Paying for the Civil War was a headache for the Lincoln administration.
Lincoln turned that problem over to Salmon P. Chase by naming him secretary of the treasury. Chase, thought he should have been president, and still had ambitions, but did a decent job as secretary of the treasury.
The government at that time relied on tariffs for most of its money, but the war would also produce the nation’s first income tax. The government also issued more paper money.
On Jan. 24, the Democratic Banner reported that Lincoln had signed a bill authorizing the issue of $100,000,000 in U.S. notes. Lecky Harper took aim in an editorial:
“Although signed by ‘A. Lincoln,’ there is no difficulty in discovering in this message the cunning hand of Secretary Chase; for point of fact it is simply an endorsement of Chase’s grand financial scheme of demolishing the local banks, or taxing them to death, in order to make the government green-backs the exclusive paper circulation of the country. Chase’s money is now at a discount or 40 percent, and when it becomes the exclusive ‘circulating medium’ of the country, we presume it will be at least as valuable as the old Continental money, a bushel of which was deemed sufficient to buy a man a dinner!”
From Andrew Jackson’s war on the Second Bank of the United States, James K. Polk’s creation of the independent treasury system, to the “Greenback Party” of the 1880’s and the issue of “bimetalism” that led to William Jennings Bryan’s “Cross of Gold” speech, the 19th century is a string of financial issues and passionate political debate over them. Not even war can silence American politicians when it comes to the issue of money!
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