Confederate Reparations

Confederate Reparations

(July 30, 2021) Although many elite activists urge reparations for slavery, few are aware that ex-Confederates and their descendants have already paid a form of reparations, for losing the Civil War, if not for slavery. Examination of federal budgets during Reconstruction reveal they paid their share of federal taxes for sizable items that if funded by an independent defeated foe would have constituted reparations. 

The following table summarizes federal tax revenues and spending for a quarter century following the Civil War. As may be observed, more than half of federal tax revenues were applied to three items: (1) interest on the federal debt, (2) budget surpluses used to retire federal debt, and (3) Union veterans’ pensions, none of which aided former Confederates. 

The first budget item of no benefit to Southerners was the interest on the federal debt. During the Civil War the federal debt swelled from $65 million in 1861 to $2.7 billion in 1865 translating to a 42-fold increase. The debts were incurred when the federal government issued bonds to finance the War. Since ex-Confederated did not own any of the bonds, they collected none of the interest payments. During the first twenty-five years after Appomattox, interest payments represented 23% of the accumulated annual budgets.   

Second, ex-Confederates derived no benefit from the budget surpluses used to pay-off the principal amount of the federal bonds. Unlike today, the nineteenth century Washington government reduced the federal debt gradually. During the first twenty-five years after the end of the war, the surpluses used to retire the debt represented 17% of the accumulated annual budgets.  

A third reason that the larger federal spending in North understates the fiscal penalties paid by Southerners involves Union veterans’ pensions. Annual pension disbursements for Union soldiers and their dependents grew far beyond the first quarter-century after the war when they represented 12% of the annual budgets. 

For the thirty years from 1880 to 1910, Union veterans’ pensions averaged more than 25 percent of the federal budget. They peaked at more than 40 percent 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 entire war. By 1942, a total of $8 billion had been paid. The last payment was made in May of 2020. 

As members of the opposing army, ex-Confederates received no federal pension, although they admittedly collected smaller pensions from their respective states.

Republicans also used the pensions as a political bribe to enlist voter support for high tariffs, which were the chief source of pension funding. The result was an unholy alliance between Northern military retirees on one side and Northern domestic manufacturers on the other. The retirees got generous pensions and the manufacturers got domestic monopolies. In 1866, for example, railroad iron was priced at $32 a ton in Liverpool whereas domestic manufacturers charged $85 because of protective tariffs. The differential was a significant penalty to Southerners desperate to rebuild their railroads after the war. Prior to the wartime destruction, the Confederate states had more railroad mileage than any other country in the World except the United States. 

As a consequence of all the above, the Florida legislature declared in 1866, “Beyond the postal service our people derive no benefit from our existence as a State of the Union. We are denied representation even when we elect a man who . . . never . . . sympathized with [the Confederacy]. . . . We are at the same time subject to the most onerous taxation; [and our] civil law . . . is enforced . . . only when it meets the approval of the local [military] commanders.” 

When California and Oregon Defied Lincoln

(July 28, 2021) Although California and Oregon never seceded, they defied federal law during the Civil War. When the US Treasury released its first paper money as legal tender the two states refused to honor the notes at face value.

Prior to the Civil War the federal government was constitutionally authorized to stamp coins out of gold or silver—known as specie— but was prohibited from issuing paper currency. While independent banks might print paper money, consumers expected that such banknotes could be redeemed for specie upon demand. Any bank failing to promptly honor such redemptions suffered a loss of public faith in its banknotes, which were no longer accepted at face value, if at all. Thus, before the war, America’s currency in circulation consisted of specie and private banknotes, amounting to about $450 million of which specie accounted for $250 million.

However, the Civil War confronted the US Treasury with unprecedented financial challenges. For example, the federal budget in 1860 was only about $80 million but grew to $1.3 billion in 1865. Taxes met only 25% of the needs. Although the bulk of the remainder came from borrowings, the government also issued a paper currency known as Greenbacks, which amounted to 18% of total funding.

After the February 1862 Legal Tender Act about $430 million in Greenbacks were issued. Although not redeemable in specie, the federal government tried to mandate Greenback acceptance by declaring them to be legal tender with two exceptions that required payment in specie. One was the custom duty due on tariffs and the other was interest on federal bonds. Buyers normally also had to use specie to pay for imports because foreign nations would not accept Greenbacks. Treasury Secretary Salmon P. Chase proposed to make Greenbacks superficially more palatable by adding the “In God We Trust” motto that he had earlier put on coins but Lincoln suggested wryly, “If you are going to put a legend on the Greenbacks, I would suggest that of Peter and John, ‘Silver and gold I have none, but such as I have I give to thee.’” Nonetheless, along with banknotes linked to them, Greenbacks became the common currency in the Union-loyal states. 

