Congress established America’s first income tax on August 5, 1861. The initial tax was light, a mere 3 percent on annual incomes over $800. An Internal Revenue Bureau was set up within the Treasury Department to administer the tax but lacked the means to assess let alone collect what people owed. Not surprisingly the take was modest. This forced Congress to enact a far more sweeping tax bill eleven months later. The Internal Revenue Act that Lincoln signed on July 1, 1862, had three provisions. The tax floor dropped to those annually making $600 a year; the rate was 3 percent on incomes from $600 to $10,000 and 5 percent above $10,000. An inheritance tax affected any estates worth more than $1,000. An excise tax was imposed on all business transactions worth more than $600. Finally, Washington tried to curtail state bank notes and raise revenue by imposing a 10 percent tax on any exchange of them. This last measure was perhaps the most powerful means of reforming the financial system, as it increasingly forced the purveyors and peddlers of dubious paper “money” certificates to close up shop.
There was another source of revenue. For Hamiltonians, tariffs had two virtues—they supplied government with money and protected American industries from voracious foreign rivals. Lincoln insisted that nurturing a steadily widening spectrum of industries was the best way to develop American wealth and power. “Give us a protective tariff,” he once said, “and we will have the greatest country on earth.”15 The trouble was that tariff policy was set through an ideological and political tug-of-war rather than a careful analysis of just what level of protection each industry needed in order to at once promote protection, innovation, and competition. Tariffs rose and fell sharply depending on who held power in the White House and Congress. Lincoln and other progressives hoped to provide crucial government revenues and industry protection with the Morrill Tariff Act of February 1862 that steadily raised average import duties until they peaked at 47 percent in 1869. The tariffs were a great success. They not only amassed desperately needed revenues but let American industries flourish.
With tax and tariff receipts covering only about 10 percent of government spending, Washington had to borrow most of the rest. It did so by selling bonds. Treasury Secretary Chase inaugurated the practice whereby individuals as well as institutions could buy bonds.
Lincoln failed to establish one key institution of the Hamiltonian agenda. Slavery was hardly the only controversial issue that passionately split Americans. Throughout the early republic, a fierce political and ideological tug-of-war raged over whether America should have a national bank. Alexander Hamilton and his followers championed such a bank while first Thomas Jefferson and his followers and later Andrew Jackson and his followers harshly condemned such an institution. Hamiltonians prevailed with the First Bank of the United States from 1791 to 1811 and the Second Bank of the United States from 1816 to 1836, but Jeffersonians killed the first and Jacksonians the second.
The historic record is clear on whether a national bank is an asset or liability for America. The economy flourished when the bank existed and suffered roller-coaster speculative booms and busts when it was abolished. The reason was that the bank regulated the money supply by easing credit when the economy faltered and by tightening credit when speculators began pushing up prices. Both banks were partnerships between the federal government and private investors, with the ratio of shares one to five between them. Since the second bank’s demise, the United States had suffered prolonged depressions following the panics or financial collapses of 1837 and 1857. The economy was struggling out of the latest depression when the Civil War erupted.
Despite history’s illumination of how well America’s economy did with a national bank and how poorly without one, proposals for a third U.S. bank died in Senate and House committees. The executioners were ideological and interest groups. Jeffersonians and Jacksonians opposed the institution on principle, while state-chartered banks opposed it because many of them would go bankrupt with a U.S. bank’s tighter regulations and credit.
Nonetheless, the American people eventually received the next best alternative. Lincoln acted decisively on his belief that “no duty is more imperative on . . . Government than the duty it owes the people of furnishing them a sound and uniform currency.”16 He had Treasury Secretary Chase work closely with congressional leaders to devise and pass the National Banking Act, which he signed into law on February 25, 1863. The bill empowered the Treasury Department to issue charters to banks that held U.S. bonds equal to one-third of their financial holdings, in return for which they could issue banknotes up to 90 percent of the value of those bonds. At first few banks sought that arrangement. It was far more profitable to print “money” by handing out banknotes to all takers. It was not until 1865, after Congress passed a law imposing a 10 percent tax on state banknotes, that most banks joined the system. This eventually forced most of the bad money from circulation.
