A Pension Act for Civil War Union soldiers and sailors was adopted in February 1862. Beneficiaries were entitled to a monthly payment for those disabled during military service or, if killed, for their survivors. The amount depended upon rank. If judged disabled for manual labor, those ranked Lieutenant Colonel or above received $30 monthly whereas Privates got $8. A couple of years later the Act was amended to provide benefits specified by an itemized disabilities schedule.
Payments commenced once an application was approved. There was no pension for merely becoming aged. About 2.2 million men served in the Union military during the war. About 365,000 died and 280,000 survived wounds, meaning that less than 650,000 participants qualified for pensions. Ultimately, however, the active recipient list would peak at about one million, which means that the accumulated number of recipients was even larger.
Only eight years after the end of the war the number of beneficiaries reached an apparent peak at around 110,000 in 1873. They numbered less than 25% of all eligible veterans and survivors, including the survivors of soldiers who died of wounds after the war. The Commissioner of Pensions, James Baker, predicted that expenditures would soon stop growing when he said in 1872, “We have reached the apex of the mountain.”
Apparently, there were three reasons why only a minority of qualified veterans applied for pensions. First, most were youthful men who chose to focus on building independent livelihoods after the war. Second, some were unfamiliar with the paperwork, although lawyers were permitted to collect application fees to help. Third, others considered pensions as charity and were too proud to take handouts.
Despite Commissioner Baker’s prediction, the “apex of the mountain” was only a foothill. Annual disbursements for Union veterans pensions would not top-out until 1921, which was sixty years after the war started. Moreover, as indicted in the chart below, for thirty years between 1880 and 1910 Union veterans pensions would average more than 25% of the federal budget. They would peak at 41% in 1893. By 1917 the accumulated pensions totaled over $5 billion, which was more than twice the amount spent by the federal and Northern state governments to fight the war.
Annual Union veterans pensions grew for more than fifty years because they became a bribe to create a Republican-loyal voter constituency. The strategy was particularly fruitful in Midwestern farm states where the Party’s high tariff and deflationary monetary policies were unpopular.
One way to enlarge the constituency was to steadily liberalize qualifications. Eventually, widows, mothers, fathers, orphans, and even orphaned siblings were allowed to qualify. Another way was to transform the disability assistance program into an old age retirement one that would include able-bodied retirees. For almost a half century after the war only a single Democrat, Grover Cleveland, was elected President. Moreover, despite a nation-wide popular vote majority Cleveland lost his bid for a second consecutive term when Benjamin Harrison narrowly beat him in Indiana and New York where veterans supplied the Republican edge. The states had 38,000 and 45,000 veterans receiving pensions respectively and gave Harrison 2,300 and 13,000 respective vote majorities.
Pension award escalation started in 1879 with adoption of an Arrears Act. Previously, beneficiaries were only permitted to collect a monthly stipend after applying for a pension. The ’79 Act basically made the application date retroactive to the date of military discharge. Thus, soldiers who left the army years earlier could collect the arrears as a lump sum. At a time when the average nonfarm worker earned less than $400 a year the average arrears payment was $1,000. Among the factors triggering the 1879 Act was powerful lobby of attorneys who earned fees for helping applicants win pension awards.
Partly because agrarian workers earned even less than nonfarm workers and partly because they contained few Union veterans, Southern states opposed the Arrears Act. Few Northern Democrats and virtually no Republicans opposed the Act. Even as late as 1901 residents of the eleven former Confederate states received less in veterans benefits than the single state of Indiana. South Carolina’s per capita amount was 20-cents as compared to $4.00 in Indiana. Northern Democrats would change their attitude after their party became more dependent upon big city immigrants who seldom qualified for such benefits. Nonetheless, one contemporary New York City magazine wrote, “the effect of this law is to stir-up a multitude [141,000] of people to apply for pensions . . . who had not realized they were disabled until the Government offered a premium of $1,000 or more . . . ”
By 1890 it was evident that Republicans were using veterans pensions as a means of keeping tariffs high in order to protect an ecosystem of Northern manufacturers. Tariffs accounted for about half of federal tax revenues even though the federal budget was consistently reporting embarrassingly large surpluses. Democrats reasoned that cutting tariffs was the best way to balance the budget and simultaneously benefit all consumers. Republicans, however, wanted to keep tariffs high. In order to balance the budget, they argued, the federal government should spend the surplus on even more liberal veterans pensions. Such advocacy was designed to strengthen their ties to Republican-loyal constituents like veterans and tariff-protected industries.
Republicans prevailed with the 1890 Dependent Pensions Act. It enlarged the number of people who could qualify for assistance. Any soldier who served a mere 90 days and wives who married veterans anytime prior to 1890 became qualified. Any soldier injured during the war who anytime later became unable to perform manual labor was covered. Within four years pension disbursements doubled from $80 million to $165 million. The budget surplus vanished and Union veterans pensions accounted for over 40% of the federal budget.
In 1904 President Theodore Roosevelt declared by executive order that all veterans over age sixty-two were eligible for pensions, thereby effectively making old age a disability.
In conclusion, few Reconstruction-era historians devote sufficient attention to Union veterans pensions. Nonetheless the spending accounted for a stunningly large share of the federal budget until the eve of World War I. Pension policy was linked to protective tariffs which were injurious to consumers throughout the country and additionally to farmers—most notably Southerners—who were dependent upon exports, which could be disadvantaged by retaliatory tariffs abroad.
Finally, like interest payments on Civil War federal debt and the retirement of such debts, Union veterans pensions represented a distributive income policy that transferred income from the impoverished South to the prosperous North. For at least twenty-five years after the end of the Civil War more than half of the federal budget was composed of such income-distributive items. They continued even longer in the case of veterans’ pensions.
If the Confederacy had been an independent defeated foe such redistributive payments would have been functionally equivalent to reparations.