y of the Treasury, Mr. Hugh McCulloch, estimated that for
the fiscal year ending with June, 1867 (for which Congress was about
to provide), the revenue would exceed the expenditures by $111,682,818,
and that the whole of our vast debt could be liquidated by annual
payments within thirty years. Mr. McCulloch's plans were to take from
the compound-interest notes their legal-tender quality, from the date
of their maturity, and to sell six per cent bonds, redeemable at the
pleasure of the Government, for the purpose of retiring both the
compound-interest notes and the plain legal-tenders. He believed that
the entire debt might be funded at five per cent, while the average of
the annual interest now stood at 6-62/100 per cent. He pointed to
harmony between the different parts of the Union and to the settlement
of the relations of labor in the Southern States, as essential
conditions to the best management of the National obligations.

The leading feature of Mr. McCulloch's financial policy was the
immediate and persistent contraction of the currency. His argument in
support of the policy, as given in his annual report, was not accepted
by the country or by Congress without serious reservation; but his
belief in the theory was strong and determined, and so far as the laws
permitted he went on reducing the volume of paper in circulation until
on the 12th of April, 1866, the sum of legal-tenders was brought down
to $421,907,103. Financiers of the Eastern cities favored the policy
of contraction, although the logical plea was urged against them that
the country would grow up to the volume of currency if not harried and
disturbed by new legislation. Manufacturers and the holders of their
products, and many who had incurred pecuniary obligations in the
expanded currency, took alarm at the rapidity with which the Treasury
notes were withdrawn. The argument was urged that the heavy taxes
could not be met if the withdrawal were so rapid, and that industry
and trade would in consequence be paralyzed by the enforced fall in
prices.

These opinions and apprehensions were developed in the debate which led
to the passage of the Act of April 12, 1866. The subject was first
introduced by Mr. Alley of Massachusetts. On the 18th of December
(1865) he offered a resolution concurring in the views of the
Secretary of the Treasury, in relation to the necessity for a
contraction of the currency, with a view to as early a resumption of
s