Civil War Financing
ON July 4, 1861, President Lincoln convened Congress in special session in order that they might "give the legal means for making this contest [with the States in rebellion] a short and decisive one." He recommended that Congress "place at the control of the Government, for the work, at least four hundred thousand men and $400,000,000." On the same day the Secretary of the Treasury, Salmon P. Chase, reported to Congress in regard to the condition of the Treasury and made recommendations as to ways and means for conducting the war.
His policy was expressed in the following words:--"It will hardly be disputed that in every sound system of finance adequate provision by taxation for the prompt discharge of all ordinary demands, for the punctual payment of the interest on loans, and for the creation of a gradually increasing fund for the redemption of the principal, is indispensable. Public credit can only be supported by public faith, and public faith can only be maintained by an economical, energetic and prudent administration of public affairs, and by the prompt and punctual fulfillment of every public obligation." This was identically the same theory of war financing as that advanced by Gallatin in 1807, when discussing the ways and means of financing a possible war with Great Britain or France and was the policy which was followed with such unsatisfactory results in financing the War of 1812.