With Southern forces now gone from Congress, the Republican Party could exercise virtually unchallenged authority.
During the war, it enacted an aggressively nationalistic program to promote economic development, particularly in the West.
The Homestead Act of 1862 permitted any citizen or prospective citizen to claim 160 acres of public land and to purchase it for a small fee after living on it for five years.
The Morrill Land Grant Act of the same year transferred substantial public acreage to the state governments, which were to sell the land and use the proceeds to finance public education.
This act led to the creation of many new state colleges and universities, the so-called land-grant institutions.
Congress also moved to complete the dream of a transcontinental railroad. It created two new federally chartered corporations: the Union Pacific Railroad Company, which was to build westward from Omaha, and the Central Pacific, which was to build eastward from California, settling the pre-war conflict over the location of the line.
The two projects were to meet in the middle and complete the link.
The government provided free public lands and generous loans to the companies.
The National Bank Acts of 1863–1864 created a new national banking system.
Existing or newly formed banks could join the system if they had enough capital
More difficult than promoting economic growth was fi - nancing the war. The government tried to do so in three ways: by levying taxes, issuing paper currency, and borrowing.
Congress levied new taxes on almost all goods and services; and in 1861 the government levied an income tax for the first time, with rates that eventually rose to 10 percent on incomes above $5,000.
But taxation raised only a small proportion of the funds necessary for financing the war,
At least equally controversial was the printing of paper currency, or “greenbacks.”
The new currency was backed not by gold or silver, but simply by the good faith and credit of the government (much like today’s currency).
The value of the greenbacks fluctuate according to the fortunes of the Northern armies.
Early in 1864, with the war effort bogged down, a greenback dollar was worth only 39 percent of a gold dollar.
Even at the close of the war, it was worth only 67 percent of a gold dollar.
Because of the difficulty of making purchases with this uncertain currency, the government used greenbacks sparingly.
The Treasury issued only $450 million worth of paper currency—a small proportion of the cost of the war but enough to produce significant inflation.
By far the largest source of financing for the war was loans from the American people.
In previous wars, the government had sold bonds only to banks and to a few wealthy investors.
Now, however, the Treasury persuaded ordinary citizens to buy over $400 million worth of bonds
\
\