State of the Union Addresses

by Benjamin Harrison

During the fiscal year there was applied to the purchase of bonds, in addition to those for the sinking fund, $90,456,172.35, and during the first quarter of the current year the sum of $37,838,937.77, all of which were credited to the sinking fund. The revenues for the fiscal year ending June 30, 1891, are estimated by the Treasury Department at $385,000,000, and the expenditures for the same period, including the sinking fund, at $341,430,477.70. This shows an estimated surplus for that year of $43,569,522.30, which is more likely to be increased than reduced when the actual transactions are written up.

The existence of so large an actual and anticipated surplus should have the immediate attention of Congress, with a view to reducing the receipts of the Treasury to the needs of the Government as closely as may be. The collection of moneys not needed for public uses imposes an unnecessary burden upon our people, and the presence of so large a surplus in the public vaults is a disturbing element in the conduct of private business. It has called into use expedients for putting it into circulation of very questionable propriety. We should not collect revenue for the purpose of anticipating our bonds beyond the requirements of the sinking fund, but any unappropriated surplus in the Treasury should be so used, as there is no other lawful way of returning the money to circulation, and the profit realized by the Government offers a substantial advantage.

The loaning of public funds to the banks without interest Upon the security of Government bonds I regard as an unauthorized and dangerous expedient. It results in a temporary and unnatural increase of the banking capital of favored localities and compels a cautious and gradual recall of the deposits to avoid injury to the commercial interests. It is not to be expected that the banks having these deposits will sell their bonds to the Treasury so long as the present highly beneficial arrangement is continued. They now practically get interest both upon the bonds and their proceeds. No further use should be made of this method of getting the surplus into circulation, and the deposits now outstanding should be gradually withdrawn and applied to the purchase of bonds. It is fortunate that such a use can be made of the existing surplus, and for some time to come of any casual surplus that may exist after Congress has taken the necessary steps for a reduction of the revenue. Such legislation should be promptly but very considerately enacted.

I recommend a revision of our tariff law both in its administrative features and in the schedules. The need of the former is generally conceded, and an agreement upon the evils and inconveniences to be remedied and the best methods for their correction will probably not be difficult. Uniformity of valuation at all our ports is essential, and effective measures should be taken to secure it. It is equally desirable that questions affecting rates and classifications should be promptly decided.

The preparation of a new schedule of customs duties is a matter of great delicacy because of its direct effect upon the business of the country, and of great difficulty by reason of the wide divergence of opinion as to the objects that may properly be promoted by such legislation. Some disturbance of business may perhaps result from the consideration of this subject by Congress, but this temporary ill effect will be reduced to the minimum by prompt action and by the assurance which the country already enjoys that any necessary changes will be so made as not to impair the just and reasonable protection of our home industries. The inequalities of the law should be adjusted, but the protective principle should be maintained and fairly applied to the products of our farms as well as of our shops. These duties necessarily have relation to other things besides the public revenues. We can not limit their effects by fixing our eyes on the public Treasury alone. They have a direct relation to home production, to work, to wages, and to the commercial independence of our country, and the wise and patriotic legislator should enlarge the field of his vision to include all of these. The necessary reduction in our public revenues can, I am sure, be made without making the smaller burden more onerous than the larger by reason of the disabilities and limitations which the process of reduction puts upon both capital and labor. The free list can very safely be extended by placing thereon articles that do not offer injurious competition to such domestic products as our home labor can supply. The removal of the internal tax upon tobacco would relieve an important agricultural product from a burden which was imposed only because our revenue from customs duties was insufficient for the public needs. If safe provision against fraud can be devised, the removal of the tax upon spirits used in the arts and in manufactures would also offer an unobjectionable method of reducing the surplus.

A table presented by the Secretary of the Treasury showing the amount of money of all kinds in circulation each year from 1878 to the present time is of interest. It appears that the amount of national-bank notes in circulation has decreased during that period $114,109,729, of which $37,799,229 is chargeable to the last year. The withdrawal of bank circulation will necessarily continue under existing conditions. It is probable that the adoption of the suggestions made by the Comptroller of the Currency, namely, that the minimum deposit of bonds for the establishment of banks be reduced and that an issue of notes to the par value of the bonds be allowed, would help to maintain the bank circulation. But while this withdrawal of bank notes has been going on there has been a large increase in the amount of gold and silver coin in circulation and in the issues of gold and silver certificates.

The total amount of money of all kinds in circulation on March 1, 1878, was $805,793,807, while on October 1, 1889, the total was $1,405,018,000. There was an increase of $293,417,552 in gold coin, of $57,554,100 in standard silver dollars, of $72,311,249 in gold certificates, of $276,619,715 in silver certificates, and of $14,073,787 in United States notes, making a total of $713,976,403. There was during the same period a decrease of $114,109,729 in bank circulation and of $642,481 in subsidiary silver. The net increase was $599,224,193. The circulation per capita has increased about $5 during the time covered by the table referred to.

The total coinage of silver dollars was on November 1, 1889, $343,638,001, of which $283,539,521 were in the Treasury vaults and $60,098,480 were in circulation. Of the amount in the vaults $277,319,944 were represented by outstanding silver certificates, leaving $6,219,577 not in circulation and not represented by certificates.

The law requiring the purchase by the Treasury of $2,000,000 worth of silver bullion each month, to be coined into silver dollars of 412 1/2 grains, has been observed by the Department, but neither the present Secretary nor any of his predecessors has deemed it safe to exercise the discretion given by law to increase the monthly purchases to $4,000,000. When the law was enacted (February 28, 1878) the price of silver in the market was $1.204 per ounce, making the bullion value of the dollar 93 cents. Since that time the price has fallen as low as 91.2 cents per ounce, reducing the bullion value of the dollar to 70.6 cents. Within the last few months the market price has somewhat advanced, and on the 1st day of November last the bullion value of the silver dollar was 72 cents.

The evil anticipations which have accompanied the coinage and use of the silver dollar have not been realized. As a coin it has not had general use, and the public Treasury has been compelled to store it. But this is manifestly owing to the fact that its paper representative is more convenient. The general acceptance and the use of the silver certificate show that silver has not been otherwise discredited. Some favorable conditions have contributed to maintain this practical equality in their commercial use between the gold and silver dollars; but some of these are trade conditions that statutory enactments do not control and of the continuance of which we can not be certain.