Cyclopædia of Political Science, Political Economy, and the Political History of the United States

Edited by: Lalor, John J.
(?-1899)
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First Pub. Date
1881
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New York: Maynard, Merrill, and Co.
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1899
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Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
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UNITED STATES SURPLUS MONEY

III.281.1

UNITED STATES SURPLUS MONEY, Distribution of, among the States. The secretary of the treasury (Ingham), in his report to congress, in December, 1829, estimated that the revenues of the government for that year would amount, including the balance on hand on Jan. 1, to $30,574,666; and the expenditures to $26,164,595, of which $9,841,011 was on account of principal and $2,563,994 on account of interest of the public debt. He also estimated that the public revenue for the next five years would be such as to leave free for application to the payment of the public debt about twelve millions yearly. The amount of debt becoming due or payable during the next five years was $48,522,869. The surplus, after paying this indebtedness, would be twelve millions. The secretary did not favor a sudden change in the tariff, but recommended such gradual changes as would reduce the revenues to correspond with the existing expenditure. President Jackson, in his message to congress in 1829, said: "After the extinction of the public debt, it is not probable that any adjustment of the tariff, upon principles satisfactory to the people of the Union, will, until a remote period, if ever, leave the government without a considerable surplus in the treasury beyond what may be required for its current service. As, then, the period approaches when the application of the revenue to the payment of debt will cease, the disposition of the surplus will present a subject for the serious deliberation of congress, and it may be fortunate for the country that it is yet to be decided. Considered in connection with the difficulties which have heretofore attended appropriations for purposes of internal improvement, and with those which this experience tells us will certainly arise whenever power over such subjects may be exercised by the general government, it is hoped that it may lead to the adoption of some plan which will reconcile the diversified interests of the states, and strengthen the bonds which unite them. Every member of the Union, in peace and in war, will be benefited by the improvement of inland navigation and the construction of highways in the several states. Let us, then, endeavor to attain this benefit in a mode which will be satisfactory to all. That hitherto adopted has, by many of our fellow-citizens, been deprecated as an infraction of the constitution, while by others it has been viewed as inexpedient. All feel that it has been employed at the expense of harmony in the legislative councils. To avoid these evils, it appears to me that the most safe, just and federal disposition which could be made of the surplus revenue, would be its apportionment among the several states according to their ratio of representation: and should this measure not be found warranted by the constitution, that it would be expedient to propose to the states an amendment authorizing it. I regard an appeal to the source of power, in cases of real doubt, and where its exercise is deemed indispensable to the general welfare, as among the most sacred of all our obligations." It thus appears that President Jackson regarded as unconstitutional the appropriation of money for internal improvements by congress, and, in view of the anticipated surplus, suggested that its distribution among the states would enable them to make such improvements, without the assistance of congress. He intimated that such a distribution would be constitutional, but if there was any doubt on this point, an amendment would remove the difficulty.

III.281.2

—During the session of congress of 1829-30, the duties on tea, coffee, cocoa, salt, and also on tonnage, were reduced, but the reductions were not sufficient to exhaust the surplus after the debt then maturing should be paid. In his message for December, 1830, President Jackson referred to this subject as follows: "In my first message I stated it to be my opinion that it is not probable that any adjustment of the tariff, upon principles satisfactory to the people of the Union, will, until a remote period, if ever, leave the government without a considerable surplus in the treasury beyond what may be required for its current services. I have had no cause to change this opinion, but much to confirm it."

III.281.3

—The secretary of the treasury, in his report for 1832, says: "After Jan. 1, 1833, no part of the public debt, except the remaining fragments of the unfunded debt, of which only small portions are occasionally presented, will be redeemable before the following year; and, though there will be in the treasury during the year ample means to discharge the whole debt, they can be applied only to the purchase of stock at the market prices." The whole public debt was virtually extinguished by Jan. 1, 1835, on which date the balance of available funds in the treasury was $5,586,282. It was estimated that for the year 1835 the receipts from all sources would be twenty millions: but the actual receipts were $35,430,087, receipts from the sale of the public lands during that year having greatly increased. In 1834 these receipts were only $4,857,600, but in 1835 they were $14,757,600. The receipts from the sales of public lands in 1834-5-6 were $44,492,381, and the total receipts from this source, from 1796 to 1834, had been but $44,595,000. The balance left in the treasury at the beginning of the year 1833, was $2,011,777; in 1834, $11,702,905, in 1835, $8,892,858, and on Jan. 1, 1836, $26,749,803.

