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H. OF R.]

The Public Debt.

[MARCH, 1792.

never to have been intended as a real or solid like exhalations, and the price of stocks blown up equivalent. It was wholly calculated to be a sub-above all reasonable calculation; but perhaps beject of speculation, which might draw the atten- fore the next week arrives, we find the stocks tion of persons in those countries where, from the fallen a fourth or a fifth, and disappointment, banksuperabundance of specie capital, enormous na- ruptcy, and stagnation of the most useful branches tional debts, and long habits in stock-jobbing specu- of commerce, spreading consternation far and wide, lation is become a science. To promote this, the and the tales of villany and consequent distress unnatural and novel distinction of parts, which swell up the news of the day. Though I have not had no foundation in the contract, and a variety changed my opinion of the Funding System, since and necessary fluctuation in the comparative value it made its appearance, yet I confess its delusory was introduced. This distinction and variety was and ensnaring progress has been more rapid, the well adapted to be an inducement to the merito- bubbles have sprung up and burst in greater rious public creditors, especially such of them as variety and in quicker succession than I expected. resided in the country, to part with their certifi- General confidence and contentment among the cates.

citizens has not been among the effects produced The two-thirds of two-thirds, the six per cents., by the irredeemability, and the complex and mysthe three per cents., deferred debt, &c., all in one terious forms of the Funding System. certificate, which the farmer received, originally A principal advantage the Funding System was with an obligation simply of six per cent. upon to produce, was, the lowering the rate of interest the principal, until it was paid, is so much be- for money; indeed this was the principle upon yond his comprehension, that he prefers parting which it was supposed to be calculated; it was to with it to keeping it on terms which he does not reduce the rate of interest to five or even four per understand, and which he conceives may, with cent. by its beneficial operation as a circulating equal ease, be changed again by the same autho- medium, &c. I ask, sir, has it had this effect? No, rity into other and more unintelligible varieties. it has not, but the reverse. I acknowledge certifiTo this end, it corresponded to admiration. Few, cates have been purchased at a rate that would not indeed, are the certificates now in the hands of afford five per cent. upon the price given for them, original holders of the agricultural class.

and that even after they were above par; but at One leading advantage which the promoters of the same time the rate of negotiable interest rose the Funding System suggested that would arise to an usurious height. No such instance of usury from its operation, was a circulation of the reve was heard of in.this country at any former period, nues to the more remote parts of the country, in (except in the times of general distress and bankpayment of interest, which had been previously ruptcy occasioned by old debts, losses in the course drawn into the Treasury by duties, and had the of the war, and an over-importation of goods at system been adapted to the genius and circum- the conclusion of the war) and this has not been stances of the people of the United States, this no incidental, but the native effect of the system. doubt would have been its effect, and in this way Negotiable interest has risen too high for the solid a beneficial balance of circulating specie would purposes of commerce, and capital, and attention have been supported. It was also suggested, that have been.withdrawn from it by the baubles of the the certificates when appreciated, would assume times; and by the prevailing fluctuations in the the form and use of a circulating medium, and in funds and private credit, the regular circulation of this way be as a substitute for money, promote the credit and cash suited to commercial purposes are purchasing of land, improving the country, and obstructed. However, I do not deny but that importgive a general spring to industry; and this salutary ations are to as great amount as ever. I believe the effect a Funding System, calculated and guarded amount is too great for the public good, but this is suitably for that purpose, might also have had. not the result of the quantity, or high price of our But these important consequences have been com-exports, but it is the return for our certificates transpletely defeated by the irredeemability and other ferred to foreigners, to whom they are in the more peculiarities of the Funding System; that the esteem because of that irredeemable quality to Funding System was calculated to be a field for which I object. In consequence of this, we bespeculation, was the general opinion of people of come tributaries to foreigners, over whom we have reflection when it was originated. And what has no control, and from whose wealth we can derive been the effects of its operation? Why, it has in- no advantage. This evil has already prevailed to a troduced the most extravagant combinations, pro- great degree, and by the present system can neither moted fictitious credits, and by giving a facility to be remedied nor prevented. stock-jobbing, in all its varied forms, has become I have said that the Funding System is inconan enormous and ruinous snare. It has occasioned sistent with the original contract. This is evimany of the most enterprising characters to desert dent from all its complex and mysterious division the useful paths of industry; dissipation, gambling, of parts and difference of value, which had no extravagant projects and extravagant modes of foundation in the original obligation. Many inlife, are promoted to such a degree as to be ruin- stances of this might be adduced, but I will only ous to our morals and degrading to our national select one. The act of Congress provided for the character. Wealth hastily gotten, without in- redemption of the old Continental bills of credit dustry, has changed the grades of society, and at forty for one; the Funding System provides erected a new and formidable interest in the Com- for it at the rate of one dollar for the hundred, and monwealth. One week we behold fortunes rising that dollar subject to its divisions of parts and

