IN dealing with expenditures, the factors become more certain quantities than those present in the forecasting of possible revenue. The money collected from Cuba, whether it was $26,000,000 or more, has all gone, and nothing was found in the treasury when the United States forces took possession but numerous evidences of promises to pay, records of receipts given by the Government for goods not paid for, and debts of all kinds, including the salaries of a large number of the minor officials. The first and most important item of expenditure is, as has been said, for sovereignty expenses, and aggregates a sum exceeding $22,000,000. These expenses are subdivided as follows:

The largest single item in these expenditures is that of the interest on the public debt and general expenses, which aggregates $12,574,709.12. Of the total, about $10,500,000 undoubtedly found its way to Spain to pay interest and sinking-fund payments on the enormous debt which Spain had saddled upon Cuba. There has been much controversy over this debt, and as the discussion has ended by the American Peace Commission insisting on Spain’s assuming the debt, and thus freeing Cuba forever from the legal obligation, a brief review of the subject will be of interest to the reader. Owing to the fact that Cuba has been, until United States occupancy, a colony without personality and without real representation, the question of the public debt was never properly settled. The Spanish Government, the Cubans contend, arbitrarily burdened the Island with the weight of the whole war debt of 1868-78. The Cubans have rightly taken the ground that this debt was Spanish, not Cuban. As a matter of fact, the Spanish Government, during the insurrection of 1868-78, never admitted that there was any war in Cuba, affirming, on the contrary, that the trouble was only a disturbance limited to some parts of the Island, and that the immense majority of the population of Cuba were loyal Spaniards. The conclusion to be drawn from this official fact and from its assertion by the Government was that Cuba was not bound to pay the expenses of that revolt. A somewhat similar instance occurred in the Peninsula at the same time. The Carlist War was likewise a very serious disturbance spread over some important provinces of Spain. The cost, however, of that war was not charged to the revolted provinces, but was considered a national debt. Besides, there are some items which have been held as forming part of the Cuban debt, which by no means can be accepted as such. Thirty or forty years ago Spain sustained war with Mexico, San Domingo, and Peru, the cost of those three wars having been charged to the Cuban Treasury, which, since then, has annually paid the interest thereon. In 1878 or 1879, a general liquidation of Cuban accounts took place, in which the “Banco Hispano-Colonial” of Barcelona assumed a very important position. Probably the cost of the three above-mentioned wars (in Mexico, San Domingo, and Peru) and some other accounts were then settled.

Not even the smallest part of the whole debt has been employed in any kind of Cuban improvement. A memorandum prepared by the Cuban planters and addressed to Madrid in 1894 thus referred to the debt:

During the discussion of the Cuban debt by the Peace Commission in Paris last autumn, the Economiste FranÇais contained an article by Paul Leroy Beaulieu, proposing an arrangement or compromise, with the bondholders, of part of the Cuban debt (about $140,000,000). The author of the article admitted that Cuba was not bound to pay the cost of the last insurrection (of 1895-98). As the Economiste FranÇais represents the interests of the French public and of the great French banking houses that have largely invested in Cuban bonds of the issues of 1886 and 1890, the inference to be finally drawn from the above-mentioned article is rather in favour of Cuba. If Spain thus lent her guarantee, she did so in obedience to a necessity and as a business convenience, in order to prop up her colonial and commercial system. The Spanish nation believed that her domination in Cuba would be lasting, and that the remote danger of being called upon to pay the Cuban debt was more than compensated by the enormous amount of wealth which she drew every year from the colony.

If, instead of extorting, yearly, millions of dollars, the Government of Spain had applied the superabundant resources of the Island to the extinction of the debt, it is certain that in 1895 the whole of it would have been paid off. It may unquestionably be asserted that Cuba has, in many ways, from 1878 to 1895, spent enormous sums of money, millions of dollars, in payment of debts not really her own,—but with this difference, namely, that the whole of the money lost to the colony, instead of going to redeem the outstanding Cuban bonds, has been spent in Spain, either in a reproductive way, or otherwise. The amount in Spain of the manufacturing, commercial, and agricultural riches, dwelling-houses, and even palaces, country villas, and other investments, representing Cuban wealth which has been transferred without any return, is incredible. The magnificent fleet of steamers of the Transatlantic Company enters into this category. At the same time, the unhappy Cubans who produced that wealth suffered want and went into bankruptcy; for the Spanish exactions absorbed not only the profits of Cuban industries, but also a part of its gross production, and in that way encroached on the industrial capital of the Island. The encroachment was shown and evinced by the accumulation of public and private debts in all forms. The productive classes of Cuba have always, though in vain, protested against the injustice of having this burden thrown upon the treasury of the Island, which, as is shown above, has been compelled to pay more than $10,500,000 every year for the interest and sinking fund of this unrighteous debt.

