Test Bank for Pearson’s Federal Taxation 2019 Corporations, Partnerships, Estates and Trus

Test Bank for Pearson’s Federal

Taxation 2019 Corporations,
Partnerships, Estates and Trusts, 32nd
Edition, Timothy J. Rupert, Kenneth E.
Anderson
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client wants to minimize her estate taxes while passing the greatest value possible to her descendants,
you would not suggest that she leave the majority of her estate to charity and only a few hundred
thousand dollars to her descendants. Although this would reduce her estate tax liability to zero, it would
be inconsistent with her objective of allowing her descendants to receive as much after-tax wealth as
possible.
Page Ref.: C:1-2; Example C:1-2
Objective: 1

2
Copyright © 2019 Pearson Education, Inc.
LO2: Steps in the Tax Research Process

1) Identify which of the following statements is true.

A) Tax planning is an integral part of both closed-fact situations and open-fact situations.
B) The first step in conducting tax research is to clearly understand the issues involved.
C) The Statements on Standards for Tax Services recommend that only written tax advice be provided to
the client in all situations.
D) All of the above are false.
Answer: C
Page Ref.: C:1-3 through C:1-5
Objective: 2

2) Describe the format of a client memo.

Answer: A client memo should include a statement of the facts, a list of issues, a discussion of relevant
authority, analysis, and recommendations of appropriate actions to the client based on the research
results.
Page Ref.: See Additional Comment page C:1-4
Objective: 2

3) Outline and discuss the tax research process.

Answer: 1) The facts must be determined. However, some facts may not have occurred in an open-
fact situation. Where facts have not yet occurred, it is useful to review tax research material to determine
which facts would produce the most favorable outcome.
2) The issues must be determined. The issues may not always be clear and may be different than the
client believes. Thus, only a thorough understanding of the facts permits an adequate formulation of the
issues.
3) Determine which authorities are applicable.
4) Evaluate the authorities. Choose the ones to follow when there are conflicting authorities.
5) Communicate the result to the client. The communication with the client should not result in a
misunderstanding. While discussions with the client may be suitable, it is recommended by the AICPA's
Statements on Standards for Tax Services that the communication be written where issues are important,
unusual or complicated. Many firms require that conclusions be communicated in writing.
Page Ref.: C:1-4
Objective: 2

LO3: Importance of the Facts to the Tax Consequences

1) There are no questions for this section.

3
Copyright © 2019 Pearson Education, Inc.
LO4: The Sources of Tax Law

1) The Internal Revenue Code of 1986 contains the current version of the tax law.
Answer: TRUE
Page Ref.: C:1-8
Objective: 4

2) Regulations issued prior to the latest tax legislation dealing with a specific Code section are still
effective to the extent they do not conflict with the provisions in the new legislation.
Answer: TRUE
Page Ref.: C:1-9
Objective: 4

3) Final regulations have almost the same legislative weight as the IRC.
Answer: TRUE
Page Ref.: C:1-10
Objective: 4

4) A revenue ruling is issued by the Internal Revenue Service only in response to a verbal inquiry by a
taxpayer.
Answer: FALSE
Page Ref.: C:1-12
Objective: 4

5) Taxpayers must pay the disputed tax prior to filing a case with the Tax Court.
Answer: FALSE
Page Ref.: C:1-14
Objective: 4

6) Appeals from the U.S. Tax Court are to the Court of Appeals for the Federal Circuit.
Answer: FALSE
Page Ref.: C:1-14
Objective: 4

7) Appeals from the Court of Appeals go to the Supreme Court under a writ of certiorari. The Supreme
Court decides whether or not they will hear the case.
Answer: TRUE
Page Ref.: C:1-14
Objective: 4

8) When the Tax Court follows the opinion of the circuit court of appeals to which the case is appealable,
the court is following the
A) Golsen rule.
B) Acquiescence rule.
C) Forum shopping rule.
D) Conformity rule.
Answer: A
Page Ref.: C:1-21
Objective: 4

4
Copyright © 2019 Pearson Education, Inc.
9) Which of the following citations denotes a regular decision of the Tax Court?
A) 41 TCM 1272
B) 35 T.C. 1083 (2003)
C) 39 AFTR 2d 77-640
D) all of the above
Answer: B
Page Ref.: C:1-17
Objective: 4

10) The primary citation for a federal circuit court of appeals case would be
A) 40 AFTR 2d 78-1234.
B) 44 F.Supp. 403.
C) 3 F.3d 134.
D) 79-2 USTC & 9693.
Answer: C
Page Ref.: C:1-20
Objective: 4

11) You have the following citation: Joel Munro, 92 T.C. 71 (1989). Which of the following statements is
true?
A) The taxpayer, Joel Munro, won the case because there is no reference to the IRS.
B) The case appears on page 71 in Volume 92 of the official Tax Court of the United States Reports and
the case was decided in 1989.
C) This citation refers to a taxpayer conference between the IRS and the taxpayer.
D) The case was tried in 1989 and was appealed in 1992.
Answer: B
Page Ref.: C:1-17
Objective: 4

12) The term "tax law" includes

A) legislation.
B) treasury regulations.
C) judicial decisions.
D) all of the above
Answer: D
Page Ref.: C:1-7
Objective: 4

13) Identify which of the following statements is false.

A) When tax advisors speak of the "tax law," they usually have in mind just the Internal Revenue Code.
B) Members from both the House and the Senate are on the Conference Committee.
C) Records of committee hearings are helpful in determining Congressional intent.
D) All of the above are false.
Answer: A
Page Ref.: C:1-7
Objective: 4

5
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Another random document with
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future as they have been in the past, if you so will it. The reverse may
bring disaster on every portion of the country; and if you will have it
thus, we will invoke the God of our fathers, who delivered them from
the power of the lion, to protect us from the ravages of the bear, and
thus, putting our trust in God, and to our firm hearts and strong
arms we will vindicate the right as best we may.
In the course of my service here, associated at different times with
a great variety of Senators, I see now around me some with whom I
have served long; there have been points of collision, but whatever of
offense there has been to me I leave here; I carry with me no hostile
remembrance. Whatever offense I have given which has not been
redressed, or for which satisfaction has not been demanded, I have,
Senators, in this hour of our parting, to offer you an apology for any
harm which, in the heat of discussion, I have inflicted. I go hence
unencumbered of any injury received, and having discharged the
duty of making the only reparation in my power for any injury
offered.
Mr. President and Senators, having made the announcement
which the occasion seemed to me to require, it only remains for me
to bid you a final adieu.
 Speech of the Hon. Henry Wilson of
Massachusetts

In the canvass against Horace Greeley at Richmond, Ind., August 3,

1872.

AN ABSTRACT.

