Presidents and Economics: James Madison and the Bonus Bill of 1817
James Madison was the fourth President of the United States, serving from 1809 to 1817. He came into office at a time when the nation was battling with Great Britain over the British boarding of American vessels and pressing American into the service of the Royal Navy. The British were also contributing to problems that American settlers in the area around the Great Lakes were having with some of the indigenous tribes. Previous administrations had tried diplomatic protests and then a trade embargo against Great Britain, but neither of these were successful. The nation became fed up and elected a hawkish Congress. Madison was able to obtain a declaration of war and the War of 1812 was on.
The war didn't go so well. Madison found the war to be an administrative nightmare, as the United States had neither a strong army nor financial system. Washington was invaded and the White House was burned. In spite of some significant victories later in the war, a peace treaty was negotiated as the British also had their problems, fighting with the French back in Europe. The experience convinced Madison that a stronger national government, a strong military, as well as the national bank, which he had previously opposed, were all good ideas.
With peace finally came about, many Americans believed that their problems with the British were over. The Federalist Party, which had called for secession over the war, dissolved and disappeared from politics. When peace arrived in Europe as well, a time of prosperity and diplomacy came about. There was still some political contention. For example, in 1816, two-thirds of the incumbents in Congress were defeated for re-election because they had voted to increase their salary.
To shore up the national economy, Madison approved a national bank, a taxation system based on tariffs, and a standing professional military. One of the final financial issues he had to deal with had to do with internal improvements to the nation. Madison supported some of these, but in his last act before leaving office, he vetoed what was known as the Bonus Bill of 1817, which would have financed even more internal improvements, including roads, bridges, and canals.
The Bonus Bill of 1817 was legislation proposed by John C. Calhoun. It planned to use the revenue surplus or "bonus", as well as future dividends from the new Second Bank of the United States, for an internal improvements fund. The bill was opposed by many of the eastern states, who were concerned that providing the means for settlers to travel west would reduce their population and influence. Although Madison approved of the need for improvements, he vetoed the bill as unconstitutional under his strict constructionist ideals.
Calhoun wanted the bonus of $1.5 million and dividends, estimated at $650,000 annually, to be used as a fund for constructing roads and canals and improving the navigation of watercourses. He said "whatever impedes the intercourse of the extremes with the center of the republic weakens the Union," adding that it was the duty of congress to "bind the republic together with a perfect system of roads and canals." Henry Clay also supported the plan.
The bill was amended to require that each state benefit equally from the new fund and approve all federal activities within its borders. The bill passed narrowly in the House by a margin of 86 to 84 on February 8, 1817, and did slightly better in the Senate (20–15) on February 27.
On the last day of his administration March 3, 1817, President Madison vetoed the bill. He said that he believed that Congress did not have the power under the Constitution to effect internal improvements. He was also concerned about potential abuse and said that "special-interest issues like internal improvements inexorably corrupted the legislative process". A last-minute attempt to override the veto failed.
The war didn't go so well. Madison found the war to be an administrative nightmare, as the United States had neither a strong army nor financial system. Washington was invaded and the White House was burned. In spite of some significant victories later in the war, a peace treaty was negotiated as the British also had their problems, fighting with the French back in Europe. The experience convinced Madison that a stronger national government, a strong military, as well as the national bank, which he had previously opposed, were all good ideas.
With peace finally came about, many Americans believed that their problems with the British were over. The Federalist Party, which had called for secession over the war, dissolved and disappeared from politics. When peace arrived in Europe as well, a time of prosperity and diplomacy came about. There was still some political contention. For example, in 1816, two-thirds of the incumbents in Congress were defeated for re-election because they had voted to increase their salary.
To shore up the national economy, Madison approved a national bank, a taxation system based on tariffs, and a standing professional military. One of the final financial issues he had to deal with had to do with internal improvements to the nation. Madison supported some of these, but in his last act before leaving office, he vetoed what was known as the Bonus Bill of 1817, which would have financed even more internal improvements, including roads, bridges, and canals.
The Bonus Bill of 1817 was legislation proposed by John C. Calhoun. It planned to use the revenue surplus or "bonus", as well as future dividends from the new Second Bank of the United States, for an internal improvements fund. The bill was opposed by many of the eastern states, who were concerned that providing the means for settlers to travel west would reduce their population and influence. Although Madison approved of the need for improvements, he vetoed the bill as unconstitutional under his strict constructionist ideals.
Calhoun wanted the bonus of $1.5 million and dividends, estimated at $650,000 annually, to be used as a fund for constructing roads and canals and improving the navigation of watercourses. He said "whatever impedes the intercourse of the extremes with the center of the republic weakens the Union," adding that it was the duty of congress to "bind the republic together with a perfect system of roads and canals." Henry Clay also supported the plan.
The bill was amended to require that each state benefit equally from the new fund and approve all federal activities within its borders. The bill passed narrowly in the House by a margin of 86 to 84 on February 8, 1817, and did slightly better in the Senate (20–15) on February 27.
On the last day of his administration March 3, 1817, President Madison vetoed the bill. He said that he believed that Congress did not have the power under the Constitution to effect internal improvements. He was also concerned about potential abuse and said that "special-interest issues like internal improvements inexorably corrupted the legislative process". A last-minute attempt to override the veto failed.