The debt which was, so far as Cuba is concerned, wiped out by the American Commission in Paris must have amounted to over $500,000,000. From a variety of rather scrappy data, obtained by the author in Havana, a brief statement of the Cuban debt has been made up. The debts of the Cuban Treasury before the war can be reduced to five.

First: Spain’s debt to the United States.

Second: Redeemable debt of 1 per cent. per annum and 3 per cent. interest.

Third: Annuity debt.

Fourth: Mortgage notes of 1886.

Fifth: Mortgage notes of 1890.

The first debt, $600,000. is an engagement made by Spain and signed in Madrid on the 17th of February, 1834, to pay the United States the amount specified; it was confirmed by the minister of the Spanish Treaty in a royal order, dated April 8, 1841, ordering the payment to be made by the Havana Treasury.

The second and third debts have been almost entirely converted into mortgage notes.

The fourth debt: by a royal decree of May 10, 1886, 1,240,000 notes of 500 pesetas each (about $124,000,000) were issued, redeemable by quarterly drawings and paying six per cent. per annum interest.

The fifth debt: by a royal decree of the 27th of September, 1890, 1,750,000 mortgage notes of 500 pesetas each (about $175,000,000), were issued, redeemable at par by quarterly drawings, and paying five percent. per annum interest.

The notes of these last two emissions are placed in Paris and London, and the redemption and interest thereon are payable in gold or its equivalent. They are guaranteed by the customs, post-office, and stamp revenue of the Island of Cuba, and the direct and indirect taxes, and besides by the Spanish nation. Besides, during the last war, the Spanish Government made an internal loan against the Cuban Treasury of 400,000,000 pesetas ($80,000,000) and another one of 200,000,000 pesetas more ($40,000,000), guaranteed by the Spanish customs. The floating debt, caused by the war expenditure and payments of current appropriations in Cuba, was not less than $100,000,000. These are not exactly official statements, and yet they were obtained personally by the author from official sources, and come close to the mark. Tabulated, we have this:

Paul Leroy Beaulieu gives the bonded debt of Cuba as 2,032,000,000 pesetas, or $406,400,000. This evidently does not include the large floating debt included in the above estimate. So far as Cuba is concerned, this debt has been liquidated. It will, therefore, in the language of the French economist, be “absolutely necessary for Spain to meet the expenditure.” Why not? Spain lost the game, therefore she must pay the cost.

The largest expenditure, next to interest on debt, was for purposes of war, $5,896,740.73. The expenses of the navy aggregate $1,055,136.13, and of the executive department, $2,645,149.98. Under the last section will be noted the salary of the Cuban Governor-General, $40,000, and the expenses of his office, $46,450, aggregating $86,450. In this division, it appears, the Civil Guards were paid; this body of men received, in all, $2,095,221.12. The second largest item in this total is the subsidy to the CompaÑia TransatlÁntica, which amounts to $471,836.68. A study of these several items will at once show that the principal expenditures for the Island of Cuba are those which have, directly or indirectly, to do with the control of the Island by Spain. Ten and a half millions, annual charge for the debt; nearly $7,000,000, the combined cost of the army and navy; while upward of $2,000,000 of the total amount expended under the classification of executive went to the Civil Guards, who have been used for patrolling the various parts of the Island. Here, then, we have a total of $19,500,000 for extraordinary expenditures, the larger portion of which will be abolished now the public debt is wiped out and peace restored to Cuba.

The second grand division of expenditure is the smallest, and represents the amount of money which was spent strictly for local affairs, and not in the defence of the sovereignty, in its possession of Cuba, and the payment of an unjust debt. One of the first items of expenditure under this latter head is the result of the concession last year by Spain of autonomy for the Island, and the round sum of $133,830 is paid under the head of “Colonial Legislature.” The second section is for the church, justice, and executive; also for the courts of justice, expenses for prisons and charitable institutions. It aggregates $1,612,859.44. The next most expensive department of the Government seems to be that of the Treasury, the salaries of the secretary, sub-secretaries, and other officers aggregating $218,725. This does not include general expenses, which make another item of this department, aggregating $33,500. Under the head of contingent expenses may be found the various provincial administrations of the Treasury; the cost of administration of custom-houses and revenue marine, amounting to $472,370, giving a total for the department of $708,978.51.

