After the Panic of 1837, the US was experiencing a sustained economic downturn forcing President Van Buren to propose a cut back on federal spending to maintain a balanced budget. This proposal was backed by Secretary of Treasury, Levi Woodbury’s 1838 annual report. In its 1838 annual report, the Treasury department estimated that the expected revenue for 1839 barring any unforeseen events would be about 19 or 20 million including revenue from both duties and bonds. The estimate included an anticipated reduction in the receipts of lands and duties that started in 1836. The reduction was due to a planned reduction in tariffs that would see revenue go from around 17 million in 1835 to about 10 or 12 million in 1842. Based on an expected increase in expenditure for 1839, the department was projecting a budget short fall in budget. On October 12, 1837, Congress authorized the issue of $10 million in Treasury Notes in denominations of at least $50, but more was needed. Without future legislation to increase revenue, the Treasury department reported that budget cuts would be needed.
Even with the budget cuts, the Treasury department suggested that permanent legislation was needed to bring in additional revenue. To maintain the public’s faith in the credit of the United States, the treasury needed to have a surplus of monies put aside for contingencies. In recent years, some of that surplus came from Indian monies that was kept in the state banks, but new legislation was needed. In 1836, Congress passed a bill authorizing the power to issue Treasury Notes, but that was for a limited time and now permanent legislation was needed to sustain the public credit.
President Van Buren shared these sentiments with Congress in his State of the Union Address that year. President Van Buren explained to Congress that based on receipts from customs and land sales along with Treasury Notes, would be nearly $30 million while expenditures were estimated to be $40 million leaving a difference of about $10 million. $8 million of this was expected to be offset by the sale of Treasury notes and the remaining $2 million was to come out of the existing cash on hand leaving the Treasury without a surplus. Van Buren reiterated, the department’s warning about the planned reduction of tariffs, something the public was vehemently in favor of and suggested to Congress that any appropriations “not immediately required for the ordinary public service or for any pressing emergency” be postponed.
Here is President Martin Van Buren's except from this 1838 State of the Union Address on the Treasury Department's report.
“The available balance in the Treasury on the 1st of January next is estimated at $2,765,342. The receipts of the year from customs and lands will probably amount to $20,615,598. These usual sources of revenue have been increased by an issue of Treasury notes, of which less than $8,000,000, including interest and principal, will be outstanding at the end of the year, and by the sale of one of the bonds of the Bank of the United States for $2,254,871. The aggregate of means from these and other sources, with the balance on hand on the 1st of January last, has been applied to the payment of appropriations by Congress. The whole expenditure for the year on their account, including the redemption of more than eight millions of Treasury notes, constitutes an aggregate of about $40,000,000, and will still leave in the Treasury the balance before stated.Nearly $8,000,000 of Treasury notes are to be paid during the coming year in addition to the ordinary appropriations for the support of Government. For both these purposes the resources of the Treasury will undoubtedly be sufficient if the charges upon it are not increased beyond the annual estimates. No excess, however, is likely to exist. Nor can the postponed installment of the surplus revenue be deposited with the States nor any considerable appropriations beyond the estimates be made without causing a deficiency in the Treasury. The great caution, advisable at all times, of limiting appropriations to the wants of the public service is rendered necessary at present by the prospective and rapid reduction of the tariff, while the vigilant jealousy evidently excited among the people by the occurrences of the last few years assures us that they expect from their representatives, and will sustain them in the exercise of, the most rigid economy. Much can be effected by postponing appropriations not immediately required for the ordinary public service or for any pressing emergency, and much by reducing the expenditures where the entire and immediate accomplishment of the objects in view is not indispensable.”
Resources
"Second Annual Message." Second Annual Message | The American Presidency Project, 3 Dec. 1838, https://www.presidency.ucsb.edu/documents/second-annual-message-4
United States. Department of the Treasury. "Report on the Finances, December 1838," Annual Report of the Secretary of the Treasury on the State of the Finances (1838). https://fraser.stlouisfed.org/title/194/item/5483, accessed on November 6, 2024.
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