Tag Archives: Union Veterans Pensions

America’s Ruling Alliance

(March 17, 2018) For the first 124 years of United States history from 1789 to 1913 import tariffs provided the bulk of federal tax revenue. Generally the South opposed high tariffs. Southerners wanted them strictly to raise revenue and not to be used as a tool for protecting domestic industry from more efficient overseas competition. That’s because few domestic manufacturers were located in the South and the region accounted for 80% of America’s exports at the start of the Civil War. Conversely, the North generally wanted tariffs specifically designed to insulate domestic industry from foreign competition even if the steep rates failed to increase tax revenue. That’s because most of the country’s manufacturing companies were in the North. From the Northern perspective a protective tariff was optimally successful when it failed to generate any tax revenue because that meant that zero quantities of the competitive foreign item had been imported thereby creating a monopoly for domestic producers.

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Thus, the balance of political power was held by the Western states. In the North-versus-South contest for control of the federal government, the winner would be the section that most effectively allied with the Western states. In both the antebellum and postbellum eras it was the North. Here’s how it happened.

Prior to the Civil War the Western states comprised a region commonly known as the Midwest today, plus the Pacific Coast. Normally, residents of those states opposed high tariffs because the duties increased the price of imported manufactured goods as well as those produced domestically. Consequently, Northerners agreed to back federally funded Western public works projects—then termed internal improvements—in exchange for support on tariffs to protect Northern manufacturers. The Western states agreed because they wanted federally funded canals, railroads and Great Lakes harbors. In contrast, Southerners felt that public works projects were the responsibility of the individual states by implication of the Tenth Amendment’s states’ rights doctrine.

Public Works Spending, Generous Union Veterans Pensions, Protective Tariffs

Ultimately the antebellum protective-tariff and internal-improvement tradeoff alliance between the West and North had two consequences. First, it shifted the Midwest’s North-South axis of commerce via the Mississippi River to an East-West axis through the Great Lakes and the latitudinal canals and railroads.

After her transportation facilities had been improved, however, the West again wanted tariff reductions. In addition to disliking the higher prices for manufactured goods caused by protective tariffs, some of the region’s farmers had become major exporters during the Civil War. Like the Southerner had learned much earlier regarding cotton exports, Western grain farmers soon realized that high tariffs made it difficult for Europeans to generate the exchange credits needed to pay for American grain. Thus, high tariffs gave Europeans an incentive to buy grain from other countries to the detriment of the Western farmer.

Thus, by the 1870s Northerners needed to strike a new bargain with Westerners if tariffs were to remain high. Since the vast majority of Westerners fought on the Union side during the Civil War, Northerners agreed to support Union veterans with generous pensions from the federal government. From the Northerners’ viewpoint the pension bargain had three advantages.

First, growing pension disbursements could be used to rationalize higher tariffs. Second, the combined life expectancies of the Union veteran and his dependents implied that the agreement would last a long time. In fact, annual pension disbursements did not peak until 1921 and did not end completely until 2016. In 1893 alone they represented forty-percent of the federal budget. By 1950 cumulative disbursements totaled $8 billion, which was three times the cost of the war on the Union side. Third, although Confederate veterans would not receive any federal pension they would be required to pay their share of taxes for the payments to Union veterans.

As a result, tariffs on dutiable items increased from 19% in 1861 to an average of 45% between 1865 and 1913 when President Woodrow Wilson reduced them to a low of 12%. Once Northern Republicans regained the White House in 1920 the average dutiable item rate increased to a high of 60% in 1932.


Speaking Truth to Power

(June 18, 2017) By one definition a person is speaking truth to power when they “stick their head above the parapet and tell those in authority how it really is.” The Wiktionary similarly states the phrase means “to address facts to an authority,” presumably when such facts are overlooked by that authority.

Thus, in the spirit of speaking truth to power the genius de jour, Ta-Nehisi Coates, was praised three years ago for his magazine article suggesting that the United States pay reparations to African-Americans as compensation for slavery. There were, however, two ways that Mr. Coates was not really speaking truth to power in the context of the meanings above.

First, he was not an outsider. Coates was a regular columnist at The Atlantic, which is among America’s most venerable periodicals. The mainstream media almost universally praised his reparations essay. He followed it a year later with perhaps the thinest non-fiction book to ever win the National Book Award. That led to a McArthur Foundation award, which granted him $125,000 annually over five years ending in 2021.

Second, the most significant unnoticed fact among Coates and his power elite is that former Confederates and their descendants have already paid a form of reparations, if not for slavery, then as a consequence of losing the Civil War. It should not be assumed that the Southern states escaped reparations-equivalent penalties merely because they were readmitted to the Union.

As the preceding table illustrates, more than half of federal tax revenues for twenty-five years after the Civil War were applied to three items, which exclusively benefitted Northerners although former Confederates were required to pay their share of the taxes needed to fund them. If such items as interest on the federal debt, budget surpluses, and Union veterans benefits were paid by an independent defeated foe, they would undeniably been classified as reparations.

The budget surpluses were used to repay federal war debts, which had jumped 40-fold from $65 million at the start of the Civil War to $2.7 billion at the end. The debt took the form of federal war bonds, which were held exclusively by Northerners. In addition to helping to pay off the bonds without owning any of them, Southerners were burdened with another penalty linked to federal bond policies.

Specifically, a law adopted four years after the Civil War required that federal debt be redeemed in gold. During the war, however, the great majority of investors used paper money, which traded at a discount to gold, to buy the bonds. The discount got to be as much as 63%—meaning that a paper dollar was worth only thirty-seven cents—after General Grant sustained heavy casualties in 1864 only to be stalemated at the siege of Petersburg. Similarly, interest on federal war bonds was also paid in gold.

Since the bonds and interest had to be paid in gold, the amount of paper money required to pay them off was larger than the face amounts of the bonds and their interest coupons. The difference was an extra cost to the taxpayer but a sizeable bonus to the bondholder, none of who were former Confederates.

Additionally, former Confederates derived no benefit from generous federal spending on Union veteran pensions. Ex-Rebel soldiers could only collect much smaller pensions from their respective states. Union veteran pensions were originally paid only to soldiers who had sustained disabling injuries during military service, but Republicans gradually expanded eligibility in order to cement veterans as one of the Party’s chief voter constituencies. In 1904 any Union veteran over age 62 was regarded as disabled thereby transforming the program from a disability assistance platform into an old age retirement system. In the 1893 such pensions represented an astounding 40% of the federal budget.

By 1917 Union veterans and their dependents had collected about $5 billion in pensions, which was more than double the amount spent to fight the war by all of the Northern state governments and the federal government combined. Annual spending on Union veteran pensions did not peak until 1921, which was over 55 years after the war had ended. By 1950 cumulative pension spending had totaled $8 billion, which exceeded three times the amount spent to fight the war. The last pension check was paid in 2016.

Demonstrating that Southerners have already paid reparations is a more valid example of speaking truth the power than is Coates’s “The Case for Reparations” for two reasons. First, the historical facts document that the payments have already been made. Second, those facts are truly overlooked by the zeitgeist in power, of which Coates is a himself member instead of an outsider.

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Union Veteran Pension Controversy

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. 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 more than 40% in 1893 and only start dropping as a percent of the total after the Spanish American War triggered a steady expansion of federal spending. 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.


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.

My Civil War Books

Lee’s Lost Dispatch and Other Civil War Controversies
Trading With the Enemy
Co. Aytch: Illustrated and Annotated

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