The Readjuster Party came into being as a result of the prolonged political crisis of the 1870s while the state government struggled unsuccessfully to pay the interest on the public debt left over from before the Civil War. Because the state had paid no interest during the years of the Civil War and Congressional Reconstruction, by the beginning of 1871 the debt had risen to more than $45.6 million. The General Assembly passed and on March 30, 1871, the governor signed "An Act to Provide for the Funding and Payment of the Public Debt," which was then and has thereafter always been known as the Funding Act of 1871. It provided for issuing new bonds worth two-thirds of that amount (with a promise that the state would pay the remainder after reaching an agreement with West Virginia about the precise amount that state owed) to replace all the existing bonds. Bondholders therefore had to exchange their old bonds for the new bonds, which, like the pre-war debt, paid 6 percent interest and were to mature in thirty-four years.
The Funding Act appeared to make good, sound business sense. Its supporters predicted that Virginia's payment of the interest and principal would encourage bankers and businessmen from outside the state to invest in Virginia and thereby help stimulate and revive its economy. However, the size of the debt was so large and the rate of interest so high that payment of the interest required more than half the annual revenue. Moreover, the Funding Act made the interest-bearing coupons on the new bonds receivable for taxes, and every dollar paid in taxes with a coupon was a dollar that the state could not spend to run the government, support the new public school system, or even pay the interest. By 1872 Virginians paid about half the state revenue in coupons, and during the remainder of the decade the state ran large budget deficits.
Rise of the Readjusters
Advocates of refinancing the debt—adjusting it, or readjusting it—to pay a reduced principal at a lower rate of interest became known as Readjusters. People who insisted on paying the full principal and interest were known as Funders. As the debates about the debt and about the shortage of money available for the schools became more intense, the state's dominant Conservative Party, founded in 1867 in opposition to Congressional Reconstruction, split into two factions. White men who identified themselves as Democrats and as Republicans also split into Funders and Readjusters. By the end of the 1870s, it is likely that most African Americans in Virginia, who by then were nearly all Republicans, sympathized with the Readjusters.
In 1878, Readjusters in the General Assembly passed a bill to require that a portion of the state's tax revenue be collected in money and not in coupons in order that the money could be spent on the public schools. It was known as the Barbour Bill, for its sponsor, James Barbour, a member of the House of Delegates. During debate on the bill, a Funder member of the Senate of Virginia, John W. Daniel, declared that he would rather see all the public schools in the state burned than divert money from paying the creditors in order to support the schools. Governor Frederick W. M. Holliday vetoed the bill and denounced the public school system as unnecessary. His veto message stated that tax money should be used to pay the state's creditors and not to fund the schools.
In the 1879 session of the assembly, the legislators passed a refinancing act popularly called the McCulloch Act, named for former Secretary of the Treasurer Hugh McCulloch, who represented the state's bondholders during negotiations between the government and the creditors. Readjusters called it the Broker's Bill because they believed that bond brokers and owners of bonds were the chief beneficiaries. The law provided that the existing bonds be replaced with new bonds that matured in forty years and paid 3 percent interest for the first ten years, 4 percent for the next twenty, and 5 percent for the last ten. They were often referred to as ten-forties or as McCulloch bonds. The legislature again made the interest-bearing coupons tax receivable.
The Readjusters' arguments in favor of the schools and Mahone's organizing skills produced victories at the polls. In 1879, the Readjusters won majorities in both houses of the General Assembly, which in 1880 elected Mahone to the U.S. Senate. The assembly passed a bill to refinance the debt with fifty-year bonds that paid 3 percent interest and repudiated about one-third of the principal established in the Funding Act of 1871. Called the Riddleberger Bill, it was named for Harrison H. Riddleberger, a member of the Senate of Virginia from the Shenandoah Valley. Holliday vetoed the bill, and that set the stage for the next statewide election.