III.281.4

—In view of this large balance, and its probable large increase by Jan. 1, 1837, the act of June 23, 1836, was passed, authorizing the distribution of the surplus among the states. As has been seen, this method of disposing of the surplus was favorably suggested by President Jackson in his message for 1829, and again indorsed by him in his message for 1830. In 1836, however, the views of the president appear to have changed. Secretary Woodbury, in his report for 1835, disapproved of the distribution of the surplus among the states, intimating that it was unconstitutional. He said: "The people themselves, it is believed, can best manage all their own money, which they and their representatives think may not be wanted for public purposes; and it would seem to be far preferable to leave it originally in their possession, than to withdraw it for the expensive operation of returning it substantially to the place whence it came, and that probably in a manner not conformable to the constitution, till after the delay of procuring an amendment to it; and even then not expedient, because calculated injudiciously to strengthen the general government, and to render the states more dependent on a great central power for yearly and important resources. Indeed, a reduction in the price of public lands, whose unusually large sales the past year are the source of most of the present surplus, would, if their sales should not thereby be much increased, seem another mode far more natural to obviate the present difficulty. But, before adopting it, this and various other considerations must be weighed, and it must be fully considered whether all the revenue anticipated from them at their present prices would not be necessary, after the great reductions in the tariff in 1842, and whether a resort to a higher tariff would not then become indispensable, if the average receipts from lands or customs should, from any new legislation, become then much diminished below the estimates which have been submitted on the present occasion." This change in the opinion of the administration from 1829 to 1836 was probably owing to the hostility of the president to the bank of the United States, resulting in the veto of the bill for renewal of its charter on July 10, 1832, and the removal of the United States deposits from the bank by order of the secretary of the treasury of Sept. 26, 1833. (See BANKING IN THE UNITED STATES.)

III.281.5

—In 1835 and 1836 the revenues of the government were deposited with the state banks, the favorites of the administration, and the distribution of the surplus at this time among the states would have deprived these banks of the deposits. In his message to congress of 1836, after the passage of the act of June of that year, regulating the public deposits, and providing at the same time for the distribution of the surplus in the treasury on Jan. 1, 1837, President Jackson said: "Without desiring to conceal that the experience and observation of the last two years have operated a partial change in my views upon this interesting subject, it is nevertheless regretted that the suggestions made by me in my annual message of 1829 and 1830 have been greatly misunderstood. At that time the great struggle was begun against that latitudinarian construction of the constitution which authorizes the unlimited appropriation of the revenues of the Union to internal improvements within the states, tending to invest in the hands, and place under the control, of the general government, all the principal roads and canals of the country, in violation of state rights, and in derogation of state authority. At the same time the condition of the manufacturing interest was such as to create an apprehension that the duties on imports could not, without extensive mischief, be reduced in season to prevent the accumulation of a considerable surplus after the payment of the national debt. In view of the dangers of such a surplus, and in preference to its application to internal improvements, in derogation of the rights and powers of the states, the suggestion of an amendment of the constitution to authorize its distribution was made. It was an alternative for what were deemed greater evils—a temporary resort to relieve an overburdened treasury, until the government could, without a sudden and destructive revulsion in the business of the country, gradually return to the just principle of raising no more revenue from the people, in taxes, than is necessary for its economical support. Even that alternative was not spoken of but in connection with an amendment of the constitution."

III.281.6

—In the meantime Jackson, in his attack on the bank of the United States, had been bitterly opposed by Clay, Calhoun, Webster, and a majority of both houses of congress, by whom many of his acts were regarded as an exercise of arbitrary power. In his first message in 1829 he recommended that the bank of the United States should not be rechartered. In January, 1832, the bank's memorial for recharter was presented both in the house and senate, and, after some debate, the bill for the recharter passed both houses. This bill was vetoed, on July 10, by the president, and the recharter of the bank was made one of the issues of the campaign of 1832. Henry Clay was defeated, and Jackson reelected, and the latter claimed that the result was an indorsement of his policy against the bank.

