There was much more financial legislation in 1862; but Chase continued to stand aside and allow Congress the lead in establishing an excise law, an increase in the income tax, and a higher tariff--the last of which was necessitated by the excise law which has been described as a bill "that taxed everything."To enable American manufacturers to bear the excise duties levied upon their business, protection was evoked to secure them the possession of their field by excluding foreign competition. All these taxes, however, produced but a fraction of the Government's revenue. Borrowing, the favorite method of the Secretary, was accepted by Congress as the main resource. It is computed that by means of taxation there was raised in the course of the war $667,163,247.00, while during the same period the Government borrowed $2,621,916,786.00.
Whatever else he may think of Chase, no one denies that in 1862he had other interests besides finance. Lincoln's Cabinet in those days was far from an harmonious body. All through its history there was a Chase faction and a Seward faction. The former had behind them the Radical Republicans, while the latter relied upon the support of the moderates. This division in the Republican party runs deep through the politics of the time.
There seems to be good reason to think that Chase was not taken by surprise when his radical allies in Congress, in December, 1862, demanded of Lincoln the removal of Seward. It will be remembered that the elections of the autumn of 1862 had gone against Lincoln. At this moment of dismay, the friends of Chase struck their blow. Seward instantly offered his resignation.
But Lincoln skillfully temporized. Thereupon, Chase also resigned. Judging from the scanty evidence we have of his intention, we may conclude that he thought he had Lincoln in a corner and that he expected either to become first minister or the avowed chief of an irresistible opposition. But he seems to have gone too fast for his followers. Lincoln had met them, together with his Cabinet, in a conference in December, 1862, and frankly discussed the situation, with the result that some of them wavered. When Lincoln informed both Seward and Chase that he declined to accept their resignations, both returned--Seward with alacrity, Chase with reluctance. One of the clues to Lincoln's cabinet policy was his determination to keep both these factions committed to the Government, without allowing himself to be under the thumb of either.
During the six months following the cabinet crisis Chase appears at his best. A stupendous difficulty lay before him and he attacked it manfully. The Government's deficit was $276,900,000.
Of the loans authorized in 1862--the "five-twenties" as they were called, bringing six per cent and to run from five to twenty years at the Government's pleasure---the sales had brought in, to December, 1862, only $23,750,000, though five hundred million had been expected. The banks in declining to handle these bonds laid the blame on the Secretary, who had insisted that all purchasers should take them at par.
