Title: Financing the Civil War - Essential Civil War Curriculum
Headings: Financing the Civil War
Financing the Civil War
by Michael A. Martorelli

Content: Financing the Union
Borrowing Money
Prior to 1861, the USA relied on tariffs and custom duties for most of its revenue. A strong sense against accumulating debt characterized administrations from Thomas Jefferson to Franklin Pierce. Only in times of war did the federal government resort to selling bonds or notes to bankers, brokers, and their large customers. When James Buchanan became President in March 1857, the federal debt level was a modest $28 million. The financial panic that gripped the nation later that year led to a sharp decline in revenue from tariffs and duties, and required the Treasury to issue large amounts of bonds and notes to cover the shortfall. President Buchanan also had to rely on borrowed funds to pay for his initiatives involving Cuba and the Mormon territory, as well as the expansions of the Navy and the postal service. Between 1857 and 1861, the Treasury issued more than $142 million worth of bonds and notes; during those years, the federal government ran a cumulative deficit of more than $76 million. [ 1]
In February and March 1861, with secession already in process, the prospects of civil war growing, and the Treasury’s cash position at a very low level, Congress passed two separate bills authorizing the issuance of $35 million worth of government bonds. When Abraham Lincoln took the presidential oath in March 1861, the federal debt stood at the unusually high level of almost $77 million.