Gentlemen, standing here to-day, in this presence, among these

liberty-loving, patriotic men and women of Wayne county, I want to
call your attention for a few moments to what we have struggled for
in the past.
Nearly forty years ago, when the slave power dominated the
country—when the dark shadow of human slavery fell upon us all
here in the North—there arose a body of conscientious men and
women who proclaimed the doctrine that emancipation was the duty
of the master and the right of the slave; they proclaimed it to be a
duty to let the oppressed go free. Rewards were offered—they were
denounced, mobbed—violence pervaded the land. Yet these faithful
ones maintained with fidelity, against all odds, the sublime creed of
human liberty. The struggle, commencing forty years ago against the
assumptions and dominations of the slave power, went on from one
step to another—the slave power went right on to the conquest of the
country—promises were broken, without regard to constitutions or
laws of the human race. The work went on till the people, in their
majesty, in 1860, went to the ballot-box and made Abraham Lincoln
President of the United States. [Cheers.] Then came a great trial; that
trial was whether we should do battle for the principles of eternal
right, and maintain the cause of liberty, or surrender; whether we
would be true to our principles or false. We stood firm—stood by the
sacred cause—and then the slave power plunged the country into a
godless rebellion.
Then came another trial, testing the manhood, the courage, the
sublime fidelity of the lovers of liberty in the country. We met that
test as we had met every other test—trusting in God, trusting in the
people—willing to stand or fall by our principles. Through four years
of blood we maintained those principles; we broke down the
rebellion, restored a broken Union, and vindicated the authority and
power of the nation. In that struggle Indiana played a glorious part in
the field, and her voice in the councils of the nation had great and
deserved influence. [Cheers.]
Now, gentlemen, measured by the high standard of fidelity to
country, of patriotism, the great political party to which we belong
to-day was as true to the country in war as it had been in peace—true
to the country every time, and on all occasions.
Not only true to the country, but the Republican party was true to
liberty. It struck the fetters from the bondman, and elevated four and
a half millions of men from chattel-hood to manhood; gave them
civil rights, gave them political rights, and gave them part and parcel
of the power of the country. [Applause.]
Now, gentlemen, here to-day, I point to this record—this great
record—and say to you, that, measured by the standard of patriotism
—one of the greatest and grandest standards by which to measure
public men, political organizations or nations—measured by that
standard which the whole world recognizes, the Republican party of
the United States stands before the world with none, to accuse it of
want of fidelity to country. [Cheers.] Measured by the standard of
liberty, equal, universal, impartial liberty—liberty to all races, all
colors and all nationalities—the Republican party stands to-day
before the country pre-eminently the party of universal liberty.
[Loud cheers.] Measured by the standard of humanity—that
humanity that stoops down and lifts up the poor and lowly, the
oppressed and the castaways, the poor, struggling sons and
daughters of toil and misfortune—measured by that standard, the
Republican party stands before this country to-day without a peer in
our history, or in the history of any other people. [Renewed and
general applause.] We have gone further, embraced more, lifted up
lowlier men, carried them to a higher elevation, labored amid
obloquy and reproach to lift up the despised and lowly nations of the
earth than any political organization that the sun ever shone upon.
And then, gentlemen, tested by the support of all the great ideas
that tend to lift up humanity, to pull none down, to lift all up, to carry
the country upward and forward, ever toward God, the Republican
party of the country has been, and now is, to-day, in advance of any
political organization the world knows.
Gentlemen, I am not here to maintain that this great party, with its
three and a half millions of voters, tested and tried as it has been
during twelve years—I am not here to say that it has made no
mistakes. We have committed errors; we could not always see what
the right was; we failed sometimes; but, gentlemen, take our record—
take it as it stands—it is a bright and glorious record, that any man,
or set of men, may be proud of. We have stood, and we stand to-day,
on the side of man, and on the side of the ideas God has given us in
His Holy Word. [Applause.] There has not been a day since by the
labors, the prayers and the sacrifices of the old anti-slavery men and
women of the country, from 1830 to 1855—during twenty-five years
—I say to you, gentlemen, here, to-day, that this party, the product of
these prayers, and these sacrifices, and these efforts—with all its
faults—has been true to patriotism, true to liberty, true to justice,
true to humanity, true to Christian civilization. [Cheers.]
I say to you here to-day, that all along during this time, the
Democratic party carried the banners of slavery. Whenever the slave
power desired anything they got it. They wielded the entire power of
the nation, until, in their arrogance, when we elected Abraham
Lincoln, they plunged the country into the fire and blood of the
greatest civil war recorded in history. After the war all the measures
inaugurated for emancipation—to make the country free—to lift an
emancipated race up—to give them instruction and make them
citizens—to give them civil rights and make them voters—to put
them on an equality with the rest of the people—to every one of that
series of thirty or forty measures the Democratic party gave their
President unqualified and united opposition. Well, now, we have
been accustomed to say that they were mistaken, misinformed, that
they were honest—that they believed what they did; but, gentlemen,
if they have believed what they have said, that they have acted
according to their convictions from 1832 to 1872—a period of forty
years—can they be honest, to-day, in indorsing the Cincinnati
platform—in supporting Horace Greeley? [“No, no!”]
Why, we have read of sudden and miraculous conversions. We
read of St. Paul’s conversion, of the light that shone around him, but
I ask you, in the history of the human family have you ever known
three millions of men—three millions of great sinners for forty years
—[laughter]—three millions of men, all convicted, all converted, and
all changed in the twinkling of an eye. [Renewed laughter.] Why,
gentlemen, if it is so, for one I will lift up my eyes and my heart to
God, that those sinners, that this great political party that has been
for forty years, every time and all the time, on every question and on
all questions pertaining to the human race and the rights of the
colored race, on the wrong side—on the side of injustice, oppression
and inhumanity—on the side that has been against man, and against
God’s holy word; I say, gentlemen, that I will lift up my heart in
gratitude to God that these men have suddenly repented.
Why, I have been accustomed to think that the greatest victory the
Republican party would ever be called upon to win—and I knew it
would win it, because the Republican party, as Napoleon said of his
armies, are accustomed to sleep on the field of victory. The
Republican party—that always won—always ought to win, because it
is on the right side; and when it is defeated, it only falls back to
gather strength to advance again. [Applause.] I did suppose that the
greatest task it would ever have, greater than putting down the
rebellion, greater than emancipating four millions of men, greater
than lifting them up to civil rights—greater than all its grand deeds—
would be the conviction and conversion of the Democratic party of
the United States. [Laughter and cheers.] Just as we are going into a
Presidential election—when it was certain that if the Republican
party said and affirmed, said by its members, said altogether, that its
ideas, its principles, its policy, its measures, were stronger than were
the political organization of the Democrats. I say, just as we are going
into the contest, when it was certain that we would break down and
crush out its ideas, and take its flags and disband it, and out of the
wreck we would gather hundreds of thousands of changed and
converted men, the best part of the body—just at that time some of
our men are so anxious to embrace somebody that has always been
wrong that they start out at once in a wild hunt to clasp hands with
our enemies and to save the Democratic party from absolute
annihilation. [Laughter.] To do what they want us is to disband.
Well, gentlemen, I suppose there are some here to-day that belonged
to the grand old Army of the Potomac. If when Lee had retreated on
Richmond, and Phil. Sheridan sent back to Grant that if he pushed
things he would capture the army—if, instead of sending back to
Sheridan, as Grant did, “Push things,” he had said to him, “Let us
disband the Army of the Potomac; don’t hurt the feelings of these
retreating men; let us clasp hands with them,” what would have been
the result? I suppose there are some of you here to-day that followed
Sherman—that were with him in his terrible march from
Chattanooga to Atlanta—with him in that great march from Atlanta
to the sea—what would you have thought of him if, when you came in
sight of the Atlantic ocean, you had had orders to disband before the
banners of the rebellion had disappeared from the Southern
heavens?
I tell you, to-day, this movement of a portion of our forces is this
and nothing more. I would as soon have disbanded that Army of the
Potomac after Sheridan’s ride through the valley of the Shenandoah,
or when Sherman had reached the sea, as to disband the Republican
party to-day. The time has not come. [Loud and continued applause.]
I am not making a mere partisan appeal to you. I believe in this
Republican party, and, if I know myself, rather than see it defeated
to-day—rather than see the government pass out of its hands—I
would sacrifice anything on earth in my possession, even life itself.
[Loud applause] I have seen brave and good men—patriotic, liberty-
loving, God-fearing men—I have seen them die for the cause of the
country—for the ideas we profess, and I tell you to-day, with all the
faults of the Republican party—and it has had faults and has made
some mistakes—I say to you that I believe upon my conscience its
defeat would be a disaster to the country, and would be a stain upon
our record. It would bring upon us—we might say what we pleased,
our enemies would claim it, and the world would record it—that this
great, patriotic, liberty-loving Republican party of the United States,
after all its great labors and great history, had been weighed in the
balances and found wanting, and condemned by the American
people.
 Well, gentlemen, I choose, if it is to fall, to fall with it. I became an
anti-slavery man in 1835. In 1836 I tied myself, pledged myself, to do
all I could to overthrow the slave power of my country. During all
these years I have never given a vote, uttered a word, or written a line
that I did not suppose tended to this result. I invoke you old anti-
slavery men here to-day—and I know I am speaking to men who have
been engaged in the cause—I implore you men who have been true in
the past, no matter what the men or their natures are, to stand with
the grand organization of the Republican party—be true to its cause
and fight its battles—if we are defeated, let us accept the defeat as
best we may; if we are victorious, let us make our future more
glorious than the past. If we fail, let us have the proud consciousness
that we have been faithful to our principles, true to our convictions;
that we go down with our flag flying—that we go down trusting in
God that our country may become, what we have striven to make it,
the foremost nation on the globe. [Immense applause.]
 Speech of Senator Oliver P. Morton, of
Indiana,

