[Sidenote: Payment of the national debt. _McMaster_, 309-310.]
312. Payment of the Debt, 1837.--The national debt had now all been paid. The government was collecting more money than it could use for national purposes. And it was compelled to keep on collecting more money than it could use, because the Compromise Tariff (p. 248) made it impossible to reduce duties any faster than a certain amount each year. No one dared to disturb the Compromise Tariff, because to do so would bring on a most bitter political fight. The government had more money in the "pet banks" than was really safe. It could not deposit more with them.
[Sidenote: Van Buren elected President, 1836.]
313. Distribution of the Surplus, 1837.--A curious plan was now hit upon. It was to loan the surplus revenues to the states in proportion to their electoral votes. Three payments were made to the states. Then the Panic of 1837 came, and the government had to borrow money to pay its own necessary expenses. Before this occurred, however, Jackson was no longer President. In his place was Martin Van Buren, his Secretary of State, who had been chosen President in November, 1836.
314. The Panic of 1837.--The Panic was due directly to Jackson's interference with the banks, to his Specie Circular, and to the distribution of the surplus. It happened in this way. When the Specie Circular was issued, people who held paper money at once went to the banks to get gold and silver in exchange for it to pay for the lands bought of the government. The government on its part drew out money from the banks to pay the states their share of the surplus. The banks were obliged to sell their property and to demand payment of money due them. People who owed money to the banks were obliged to sell their property to pay the banks. So every one wanted to sell, and few wanted to buy. Prices of everything went down with a rush. People felt so poor that they would not even buy new clothes. The mills and mines were closed, and the banks suspended payments. Thousands of working men and women were thrown out of work. They could not even buy food for themselves or their families. Terrible bread riots took place. After a time people began to pluck up their courage. But it was a long time before "good times" came again.