General Schofield and General Ord alone of the original commanders in the Southern military districts were left to carry through the work of Reconstruction. They both discharged their duties with intelligence and fidelity. Nor was the work of Reconstruction essentially hindered by the changed in other departments. It is the trained habit of the officers of the United-States Army to carry out their orders with implicit faith, and there is seldom a conflict as to the line of duty to be followed. If there was any exception, it was in regard to the course pursued by General Hancock. His conduct became a subject of controversy, and the popular division respecting its merits was on the political line. The National Administration and the Democratic party, both North and South, applauded every thing which General Hancock said and did in Louisiana. The Republican party throughout the country, and the General commanding the army, who was about to be nominated for the Presidency, united in strong disapproval of his course. But General Hancock's construction of the laws under which he was acting was the same as that held by the Attorney-General of the United States, and he thus felt abundantly justified and fortified in his position. He disobeyed no specific order of the General commanding the army, and, even if there had been a difference between them, General Hancock was sure of the sympathy and support of their common superior—the President of the United States.
It was however the subsequent opinion of General Grant that much of the disorder and bloodshed in the State of Louisiana during the national election of 1868 had resulted from the military government of General Hancock. It was not his belief that General Hancock had the slightest desire or design to produce such results, but that they were the outgrowth of the encouragement which the rebels of Louisiana received from the changes which General Hancock inaugurated in the manner of administering the Reconstruction Laws. Aside however from the conduct of General Hancock, the removal of General Sheridan from the Louisiana District was unqualifiedly offensive to General Grant in a personal sense, and contrary to his best judgment on ground of public policy and safety. His attachment to Sheridan was very strong, and a wrong against the latter was sooner or later sure to be resented by General Grant. His feelings of the question were promptly and significantly shown when he became President. Inaugurated on the 4th of March, he caused an army order to be issued on the morning of the 5th, restoring General Sheridan to his former command in Louisiana, and ordering General Hancock to the remote and peaceful Department of Dakota.]
CHAPTER XIII.
The financial experience of the Government of the United States in the years following the war is without precedent among nations. When Congress first met after the close of hostilities (December, 1865), it was as a ship sailing into dangerous and unknown seas without chart of possible channels. The Reconstruction problem before the country seemed at the time to be less difficult than the financial problem. Other nations had incurred great expenditures for war purposes, but had always left them in chief part as a heritage for the future. Great Britain will probably never pay the total principal of her public debt. France will be burdened perhaps as long as her nationality endures by the debts heaped upon her through the ambition of her sovereigns, and in her own struggles to enlarge the liberty of her people. But in this country the purpose was early formed, not simply to provide for the interest upon the debt incurred in the war for the Union, but to begin its payment at once, and to arrange for its rapid liquidation. In view of the magnitude of the sum involved this was a new undertaking in the administration of Government finances.
The difficulties of the situation were undoubtedly aggravated and complicated by the questions which arose from the condition of the Southern States. Could Congress expect at once that the populations in those States would begin to contribute to the revenue, would cease to require large expenditures for the maintenance of the National authority, would again add to the volume of our exports, to our commerce, and our general prosperity? Serious re-action had in other lands followed the financial expansion created by great wars, even without complications similar to those which the disturbed condition of the South seemed to render unavoidable. Ought Congress to accept such a re-action as the necessary condition of the restoration of our currency, of return to a normal situation, of adjustment of expenditure to revenue on a peace footing? Could the possibility be entertained of such a return and such an adjustment, without panic, without paralysis of industry, without temporary interruption and prostration of commerce? Grave apprehensions were felt as to the possible effect upon production and trade of the legislation required to maintain the National credit. These apprehensions derived force and peculiar seriousness from the growing conflict between President Johnson and Congress upon measures of Reconstruction and upon removals from office.
In spite however of all suggested fears and doubts, a feeling of confidence pervaded the country, and was fully shared by Congress, that the power which had saved the Union could re-establish its credit without panic and without dangerous and prolonged depression. Faith in the resources which had equipped and supported the National armies, now embraced the plainer and less exciting duties of funding and paying the debt and of protecting the notes of the United States. The loans had been placed, the money borrowed, under the excitement of war,—sometimes under the pressure of defeat, sometimes in the exaltation of victory. Without this pressure, without this exaltation, could money be secured at a rate adequate to build up a National credit worthy to be compared with that of the older and richer nations beyond the Atlantic?