Gold Premium Relative to the Greenback Dollar (1862-1879)

Consequently, as this graph illustrates, Greenbacks traded at fluctuating discount to specie. At the low point in the early summer 1864, when Grant was stalled before Petersburg and Sherman did not seem to be making progress in Georgia, a Greenback dollar was only worth thirty-five cents in specie. (The graph shows the inverse relationship, which is the number of Greenbacks dollars required to buy a single gold dollar.)

Since gold was more common on the West Coast, Californians and Oregonians were contemptuous of Greenbacks. In November of 1862 San Francisco merchants refused to accept them at anything above the discounted quoted rates. In April of 1863 the California legislature adopted a Specific Contracts Act, clarifying that contracts entered on the basis of specie were enforceable in specie. Finally, the California state government refused to accept Greenbacks in payment for taxes.

Oregon quickly followed California. For years gold had been the exclusive Oregon currency. Shortly after the San Francisco merchants’ agreement, those in Salem and Portland followed suit. Portland merchants also circulated a blacklist of residents and businesses that tried to settle bills with Greenbacks. Finally, the state’s Supreme Court ruled that it was unconstitutional to accept Greenbacks for tax payments.

Ultimately, Greenbacks were redeemable at par in 1879, and that’s a controversial story. Nonetheless, the wartime defiance of California and Oregon is a rare example of state sovereignty successfully resisting federal authority. Unlike in the South, neither California nor Oregon were invaded by federal troops to compel them to comply with the law. 

A Perpetual Unholy Alliance

A Perpetual Unholy Alliance

(July 27, 2021) In English-speaking countries, banking evolved among merchants in the mid-seventeenth century. Shopkeepers normally stored their surplus gold in the king’s mint for safekeeping, until Charles I needed money shortly before the English Civil War in 1638. He confiscated much of the merchants’ gold, calling it a loan. Although it was eventually repaid, merchants thereafter preferred to deposit their gold with private goldsmiths who issued warehouse receipts to each depositor. Such receipts basically became paper money and were preferred in many transactions in place of bulky coins.

Soon goldsmiths realized that most of their receipts would remain in circulation and rarely be presented for redemption. Therefore, they could lend money in the form of newly issued receipts maintaining a gold inventory equal to only a fraction of the face value of receipts outstanding. Theoretically, once such loans were repaid, the amount of receipts remaining in circulation would equal the gold inventory, and the smith would have earned interest income on the loan. Pragmatically speaking, however, new loans were constantly created as old ones were paid off. As long as the receipts presented for redemption never exceeded the smith’s gold inventory, there was no harm. But if ever a holder presented a receipt that could not be redeemed in gold, public confidence in the smith’s warehouse receipts would vanish, and the paper would no longer be accepted in transactions, except perhaps at a discount to face value.

At the start of the American Civil War, about 1600 banks operated in the above manner. There were no federal minimum reserve requirements. Regulations regarding reserve ratios, interest rates, and loan activities were set by the states individually. The nation’s total currency was about $450 million, of which only $250 million was specie, meaning gold or silver coins. The remaining $200 million was composed of various private paper issues, meaning banknotes.

The enormous Civil War financing needs impelled changes to the monetary system, as federal spending grew from $80 million in fiscal year 1861 to $1.3 billion in 1865. During the war, the federal debt similarly leaped from $65 million to $2.7 billion. 

The first legislated monetary change was the 1862 Legal Tender Act, which authorized greenbacks. Although greenbacks were not redeemable in specie, the federal government tried to mandate their acceptance by declaring the bills to be “legal tender for all debts, public and private.” Soldiers and government employees, for example, were paid in greenbacks. It soon became the standard currency, except for imports which still had to be paid for in gold. 

The second change was the 1863 National Bank Act, which provided incentives for state banks to seek national charters. Specifically, it enabled such banks to use government bonds as reserves instead of gold. Thus, the arrangement enabled the bankers to earn interest income twice from a fixed amount of invested capital. One source was the bank’s borrowers, who paid interest on their borrowings. The other source was the federal Treasury, which paid the interest on the bonds. That lucrative arrangement remains in place to this very day. That is why banks are ever ready buyers of government bonds. 

