Thus in the year 1814, the revenue derived from customs had been reduced to one fourth part (to nearly one sixth part, if compared according to the revenue accrued, or amount of importations), the tonnage employed in the foreign trade of the United States to nearly one ninth; and that of the American vessels employed in that trade, to one fourteenth part of their respective average amount during the eleven years of peace.
The small American navy did during the last war with England all and more than could have been expected. The fact was established to the satisfaction of the world and of Great Britain herself, that the navy of the United States, with a parity of force, was at least equal to that of England. But the prodigious numerical superiority of the British navy rendered it impossible for a few frigates to protect the commerce of the United States, which was accordingly almost annihilated. We have now ten ships of the line, and a proportionate number of frigates and smaller vessels. The great numerical superiority of the British navy still continues; and it cannot be doubted that, in case of war, every exertion will be made by the British Government to maintain its superiority in our seas and on our coasts. Still it is but a portion of her force that can be employed in that way, and, taking every circumstance into consideration, it may be confidently hoped that our commerce, though much lessened, will be partially protected by our navy. Although the actual diminution which will be experienced is altogether conjectural, I think that no great error is to be apprehended in estimating the revenue from customs, after the first year of the war, at about one half of its present amount; and the whole revenue from that source, from the sale of lands and all the branches of the existing income, at fourteen millions of dollars; leaving to be provided for sixty to sixty-five millions, besides the interest on loans, which, for a war of three years, may be estimated at about six millions of dollars on an average. However energetic and efficient Congress and the Executive may be, the resources and strength of the nation can be but gradually brought forth: the expenses will therefore be less during the first year, after which the whole amount will be required and will be annually wanted. In reference therefore to the second year of the war—
| Assuming the total war expenses at | $65,000,000 | ||
| All the others at | 12,000,000 | ||
| ————— | |||
| In all, | $77,000,000 | ||
| From which deduct for existing revenue, | 14,000,000 | ||
| ————— | |||
| To be provided for by taxes and loans, | $63,000,000 | ||
| On the principle that the amount of annual taxes | |||
| should be at least equal to the expenses of | |||
| the peace establishment and the interest on | |||
| the war loans, annual peace expenses at | 27,000,000 | ||
| And for interest on the loans of 1st and 2d years, | |||
| viz. 1st year 25, and 2d year 45 millions at | |||
| 7 per cent. | 5,000,000 | ||
| ————— | |||
| Together, | $32,000,000 | ||
| From which deduct for existing revenue, | 14,000,000 | ||
| ————— | |||
| Leaves to be provided for by new taxes, at least | $18,000,000 | ||
| And by loans, | 45,000,000 | ||
| ————— | |||
| $63,000,000 | |||
The estimate of 5,000,000 dollars for the interest of the loans the second year after the war, is founded on the supposition that the direct and other internal taxes or duties laid for the first year, together with the existing revenue, and twenty-five millions borrowed by loans or Treasury notes, will be sufficient to defray the expense incurred prior to and during the first year of the war. The deficiency in the regular force for that year must be supplied by large drafts of militia, which will be as expensive at least as the regular soldiers whose place they will supply.
But it appears very doubtful whether such a large sum as forty-five millions can be raised annually by loans and Treasury notes. It is necessary in the first place to correct some erroneous opinions respecting the extent to which these notes may be kept in circulation, and the legitimate objects to which they may be applied.
The Treasury notes were first introduced on my suggestion, which was no new discovery, since they are a mere transcript of the Exchequer Bills of Great Britain. As these have been resorted to for more than a century, and have never become there a portion of the ordinary currency, the extent to which they may be used for other purposes is well ascertained, and bears always a certain ratio to the wealth of the country and to the revenue of the State. Whether issued to the bank as an anticipation of the revenue, or used by capitalists for short investments, the gross amount has rarely exceeded twenty millions sterling. Judging from past experience, the amount which may, in time of war, be kept in circulation at par in the United States falls far short of a proportionate sum.
| The amount of Treasury Notes issued during | ||
| the years 1812 and 1813 amounted to | $8,930 000 | |
| Of which there had been paid including interest | $4,240 000 | |
The amount in actual circulation was less than five millions, and thus far they had been kept at par.
All the demands from the other departments had been met by the Treasury, and there were but few, if any, outstanding arrears. Nothing had as yet been collected on account of the direct tax and of the internal duties. Besides the five millions of Treasury Notes, there had been paid into the Treasury in the years 1812 and 1813, $28,740,000 on account of war loans, and $22,283,000 from the customs. The balance in the Treasury amounted to $5,196,542 on the 31st December, 1813.