Finding that these great purchases were paid for
not in gold and silver, but in state bank paper money, Jackson became
alarmed. Many of the banks were of doubtful soundness, and if they
failed, all their money which the government had taken for land would be
lost. In 1836, therefore, Jackson issued his "Specie Circular," which
commanded all officials authorized to sell government land to receive
payment in nothing but gold or silver or land scrip. A great demand for
specie and a removal of it from the banks in the East to those in the
West followed, which of course hurt the Eastern banks, because it took
away some of their money, and that kind of money which they were holding
for the purpose of redeeming their paper.

[Footnote 2: Shepard's _Van Buren_, Chap. 8; Sumner's _Jackson_, pp.
322-325]

Another thing which hurt the banks, by forcing them to stop loaning and
to call for a settlement of debts, was the distribution of the surplus
revenue among the states.

%344. The Surplus Revenue.%--What caused this surplus revenue? Many
things.

1. The United States had no debt. The national debt, you remember, was
created in 1790 by funding the foreign and Congress debt and assuming
those of the states, and amounted to $75,000,000. When Jefferson was
elected President in 1801, this debt had risen to $80,000,000; but
during his administration it fell to $57,000,000. The war with England
raised it to $127,000,000, after which it once more decreased year by
year till 1835, when every dollar was paid off, and the United States
was out of debt[1].

[Footnote 1: As bonds, etc., to the value of $35,000 were never
presented for payment, the United States appears to have always been in
debt. This $35,000 probably represents evidences of indebtedness lost by
the owners]

2. The expenses of the government were not large.

3. There was a heavy importation of foreign goods, which produced a
great revenue under the tariff act.

4. The immense speculation in government lands already described
produced a large income to the government[1].

[Footnote 1: The land sales were $4,800,000 in 1834, $14,757,000 in
1835, and $24,877,000 in 1836]

In consequence of these causes, the government on June 1, 1836, had in
the banks $41,500,000 more than it needed.

What to do with this useless money sorely puzzled Congress. It could not
reduce the tariff, because that was gradually being reduced under the
compromise of 1833. Some wanted the m