PRESIDENTIAL MIDWESTERN TOUR

            September 5, 1878

State Fair Grounds

St. Paul, Minnesota

 

FELLOW-CITIZENS OF MINNESOTA: I wish to make my sincere acknowledgments to the Governor of Minnesota, Governor Pillsbury, to the Mayor of St. Paul, Mayor Dawson, to the President of the Minnesota State Agricultural society, Mr. George Grench, and to those associated with them, and to the people of this State whom they represent, for their kind and generous welcome. I know very well that nothing I can do or say will be a fitting and adequate return for your kindness, but I earnestly desire to say something touching the material interests of the country which will tend at least to encourage those who need encouragement, and to give increased hope to those who are already hopeful.

The most interesting questions in public affairs which now engage the attention of the people of the United States are those which relate to the financial condition of the country. Since the financial panic and collapse five years ago, capital and labor and business capacity have found it hard to get profitable employment. We have had what is commonly and properly known as hard times. In such times men naturally ask, what can be done? How long is this stagnation of business to last? Are there any facts which indicate an early return to better times? I wish to ask your attention for a few minutes while I present some facts and figures which show a progressive improvement in the financial condition of the general government. It will be for you to consider what inferences may fairly be drawn as to their bearing on the question of a revival of business prosperity throughout the country.

The financial condition of the Government of the United States is shown by its debt, its receipts and expenditures, the currency, and the state of trade with foreign countries.

Let us consider the present state of the public debt.

The ascertained debt reached its highest point soon after the close of the war, in August, 1865, and amounted to $2,757,689,571.43. In addition to this, it was estimated that there were enough unadjusted claims against the government of unquestioned validity, to swell the total debt to $3,000,000,000. How to deal with this great burden was one of the gravest question which pressed for decision as a result of the war. It will be remembered that in important speeches and in the public press the opinion was confidently declared that the debt could never be paid; that great nations never did pay their war debts; that our debt would be like that of England—permanent, and a burden upon ourselves and our posterity for all time. Some advocated and many feared repudiation. There were those also who thought that a national debt was a national blessing. Fortunately, however, the eminent gentleman at the head of the Treasury, Mr. Hugh McCulloch, did not hold these views. He believed and the people believed, that the debt was not a blessing, but a burden, and that it ought to be and could be honestly paid. The policy adopted was to reduce the debt, and thereby strengthen the public credit, so as to refund the debt at lower rates of interest. And now I give you the results.

The debt has been reduced until now it is only $2,035,580,324.85. This is a reduction, as compared with the ascertained debt thirteen years ago, of $722,109,246.58. More than one-fourth of the debt has been paid off in thirteen years. If we compare the present debt with the actual debt thirteen years ago—placing the actual debt at $3,000,000,000—the reduction amounts to about $1,000,000,000 or one-third of the total debt. Thus it has been demonstrated that the United States can and will pay the national debt.

Encouraging as are these facts, they do not fully show the progress made in relieving the country from the burden of its war debt. All who have to borrow money to carry debts know the importance of the question of interest.

The total among of interest-bearing debt at the time it reached its highest point, the 31st of August, 1865, was as follows:

4 per cent. bonds ……………………………..           $618,127.98

5 per cent. bonds ……………………………..      269,175,727.65

6 per cent. bonds ……………………………..    1,064,712,279.33

7 3-10 U.S. notes ……………………………..       830,000,000.00

Compound-Interest notes, 6 per cent………….       217,024,160.00

Total interest-bearing debt ……………………    2,381,530,294.96

The total annual interest charge amounted to….      150,977,697.84

This was an oppressive burden. For interest alone we were paying more than double the total current expenses of the government in any year of peace prior to the war for the Union. With such a burden for interest, it is not strange that many believed that the debt could never be paid. But, as we have seen, a better opinion prevailed. Those who believed that by strengthening the national credit the rates of interest might be reduced were sustained by the public judgment. The ability and the purpose to pay the debt according to its letter and spirit were demonstrated. It was seen that the successful management of the debt depended on the rates of interest to be paid; that a reduction of one per cent. on our whole interest-bearing debt would be a yearly saving in interest of over twenty millions of dollars. That a reduction of two per cent. in the rate of interest would save to the country over $40,000,000, which is the interest at four per cent. on a thousand millions of dollars.

