Our Public Debt: An Historical Sketch with a Description of United States Securities

ALTHOUGH trouble had been brewing for years the advent of this war found the country in every way quite unprepared. As far back as 1807 Gallatin had discussed in his annual report the proper method of financing war if it came and this method was the one adopted. His theory was that the war expenses should be financed by loans and the taxes increased only enough to provide for the interest thereon. For several years the treasury revenues had been large, the redemptions of debt substantial and a cash balance had accumulated of around eight million dollars. The Administration was evidently apprehensive as to how tense the international complications might become in the early future. Gallatin realized that the revenue would be considerably impaired by a war. He also realized that a maritime war would immediately affect almost every individual in the community because not only commercial profits would be curtailed, but principally because a great portion of the agricultural produce necessarily required a foreign market. Continuing his argument, he said, "the reduced price of the principal articles exported from the United States will operate more heavily than any contemplated tax." He therefore reached the conclusion that "the losses and privations caused by the war should not be aggravated by taxes beyond what is strictly necessary," namely "to provide for the interest of war-loans."

In his report for 1808 Gallatin refers to the fact that as the "decrees of France can be enforced only in her own

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