. Y. Herald (weekly), Aug. 1, 29; Dec. 19, 1846; Jan. 29, 1848. N. Y. Globe, Jan. 9, 1847. Bankers' Mag., i, 136; ii, 74. Ho. 6; 29, 1 (Walker, report, Dec. 3, 1845). Sen. 2; 29, 2 (Id., report, Dec. 9, 1846). U.S. Stat. at Large, ix, 42, 53, 59, 106. Lalor, Cyclop., ii, 495; iii, 864. Phila. No. American, July 16, 1846.
Walker's report of December 3, 1845, enunciated and defended his tariff principles (Ho. 6; 29, 1). These were: 1, to collect only enough revenue for the economical administration of the government; 2, to have no duty higher than the lowest rate that will yield the greatest revenue (e.g. some luxuries are so easily smuggled in that a high duty would produce little); 3, below such a rate to permit discrimination, if thought desirable (e.g. less on necessaries than on luxuries); 4, to lay the maximum rate on luxuries; 5, to have only ad valorem duties; and, 6, to discriminate against no section or class of the nation. He expressed the opinions that many of the high duties were becoming prohibitive and therefore unprofitable, and that the increased risk and costs of transportation during a war would cause nearly all of them to become so. Besides, he said, "at least two thirds of the taxes imposed by the present tariff are paid, not into the treasury, but to the protected classes" (Niles, Aug. 1, 1846, p. 349). Walker also charged that the specific duties, which formed a part of the 1842 tariff, taxed most highly the cheapest articles and therefore produced relatively little (Sen. 105; 29, 2: to Dallas). It was argued by others that war would sufficiently hinder importing to make a protective tariff unnecessary (Wash. Union, May 28, 1846).
The essential idea underlying the tariff of 1846, though it was not strictly a revenuc tariff, was that it would increase the revenue by stimulating importation. But opponents argued that unless Europe should take a greatly increased quantity of our agricultural products — which there was no reason to expect — we could not pay for larger imports; while, should foreign goods be "dumped" at low prices upon our markets, American manufacturers would be ruined. Even in the year ending June 30, 1845, the balance of trade had been $7,251,589 against us, and we had exported $8,606,495 in specie (Bankers' Mag., i, 136). Under the tariff of 1842 the average rate of duty was 24 per cent; under that of 1846, 18 per cent.
One natural effect of the uncertainty caused by the new fiscal laws was to check business, but this was offset by its tendency to check speculation and inflation. The specie feature tended to contract the currency, and many deemed this unfortunate in view of the large calls for money likely to result from the war. Good judges thought its enforcement would have to be deferred, therefore. A special cause of alarm was that in preparing for the second war with England the duties had been increased instead of reduced. Senator Haywood of North Carolina opposed the new scale of duties as sure to plunge the country into debt, opposed putting them into effect so promptly (Dec. 1, 1846), and opposed the adoption of such a combination of new financial measures (Wash. Union, Aug. 18, 1816). He therefore resigned, and this endangered the plan of the administration.
The warehouse system consisted in deferring the payment of assessed duties without an interest charge, the government retaining the goods meanwhile as security for the eventual payment of them. Goods could therefore wait for a purchaser, instead of going — if not at once in demand — for what they would bring at a forced sale. This encouraged importation and built up extensive stocks, which in turn attracted purchasers from afar (Walker, report, Dec. 9, 1846, in Sen. 2; 29, 2). This system, like that of the sub-treasury, proved highly advantageous. The specie provision of the sub-treasury bill required the government to accept only specie after Dec. 31, 1846, arid to pay out only specie after Mar. 31, 1847 (U.S. Stat. at Large, ix, 64), with the exception of treasury notes.
10. N. Y. Tribune, Jan. 24, 1848. Sen. 105; 29, 2 (Walker to Dallas, Feb. 1, 1847). Sen. 392; 29, 1 (Polk, Message, June 16; Walker, June 15, 1846, etc.). Polk, Diary, Sept. 29, 1846. Ho. 6; 29, 1 (Walker, report, Dec. 3, 1845). Sen. 2; 29, 2 (Id., report, Dec. 9, 1846). Ho. 6; 30, 1 (Id., report, Dec. 8, 1847). Ho. 2 and 10; 29, 2. Ho. 9, 51, 56, 81, 82; 29,1. Sen. 1; 29, 2, p. 395. Sen. 27; 30, 1.
The warehouse bill also delayed the payment of duties. Walker's estimate of the customs revenue for 1846-7 was $27,835,731 (report, Dec. 9, 1846, in Sen. 2; 29, 2). The receipts were actually $23,747,865 (report, Dec. 8, 1847, in Ho. 6; 30, 1). Walker pointed out that nearly half a million was due on warehoused goods (Niles, July 31, 1847, p. 337); but these goods might not all have been imported, had it been necessary to pay the duties at once, and some of them were practically sure to be ex~ ported, and hence not all the duties assessed upon_them could be considered a part of the revenue, as Walker intimated. The Democrats feared that taxes would make the war unpopular, and the Whigs hoped to obtain that result by less expensive methods.
11. Sen. 392; 29, 1 (Walker to Polk, June 15, 1846). Gallatin, War Expenses, 15-6. Niles, Sept. 19, 1846, p. 48; Oct. 3, 1846, p. 80. Bankers' Mag., i, 193-4, 322. N.Y. Herald (weekly), July 18; Aug. 15; Sept. 19; Oct. 31, 1846; Jan. 9, 1847. Bayley, National Loans, 70-2. Polit. Sci. Qtrly., i, 375-84. N.Y. Tribune, Jan. 24, 1848. U.S. Stat. at Large, ix, 39. Knox, U. S. Notes, 63-4.
