To get some notion of the scale of spending during Reconstruction, it is useful to compare it to antebellum levels. The state's expenses for the biennium from September 1858 to September 1860 were only $408,394.98 and the total tax rate of both state and counties was less than six mills. This did not include the unpaid interest on the state's banking debt which continued to compound. By 1865 this debt totaled $4,500,000.
For 1868, 1869, and 1870, the annual expenditures of the Clayton government averaged $800,000 annually. Moreover, because of the state's funding of state bonds, railroad bonds, levee bonds, and deficit spending, the state's debt continued to increase. Clayton attempted a three-fold strategy to address the problem: the tax rate was increased, the assessed value of property was revised, and the state's outstanding debt was renegotiated.
From 1860 to 1870 the total property tax rate in Arkansas increased from 6 mills to 40 mills per dollar of assessed valuation, including state, county, school, and other district levies. The definition of taxable property was expanded to include real and personal property, monies, credits, and tangible goods. Moreover the total acreage being taxed increased by 60%. This amounted to a ten-fold increase in taxation.
Clayton also refinanced the state's outstanding debt. The most controversial aspect of this had to do with 500 one-thousand-dollar bonds issued to finance the State Bank. These were being held by the American Trust and Banking Company as collateral for an advance of $121,336.59 in cash. AT&BC, in violation of the conditions of the law under which the bonds were issued, sold the bonds at a profit to Holford & Company, London bankers, who insisted they be redeemed at their face value. Most Arkansans, including Unionist Republicans, believed the state should refuse to pay more than the $121,336.59. This proved a deal-breaker, however, and Clayton, eager to re-establish the state's credit so he could issue railroad bonds, agreed to payment at face value.
Clayton might have been able to haggle better terms for the Holford bonds had he not been forced to break off negotiations and race back to Little Rock. Since his imposition of martial law, Clayton had been facing growing opposition from within the Republican Party from the Arkansas Unionists on one hand and an alliance between Joseph Brooks and black Republicans on the other. The situation had become so tense that he had actually been forced to sneak away to New York for the debt negotiations. A telegram reached him saying that his enemies had discovered his whereabouts and had summoned his Unionist Lieutenant Governor James M. Johnson back from Madison County to assume the reigns of government before Clayton could return. Such was the primitive nature of transportation in Arkansas at the time that Clayton was able to arrive from New York before Johnson could travel to Little Rock from Huntsville.
Taxation represented only a fraction of the financial burden of Reconstruction. Bonds, scrip, and other unfunded expenses outstripped those paid for by taxes. The result was a staggering debt. Charles Nordhoff, a Northern journalist who visited Arkansas immediately after the end of Reconstruction, offered this account of the impact on the citizens of Arkansas:
Arkansas has less than 650,000 people. It has about 120,000 voters. These owed in 1868, when Reconstruction began in this state, about $3,500,000, and had $319,000 in cash in their treasury. The debt was State debt. The counties owed little or nothing.
Today, after seven years, the State owes at least $15,700,000 and most of the counties have debts of their own sufficient to make them bankrupt. And for this huge indebtedness, which amounts for State, counties, town, and school districts, probably $20,000,000, the people have nothing to show, except some miles of railroad, on which they must pay for their passage whenever they travel. There are no new public buildings; neither science nor the arts have been advanced; the old Statehouse looks as dilapidated as when Reconstruction began, and has been changed in nothing except having its door-lintels mutilated that a Brooks cannon might be squeezed into the hall; the schools are almost all closed because the school fund was stolen; and Little Rock is unpaved, though the conquerors of 1868 issued nearly shinplasters enough to pave all the streets handsomely with the paper itself, and bonds enough to make dry crossings at the corners.
The State debt alone amounts today to more than $115 for every voter. State, county, township, and school debts, including scrip of all kinds, would probably bring the voters in debt $175 per head. And the whole of this prodigious burden has been laid upon an impoverished and never very prosperous people in seven years.
To put these numbers in perspective, $20,000,000 amounted to one-fifth the value of all the assessed property in the entire state of Arkansas.
Next: The End of the New Era
Back to the Powell Clayton Menu Page
|
