Rensselaer Republican, Volume 17, Number 14, Rensselaer, Jasper County, 11 December 1884 — FUNDS OF THE NATION. [ARTICLE]

FUNDS OF THE NATION.

■ ■ i Secretary McCulloch’s Yearly * Balance-Sheet of the United States Treasury. Fsreign Trade, Taxation, and America's Shipping? Interests Considered. The report of Hugh McCulloch, Secretary of the Treasury, is of great length, but on several questions of vital interest to the financial and commercial world it is exceedingly Interesting. From the mass of figures submitted it is learned that the total revenues of the Government for the last fiscal year were $343,519,860, and that the expenditures were $290,916,773. leaving a surplus of $57,603,396, of which $31,000,000 has been applied to bond redemption. The actual and estimated revenue for the fiscal year 1894-3 is $330,000,000 and the estimated expenditures are $290,000,i 00. Of the revenues expected during the ensuing year $185,000,000 will come from customs nue. The Secretary estimates that the Treasury surplus in 1886 will be not less than $50,000,000, and argues that something should be done to relieve the people of this unnecessary taxation.

The most Important chapter In the report Is devoted to foreign trade and taxation. After speaking of the remarkable changes in the western States and Territories, and asserting that “to the rise in the value of lands resulting from the construction of railroads the wonderful increase of the national wealth Is very largely attributable,” he says: The condition of the manufacturing interest of the United States is similar In some respeets to the condition of the agricultural interest of the West in the early days. What the Western tanners then needed eras a market fir.their crops. - What manufacturers now need is a market for their surplus manufactures. The real foundation of our great manufacturing industry was laid in New England under the first tariff of a protective character, which diverted a part of its capital from shipping Into cotton factories. Those first constructed having been fairly remunerative, more were constructed, and other branches of manufacture were undertaken, until New England was converted from maritime and commercial pnrsuits into manufacturing. It will be recollected that New England was opposed to the first protective tariff—that one of Mr. Webster’s great speeches was a free-trade speech. It was not many years after the first cotton mills were erected in New England that the great iron industries of the country began to be developed, and Pennsylvania soon became the great iron manufacturing State of the Union. Nor was it long before various kinds of manufactures came into existence, in most of the Northern and Western States. The demands of the Government daring the late civil war for nearly all kinds of manufactured goods and the high tariff greatly stimulated production. After the war stimulus was fonnd in railroad building and in extravagant expenditures induced by superabundant currency, and the time has now come when the manufacturing industry of the United States is in dire distress from plethora of manufactured goods. Some manufacturing companies have been forced into bankruptcy; others have closed their mills to escape it; few mills are running on full time, and as a consequence a very large number of operatives are either deprived at employment or are working for wages hardly sufficient to enable them to live comfortably or even decently. Nor are manufacturers and their employes the only sufferers by the present depression of onr manufacturing Industry. So large and widespread has this Industry become, so interwoven is it with other industries, so essential is it to the welfare of the whole country, that it cannot be seriously depressed without injuriously affecting business throughout the Union, The all-important question, therefore, that presses itself upon the pnblic attention Is, how shall the country be relieved from the plethora of manufactured goods, and how shall plethora hereafter be prevented? It Is obvious that our power to produce Is much in excess of the present or any probable future demand for home consumption. The existing iron, cotton and woolen mills. If employed at their fall capacity, conld meet in six months—perhaps in a shorter time —the home demand for a year. It is certain, therefore, that unless markets now practi-cally-closed against us are opened, unless we ean share in the trade which is monopolized by European nations, the depression now so severely felt will continue, and may become more disastrous.

