THE COST OF THE WAR
%464. The Cost in Money.%—When Fort Sumter was fired on in 1861 and Lincoln made his call for volunteers, the national debt was $90,000,000, the annual revenue was $41,000,000, and the annual expenses of the government $68,000,000. As the expenses were vastly increased by the outbreak of war, it became necessary to get more money. To do this, Congress, when it met in July, 1861, began a financial policy which must be described if we are to understand the later history of our country.
%465. Power to raise Money.%—The Constitution gives Congress power
1. "To lay and collect taxes, duties, imposts, and excises."
2. "To borrow money on the credit of the United States."
3. To apportion direct taxes among the several states according to their population.
%466. Raising Money by Taxation; Internal Revenue.%—Exercising these powers, Congress in 1861 increased the duties on articles imported, laid a direct tax of $20,000,000. and imposed a tax of three per cent on all incomes over $800. The returns were large, but they fell far short of the needs of the government, and in 1862 an internal revenue system was created. Taxes were now imposed on spirits and malt liquors; on manufactured tobacco; on trades, professions, and occupations; till almost everything a man ate, drank, wore, bought, sold, or owned was taxed. The revenue collected from such sources between 1862 and 1865 was $780,000,000.
%467. Raising Money "on the Credit of the United States."%—Money raised by internal revenue and the tariff was largely used to pay current expenses and the interest on the national debt. The great war expenses were met by borrowing money in two ways:
1. By selling bonds.
2. By issuing "United States notes."