Public instruction fares badly in Cuba. Under this head, it appears, $247,033.02 were expended. The largest item in these expenditures seems to be for the University of Havana and its educational adjuncts, aggregating $172,840.80. The next largest item is the salary of the Secretary of Education and the inspectors of primary instruction, etc., aggregating $58,300. None of the total amount seems to go for common-school education, as it is understood in the United States. Under the head of “Public Works and Communications,” $1,036,582.10 was expended. The proportion of this money which goes for salaries is very large indeed. The largest single item of expenditure is given under the rather dubious heading of “Communication,” and aggregates $417,640. Repairs and care of public buildings, including rent of buildings, aggregates $79,500; postal communication, $114,514. Marine navigation, including docks and sheds, lighthouses and buoys, aggregates $98,058; and the construction of the San Cristobal bridge, $49,000. The care and repair of public roads cost $100,000; in all making the above-mentioned total.

A COCOANUT GROVE.
A COCOANUT GROVE.

The agriculture, industry, and commerce of Cuba, like the public instruction, in the broader sense of the word, comes in for a meagre share of the small amount of the total budget, which seems to be reserved exclusively for expenditures for the benefit of the Home Government. The aggregate under the title of “Agriculture, Industry, and Commerce” is $108,178.52, the most of which is used in salaries and expenses for the secretary’s office, for which one-third of the total appropriation is expended. Under the head of “Local Fairs of Agricultural Industries,” $40,000 is appropriated. The forest lands seem to come in for some attention; at least $16,175 is expended for inspection under this head.

These form the chief items of expenditure for all purposes for the Island of Cuba. Perhaps it would be more accurate to say these are the estimates of the appropriations which the Secretary of the Treasury thought would be necessary to run the government on the present plan. It is only necessary to study these interesting tables in detail to see where a large amount of this expenditure can be reduced or abolished altogether. In doing this, however, it must be borne in mind that other expenses will be necessary in order satisfactorily and honestly to administer the affairs of Cuba in the interests of the people of the Island.

At this moment it is impossible to make a satisfactory estimate of the new budget, nor can it very well be done until after the United States authorities have been in full possession for at least twelve months, and are thus able to secure complete data as to the pressing needs of the Government of Cuba. Of course, the large items, such as interest on the public debt and expenditures of Spain for the purpose of conquering the Island will have disappeared, making a reduction, if we include the Civil Guards, of $18,000,000 or $20,000,000. To forecast how much of this amount will be required for immediate expenditures under the new order of things is impossible.

In recommending revenue laws for Cuba, the author was aided by the suggestions of Mr. Fran Figueras, who has given the subject intelligent consideration. To emphasise the importance of giving immediate attention to a careful division of the expenditures for the central government and the expenditures for local purposes (something the Spanish Government, in the whole history of its management of Cuba, has failed to do), the following is given from a statement made to the author by Mr. Figueras:

Another statement well worth attention in this connection is that of Mr. Philip Pelaez, a former official of the Spanish Government in Cuba, who said to the author when in Havana:

This sets forth substantially what has been done. The United States Government has made no violent fiscal changes in Cuba. Where the old laws and methods and customs could be fitted to the new order of things, they have been so fitted. The first and only radical change in the revenue system of Cuba is the speedy and absolute separation of local and general revenue. That which is local should be collected by local authorities and regarded as municipal revenue, to be expended for municipal purposes; while that which is general should be levied and collected by general authorities and expended for the general welfare of the Island. The general fund, after careful consultation with the governor of each province, should be apportioned geographically, and also into funds, such as the following:

a.—Maintenance of the general government, 20 per cent.

b.—Sanitary and other improvements, and loans to cities therefor, 10 per cent.

c.—Public schools and education, 10 per cent.

d.—To pay the bonds and other obligations issued by the Provisional Government of Cuba and its duly authorised agents since February, 24, 1895, which in the aggregate must not exceed $2,500,000, and to pay amounts due the soldiers of the Army of Liberation, 20 per cent.

e.—Development of the Island by the building of railroads, properly constructed highways, and other means of communication, 25 per cent.

f.—The repayment of the cost to the United States of the temporary military occupation pending the establishment of the proposed stable and independent government, 15 per cent.

As all the expenses of the municipal and local government can be readily provided from taxes on real estate, income tax, liquor licences, and other internal-revenue taxes, the customs revenue can, without embarrassment, be devoted to and amply satisfy all general governmental requirements as scheduled above. The percentages above suggested are, of course, tentative, and must not be regarded as more than a rough apportionment. The widest possible latitude should be given each provincial governor in the expenditure of the share of the general funds allotted him for sanitary and other improvements, public schools, for building railroads, and constructing highways. A study of the Jamaica budget, presented in Chapter IV., might help in a fair apportionment of funds for the new budget of Cuba. The subject has not yet been taken up systematically by the United States Government, but will soon need attention, or the old haphazard Spanish methods will receive a new lease of life. Such a contingency would indeed prove a misfortune.