John Milton – The Intelligent Collector Magazine

Series 1861 $10 Demand Notes were placed into circulation in 1862 and were among the first of U.S. Federal banknotes ever issued. This sample, graded PMG Very Fine 30 EPQ, sold for $381,875 at an August 2014 Heritage auction.

By Jim O’Neal

A follow-up to my previous post:

The North had a tough time raising money for the war as well. After the defeat at Bull Run, they suffered a new crisis: the collapse of the bond market. Under the Constitution, the U.S. House of Representatives had responsibilities for originating all revenue measures and under pressure from Treasury Secretary Salmon P. Chase started considering legislation to raise taxes. Ways and Means started with tariffs, but a storm of criticism erupted since it would fall on the poor who needed tea, coffee, sugar and whiskey.

The next option was real estate via “direct taxes,” but Congress objected by noting that wealth in stocks and bonds was excluded, which meant the wealthy could escape paying any taxes quite easily. The more Congress debated the property tax the louder the opposition became. U.S. Rep. Schuyler Colfax from Indiana (a future Republican vice president) said, “I cannot go home and tell my constituents I voted for a bill that would allow a man, a millionaire, who has put his entire property in stock, to be exempt from taxation, while a farmer who lives by his side must pay a tax!” Colfax proposed a tax on stocks, bonds, mortgages and interest on money – and income earned from them. An income tax (inevitably).

U.S. Rep. Thomas Edwards from New Hampshire proposed calling the new tax something other than a direct tax. “Why should we not impose the burdens which are to fall on this country equally, in proportion to their ability to pay them?” An amendment was passed imposing a 3 percent tax on incomes over $600 per year. Someone quoted John Milton in Paradise Lost – he compared the taxpayer to Adam and Eve, driven by necessity “from our untaxed garden, to rely upon the sweat of our brow for support.” An income tax it was.

Secretary Chase was skeptical. He doubted merely labelling the income tax to be indirect would not make it constitutional. More importantly, there were no provisions made for a bureaucratic or enforcement mechanism. The income tax was not collectible. Since it was only a recommendation, he ignored it since he was far too busy with the need to borrow money for the war. As banks were all reluctant to loan a shaky government any money, he turned to a young Philadelphia banker, Jay Cooke, who had a scheme to market the government debt to the public, with Cooke taking a sales commission.

They finally got a consortium of 39 banks to loan $150 million in gold to be paid in three $50 million installments for sale to private individuals. The first $50 million barely sold and the second round failed completely, which killed the scheme. By Dec. 30, 1861, the banks were so stressed they were forced to stop honoring gold payments to their other customers, which was almost tantamount to becoming insolvent.

By the start of 1862, Chase realized he had grossly underestimated the costs of the war. His new estimate for year one was $530 million and the assumed revenues from taxes, tariffs and other schemes were falling short and the Treasury funds were almost depleted. New taxes or loans could not possibly fill the gap in time. With no other alternatives available, Chase and President Lincoln overcame their misgivings and endorsed the idea of simply printing money – $50 million in green paper money that the government would just declare to be valid legal tender, though not redeemable in gold or silver.

Then Congress passed the Legal Tender Act in February 1862, providing for $150 million in currency that became known as greenbacks – the first paper money ever issued by the U.S. government … a practice that continues today as the debt has exceeded $20 trillion and seems to be accelerating. I hope to be around to see how it ends.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

A 1996 letter President Clinton sent to a journalist, regarding an article that had moved the president, sold for $10,755 at a February 2010 Heritage auction.

By Jim O’Neal

On Jan. 7, 1789, members of the Electoral College cast 69 votes for George Washington to become the first president of the United States, while John Adams, who finished in second place with 34 votes, became the first vice president.

These electors, who had been chosen by white men who were landowners in 10 states, also cast votes for John Jay (9), Robert Harrison (6), John Rutledge (6), Samuel Huntington (2), John Milton (2), Benjamin Lincoln (1), and Edward Telfair (1). Forty-four electors failed to cast a vote.

North Carolina and Rhode Island were ineligible since their statehood had not been ratified. New York did not appoint the eight electors they were eligible for since they were deadlocked in their state legislature.

We still use the Electoral College, as established by the Constitution, which has been modified several times and today gives all citizens age 18 and over the right to vote for electors, who in turn vote for the president and vice president (only). On the first Monday after the second Wednesday in December, each state’s electors simultaneously cast their ballots nationwide.

Then on Jan. 6, the electoral votes are counted before Congress and, finally, on Jan. 20, the president is sworn into office. In the case of George Washington, he wasn’t sworn in until April 30, 1789, since Congress didn’t count the electoral votes until April 6.

Exactly 210 years later, on Jan. 7, 1999, the impeachment trial of President William Jefferson Clinton began in the U.S. Senate, with senators sworn in as jurors and Chief Justice William Rehnquist sworn in to preside. President Clinton was formally charged with lying under oath and obstruction of justice.

Four years earlier, he had sexual relations with a 21-year-old unpaid intern in the White House before she was transferred to the Pentagon. Contrary to his sworn testimony in an unrelated sexual harassment case, President Clinton admitted to a grand jury (via closed-circuit television) that he had not been truthful.

On Dec. 11, 1998, the House Judiciary Committee approved three articles of impeachment. On Dec. 19, the full House approved two articles of impeachment: lying under oath to a grand jury and obstructing justice. On Feb. 12, the Senate voted on the perjury charge and 45 Democrats and 10 Republicans voted “not guilty.” On the charges of obstruction of justice, the Senate vote was split 50-50.

This was the third and last time the Senate Judiciary Committee had voted to impeach the president of the United States. Two were found not guilty (Andrew Johnston in 1868 and Bill Clinton), while a third, Richard Nixon, resigned to avoid what was an almost certain guilty verdict. (In 1834, the Senate voted to “censure” Andrew Jackson).

Tag: John Milton

For North, Tariffs and Taxes to Fund War Gave Way to Printing Money

No President has been Removed by Impeachment, Conviction