Early in 1882, the assembly passed and Cameron signed a revised version of the 1880 bill. Known as the Riddleberger Act, it reduced the principal and interest rate much as Riddleberger's 1880 bill had done and was intended to replace the bonds issued in 1871 and 1879. The interest-bearing coupons on the Riddleberger bonds could not be used to pay taxes. Later in the session, the legislators elected Riddleberger to the other Virginia seat in the U.S. Senate.
Early in the 1880s, seven Readjusters also won election to the U.S. House of Representatives. The Readjuster ascendancy in Virginia politics was as short-lived as it was dramatic. As soon as the party had accomplished the main task for which it was founded, refinancing the debt, it began to fall apart. The main reasons were that the party's leading spokesmen, such as Mahone, Cameron, and Riddleberger, welcomed African American men into the party as fully enfranchised citizens and Mahone joined the Republicans. The emerging egalitarian thinking among the party's leaders appealed to farmers and working class people of both races, which alienated many white voters and political leaders who opposed participation of poor men and black men in politics. That raised fears of racial equality or black domination, which opponents of the Readjusters seized on to regain control of the General Assembly.
1822–1861 - Virginia accrues about $34 million in public debt subsidizing the construction of canals, toll roads, and railroads.
1871 - Virginia's pre–Civil War public debt, with interest, totals more than $45.6 million.
March 30, 1871 - The General Assembly passes "An Act to Provide for the Funding and Payment of the Public Debt," or the Funding Act of 1871.
March 1872 - The General Assembly repeals the portion of the Funding Act that permits people to pay taxes with coupons.
February 22, 1878 - The General Assembly passes what comes to be known as the Barbour Bill, after James Barbour. It requires that a portion of the state's tax revenue be collected in money and not in coupons in order that the money can be spent on the public schools. The governor vetoes it.
February 25–26, 1879 - The Readjuster Party is founded at a convention in Richmond with the goal of "readjusting," or reducing the amount the principal of and the rate of interest on the state debt.
March 28, 1879 - The General Assembly passes the McCulloch Act, refinancing the state debt. Opponents dub it the Broker's Bill because they believe bond brokers and the owners of state-issued bonds are the chief beneficiaries.
November 1879 - The Readjuster Party wins majorities in both houses of the General Assembly.
March 1, 1880 - The General Assembly passes a bill to reduce the rate of interest on the debt to 3 percent for fifty years and to repudiate about one-third of the principal. The governor vetoes it.
March 4, 1881 - William Mahone, a Readjuster, begins his term in the U.S. Senate.
March 14, 1881 - Almost 300 African American Republicans convene in Petersburg and decide to endorse the Readjuster Party in the important 1881 general election.
November 1881 - Under William Mahone's guidance, William E. Cameron, of the Readjuster Party, is elected governor.
February 14, 1882 - The governor signs the Riddleberger Act, named after Harrison H. Riddleberger. It provides for fifty-year, 3-percent bonds on the debt, reduces the principal by about a third, and prohibits the payment of taxes with coupons.
1883 - Virginia's Conservative Party changes its name to the Democratic Party and chooses a new leader, John S. Barbour Jr., who organizes the party down to the precinct level. Barbour's leadership marks the beginning of a long era of Democratic domination.
November 3, 1883 - Racial and political tensions erupt in an election-eve street fight in Danville that leaves at least one white and four black men dead.
November 1885 - The Democratic Party sweeps to power, winning all statewide elected offices. The Readjuster Party dissolves, with many of its members becoming Republicans.
March 3, 1887 - William Mahone ends his one term in the U.S. Senate. In the most recent election, his Readjuster Party lost the General Assembly to the Conservatives, who elected John W. Daniel to the Senate.
Cite This Entry
- APA Citation:
Tarter, B. Readjuster Party. (2014, November 14). In Encyclopedia Virginia. Retrieved from http://www.EncyclopediaVirginia.org/Readjuster_Party_The.
- MLA Citation:
Tarter, Brent. "Readjuster Party." Encyclopedia Virginia. Virginia Foundation for the Humanities, 14 Nov. 2014. Web. READ_DATE.
First published: November 7, 2014 | Last modified: November 14, 2014
Contributed by Brent Tarter, founding editor of the Dictionary of Virginia Biography.