The Act of July 22, 1846, was based upon and virtually embodied that of Oct. 12, 1837. Notes redeemed could be reissued. Any fraction of the $10,000,000 could be issued in notes or in stock (bonds) at the President's discretion, but the amount of both could not exceed that figure. The bonds were to conform to the Act of Apr. 15, 1842, and to "be redeemable at a period not longer than ten years from the issue thereof." Walker thought that only a war with a powerful maritime nation, exposing our commerce to peril and causing a great loss in customs revenue, would be thought to warrant excise and direct taxes. (The idea of a direct tax was widely unpopular, because such a tax would be based upon population, and therefore would favor the capitalistic sections.) Before issuing treasury notes Walker used up much of the surplus lying in the banks. The notes were issued at par. They could not become a circulating medium. For redemption they went to the city banks. So long as these banks had deposits of public funds, they were accepted as cash. After that, their tendency was to fall. About Oct. 1, 1846, the notes were quoted at 985 in St. Louis. For a time the New Orleans banks would not receive the notes, but retaliation brought the banks round. Since only specie and treasury notes were to be receivable after Jan. 1, 1847, for dues to the government, the sub-treasury Act aided the notes. On the other hand the issuance of the notes offset the specie requirement of that Act, and therefore prevented or modified some of its anticipated consequences — particularly a drain upon the specie of the banks. One advantage of the notes was that, should the war suddenly end, they could be withdrawn and the interest on them stopped. This was not true of loans.
12. Ho. 6; 29, 1 (Walker, report, Dec. 3, 1845). Polk, Diary, Sept. 29, 1846. Gallatin, War Expenses, 14-6. Niles, Sept. 12, 1846, p. 17. De Knight, Currency, 69. N. Y. Herald (weekly), June 6; Aug. 15, 1846; Jan. 9, 1847; Jan. 29, 1848. Bankers' Mag., i, 193-4.
The authority to issue these notes was limited to one year; but on Jan. 28, 1847, the time was extended to six months after the ratification of peace with Mexico, with the proviso that the notes thus authorized should not exceed $5,000,000 in amount (§ 15, U. S. Stat. at Large, ix, 121-2). In his report of Dec. 9, 1846, Walker stated that $3,853,100 of these notes had been issued, $1,766,450 bearing interest at one tenth of 1 per cent (De Knight, Currency, 69), and the residue at 525 per cent per annum payable on redemption. Nov. 2, 1846, treasury notes of prior issues amounting to $412,283.97 were outstanding. The surplus, July 1, 1846, was $9,126,439. Sept. 29, 1846, the treasury contained "only a fraction over" four millions (Polk, Diary, Sept. 29).
13. 13Pakenham, nos. 127, Oct. 29; 180, Nov. 12, 1846. (Walker) Wash. Union, May 10; Dec. 9, 1847; N. Y. Express, Dec. 12, 1846; Welles papers; Boston Courier, Feb. 17, 1848; 345G. A. Worth to V. Buren, Dec. 16, 1847; 198Gallatin to Newboldt, Feb. 8, 1848; 198Id. to Rockwell, May 8, 1848; 181Buchanan to Donelson, May 13, 1847. Miss. Hist. Soc. Pubs., vi, 363. Dodd, Walker, 24, etc. Wash. Union, Nov. 16; Dec. 8, 1846. N. Y. Express, Nov. 18, 1846. Bankers' Mag., i, 321-2. N. Y. Herald (weekly), Sept. 19; Nov. 7, 14, 28, 1846. Bayley, National Loans, 71. De Knight, Currency, 70. Niles, Oct. 10, p. 81; Oct. 17, p. 97; Oct. 24, p. 128; Nov. 7, pp. 146-7, 1846. Sen. 105; 29, 2 (Walker to Dallas, Feb. 1, 1847). Polk, Diary, Oct. 1, 13, 15-7, 22, 30; Nov. 7, 1846. London Times, Oct. 27, 1846. Sen. 2; 29, 2 (Walker, report, Dec. 9, 1846). Cong. Globe, 29, 2, app., 124 (Ingersoll). Dewey, Financial History, 256.
Professor Tucker proved, it was said, that Walker's argument for free trade made an error of $1,000,000 per year in the productive industry of the United States. Stewart of Pennsylania charged him in Congress with a number of errors. Rockwell of Connecticut made a startling analysis of treasury statements (Cong. Globe, 30, 1, pp. 404-7); but it would lead us too far afield to enter upon such a discussion. $4,999,149 of the loan was issued (Bayley, Nat. Loans, 71). On $363,900 there was an average premium of .277 of 1 per cent, while the rest went at par (De Knight, Currency, 70). Opponents of the government attributed the success of the loan to Marcy's statement that it would not be necessary to call for more volunteers. As a new call for volunteers went out almost immediately after the bids were opened, he was charged falsely with having played a trick on the public (N. Y. Express, Nov. 18, 1846). For the truth in this matter see vol.i, p. 351. Most of the loan was taken at New York, but it became fairly well distributed. Walker's offering the loan only ten days after advertising an issue of $3,000,000 in notes (Niles, Nov., 1846, p. 147) was rather alarming, it must be admitted. A less reasonable criticism on his policy was that he could and should haveborrowed liberally June 1 and July 1 at 5 per cent. At those dates he had a large surplus, the tariff had not been changed, and the administration did not expect a serious war.
