clerical service. Therefore the monthly record of efficiency is greatly superior to the haphazard results of the competitive examinationBut this record of efficiency counts for only 20 percent, while the competitive result counts for 80 percent. 12

Rosencrans recommended that the relative weights of efficiency reports and examinations be reversed. He also complained about the problem of promoting clerks when no openings appeared at the upper levels and asked for higher pay for all the employees in his operation. 13

Rosencrans' comments reflect the small size of his operation, for the total number of employees in the Register's office was 108 in 1892. He had intimate knowledge of those employees which was demonstrated in a letter written to the Secretary of the Treasury, elaborating on a report by the Captain of the Watch discussing a safe used for currency being prepared for destruction which was found open. Investigation showed that because the room where the safe was located had been overfilled with currency from the Treasurer's Office, another place for storing the money had to be found. The clerk in charge had not locked the door of the safe, and he returned to do so later. The currency was recounted, with no losses recorded, and Rosencrans exonerated the man in charge of the safe by stating, "he was and is esteemed as a man of strict integrity." 14

Rosencrans was able to comment about the clerical staff in general, "to testify to the zeal and fidelity with which, generally, they have performed their duty, clerks sometimes cheerfully doing work as messengers and even laborers in handling and moving files, when our already inadequate force of messengers and laborers was weakened by casualties." 15 Such were the pleasures of working at a time when the scale of government operations was quite small.

Along with civil service reform during the 1880's, the nation was also engrossed in debates over the use of silver as a form of money, and tariff reform. There was pressure for changes to be made in these two areas, because the surplus in the Treasury was beginning to accumulate again. In 1882, Treasury Secretary Charles J. Folger

14 W.S. Rosencrans, Letter to the Secretary of the Treasury, (Washington, D.C.: in the files of the Bureau of Public Debt, October 15, 1888). U.S. Govt., Report of the Register of the Treasury, 1889.

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15

remarked, "What now perplexes the Secretary is not where from he may get revenue and enough for the pressing needs of the government, but whereby he shall turn back into the flow of business the more than enough for those needs, that has been drawn from the people." 16 President Grover Cleveland (1885-1889) was able to keep expenditures down, so further debt reduction was possible. But by 1887 all of the callable debt had been paid, leaving only the prospect of open market purchases at a premium. All Secretaries of the Treasury disliked this practice, as it wasted tax money. Unfortunately, a sinking-fund law required annual retirements of debt, so in fiscal years 1888 and 1889, the Treasury purchased about $170 million of its securities, paying a premium of about $26 million. There were also proposals to distribute the surplus to the states, to use it for internal improvements and to pay out veterans' pensions, but Cleveland refused. He sought to eliminate the surplus through reduction of tariff rates, but that suggestion met with little success. In 1889, the Harrison administration (1889-1893) took office, with the contradictory goals of increasing protection and reducing the surplus. The McKinley Tariff of 1890 raised the customs rates on a variety of goods. The duty on raw sugar, however, which had brought in $50 million a year, was eliminated. Not surprisingly, in 1894, the Treasury began showing a deficit which continued for the rest of the century. At the close of fiscal year 1899, the gross debt, including Treasury notes, stood at $1.9 billion. The interest-bearing portion was just over $1 billion. Due to low interest rates, interest paid out during the year was $39.9 million, less than 10 percent of total expenditures. 17 The government ended the century with its finances in very good order.

16 Dewey, Financial History, 415.

17

Studenski and Kroos, Financial History, U.S., 212-235.

Chapter Nine

THE NATIONALIST PERIOD

For the next twenty years (1900-1920), the nation experienced a period of increased governmental activity. The industrial system that had been created over the previous three decades left a variety of social problems. New laws and regulations were passed to handle these problems. The Pure Food and Drug Act, which required the national government to employ more civil servants, was one of these measures. In addition, the Spanish-American War resulted in acquisition of several remote territories which required administration. The Panama Canal was also built during this period. By 1914, Federal expenditures were double what they had been in the 1890s. Gross debt totalled nearly $3 billion, with the interest-bearing portion at just under $1 billion. Interest, however, was very low, at only $23 million, about 3 percent of the total budget.

The Independent Treasury law was still in effect in 1902, although it had been modified to permit, under certain conditions, the deposit of government funds in national banks. Still, in principle, the Treasury was supposed to remain distinct from the banking system. However, the size of Treasury operations made this principle impossible to achieve. Any time the Treasury collected or expended revenues, there was a noticeable impact on the money supply.

Secretary of the Treasury Leslie M. Shaw stated in his annual report in 1906 that the Treasury should conduct its operations with an eye toward having a positive influence on the economy. Financial panics were to be minimized. The Treasury increased its deposits in banks by about $80 million during the panic of 1907, in an effort to help banks remain liquid. Previously, the Knickerbocker Trust Company with $50 million in deposits had suffered a run and had been forced to close, causing runs on other banks.