On the National Idea, at Providence, R. I.

The distinguished orator was introduced by Senator Anthony, and
made an extended speech, from which we take the more pertinent
paragraphs:
From this proposition two corollaries have been adduced from
time to time, and I must say with great force of logic. The first is that
this Union is composed of sovereign and independent States who
have simply entered into a compact for particular purposes, and the
government is merely their agent; that any State has the right to
withdraw from the Union at pleasure, or whenever in its judgment
the terms of the compact have been violated, or the interests of the
State require its withdrawal. The second is that each State has the
right to nullify any law of Congress which, in the judgment of the
State, is in violation of the compact by which the government was
formed. This doctrine has been the evil genius of the country from
the foundation of our government. It may be said to be the devil in
our political system. It has been our danger from the first. It is the
rock in the straits, and we fear that the end is not yet. Now what can
we oppose to this doctrine? We oppose what we call “the national
idea.” We assume that this government was formed by the
governments of the United States in their aggregate and in their
primary capacity. We assume that, instead of there being thirty-
seven nations, there is but one; instead of there being thirty-seven
sovereignties, there is but one sovereignty. We assume that the
States are not sovereign, but that they are integral and subordinate
parts of one great country. I may be asked the question here, “Are
there no State rights? Would you override the States? Would you
obliterate State lines?” I answer, “No.” I answer that this doctrine is
the only doctrine that can preserve the peace of this nation and
preserve the rights of the States. I answer that there is a vast body of
State rights guaranteed and secured by the Constitution of the
United States, by the same Constitution that created and upholds the
government of the United States; that these State rights have the
same guarantee that the rights of the National Government have,
equally entitled to the protection of the Supreme Court, springing
out of the same instrument, and that one set of rights are just as
sacred as the other. Some confound the idea of State sovereignty and
State rights as being one and the same thing. Others seem to suppose
that State rights are only consistent with State sovereignty, and
cannot exist except upon the theory of State sovereignty; while I
assume that State rights are consistent with National sovereignty,
and are safest under the protection of the nation. The Constitution
gives one class of rights to the government of the United States. They
are specified, and they carry with them all the rights that are
indispensable and necessary to their full execution and enjoyment.
The rest are to be held and enjoyed by the States, or reserved to the
people. The States have their rights by the agreement of the nation.
That seems to be the important truth that is so often overlooked, that
the rights of the States, sacred and unapproachable, are sacred by the
agreement of the nation, as much so as are the powers that are
conferred upon the government of the United States, that the States
derive their powers from the same source, viz: The Constitution of
the United States. That Constitution says that the government shall
have one class of powers, and that other powers shall be gained by
the States, to be enjoyed by them or reserved to the people. In the
consideration of this question, we must reflect that the nation had
assembled in convention in 1787, and there formed a government,
there declared what rights should be given to the National
Government, and what rights should be reserved to the States, and
that, in either case, the grant and guarantee is an act of national
sovereignty by the people in convention assembled. When we shall
embrace this idea fully, all the danger of centralization will pass
away, though we discard the idea of State sovereignty.
I do not differ so much with many gentlemen in regard to what the
rights of the States are. I differ with them in regard to the titles by
which they hold them. I say that so far as State rights are concerned,
and the rights of the government, that we are not to go back beyond
the period of 1787, when the Constitution was formed. The rights of
the elder States, and of Rhode Island as she has them now, are to be
dated from the formation of the Constitution. Then they came into
convention. They had the right to make any sort of government they
pleased, and they did. And in that government they guarantied and
secured to the States the great body of rights in regard to local and
domestic government, but it was the agreement of the nation at that
time. So far as the new States are concerned, they are to come in on
an equality. They are to have the same rights with the old; and this
theory would be impossible of execution except upon the idea that
the rights of the States and of the National Government are to be
determined from the action that was taken at that time. The difficulty
had been in regard to this theory of State sovereignty, and the
assumed right of secession and of nullification was the result. They
assumed that these States existed as nations separate and distinct
before that time, and that they only loaned a portion of their rights
for a particular purpose. This is the base of that theory; while we
assume that the people were acting together at that time in their
aggregate capacity, raising a system of government, giving the United
States certain powers, and providing that the States should hold and
enjoy the rest, excepting those that were reserved to the people. The
preservation of local self-government is essential to the liberties of
this nation. Nobody endorses that sentiment more strongly than I
do. Nobody will stand by the rights of the States more firmly than I
will. I hold that their rights are consistent with national sovereignty,
and that national sovereignty is consistent with the rights of the
States, and I deny that these rights are the result of inherent original
State sovereignty. In other words, we differ in regard to the title.
What the States should have, and what the government should have,
was settled by the act of the nation in convention in 1787, changed to
some extent by the adoption of amendments since that time. It is not
enough for a party to deny the right of secession. It is not enough for
a party to deny the right of nullification. They must go further. They
must deny the doctrine of State sovereignty; for as long as that
doctrine is admitted, these other things will spring up spontaneously
from it, and whenever the occasion allows it. If we were to admit that
the States were sovereign, then we would be bound to say that
Webster did not answer Hayne, and that Webster and Hayne never
answered Calhoun. If once it is admitted that the States are
sovereign, it is hard to resist the corollaries to which I have referred,
that they have the right to secede, and that they have the right to
nullify.
The doctrine of nationality planted deep in the hearts of the
American people is our only sheet-anchor of safety for the future.
Our country is greatly extended, from the tropical to the arctic
regions, with every variety of climate, soil, and productions, with
different commercial and manufacturing interests. The States on the
Pacific slopes are separated from those on this side of the Rocky
Mountains by fifteen hundred miles of mountain and desert. They
have a different commerce from what you have, almost an
independent commerce. Their commerce will be with China, Japan,
Australia, the western countries of South America, and the islands of
the Southern Pacific. It is now but in its infancy, but it bids fair to
develop into colossal proportions, and may change the commercial
aspect of the world. We know not what feelings of independence may
arise in those States in time to come. It is difficult to deny the effect
that may be produced by the separation of vast States with a different
commerce acting in conjunction with forced theories of the origin
and laws of our government. In saying this I will cast no imputation
upon the loyalty of those States. They are now as loyal as any, and
were during the war. But we can imagine that what has been may be
again. And we can understand what may be the danger of this
doctrine, if it should still maintain its hold in the minds of the
American people, when conflicting interests arise, and conflicting
notions arise as to what may be the interests of the people; as in 1812
a war was brought about which was regarded as being fatal to the
interests of the New England States, they took their position upon it.
We have had a law which was regarded in South Carolina as being
fatal to her interests, and she took her position upon it. This doctrine
was again seized by slavery in 1861, and the rebellion was brought
on. And what may happen in the far future upon the eastern and
western coasts, upon the northern and southern extremities of our
nation, we cannot tell.
The idea that we are a nation, that we are one people, undivided
and indivisible, should be a plank in the platform of every party. It
should be printed on the banner of every party. It should be taught in
every school, academy, and college. It should be the political North
Star by which every political manager should steer his bark. It should
be the central idea of American politics, and every child, so to speak,
should be vaccinated with this idea, so that he may be protected
against this political distemper that has brought such calamity upon
our country. Were the mind of the nation, so to speak, fully saturated
with this sentiment of nationality, that we are but one people,
undivided and indivisible, there would be no danger though our
boundaries came to embrace the entire continent. It is therefore of
the utmost importance that it should be taught and inculcated upon
all occasions. What the sun is in the heavens, diffusing light, and life,
and warmth, and by its subtle influence holding the planets in their
orbits and preserving the harmony of the universe—such is the
sentiment of nationality in a nation, diffusing light and protection in
every part, holding the faces of Americans always toward their home,
protecting the States in the exercise of their just powers, and
preserving the harmony and prosperity of all.
We must have a nation. It is a necessity of our political existence,
and we find the countries of the Old World now aspiring for
nationality. Italy, after a long absence, has returned. Rome has again
become the centre and the capital of a great nation. The bleeding
fragments of the beautiful land have been bound up together, and
Italy again resumes her place among the nations. And we find the
great Germanic family has been sighing for a nationality. That race,
whose overmastering civilization is acknowledged by all the world,
has hitherto been divided into petty Principalities and States, such as
Virginia and South Carolina aspire to be, but now are coming
together and asserting their unity, their national existence, and are
now able to dominate all the nations of Europe. We should then
cherish this idea, that while the States have their rights sacred and
unapproachable, which we should guard with untiring vigilance,
never permitting an encroachment, and remembering that such
encroachment is as much a violation of the Constitution of the
United States as to encroach upon the rights of the general
Government, still bearing in mind that the States are but subordinate
parts of one great nation, and that the nation is over, all even as God
is over the universe. Without entering into any of the consequences
that flow from this doctrine, allow me for to-night to refer to that
great national attribute, that great national duty—the duty and the
power to protect the citizen in the enjoyment of life, liberty, and
property. If the Government of the United States has not the power
to protect the citizens of the United States in the enjoyment of life,
liberty, and property in cases where the States fail, or refuse, or are
unable to grant protection, then that Government should be
amended, or should give place to a better. Great Britain sent forth a
costly and powerful expedition to Abyssinia to rescue four British
subjects who had been captured and imprisoned by the government
of that country. She has recently threatened Greece with war, if she
did not use all her power to bring to justice two brigands who had
lately murdered two British subjects. These things are greatly to the
honor of Great Britain. And our Government threatened Austria with
war if she did not release Martin Kosta, who had declared his
intention to become a citizen of the United States, and was therefore
protected by the Government of the United States. More recently we
have made war upon Corea, a province in Asia, and slaughtered her
people, and battered down her forts, because Americans shipwrecked
upon her coast were murdered and the government had refused to
give satisfaction for it. And if a mob in London should murder half a
dozen American citizens, we would call upon that government to use
all its power to bring the murderers to punishment, and if Great
Britain did not do so, it would be regarded as a cause of war. And yet
some people entertain the idea that our Government has the power
to protect its citizens everywhere except upon its own soil. The idea
that I would advocate, the doctrine that I would urge as being the
only true and national one, flowing inevitably from national
sovereignty, is that our Government has the right to protect her
citizens in the enjoyment of life, liberty, and property wherever the
flag floats, whether at home or abroad.
Speech of Hon. J. Proctor Knott, of Kentucky,