14. Sen. 2; 29, 2 (Walker, report, Dec. 9, 1846). Dewey, Financial History, 255-6. U.S. Stat. at Large, ix, 118. 247King to Larkin, Nov. 7, 1847. Polk, Diary, Feb. 16. 13Pakenham, no. 13, Nov. 12, 1846. Niles, Apr. 24, 1847, p. 113; June 5, p. 224; Aug. 21, pp. 392, 400; Feb. 5, 1848, p. 354 (McLean). Wash. Union, Jan. 14; Apr. 12, 1847. N. Y. Herald (weekly), Apr. 24; Nov. 30, 1847; Feb. 26; Mar. 4, 11, 18, 1848. Bayley, Nat. Loans, 72. De Knight, Currency, 71-2. Knox, U.S. Notes, 64, 69. 108Buchanan to Bancroft, Dec. 29, 1846, priv.
The estimated deficit, July 1, 1847, was $4,779,042 (Walker, report, Dec. 9, 1846 in Sen. 2; 29, 2). By the Act of Jan. 28, 1847, the treasury notes were to be redeemable in one or two years, to bear interest (not more than 6 per cent) at the discretion of the President, and to be convertible into bonds. None could be issued, used as security for loans, or bought up by the government, at less than par plus the accrued interest. New notes could be issued for those redeemed, but the total outstanding amount of notes and bonds issued under the Act could not exceed $23,000,000. The public lands were in effect pledged as security for the loan, which was made payable at any time after Dec. 31, 1867. The Act provided that the notes to be issued under it and all previous treasury notes could be converted into 6 per cent stock (bonds).
It was predicted that the loan could not be placed at better than 90, if at all (N. Y. Express, Dec. 14, 1846). Bids (to be in by Apr. 10) for $18,000,000 of it were invited on Feb. 9, 1847. The New York and Boston banks appear to have agreed on a price, but some New York capitalists offered more, and they in turn were outbid by Corcoran and Riggs of Washington, who seem to have taken a very large part of it. The bids above par totalled about $55,000,000, and the premiums offered ran as high as 2 per cent. It has been called a mistake to pay 6 per cent on long-term bonds, and this is proved by the premium they soon commanded. But before the bonds were issued grave doubts regarding their acceptability were entertained, and a saving in interest was of relatively little importance. Many had expected that the whole amount ($23,000,000) would be issued in treasury notes and practically increase the amount of the currency; but the amount issued at first was largely taken for investments (N. Y. Herald (weekly), Mar. 20, 1847). Hence the currency in circulation was diminished. However, the specie coming from abroad soon made up for this.
Bids for $5,000,000 of notes were invited on Feb. 26. The Rothschilds (represented by A. Belmont) were soon understood to be interested, and were in fact successful to a large extent in the bidding. Their bidding encouraged American capitalists. Probably the notes could safely, and therefore should, have been made convertible into 5 per cent, instead of 6 per cent, bonds. The interest paid on them at redemption was 52 or 6 per cent (De Knight, Currency, 71).
June 1, 1847, Walker reported treasury notes as outstanding (minus $789,700 of cancelled notes on hand): of issues prior to July 22, 1846, $303,817; of issues under the Act of July 22, $3,565,600; of issues under the Act of Jan. 28, $8,100,000; net total, $11,179,717 (Niles, June 5, p. 224). About the middle of August, 1847, they sold at 10612, but within a week (probably because reports that Scott had captured Mexico City were found to be false) they fell at New York to 10312. The issuing of more notes was objected to on the ground that it would virtually mean a government bank controlled by a party. It was argued by some that notes for small amounts bearing interest at a nominal rate should have been put out. These, it was said, would have been purchased by persons of small means, who actually put their savings into specie needed by the government. The question was raised why Polk asked in December, 1846, for funds to cover the fiscal year 1847-8 (N. Y. Express, Dec. 14, 1846). Walker's report included estimates for that period, but this fact does not seem to be an adequate explanation. One suspects that Polk and Walker knew the money would be needed, and thought this the easiest way to get it.
15. Richardson, Messages, iv, 516. Pakenham, no. 6, Jan. 28, 1847. Sen. 2; 29, 2 (Walker, report, Dec. 9, 1846). Ho. 6; 30, 1 (Id., report, Dec. 8, 1847). Ho. 7; 30, 2 (Id., report, Dec. 9, 1848). Sen. 105; 29, 2 (Id. to Dallas, Feb. 1, 1847). Sen. 392; 29, 1 Ud. to Polk, June 15, 1846). Taussig, Tariff Hist., 115. Welles papers. Polk, Diary, Jan. 2, 1847. Niles, Jan. 2, 1847, p. 288. Boston Courier, Feb. 17, 1848. Cong. Globe, 30, 1, pp. 281, 298. N. Y. Herald (weekly), Jan. 9, 1847. (Pessimists) 345G. A. Worth to Van Buren, May 20, 1847.
In Dec., 1847, Polk had to admit that a deficiency of $15,729,114 on June 30, 1848, was probable. The British minister reported that one reason for proposing the tax on tea and coffee was a wish to defeat anticipated attempts of the protectionists to repeal the tariff of 1846. It was suspected that Walker made the appeal to Congress in order to display his influence or to relieve that body of responsibility for modifying the tariff it had so recently voted. The motives of the House were mixed. Some members doubtless objected to the plan on principle, others because they wished to be consistent with their action in accepting that tariff, others because the estimated return from such a tax ($2,500,000 or $3,000,000 per year) did not seem enough to meet the requirements, and others, perhaps, to rebuke what struck them like dictation on Walker's part; but the main considerations appear to be those mentioned in chap. xxxiv (e g, p. 285.) The vote in the House was taken Jan. 2, 1847. Walker persisted, but without effect. Benton's idea was adopted in 1854. See "Public Lands, Bill to reduce and graduate the price of," in Senate index of Cong. Globe, 29 Cong., 1 and 2 sess.; 30 Cong., 1 sess., etc.