The policy of reducing the debt and thereby strengthening the public credit having been adopted, let us observe the result in the present condition of the public debt with respect to interest. The total interest-bearing debt, August 1, 1878, was as follows:

3 per cent. Navy-pension fund …………………………    $14,000,000

4 per cent. bonds ……………………………………….     112,850,000

4 ½ per cents ……………………………………………    246,000,000

5 per cents ……………………………………………...     703,266,650

6 per cents ……………………………………………...     733,561,250

Total present interest-bearing debt …………………...  1,809,677,900

The interest on which amounts to the sum of $95,181,007.50 per annum. It thus appears that in thirteen years the interest-bearing debt has been reduced from $2,381,530,296.96 to $1,809,677,900; a gain in the amount of the interest-bearing debt of $571,852,394.96.

The reduction of the annual interest charge is $55,796,690.34, or more than fifty per cent. of what we now pay. If the reduction of annual interest were placed in a sinking-fund at four per cent, interest it would pay off the whole debt in less than twenty-five years.

There has been another gratifying and important improvement in the state of the public debt. A few years ago our bonds were largely owned in foreign countries. It is estimated that in 1871 from $800,000,000 to $1,000,000,000 were held abroad. We then paid from fifty to sixty millions of dollars annually to Europe for interest alone. Now the bonds are mainly held in our own country. It is estimated that five-sixths of them are held in the United States and only one-sixth abroad. Instead of paying to foreigners fifty millions, we now pay them only about twelve or fifteen millions of dollars a year, and the interest on the debt is mainly paid to our own citizens. It appears from what has been shown that since the close of the war, since the panic of five years ago, there has been a great change in the condition of the debt. The change has been one of improvement.

1.      The debt has been greatly reduced.

2.      The interest to be paid has been largely diminished.

3.      And it is to be paid at home instead of abroad.

TAXATION

The burden of taxation has been reduced since1866, the first year after the war, as follows:

The taxes in 1866 were –

Customs …………………………………………. $179,046,651.58

Internal Revenue …………………………………   309,226,813.42

…………………………………………………  $488,273,465.00

The taxes in 1878 were –

Customs ………………………………………….. $130,170,680.20

Internal Revenue ………………………………….   110,581,624.74

                                                                                   $240,752,304.94

Reduction of taxation since 1866 …………………   240,521,160.06

Taxation the year of the Panic.

1873 Customs …………………………………… $188,089,522.70

Internal Revenue …………………………………   113,729,314.14

Total ……………………………………………… $301,818,836.84

1878 ……………………………………………….   240,752,304.94

Reduction since the panic …………………………    61,066,531.90

Expenditures.

The expenditures have been reduced since the end of the war as follows:

1867 – Expenditures including pensions and interest …… $357,542,675.16

1878 ………………………………………………………   236,964,326.80

Reduction of expenses ……………………………………   120,578,348.36

Expenditures the year of the Panic.

1873 ………………………………………………………. $290,345,245.33

1878 ……………………………………………………….   236,964,326.80

Reduction in five years ……………………………………     53,380,918.53

THE CURRENCY

The improvement in the currency since the close of the war has been very great. In 1865 the paper currency of the country consisted of –

Greenbacks………………………………………………………………………  $432,757,604

National bank notes ………………………………………………………………..    176,213,955

Fractional currency ……………………………………….......................................      26,344,742

Old demand notes …………………………………………………………………..          402,965

Treasury notes, compound-interest notes, and state-bank notes estimated ………  100,000,000

Total …………………………………………………………………………………$735,719,266

Its value was 32-100 on the dollar in coin, and its total value in coin was $509,099,595.19

In 1878 our paper currency consists of –

Greenbacks …………………………………………………………………….....$346,681,016.00

National-bank notes ……………………………………………………………….324,514,284.00

Fractional currency ………………………………………………………………... 16,547,768.77

Total ……………………………………………………………………………….687,743,168.77

Each dollar of paper currency is now worth ninety-nine and a half cents in coin, and the total value in coin of our paper currency is more than $684,000,000.

The value of the paper dollar is as stable as that of coin. Coin and paper are practically abreast of each other. The fluctuation in the value of the paper dollar has not in the last five months exceeded the fraction of a cent.