Delivered in the House of Representatives on the St. Croix and

Superior Land Grant, January 21, 1871.
The house having under consideration the joint resolution (S. R.
No. 11) extending the time to construct a railroad from St. Croix river
or lake to the west end of Lake Superior and to Bayfield—
Mr. Knott said: Mr. Speaker—If I could be actuated by any
conceivable inducement to betray the sacred trust in me by those to
whose generous confidence I am indebted for the honor of a seat on
this floor; if I could be influenced by any possible consideration to
become instrumental in giving away, in violation of their known
wishes any portion of their interest in the public domain for the mere
promotion of any railroad enterprise whatever, I should certainly feel
a strong inclination to give this measure my most earnest and hearty
support; for I am assured that its success would materially enhance
the pecuniary prosperity of some of the most valued friends I have on
earth; friends for whose accommodation I would be willing to make
almost any sacrifice not involving my personal honor or my fidelity
as the trustee of an express trust. And that act of itself would be
sufficient to countervail almost any objection I might entertain to the
passage of this bill not inspired by any imperative and inexorable
sense of public duty.
But, independent of the seductive influences of private friendship,
to which I admit I am, perhaps, as susceptible as any of the
gentlemen I see around me, the intrinsic merits of the measure itself
are of such an extraordinary character as to commend it most
strongly to the favorable consideration of every member of this
house, myself not excepted, notwithstanding my constituents, in
whose behalf alone I am acting here, would not be benefited by its
passage one particle more than they would be by a project to
cultivate an orange grove on the bleakest summit of Greenland’s icy
mountains.
Now, sir, as to those great trunk lines of railways, spanning the
continent from ocean to ocean, I confess my mind has never been
fully made up. It is true they may afford some trifling advantages to
local traffic, and they may even in time become the channels of a
more extended commerce. Yet I have never been thoroughly satisfied
either of the necessity or expediency of projects promising such
meagre results to the great body of our people. But with regard to the
transcendent merits of the gigantic enterprise contemplated in this
bill, I have never entertained the shadow of a doubt.
Years ago, when I first heard that there was somewhere in the vast
terra incognita, somewhere in the bleak regions of the great
northwest, a stream of water known to the nomadic inhabitants of
the neighborhood as the river St. Croix, I became satisfied that the
construction of a railroad from that raging torrent to some point in
the civilized world was essential to the happiness and prosperity of
the American people if not absolutely indispensable to the perpetuity
of republican institutions on this continent. I felt instinctively that
the boundless resources of that prolific region of sand and pine
shrubbery would never be fully developed without a railroad
constructed and equipped at the expense of the government, and
perhaps not then. I had an abiding presentiment that, some day or
other, the people of this whole country, irrespective of party
affiliations, regardless of sectional prejudices, and “without
distinction of race, color, or previous condition of servitude,” would
rise in their majesty and demand an outlet for the enormous
agricultural productions of those vast and fertile pine barrens,
drained in the rainy season by the surging waters of the turbid St.
Croix.
These impressions, derived simply and solely from the “eternal
fitness of things,” were not only strengthened by the interesting and
eloquent debate on this bill, to which I listened with so much
pleasure the other day, but intensified, if possible, as I read over this
morning, the lively colloquy which took place on that occasion, as I
find it reported in last Friday’s Globe. I will ask the indulgence of the
house while I read a few short passages, which are sufficient, in my
judgment, to place the merits of the great enterprise, contemplated
in the measure now under discussion, beyond all possible
controversy.
The honorable gentleman from Minnesota (Mr. Wilson), who, I
believe, is managing this bill, in speaking of the character of the
country through which this railroad is to pass, says this:
“We want to have the timber brought to us as cheaply as possible.
Now, if you tie up the lands, in this way, so that no title can be
obtained to them—for no settler will go on these lands, for he cannot
make a living—you deprive us of the benefit of that timber.”
Now, sir, I would not have it by any means inferred from this that
the gentleman from Minnesota would insinuate that the people out
in this section desire this timber merely for the purpose of fencing up
their farms so that their stock may not wander off and die of
starvation among the bleak hills of St. Croix. I read it for no such
purpose, sir, and make no comment on it myself. In corroboration of
this statement of the gentleman from Minnesota, I find this
testimony given by the honorable gentleman from Wisconsin (Mr.
Washburn). Speaking of these same lands, he says:
“Under the bill, as amended by my friend from Minnesota, nine-
tenths of the land is open to actual settlers at $2.50 per acre; the
remaining one tenth is pine-timbered land, that is not fit for
settlement, and never will be settled upon; but the timber will be cut
off. I admit that it is the most valuable portion of the grant, for most
of the grant is not valuable. It is quite valueless; and if you put in this
amendment of the gentleman from Indiana you may as well just kill
the bill, for no man and no company will take the grant and build the
road.”
I simply pause here to ask some gentleman better versed in the
science of mathematics than I am, to tell me if the timbered lands are
in fact the most valuable portion of that section of country, and they
would be entirely valueless without the timber that is in them, what
the remainder of the land is worth which has no timber on it at all?
But, further on, I find a most entertaining and instructive
interchange of views between the gentleman from Arkansas (Mr.
Rogers), the gentleman from Wisconsin (Mr. Washburn), and the
gentleman from Maine (Mr. Peters), upon the subject of pine lands
generally, which I will tax the patience of the house to read:
 “Mr. Rogers—Will the gentleman allow me to ask him a question?
“Mr. Washburn, of Wisconsin—Certainly.
“Mr. Rogers—Are these pine lands entirely worthless except for
timber?
“Mr. Washburn, of Wisconsin—They are generally worthless for
any other purpose. I am personally familiar with that subject. These
lands are not valuable for purposes of settlement.
“Mr. Farnsworth—They will be after the timber is taken off.
“Mr. Washburn, of Wisconsin—No, sir.
“Mr. Rogers—I want to know the character of these pine lands.
“Mr. Washburn, of Wisconsin—They are generally sandy, barren
lands. My friend from the Green Bay district (Mr. Sawyer) is himself
perfectly familiar with this question, and he will bear me out in what
I say, that these timber lands are not adapted to settlement.
“Mr. Rogers—The pine lands to which I am accustomed are