The question how shall our foreign trade be increased is the question which now comes to the front and demands prompt and careful eon-* sideration. Manufacturers are primarily Interested, but the whole country has a stake in its solution. In its investigation the tariff will neoessarily be involved, inasmuch as the relations between it and our foreign trade are so close that they cannot be considered separately, but it need not be involved except so far as it stands in the way of international trade. If the duties upon raw materials are an obstruction, those duties should be removed. If the duties upon other articles are an obstruction, they should be modified. Whatever may be required to increase our foreign trade, whether it be a repeal or modification of existing duties should be demanded by the manufacturers themselves. How, then, shall the information required for a full understanding of what stands in the way of an increased exportation of our manufactured goods be obtained? It may not be proper for me to offer advice on this point, but I cannot forbear to say that I can see no better means than by the appointment of a commission, composed of men not wedded to the doctrines of free trade or pro-tection—fair-minded men, prosecute the inquiry thoroughly, comprehensibly, and impartially. If such a commission should be created, it should be done without unnecessary delay. The business of the whole world has been revolutionized by steam power and the substitution of machinery for hand work. If not the inventor of the steam engine. Great Britain took the lead In utilizing it in manufacturing, and she thus became the great workshop of the world. For many years she had a monopoly of manufacturing. The raw materials from nearly all nations was taken in her own ships to her ports and returned in manufactured goods. It has been the profit of this combination of manufactures and commerce which has made her the richest and most powerful of nations. Now, however, all Western nations are endeavoring to use their raw materials at home and to encourage and sustain their manufactures by protective duties, the effect of which has been general overproduction. It is this great revolution caused by steam power and machinery and their general use that will make the labors of the commission arduous. All the leading nations of the world ore now engaged in manufacturing, and all but Great Britain are forcing themselves in by protective duties. Among them the United States has been conspicuous Has not the time come when a new departure is demanded? Cobden, one of the ablest and most far-seeing of British statesmen, predicted that the United States would in time not only become a great manufacturing country, but would become a competitor of Great Britain in the South American markets. In the course of some remarks upon the condition of British trade he said: “ Members of the House of Commons and others are constantly crying oat that there is very great danger threatening this country from Russia, and they neglect to observe that the great danger to the supremacy of the country is not in Russia, but in the competition of the United States of America." The present condition of our foreign trade is not as fully understood by the public as it ought to be, or there would be greater uneasiness in regard to what may be the result. Look, for Instance, at our trade relations with Brazil. We sold to Brazil last year various articles to the amount of $8,645,261. We bought of her various kinds of her own productions to the amount of $50,265,880, leaving $41,620,608 as the* balance against us. Now, how is this large balance liquidated? Not by gol<U.but by the sale of our farm products, for which tnere is a large demand in Europe. It is our cotton, our wheat, our petroleum, our beef pork, which can be produced more cheaply in the United States anywhere else, which create the sterling exchange that enables us to carry ons this one sided trade with Brazil. Now, if by the failure of our crops, or very favorable seasons on the other side of the Atlantic, or what is more probable, by retaliation, our exports of these articles should materially decline, what then would be the condition of our Brazilian trade? Instead of depending on the exports to Europe for means to cover the balance in favor of Brazil.ougbt not an effort be made to equalize that trade by our manufactured goods? Ought we not to endeavor to verity the prediction of Cobden bv becoming a competitor with- Great Britain in the Brazilian markets? Ought not this to be attempted in the interest of our own •nahufactures ?

When the real condition of our foreign trade and the character of the competition in which we must sooner er later encage, are fullr understood, it wi‘l be found that our inability to «nak; that trade as tree as our liest interests zequir? lies in the necessity which exists for heavy import duties, which, although they may be levied tor revenue only, most be in a large degree piotective. It is upon such taxes, therefore, that onr government must mainly rely lor its large current expenditures and the reduction of the national debt. Large revenues will i e derived from the taxes upon whiskey and tobacco, if the tax on the latter article should be retained, but our chief revenue must be derived from import duties. To show how these duties may be so imposed and distributed as to neither imperil onr

manufacturers nor obstruct out foreign trade, while the Treasury Is kept in an easy condition, will be the task of the commission. That the task will be a very difficult one is certain; that it may be successfully performed ought to be oertaln also. ’ '' In the commencement of Its work the commission should, I think, regard the following points as being settled: 1. That the public revenues are not to beta excess of what may be required for the Support of the Government and the gradual redaction of the pnblic debt. 2. That onr manufactures, which uniler the foftering care of the Government have attained such gigantic proportions, and whose prosperity is essential to the welfare of all other Interests, are not to be pnt In jeopardy by rapid and sweeping ohangeslnthe tai iff, and that all reductions of Import duties should be made with a view to their ultimate advantage by opening to them markets from which they are now in a large degree excluded. If such a commission as has been suggested had been appointed, and lta work could be pei formed at an early date, I should not be disposed to say anything bearing directly upon the tariff; but as relief from the present burden of taxation is urgently and justly demanded, I deem It my duty to snggest that something in this direction should be done without dehy. Owing to the shortness of the time allowed to me for the consideration of the subject, lam not prepared to name the articles upon which duties should be removed or reduced. I should regret this if Congress were not already in possession of the facts which should govern Its action. This much, however. It may jbe proper for me to recommend.

