28 DECEMBER 1861, Page 7



EUROPE is not unaccustomed to gigantic national debts ; indeed, accumulating deficits, huge expenditure, and small revenues are the normal phenomena here. We have only just left off wondering at the uncomfortable scrape into which the imperial system has plunged France ; Austria is sounding the depths of profound embarrassments under the eye of-national criticism for the first time ; Italy is adding millions annually to her obligations, though with a moderate, well-restrained, and well-considered audacity. Russia is still probably far from the time when she could resume specie payments for her paper-money. England herself retains the memory of transactions of two generations back, which pre- vent her from assuming an attitude of anything like financial prudery in criticizing great expenditure and enormous leans. But even keeping all these things in view, we must say that America does everthing on a grand scale. "Grand," is the favourite word of her orators, and we fear will soon be a favourite word with her financiers. Like her mountains and lakes, which American travellers so often compare quantitatively with the trifling efforts of Nature on this side of the Atlantic, it seems that her debt will also be at once Titanic and sudden—perhaps thrown up by a single convulsion. Certainly, the style in which she is now plunging into these European experiences, is "terrible and grand" beyond the measure of all that Europe has ever known, except during the worst spasm of French revolution. Even in our bitterest crisis of war and debt, there was nothing ap- proaching to. the same scale. The style in which the Northern Government now handles fabulous millions is positively amaz- ing ; though, granting the sensitive and wilful democracy with which it has to deal, and the wasteful official system which has so long been fostered there, we do not know that the Northern Government is very greatly in fault. But one great and almost fatal blunder Mr. Chase and his colleagues have obviously made. They are quite blind to the chronic and wearing character of the struggle on which they have entered, and, like imprudent wrestlers, are spending their whole reserve of force on the very first onset. Mr. Chase is already resorting to a kind of budget, which might possibly be excused in the last year of a great war, when it seemed certain that a single final effort would conclude the struggle ; but, certainly, not a moment sooner. The Budget he presented to Congress is the Budget of a desperate states- man using his last expedients for one tremendous effort; and this in the first year of war, which—if it is to terminate with any result more favourable to the North than could at present be easily secured—must probably be carried on with stern patience, fortitude, and self-sacrifice for several years. The key-note of the budget is the following sentence : "It is earnestly to be hoped, and, in the judgment of the Secretary, not without sufficient grounds, that the present war may be brought to an auspicious termination before Midsummer. In that event, the provision of revenue by taxation, which he has recommended, will amply suffice for all financial exigencies, without resort to additional loans ; and not only so, but will enable the Government to begin at once the reduction of the existing debt."

Now, though Mr. Chase will not quite allow himself to build upon this hope and puts frankly before Congress the contingency of one other year of war almost as expensive, still all his proposals all his calculations are made on the assump- tion of a very short war; for the expedients he proposes are of a nature which, once exhausted, it would be simply impos- sible to repeat. Instead of so far limiting the expenditure, that the same expenditure could be repeated for a consider- able series of years with increasing efficiency, Mr. Chase- makes proposals which must, we fear, utterly exhaust the North in one year, if not in less time, and oblige it to risk everything on the first campaign of its untrained and inex- perienced troops. This is a fatal error. The net result is this, that while Mr. Chase proposes to- expend the gigantic sum of 122 millions sterling (543 million, dollars), the revenue of the year will reach 12 millions sterling - at most, or zbout ten per cent, of the expenditure, while all the rest must be paid by loans. In other words, after raising by taxation the sum due for interest on the amount to be borrowed, he will have about five millions sterling left over to spend directly for the public service, on which he must actually spend one hundred and fifteen millions. This looks ugly enough, nor does the consideration of the details tend to make it look less so. Turning Mr. Chase's figures from dollars into English money, the expenditure of the year ending on the 30th June, 1862, of which only half has as yet expired, and only a quarter has been actually tested by ex- perience, is as follows : First quarter's actual expenditure 222,100,000 Last three quarters, so far as at present authorized 67,900,000 Additional appropriations now asked for 32,200,000 Total 2122,200,000 Of this sum only 44,370,0001. has been already raised by loan, and about 12,000,000/. is expected from revenue within the year—provisionally on certain changes proposed by Mr. Chase—of which a proportion comparatively very small (little more than a million and a half sterling) was paid in the first quarter. We cannot, therefore, by any means consider even this twelve millions of revenue safe, indeed barely probable, as some of it is to come from raised cus- toms duties on tea, coffee, and sugar, and part from a very doubtful direct tax. This leaves about 65,000,0007. to raise, even granting this far from certain twelve mu- lions; and it will be seen that, even if we further grant Mr. Chase's assumption that from various minor sources he can make up three millions sterling more,no less than 62,000,000/. have yet to be extracted within the year from some source other than taxation, and this in the same financial year in which with great difficulty forty-four millions sterling have already been extracted from the money market—a truly formidable prospect ! Mr. Chase had already in the previous session received power to raise about 17,000,000/. of this by loan, funded or unfunded, a power which he has yet to endeavour to exercise. He asks the Congress just assembled for instructions on the very perplexing point how he is to get the 45,000,000/. still wanting for the current year, even supposing this 17,000,000/. can be obtained. In such a wilderness of missing millions no wonder the imagination is confused. Mr. Chase's suggestions are not very hopefuL He thinks something may be got by confiscating rebel property in the North—and the South when they get there. But this refreshing device affords him naturallybut little relief. The only real expedient he is able to suggest is raising a fresh sum by substituting United States paper currency for the various paper currencies of the many Banks and States now issuing paper of their own. He says he is anxious to substi- tute this central currency gradually for such various curren- cies, taking security in the form of deposit of United States Stock, and adequate provisiou of specie. Now of course the safety of such a step, all depends on the detailed caution with which it might be worked out. There is nothing in it that would not be intrinsically defensible, if it were a monetary reform in times of peace and wealth. But considered as an expedient for raising an urgent loan, the step must be re- garded as an act of bankruptcy. In the most tranquil times, the substitution of a single Government currency for a vast number of different local circulations, would be an anxious and difficult step. But to take it when the Government is urgently in need of money, is to ensure over-issue, and a consequent depreciation of the currency of the Northern States. The whole paper circulation • of the Union only amounts, according to Mr. Chase, to about 200,000,000 dollars, or about 45,000,000/. sterling, of which a quarter—say 11,000,000/. sterling—is in disloyal States. it therefore, the whole paper circulation of the loyal States were absorbed by the Government within the year—manifestly impossible—Mr. Chase would not get his required sum, and he would have resorted to that last and most fatal expedient which engenders too surely the tempta- tion to an over issue of Government paper. We fear the time is not far distant when the Northern Government, in spite of its superiority in resources, will have recourse to Mr. Jefferson Davis's desperate expedient of issuing uncon- vertible paper. Nor would the effect on the Northern States be nearly so little injurious as it is in the South. Where commerce and money operations are in a primitive state, a little depreciation of the currency, though of course in- jurious, is not so much so as might be anticipated. In a highly organized commercial community, where fixed money and time bargains are very numerous and complicated, any depreciation of the currency will have a most fatal effect in aiding debtors and injuring creditors. In a word, Mr. Chase is beginning to play with a kind of edged tool that will terribly endanger the great mercantile community which is his sole support in this crisis.