III.281.7

—During the summer of 1832, Jackson, as a measure of hostility against the bank, conceived the project of the removal of the United States deposits. Benton, in his "Thirty Years' View," (vol. i., p. 377), says: "General Jackson was not the man to tolerate these illegalities, corruptions and indignities. He therefore determined on ceasing to use the institution any longer as a place of deposit for the public moneys; and accordingly communicated his intention to the cabinet, all of whom had been requested to assist him in his deliberations on the subject. The major part of them dissented from his design; whereupon he assembled them on the 22d of September, and read to them a paper containing his views on this subject. This paper concludes as follows: 'Under these convictions he feels that a measure so important to the American people can not be commenced too soon; and he therefore names the first day of October next as a period proper for the change of the deposits, or sooner, provided the necessary arrangements with the state banks can be made.' "

III.281.8

—Secretary Duane refused to carry out the wishes of the president without a previous reference to congress. Roger B. Taney, then attorney general, was made secretary of the treasury, and issued the order for removal of the deposits on Sept. 26, 1833. The opponents of the administration, looking at the surplus revenue, regarded the propositions made for distribution of the surplus among the states favorably, as tending to deprive the president of a portion of an immense patronage.

III.281.9

—The deposit of the public money in the pet banks had been followed by great financial distress, continuing during the year 1834; and previous to and during that year propositions were frequently made in the public press for distribution of the surplus revenue among the states as a measure of relief. These propositions were first in the form of a distribution of the revenue from public land, then a distribution of the public lands themselves, and finally the distribution of both land and customs revenues.

III.281.10

—During the session of 1835, on motion of Mr. Calhoun, a select committee, consisting of Calhoun, Webster, Benton, Bibb, Southard and King, were appointed to inquire into the extent of executive patronage, the increase of public expenditures, and the number of persons employed or fed by the executive government. The committee assumed that there would be an annual surplus of nine millions for the next eight years. It regarded the disposal of this surplus as a problem to be solved with great difficulty, but one which was important to determine, lest the executive should greatly increase his power by depositing the public funds with the favorite banks. The committee accordingly "reported a resolution so to amend the constitution that the money remaining in the treasury at the end of each year till Jan. 1, 1843, deducting therefrom the sum of $2,000,000 to meet current and contingent expenses, shall annually be distributed among the states and territories, including the District of Columbia; and, for that purpose, the sum to be distributed to be divided into as many shares as there are senators and representatives in Congress, adding two for each territory and two for the District of Columbia; and that there shall be allotted to each state a number of shares equal to its representation in both houses, and to the territories, including the District of Columbia, two shares each. Supposing the surplus to be distributed should average $9,000,000 annually, as estimated, it would give to each share $30,405, which, multiplied by the number of senators and representatives from a state, will show the amount to which any state will be entitled." This resolution was opposed by Benton, who represented the administration in the senate. He argued that the customs revenues could be largely reduced by changes in their methods of collection; that the revenues from the sale of land could be made to disappear by selling these lands at nominal prices to the people. If, after this, there should still be a surplus, he advocated its use in the construction of fortifications to protect the coasts and frontiers of the country. The proposition of the committee to amend the constitution to authorize the distribution was never brought to a vote. In the spring of 1836, the following paragraph appeared in the "Philadelphia National Gazette": "The great loss of the bank has been in the depreciation of the securities, and the only way to regain capital is to restore their value. A large portion of them consists of state stocks, which are so far below their intrinsic worth that the present prices could not have been anticipated by any reasonable man. No doubt can be entertained of their ultimate payment. The states themselves, unaided, can satisfy every claim against them; they will do it speedily, if congress adopt the measures contemplated for their relief. A division of the public lands among the states, which would enable them all to pay their debts, or a pledge of the proceeds of sales for that purpose, would be abundant security. Either of these acts would inspire confidence, and enhance the value of all kinds of property."

III.281.11

—A bill for the distribution of the revenues was introduced in the senate, and supported both by Mr. Clay and Mr. Webster. It was opposed by Mr. Benton, who introduced an antagonistic bill devoting the surplus revenues to public defenses. The bill passed the senate by a vote of 25 to 20. Being sent to the house for concurrence, it became evident that it could not pass that body, as a majority of its members regarded the project in its form of a distribution as unconstitutional. The friends of the measure in the senate determined to change its form so as to remove the difficulty. Instead of a distribution it was to be a deposit, and the faith of the states was to be pledged to the return of the money.