MARCH, 1792.]

The Public Debt.

[H. OF R.

value. Is not this a total departure from the con- proves that legal interest is supposed in the law tract, both in matter and form? It is vain to an- to be a sufficient compensation for the delay of swer, that the Congress money had been consider-payment. ed as lost, and had depreciated much lower than My first design was to have moved to amend one for forty. The sanction of an act of Congress, the resolution so as to provide six per cent. for supported by the obligation of the Constitution, the principal, according to contract, and to have fixed it at forty for one; and the same power that proposed some provision for paying the arrears of could alter it to one hundred for one, could anni- interest ; but, upon reflection, I find the business so hilate that or any original claim altogether. I am far put out of its natural course already, that I not here treating about the equity of the claims, have relinquished that design. The progress of but about the Legislative authority of Congress to innovation has been so great that it is difficult to change contracts which they were bound to fulfil, tread back the ground; therefore, I will vote for both by the acts of the old Congress and an ex- the amendment. press clause of the Constitution.

One difficulty which influenced me to give up. In preparing and enacting the Funding law, Con- my first design was, that not only the arrears of gress seems to have laid aside the character of the interest which arose since the first of January, Legislature, and assumed that of the Judge; where- 1788, is funded at three per cent., to those who as, their most conspicuous character in transacting subscribed to the loan, but also the indents of intethat business ought to have been that of a party rest issued previous to that period, under the Conprevailing for the payment of their debts: būt, in federation, which had been disposed of and proacting the part of a Judge, they have taken it upon vided for by requisitions as fully as the power or an original plan. They have changed the value laws of that Government permitted. Many, inand the principles of the claim by a mere act of deed I believe most of the States, had made adetheir will, without being guided by reasons taken quate provision for them to their respective citifrom the original obligations; but have rather been zens; and those who did not, were under the same influenced by the contemplation of the mighty po- obligations to do it that they had been to do any litical machine they were about to erect, viz: an other part of Federal duty in the course of the Reunextinguishable national debt and consolidated volution. Even these have been received again moneyed interest.

and funded at three per cent. The indents, and I have also said, that the irredeemable quality about three years' interest, which became due of the Funding System is contrary to the Consti- since the first of January, 1788, making, in all tution. Congress have the power of applying the above ten millions, have been 'funded. Above public resources towards paying the debts of the seven millions of these, if it was not a debt creUnion.

Every successive Congress is equally ated by the Funding System, received a resurrecvested with that power. It is derived immediate- tion by it. This will explain the charge of creatly from the Constitution to every Congress, and ing a new debt, asserted by one of the gentlemen, not derived through the laws of one Congress to and denied by another. Here was above seven another; but, in the Funding System, the Con- millions received, which ought to have been congress who enacted have decreed that no suc- sidered as redeemed, unless, perhaps, in a few inceeding Congress shall pay the existing debts of stances, to such as were not citizens of any State, the United States, except in certain small and dis- and above three millions funded at three per cent., tinct instalments, which, perhaps, would occupy for the doing of which there existed no obligation. two, or a part of three, generations to complete. If it be answered, that equity required it, I will Certainly the present Congress cannot say unto allege that, if the Congress, acting on the general the next, or to any future Congress, that they claims of equity which originated in the course shall not do what the Constitution expressly says of the Revolution, a much greater amount must they have power to do; and yet, if we reject the yet be provided for. I never knew a public creamendment and adopt the resolution, we are in ditor who expected interest upon his interest, or fact saying so. If we do so, we are holding out a that expected the indent debt that had been disfurther delusion to the citizens. Snares of this posed of to be received, or otherwise provided for kind have proceeded far enough already. A fu-than by a final settlement between the respective ture Congress certainly will disregard this re- States and the United States. Why should they straint, and repeal the irredeemable quality of the expect Congress to make provision where an.acFunding System.

