nue was effected by the Act of July 4,
1870. There was an earnest effort to repeal the income tax, but it was
retained for the year, and was to terminate at the end of 1871. The
duties on tea, coffee, sugar, and some articles of iron and steel, were
diminished. In presenting the conference report Mr. Schenck estimated
that the reduction in customs charges by the Bill would be $27,000,000,
and in the internal taxes more than $50,000,000. Many persons feared
that the reduction of taxes was too rapid, but it was impossible to
resist a movement so popular as the removal of the burdens left by the
war. Under such a pressure it was probable that Congress might not
have sufficient regard to the prospective needs of the Government.

The condition of trade, wise legislation, and the hope of refunding the
debt with rapid reduction of interest, were producing beneficent
results; but the expectations of the Secretary of the Treasury in
regard to the prompt sale of the new bonds were rudely shocked by the
war between France and Germany, which was declared immediately after
Congress had clothed him with enlarged powers. At home, as well as in
Europe, the money markets were so far disturbed that prudence forbade
immediate action. After a necessary postponement and careful
preparation Mr. Boutwell gave notice that on March 6, 1871, books
would be opened in this country and in Europe for subscriptions to the
bonds. Preference was awarded to subscribers for the five per cents
within the limit of $200,000,000. On the anniversary of the passage of
the Act, July 14, 1871, a proposition came from a syndicate of London
bankers to take this whole amount of the five per cents. The National
banks, with a few individuals in this country, subscribed for
$117,518,950, and the residue was conceded to the foreign syndicate.

The leading arguments in the House for the policy of refunding were
made by Mr. Dawes and by Mr. Ellis H. Roberts. The gain to the
Government, as they proved, would be obvious and great. If the new
bonds were exchanged for the whole amount of six per cents already
issued, and were to run only till the time of redemption, the saving,
without compounding interest, would amount to an enormous aggregate,
certainly exceeding $600,000,000. The country was therefore
disappointed that events beyond the sea had for a time suspended the
operations of funding, and compelled the Treasury to maintain its high
rate of interest.