Thomas Jefferson famously wrote that “those who labour in the earth are the chosen people of God.”17 It was easy for Jefferson to idealize farming since he had several hundred slaves doing it for him. Abraham Lincoln held no such sentiments. He grew up farming and hated everything about it. And because of this he sought to alleviate the difficulties in the lives of farmers through policies that made it easier and cheaper for them to obtain new land and that promoted scientific farming practices that increased crop yields, reduced labor, and thus expanded wealth.
Lincoln intended to initiate an agrarian revolution through two laws. The Homestead Act that Congress passed and he signed into law on May 20, 1862, granted each settler 160 acres of public land after he or she registered and worked it for five years. Over the next three years, twenty-five thousand pioneers laid claim to three million acres. While the Homestead Act expanded the amount of land farmed, the Morrill Act that Lincoln signed into law on July 2, 1862, attempted to expand the productivity of farmland. The Department of Agriculture was established to develop the rural economy by encouraging farmers to adopt cutting-edge techniques and technologies that expanded crop and livestock yields and to send their children to state colleges funded by public land sales.
Although Lincoln may not have shared Jefferson’s enthusiasm for farming, he was just as powerful an advocate for education. In his first public address as a young aspiring politician in 1832, he explained, “Upon the subject of education, not presuming to dictate any plan or system respecting it, I can only say that I view it as the most important subject which we as a people can be engaged in.” He aspired “that every man may receive at least a moderate education.”18
Three decades later Lincoln derived enormous satisfaction from signing into law the Morrill Land Grant College Act of July 1, 1862. The Morrill Act provided money to found “agricultural and mechanical” colleges in each state. Eventually sixty-nine “land grant” colleges were established. The result was to accelerate the nation’s transition from subsistence to market farming, as scientific methods led to greater productivity with better harvests and herds. The Morrill Act also helped inspire an education revolution as the public share of education funding soared in volume and proportion. Public school spending tripled from $19.9 million, or 57 percent of $34.7 million in total spending among the states for education, in 1860 to $61.7 million, or 65 percent of $95.4 million, in 1870 as states with existing school systems expanded them and other states established them.19 The Hamiltonian idea that government should help nurture the nation’s intellectual development also inspired Lincoln and Congress to create the National Academy of Sciences in 1863.
“Military necessity” justified one key element of the Hamiltonian agenda. The Pacific Railway Act, which Lincoln signed on July 1, 1862, massively subsidized the expansion of railroads across the continent by eventually giving railroad companies 225 million acres of public lands. The initial grant was sixty-four hundred acres for each mile constructed, but the amount was soon doubled. In addition, the government gave railroad companies low-interest loans of $16,000 a mile on flat lands and $48,000 a mile in t
he mountains. The railroad and homestead acts complemented each other. The railroads conveyed and supplied settlers, who in turn provided passengers and markets for goods born by the railroads.
As the initial transcontinental railroad’s terminals, Lincoln designated Sacramento, California, and Omaha, Nebraska. While no one seriously disputed those obvious choices, Congress did override his selection of a five foot width for the railroad gauge, the size used in California and most of the South, which was incompatible with the four foot, eight and a half inch width used across the North. The reason for Lincoln’s preference is unclear, but it might have been a conciliatory gesture to the rebels. Congress ensured that the North’s standard prevailed.
Inventions and inventers fascinated Lincoln. In 1849 he registered a patent for a device that lifted steamboats over shallow water.20 As president he tested all of the prototypes for firearms whose adoption the military was considering. The seven-shot Spencer carbine and rifle especially impressed him, and he ordered the Ordnance Bureau to equip the army with them. Politics prevailed. The Springfield Company, which manufactured the army’s standard rifle, protested and asserted all methods fair and foul to stall this transition. Although the infantry was denied the Spencer repeater rifles, the cavalry did get its hands on the carbine version.21
After that whirlwind of revolutionary initiatives, Lincoln had one last Hamiltonian step to make, this of little substance but richly symbolic. While all Americans enjoy the national holiday of Thanksgiving, few know who designated it. The popular view is that Thanksgiving has been around ever since the Pilgrims. Actually it was the earlier colony of Jamestown that first set aside a day for prayer and reflection. It was Lincoln who, on October 3, 1863, designated the third Thursday of every November for Americans to share that experience that helps define them as one people.22
10
Turning Points
Must I shoot a simple-minded soldier boy who deserts while I must not touch a hair of a wily agitator who induces him to desert?
