Saturday, January 03, 2009

Governor Bouck Sets the Barn on Fire

I was taking a look around to see what I could find on the origins of the dispute between the Barnburners and the Hunkers in New York. Interestingly, there isn’t that much on the details, rooted as they are in the Byzantine intricacies of New York politics. Wikipedia, for example, says only that “The Barnburners were the more radical faction of the New York state Democratic Party in the mid 19th century. . . . The Barnburners opposed expanding the public debt, and the power of the large corporations; they generally came to oppose the extension of slavery.”

In his excellent The Anti-Rent Era in New York and Politics, 1839-1865, Charles W. McCurdy dates “the famous Barnburner-Hunker split in the New York Democracy” to 1843, when circumstances exposed a divide between New York Democrats over economic policy. To understand how it arose, we must go back several years.

After years of Democratic domination, New York somewhat unexpectedly elected Whig William Seward as governor in the fall of 1838. Seward took office on January 1, 1839.

The Panic of 1837 was then in remission (temporary, as it would turn out), and the new governor proposed a bold and aggressive spending program. The legislature should abandon the Democrats’ pay-as-you-go policy for canals and railroads. He urged it instead “to accelerate progress on the public works by authorizing the [state] to borrow $4 million a year for the next decade.” The governor argued that these expenditures would pay for themselves:
Each $500,000 increment of revenue from canal tolls, Seward pointed out, would pay the interest on another $10 million of debt. As a result, “taxation for purposes of internal improvement is happily unnecessary as it would be unequal and oppressive.”

The Panic of 1837, however, laid waste to Seward’s aggressive program. The initial contraction in 1837 had eased somewhat during late 1838 and much of 1839, but an even more severe downturn followed at the end of that year. Seward was reelected to a second two-year term in the fall of 1840. However, by 1841-42, the New York economy was a disaster – and the state budget was too.

As of January 1842, when the state legislature met (annual sessions started at the beginning of January and usually went into early May) the state debt had climbed to $26.8 million from $11.9 million three years earlier. Canal tolls and other sources of revenue expected to fund the building program had dried up. No help could be expected from the federal government; the Whigs, who had surged to power in the national elections of 1840, were now at war with their own president, John Tyler.

New York voters went to the polls in the fall of 1841 to elect a new state legislature, and they punished the Whigs with a vengeance. The Democrats won control of the state senate and “rolled up an astonishing majority of 95-33 in the lower house. Governor Seward pronounced the result ‘a disastrous overthrow of the Whig party in this state.’”

When the new, Democratic legislature met at the beginning 1842, it was determined to bring the governor’s spending spree to a halt. To this end, it passed what was known as the Stop and Tax Act, which Governor Seward reluctantly signed into law on March 29, 1842:
The act provided for the suspension of all canal construction, except that essential to navigation or “necessary to preserve the work already done from destruction by ice or floods.” It also provided for a one-mill [real] property tax. Every dollar generated by the tax and an amount from canal tolls “at least equal to one third of the interest of the canal debt remaining unpaid” were “sacredly” pledged to debt retirement.

Nationwide, the year 1841 had been a grim one economically. Four states – Arkansas, Indiana, Mississippi and Illinois – had defaulted on their debts. The next year was even worse. “Almost every index of economic activity plunged to a record low in 1842.” Amidst this economic carnage, the Stop and Tax Act proved stunningly effective. It “immediately restored confidence in the New York financial system.” State bonds rose to par by September 1842.
New York banks, their reserves buoyed by the rising market for government securities, soon eased credit and injected new money into the stream of commerce. The depression was not yet over. But conditions improved even in the canal counties, and Democrats were quick to claim credit for having saved New York from the battery of [debt] repudiation, suspension and stay laws that had deranged the economics of so many other states.

The New York electorate agreed. Recognizing that he could not win, Seward chose not to seek a third term as governor in the fall of 1842. The voters elected William C. Bouck, “a colorless Democrat,” who took office January 1, 1843. But in the Democrats’ electoral success lay the seeds of future division, for the Stop and Tax contained an ambiguity.

As noted above, the Act “pledged to debt retirement every dollar generated by the [new] property tax and an amount from canal tolls ‘at least equal to one third of the interest of the canal debt remaining unpaid.” The Act did not, however, specify what would happen if revenues unexpectedly increased. “Did the Stop and Tax Act authorize the use of surplus funds on suspended construction projects?”

The Democratic party in New York at the time was more fiscally conservative than former Governor Seward and most Whigs, but within their ranks it was still possible to find a range of opinion. More “radical” hard money men took the position that there should be no further state spending until the existing debt was paid off. In 1841, these radicals had championed a “People’s Resolution,” a proposed constitutional amendment designed to thwart future state spending. It had proposed
that the constitution of the state be so amended, that every law authorizing the borrowing of money . . . shall specify the object for which the money shall be appropriated; and that every such law shall embrace no more than one such object, which shall be singly and specifically stated; that no such law shall take effect until it shall be distinctly submitted to the people at the next general election, and be approved by a majority of the votes cast for and against it.

Other, more “conservative” democrats were prepared to be a bit more flexible when it came to state spending. In part, this reflected their pragmatic understanding that upstate voters depended heavily on the Eric Canal system and would likely punish politicians who dogmatically rejected all funding schemes. Back in 1841, these more conservative legislators had killed the People’s Resolution:
[The] proposed amendment caused an uproar in the New York Democracy [in 1841]. Democratic assemblymen with districts along the Erie Canal, the unfinished “feeder” canals, and the New York & Erie Railroad regarded the People’s Resolution as a kiss of death. Standing for reelection on the Stop and Tax Act, which suspended construction temporarily, would be hard enough. Defeating Whig opponents on a platform that was likely to result in the abandonment of internal improvements by state government would be virtually impossible.

In 1843, Governor Bouck proved to be of the latter, somewhat more moderate, persuasion. As a former member of the State’s Canal Board, he may have been sensitive to the importance of maintaining the canal system, or at least to its political importance. Whatever the reason, in his first annual message on January 3, 1843, the new governor anticipated increased revenues and urged the legislature to authorize spending on renewed canal projects:
“I am convinced that the completion of the unfinished work . . . [on the Erie Canal enlargement] would be essentially useful, and some of it may be indispensably necessary,” Bouck proclaimed. “The speedy completion of the Black River Canal . . . and the Genessee Valley Canal . . . is doubtless anxiously desired by the friends of these improvements. I do not feel that I should faithfully discharge my duty did I not recommend for your careful consideration these portions of the public works.”

Governor Bouck's message “stunned the New York Democracy.” What Martin Van Buren termed “a ruinous schism in our ranks” led to bitter intra-party conflict and legislative stalemate. Excerpts from a report written by William McMurray, a radical Democrat, give some feel for the rancor:
“It was from unjust taxation that our forefathers were impelled to throw off the British yoke,” McMurray wrote; “but not more oppressive or unequal were British impositions than that system which taxes a man in one section of the state for improvements made in another, not only without benefit to him, but frequently to his direct or consequent injury.” In his view, even the phrase internal improvement was a misnomer: “It should rather be called, as it really is, robbery and plunder, inflicted by the strong arm of a bandit government upon the weak, miserable abject and defenseless victims, not of its fostering care, but of its peculation and avarice.”

All quotes are from Professor McCurdy's highly-recommended book.

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