tual obligation did not exist, when, in the same The creditors who hold those claims for which act, they were destroying ten years' interest of we are about to provide, have an unquestionable one-third of the principal, where the most express right to six per cent. interest upon the original obligation did exist, and where the claim was also claim-not to interest upon the interest-but to founded in the strictest equity? This increase of a provision for extinguishing the arrears of inte- the debt, and funding at three per cent., appears rest: All the different laws which I know of con- not to have been calculated for the profit, nor at template a delay of payment of interest and ex- the request of the public creditor; for what they pressly guard against paying compound interest. gain in the one hand they lose in the other. Nor The party to whom interest is due may claim and does it operate as a gain to the United States. If recover it at short periods, but if it is not claimed, we may judge of its object by its effects, we may or cannot be got, any supposed delay does not ena- observe that, by receiving the indents redeemed ble the creditor to claim interest thereon. This by the States, an increase of revenue becomes ne

H. OF R.]

The Public Debt.

[MARCH, 1792.

cessary, and the States become like pensioners to forty-two pounds eight shillings and three pence, curCongress for the annual amount they are to re rent money of the said State, the amount of a judge ceive. Thus the revenue must be the greater in ment rendered against him in the General Court of the the hands of those who conduct it, and the indi-same State, on account of horses purchased for the use vidual States must be dependent on the Treasury of the United States, during the late war; and that the of the United States for the means of their sup-claim of the said State, by the payment aforesaid, hath port. Foreigners may make reprisals if they are not been credited in the accounts of the same with the

United States : not paid; nor does the support of their Government depend upon it. But this is not the case be authorized, and they are hereby directed, to adjust

Resolved, that the proper officers of the Treasury with dependent States. We know several of the and settle the said claim with the Agent of the State States are in this way entitled to a greater annu- aforesaid, any limitation in the acts of Congress to the ity than is necessary for the support of their Go

contrary notwithstanding :" vernments, and the people are in the habit of living wholly free of State taxes; while, to accomplish

Ordered, That the said motion be referred to this strange state of things, the debt of the Union Mr. SENEY, Mr. Gerry, and Mr. SUMPTER; that is increased, obnoxious revenues are rendered ne

they do examine the matter thereof, and report cessary, ministerial influence, speculation, and con- the same, with their opinion thereupon, to the

House. sequent depravity, are advanced. With respect to the dangerous effects which the

A representation and memorial of the Legis

lature of the Commonwealth of Massachusetts irredeemable principle and unnecessary increase of funded capital will have upon the genius of our

was presented to the House and read, praying Government, and the interests of posterity, this that the General Government will assume the subject has been investigated with too much abili- balance of the debt of the said State. Referred ty by the gentlemen who were up before me in to the Committee of the Whole House, on the support of the amendment, that I will not now

Report of the Secretary of the Treasury on the detain the Committee with any thoughts upon it, subject of the Public Debt. but will conclude with observing, that, having

THE PUBLIC DEBT. proved that the irredeemable principle, which the amendment is designed to correct, is not an equiva The House again resolved itself into a Comlent for the departure from the terms of the con- mittee of the Whole House, on the Report of the tract, and that, being contrary to the Constitution, Secretary of the Treasury on the subject of the cannot be obligatory on any future Congress, but Public Debt. is delusory in its nature, and calculated to pro

Mr. GERRY offered a few remarks on the submote speculation and a transfer of the debt to fo-ject, and urged the justice and sound policy of reigners; and that the increase of funded debt completing a business which had, for reasons well created in the Funding System was not necessary known, been left in an unfinished state, but which from the original obligation, nor profitable to the equity and precedent now called on Congress to public creditors, but calculated for dangerous spe

finish. culating and political purposes. I will sit down, Mr. Clark was opposed to the proposition. with expressing a wish that, by adopting the Mr. Hartley.—After so long a discussion, my amendment, we will prevent the worst effects of attempting to take up any great length of time the Funding System from being further extended. would not be excusable; but I consider it my duty

The Committee now rose, and reported pro- to say a word or two in answer to some expresgress.