III.281.12

—There was another bill in the senate for regulating the deposit of public moneys with the state banks, and the proposition in the form of a deposit with the states became sections thirteen and fourteen of this bill, which passed with only six dissenting votes. It passed the house by a large majority, 155 to 38. In the form of distribution it had no chance of passing the house. "It was approved by the president," Benton says, "but with a repugnance of feeling and a recoil of judgment which it required great effort of friends to overcome." Probably, if he had returned it with his veto, it would have had two-thirds of each house in its favor.

III.281.13

—The following is a copy of the 13th and 14th sections of the act of June 23, 1836: "An act to regulate the deposits of the public money. Section 13. That the money which shall be in the treasury of the United States, on the first day of January, eighteen hundred and thirty-seven, reserving the sum of five millions of dollars, shall be deposited with such of the several states, in proportion to their respective representation in the senate and house of representatives of the United States, as shall, by law, authorize their treasurers, or other competent authorities, to receive the same on the terms hereinafter specified; and the secretary of the treasury shall deliver the same to such treasurers, or other competent authorities, on receiving certificates of deposit therefor, signed by such competent authorities, in such form as may be prescribed by the secretary aforesaid; which certificates shall express the usual and legal obligations, and pledge the faith of the state for the safe keeping and repayment thereof, and shall pledge the faith of the states receiving the same, to pay the said moneys, and every part thereof, from time to time, whenever the same shall be required by the secretary of the treasury, for the purpose of defraying any wants of the public treasury, beyond the amount of the five millions aforesaid: Provided, that if any state declines to receive its proportion of the surplus aforesaid, on the terms before named, the same shall be deposited with the other states, agreeing to accept the same on deposit in the proportion aforesaid: And provided, further, that when said money, or any part thereof, shall be wanted by the said secretary, to meet appropriations by law, the same shall be called for, in ratable proportions, within one year, as nearly as conveniently may be, from the different states with which the same is deposited, and shall not be called for, in sums exceeding ten thousand dollars, from any one state, in any one month, without previous notice of thirty days for every additional sum of twenty thousand dollars which may at any time be required. Section 14. And be it further enacted, That the said deposits shall be made with the said states in the following proportions and at the following times, to wit: one-quarter part on the first day of January, eighteen hundred and thirty-seven, or as soon thereafter as may be; one-quarter part on the first day of April, one quarter part on the first day of July, and one quarter part on the first day of October, all in the same year."

III.281.14

—In his message for December, 1836, President Jackson objected to the method of distribution provided in the law, viz., according to representation, and advocated a method founded on the population of each state.

III.281.15

—On Jan. 1, 1837, the surplus in the treasury, after reserving the five millions required by law, was $37,468,859.97, and the apportionment among the several states is shown by the following table:

Table.  Click to enlarge in new window.

III.281.16

The table on preceding page, with the exception of the last column, is copied from the report of Mr. Woodbury to congress, of January 3, 1837.

III.281.17

—It will be noticed, that, by the law authorizing the deposit of the surplus, each state was required to authorize its treasurer by law to receive the deposit and to give certificates of deposit therefor. The necessary forms for carrying out this plan were prepared by the secretary of the treasury, and may be found in Ex. Doc. and Reports of Committees, 1st Sess. 25th Congress, Doc. No. 30.

III.281.18

—All of the states named in the foregoing table of apportionment passed laws authorizing the receipt of the deposit, and some took the opportunity of instructing their representatives to protest against, or to endeavor to obtain changes in, some of the features of the law. The legislature of the state of New Hampshire, by resolution, declared that any distribution of surplus was unconstitutional. They instructed their delegates to vote for a reduction of revenue and against any measure for relinquishment, by the United States, of the sums on deposit with the states. The legislature of the state of Indiana requested its senators and representatives to use their exertions to procure the passage of an act of congress for the relinquishment on the part of the United States of all claims of surplus revenue deposits under act of June 23, 1836. These resolutions show conclusively that these states regarded the money received as a deposit to be likely to be recalled, and not as a gift.