The total increase in the coin-value of our paper currency since 1864 is about $175,000,000.

Nothing connected with the financial affairs of the government is more interesting and instructive than the state of trade with foreign countries.

The exports from the United States during the year ending June 30,1878, were larger than during any previous year in the history of the country. From the year 1863 to the year 1873, the net imports into the United States largely exceeded the exports from the United States- the excess of imports ranging from $39,000,000 to $182,000,000.

During the years 1874 and 1875, the exports and imports were about equal. During the years ending June 30, 1876, ’77, ’78, however, the domestic exports from the United States greatly exceeded the net imports, the excess of exports increasing rapidly from year to year.

This is shown as follows:

Year ending June 30. (excess of exports over net imports)

1876 ………………………………………. $79,643,481

1877 ………………………………………. 151,152,094

1878 ………………………………………. 257,786,667

The total value of exports from the United States increased from $269,389,900 in 1868, to $680,683,798 in 1878; an increase of $411,293,898, or 153 per cent.

The following table shows the principal commodities the exportation of which has greatly increased during the last ten years:

Commodities.                          Year ending June 30-     1868.                1878.                 Increase.

Agricultural Implements ………………………….   $673,381        $2,575,198           $1,901,817

Animals, living ……………………………………     733,395          5,844,653             5,111,258

Bread and Breadstuffs …………………………….68,980,997       181,774,507        112,793,510

Iron and steel, manufactures of …………………… 6,389,429          12,084,048           5,694,619

Coal ………………………………………………..  1,516,220            2,359,467             843,247

Copper and brass, and manufactures of ……………     939,250           3,078,349          2,139,099

Cotton, manufactures of …………………………  4,871,054         11,435,628          6,564,574

Fruit ………………………………………………...      406,512           1,376,969            970,457

Leather, and manufactures of ……………………….  1,414,372           8,077,659         6,663,287

Oil-cake ……………………………………………..   2,913,448           5,095,163        2,181,715

Coal-oil and petroleum ……………………………… 21,810,676        46,574,974      24,764,298

Provisions …………………………………………… 30,278,253       123,549,986      93,271,733

Total ………………………………………………… $140,926,987    403,826,601   262,899,614

The total increase in the value of agricultural products exported from the United States in the year 1878 over the exports of the year ending June 30, 1868, amounts to $273,471,282 or 86 per cent.

This is shown as follows:

Domestic exports of agricultural products during the years ending June 30.

1868 …………………………………………………. $319,004,531

1878 ………………………………………………….    592,475,813

Increase ………………………………………………    273,471,282

Percentage of Increase ……………………………….      86 per cent

THE BALANCE OF TRADE.

The balance of trade against the United States in the five years before the panic was as follows:

1869 ……………………………………………………. $131,388,682

1870 …………………………………………………….     43,186,640

1871 …………………………………………………….     77,403,506

1872 …………………………………………………….    182,417,491

1873 …………………………………………………….    119,656,288

Total in five years ………………………………………    554,052,607

Or an average of over $110,000,000 a year.

As we have already seen, the balance of trade in the last three years in favor of the United States is $488,582,539 or an average of more than $160,000,000 a year. The balance of trade the last year, if compared with that of the two years next before the panic, shows a gain in favor of the United States, in one year, of over $4000,000,000.

It is not necessary that I should dwell on the importance of this favorable state of the balance of trade. Balances must be settled in cash – in the money of the world. The enterprises of our business-men reach out to all parts of the world. Our agricultural and manufactured products more and more seek and find their market in foreign countries. The commerce of all parts of the world, bound together more than ever before by steamships, railroads, and the telegraph, is so connected that it must be conducted on the same principles and by the same instruments by all who take part in it.

We cannot if we would, we should not if we could, isolate ourselves from the rest of the commercial world. In all our measures for the improvement of our financial condition we should remember that our increasing trade with South America and with the Old World requires that our financial system shall be based on principles whose soundness and wisdom are sanctioned by the universal experience and the general judgment of all mankind. With diminished and still diminishing public burdens of debt, expenditures, and interest, with an improved condition of currency and foreign trade, we may well hope that we are on the threshold of better times. But we must not forget that the surest foundation of a restored financial prosperity is a sound constitutional currency and unstained national credit.

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