taxation of such institutions as light as possible. A large amount of the bonds are held by guardians and trustees for orphans and minor children.

This exhibit shows that nearly three fourths of the bonds are either beyond the reach of legitimate taxation, or are so invested as to make a heavy and exceptional taxation impolitic.

Who hold the remainder of the bonds? There seems to be a general impression that a few capitalists of this country hold the bonds. The Democratic press and speakers talk about the "bloated bondholders," the " aristocratic bondholders," etc. From all I have been able to gather on this subject, I am satisfied that comparatively few of the bonds are held by capitalists. I have in my possession a full list of those persons who hold bonds in two great cities of the West,- Chicago and Cincinnati, - and I observe but few capitalists among them. Such men can make better use of their money. They invest in active, speculative enterprises. The individual bondholders are men of smaller means, those who have not quite enough capital to go into business, but who have a little money that they wish to invest for future use, and who put it in bonds to save interest. From the records of the Treasurer's Office in Washington I have obtained a statement of the number of the different denominations of bonds now in existence, and I find that seventy per cent of all the bonds are of the denomination of $1,000 or less; only thirty per cent are of denominations of over $1,000, and these large bonds are mostly held by the banks. Of those held by individuals, more than seventy per cent-probably eighty per cent are in small denominations.

But, all these considerations aside, what will be gained by an exceptional taxation of the bonds? Suppose the Cobb resolution had become a law, and we had levied a tax equal to one per cent on the interest of the bonds. In the first place, this law would be a plain act of repudiation. It would reduce six per cent bonds to five per cent bonds. A five per cent bond is worth but 82 per cent as much as a six per cent bond. Therefore, by taxing the interest one cent on each dollar of the principal, we reduce the value of the property in the hands of the holder 16 per cent. By taxing one cent on the dollar, it is said we save to the treasury $13,000,000 annually. But if that taxation should depreciate the market value of the bonds only

1 See ante, PP. 327-355.

one cent on the dollar, it would take away from the holders $21,000,000; that is, in putting $13,000,000 into the treasury, it would take $21,000,000 out of the pockets of the people.

Now, fellow-citizens, in opposition to all this wretched trickery in finance, I turn with pride and satisfaction to the noble declaration of the Chicago Convention, that the best method of lightening the burdens of taxation is to improve our credit, so that capitalists will seek to lend us money at a lower rate of interest. The average rate of interest throughout Europe is not more than three per cent. We are paying six per cent in gold for all the money that foreigners have loaned us. They buy our bonds at seventy cents on the dollar, and we pay them six cents on each seventy cents they loan us. We pay them five and a half per cent more than they obtain from their European customers. This additional sum is not interest, it is insurance. It is the guaranty which we pay them against their being cheated by repudiation. Every time we pay a million of dollars for interest, we pay more than a million as security to these people that we will not cheat them. If our credit was perfectly good, all this additional price for security would be saved to the treasury. Suppose, too, our credit was as good as a nation as that of Massachusetts is as a State. That little State, through all the darkest days of the war, kept her financial matters in such a condition that, when other States were paying their interest in paper, she paid her creditors, not only according to the letter, but the spirit of her contract. And now witness the result. She negotiated a sterling loan in London, a few months ago, at so great a premium that the interest amounted to but little over three per cent. Her five per cent bonds are to-day worth twenty-one cents on the dollar more than the five per cent gold-bearing bonds of the United States. These things can be explained only on the ground that, in the State of Massachusetts, there are not enough Democrats to get up a respectable effort at repudiation. Could we to-day fund our whole debt on the credit of Massachusetts, we could save four hundred millions of dollars more than by funding it on our own credit. It has been the policy of the Republican party to fund the debt at a lower rate of interest. The funding bill passed by Congress about the close of its last session proposes to obtain loans at four and a half per cent. President Johnson refused his signature to the bill, but a similar one will be passed at the next session of

Congress. Unless the credit of the country is destroyed by the success of the Democratic party or the folly of our own party, we may expect to reduce the whole amount of interest on our public debt at least one third.

