Several war mea sures dis appeared after 1865, at least for a time. Tariff rates subsided and tariffs again loomed large in the revenue stream until the early 1890s, as figures 2 and 4 depict. The income tax vanished in 1872—at least for a few de cades. Excise taxes went away too, except for the ones on alco-hol and tobacco.
As figure 23 shows, federal spending subsided as well and the country returned to a more sustainable debt burden, although both state and federal governments settled down to a larger role than they had played before the war. The nation also went back to the gold standard in 1879;
in so doing, it endured a deflationary pro cess that was nearly as painful as the inflationary one.38 In nominal terms, the debt burden per capita declined nearly continuously after the war, but the real debt burden did not begin to fall until after the country had fully restored the gold standard.
State banks regained their footing (see fig. 15), in part because of ineffi-cient management of the national system.39 But state banks never again is-sued their own notes.
Despite the apparent temporary nature of some war programs, the words of John Sherman ring true: by the end of the Civil War, Americans (at least in the North) had a “broader and more generous nationality” than they did at the beginning. This may have partly been due to widespread travels of young soldiers—my great- great- grandfathers had never left the confines of Baker Township in Morgan County, Indiana, until they trav-eled to Natchez, Mississippi, and Appomattox, Virginia. The world grew for them.
The financial experiments undertaken by the Thirty- Seventh Congress also planted seeds that grew strong roots and bore later fruit. The income tax returned via the Sixteenth Amendment in 1913 and remains an impor tant
38For discussion, see James Kindahl, “Economic Factors in Specie Resumption in the United States, 1865–1879,” Journal of Po liti cal Economy 69 (1961):30–48.
39Richard Sylla, “Monetary Innovation in Amer i ca,” Journal of Economic History 31 (1982):21–30.
Fig. 23. Real ($1860) per capita federal revenue, federal expenditure, state and local tax revenue, federal debt, 1850–95. (Sources: John Wallis, “American Government Finance in the Long Run: 1790–1990,” Journal of Economic Perspectives 14 [2000]:61–82; HSUS, Series Cc2, Ea584–5, 587, 651)
revenue raiser for the federal government today.40 War time financing using massive government borrowing reappeared in both world wars and the
40The individual income tax raised 47 percent of revenue for the federal government in fiscal year 2012. Office of Management and Bud get, Bud get of the U.S. Government, Table 2.2.
To Form a More Perfect (Financial) Union 57 Vietnam conflict, and it has now become routine even during times of rela-tive peace—so much so that we have imposed “debt ceilings” on ourselves, which have in turn recently led the United States to the brink of default on its obligations.41
What is more, the impossibility of maintaining the gold standard in the face of monetary expansion and large federal expenditures on Vietnam and the Great Society programs meant a permanent shift to fiat money in 1971, which was undertaken by another (though quite diff er ent) Republican president. Not only does the United States operate on fiat money, but it now truly has a unified currency, which includes a portrait of Salmon Chase on the $10,000 bill.
The movement toward nationalization of banks and currency led to the creation of the Federal Reserve in 1913 and federal deposit insurance in 1933, which have ineluctably bound the federal government to the banking system.
Banks and bank- like institutions are now considered “too big to fail,” and the federal government has come to their rescue many times over the past thirty years. Actions include the bailouts of Continental Illinois in 1984, Long- Term Capital Management hedge fund in 1998, and AIG (American International Group) in 2008, as well as the Emergency Economic Stabili-zation Act of 2008, which authorized the Trea sury Department to buy or insure up to $700 billion in troubled assets.
Perhaps most significantly, the Civil War made us grapple with funda-mental questions about the role of government generally and the role of the federal government specifically. Importantly, monetary policies en-acted by the Thirty- Seventh Congress later led to a broad interpretation of the necessary and proper clause of the Constitution42 when the Supreme
41The website http:// www . whitehouse . gov / omb / budget / Historicals offers numerous tables showing federal revenues and expenditures. Congress first imposed limits on the debt in 1917. In 1979, Representative Richard Gephardt (D- Mo.) proposed a parliamentary rule that effectively raised the debt ceiling when a bud get was passed. Congress repealed the rule in 1995, which led to a bud get controversy and a government shutdown. A delay in raising the debt ceiling in 2011 led to the first- ever downgrade in the federal government’s credit rating. The United States strug gled throughout 2013 after it reached the debt ceiling on December 31, 2012, with the government coming to the very brink of default in October 2013.
42U.S. Constitution, Art. I, Sec. 8, cl. 18: “The Congress shall have power to make all laws which shall be necessary and proper for carry ing into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.”
Court validated the use of paper money in the Legal Tender Cases.43 As one scholar put it: “The authorization of the greenbacks was of greater significance in the evolution of federal powers than in monetary history and of greater importance to the student of government than to the economist.”44
43Dam, “The Legal Tender Cases,” p. 390, argues that the Legal Tender Cases are key to understanding current interpretations of the necessary and proper clause. Gerald Magliocca, “A New Approach to Congressional Power: Revisiting the Legal Tender Cases,” Georgetown Law Journal 95 (2006):119–70, concluded that the operative standard in implied power cases comes from the Legal Tender Cases.
44Hammond, Sovereignty and an Empty Purse, p. 227.
59
A
lt hough C l a r a Ba rt on and a few other women had broken the gender barrier to employment in the federal government when they worked in the Patent Office in the early 1850s, by 1860 no women worked in federal government offices in Washington.1 The war time employment of female clerical workers in the federal government dates to the fall of 1861, when Francis E. Spinner (fig. 1), trea surer of the United States, began to employ women to cut and count Trea sury notes. Abraham Lincoln had ap-pointed Spinner, a former congressman from New York, as trea surer in March 1861. The mobilization for war drew tens of thousands of men from the workforce while si mul ta neously expanding the need for clerical laborers.1Robert McClelland, secretary of the interior under Franklin Pierce from 1853 to 1857, wrote to Mas sa chu setts Representative Alexander De Witt on September 27, 1855, regarding Clara Barton: “ There is every disposition on my part, to do anything for the lady in question, except to retain her, or any of the other females at work in the rooms of the Patent Office. I have no objection to the employment of females by the Patent office, or any other of the Bureaus of the Department, in the per for mance of such duties as they are competent to discharge, and which may be executed by them at their private residences, but there is such an obvious impropriety in the mixing of the sexes within the walls of a public office, that I determined to arrest the practice, though not until after full consideration, on account of the probable effect on some, now enjoying the emoluments of such labor.”
Robert McClelland to Alexander De Witt, Sept. 27, 1855, vol. 1, 224, Rec ord Group 48:
Rec ords of the Office of the Secretary of the Interior, Entry 186: Rec ords of the Patents and Miscellaneous Letters Division, 1813–1943, General Rec ords, 1813–1926, Miscellaneous Letters Sent, 1849–1906, National Archives and Rec ords Administration, College Park, Md. (hereafter NARA).