CHAPTER VIII.
In the tempest of war that raged over land and ocean during the months of August and September, 1814, bystanders could not trust their own judgment of the future; yet shrewd observers, little affected either by emotion or by interest, inclined to the belief that the United States government was near exhaustion. The immediate military danger on Lake Champlain was escaped, and Baltimore was saved; but the symptoms of approaching failure in government were not to be mistaken, and the capture of Washington, which was intended to hurry the collapse, produced its intended effect.
From the first day of the war the two instruments necessary for military success were wanting to Madison,—money and men. After three campaigns, the time came when both these wants must be supplied, or the national government must devolve its duties on the States. When the President, preparing his Annual Message, asked his Cabinet officers what were the prospects of supplying money and men for another campaign, he received answers discouraging in the extreme.
First, in regard to money. In July, Secretary Campbell advertised a second loan, of only six million dollars. He obtained but two and a half millions at eighty. His acceptance of this trifling sum obliged him to give the same terms to the contractors who had taken the nine millions subscribed in the spring at eighty-eight. Barker found difficulty in making his payments, and from both loans the Treasury could expect to obtain only $10,400,000, owing to the contractors’ failures.[314] The authorized loan was twenty-five millions. The secretary could suggest no expedient, except Treasury notes, for filling the deficit.
Bad as this failure was,—though it showed Secretary Campbell’s incapacity so clearly as to compel his retirement, and obliged the President to call a special session of Congress,—the Treasury might regard it as the least of its embarrassments. Commonly governments had begun their most desperate efforts only after ordinary resources failed; but the United States government in 1814 had so inextricably involved its finances that without dictatorial powers of seizing property its functions could not much longer be continued. The general bankruptcy, long foreseen, at length occurred.
The panic caused by the capture of Washington, August 24, obliged the tottering banks of Philadelphia and Baltimore to suspend specie payments. The banks of Philadelphia formally announced their suspension, August 31, by a circular explaining the causes and necessity of their decision.[315] The banks of New York immediately followed, September 1; and thenceforward no bank between New Orleans and Albany paid its obligations except in notes. Only the banks of New England maintained specie payments, with the exception of those in least credit, which took the opportunity to pay or not pay as they pleased. The suspension was admitted to be permanent. Until the blockade should be raised and domestic produce could find a foreign market, the course of exchange was fixed, and specie payments could not be resumed. The British navy and the Boston Federalists held the country firmly bound, and peace alone could bring relief.
Suspension mattered little, and had the National Bank been in existence the failure might have been an advantage to the government; but without a central authority the currency instantly fell into confusion. No medium of exchange existed outside of New England. Boston gave the specie standard, and soon the exchanges showed wide differences. New York money stood at twenty per cent discount, Philadelphia at twenty-four per cent, Baltimore at thirty per cent. Treasury notes were sold in Boston at twenty-five per cent discount, and United States six-per-cents stood at sixty in coin.[316] The Treasury had no means of transferring its bank deposits from one part of the country to another. Unless it paid its debts in Treasury notes, it was unable to pay them at all. No other money than the notes of suspended banks came into the Treasury. Even in New England, taxes, customs-duties, and loans were paid in Treasury notes, and rarely in local currency. Thus, while the government collected in the Middle and Southern States millions in bank-notes, it was obliged to leave them in deposit at the local banks where the collection was made, while its debts in Boston and New York remained unpaid. The source of revenue was destroyed. The whole South and West, and the Middle States as far north as New York, could contribute in no considerable degree to the support of government.
The situation was unusual. The government might possess immense resources in one State and be totally bankrupt in another; it might levy taxes to the amount of the whole circulating medium, and yet have only its own notes available for payment of debt; it might borrow hundreds of millions and be none the better for the loan. All the private bank-notes of Pennsylvania and the Southern country were useless in New York and New England where they must chiefly be used. An attempt to transfer such deposits in any quantity would have made them quite worthless. The Treasury already admitted bankruptcy. The interest on the national obligations could not be paid.
The President’s second inquiry regarded men. The new Secretary of War, Monroe, gave him such information as the Department possessed on the numbers of the army. A comparative account showed that in June, 1813, the regular troops numbered 27,609; in December, 34,325. In January, 1814, the number was nominally 33,822;[317] in July the aggregate was 31,503, the effectives being 27,010.[318] Since July the recruits had declined in numbers. The three months of March, April, and May produced 6,996 recruits; the three months of July, August, and September were reported as furnishing 4,477.[319] The general return of September 30 reported the strength of the army at 34,029 men.[320] The government was not able to provide the money necessary to pay bounties due for the last three months’ recruiting.[321] The Secretary of War admitted the failure of the recruiting service, and attributed it to the high bounties given for substitutes in the militia detached for United States service.[322]
The smallness of the armies in the field showed worse results than were indicated by the returns. Macomb at Plattsburg claimed to have only fifteen hundred effectives. Izard carried with him to Buffalo only four thousand men. Brown’s effectives at Fort Erie numbered two thousand. Apparently these three corps included the entire force in the field on the Canada frontier, and their combined effective strength did not exceed eight thousand men. The year before, Wilkinson and Hampton commanded fully eleven thousand effectives in their movements against Montreal. Nothing showed that the victories at Niagara and Plattsburg had stimulated enlistments, or that the army could be raised above thirty thousand effectives even if the finances were in a condition to meet the expense.