Thus, fellow-citizens, may we illustrate the old adage, that honesty is the best policy. For myself, I have long since chosen my course. I prize highly the great confidence and support the people of the Nineteenth District have given me. These are the people who so long sustained Joshua R. Giddings in his struggle for the liberty of all the people. They will not now, I believe, be willing to lower the high standard of morality that has ever characterized them, and become repudiators of the national obligations. But if they do, I should consider myself dishonored by accepting or continuing to hold office on any such terms. Let us maintain the good name and honor of the nation. Its life was saved by the valor of our army and the fidelity of our people. Let us maintain its good name by keeping our engagements with honesty and promptness. In a few years another generation will be here with its seventy-five millions of people, and its sixty billions of wealth. Our population is increasing at the rate of more than three per cent per annum, while our wealth increases at the rate of ten per cent per annum. Twenty years from now the debt will be a light burden to a great, and powerful, and wealthy nation; and our children will pay the last bond with the same affectionate reverence that they will pay the last pension of the last survivor of the great war for the Union.

THE REDUCTION OF THE ARMY.

SPEECH DELIVERED IN THE HOUSE OF REPRESENTATIVES, FEBRUARY 9, 1869.

IN the Fortieth Congress, Mr. Garfield held the chairmanship of the Committee on Military Affairs. On the 9th of July, 1868, he reported from that committee a bill to reduce and fix the military peace establishment, which was debated from time to time, but on which no final action was had. At the next session he said, "It was a well prepared, well considered bill, but it did not seem to meet at all the views of some members of the House, and it was therefore overloaded with amendments of such a character that finally the House was entirely unwilling to act upon it in its amended condition. Hence," he continued, "following the lead of others who desired to cut the army to pieces rather than to make what seems to me to be a reasonable reduction, nothing was done last session." February 5, 1869, he obtained permission of the House to report from his committee an amendment to the Army Appropriation Bill, then pending. The next day he reported the amendment, which was in substance his bill of the previous session. On the 9th of the same month, the House 'being in Committee of the Whole on the Army Appropriation Bill, he discussed the subject of army reduction and organization in the speech following. On the 26th of February, he laid before the House the testimony of army officers, to which he several times refers in his speech, accompanied by a brief report.

The main features of the bill of 1868, and the amendment of 1869, can be gathered from Mr. Garfield's speech. As a whole, his plan failed to pass; but the act making appropriations for the army for the fiscal year ending June 30, 1870, approved March 3, 1869, contained these provisions:

"That there shall be no new commissions, no promotions, and no enlistments in any infantry regiment until the total number of infantry regiments is reduced to twenty-five; and the Secretary of War is hereby directed to consolidate the infantry regiments as rapidly as the requirements of the public service and the reduction of the number of officers

will permit. . . . . That no appointments of Brigadier-Generals shall be made until the number is reduced to less than eight; and thereafter there shall be but eight Brigadier-Generals in the army. . . . . That hereafter the term of enlistment shall be five years. . . . That, until otherwise directed by law, there shall be no new appointments and no promotions in the Adjutant-General's Department, in the Inspector-General's Department, in the Pay Department, in the Quartermaster's Department, in the Commissary Department, in the Ordnance Department, in the Engineer Department, and in the Medical Department."

R. CHAIRMAN, -I desire to state to the committee as briefly as I can the substance of the amendment offered by the Committee on Military Affairs, and to call their attention to the questions involved in the proposed reduction of the army; and as the amendment is likely to meet with some opposition, I shall be greatly obliged if I can have the attention of the committee while I state the conclusions and recommendations of the Committee on Military Affairs, and the grounds of their action.

I wish, in the outset, to say that the committee share to the fullest extent in the general desire and determination of this House to reduce expenditures, and they believe that the extent to which retrenchment ought to be carried should be limited only by the necessities of the public service and the efficiency of the several departments of the government. Retrenchment unwisely made is wastefulness. It is not economy alone that should be considered in reorganizing the army. The committee have proceeded, and I shall proceed, upon the supposition that the question has been settled by Congress that we are to maintain an army of such size and organization as the people are willing to support with their means, and will be proud of as a worthy and valuable instrument of the government. When the army is properly organized, when it is not too large, when it is well officered and well disciplined, it ought to be the pride of every American citizen; it ought to be an institution that we desire to protect; and it is the duty of this House so to adjust and limit its organization that we shall not need to make it the object of every-day attack, but may defend it here while it defends the country and maintains the national honor. It appears to me, therefore, Mr. Chairman, that the preliminary and