leaving, according to Mr. Chase's estimates, about $200,000,000 to be provided for, probably by loans.* The ordinary expenditure of the country, together with the interest of the national debt and a surplus fund to provide for its repayment, were to be furnished by an increase in the direct taxation on property, by augmented duties on certain specified articles, and by the proceeds of the customs and other miscellaneous sources, making the yearly revenue $90,000,000. Mr. Chase, after setting forth the value of the real and personal property of the loyal States, considered that the sum, although large, would be raised without any great detriment to the prosperity of the country.

According to precedents taken from the great war waged by England with France, the estimates of expenditure were very light, and the amount proposed to be raised by taxation, in comparison with that acquired by loans, and consequently added to the national debt, very small. Notwithstanding, Mr. Chase enunciated his budget with the statement that the idea of perpetual debt was not of American nativity, and should not be naturalised. At this period neither side anticipated a long war: the South leaned too much on the expectation of European intervention, and the North buoyed themselves up with hopes that a great battle would decide the fate of the war, and that that battle would assuredly terminate it in their favour. Even General M'Clellan, usually guarded in his language, committed himself by the assertion that the war cannot last long: it may be desperate. Nothing assuredly is more remarkable in the history of this

* The exact sum according to calculations was greater.

† Speech delivered on Nov. 2 at Washington, on the reception of a sword from the city council of Philadelphia.

great war than the buoyancy of hope and carelessness for the future evinced by the rulers and people of the Northern States. The latter was visible not only in the interior government of their own country, but, as was shown in the Trent difficulty, in their dealings with other nations. England, as has been seen, was sufficiently powerful to exact reparation for the injury; but in another instance of a more palpable violation of the privilege of neutrals, the weakness of the power on whom the insult was inflicted prevented an enforcement of redress. In the month of November General Sumner was on his way, with a detachment of regular troops, from San Francisco to New York. On board the Pacific steamer Orizaba were two ex-senators and the late Attorney-General of the State of California. These persons General Sumner saw fit to arrest, and, in violation of the rights of the neutral State of New Granada, and in defiance of the remonstrances of her rulers and people, he conveyed them as prisoners across the Isthmus of Panama. The strength of the detachment under General Sumner's command prevented any attempt at rescue by the inhabitants. The long course of prosperity enjoyed by the American people, and the marvellous development of resources and power which their country had shown during the past seventy years, had exercised an influence on the character of the nation similar to that which is frequently noticed in individuals. As a nation they had become proud and self-sufficient, and were often regardless of the rights and feelings of their neighbours. These characteristics, prior to the secession of the South, were shared by the whole American nation, but, subsequent to the commencement of the war, appear more especially to belong to the Northern portion of the

Union. The defeat at Bull's Run was for a short time a check on their self-esteem; but the energy displayed by the nation to remedy that defeat, and its apparent remarkable fruits, restored their self-confidence, and, it may be said, their self-conceit. The reports of the Secretaries of War and of the Navy showed that, at the close of the year 1861, there were in the service of the Federal Government upwards of 640,000 volunteers, upwards of 20,000 regular troops, and 22,000 seamen and marines. It must be allowed that in the efforts used to raise and equip so enormous a force in so short a time, the Northern Americans afford an example of energy rarely equalled. It may be that the youth of the nation, which was partially conducive to so great energy, was also the cause of faults which detract from the credit due to it, and that more serious disasters and greater suffering were requisite to check the evil and to develope the worth which existed in the character of the American people. The war had commenced in favour of the South by the brilliant victory of Bull's Run; but the greater resources of the North, and her command of the sea, joined to the overweening confidence of the South induced by her first successes, together with her disposition to rely on external aid rather than on her own efforts, had caused the tide to turn, and with the spring of 1862 commenced a series of disasters which finally roused the people of the South, showed them the true character of the struggle in which they were engaged, and developed the stubborn resistance which has few parallels in the history of the world.

CHAPTER XI.

CAMPAIGN OF KENTUCKY AND TENNESSEE.

GENERAL M'CLELLAN, soon after his appointment to the command of the army of the Federal States, prepared for the information, and at the request of, President Lincoln, a memorandum, in which was sketched out the scheme of operations which he considered advisable, and the means required to carry it out. In this paper he showed that the important strategical point was Eastern Virginia, and that there the struggle must be fought out. The other operations he considered to be in themselves of minor importance, but essential as conducive to the success of the main object of the campaign. He recommended that a strong movement should be made on the Mississippi, and that the Confederates (or rebels, as they are termed in the document) should be driven out of Missouri. As soon as it should become clear that Kentucky was cordially united with the North, an advance, he declared, ought to be made through that State into Eastern Tennessee, for the purpose of assisting the Union men, and of seizing the railroads leading from Memphis to the east. He recommended that the passes into Western Virginia from the east should be securely guarded; but, unless the political condition of Kentucky should render it impossible or inexpedient to make the movement upon Eastern Tennessee through that State, no operations from

Western Virginia ought to be conducted against Richmond. Every effort, he urged, should be made to organise and equip regiments in Western Virginia, in order to render the Ohio and Indiana regiments available for other operations. The importance of occupying Baltimore and Fortress Monroe was pointed out, together with the necessity of concentrating a large army in the vicinity of Washington, as by that means the number of troops guarding the Upper Potomac could be diminished, no general, in advancing into Pennsylvania, being able to leave so large a garrison on his flank and rear as that of Washington. With regard to the number of troops required for these extended operations, General M'Clellan reiterated his opinion that the main army should be concentrated in Virginia, and demanded

This immense army was to be exclusive of the garrison of Washington and other places, and it was advised that from 5,000 to 10,000 Western troops should occupy Western Virginia, 10,000 protect the Baltimore and Ohio Railroad, 5,000 garrison Baltimore, and 2,000 Fortress Monroe; whilst, should Kentucky declare for the North, 20,000 men were considered sufficient for the campaign of Eastern Tennessee; the numerical strength of the force required for the descent of the Mississippi being left to the determination of its commander. A strong naval force, in conjunction with a fleet of transports, was considered essential for coast operations, and in order to seize the important seaboard