16. Ho. 6; 30, 1 (Walker, report, Dec. 8, 1847). Ho. 7; 30, 2 (Id., report, Dec. 9, 1848). 13Pakenham, no. 147, Dec. 29, 1846. Stockton, circular, Aug. 15, 1846. Ho. 60; 30, 1, pp. 905 (Marcy); 930, 1085 (Scott); 931 (Worth). London Times, June 8, 1846. Richardson, Messages, iv, 548-9, 570, 672. Vattel, book 3, chap. 9, sect. 161. Balt. American, Feb. 17, 1847. Wash. Union, Apr. 12, 1847. N. Y. Herald (weekly), May 1, 1847. Sen. 1; 30, 1, pp. 552, 558, 561 (Polk); 553 (Walker). Niles, Apr. 24, 1847, p. 118. _Ho. 1; 30, 2, p. 1075 (Shubrick). 47Shubrick, Apr. 15, 1848. 76Lavallette, proclam., Oct. 26, 1847. Sen. 24; 30, 1 (Polk, Message). Ho. 20; 30, 2 (Polk, Message). Polk, Diary, Mar. 10, 1847.
We do not positively know that Walker originated the idea of the tariff in Mexican ports, nor that it had any relation to the tea and coffee tax; but one would naturally assume as much, and so the Washington Union stated (Niles, Apr. 24, 1847, p. 118). At first, however, Walker did not perceive that the tariff would have to rest upon the President's military authority. Contributions took the place of the pillage formerly practised in war. An advantage of the plan, perhaps not contemplated at frst, was that it would greatly discourage smuggling, and therefore, since imports would mostly have to pass the inspection of American officers, contraband could much more fully be excluded. This tariff was fiercely attacked in Congress, but the position of the Executive was impregnable. 'Complaint was also made that Americans as well as neutrals had to pay it; but had they not done so, they would have been able to defy competition, foreign nations would have complained, the Mexicans would have benefited by the low prices of merchandise, and the United States would have obtained no revenue.
The American policy prior to March 31, 1847, is shown by Walker's circular of June 30, 1846 (Ho. 60; 30, 1, p. 158) and by Mercy's 63instructions to the commanding officer at Tampico, Dec. 15, 1846. The latter said: Only United States vessels may enter, and those only when carrying articles produced in the United States or imports upon which United States duties have been paid, and on all such goods no duties will be charged. "But in a spirit of accommodation" clearances to Tampico of cargoes of foreign products, etc., in American vessels will be granted (duties having been paid) without being unloaded in the United Stztes. Vessels admitted at Tampico may take out return cargoes of the property of Americans or neutrals without paying export duties; and specie belonging to neutrals may be freely exported. Indeed this export of specie should be encouraged, since it prevents Mexico from seizing the means of waging war. Pakenham complained that this policy would give American goods (which would not have to pay a duty) a monopoly of tke Mexican market; but it seemed impossible at this time to run the risk of the military injury liable to result from admitting neutral vessels generally. He seems to have felt inclined to protest, but he did not find that the ministers of France, Spain and Germany intended to do so (13 no. 147). Previous to Dec. 15, 1846, American goods had been extensively smuggled into Mexico across the Rio Grande, and of course that process continued.
17. Ho. 60; 30, 1, pp. 975, 1014 (Marcy); 1083 (Shubrick). Sen. 1; 30, 1, pp. 552-76, 583, 585 (Marcy); 585 (circular); 586 (Walker); 951 (Mason). Ho. 1; 30, 2, pp. 1073, 1086 (Shubrick). Sen. 14; 380, 1, pp. 9 (Marcy); 10 (Walker). London Times, June 8, 1846; June 15, 1847. Polk, Diary, June 11; Nov. 6, 1847. Richardson, Messages, iv, 531-2, 548. 52Chargé Martin, no. 31, May 15, 1847. 138Consul Glass, July 12, 1848. Ho. 6; 30, 1 (Walker, report, Dec. 8, 1847). Ho. 7; 30, 2 (Id., report, Dec. 9, 1848). Constitutionnel, May 15, 1847. 13Mora to Palmerston, May 19, 1847. Nat. Intelligencer, Apr. 24, 1847. Mason to Perry, Apr. 3; June 16, 1847.
In some cases the Mexican tariff was reduced very much more than one half, and many articles of daily use, that had previously been prohibited, became available. No tonnage dues were assessed on vessels (chartered by the United States) laden exclusively with supplies for our army or navy (60Marcy to Scott, May 10, 1847), and United States officers, soldiers and sailors were exempted from the operation of the order to pay duties (Richardson, Messages, iv, 548). At Matamoros, Tampico and Vera Cruz the military governors acted as collectors. At places held by the navy, naval officers did so. On the Pacific coast it proved necessary to modify the tariff. June 11, 1847, the regulations were somewhat modified (Polk, Diary, June 11), and additional changes were made in Nov., 1847 (Polk, Diary, Nov. 6; Sen. 14; 30, 1, p. 11). July 31, 1847, the duty on books was made 20 per cent ad valorem (Sen. 1; 30, 1, p. 585).