III.281.19

—The first three installments were paid to the states as nearly as possible on the following dates, viz.: one-fourth on Jan. 1, 1837, one-fourth on April 1, and one-fourth on July 1, following. The sums were paid by transfers from the deposit banks. On Nov. 1, 1836, the secretary of the treasury notified the banks of the requisition which would be made upon them to meet the installments due, on Jan. 1, to the several states. On Feb. 18, 1837, he gave similar notification in reference to the next three installments. Forms of the letters sent to each of the deposit banks are given, also, in Document 30, Sept. 26, 1837, before referred to. The installments payable on Jan. 1, April 1, and July 1, were transferred to the states on or near those dates. They amounted in all to $28,101,645, and proportionate amounts were deposited with and receipted for by each state.

III.281.20

—In May, 1837, the financial pressure became so great that the banks generally suspended specie payments. The fifth section of the act of June 23, 1836, for regulating deposits of public money, provided that no bank shall be selected or continued as a place of deposit of public money which shall not redeem its notes and bills on demand in specie. On May 1, 1837, the number of the deposit banks was 88, distributed by states as follows:

Maine... 8
New Hampshire... 4
Vermont... 2
Massachusetts... 6
Connecticut... 3
Rhode Island... 2
New York... 16
South Carolina... 2
Georgia... 3
Alabama... 1
Mississippi... 2
Louisiana... 2
Tennessee... 2
New Jersey... 3
Pennsylvania... 8
Delaware... 2
Maryland... 2
District of Columbia... 1
Virginia... 3
North Carolina... 1
Kentucky... 7
Ohio... 9
Indiana... 1
Illinois... 1
Michigan... 2
Total... 88

III.281.21

The number of deposit banks on Nov. 1, 1836, was 89. Their capital was $77,576,449; United States deposits, $49,377,986; other deposits, only $26,573,479.*149

III.281.22

—The difficulties arising from the necessity of discontinuing as public depositories those banks which refused to pay specie, made it apparent that it would be very inconvenient, if not impossible, to transfer the fourth installment of the deposit with the states. Further legislation was deemed necessary in this emergency, and an extra session of Congress was called by President Van Buren. Congress met on Sept. 4. Among other reasons for the extra session, the president in his message mentioned, that "questions were also expected to arise in the recess in respect to the October installment of those deposits, requiring the interposition of congress."

III.281.23

—Secretary Woodbury, in a report made on the safe keeping of the public moneys, on Sept. 23, in answer to a resolution of the house of representatives, said. "This last mode [viz., deposit with selected state banks] ceased by operation of law during the last spring, except in relation to five or six deposit banks which have continued to redeem their notes in specie. The direct losses sustained under it appear to be large. But, in the end, they are not considered likely to amount to anything, though the disappointments, delays and injuries under it, must, it is manifest, in several cases be great. The indirect losses to the public creditors and contractors have been considerable, and are difficult to be computed." From this it will be seen that only six out of the eighty-eight banks designated as public depositories on May 1, could be used as such in September.

III.281.24

—Benton says, in relation to these payments: "The deposit with the states had only reached its second installment when the deposit banks, unable to stand a continued quarterly strain of near ten millions to the quarter, gave up the effort, and closed their doors. The first installment had been delivered on Jan. 1, in specie or its equivalent; the second in April, also in valid money; the third one, demandable on July 1, was accepted by the states in depreciated paper; and they were very willing to receive the fourth installment in the same way."

III.281.25

—The secretary's report shows that there would be a deficiency in the revenues to meet expenditures of over ten millions of dollars, which would render it necessary either to recall some of the money deposited with the states, or to postpone the payment of the fourth installment due on Oct. 1. The secretary mentioned the inconvenience of paying the fourth installment, arising from the difficulty of transferring from the west and southwest, where the money received from sales of public lands had accumulated. The lack of revenue was his principal reason for urging the withholding or postponement of the fourth installment. Believing the money would be immediately necessary to the government, he thought it would be less inconvenient to withhold payment than to pay and immediately recall.