Still if the tremendous and unparalleled expenditure of 122,000,0001. in a single year is to be sanctioned at all, we do not know that Mr. Chase has any choice as to how he will do it. As regards taxation, a united nation, really governed i by thoughtful leaders, might do something more n the way of immediate sacrifice. But we doubt whether anythine more could be extracted from the reckless and ignorant d:- inocracy which appoints Congress. Mr. Chase already look's to raise from the loyal States as much in a year of war and general depression as was extracted from the whole Union (including the eleven disloyal and three doubtful states) ia times of prosperity and peace. In 1859, for example, with the Union still unbroken, 12,000,000/. was the total Federal revenue from all sources. For such a democracy as that of the North to raise the same sum in evil times from an area very much diminished, is perhaps as much as could be rationally expected. The utter desperateness of American finances will scarcely be understood without some comparison with our own ex- penditure and resources at the most desperate era of modern British finance. Let us take the English expenditure and resources in the most costly year of the great French war, and compare them with those of the North at the present moment. Take 1815, the year of our greatest expenditure, as the term of comparison with the present American budget. In round numbers it was as follows :



Navy. Army. Ordnance. Miscellaneous. Total. 1815. £75,300,000 I E22,000,000 1 £33,700,000 1 Z.4,400,000 I £66,200,000 I 4126,000,000 00300,000

And the loan of the year was 36,000,0001. In the following year, and once previously (in 1798), we had borrowed as much as 39,000,000/., but the average annual loan during this period was very much smaller, about twenty-six millions, and this in a country which, as we see, could, in its worst and last year of war, raise by revenue twice as much as it raised by loan. Now compare with this the resources and expenditure of the North in its first, and therefore most favourable year. Mr. Chase has unfortunately not given us distinct estimates for the different services in his published report for 1861-62, but as he has done so for 1862-63, if the war last, though he has calculated them less in amount than for the year now current, we may compare this estimate with our budget of 1815, remembering that it is much more favourable than the actual experience of the present year. Mr. Chase's estimate is for the second year of war: Revenue. Civil War. Navy. Interest on Deficit.

Expenses. Debt.

.821,000,000 £5,000,000 l £81,000,000 f £10,000,000 I £2,500,000 I £86,000,000 Remembering that this is, beyond all probability, a very hopeful estimate, in which the expenditure is suppoeed to be diminished from 122,000,0001. this year to 106,000,000/. next, and the revenue is supposed to be increased from 12,000,000/. this year to 21,000,000/. next, we shall scarcely- be unjust to the Federal Government in comparing it with the ex- penditure and revenues of Great Britain in 1815. We see, then, that where Great Britain spent 60,000,0007. on army, navy, and ordnance, Mr. Chase expects to spend, even in the second year, 91,000,0001.; where England raised 75,000,000/. by taxation, theFederal Government hopesto raise21,000,000L, (but has not as yet succeeded in raising even 12,000,0007.0 and where England borrowed 36,000,000/., the Federal Go- vernment expect to be obliged to borrow—if they can—about 85,000,0007. Nothing can present a more startling picture. The Federal Government are spending in their first year what we spent in our most exhausting and expensive year at the end of a long struggle ; they are raising by immediate taxation about a sixth part of what we raised ; they are borrowing nearly three times as much as we borrowed, and are proposing to borrow by a measure that will in effect lead to d great and rapid depreciation of the currency. And they are doing this for an army that appears to be still ill-disciplined and in- effective, instead of for the army with which we defeated Napoleon at Waterloo. In a financial point of view nothing can be worse. This means, we fear, simply bankruptcy— bankruptcy not perhaps so complete, but involving far more individual distress and ruin, than that of the South. We could wish these tremendous financial efforts had been ke.pt for the crisis of the struggle instead of being wasted on its very commencement, when prodigality and jobbery appear to be at a maximum. As it is, we fear that the Northern cause must pass through the chaos of bankruptcy before emerging into the real struggle.