With the election of 1876 and the inauguration of President Hayes, March 4, 1877, the Period of Reconstruction may be said to have closed. The last formal act of that period was the withdrawal of the national troops from the South by President Hayes soon after his inauguration. During the last two decades the "Southern Question," while it has been occasionally prominent in political discussions,—especially in connection with the Lodge Federal Elections Bill, 1889-91, has, nevertheless, occupied a subordinate place in public interest and attention. As an issue in serious political discussions and party divisions the question has disappeared.
In addition to the subject of the Tariff, considered in the previous section, public attention has been directed chiefly, during the last quarter of a century, to the two great subjects, Finance and Civil Service Reform.
The Financial question has been like that of the Tariff,—it has been almost a constant factor in political controversies since the organization of the Government.
The financial measures of Hamilton were the chief subject of political controversy under our first administration, and they formed the basis of division for the first political parties under the Constitution. The funding of the Revolutionary debt, its payment dollar for dollar without discrimination between the holders of the public securities, the assumption of the State debts by the National Government, and the establishment of the First United States Bank, these measures of Hamilton were all stoutly combated by his opponents, but they were all carried to a successful conclusion. It was the discussion on the establishment of the First United States Bank that brought from Hamilton and Jefferson their differing constructions of the Constitution. In his argument to Washington in favor of the Bank, Hamilton presented his famous theory of implied powers, while Jefferson contended that the Constitution should be strictly construed, and that the "sweeping clause"—"words subsidiary to limited powers"—should not be so construed as to give unlimited powers. Madison and Giles in the House presented notable arguments in support of the Jeffersonian view. For twenty years after 1791 our financial questions were chiefly questions of administration, not of legislation. In 1811 the attempt to recharter the First United States Bank was defeated in the Senate by the casting vote of Vice-President Clinton. The financial embarrassments of the war of 1812, however, led to the establishment, in 1812, of the second United States Bank,—by a law very similar in its provisions to the act creating the First Bank in 1791. The bill chartering the Second United States Bank was signed by Madison, who had strenuously opposed the charter of the First Bank. The financial difficulties in which the war had involved his administration had convinced Madison that such an institution as the Bank was a "necessary and proper" means of carrying on the fiscal affairs of the Government. The Second Bank was, however, opposed on constitutional grounds, as the First had been; but in 1819 in the famous case of McCulloch vs. Maryland, the Supreme Court sustained its constitutionality, Chief-Justice Marshall rendering the decision. The Court held, in this notable decision, that the Federal Government was a government of limited powers, and these powers are not to be transcended; but wherein a power is specifically conferred Congress might exercise a sovereign and unlimited discretion as to the means necessary in carrying that power into operation.
The next important chapter in our financial history is the war upon the Second United States Bank begun and conducted to a finish by President Jackson. A bill rechartering the Bank was passed by Congress in 1832, four years before its charter expired. Jackson vetoed this bill, chiefly on constitutional grounds, in the face of Marshall's decision of 1819. The political literature of Jackson's two administrations is full of the Bank controversy, and this literature contains contributions from Webster, Clay, Calhoun, Benton, and other of the ablest public men of the day. No subject of public discussion in that day more completely absorbed the attention of the people.
On these important subjects, which engaged public attention during the first half-century of our national history, there may be found many valuable speeches. These, however, are largely of a Constitutional character. It has been since the opening of our civil war that our financial discussions have assumed their greatest interest and importance. We can attempt here only a meagre outline of the financial history of the last thirty years,—a history which suggests an almost continuous financial struggle and debate.
Leaving on one side the questions of taxation and banking, the financial discussion has presented itself under two aspects,—the issue and redemption of Government paper currency, and the Government policy toward silver coinage. The issue, the funding, and the payment of Government bonds have been incidentally connected with these questions.
The first "legal-tender" Act was approved February 25, 1862. Mr. Blaine says of this Act that it was "the most momentous financial step ever taken by Congress," and it was a step concerning which there has ever since been the most pronounced difference of opinion. The Act provided for the issue of $150,000,000 non-interest-bearing notes, payable to bearer, in denominations of not less than $5, and legal tender in payment of all debts, public and private, except duties on imports and interest on the public debt. These notes were made exchangeable for 6 per cent. bonds and receivable for loans that might thereafter be made by the Government. Supplementary acts of July 11, 1862, and January 17, 1863, authorized additional issues of $150,000,000 each, in denominations of not less than one dollar, and the time in which to exchange the notes for bonds was limited to July 1, 1863. It was under these Acts that the legal-tender notes known as "greenbacks," now outstanding, were issued.
The retirement of the greenbacks was begun soon after the war. On April 12, 1866, an Act authorized the Secretary of the Treasury to retire and cancel not more than $10,000,000 of these notes within six months of the passage of the Act, and $4,000,000 per month thereafter. This policy of contraction was carried out by Secretary McCulloch, who urged still more rapid contraction; but the policy was resisted by a large influence in the country, and on February 4, 1868, an Act of Congress suspending the authority of the Secretary of the Treasury to retire and cancel United States notes, became a law without the signature of the President.
On March 18, 1869, an "Act to strengthen the public credit" was passed, which declared that the "greenbacks" were redeemable in coin. This Act concluded as follows: "And the United States also solemnly pledges its faith to make provision at the earliest practicable period for the redemption of the United States notes in coin."