1. That the existing duties upon raw materials which are to be used In manufacture should be removed. This can be done in the Interest of ons foreign trade. 2. That the duties upon the articles used or consumed by those who are the least able to bear the burden of taxation should be reduced. This also can be effected without prejudice to our export trade. In regard to or.r internal revenue taxes, I have to say that, as these taxes, with the exception of the tax upon whisky, ought not to be and will not be needed for revenue if appropriations are kept within reasonable bounds and rigid economy is established in all branches of the pnblic service, I see no good reason for their continuance. Taxes upon agricultural productions, although indirectly levied, are inconsistent with our general policy, and tobacco is the only one of these productions which baa been taxed. An article which is bo generally used, and yvbich adds so much to the comforts of the large numbers of onr population who earn their living by manual laDor. cannot properly be considered a luxury, and as the collection of the tax is expensive and troublesome to the Government, and Is especially obnoxious and irritative to small manufacturers, the tax upon tobacco Bhould, in my judgment, be removed. The tax upon whisky conld not be repealed without a disregard of pnblic sentiment, nor without creating a necessity for higher duties upon imported goods, but while this is true the tax upon the alcohol used In manufacturing might be removed witlrdecided benefit to home industry and foreign trade. On the subject of our shipping interests Secretary McCulloch urges the prompt removal of the unjust tariff taxes which have driven American vessels from the sea and paralyzed shipbuilding in this country. He does not, however, consider the restoration of onr raferehant marine an easy matter. We have been out of the carrying trade so long, and foreign companies have such enormous capital invested, that an attempt on the part of the United States to gain supremacy on the seas would meet with most vigorous competition. On this point Mr. McCulloch says: There is, in my opinion, no prospect whatever that the United States will ever share to a considerable extent in the foreign earning trade without Government aid. It is for Congress to determine whether this aid shall be granted or whether onr foreign shipping interest shall remain in its present death-like condition. The let-alone policy has been tried for many years, duilng which our ships have been swept from the ocean, and we pay every year many millions of dollars to foreign ship owners for freights and fares. Ought this condition of things to be continued?

Entertaining these views, I do not hesitate to express the opinion: 1. That without government aid to United States steamship lines the foreign carrying trade will remain in the hands of foreigners. 2. That as we ought to have an interest in the business which we create, and as the restoration of our shipping Interest Is important, if not essential, to the extension of onr foreign trade, subsidies in the form ofllberal payments for the transportation of mails or in some other form should be offered as an inducement to investments of capital in steamships. The amount of necessary aid wonld be Insignificant In comparison with what has been granted to manufacturers by protective duties, and nothing would be paid until the services were rendered. ? After showing the danger Involved in the continued coinage and unlimited legal tender quality of the silver dollar the Secretary says: I have be:n forced to the conclusion that unless both the coinage of silver dollars and the isgue of silver certificates are suspended there la danger that silver, and not gold, may become onr metallic standard. This danger may not be imminent, but it is of so serious a character that there ought not to be delay in providing against it. Not only would tbe national credit lie seriously impaired if the Government should be under the necessity of using silver dollars or certificates in payment of gold obligations, but business of all kinds would be greatly disturbed; not only so, bnt gold would at once cease to be a circulating medium, and severe contraction wonld be the result.

The United States is one Of the most powerful of nations—its credit is high, its resources limitless; but it cannot prevent a depreciation of silver unless its efforts are aided by leading nations of Europe. If the coinage of silver is continued in despite of the action of Germany m demonetizing it and the limitation of its coinage by what are known as the Lathi nations, there can be but one result—silver will practically become the standard of value. Our mines produce large amounts of silver, and it is Important, therefore, that there should be a good demand for it at remunerative prices for the outlays in obtaining it. The suspension of its coinage might depress the market price of silver for a time, but the ultimate effect would doubtless be to enhance it. The production of gold is diminishing, that of silver has practically reached its maximum, and there are strong indications that from this time the yield of both gold and silver mines will speedily decline. At the same time the demand for both for coinage and in manufactures will increase. The very necessities of the commercial world will prevent a general and continued disuse of either as money. The European nations which bold large amounts of silver must sooner or later come to its rescue, and the suspension of coinage in the United States would do much to bring about on their part action in its favor. But, whatever might be the effect of the suspension of the coinage upon the commercial value of silver, it is very clear that the coinage cannot be continued without detriment to general business and danger to the national credit. The amount of one-doilar notes in circulation is $26,763,097.80; the amount of two-dollar notes in circulation is $26,778, 738.20. Congress would, I think, act wisely in putting an end to their circulation. Nor do I hesitate to express the opinion that the country would be benefited if all flve-dollar notes should be gradually retired and the coinage of half and quarter eagles should be increased. If this should be done the circulating medium of the United States below $lO would be silver and.gold, and we should be following the example of France, in which there is an immense circulation of silver coin, which in all domestic transactions maintains a parity with gold. The substitution of gold and silver for small notes would be productive of some inconvenience, but this would be temporary only. If the five dollar notes should be withdrawn the Treasury would be relieved from the burden of silver in its vaults, and it would not be long before the coinage of silver might be resumed. In conclusion, the Secretary recommends that immediate action be taken by Congress relative to the basis of national bank circulation, now seriously threatened by the rapid call for bonds on which it is based, and that the system be continued substantially as it now is, except that the tax on circulation be repealed; that our sub’sidiary silver coins should be recoined and increased In weight; that the trade dollars should be purchased at a slight advance only upon their bulUmf value, and not at all unless presented within a year; and that additional vaults lor the storage of silver be constructed.