Chargé Martin reported from Paris that the French newspapers, alarmed by the protest of the Mexican consul at Havre, called on their government to demand guaranties from ours. Martin justly took the position that our admitting French commerce to Mexican ports was a pure favor, to be enjoyed at the risk of those caring to take advantage of it, but expressed the opinion freely that in the treaty of peace we should protect the interests invited by our policy, as in fact we pledged ourselves to do and did (Walker, report, Dec. 8, 1847 in Ho. 6; 30, 1, 619; chap. xxxii, p. 468).
18. N. Y. Herald (weekly), May 1, Dec. 4, 1847. Ho. 60; 30, 1, p. 1037 (Marcy). Ho. 1; 30, 2, p. 1148 (Shubrick). 13Consul Giffard, no. 37, Oct. 20, 1847. Richardson, Messages, iv, 548. 13Consul Glass, Dec. 1, 1847; July 12, 1848. 75Hacienda to Relaciones, Dec. 3, 1847. 75Gov. Tamaulipas to Relaciones, Dec. 10, 23, 1847. 75Gates, order, Nov. 27, 1847. 76Hacienda to Guerra, Dec. 3, 29, 1847. 13Crampton, no. 30, Aug. 13, 1847. 76 to Amador, Feb. 2, 1848.
The governor of Tamaulipas wrote frankly to the central government that prohibition would merely promote robbery and smuggling while injuring good Mexicans. He therefore did nothing except to collect a duty. Yet Gates, commanding at Tampico, had to send escorts with traders, and could not fully protect them.
19. N. Y. Express, Dec. 1, 1846. Sumner, Amer. Currency, 167. Economist, Apr. 24, 1847. Gallatin, War Expenses, 3, 10. Bankers' Mag., i, 513-6, 609-12, 673-4; ii, 201, 706-7. N. Y. Herald (weekly), Dec. 19, 1846; Feb. 6; Apr. 17, 24; July 24, 31; Nov. 20; Dee. 11, 1847. Niles, Feb. 18, 1847, p. 384; Feb. 27, p. 416; Sept. 11, p. 18; Sept. 25, p. 60; Oct. 2, p. 80; Oct. 9, p. 82; Oct. 23, p. 128; Nov. 6, p. 145. 52Bancroft, no. 46, Dec. 4, 1847. Welles papers. 198Gallatin to Everett, Dec. 16, 1847. Ho. 6; 30, 1 (Walker, report, Dec. 8, 1847). Ho. 7; 30, 2 (Id., report, Dec. 9, 1848). 181Buchanan to Donelson, Jan. 29, 1847.
During the year ending June 30, 1848, almost thirty-seven and a half millions in breadstuffs were exported (Walker, report, Dec. 9, 1848 in Ho. 7; 30, 2). As early as March, 1847, the Bankers' Magazine estimated the increase in the value of our "present" exports of grain and cotton as $12-15,000,000. The customs receipts for the year ending June 30, 1847, were $23,747,865; for the following year $31,757,071. Of course the rising tide of prosperity, besides increasing the customs receipts and bringing specie, enhanced the credit of the government generally, and assisted the country in other ways to support the burden of the war. The crops of 1847 were fine in Europe; the importations were found there to have been excessive; and prices fell sharply. British business proved to be far less solid than it had been supposed to be. Bancroft, our minister, reported "a whirlwind of bankruptcies overspreading the land" (no. 46, Dec. 4, 1847). Orders for American goods were cancelled. Owing to a want of confidence the practice of consigning goods to English houses, with bills drawn on the consignees for a considerable part of their value, was to a large extent abandoned. Every vessel from England brought large parcels of American bonds to be sold for what they would fetch. Early in November the rate of exchange went up and specie began to be exported from this country, though much remained in the interior. Numerous failures occurred in the United States. All called in their resources. But here the trouble did not prove to be long or very serious; and while another year of war might have caused embarrassment, the country, despite the revolution in France, soon found itself comfortable.
20. Ho. 6; 30, 1 (Walker, report, Dec. 8, 1847). Ho. 7; 30, 2 Id., report, Dec. 9, 1848). U. S. Stat. at Large, ix, 217. 13Crampton, no. 40, Apr. 2, 1848. N. Y. Herald (weekly), Jan. 29, 1848. Bayley, National Loans, 73. De Knight, Currency, 73. For the debates in Congress consult the Cong. Globe. Boston Courier, Feb. 23, 1848. 345Niles to V. Buren, Dec. 16, 1847. Polk, Diary, Feb. 1, 1848.
The debate in the House began Feb. 8 and ended Feb. 17. In the course of the discussion it came out that the treasury really had about $7,000,000 more than had been supposed, but that $4,000,000 were desired by the war department to make good certain deficiences. The amount of the loan was therefore reduced from $18,500,000 to "not more than" $16,000,000 (Bayley, Nat. Loans, 73). The power to borrow under this Act was to continue one year. The bonds were to bear not more than 6 per cent interest, be sold at not less than par, and be reimbursable at any time after July 1, 1868. Before July 1, 1868, the secretary could purchase the bonds at the market price (but not below par). Coupons could be attached to the certificates, and such certificates be transferable by mere delivery. The secretary of the treasury was required to advertise for bids — these to be received 20-60 days from the date of the earliest advertisement at Washington. In order to give the loan the aid of assured peace, Walker arranged the advertising so as to defer the time of opening the bids until June 17, 1848. The premium obtained was $487,169. Though assisted with this loan, the treasury ended the fiscal year with a balance of only $153,535.