ABRAHAM LINCOLN
The Father of Waters again flows unvexed to the sea.
ABRAHAM LINCOLN
The Republican Party took a shellacking in the midterm elections of November 1862. The two biggest reasons were Lincoln’s Emancipation Proclamation and growing opposition to the stalemated and ever-bloodier war. Democrats recaptured the statehouses of Ohio, Indiana, and Illinois, won the governorships of Pennsylvania, New Jersey, and New York, and ate away at Republican majorities in Minnesota, Wisconsin, and Michigan. New York governor Horatio Seymour was an especially fierce and unrelenting critic of the Lincoln administration as he nurtured his own presidential ambitions. Nonetheless, among the nineteen free states, the Republicans retained control of sixteen governorships and sixteen legislatures as well as both houses of Congress.1
The Emancipation Proclamation had a liberating effect on the president. In late fall Lincoln purged three armies of inept leaders. First he replaced Don Buell with William Rosecrans, then Benjamin Butler with Nathaniel Banks. He saved the worst for last. No general was guilty of more egregious crimes of near-traitorous dereliction of duty than George McClellan. The president prudently waited until after the November elections to fire McClellan, a Democratic Party hero. Had Lincoln martyred that paper tiger on the election’s eve, the Democratic turnout would have swelled and Republican losses would have been greater. He removed the single worst obstacle to an American victory in the war on November 7. McClellan’s adoring fans were not the only ones who mourned his forced early retirement. The news saddened Confederates as well. Robert E. Lee spoke for his compatriots by facetiously remarking that “I hate to see McClellan go. He and I had grown to understand each other so well.”2
Yet, having cleared that military deadwood, Lincoln still faced a dilemma. He explained that “I certainly have been dissatisfied with the slowness of Buell and McClellan, but before I relieved them I had great fears I should not find successors to them who would do better; and I am sorry to add that I have seen little since to relieve those fears.”3 Most of his new crop of army generals would realize those fears.
The worst was Ambrose Burnside, who replaced McClellan as the Army of the Potomac’s commander. The first impression of Burnside, however, was positive, as Lincoln and others contrasted his energy, cheerfulness, and initiative with his predecessor’s whining, arrogance, and sloth. Burnside launched his army against Lee’s. Outnumbered two to one, Lee withdrew across northern Virginia until he reached Fredericksburg, south of the Rappahannock River, in early December. There he deployed his 75,000 troops along a low ridge overlooking the town and the river beyond. Burnside encamped his 110,000 troops just beyond cannon shot north of the Rappahannock.
Lincoln devised a strategy for Burnside to implement. He explained that “I wish the enemy to be prevented from falling back, accumulating strength as he goes, into his entrenchments at Richmond.” To this end, Burnside was to split his army into three to circle, trap, and destroy Lee’s army. One part would remain before Fredericksburg and distract Lee. The bulk of the Union troops would march up the river to the closest ford, cross over, and attack the enemy’s left flank. Meanwhile the rest of Burnside’s army would embark on transports on the Potomac and steam up the Rappahannock and Pamunkey Rivers before disembarking to cut off the rebel retreat.4
Once again tragedy resulted from a general’s failure to follow the president’s latest brilliant plan. Burnside ordered a frontal assault on Fredericksburg on December 13. The Union army crossed the river on pontoon bridges and valiantly marched straight against the rebel positions. By the day’s end, the Union suffered 12,653 casualties to the Confederacy’s 5,309. Those stunning losses were soon compounded by two battles in the west, one a victory and the other a defeat, along with an aborted campaign.
