A Just and Generous Nation

by Harold Holzer

  The Congress that convened on July 5, 1861, to hear Lincoln’s Special Message was controlled by members of his party. After the members from the rebellious Southern states left Washington, Republicans assumed large majorities in both houses—32 out of 48 members of the Senate and 106 out of 176 members of the House of Representatives. It was not surprising that this one-sided Congress supported the president’s call to support his effort to maintain the Union. Nor was it surprising, given Lincoln’s rousing words about the government’s role, that Congress proceeded to pass legislation consistent with Lincoln’s vision of an activist government working to improve the economic life of all Americans.

  As president—with the support of the Republican Congress—Lincoln signed into law measures decisively strengthening the role of the federal government in American economic life.

  Lincoln signed the National Banking Act, which not only revived the national bank that President Jackson had killed in 1833, but also gave the country its first unified currency and created a national system of chartered national banks, replacing a system in which states and state banks created their own money. The 1862 Homestead Act provided 160 acres of inexpensive land to settlers willing to migrate west. Lincoln favored high protective tariffs to encourage the development of domestic manufacturing. He chartered the first transcontinental railroad, which would link the country from East to West Coasts, the greatest “internal improvement” up to that time. He signed the Morrill Act in 1862, which provided states with grants of land to establish colleges, designed to provide useful education to help “clear the path” for ordinary people to achieve the American economic dream. And these colleges became the basis of the nation’s state university system. All these programs were embodiments of what Lincoln believed to be government’s legitimate and vital role in building and expanding America’s middle-class economy and society. In the process, he created what distinguished historian Leonard P. Curry has called “a blueprint for modern America.”

  On issue after issue, Lincoln was not only a philosopher, but also a pragmatic politician—and a cautious one at that. As a result, his path to guaranteeing equal treatment and widening paths to economic opportunity was not always clear. Yet Lincoln consistently proved willing to adjust initiatives that did not, at first, go far enough.

  To help pay for the war, Lincoln signed the first federal income tax bill on August 5, 1861, levying a flat 3 percent tax on annual incomes above eight hundred dollars. After midwestern farmers howled that the new levy imposed disproportionate hardships on their region, Congress and the president on July 1, 1862, changed the law by passing the first graduated income tax law: 3 percent on incomes between six hundred and ten thousand dollars and 5 percent on incomes above that amount. Over time, Lincoln had learned the efficacy and inherent fairness of the graduated income tax system. Though the courts declared the entire system unconstitutional in 1872, it later served as the model for the graduated income tax system reintroduced in the twentieth century.

  In another case of an imperfect initiative later improved, the first conscription law offered wealthy Northerners the opportunity to buy a substitute enlistee for three hundred dollars, leading to charges that Lincoln’s was a “rich man’s war,” meant to be fought by the poor. The ill-conceived buyout clause (Lincoln actually purchased his own substitute when the law was introduced) soon vanished—another lesson in the need for economic equality that Lincoln learned late, but well, as president.

  Lincoln was also overcautious in introducing the idea of black enlistment in 1863. Initially, he approved a plan to pay African American soldiers lower salaries than white troops. And while white soldiers would continue to receive a bonus for buying uniforms, black soldiers would be charged extra for theirs. The glaring disparity brought a furious Frederick Douglass—who was expected to encourage black recruitment—storming to the White House to demand equal pay at once. “You must give colored soldiers the same pay that you give white soldiers,” Douglass bluntly demanded at his historic White House meeting with the president.

  “Mr. Lincoln listened with earnest attention and with very apparent sympathy,” Douglass remembered. But the president did not yield. “First he spoke of the opposition generally to employing negroes as soldiers at all, of the prejudice against the race, and of the advantage to colored people that would result from their being employed as soldiers in defense of their country.” Unequal pay, he frankly admitted, was a necessary “concession to prejudice.” But if the “experiment” succeeded, Lincoln said, “I assure you, Mr. Douglass, that in the end they shall have the same pay as white soldiers.” The experiment did succeed, and Lincoln kept his promise, another case of a revolutionary policy introduced slowly, letting economic equity catch up with, and alter, the result.

  Cautious he may have been, but Lincoln proved remarkably consistent in his efforts to introduce controversial new policies slowly and having them evolve over time. In much the same way, the man who came to office vowing to leave slavery alone where it existed eventually formulated a compensated emancipation plan and, when that failed, substituted the Emancipation Proclamation. And when that order, too, proved limited, Lincoln fought for a constitutional amendment banning slavery everywhere.

  The progressive ferment unleashed by Lincoln’s federal government programs for the people also led to a surprising first step in the creation of America’s national and state park systems. California senator John Conness, with the help of the Lincoln administration’s General Land Office, drafted legislation to authorize the federal government to give a large tract of land in the Yosemite Valley to the state of California—to create a natural park for the recreational enjoyment of all Americans. The legislation was passed by a large majority of votes in the Senate and in the House of Representatives. Lincoln signed the law on June 30, 1864. This initiative was followed eight years later in the Grant administration by the creation of the first US national park—the 2 million acre Yellowstone National Park. Four decades later, Lincoln’s ardent admirer President Theodore Roosevelt encouraged Congress to create new national parks throughout the United States to enable Americans to enjoy natural beauty as part of their collective heritage. With this initiative, as with so many others, Lincoln’s vision and his specific policies provided the foundation stones for future presidents to build on as they implemented new progressive policies to improve the lives of all Americans.

