e example of other nations, experience has
proven that this source of revenue is in the United States the most
productive, the easiest to collect, and the least burthensome to
the great mass of the people. 2d. Indirect taxes, however
ineligible, will doubtless be cheerfully paid as _war taxes_, if
necessary. 3d. Direct taxes are liable to a particular objection
arising from unavoidable inequality produced by the general rule
of the Constitution. Whatever differences may exist between the
relative wealth and consequent ability of paying of the several
States, still the tax must necessarily be raised in proportion to
their relative population."

The Orders in Council of November 11, 1807, avowedly adopted to compel
all nations to give up their maritime trade or accept it through Great
Britain, reached Washington on December 18, 1807, and were immediately
replied to by the United States by an embargo act on December 22. The
history of the political effect of this measure is beyond the limits of
this economic study, and will be touched upon in a later chapter, but
the result of its application upon the Treasury falls within this
analysis of the methods of Mr. Gallatin's administration.

On December 18 Gallatin wrote Jefferson that "in every point of view,
privations, sufferings, revenue, effect on the enemy, politics at home,
etc.," he preferred "war to a permanent embargo;" nevertheless he was
called upon to draft the bill. The correctness of Mr. Gallatin's
prevision was soon apparent. In his report of December 10, 1808, he
reviewed the general effect of the measure. "The embargo has brought
into and kept in the United States almost all the floating property of
the nation. And whilst the depreciated value of domestic product
increases the difficulty of raising a considerable revenue by internal
taxes, at no former time has there been so much specie, so much
redundant unemployed capital in the country." Again stating his opinion
that loans should be principally relied on in case of war, he closed
with the following words: "The high price of public stocks (and indeed
of all species of stocks), the reduction of the public debt, the
unimpaired credit of the general government, and the large amount of
existing bank stock in the United States [estimated by him at forty
millions of dollars], leave no doubt of the practicability of obtaining
the necessary loans on reasonable terms