21. Ho. 60; 30, 1, pp. 354 (Taylor); 994 (Scott); 1005 (Mason); 341, 1007, 1037 (Marcy). 256J. Parrott to Marcy, Dec. 20, 1847, private. 256Marcy to Scott, Nov. 17, 1847. Sen. 14; 30, 1, pp. 5 (Marcy), 6 (Scott). Cong. Globe, 30, 1, app., 423-4. Polk, Diary, Sept. 19, 1846; Aug. 31; Oct. 4, 5, 1847. 63Mason to Scott, Sept. 1, 1847. Richardson, Messages, iv, 546-8. 13Crampton, no. 58, Nov. 28, 1847. Sen. 52; 30, 1, pp. 124 (Scott); 145 (Marcy). Scott, Mems., ii, 552-8. Diario, May 23, 1847. Republicano, June 9, 1847. Ho. 6; 30, 1 (Walker, report, Dec. 8, 1847).
For the olive branches (i.e. offers to treat) see pp. 122-4. A particular difficulty in attempting to live on the country would have been the general sparseness of the population, especially since the Americans had to keep together. For this reason, though some of the enemy expected us to rouse the nation by undertaking to enforce such a policy, the wiser Mexicans did not look for it. On the ground that places would be occupied alternately by the contending armies, the British chargé at Washington deplored the order to exact contributions; but the course of the war preserved the Mexicans from this misfortune in a way he did not anticipate.
22. Ho. 60; 30, 1, pp. 1048, 1062, 1081, 1085 (Scott), 1050, 1063, 1066 (gen. orders). J. Parrott to Marcy (note 21). 256Id. to Id., Dec. 28, 1847, private. 60Butler to Marcy, Mar. 7, 1848. 69Wool to Marcy, Jan. 24, 1848. Sen. 14; 30, 1, pp. 11, 138. 63Marcy to Gates, Mar. 7, 1848; to Davenport, May 2, 1848. 65Scott, gen. orders 358, 376, 395 (1817); 15, 31 (1848). Scott, Mems., ui, 553, 582. Grant, Mems., i, 170-1. 61McDowell to Hunter, Feb. 20; Mar. 5, 1848. Rodriguez, Breve Reseña, 1849, 5. 69Scott to commander at Jalapa, Jan. 6, 1848. 61McDowell to Monclova ayunt., Mar. 5, 1848. 80Actg. treas., Méx. state, Feb. 29, 1848. 60Taylor to Marcy, Nov. 20, 1847. 60Butler to Marcy, Mar. 2, 7, 1848. 92Mex. ayunt., session of Sept. 16, 1847. 92Quitman, proclam., Sept. 22. 92Veramendi to ayunt., Sept. 24. 65Wool, orders 157, Dec., 1847. Delta, Dec. 19, 1847 ("Mustang"). 6 Memoir on Mex. finances. Sen. 19; 30, 1, pp. 2-4 (Scott). Moreno, Canón, 380. 69Wool to Taylor, Mar. 7, 1847. 61McDowell to Webb, Apr. 15, 1848. 358Williams to father, Dec. 27, 1847.
Besides the $150,000, Scott collected some $70,000 (about $12,000 captured at Cerro Gordo, nearly $50,000 for captured tobacco, and smaller amounts for licenses, etc.). Polk was accused of inconsistency for holding that Mexico could pay us no indemnity except in territory and yet expecting to draw large revenues from that country (Amer. Review, Jan., 1848, p.*2). The reply is threefold: 1, in the latter case he assumed that Mexico was to be deprived by military force of the revenues normally used by a nation; 2, even if a Mexican government might have had the physical power to raise a cash indemnity for us, it could not actually have obtained the money from the people for that purpose, as our own armies were expected to do by force; and, 3, Polk's expectations were not realized. Polk was also charged with encroaching upon the prerogatives of the House both in taxing the Mexicans and in spending the proceeds. Webster and Calhoun concurred in this view (Cong. Globe, 30, 1, 495-6). But if Gen. Taylor had a right — as all admitted — to impress a Mexican donkey into the service of his army, Polk had a right to do all that he did in this regard. The authority of the commander-in-chief in the enemy's country, waging war according to the Constitution, was quite broad enough to cover it. See Cong. Globe, 30, 1, app., 423-4.
The estimated possible revenues were as follows: import duties, $12,000,000; duties on goods passing to the interior, $2,400,000; direct taxes on real estate, professions, trades, etc., $3,000,000; duties on the production of gold and silver, $600,000; melting and assay dues, $50,000; export duties on coined gold and silver, $1,000,000; revenue from the monopolies, $3,525,000 (61Memoir). Transit dues on animals and goods, including the duties at city gates (alcabalas), were to be discontinued. For a short time in 1847 Perry allowed logwood to be exported under a 10 per cent duty. It seemed impracticable to seize the mines, for the miners would probably have fled on the approach of American troops.
Scott resolved not to take the ordinary state and city revenues, because he felt that such a course would be "to make war on civilization"; since every civilized community requires the means of paying for administration, without which it would fall into anarchy (Ho. 60; 30, 1, p. 1049). His broad taxation orders were based upon an announced intention of spreading over the country. He proposed to send out expeditions soon. One actually proceeded, as we have seen, to Toluca, another to Cuernavaca, and another to the important mining town of Pachuca (Ho. 60; 30, 1, pp. 1048, 1061-2). The occupation of Córdoba and Orizaba was partly in pursuance of the same policy (61Scott to Twiggs, Dec. 26, 1847). He proposed in particular to send 7000 men to San Luis Potosí in order to open the communication between Tampico and the mining city of Zacatecas. But his lack of troops and the peace negotiations prevented this.