  The basis of Lincoln’s political philosophy, one he put into practice through these policies, was a vision of an economic society in which all citizens had an equal chance. It was a vision that he wanted to make a reality, especially after the South had seceded and the war had begun; in doing so, he would be living up to the reasons he had given for fighting the war in the first place: to ensure that the unique American middle-class nation “conceived in liberty” and “dedicated to the proposition that all men are created equal” would endure. It was a vision based on his understanding of the pre–Civil War middle-class economy in the Northern states. He did not anticipate that the Industrial Revolution that began to take hold in Great Britain in the decades before 1860 would radically change the middle-class society of the North during and after the Civil War.

  Lincoln’s vision of the American middle-class society was remarkably specific. He took pains to describe it in detail in his first Annual Message to Congress on December 3, 1861. It is a remarkable address, long overshadowed by both his July Special Message and his more famous Annual Message the following year. But it is instructive that Lincoln used his first such report to Congress—the equivalent of today’s State of the Union messages—to share his rationale for fighting to save the Union. Never before had he delivered such a frankly economic justification for his commitment to preserving the Union. First, Lincoln offered a new and finely honed version of his long-standing belief that labor was superior in standing to capital:

  It is not needed, nor fitting here, that a general argument should be made in favor of popular institutions
; but there is one point, with its connexions, not so hackneyed as most others, to which I ask a brief attention. It is the effort to place capital on an equal footing with, if not above labor, in the structure of government. It is assumed that labor is available only in connexion with capital; that nobody labors unless somebody else, owning capital, somehow by the use of it, induces him to labor. This assumed, it is next considered whether it is best that capital shall hire laborers, and thus induce them to work by their own consent, or buy them, and drive them to it without their consent. Having proceeded so far, it is naturally concluded that all laborers are either hired laborers, or what we call slaves. And further, it is assumed that whoever is once a hired laborer, is fixed in that condition for life.

  Now, there is no such relation between capital and labor as assumed; nor is there any such thing as a free man being fixed for life in the condition of a hired laborer. Both these assumptions are false, and all inferences from them are groundless.

  Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are as worthy of protection as any other rights. Nor is it denied that there is, and probably always will be, a relation between labor and capital, producing mutual benefits. The error is in assuming that the whole labor of the community exists within that relation.

  It was clear from these bold statements that Lincoln meant to sharply contrast the opportunities guaranteed by the Northern middle-class society with the insurmountable barriers that blocked social and economic advancement in the Southern slave-based society. As Lincoln put it:

  Again: as has already been said, there is not, of necessity, any such thing as the free hired laborer being fixed to that condition for life. Many independent men everywhere in these States, a few years back in their lives, were hired laborers. The prudent, penniless beginner in the world, labors for wages awhile, saves a surplus with which to buy tools or land for himself; then labors on his own account another while, and at length hires another new beginner to help him. This is the just, and generous, and prosperous system, which opens the way to all—gives hope to all, and consequent energy, and progress, and improvement of condition to all. No men living are more worthy to be trusted than those who toil up from poverty—none less inclined to take, or touch, aught which they have not honestly earned. Let them beware of surrendering a political power which they already possess, and which, if surrendered, will surely be used to close the door of advancement against such as they, and to fix new disabilities and burdens upon them, till all of liberty shall be lost.

  Lincoln’s famous peroration reminded Congress that its members were obliged to continue supporting the war not just to put down a surprisingly strong rebellion, but to ensure the triumph of freedom and opportunity for future generations: “The struggle of today is not altogether for today—it is for a vast future also. With a reliance on Providence, all the more firm and earnest, let us proceed in the great task which events have devolved upon us.”

  Lincoln returned to this argument the following year in his second and most famous Annual Message to Congress. In that message he described the commitment to save the Union in almost biblical terms, though the arguments were the same as they had been in 1861.

  Fellow-citizens, we cannot escape history. We of this Congress and this administration, will be remembered in spite of ourselves. No personal significance, or insignificance, can spare one or another of us. The fiery trial through which we pass, will light us down, in honor or dishonor, to the latest generation. We say we are for the Union. The world will not forget that we say this. We know how to save the Union. The world knows we do know how to save it. We—even we here—hold the power, and bear the responsibility. In giving freedom to the slave, we assure freedom to the free—honorable alike in what we give, and what we preserve. We shall nobly save, or meanly lose, the last best, hope of earth.

