Rutherford B. Hayes

C

Sound Money

Hayes also clashed with members of both parties over his support of the sound-money principle. This principle stated that paper money should have a single, stable standard of value. That standard was gold. Hayes insisted that paper money be fully convertible into gold coin. He backed the Specie Resumption Act of 1875, which would make greenback paper money redeemable in gold starting in 1879. Hundreds of millions of dollars of this money, officially called United States Notes but known as greenbacks from the color of ink used, had been in use since the Civil War. It was thought that making the greenbacks payable in gold would take them out of circulation, thus decreasing the total supply of money. A smaller money supply would ease inflation (rising prices and interest rates on debt), which occurs when more money is circulating than is justified by the actual capital assets existing in the economy. (See also Inflation and Deflation.)

Hayes's opponents favored a large supply of money and wanted to repeal the Specie Resumption Act. These opponents included the Greenback Party, made up largely of farmers whose debts had increased during the economic depression of the 1870s. They believed that a large money supply would help them pay off their debts and would also raise the prices for their products. The party's successor, the Greenback-Labor Party, included trade unionists who believed that a large supply of money would bring full employment. The Greenbackers were joined by those, including Republicans in the West, who argued that an expanding money supply was needed to start the economy growing again.

Hayes's opponents also wanted to expand the money supply by allowing unlimited coinage of silver, which had been ended by law in 1873. Westerners had the added incentive of wanting a large market for silver, which had recently been found in abundance in the Rocky Mountains.

In November 1877 the House of Representatives passed bills repealing the Specie Resumption Act and requiring the unlimited coinage of silver. Hayes sent a message to Congress opposing both bills. He believed that they would not only add to inflation but would also cheapen U.S. government bonds and drive down the government's credit rating. He stopped the Resumption Act repeal by vetoing it, but the silver coinage bill became law over his veto as the Bland-Allison Act. The opposition to his sound-money policies led Hayes to observe, “I am not liked as a President, by the politicians in office, in the press, or in Congress.”

---

---

Hayes had not really failed on the silver coinage bill, however. His veto was overridden only after the addition of a Senate amendment that let the secretary of the treasury decide, within limits, how much silver to buy each month. The secretaries were conservative in their buying, and thus the act did not lead to inflation. Silver coinage did not become an issue again until the depression of the 1890s.

However, Hayes did not totally eliminate the greenbacks. In 1878 Congress passed an act making $347 million in greenbacks a permanent part of the currency. By then, however, they had already ceased to be an issue because the treasury had gold on reserve to redeem them. The public, knowing this, had confidence in the greenbacks and thus did not rush to redeem them when it became legally possible in 1879.

D

Panama Canal

In 1878 a French company headed by engineer and diplomat Ferdinand de Lesseps, who had built the Suez Canal in Egypt, was granted the right to construct a canal across the Isthmus of Panama in Central America. The United States had long been interested in a Central American canal, which would be a great advantage to the shipping trade. However, this country had a long-standing hostility to adventures by European governments in the Western hemisphere. In a message to Congress in March 1880, Hayes declared, “The policy of this country is a canal under American control.” That same day, de Lesseps appeared before a congressional committee and, allaying fears of foreign intervention, testified that his company had no connection with the French government.

The insistence of Hayes on American control helped to shape the policy that eventually produced a Panama Canal owned by the United States. This was to take a number of years, however. One obstacle that had to be removed was the Clayton-Bulwer Treaty of 1850, in which the United States and Britain had mutually guaranteed the neutrality of such a canal.

E

Mexico

Disorders along the Mexican border were causing loss of American lives and property. In June 1877, Hayes authorized American troops to pursue Mexican marauders across the border. The Mexican government resented this move as an invasion of its national sovereignty. It ordered the Mexican army to repel American incursions by force. The Mexican press clamored for war and denounced Hayes. However, the dictator Porfirio Díaz then came to power in Mexico, and a peaceful settlement was arranged between the two countries.

F

Chinese Exclusion

The building of the Central Pacific railway after the Civil War created a labor shortage in the West. Between 1865 and 1869, large numbers of Chinese unskilled laborers were encouraged to enter the country to meet the demand. However, in the 1870s, anti-Chinese sentiment grew, and in 1879, Congress passed a law forbidding any ship to bring more than 15 Chinese to the United States on one trip. Hayes vetoed the law, which he felt amounted to exclusion of Chinese immigrants in violation of a treaty with China. He then sent envoys to China to negotiate a new treaty allowing the immigration to be regulated. He was fiercely assailed for his actions, particularly in California, where many of the Chinese immigrants settled.

G

Personal Life

President Hayes did not drink, smoke, or gamble. His critics derisively called him “Granny” Hayes and “Queen Victoria in breeches.” His wife, Lucy, was a kindred spirit. Family prayers were offered daily. A vigorous temperance advocate, she earned the nickname Lemonade Lucy by serving no strong drinks in the White House. However, she entertained generously and with grace. It was Mrs. Hayes who originated the custom of inviting children for egg rolling at Easter on the White House lawn.