In order to force the products of the mines into circulation for the benefit of both Americans and Mexicans, Scott forbade the exportation of gold and silver bullion, and on gold and silver coin exported he imposed a duty of 5 per cent (65gen. orders 362). Walker's and Polk's views on these points had been different from Scott's, and Scott's action was taken subject to revision at Washington, where he presented his reasons. At the end of April, 1848, Walker's instructions were put into force by General Butler.
Scott instructed his officers to execute his orders in a conciliatory manner, if possible, but apply force should that be necessary. Should there be no other way, the commanding officer was to collect the assessment in money or some equivalent from the wealthier inhabitants.
In the northeast Wool carried out the financial purposes of the government to the best of his ability, beginning at Saltillo as early as May, 1847, with a revenue system, the occupation of buildings, and the seizure of cattle, mules, etc. He punished refractory towns and places violating pledges of neutrality with special taxes. Mar. 2, 1848, he reported that all were paying their taxes. The owners of houses taken for the use of the army were indemnified through a tax on all the real estate of the vicinity. In northwestern Mexico only coast towns were in our hands. California and New Mexico, which the United States government intended to retain, were of course viewed in a different light. Naturally all possible attempts were made by the Mexicans to protect their property against us. Subsistence, forage, etc., continued to be paid for, since the interests of the army prescribed that policy still. Our officers were not permitted to have any interest (e.g. claim for special services) in cases of seizure, etc.
23. Richardson, Messages, iv 591, 651, 678. Sen. 52; 30, 1, pp. 107-9. 69Hughes to Scott, Jan. .5, 1848. 63Marcy to Twiggs, Mar. 7, 1848. Ho. 60; 30, 1, p. 1062 (Scott). Sen. 1; 30, 1, p. 588. Ho. 47; 30, 2, pp. 2 (Marcy), 109 (Mason). Ho. 1; 30, 2, p. 1181 (Shubrick). 47Shubrick, Apr. 15, 1848. 69Wool to Marcy, Jan. 24, 1848. Sen. 14; 30, 1, p. 11 (Scott).
Import, export and tonnage duties produced in all only $3,434,665; contributions from other sources, $553,055; captured money and property, $163,573; assessments on states and the City of Mexico, $225,649; and state end municipal revenues, together with some other sources of income, $163,055. From these: amounts the costs of collection, drawbacks on goods disposed of to men in the service, and the expenses of the state and municipal governments had to be deducted. It was to make up for surrendering the monopolies that Scott quadrupled the state essessments originally contemplated. $769,650 derived from the military contributions were applied on the first instalment due to Mexico. All of the $3,000,000 appropriated by the Act of March 3, 1847, was paid to her shortly after she ratified the treaty of peace (Sen. 52; 30, 1, pp. 107-9; Richardson, Messages, iv, 588).
24. Sen. 1; 30, 1, p. 589. 13Pakenham, no. 74, June 13, 1846. Ho. Rep. 503; 31,1. Ho. 60; 30, 1, p. 1004 (Marcy). Sen. 52; 30, 1, p. 125 (Scott). Scott, Mems., 11, 583. Polk, Diary, Aug. 18-20, 24-5, 28; Nov. 13, 1847. Wash. Union, Dec. 9, 1847. N. Y. Herald (weekly), May 23; June 20; Oct. 31; Nov. 7, 1846; Aug. 21; Oct. 16; Nov. 6, 1847. Ho. Report 503; 31, 1. Picayune, Sept. 14, 1847. 256J. Parrott to Marcy, Dec. 20, 27, 1847, private. 139W. B. to D. Campbell, Aug. 9, 1816.
Scott spent nearly $64,000 of the funds that he derived from the Mexicans for blankets and shoes given to private soldiers; and $10 each were given to a large number of wounded men when they left the hospital. Probably Belmont's arrangement left the Rothschilds a handsome profit, for John Parrott, who had been our consul at Mazatlán, offered, if the government would open a credit of two or three millions in London, to take charge of supplying cash in Mexico at the rate of five dollars for every pound sterling, and a pound sterling would have cost the government only about $4.80. One main purpose of our government in laying an export duty on gold and silver was to facilitate the exchange of treasury notes for specie with Mexican citizens; but probably little was accomplished, for nearly all the specie in Mexico was held by foreigners. In the offices at Washington a good deal of carelessness in making estimates and handling funds appears to have prevailed (e.g. Polk's Diary, Aug. 18-28, 1847), and Walker's relations with Belmont and with Corcoran and Riggs were perhaps a little too intimate (ibid.); but one finds no reasons for suspecting Walker of crookedness. Of course property was handled more or less wastefully in the field, and contractors took an advantage sometimes. Roa Bárcena (Recuerdos, 249) states that some men buying grain, etc., for the American army required the sellers to give receipts for larger sums than were paid to them. See also Polk, Diary, July 10, 1847. The largest loss resulted from Gaines's unauthorized calls for troops, which probably cost $1,500,000 (13Pakenham, no. 74, 1847).