Lincoln had sent Gen. William Rosecrans, who now led the forty-two-thousand-man Army of the Cumberland that was camped around Nashville, several orders to march against Gen. Braxton Bragg, who commanded the thirty-four-thousand-man Army of Tennessee, just twenty miles south at Murfreesboro. Rosecrans finally complied. The battle of Murfreesboro, or Stone’s River, that began early on December 30 and raged for three days was the war’s bloodiest in the ratio of casualties to combatants, with the Federals suffering losses of 12,906 and the Confederates 11,739, or one in four and one in three, respectively. Bragg finally withdrew his battered army southeast toward Chattanooga. Rosecrans did not pursue.
Meanwhile General Grant implemented his own plan for overrunning Mississippi. He would lead most of his army due south to take Jackson, the state’s capital, while General Sherman took his corps down the Mississippi River and captured Vicksburg. The two wings would then link up and march toward Montgomery and Mobile, Alabama. Grant led his troops southward, set up a supply base at Holy Springs, and reached Oxford by early December. The rebel forces withdrew slowly before Grant’s juggernaut. Raids by brilliant cavalry commanders like generals Bedford Forrest and John Hunt Morgan slowed Grant’s advance and diminished his army by attacking his supply lines. The worst blow came on December 20, when Gen. Earl Van Dorn and thirty-five hundred cavalry captured and destroyed Grant’s key supply depot at Holy Springs. This forced Grant to withdraw all the way back to Corinth.
Sherman launched his offensive in late December, when he disembarked his thirty thousand troops at Chickasaw Bluffs overlooking the Yazoo River near its confluence with the Mississippi River just above Vicksburg. He ordered his army to attack on December 29. The result resembled Fredericksburg on a smaller scale as Union troops valiantly struggled up the bluff against entrenched rebels who slaughtered them, inflicting 1,776 casualties while losing only 207 men. Sherman partly redeemed himself when he packed his army aboard transports and steamed fifty miles up the Arkansas River to capture Fort Hindman and its 5,000 defenders at a loss of 1,061 casualties. He then withdrew his army to Memphis.
The year opened with a victory when an expedition captured Galveston on January 1, 1863, but s
oon morphed into the latest humiliating defeat. A well-coordinated rebel counterattack of gunboats drove off the Union flotilla while troops forced the garrison to surrender.
Shortly after the slaughter at Fredericksburg, Lincoln replaced Burnside with Joseph Hooker. The Army of the Potomac’s latest commander inspired two nicknames, “Fighting Joe” for himself and “hookers” for the prostitutes whose services he was alleged to enjoy. With his boisterous, backslapping animal spirits, he was a popular choice with his troops. He boosted morale and his own popularity by improving the men’s rations, getting them six months of back pay owed them, granting generous leaves, cleaning up the camps and hospitals, and issuing corps badges to nurture pride. As a result desertion and sickness rates plummeted. President Lincoln further swelled the ranks after March 10 by promising amnesty for any deserters who returned after April 1. Thousands of those absent without leave sheepishly rejoined their regiments. By spring there was ample truth in Hooker’s boast that “I have never known men to change from a condition of lowest depression to that of a healthy fighting state in so short a time.”5
Of course, an army with high morale is not an end in itself but merely a means. In reply to Lincoln’s queries about his intentions, Hooker assured the president that once he led his men into the field he would destroy Lee once and for all. The general’s bravado may have inspired his troops but it worried the president. “That is the most depressing thing about Hooker,” the president confided. “It seems to me that he is overconfident.”6
This was not Lincoln’s only worry. The power and adulation went to Hooker’s head. Rumors swirled that Hooker and others discussed overthrowing the government and forming a dictatorship. Yet Lincoln was so desperate for a general who was determined to win that he did not automatically open an investigation and fire Hooker or anyone else guilty of such treasonous remarks. Instead he offered a strange and dangerous incentive to Hooker that mercifully did not come back to haunt him and the nation: “I have heard . . . of your recently saying that both the army and the government need a dictator. Of course it was not for this but in spite of it that I have given you the command. Only those generals who gain successes can set up dictators. What I now ask of you is military success, and I will risk the dictatorship.”7
The Age of Lincoln and the Art of American Power, 1848-1876 Page 20