sions and observations used against the Constitution and operation of this Government; and give

a few reasons why I shall now vote for the resoSATURDAY, March 31.

lution under consideration. It will not be necesMr. LIVERMORE, from the committee appointed, sary to take into view the principles upon which presented a bill in addition to an act, entitled " An the Constitution was framed; they were fully act to provide for the Territory Northwest of the examined in the General Convention, as well as River "Ohio;" which was received, read twice, in the several State Conventions, and stood the and committed.

test of the strictest scrutiny. They are favorable Mr. Vining, from the committee appointed, pre- to liberty and justice. As to the operation of the sented a bill to compensate the Corporation of Government, we may best understand it by conTrustees of the Public Grammar School and Aca- trasting the state of America at the adoption of demy of Wilmington, in the State of Delaware, the Constitution, with that of the present day. for the occupation of, and damages done to, thé At the former period, our credit as United States said school, during the late war; which was re- of America was at a low ebb. Few of the indiceived, read twice, and committed.

viduals of foreign countries would give credit to On a motion made and seconded that the House the individuals of this. The capital of Europe do come to the following resolution:

would not be trusted in America; they doubted Whereas, by several documents and papers commu

our justice as well as our Government; there was nicated in pursuance of a resolve of the Legislature of scarcely any credit given to individuals here; a Maryland, it appears that Nicholas Ruxton Moore re- universal distrust prevailed. Agriculture lanceived, from the Treasurer of that State, on the 24th guished; the farmer diffident, he had lost his conday of November last, the sum of two hundred' and I hidence; the great spur to industry was wanting.

MARCH, 1792.]

The Public Debt.

[H. OF R.

No ships on our stocks, few vessels in our harbors, resources as my worthy colleague, who has just commerce decayed; the vital spirit lost. I might sat down, I assure you I am not desponding. I say more; but I will turn from a disagreeable think our resources are competent, and our cirscene to one more pleasing.

cumstances not depressed; the great industry of What is our present state? The credit of our our citizens, and the great demand and high price Government is as good as that of any country. for our produce in foreign markets, which took Individuals of all nations will trust the individu- place about two years ago, gave a spring to our als of America. Individuals here (until a late wealth and industry, and furnished ample resourunfortunate bubble or abuse of credit, arising from ces to Government; our feelings have not been bad men or bad management, and which will pos- pierced with the cries of general distress, until sibly, only do hurt for the moment) gave full very lately, through the abuse of the novel princredit to each other as far as their capital ex- ciples introduced in the Funding System. But tended, as well in the city as in the country, and though I rejoice with the gentleman in the sufficonfidence prevailed. Agriculture, where the peo-ciency of our means, yet I consider ourselves in ple are industrious and apply their attention to the situation of an unexperienced heir, newly the raising of those articles which are most in come to the enjoyment of a great estate, who, demand, is in the highest improvement ever being dazzled with his own splendor, and confiknown here before. I can speak with confidence dent of his means, sets about spending without of the State I live in. The idle and indolent can system or principles, and gets embarrassed before expect no great success in an art which depends he is aware. We are told, that the principle of upon the steady hand of industry. There are assuming the State debts is already admitted by ships on the stocks in every part where there are the last Congress, therefore it ought to be comship-builders and materials. The tonnage list pleted now; we are just told, too, that it was fully will evidence the mighty increase of the Ameri- considered there. I ask, then, why was not the can shipping; it has far exceeded the most san- business fully completed at that time? If it was guine expectation. Several of the first merchants not, then what good reason can be given for carstate your commerce in a most respectable situa- rying it further now? Is there any new discovery tion, far beyond any other period. Indeed, the of better rules to apportion by? or is the distress returns from the Secretary of the Treasury show of the States who have yet some unassumed debt, how great our imports and how vast our exports. as pressing as when they had to bear the burden In point of justice, our reputation stands high of three or four millions more than now? Genwi i the world: our courts will do justice. Pray tlemen know, that the length this business has wha. .-undation for those strong assertions which gone already, has given great uneasiness to those have been made against the Constitution and the States who made the greatest exertions to extinGovernment ?

