How Much Have We Lost?

Monday, December 27, 2010

The Legacy of Debt, Part II: The Election of 1877 & The Rise of the Readjusters

This is the second article in a series to provide historical context to the rationale of Virginia’s debt limit and tradition of pay-as-you-go.

In the prior article, A Legacy of Debt, Part I: Readjusters & Funders, I wrote about how the interest owed on Virginia’s Civil War Debt had completely hobbled the state’s ability to launch any new programs such as public schools, roads, or any kind of safety net after the Civil War. Debate in Virginia was dominated by the Conservative Party (also called “Funders” or “Bourbons”) who believed that Virginia’s “honor” required payment of the debt and more progressive elements who believed that the Legislature should force a “readjustment” of the debt (called “Readjusters”).

At the conclusion of Governor Kemper's term the Conservative Party rallied behind Stonewall Brigade veteran and Conservative F.W. Holliday who was elected in 1877. Holliday was unambiguously a Conservative "Funder" politician. Notwithstanding Holliday's clear position, a majority of legislators were elected who favored readjustment of debts comprised of “Independent” Conservatives and Republicans.

Shortly after the session started, Governor Holliday vetoed new legislation that prioritized public school transfers over the payment of debt interest. Conservatives attacked this legislation claiming public education was “socialist,” “unjust,” “taught children to look to the state for support throughout life," characterized debt readjustment as "communism" and said they were ready to shut down schools to honor the state's debt obligations. Holliday pointed out that his forebearers did not need public education to achieve success.

By 1879, with the Governor opposing any kind of reform and bond interest continuing to exceed revenues, the situation became ugly – the state’s school transfer payments went further into default, half of of Virginia's limited public schools closed, salaries of state employees were suspended, and the state began borrowing money to fund government.

That year, the Confederate hero of the Battle of the Crater, General William Mahone (click here for a short bio by the Virginia Foundation for the Humanities), called a convention to form a new political party who named themselves the Readjuster Party. The Readjuster Party was a coalition of freed blacks and poor whites and its focus was Virginia's debt. They were extremely popular in Southwestern Virginia and with Virginia's relatively sizeable African-American population - 40 counties were majority black after the Civil War.

The 5'5" William Mahone became the Readjuster's chief spokesman. In 1879, Virginians sent 56 Readjusters to the House of Delegates and 24 to the State Senate. Mahone was elected by the legislature to the U.S. Senate (before direct election of U.S. Senators) and caucused with Republicans giving them a majority in the U.S. Senate. Legislation readjusting the state debt yet again was promptly vetoed by Governor Holliday.

In 1881, Virginia elected a Readjuster Governor, William Cameron from Petersburg and Virginia moved into a progressive era. Cameron immediately signed legislation issuing new bonds cutting interest in half to 3%, rebuked a presumed share of the debt owed by West Virginia, wrote off bonds issued to cover interest accrued during the Civil War & Reconstruction, and prohibited bond interest coupons from being used for tax payments. The new bonds were named for the legislation’s sponsor and called “Riddlebergers.” Virginia's schools reopened. The tax code was reformed in favor of farmers and small businesses and against the railroads. Virginia spent more on hospitals, jails, and its few colleges. He also started the Virginia Oyster War of 1882 which is an interesting short story.

Litigation immediately ensued over the legality of “readjustment” and continued for decades.

In 1879, future-Delegate Richard Evelyn Byrd of Winchester turned 19. He personally witnessed the Conservative-Funder-Mahone debt struggle during a critical formative time in his life. Byrd went on to serve as Virginia's 40th Speaker from 1908-1914. His namesake became a famed naval aviator. His younger son had a career in apple farming, newspaper editing, turnpike management, and changing Virginia history. More on that later.

The next article will discuss the Readjusters conversion to the Republican Party, their fall, and the Conservatives return to power to "redeem" Virginia from "Mahoneism."

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