%343.  The Specie Circular.%—­Speculation in government land was so general that the annual sales rose from $2,300,000 in 1831, to $24,900,000 in 1836.[2] Finding that these great purchases were paid for not in gold and silver, but in state bank paper money, Jackson became alarmed.  Many of the banks were of doubtful soundness, and if they failed, all their money which the government had taken for land would be lost.  In 1836, therefore, Jackson issued his “Specie Circular,” which commanded all officials authorized to sell government land to receive payment in nothing but gold or silver or land scrip.  A great demand for specie and a removal of it from the banks in the East to those in the West followed, which of course hurt the Eastern banks, because it took away some of their money, and that kind of money which they were holding for the purpose of redeeming their paper.

[Footnote 2:  Shepard’s Van Buren, Chap. 8; Sumner’s Jackson, pp. 322-325]

Another thing which hurt the banks, by forcing them to stop loaning and to call for a settlement of debts, was the distribution of the surplus revenue among the states.

%344.  The Surplus Revenue.%—­What caused this surplus revenue?  Many things.

1.  The United States had no debt.  The national debt, you remember, was created in 1790 by funding the foreign and Congress debt and assuming those of the states, and amounted to $75,000,000.  When Jefferson was elected President in 1801, this debt had risen to $80,000,000; but during his administration it fell to $57,000,000.  The war with England raised it to $127,000,000, after which it once more decreased year by year till 1835, when every dollar was paid off, and the United States was out of debt[1].

[Footnote 1:  As bonds, etc., to the value of $35,000 were never presented for payment, the United States appears to have always been in debt.  This $35,000 probably represents evidences of indebtedness lost by the owners]

2.  The expenses of the government were not large.

3.  There was a heavy importation of foreign goods, which produced a great revenue under the tariff act.

4.  The immense speculation in government lands already described produced a large income to the government[1].

[Footnote 1:  The land sales were $4,800,000 in 1834, $14,757,000 in 1835, and $24,877,000 in 1836]

In consequence of these causes, the government on June 1, 1836, had in the banks $41,500,000 more than it needed.

What to do with this useless money sorely puzzled Congress.  It could not reduce the tariff, because that was gradually being reduced under the compromise of 1833.  Some wanted the money derived from the sale of land distributed.  But at last it was decided to take all the surplus the government had on January 1, 1837, subtract $5,000,000 from it, and divide the rest by the number of senators and representatives in Congress, and give each state as many parts as it had senators and representatives[1].