III.281.26

—On Sept. 11, 1837, Mr. Silas Wright, from the senate committee on finance, reported a bill which provided "that the transfer of the fourth installment of deposits directed to be made with the states, under the thirteenth section of the act of June 23, 1836, be and the same is hereby postponed until further provision by law." The bill was brought up for consideration on the 14th, when he said, that, according to the report of the secretary of the treasury of the 28th ult., there was then in the treasury subject to draft, available and unavailable, but $8,100,000. If the expenses of the month of September were deducted, which were estimated at two and a half millions, there would be in the treasury, subject to draft on Oct. 1, less than six millions without the transfer of a dollar to the states toward the October installment. If the October installment was to be transferred to the states, all the means in the treasury on the day when that installment was made transferable would not be equal to two-thirds of the amount, and money must be borrowed upon the credit of the United States to supply the deficiency. The largest portion of the funds in the treasury was wholly unavailable; they were in the western and southwestern banks, and experience had already shown, that the drafts of the treasurer upon these banks would not be received in payment by the public creditors, neither would the states, other than those in which the banks were located, take these drafts, and give their obligations for a repayment of the amount in money in pursuance of the provisions of the deposit law. The transfer to the states, therefore, could not be made, even to the amount of the funds in the treasury subject to draft, by reason of the character of the funds to be drawn upon. The whole means in the treasury on the first day of October next would be from three and a half to four millions less than the transfer required. If congress should insist upon this transfer, it must authorize a loan of money upon the public credit in order that that money when loaned, may be deposited with the states for safe keeping. Mr. Webster thought that it was a mere question of convenience, the distributed money would go to all the people, and any deficiency in the treasury must be supplied by all the people. He thought the most convenient way was to pay the installment, and provide for the necessities of the treasury by other means. Mr. Preston opposed the bill on the ground that many states had already appropriated the money, and had undertaken public works on the strength of it, etc. Mr. Crittenden, of Kentucky, opposed it on the same ground. By other senators the deposit act was treated as a contract which the United States was bound to carry out. Mr. Buchanan proposed an amendment, the effect of which, it was urged, was to change the character of the deposit act and make it a distribution measure. By the act it was the duty of the secretary of the treasury to call for a return of the deposit when needed by the federal treasury. The amendment superseded this, and enacted that the deposits should remain until called for by congress. Mr. Niles pointed out the effect of this amendment. He said the majority of those who voted for the deposit act did so because it was a deposit and not a distribution, and merely withdrew the public moneys from the banks and deposited them with the states. The amendment would change the deposit to a loan, or, more properly, a grant, to the states. Mr. Buchanan's amendment, however, passed by a vote of 32 to 12, and thus the recall of the deposits already made was taken from the hands of the secretary and placed with congress.

III.281.27

—In the house of representatives the disposition to regard the deposit act as a contract was even stronger than in the senate. Mr. Caleb Cushing argued that it had all the features of a contract, that it was a "contract of deposit." It was a contract in honor, and, as far as there could be a contract between the United States and the states, a contract in law. On the other hand, it was argued very forcibly that neither in honor not in law was there any reason for paying the fourth installment when there was no surplus in the treasury. Mr. Halsey, on the same side, said, "In reference to the deposit act, if a contract, it was a contract based alone upon the distribution of an existing surplus, not wanted for the ordinary or extraordinary expenditures of the government. The structure was reared upon that rock, and was so understood at the time the statute was enacted. The money to be distributed was out of a surplus fund. Where was there a surplus fund? There was none." The opponents of the bill, apart from the argument of contract, mainly founded their arguments on the fact that the states had been induced to undertake public works and other engagements by the promise of the money, and the inconvenience to which they would be put by withholding the fourth installment. It was justly observed by their opponents, that the states should have regulated their action by the actual terms of the law of congress, to which they agreed when they accepted the deposits. The opposition to the bill was persistent, the debate was long, and many members were participants, among whom were Adams of Massachusetts, Fillmore and Sibley of New York, Bell of Tennessee, and Wise of Virginia. It finally passed the house by the close vote of 119 to 117. A motion to reconsider was made by Mr. Pickens, and carried. On reconsideration, Mr. Pickens moved to amend so that, instead of postponing the payment indefinitely until further action by congress, it be postponed to Jan. 1, 1839, a day certain. This amendment was agreed to and concurred in by the senate, and the bill finally passed in that form.

III.281.28

—The effect of the postponement of the payment to a fixed day has been held by some to bind the United States to such a payment; and the making the withdrawal of the first three installments received by the states dependent on an act of congress, has, by the same kind of construction, been regarded by some as altering what was originally a deposit to a gift.