generally very good. What I want to know is, what is the difference
between our pine lands and your pine lands?
“Mr. Washburn, of Wisconsin—The pine timber of Wisconsin
generally grows upon barren, sandy land. The gentleman from Maine
(Mr. Peters) who is familiar with pine lands, will, I have no doubt,
say that pine timber grows generally upon the most barren lands.”
“Mr. Peters—As a general thing pine lands are not worth much for
cultivation.”
And further on I find this pregnant question the joint production
of the two gentlemen from Wisconsin.
“Mr. Paine—Does my friend from Indiana suppose that in any
event settlers will occupy and cultivate these pine lands?
“Mr. Washburn, of Wisconsin—Particularly without a railroad.”
Yes, sir, “particularly without a railroad.” It will be asked after
awhile, I am afraid, if settlers will go anywhere unless the
government builds a railroad for them to go on.
I desire to call attention to only one more statement, which I think
sufficient to settle the question. It is one made by the gentleman
from Wisconsin (Mr. Paine), who says:
 “These lands will be abandoned for the present. It may be that at
some remote period there will spring up in that region a new kind of
agriculture, which will cause a demand for these particular lands;
and they may then come into use and be valuable for agricultural
purposes. But I know, and I cannot help thinking that my friend
from Indiana understands that, for the present, and for many years
to come, these pine lands can have no possible value other than that
arising from the pine timber which stands on them.”
Now, sir, who, after listening to this emphatic and unequivocal
testimony of these intelligent, competent and able-bodied witnesses,
who that is not as incredulous as St. Thomas himself, will doubt for a
moment that the Goshen of America is to be found in the sandy
valleys and upon the pine-clad hills of the St. Croix? Who will have
the hardihood to rise in his seat on this floor and assert that,
excepting the pine bushes, the entire region would not produce
vegetation enough in ten years to fatten a grasshopper? Where is the
patriot who is willing that his country shall incur the peril of
remaining another day without the amplest railroad connection with
such an inexhaustible mine of agricultural wealth? Who will answer
for the consequences of abandoning a great and warlike people, in
the possession of a country like that, to brood over the indifference
and neglect of their government? How long would it be before they
would take to studying the Declaration of Independence and
hatching out the damnable heresy of secession? How long before the
grim demon of civil discord would rear again his horrid head in our
midst, “gnash loud his iron fangs and shake his crest of bristling
bayonets?”
Then, sir, think of the long and painful process of reconstruction
that must follow with its concomitant amendments to the
constitution, the seventeenth, eighteenth and nineteenth articles.
The sixteenth, it is of course understood, is to be appropriated to
those blushing damsels who are, day after day, beseeching us to let
them vote, hold office, drink cocktails, ride a-straddle, and do
everything else the men do. But above all, sir, let me implore you to
reflect for a single moment on the deplorable condition of our
country in case of a foreign war, with all our ports blockaded, all our
cities in a state or siege, the gaunt specter of famine brooding like a
hungry vulture over our starving land; our commissary stores all
exhausted, and our famishing armies withering away in the field, a
helpless prey to the insatiate demon of hunger; our navy rotting in
the docks for want of provisions for our gallant seamen, and we
without any railroad communication whatever with the prolific pine
thickets of the St. Croix.
Ah, sir, I could very well understand why my amiable friends from
Pennsylvania (Mr. Myers, Mr. Kelley and Mr. O’Neill) should be so
earnest in their support of this bill the other day; and if their
honorable colleague, my friend, Mr. Randall, will pardon the remark,
I will say I consider his criticism of their action on that occasion as
not only unjust, but ungenerous. I knew they were looking forward
with a far-reaching ken of enlightened statesmanship to the pitiable
condition in which Philadelphia will be left unless speedily supplied
with railroad connection in some way or other with this garden spot
of the universe. And beside, sir, this discussion has relieved my mind
of a mystery that has weighed upon it like an incubus for years. I
could never understand before why there was so much excitement
during the last Congress over the acquisition of Alta Vela. I could
never understand why it was that some of our ablest statesmen and
most disinterested patriots should entertain such dark forebodings of
the untold calamities that were to befall our beloved country unless
we should take immediate possession of that desirable island. But I
see now that they were laboring under the mistaken impression that
the government would need the guano to manure the public lands on
the St. Croix.
Now, sir, I repeat, I have been satisfied for years that if there was
any portion of the inhabited globe absolutely in a suffering condition
for want of a railroad it was these teeming pine barrens of the St.
Croix. At what particular point on that noble stream such a road
should be commenced I knew was immaterial, and it seems so to
have been considered by the draughtsman of this bill. It might be up
at the spring or down at the foot-log, or the water-gate, or the fish-
dam, or anywhere along the bank, no matter where. But in what
direction should it run, or where it should terminate, were always to
my mind questions of the most painful perplexity. I could conceive of
no place on “God’s green earth” in such straitened circumstances for
railroad facilities as to be likely to desire or willing to accept such a
connection. I knew that neither Bayfield nor Superior city would
have it, for they both indignantly spurned the munificence of the
government when coupled with such ignominious conditions, and let
this very same land grant die on their hands years and years ago
rather than submit to the degradation of a direct communication by
railroad with the piny woods of the St. Croix; and I knew that what
the enterprising inhabitants of those giant young cities would refuse
to take would have few charms for others, whatever their necessities
or cupidity might be.
Hence as I have said, sir, I was utterly at a loss to determine where
the terminus of this great and indispensable road should be, until I
accidentally overheard some gentleman the other day mention the
name of “Duluth.”
Duluth! The word fell upon my ear with a peculiar and
indescribable charm, like the gentle murmur of a low fountain
stealing forth in the midst of roses; or the soft, sweet accents of an
angel’s whisper in the bright, joyous dream of sleeping innocence.
“Duluth!” ’Twas the name for which my soul had panted for years,
as the hart panteth for the water-brooks. But where was Duluth?
Never in all my limited reading, had my vision been gladdened by
seeing the celestial word in print. And I felt a profound humiliation
in my ignorance that its dulcet syllables had never before ravished
my delighted ear. I was certain the draughtsman in this bill had
never heard of it or it would have been designated as one of the