For the last thirteen years, however, interest rates have been near zero. Thus, banks are more prone to sell the bonds they buy from the Treasury. The trick to keeping the Ponzi scheme going is to find a buyer to buy the bonds from the banks at higher prices so that the banks may record a profit to their shareholders. There needs to be a sucker buyer. That’s where the Federal Reserve Bank steps in with a program called Quantitative Easing. Basically, the Federal Reserve stands ready to buy the bonds from the banks at prices that enable the banks to record a profit. Since the Federal Reserve is merely another branch of the Federal Government, the scheme basically rewards commercial banks to act a middle-men in order to disguise the fact that one branch of the government is merely buying the bonds from another branch. The Federal Reserve is essentially buying from the U. S. Treasury.

Since there is no independent buyer for the bonds, Quantitative Easing is merely another type of Ponzi scheme. Thus, the game that the 1863 National Banking Act started, may not really be perpetual. In may ultimately end catastrophically.  

Who Freed the Slaves?

(July 26, 2021) Ever since Columbia history professor Barbara Fields told Ken Burns during his 1990 PBS Civil War Documentary that “the slaves freed themselves by walking off the plantations,” her claim has become a mantra. But Field’s politically correct narrative is only partially valid. 

Consider the composition of the United States Colored Troops that fought for the Union. The 54% percent that came from the Confederate states generally could not leave their plantations until the Union Armies had liberated their neighborhood. Similarly, the 24% that came from the Border States could not leave their manors until after the July 1862 Confiscation Act set them free from masters who were allegedly sympathetic to the Confederacy.  Thus, nearly 80% of the Federal black troops came from the Confederate or Border States where slaves were dependent upon military liberation or legal action at the Federal level before they were freed. Only 22% of the black troops, like the celebrated 54^th Massachusetts regiment, came from the so-called “free” states. 

Consider also how President Lincoln was greeted when he toured Petersburg and Richmond on April 3^rd and 4^th of 1865, shortly after the Confederates soldiers left. On Monday the third he conferred with General Ulysses Grant at Petersburg for more than an hour. Before long the yard of Grant’s Headquarters post was crowded with former slaves. According to Admiral David Porter who accompanied Lincoln, Petersburg became “alive with negroes, who were crazy to see their savior, as they called the President.” 

The next day Lincoln went to Richmond with his twelve-year-old son, Tad. They went up the James River and beached with an escort of twelve soldiers at 20^th Street near Libby Prison, which originally held captured Union soldiers who were later moved to Andersonville, Georgia. The entourage intended to go to the Confederate White House at 12^th and Clay Streets. 

Before they could get started, they were set upon by a dozen jubilant blacks, including one old white-haired man who rushed toward Lincoln shouting, “Bless the Lord, the Great Messiah! I knowed him as soon as I seed him. He’s been in my heart four long years, and he come at last to free his children from bondage. Glory Hallelujah!” With that he threw himself at the President’s feet, as did the rest, much to Lincoln’s embarrassment. “Don’t kneel to me,” he said. “That is not right. You must kneel to God only and thank him for the liberty you will enjoy hereafter.” They responded with a hymn, “All Ye People, Clap Your Hands.”

After Lincoln’s group set out for Jefferson Davis’ recently vacated home, still larger black crowds accompanied them. Freedmen and women “came from all the by-streets, running in breathless haste, shouting and hallooing and dancing with delight.”  One newspaper quoted an old black lady who maneuvered close to Lincoln, “I know that I am free for I have seen Father Abraham and felt him.” A black patriarch apologized for slowing the President’s walk, “Scuse us, sir; we means no disrepec’ to Mass’ Lincoln; we means all love and gratitude. . . After bein’ so many years in de desert widout water, it’s mighty pleasant to be lookin’ at las’ on our spring of life.” When they arrived within three blocks of the Confederate White House one reporter estimated that the crowd totaled about 3,000. Admiral Porter later wrote, “We all stood a chance of being crushed to death.”

It is odd, is it not, that 155 years later some blacks feel entitled to slavery reparations whereas their ancestors were mostly overwhelmed with gratitude merely to be set free. In the presence of Lincoln their gratitude became like a religious experience that deified the President. Delighted to face the future for the first time as a free people, they demanded no special treatment; no affirmative action; no reparations. 

Contrast their gratitude with the special privilege demands of John Thompson who is a black representative in the Minnesota state legislature. Over the July Fourth weekend he was arrested in a routine traffic stop for driving aggressively and failing to have a front license plate. Ten days later he put out a press release complaining that he was racially profiled and urging the St. Paul police to release the arresting officer’s bodycam footage. To his shame the video revealed two problems for Thompson. 

First, he was seeking special treatment from the beginning by unhesitatingly telling the arresting white officer that he was a member of the Minnesota legislature, adding “if that makes any difference.” Second, his Minnesota driver’s license had been suspended because he failed to pay child support. Thus, when asked to produce a license he gave the officer one issued by Wisconsin.  But as a member of the Minnesota legislature, he is required to be a Minnesota resident. And if he is a Minnesota resident, it’s kind of weird that his driver’s license was issued by Wisconsin. 