III.281.29

—As Jan. 1, 1839, approached, it became apparent that there would be no funds in the treasury available for the deposit of the postponed installment. The secretary of the treasury, in his report for December, 1838, stated that the available balance on Jan. 1, 1839, would be $2,765,342 only, and at the date of the report the treasury notes outstanding amounted to over $7,754,560. He said, "It will be perceived by these statements that no surplus balance will probably exist either on Jan. 1, 1839, or during that year, to be deposited with the several states for safe-keeping as a fourth installment under the deposit act of June 23, 1836." Since Jan. 1, 1839, there has never been a time when the United States had in its treasury a surplus over and above all its debts and estimated expenditures. The amount deposited in the first three installments with the states, has always been carried as funds of the treasury unavailable; and, under the terms of the acts relative to its deposit, it could now be recalled at any time by an act of congress.

III.281.30

—General John A. Dix, secretary of the treasury, in a letter to the chairman of the committee on ways and means, of Jan. 18, 1861, called attention to the fact that "there are deposited with twenty-six of the states, for safe-keeping, over twenty-eight millions of dollars belonging to the United States, for the payment of which the promise of these states is pledged by written instruments on file in this department. The annual statement of receipts and expenditures for the year ending June 30, 1860, represents this amount as part of 'the balance in the treasury' on that day. * * I refer to this final resource as an available one, should the public exigencies demand it. It is not doubted that the greater portion of the amount so deposited would be promptly and cheerfully paid should an exigency arise involving the public honor or safety. If, instead of calling for these deposits, it should be deemed advisable to pledge them for the repayment of any money the government might find it necessary to borrow, loans contracted on such a basis of security, superadding to the plighted faith of the United States that of the individual states, could hardly fail to be acceptable to capitalists." (See UNITED STATES NOTES.)

III.281.31

—It is easy to see that there can be no constitutional authority for the claim that this money, already in the possession of the states, irrevocably belongs to them, since, according to the constitution, it is still in the treasury of the United States. The only method of taking money out of the treasury is by an appropriation by congress, upon which the secretary of the treasury is authorized to issue his warrant, and no such method was ever adopted in relation to this money. The whole object and intention of the act was to deposit the surplus, not distribute it, as it has been seen that a distribution act was known at the time to be unconstitutional. Upon the delivery of the money the treasurer of each state gave to the United States, not a receipt, but a certificate of deposit, subject to the future requisition of the government. The amount of the deposit has always been held among the "unavailable funds of the treasury," and is annually so reported among other like funds, as may be seen by reference to page 383, Finance Report, 1882, and previous reports. But whether a deposit or a distribution, no constitutional method has been taken to authorize the payment of the money out of the treasury. Moreover, it was a deposit of surplus and surplus only, and when the surplus did not exist was suspended by act of congress until a certain date; and, when at that date there was still no surplus, the deposit was again withheld by the executive, and, on the same principle, has been withheld ever since. Congress at any time can authorize the withdrawal of the whole amount from the states, and it doubtless could authorize the perpetual withholding of the fourth installment in view of the fact that at some time in the future, after the national debt is paid, there may be a surplus similar to that which existed Jan. 1, 1877.

III.281.32

—Benton, in his Thirty Years' View, thus refers to the use made of the deposits by the different states: "All sorts of plans were proposed for the employment of the money; and combinations, more or less interested or designing, generally carried the point in the universal scramble. In some states a pro rata division of the money per capita was made; and the distributive share of each individual, being but a few shillings, was received with contempt by some, and rejected with scorn by others. In other states it was divided among the counties, and gave rise to disjointed undertakings of no general benefit. Others, again, were stimulated, by the unexpected acquisition of a large sum, to engage in large and premature works of internal improvement, embarrassing the state with debt, and commencing works which could not be finished."

III.281.33

—A claim has been made within a few months (1884) upon the secretary of the treasury, under authority of an act passed by the legislature of the state of Virginia for the deposit of the amount of the fourth installment ($732,809,33) under the act of June 23, 1836. A similar claim has also been made by the treasurer of the state of Arkansas, through Senator Garland of that state, to which the secretary replied, on Oct. 8, 1883: "I find that the tradition of this department for over a dozen years has been to consider that act as obsolete, or at least not imperatively effective during a season of large public federal indebtedness. I can for the present follow in the path of my predecessors in the office of the secretary of the treasury. It is not improbable that I may ask the attention of congress to the matter in the next annual report from this department."

JOHN JAY KNOX.


Notes for this chapter


For statement of resources and liabilities of these banks see Report of Comptroller of the Currency, 1876, p. 43.

Footnotes for UNIVERSITIES

End of Notes


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