termini of this road. I asked my friends about it, but they knew
nothing of it. I rushed to the library, and examined all the maps I
could find. I discovered in one of them a delicate hairlike line,
diverging from the Mississippi near a place marked Prescott, which, I
supposed, was intended to represent the river St. Croix, but, could
nowhere find Duluth. Nevertheless, I was confident it existed
somewhere, and that its discovery would constitute the crowning
glory of the present century, if not of all modern times. I knew it was
bound to exist in the very nature of things; that the symmetry and
perfection of our planetary system would be incomplete without it.
That the elements of maternal nature would since have resolved
themselves back into original chaos if there had been such a hiatus in
creation as would have resulted from leaving out Duluth! In fact, sir,
I was overwhelmed with the conviction that Duluth not only existed
somewhere, but that wherever it was, it was a great and glorious
place. I was convinced that the greatest calamity that ever befell the
benighted nations of the ancient world was in their having passed
away without a knowledge of the actual existence of Duluth; that
their fabled Atlantis, never seen save by the hallowed vision of the
inspired poesy, was, in fact, but another name for Duluth; that the
golden orchard of the Hesperides, was but a poetical synonym for the
beer-gardens in the vicinity of Duluth. I was certain that Herodotus
had died a miserable death, because in all his travels and with all his
geographical research he had never heard of Duluth. I knew that if
the immortal spirit of Homer could look down from another heaven
than that created by his own celestial genius upon the long lines of
pilgrims from every nation of the earth to the gushing fountain of
poesy opened by the touch of his magic wand, if he could be
permitted to behold the vast assemblage of grand and glorious
productions of the lyric art called into being by his own inspired
strains, he would weep tears of bitter anguish that, instead of
lavishing all the stores of his mighty genius upon the fall of Illion, it
had not been his more blessed lot to crystalize in deathless song the
rising glories of Duluth. Yes, sir, had it not been for this map, kindly
furnished me by the legislature of Minnesota, I might have gone
down to my obscure and humble grave in an agony of despair,
because I could nowhere find Duluth. Had such been my melancholy
fate, I have no doubt that with the last feeble pulsation of my
breaking heart, with the last faint exhalation of my fleeting breath, I
should have whispered, “Where is Duluth?”
But, thanks to the beneficence of that band of ministering angels
who have their bright abodes in the far-off capital of Minnesota, just
as the agony of my anxiety was about to culminate in the frenzy of
despair, this blessed map was placed in my hands; and as I unfolded
it a resplendent scene of ineffable glory opened before me, such as I
imagined burst upon the enraptured vision of the wandering peri
through the opening gates of Paradise. There, there, for the first
time, my enchanted eye rested upon the ravishing word, “Duluth!”
This map, sir, is intended, as it appears from its title, to illustrate the
position of Duluth in the United States; but if gentlemen will
examine it, I think they will concur with me in the opinion, that it is
far too modest in its pretensions. It not only illustrates the position
of Duluth in the United States, but exhibits its relations with all
created things. It even goes further than this. It hits the shadowy vale
of futurity, and affords us a view of the golden prospects of Duluth
far along the dim vista of ages yet to come.
If gentlemen will examine it, they will find Duluth not only in the
center of the map, but represented in the center of a series of
concentric circles one hundred miles apart, and some of them as
much as four thousand miles in diameter, embracing alike, in their
tremendous sweep the fragrant savannas of the sunlit South and the
eternal solitudes of snow that mantle the ice-bound North. How
these circles were produced is perhaps one of those primordial
mysteries that the most skilled paleologist will never be able to
explain. But the fact is, sir, Duluth is pre-eminently a central point,
for I am told by gentlemen who have been so reckless of their own
personal safety as to venture away into those awful regions where
Duluth is supposed to be, that it is so exactly in the center of the
visible universe that the sky comes down at precisely the same
distance all around it.
I find, by reference to this map, that Duluth is situated somewhere
near the western end of Lake Superior, but as there is no dot or other
mark indicating its exact location, I am unable to say whether it is
actually confined to any particular spot, or whether “it is just lying
around there loose.” I really cannot tell whether it is one of those
ethereal creations of intellectual frostwork, more intangible than the
rose-tinted clouds of a summer sunset; one of those airy exhalations
of the speculator’s brain which, I am told, are very flitting in the form
of towns and cities along those lines of railroad, built with
government subsidies, luring the unwary settler as the mirage of the
desert lures the famishing traveler on, and ever on, until it fades
away in the darkening horizon; or whether it is a real, bona fide,
substantial city, all “staked off,” with the lots marked with their
owners’ names, like that proud commercial metropolis recently
discovered on the desirable shores of San Domingo. But, however
that may be, I am satisfied Duluth is there, or thereabouts, for I see it
stated here on the map that it is exactly thirty-nine hundred and
ninety miles from Liverpool, though I have no doubt, for the sake of
convenience, it will be moved back ten miles, so as to make the
distance an even four thousand.
Then, sir, there is the climate of Duluth, unquestionably the most
salubrious and delightful to be found anywhere on the Lord’s earth.
Now, I have always been under the impression, as I presume other
gentlemen have, that in the region around Lake Superior it was cold
enough for at least nine months in the year to freeze the smoke-stack
off a locomotive. But I see it represented on this map that Duluth is
situated exactly half way between the latitudes of Paris and Venice,
so that gentlemen who have inhaled the exhilarating air of the one,
or basked in the golden sunlight of the other, may see at a glance that
Duluth must be the place of untold delight, a terrestrial paradise,
fanned by the balmy zephyrs of an eternal spring, clothed in the
gorgeous sheen of ever blooming flowers, and vocal with the silvery
melody of nature’s choicest songsters. In fact sir, since I have seen
this map, I have no doubt that Byron was vainly endeavoring to
convey some faint conception of the delicious charms of Duluth
when his poetic soul gushed forth, in the rippling strains of that
beautiful rhapsody—
“Know ye the land of the cedar and the vine,
Whence the flowers ever blossom, the beams ever shine;
Where the light wings of Zephyr, oppressed with perfume,
Wax faint o’er the gardens of Gul in her bloom;
Where the citron and olive are fairest of fruit,
And the voice of the nightingale never is mute;
Where the tints of the earth and the hues of the sky,
In color though varied, in beauty may vie?”

