The United States Since the Civil War

by Charles Ramsdell Lingley

In the meantime the silver agitation, which had been somewhat repressed by the well-known attitude of Cleveland during his first administration revived with increased vigor. The election of 1888, it will be remembered, had turned wholly on the tariff and had been a victory for the Republicans. The western states had almost uniformly supported Harrison in the election and during 1889 four more were admitted to the Union. Their representatives in Congress were mainly silver advocates. In his first message to Congress the President declared that the evil anticipations which had accompanied the use of the silver dollar had not been realized but he feared nevertheless that either free coinage or any "considerable increase" of the present rate of coinage would be "disastrous" and "discreditable." He announced that a plan would be presented by the Secretary of the Treasury, to which he had been able to give only a hasty examination. The scheme for expanding the silver coinage which the Secretary, William Windom, presented was not acceptable to Congress, but the result of the agitation was the law generally known as the Sherman silver purchase act, which was passed on July 14, 1890. It directed the secretary of the treasury to purchase 4,500,000 ounces of silver bullion per month and to issue in payment "Treasury notes of the United States." These notes were legal tender for all debts and were receivable for customs and all public dues. Further, the secretary was directed to redeem the notes in gold or silver at his discretion, "it being the established policy of the United States to maintain the two metals on a parity with each other."

[Illustration:
Total Silver Coinage, 1873-1894, in millions of dollars]

The silver to be purchased was substantially the total output of the American mines. Fearing the strength of the silver element in the Senate and doubtful of the position which the President might take, former Secretary Sherman, now in the Senate, supported the act, although confessing that he was ready to vote for repeal at any time when it could be done without substituting free coinage. The provision for the purchase of four and one-half million ounces instead of four and one-half million dollars' worth was introduced at Sherman's suggestion. This clause kept the amount to be absorbed at a uniform level, whereas the purchase of a fixed number of dollars' worth would have increased the coinage when the price of bullion fell. The vote on the Sherman act was strictly partisan—no Republicans opposing it and no Democrats favoring it when the measure was finally passed, although 116 members of the House failed to answer to their names on the roll-call.

In view of the fact that the industrial and commercial countries of Europe were almost universally reducing their silver coinage, the passage by the United States of an act which substantially doubled the amount of silver purchased under the Bland-Allison law seems extraordinary. Moreover, only six years later a presidential campaign was fought almost wholly on the silver issue and at that time the Republican party resolutely opposed free coinage. It is obvious that powerful forces must have been at work to align the party so unitedly in behalf of the Sherman law. It was to be expected that western Republicans would support it, but the eastern members were found voting for it as well. Doubtless many things contributed to the result. Some perhaps agreed with Sherman that the silver advocates were so strong that free coinage would result in case Congress refused to pass legislation of any kind. Some may have feared with Platt of Connecticut, that a party split would ensue unless the wishes of the westerners were acceded to—hence an act which gave liberal assistance to silver to please the West and South but stopped short of free coinage so as to please the East. That opportunist politics had an influence with certain members is indicated by the remarks of a Massachusetts Republican representative who later favored the gold standard:

It is pure politics, gentlemen; that is all there is about it. We Republicans want to come back and we do not want you (to the Democratic side) to come back in the majority, because, on the whole, you must excuse us for thinking we are better fellows than you are. That is human nature, that is all there is in this silver bill (laughter on the Republican side); pure politics.

A Democrat who favored free coinage denounced the act as "Janus-Faced," moulded so as to look like silver to the West and gold to the East. Important, also, seems to have been the attitude of the western members on the tariff. The party had returned to power on the tariff issue and it seemed necessary to pass some sort of legislation on the subject. Yet the party majority in Senate and House was slight and the westerners were understood to be ready to defeat the McKinley bill which was then pending, unless something was done for silver. Harrison seems to have been unwilling to endanger successful tariff legislation by opposing the considerable extension of the coinage of silver.[4]

Contrary to the expectations of the proponents of the act, the price of silver fell gradually until the value of the bullion in a dollar was sixty cents in 1893 and forty-nine cents in 1894. They who had opposed the law saw their fears verified; as they had prophesied, silver began to replace gold in circulation; the latter was hoarded and used for foreign shipments; customs duties, which had hitherto been paid largely in gold, were now paid in paper currency; since gold was now more desired than silver, large amounts of paper were presented to the government for redemption in the more valuable metal. To be sure, the Sherman law allowed the secretary of the treasury to redeem the treasury notes of 1890 in gold or silver at his discretion, but it contained a proviso that the established policy of the United States was to maintain the two metals on a parity or equality. The secretary believed that if he refused to redeem the treasury notes in whatever coin the holder desired, that is if he insisted on redemption in silver only, a discrimination would be made in favor of gold and the equality of the two metals would be destroyed. Parity would be maintained, the government held, only when any kind of money could be exchanged for any other kind, at the option of the holder.

For the redemption of the greenbacks, the government had since 1879 maintained a fund known as the gold reserve. No law fixed its amount, but custom had set $100,000,000 as the minimum. Hitherto a negligible amount of paper had been presented for redemption, but as soon as the Sherman law came into effective operation the demand for gold became increasingly great and the level of the reserve promptly fell. Between July 1, 1890, and July 15, 1893, the supply of gold in the treasury decreased more than $132,000,000, while the stock of silver increased over $147,000,000. Evidently silver was replacing gold in the treasury, and it was equally clear that a continuation of the process would result in forcing the government to pay its obligations in silver and to refuse to redeem paper in gold—in other words, go upon a silver standard.

The situation when Cleveland's second administration began on March 4, 1893, was complex and critical. The annual expenditures had increased by $119,000,000 between 1880 and 1893, while the revenue had expanded by only half that amount; the surplus had decreased every year during Harrison's administration and a deficit had been avoided only by the cessation of payments on the public debt; the supply of currency in circulation was being heavily increased by the operation of the Sherman law; and the gold reserve had been kept at the traditional amount only through extraordinary efforts on the part of Harrison's Secretary of the Treasury as the administration came to a close.

Cleveland's attitude toward the Sherman law was well-known. He had long urged the repeal of the Bland-Allison act; before the election of 1892 he had predicted disaster in case the nation entered upon "the dangerous and reckless experiment of free, unlimited, and independent silver coinage"; it was his belief that the distresses under which the country labored were due principally to the Sherman silver purchase law. He therefore called a special session of Congress for August 7, (1893), sent a message giving a succinct account of the operation of the law and urged its immediate repeal.[5] In the House, repeal was voted with surprising promptness, although a strong free-silver element fought vigorously to prevent it. That party lines were broken was indicated by the fact that two-thirds of the Democrats and four-fifth of the Republicans voted in accord with the President's request.