  In 1863 Lincoln introduced the idea of a “new birth of freedom” in the United States. In doing so, he placed greater emphasis on the immorality of the Southern slave system in contrast to the free labor system of the North. Now he was urgently committed to the immediate and permanent abolition of slavery throughout the United States. This was not a new cause; instead, it was an expanded commitment to the belief that liberty, freedom, and economic opportunity were inseparable. Lincoln, our most philosophic president, called all Americans to battle for this universalist ideal for the American nation as well as for all nations of the world. Eighty years later, another president in the midst of World War II echoed and expanded these sentiments in describing the commitments of Americans to support the right of all people everywhere in the world to enjoy freedom of speech, freedom of religion, freedom from want, and freedom from fear.

  In order to achieve his “new birth of freedom” by saving the Union and abolishing slavery, Lincoln understood that he first needed to win the war. Lincoln accepted his expanded responsibility as commander in chief, which meant both defeating the rebels on the battlefield and providing the economic tools of war on the home front.

  Before 1861 the federal government was limited in size and scope. The budget of the executive branch of the government reflected a small number of employees engaged in a minimalist level of activity. Even the military and foreign service offices were small in size and activity. The annual federal budget before 1861 was funded almost exclusively by tariff revenues from imported goods. There was only a tiny federal army. When Lincoln arrived in Washington on February 23, 1861, there were few, if any, federal soldiers in the nation’s capital. Lincoln was a largely unprotected president until the first contingent of New York militia arrived in Washington in April 1861. They were originally scheduled to remain for only ninety days.

  The new tasks Lincoln, his cabinet, and his generals faced were unprecedented, and they would never be able to carry them out by relying on a federal government and military at their existing sizes. It quickly became clear that the war demanded an increase in US federal government activities—both military and civilian. The first and foremost task was creating from scratch a large and disciplined army. Securing funds to enable the federal government to conduct the war was even more important.

  Expanding the size of the government and the army could have easily ignited a backlash from the Northern public. Fortunately, however, Lincoln brought to the presidency a brilliant record in managing “public sentiment,” honed by decades of experience influencing individual judges, juries, and both small and large audiences of potential voters. He was a skillful political practitioner—wise in the ways of gaining widespread support from voters in political campaigns. He was the most effective national politician in using the newspapers to get his messages to the public. He also drew on his ability to manage individual and small-group sentiment to build a cabinet capable of managing a rapidly growing federal government and winning the war. He successfully persuaded his most ardent political rivals in the contest for the 1860 Republican presidential nomination—William Seward, Salmon Chase, and Edward Bates—to join his cabinet, along with other talented men such as Edwin Stanton and Gideon Welles.

  Nor did Lincoln shy away from taking the steps needed to fund a larger government. He had spent his political life as a devoted advocate of the Whig Party’s Hamiltonian tradition of active federal management of the financial affairs of the nation. He did not hesitate to act directly to provide the national government with the money needed to pay for the war. Lincoln and his secretary of the treasury, Salmon P. Chase, secured approval of legislation on February 25, 1862, that authorized the issuance of national notes convertible into government bonds redeemable in five to twenty years. Lincoln’s administration could now print federal money (greenbacks) and issue federal bonds. Lincoln also persuaded Congress to pass legislation to create the nation’s first income tax. These financial programs provided the federal gove
rnment with an ongoing source of funds to pay the Union’s soldiers and sailors and provide them with food, supplies, and weapons. As Lincoln explained in his Annual Message to Congress of 1862: “In no other way could the payment of the troops, and the satisfaction of other just demands, be so economically, or so well provided for.”

  When Lincoln took office as president on March 4, 1861, he also assumed the role of chief executive officer of the American economy. The increasing prosperity of the North, during the war and most particularly between 1863 and 1865, was one of the most significant factors leading to eventual Union victory. By 1864 the gross national product of the Union states was $4,019,000,000—larger than the combined GNP of the North and South in 1860. Lincoln’s National Banking Act of 1863 provided the financial underpinning of the federal government’s conduct of the war. In June 1863 there were only 66 national banks. By 1864–1865 the number had increased to 1,294. The new national banks were required to purchase and concurrently deposit US bonds with the Treasury before issuing notes to customers, a policy that provided ready cash to the government to conduct the war.

  Federal government expenditures rose from $475,000,000 in 1862 to $1,298,000,000 in 1864, the last full year of the war. Nearly all of the federal debt was financed internally. Personal bank savings, which were already substantial in 1860, increased year by year during the war. The savings banks invested their deposits in government notes and bonds. Individuals purchased government bonds directly. Government receipts increased so substantially that they covered the rapidly rising costs of government.

  The war brought a substantial increase in federal government activities, civilian as well as military. First, there was a major increase in direct expenditures to pay the soldiers and sailors and the civil personnel directly engaged in the war. In addition, Lincoln and his advisers raised and spent unprecedented amounts of money to pay for munitions and supplies and ships to conduct the war. For the first time in the life of the Republic, federal government expenditures provided a substantial stimulus to the private economy. Lincoln’s wartime economic policies had a profound impact on the growth of the American economy. The Northern economy went through a period of difficult readjustment in 1861 and 1862. But by 1863 federal wartime expenditure to supply and support the Northern armies had created what can only be described as booming economic growth throughout the Northern states.