As to the commercial resources of Duluth, sir, they are simply

illimitable and inexhaustible, as is shown by this map. I see it stated
here that there is a vast scope of territory, embracing an area of over
two millions of square miles, rich in every element of material wealth
and commercial prosperity, all tributary to Duluth. Look at it, sir,
(pointing to the map.) Here are inexhaustible mines of gold,
immeasurable veins of silver, impenetrable depths of boundless
forest, vast coal measures, wide extended plains of richest pasturage
—all, all embraced in this vast territory—which must, in the very
nature of things, empty the untold treasures of its commerce into the
lap of Duluth. Look at it, sir, (pointing to the map); do not you see
from these broad, brown lines drawn around this immense territory,
that the enterprising inhabitants of Duluth intend some day to
inclose it all in one vast corral, so that its commerce will be bound to
go there whether it would or not? And here, sir, (still pointing to the
map), I find within a convenient distance the Piegan Indians, which,
of all the many accessories to the glory of Duluth, I consider by far
the most inestimable. For, sir, I have been told that when the small-
pox breaks out among the women and children of the famous tribe,
as it sometimes does, they afford the finest subjects in the world for
the strategical experiments of any enterprising military hero who
desires to improve himself in the noble art of war, especially for any
valiant lieutenant-general whose
“Trenchant blade, Toledo trusty,
For want of fighting has grown rusty,
And eats into itself for lack,
Of somebody to hew and hack.”

Sir, the great conflict now raging in the Old World has presented a
phenomenon in military science unprecedented in the annals of
mankind, a phenomenon that has reversed all the traditions of the
past as it has disappointed all the expectations of the present. A great
and warlike people, renowned alike for their skill and valor, have
been swept away before the triumphant advance of an inferior foe,
like autumn stubble before a hurricane of fire. For aught I know the
next flash of electric fire that simmers along the ocean cable may tell
us that Paris, with every fibre quivering with the agony of impotent
despair, writhes beneath the conquering heel of her loathed invader.
Ere another moon shall wax and wane, the brightest star in the
galaxy of nations may fall from the zenith of her glory never to rise
again. Ere the modest violets of early spring shall ope their
beauteous eyes, the genius of civilization may chant the wailing
requiem of the proudest nationality the world has ever seen, as she
scatters her withered and tear-moistened lilies o’er the bloody tomb
of butchered France. But, sir, I wish to ask if you honestly and
candidly believe that the Dutch would have overrun the French in
that kind of style if General Sheridan had not gone over there, and
told King William and Von Moltke how he had managed to whip the
Piegan Indians.
And here, sir, recurring to this map, I find in the immediate
vicinity of the Piegans “vast herds of buffalo” and “immense fields of
rich wheat lands.” [Here the hammer fell.]
[Many cries: “Go on!” “go on!”]
 The Speaker—Is there any objection to the gentleman from
Kentucky continuing his remarks? The chair hears none. The
gentleman will proceed.
Mr. Knott—I was remarking, sir, upon these vast “wheat fields”
represented on this map in the immediate neighborhood of the
buffaloes and Piegans, and was about to say that the idea of there
being these immense wheat fields in the very heart of a wilderness,
hundreds and hundreds of miles beyond the utmost verge of
civilization, may appear to some gentlemen as rather incongruous, as
rather too great a strain on the “blankets” of veracity. But to my mind
there is no difficulty in the matter whatever. The phenomenon is very
easily accounted for. It is evident, sir, that the Piegans sowed that
wheat there and ploughed it in with buffalo bulls. Now, sir, this
fortunate combination of buffaloes and Piegans, considering their
relative positions to each other and to Duluth, as they are arranged
on this map, satisfies me that Duluth is destined to be the best
market of the world. Here, you will observe, (pointing to the map),
are the buffaloes, directly between the Piegans and Duluth; and here,
right on the road to Duluth, are the Creeks. Now, sir, when the
buffaloes are sufficiently fat from grazing on those immense wheat
fields, you see it will be the easiest thing in the world for the Piegans
to drive them on down, stay all night with their friends, the Creeks,
and go into Duluth in the morning. I think I see them, now, sir, a vast
herd of buffaloes, with their heads down, their eyes glaring, their
nostrils dilated, their tongues out, and their tails curled over their
backs, tearing along toward Duluth, with about a thousand Piegans
on their grass-bellied ponies, yelling at their heels! On they come!
And as they sweep past the Creeks, they join in the chase, and away
they all go, yelling, bellowing, ripping and tearing along, amid clouds
of dust, until the last buffalo is safely penned in the stock-yards at
Duluth.
Sir, I might stand here for hours and hours, and expatiate with
rapture upon the gorgeous prospects of Duluth, as depicted upon this
map. But human life is too short, and the time of this house far too
valuable to allow me to linger longer upon this delightful theme. I
think every gentleman upon this floor is as well satisfied as I am that
Duluth is destined to become the commercial metropolis of the
universe and that this road should be built at once. I am fully
persuaded that no patriotic representative of the American people,
who has a proper appreciation of the associated glories of Duluth and
the St. Croix, will hesitate a moment that every able-bodied female in
the land, between the ages of eighteen and forty-five, who is in favor
of “woman’s rights,” should be drafted and set to work upon this
great work without delay. Nevertheless, sir, it grieves my very soul to
be compelled to say that I cannot vote for the grant of lands provided
for in this bill.
Ah, sir, you can have no conception of the poignancy of my
anguish that I am deprived of that blessed privilege! There are two
insuperable obstacles in the way. In the first place my constituents,
for whom I am acting here, have no more interest in this road than
they have in the great question of culinary taste now, perhaps,
agitating the public mind of Dominica, as to whether the illustrious
commissioners, who recently left this capital for that free and
enlightened republic, would be better fricasseed, boiled, or roasted,
and, in the second place, these lands, which I am asked to give away,
alas, are not mine to bestow! My relation to them is simply that of
trustee to an express trust. And shall I ever betray that trust? Never,
sir! Rather perish Duluth! Perish the paragon of cities! Rather let the
freezing cyclones of the bleak northwest bury it forever beneath the
eddying sands of the raging St. Croix.
 Henry Carey’s Speech on the Rates of
Interest.