25. Sen. 15; 30, 1. Semmes, Service, 472-3. Bancroft, Pac. States, vil, 545. Ho. 70; 30,1, p. 11. Ho. 9, 27; 30,2. Polk, Diary, Nov. 7, 1846; Feb. 16; Nov. 6, 9, 1847; Jan. 24, 1848. Sen. 27; 30,1. 73Bermúdez de Castro, no. 517, June 29, 1847. Richardson, Messages, iv, 591. Ho. 6; 29, 1 (Walker, report, Dec. 3, 1845). Ho. 7; 30, 2 (Id., report, Dec. 9, 1848). Lalor, Cyclop., iii, 864. N.Y. Herald (weekly), Apr. 10, 1847; July 1, 1848.
26. (Webster) Wash. Union, Dec. 11, 1846; Niles, Jan. 9, 1847, p. 303. Cong. Globe, 30, 1, p. 912 (Stephens). The national debt, Oct. 1, 1845, was $17,075,446 (Walker, report, Dec. 3, 1845). July 6, 1848, Polk gave it as $65,778,450 including the bonds and treasury notes still available for issue (Richardson, Messages, iv, 591). Walker's report, Dec. 9, 1848, gave the increase of the national debt over that of March 4, 1845, as $48,036,151.
In a sense the war with Mexico cost too little. The estimates were pared below our needs. Troops could not be called out when they should have been. Transports and many other necessaries were lacking at critical times. This point will come up in the text of the next chapter. At the end of the war the country and the treasury were in a sound condition, and the government's income was ample. A period of solid prosperity ensued. It may be worth mention that American capitalists offered more than $100,000,000 for the less than $50,000,000 of government securities, and that the total received by the treasury in premiums was $555,511 (Walker, report, Dec. 9, 1848, in Ho. 7; 30, 2).
An account of the money market during the war (based mainly on the financial columns of the New York Weekly Herald) may be of interest. During the early spring of 1846 the Oregon controversy with England was a strong depressing influence. The outbreak of the war with Mexico caused a panic (May 11), but this passed immediately (May 12), and by May 19 the market was rather buoyant, largely in consequence of favorable news from Taylor. it then declined; but about the middle of June there was a plethora of money, and much activity prevailed in consequence of the settlement of the Oregon controversy. This faded gradually away into dulness, but quickened again about the first of August. Fluctuations followed. The first half of September saw a decline. Sept. 5 United States bonds that had sold at 113 before the war brought only 102, but the prospect of foreign demands for grain caused a revival (Sept. 20Oct. 3). Dulness then returned; the general feeling about the war was reflected in very low prices about the middle of November, and Dec. 7 was a "blue day." Though the treasury required all payments to it to be in specie on and after Jan. 1, 1847, it did not begin to pay out specie until Apr. 1. Hence it piled up coin during the interim. Jan. 3, 1847, the market was rather stringent. During the second half of February, the Bank of England rate rose from 3 to 4. Prices continued to decline until by April 4 good prospects at the seat of war and an influx of specie turned the tide. May 1 the New York banks were said to have more than $12,000,000 in specie. May 10 Reading R. R. difficulties precipitated a panic, but this was only a flurry. Money was extremely abundant in a few days (May 19) and prices advanced until about the middle of July. During the second week of August the increasing war expenses bore hard on the market, and treasury notes fell about 2 per cent. About Oct. 1 the report that Scott had entered Mexico City was found to be untrue, and a panic set in (Oct. 4), due to that fact and bad news regarding the financial situation in Europe. The "explosion" of "corners" followed. By Nov. 11 the banks were "shaking in the wind," and a crisis came on at once (Nov. 14). Paper money was loudly called for. After a troubled month, however, money became much easier and prices responded (Dec. 19). Another month, and the banks (really in a tight place themselves) were believed to be tightening everything to force a change in the financial policy of the government (Jan. 25, 1848); but by Feb. 10 natural conditions revived buoyancy, and there was a loud call for more treasury notes. Things then quieted down, but the arrival of the draft of a treaty stimulated activity once more. Absurd rumors about the terms of the treaty next caused a temporary reaction; but when it was accepted, prices went up (Mar. 11). For the day-by-day prices of United States securities, Dec. 1, 1846, to Dec. 1, 1847, see Ho. 6; 30, 1, p. 71.
Other financial legislation of the war period. U.S. Statutes at Large, ix, p. 35, Act of June 27, 1846, sec. 2: $75,000 in U. S. stock belonging to the Seneca Indians to be cancelled, and interest to be paid them on a credit of that amount to be entered on the books of the secretary of the treasury. P. 94, Act of Aug. 10, 1846: Mexican Indemnity Stock (see Bayley, National Loans, 71, modified by statements of this work). P. 106, Act of Aug. 10, 1846: Treasury notes, stolen and put into circulation, to be redeemed by the government. P. 125, Act of Feb. 11, 1847, sec. 9: Any non-commissioned officer, musician and private entitled under this Act to receive a certificate or warrant for 160 acres (or 40 acres) may take instead of it $100 (or $25) in 6 per cent treasury scrip, redeemable at the pleasure of the government. P. 248, Act of July 19, 1848: Three months' extra pay to all who actually served out their term or were honorably discharged, or the heirs of those who lost life or died after being honorably discharged. P. 249, Act of July 21, 1848: Act of July 4, 1836, granting half-pay and pensions to widows, orphans, etc., made applicable to cases of these in the Mexican War. P. 412, Act of March 3, 1849: To provide for settling accounts of those who received money from military contributions, etc., in Mexico. P. 414, Act of March 3, 1849: To provide payment for property lost or destroyed in the military service of U. S. P. 520, Act of Sept. 28, 1850: Bounty lands to be given to certain officers and soldiers who served in the Mexican War.
- ↑ All the citations of the Herald in the notes on this chapter refer to the financial articles.