The intrepidity with which Congress met its task will always compel the admiration of the student of American history. While the war lasted, the contributions by taxes and by loans had been on a munificent scale. The measures adopted at the close of the Thirty-eighth Congress, after four years of desperate struggle and on the very eve on National victory, showed as great readiness to make sacrifices, as little disposition to count the cost of saving the Union, as had marked previous legislation. Less than six weeks before the surrender of Lee the internal taxes were increased, the duties on imports were adjusted to that increase, and a new Loan Bill was enacted. The bill provided for borrowing, in addition to the authority given by previous Acts, any sum not exceeding $600,000,000 in bonds, or treasury notes convertible into bonds, at six per cent interest in coin or seven and three-tenths per cent interest in currency. This provision was found to be so comprehensive that it not only provided a strong instrumentality for meeting the immense demands incident to the disbanding of the armies and the final settlement of claims connected with that momentous change in our affairs, but also laid the foundation for the policy of funding the debt at a reduced rate of interest. These results testify to the magnificent proportions of the financial legislation during the period of hostilities.
When the Thirty-ninth Congress met in December, 1865, gold stood at 147-7/8 @ 148½. A month later, on the 1st of January, 1866, the legal-tender notes and fractional currency amounted to $452,231,810; notes bearing 7-3/10 per cent interest, to $830,549,041; compound-interest notes payable three years from date (a considerable proportion of which time had elapsed), to $188,549,041; certificates of indebtedness, payable at various dates within the current year, to $50,667,000; and the temporary loan, practically payable on demand, had reached the large sum of $97,257,194. These might all be called floating and pressing obligations, and their grand aggregate was $1,618,705,045. At the same time the amount represented by bonds (6's of 1861, 5-20's, and 10-40's) was $1,120,786,700,—showing a total National debt on New-Year's Day, 1866, of $2,739,491,745. If the National credit was to be maintained these sixteen hundred millions of floating obligations must be promptly placed on a basis that would give time to the Government to provide means for their ultimate redemption. President Johnson, in his message at the opening of the session, spoke of the debt not as a public blessing, but as a heavy burden on the industry of the country, to be discharged without unnecessary delay. This was the popular sentiment in all sections of the country, although in financial circles arguments were frequently heard in favor of creating interminable obligations and of adjusting the debt on a basis of permanency, after the European fashion. The reduction had indeed already begun, since the maximum of debt had been attained in the preceding August.
The Secretary of the Treasury, Mr. Hugh McCulloch, estimated that for the fiscal year ending with June, 1867 (for which Congress was about to provide), the revenue would exceed the expenditures by $111,682,818, and that the whole of our vast debt could be liquidated by annual payments within thirty years. Mr. McCulloch's plans were to take from the compound-interest notes their legal-tender quality, from the date of their maturity, and to sell six per cent bonds, redeemable at the pleasure of the Government, for the purpose of retiring both the compound-interest notes and the plain legal-tenders. He believed that the entire debt might be funded at five per cent, while the average of the annual interest now stood at 6-62/100 per cent. He pointed to harmony between the different parts of the Union and to the settlement of the relations of labor in the Southern States, as essential conditions to the best management of the National obligations.
The leading feature of Mr. McCulloch's financial policy was the immediate and persistent contraction of the currency. His argument in support of the policy, as given in his annual report, was not accepted by the country or by Congress without serious reservation; but his belief in the theory was strong and determined, and so far as the laws permitted he went on reducing the volume of paper in circulation until on the 12th of April, 1866, the sum of legal-tenders was brought down to $421,907,103. Financiers of the Eastern cities favored the policy of contraction, although the logical plea was urged against them that the country would grow up to the volume of currency if not harried and disturbed by new legislation. Manufacturers and the holders of their products, and many who had incurred pecuniary obligations in the expanded currency, took alarm at the rapidity with which the Treasury notes were withdrawn. The argument was urged that the heavy taxes could not be met if the withdrawal were so rapid, and that industry and trade would in consequence be paralyzed by the enforced fall in prices.