In the Pennsylvania Constitutional Convention, 1873.

In the Constitutional Convention, in Committee of the Whole on
the article reported from the Committee on Agriculture, Mining,
Manufactures, and Commerce, the first section being as follows:—“In
the absence of special contracts the legal rate of interest and discount
shall be seven per centum per annum, but special contracts for
higher or lower rates shall be lawful. All national and other banks of
issue shall be restricted to the rate of seven per centum per annum.”
Mr. H. C. Carey made an address in favor of striking out the section.
The following is an abstract of his remarks:—
Precisely a century and a half since, in 1723, the General Assembly
of Pennsylvania reduced the legal charge for the use of money from
eight to six per cent. per annum. This was a great step in the
direction of civilization, proving, as it did, that the labor of the
present was obtaining increased power over accumulations of the
past, the laborer approaching toward equality with the capitalist. At
that point it has since remained, with, however, some change in the
penalties which had been then prescribed for violations of the law.
Throughout the recent war the financial policy of the National
Government so greatly favored the money-borrower and the laborer
as to have afforded reason for believing that the actual rate of
interest was about to fall permanently below the legal one, with the
effect of speedily causing usury laws to fall into entire disuse. Since
its close, however, under a mistaken idea that such was the real road
to resumption, all the Treasury operation of favoring the money-
lender; the result exhibiting itself in the facts that combinations are
being everywhere formed for raising the price of money; that the
long loans of the past are being daily more and more superseded by
the call loans of the present; that manufacturer and merchant are
more and more fleeced by Shylocks who would gladly take “the
pound of flesh nearest the heart” from all over whom they are
enabled to obtain control.
Anxious for the perpetuation of this unhappy state of things, these
latter now invite their victims to give their aid towards leveling the
barriers by which they themselves are even yet to a considerable
extent protected, assuring them that further grant of power will be
followed by greater moderation in its exercise. Misled thereby,
money borrowers, traders, and manufacturers are seen uniting, year
after year with their common enemy in the effort at obtaining a
repeal of the laws in regard to money, under which the State has so
greatly prospered. Happily our working men, farmers, mechanics,
and laborers fail to see that advantage is likely to accrue to them
from a change whose obvious tendency is that of increasing the
power of the few who have money to lend over the many who need to
borrow; and hence it is that their Representatives at Harrisburg have
so steadily closed their ears against the siren song by which it is
sought to lead their constituents to give their aid to the work of their
own destruction.
Under these circumstances is it that we are now asked to give place
in the organic law to a provision by means of which this deplorable
system is to be made permanent, the Legislature being thereby
prohibited, be the necessity what it may, from placing any restraint
upon the few who now control the supply of the most important of all
the machinery of commerce, as against the many whose existence,
and that of their wives and children, is dependent upon the obtaining
the use thereof on such terms as shall not from year to year cause
them to become more and more mere tools in the hands of the
already rich. This being the first time in the world’s history that any
such idea has been suggested, it may be well, before determining on
its adoption, to study what has been elsewhere done in this direction,
and what has been the result.
Mr. Carey then proceeded to quote at great length from recent and
able writers the results that had followed in England from the
adoption of the proposition now before the convention. These may
be summed up as the charging of enormous rates of interest, the
London joint stock banks making dividends among their
stockholders to the extent of twenty, thirty, and almost forty per
cent., the whole of which has ultimately to be taken from the wages
of labor employed in manufactures, or in agriculture. At no time, said
Mr. Carey, in Britain’s history, have pauperism and usury traveled so
closely hand in hand together; the rich growing rich to an extent that,
till now, would have been regarded as fabulous, and the
wretchedness of the poor having grown in like proportion.
After discussing the effects of the repeal of the usury laws in some
of the American States, Mr. Carey continued:—
“We may be told, however, that at times money is abundant, and
that even so late as last summer it was difficult to obtain legal
interest. Such certainly was the case with those who desired to put it
out on call; but at that very moment those who needed to obtain the
use of money for long periods were being taxed, even on securities of
unexceptionable character, at double, or more than double, the legal
rates. The whole tendency of the existing system is in the direction of
annihilating the disposition for making those permanent loans of
money by means of which the people of other countries are enabled
to carry into effect operations tending to secure to themselves control
of the world’s commerce. Under that system there is, and there can
be, none of that stability in the price of money required for carrying
out such operations.
Leaving out of view the recent great combination for the
maintenance and perpetuation of slavery, there has been none so
powerful, none so dangerous as that which now exists among those
who, having obtained a complete control of the money power, are
laboring to obtain legal recognition of the right of capital to perfect
freedom as regards all the measures to which it may be pleased to
resort for the purpose of obtaining more perfect control over labor.
Already several of the States have to some extent yielded to the
pressure that has been brought to bear upon them. Chief among
these is Massachusetts, the usury laws having there been totally
repealed, and with the effect, says a distinguished citizen of that
State, that “all the savings institutions of the city at once raised the
rate from six to seven per cent.; those out of the city to seven and a
half and eight per cent. and there was no rate too high for the greedy.
The consequence,” as he continues, “has been disastrous to industrial
pursuits. Of farming towns in my county, more than one quarter
have diminished in population.” Rates per day have now to a great
extent, as I am assured, superseded the old rates per month or year;
two cents per day, or $7.30 per annum, having become the charge for
securities of the highest order. What, under such circumstances,
must be the rate for paper of those who, sound and solvent as they
may be, cannot furnish such security, may readily be imagined. Let
the monopoly system be maintained and the rate, even at its
headquarters, New England, will attain a far higher point than any
that has yet been reached; this, too, in despite of the fact that her
people had so promptly secured to themselves a third of the whole
circulation allowed to the 40,000,000 of the population of the Union
scattered throughout almost a continent. How greatly they value the
power that has been thus obtained is proved by the fact that to every
effort at inducing them to surrender, for advantage of the West or
South, any portion thereof, has met with resistance so determined
that nothing has been yet accomplished.
Abandonment of our present policy is strongly urged upon us for
the reason that mortgages bear in New York a higher rate of interest.
A Pennsylvanian in any of the northern counties has, as we are told,
but to cross the line to obtain the best security at seven per cent.
Why, however, is it that his neighbors find themselves compelled to
go abroad when desirous of obtaining money on such security? The
answer to this question is found in the fact that the taxation of
mortgages is there so great as to absorb from half to two-thirds of the
interest promised to be paid.
Again, we are told that Ohio legalizes “special contracts” up to
eight per cent. and, that if we would prevent the efflux of capital we
must follow in the same direction. Is there, however, in the exhibit
now made by that State, anything to warrant us in so doing? Like
Pennsylvania, she has abundant coal and ore. She has two large
cities, the one fronting on the Ohio, and the other on the lakes, giving
her more natural facilities for maintaining commerce than are
possessed by Pennsylvania; and yet, while the addition to her
population in the last decade was but 306,000, that of Pennsylvania
was 615,000. In that time she added 900 to her railroad mileage,
Pennsylvania meantime adding 2,500. While her capital engaged in
manufactures rose from 57 to 141 millions, that of Pennsylvania grew
from 109 to 406, the mere increase of the one being more than fifty
per cent. in excess of the total of the other. May we find in these