William Lowndes fortified his position by an argument showing that “if the plan of confiscation and of a rigid execution of the law were dismissed, no just principles of policy and not even the interests of the Treasury could sanction an exaction which would resolve itself into a tax.” Josiah Quincy found himself for once in accord with his chief opponents, and declared that in his opinion highway robbery stood a little higher in point of courage, and was a little less in point of iniquity, than this Treasury attempt to make calumny the basis of plunder. Felix Grundy said: “Gentlemen have assumed a strange, high-minded position in this argument, the force of which, I confess, is beyond my comprehension.”
December 11 the House in Committee of the Whole, by a vote of fifty-two to forty-nine, rejected Gallatin’s suggestion. December 15 a bill came from the Senate remitting all forfeitures on goods owned by Americans and shipped from England before September 15, when the declaration of war became known there. After a sharp debate this bill passed by a vote of sixty-four to sixty-one,—Calhoun, Cheves, and Lowndes voting with the Federalists and securing its passage. This decision closed one source of revenue for the year.
The course taken by Cheves, Calhoun, and Lowndes was largely due to their dislike of the non-importation system on which the proposed forfeiture rested. They wished to abolish commercial restrictions; they were anxious to avoid internal taxation, and to supply the Treasury with revenue by admitting British goods under heavy duties. So earnest was Cheves in pursuit of this object that he hardly tolerated any other, and made no secret of his hope that the failure to exact these forfeitures and to lay internal taxes would compel Congress to depend upon imports for resources.
“How are the exigencies of the government for the next year to be supplied?” he asked as early as December 4. “Is the deficiency to be derived from [internal] taxes? No! I will tell gentlemen who are opposed to them, for their comfort, that there will be no taxes imposed for the next year. It was said last session that you would have time to lay them for this session, but I then said it was a mistake. You now find this to be the fact. By your indecision then, when the country was convinced they were necessary, you have set the minds of the people against taxes; but were it otherwise, you have not time now to lay them for next year.”
Calhoun also laid down emphatic principles on this point, dwelling in strong language on what he held to be the radical error of Virginia statesmanship.
“At the end of the last session,” said Calhoun, December 8, “I recommended high duties as a substitute for the Non-importation Act. High duties have no pernicious effects, and are consistent with the genius of the people and the institutions of the country. It is thus we would combine in the highest degree the active resources of the country with the pressure on the manufactures of the enemy. Your army and navy would feel the animating effect.... The non-importation as a redress of wrongs is radically defective. You may meet commercial restrictions with commercial restrictions, but you cannot safely confront premeditated insult and injury with commercial restrictions alone.... It sinks the nation in its own estimation; it counts for nothing what is ultimately connected with our best hopes,—the Union of these States. Our Union cannot safely stand on the cold calculation of interest alone; it is too weak to withstand political convulsions; we cannot without hazard neglect that which makes man love to be a member of an extensive community,—the love of greatness, the consciousness of strength.”
The three South Carolinians—Calhoun, Cheves, and Lowndes—had a financial policy of their own, in which they received some private sympathy, if not much active support, from the Treasury. Gallatin, in his own way, stood in a position almost as solitary as that of John Randolph; but condemned as he was to support the burden of a war which Congress had insisted upon, with only such financial means as Congress left him, he could feel little sympathy with any financial scheme, for all were more or less clumsy and inefficient. As far as he could see, nothing but peace could save the Treasury. In June, at the time of declaring war, he urged taxation; but the party feared taxation, and preferred to wait the chances of military success. In December these expected successes turned into disasters; the country showed an unforeseen hostility to the war. Taxation might easily be fatal, for the war found little real support except in Kentucky, Tennessee, and the Southern States, precisely where internal taxation would excite deepest resistance. The war leaders would not hear of laying taxes at such a moment, and they had no great difficulty in carrying their point. Gallatin himself could afford to wait. The accidental importations from England after the repeal of the British orders brought five million dollars into the Treasury,—a sum so much greater than had been expected, and so ample for meeting the interest on old and new loans, that Gallatin could not think himself obliged to exhaust his influence and risk that of his party in order to wring taxes from a timid Congress. The secretary’s attitude brought upon him a fair and just rebuke from John Randolph, that he had trifled with the dignity of the House.[378] Had Gallatin been inclined to retort, he would have replied that so far as the Treasury knew, the House had no dignity to trifle with; but Gallatin never lost control of his temper or his tongue, and after having been the readiest and boldest adviser of his party he had become a master in the art of silence. He expressed once more his belief in the necessity of taxation;[379] but this done he let Congress go its own gait.
Cheves aspired to abolish the remains of Jeffersonian statesmanship,—non-importations, embargoes, and restrictions,—and to restore the freedom of commerce; and in support of this scheme he obtained from Gallatin a letter dated Feb. 9, 1813,[380] expressing the decided opinion that Congress must not only impose war taxes, both external and internal, but must also repeal the non-importation, if the increased expenditures authorized by law were to be met. February 15 Cheves introduced a bill carrying out the secretary’s opinion so far as to suspend the Non-importation Act in part, though continuing it against articles specially enumerated. Two days afterward the House, by a vote of sixty-nine to forty-seven, instructed the Committee of Ways and Means to report tax-bills, although Cheves complained that the instruction was deceptive, and that no system of taxation could possibly be adopted within the fortnight that remained of the session. Apparently Cheves looked on the motion as a manœuvre to save the Non-importation Act; but he could hardly have been prepared to see the Federalist member, Elisha Potter of Rhode Island, rise, February 20, and declare that his constituents had invested a capital of four or five million dollars in manufactures protected by non-importation, and that Cheves’s bill, sacrificing as it did the interests of the manufacturing States, ought not to pass.
Such a change of attitude foreshadowed a revolution. New England had her price. The system which Jefferson forced upon her at the cost of the Southern States had begun to work its intended effect. Under the pressure of Virginia legislation, New England was abandoning commerce and creating manufactures. While every Federalist newspaper in the country denounced the restrictive system without ceasing, nearly every Federalist in the House voted with Potter in its favor. By seventy-nine votes to twenty-four, the Committee of the Whole struck out Cheves’s proposed relaxation, and converted his bill into a measure for the stricter enforcement of non-importation. Cheves and Lowndes were then obliged to vote against their own bill, so amended, in a minority of forty-five to sixty-seven.
Nothing remained but to depend upon loans and call an extra session to consider the taxes. The loan bill, passed January 26, authorized the President to borrow sixteen million dollars on any terms he could obtain, provided only that the nominal capital might be repaid at the end of twelve years. Attempts to limit the rates of interest and discount were defeated, and the bill passed by a vote of seventy-five to thirty-eight. Another bill immediately followed, authorizing the issue of treasury notes bearing interest at five and two fifths per cent, to be redeemed in one year. Five millions in such notes were to be issued at all events, and five millions more in case the loan should prove less advantageous than the notes. By these means Congress proposed to supply the needed twenty-one million dollars, although no one could say with confidence how much these millions would cost, or whether they could be obtained at any price.