a great extent.

4. In order to destroy our commerce a fleet of cruisers was built in
England, purchased and manned by the Confederate government. They
inflicted very serious damage.

5. But the great event of the war was the battle between the ironclads
_Monitor_ and _Merrimac_, which marked the advent of the
iron-armored war ship.

CHAPTER XXIX

THE COST OF THE WAR

%464. The Cost in Money.%--When Fort Sumter was fired on in 1861 and
Lincoln made his call for volunteers, the national debt was $90,000,000,
the annual revenue was $41,000,000, and the annual expenses of the
government $68,000,000. As the expenses were vastly increased by the
outbreak of war, it became necessary to get more money. To do this,
Congress, when it met in July, 1861, began a financial policy which must
be described if we are to understand the later history of our country.

%465. Power to raise Money.%--The Constitution gives Congress power

1. "To lay and collect taxes, duties, imposts, and excises."

2. "To borrow money on the credit of the United States."

3. To apportion direct taxes among the several states according to their
population.

%466. Raising Money by Taxation; Internal Revenue.%--Exercising these
powers, Congress in 1861 increased the duties on articles imported, laid
a direct tax of $20,000,000. and imposed a tax of three per cent on
all incomes over $800. The returns were large, but they fell far short
of the needs of the government, and in 1862 an internal revenue system
was created. Taxes were now imposed on spirits and malt liquors; on
manufactured tobacco; on trades, professions, and occupations; till
almost everything a man ate, drank, wore, bought, sold, or owned was
taxed. The revenue collected from such sources between 1862 and 1865 was
$780,000,000.

%467. Raising Money "on the Credit of the United States."%--Money
raised by internal revenue and the tariff was largely used to pay
current expenses and the interest on the national debt. The great war
expenses were met by borrowing money in two ways:

1. By selling bonds.

2. By issuing "United States notes."

%468. The Bonded and Interest-paying Debt.%--The bonds were
obligations by which the government bound itself to pay the holder the
sum of money specified in the bond at the end of a certain period of
years, as twenty or thirty or forty. Meantime the holder was to be paid
interest at the rate of five, six, or seven per cent a year. Between