In short, the body cam footage shows a perfectly respectful cop trying to do his job and an entitled black man trying to worm his way out of a traffic ticket, first by puffing his social status and then by whining about nonexistent racism. Thompson tells the officer, “You givin’ me a ticket for driving while black. What you doin’ is wrong to black men.” Even though it was night and hard to see inside Thompson’s car, Thompson said, “You pulled me over because you profilin’ me as black.”

When running for office last August Thompson spoke at a Black Lives Matter rally in predominantly white Hugo, Minnesota. He shouted through an electric megaphone that the town of “white mother___kers” should be burned to the ground. “We com’in. We com’in for everything you white mother___kers took from us.”

Ironically, John Thompson won his election notwithstanding all the systemic racism he claims is holding black people down; his public and profane diatribes against whites; his dubious residency and possibly illegal driver’s license. The question of how a guy like this gets elected is an important one. Perhaps he won because systemic racism does not exist and cancel culture affords him special privileges.

A Pivotal Moment for Robert E. Lee

(July 24, 2021) During the first thirteen months of the War Between the States Robert E. Lee did not command Confederate field troops. He was largely an advisor to the commanders of two small uncooperative armies in present-day West Virginia and later a special military consultant to President Jefferson Davis. In the second capacity he arranged to reinforce and unleash Thomas “Stonewall” Jackson on the latter’s legendary Shenandoah Valley Campaign on April 21, 1862.

Two weeks later General Joseph E. Johnston withdrew the largest Confederate army in Virginia from Yorktown under pressure from an even bigger Union army commanded by General George B. McClellan as the latter advanced his troops up the York-James peninsula toward Richmond. Under questioning from President Davis, Johnston explained that the Yankees had enveloped Yorktown with heavy siege guns that made the defensive position untenable. Thereafter, Johnston made a brief stand a Williamsburg designed to give his withdrawing troops time put distance between them and their pursuers. Beyond that he provided little information to explain his plans for resisting McClellan’s continuing advance. 

On 12 May he wrote Lee asking what plans had been made to supply his army should Richmond be evacuated.  As word of Johnston’s planless retreat spread, Richmond became gripped in panic. Even President Davis sent his family to Raleigh. Consequently, Davis summoned Lee to an emergency cabinet meeting on 14 May. Lee biographer Clifford Dowdy described the scene as follows:

As soon as Lee seated himself, Davis told him the meeting had been called to discuss the next line of defense after Richmond had been abandoned.

Richmond abandoned! Lee stared at the President as if he had not heard him correctly. Then, glancing at the silent men, Lee lost his famed composure. “But,” he said in a loud voice shaken with passion, “but Richmond must be defended.”

The power of his emotion filled the room and that is what the men remembered. That, more than the words, shook them out of their despair. 

If McClellan captured Richmond, even Johnston’s army could not be long maintained in the field. Yet, so general was the defeatism spread by Johnston’s planless retreat that only the passion of Lee’s conviction gave the President and cabinet the determination to defend the capital. 

Not until the last day of May when McClellan’s army was only six miles from Richmond, did General Johnston engage the enemy at the Battle of Seven Pines. Not only was the attack unsuccessful, but Johnston himself was badly injured. He was compelled to relinquish command and President Davis replaced him with General Lee. Thereafter, Union troops would not enter Richmond for three more years notwithstanding their superior numbers and resources and the mere 100 miles separating the capitals of the USA and CSA. 

When Lee assumed command, most Northerners had expected the Confederacy to soon collapse. Lee realized that he must attack McClellan before the latter got his siege guns deployed against the Richmond defenses. To recruit Jackson to the defense of Richmond he wrote Stonewall, “Unless McClellan can be driven out of his entrenchments, he will move by positions under cover of his heavy guns within shelling distance of Richmond.” Thereafter it would only be a matter of time before Richmond would need to be evacuated. But, from the Union perspective, the unexpected did happen. In a nearly continuous week of fighting starting on June 26, Lee’s smaller army relentlessly drove McClellan back twenty miles to a defensive redoubt on the James River under the protective guns of a Union naval flotilla.

Less than three months later Lee’s outnumbered force carried the war in the East from the doorstep of the Confederate capital at Richmond to the front porch of the Union capital at Washington. The reversal in Union morale was so severe that Attorney General Edward Bates quoted President Lincoln as saying he “felt almost ready to hang himself.”

You’ll find the rest of the story in The Confederacy at Flood Tide.