guish their own debts, and to whose circumstances As to the Funding System, I shall say little at and feelings the resources applied to the assumed present. I much doubt if it deserves the hard debts of the States, are distressing and disagreenames which have been given it. Abuses will able. For what purpose are the Commissioners be committed in all countries; no human plan employed in adjusting the accounts between the can be secure against them. The assumption of individual States and the United States, if the the State debts was fully considered upon a form- whole of the State debts were to be assumed preer occasion. Several of us wished to fund the vious to that settlement? We know the Governdebt of the Union alone: many gentlemen of the ment is not vested with powers to compel delinSouth, when we came to look for ways and means, quent States to do justice, and that if ever justice voted against us, and the Eastern Representatives is done to those States who have extinguished were always ready to join in defeating us, unless their own debt, it must be by increasing of the the assumption of State debts also took place. general revenue in proportion to the money Con

The bill passed the House of Representatives gress will have to pay to those States; and it is for funding the debt of the Union alone; but the an unjustifiable and dangerous policy to draw the Senate sent it back, with an amendment, assuming money from the people with one hand, to pay it State debts to a certain amount. After much ar- to the State Governments with the other. gument, the amendment of the Senate was agreed I have such information as I can depend upon, to by the House of Representatives. Justice was that the Commissioners will report upon the final nearly done to some States; others do complain, settlement of the State debts, in the course of and I think Rhode Island with much reason. next winter; and the resolution before the Com

I could have wished that the accounts between mittee makes no provision for interest until after the United States and the several States had been the year 1792. Why then take this further leap settled. But I will give the gentlemen who com- in the dark, when those States who will be actuplain so much an opportunity of satisfying this ally entitled to it, will be as soon relieved, accordHouse, (if they are able,) when the blanks are to ing to the principles of justice, as they would be be filled up in the bill, that the sums they demand by distributing the public property in this manner, are reasonable, and are intended to give relief to by the rule of thumb? the people of their States. I will vote for the I always thought the assumption of the State resolution.

debts a measure which the Constitution did not Mr. Findley, in answer, said: If I am not al- contemplate, and which had a tendency to sow together so elated with our present prosperity and the seeds of discontent in many parts of the Unit

H. OF R.]

The Public Debt.

[APRIL, 1792.

proper or doubtful.

ed States; and now it is argued that the prece- the remainder of the State debts totally unprodent being set by the last Congress, we ought to vided for. copy it. I admit of no principles of infallibility The question on agreeing to this proposition in Congress: and if precedents produce an oblí- was carried in the affirmative, 33 to 25, but was gation, we ought to be the more careful not to eventually lost. strengthen them, by repeating such as are im The Committee then rose, and had leave to sit

The only plausible reason again. for assuming the State debts in the last Congress so far, was to ease the burden of such States as had been most backward in providing for their

Monday, April 2. respective debts, so as that they might be able to The House proceeded to consider the report of provide for what remained until the accounts the committee to whom was referred the Letter would be settled, and to make some provision for from the Secretary of the Treasury, enclosing the States who had done much to extinguish their Returns of Duties arising on Imports and Tondebt, as a security that the debts would be brought nage within the United States, for one year, endto a final settlement. Certainly those States, at ing the 30th of September; also, a Return of Exwhose desire and for whose convenience so much ports within the same period. Whereupon, has been done, ought to bave a little more mode

Ordered, That the abstract returns of duties on ration.

imports and tonnage, also the abstract of exports Mr. Madison observed, that a great deal had from the United States to foreign countries, be been said to prove that the General Government printed for the use of the members of this House; is under obligation to provide for the debts of the and that the Secretary of the Treasury be diindividual States. The gentlemen who maintain rected to report to this House, in the course of this opinion have not shown that the creditors this session, the quantity and value of the exports themselves ever entertained an idea that they from each State, anything in the order of the 10th should look to the United States for payment of of November last to the contrary notwithstanding. those debts. It is not pretended that the new Con

THE PUBLIC DEBT. stitution varies the situation of the creditors; they stand precisely on the same ground they did un-mittee of the whole House, on the Report of the

The House again resolved itself into a Comder the old Confederation. He (Mr. M.) denied that in the former assumption, the creditors of Secretary of the Treasury on the subject of the the individual States were considered in the same

Public Debt; and, after some time spent therein, point of light as the creditors of the Continent, the Chairman reported that the Committee had and for the truth of this , he appealed to the again had

the said report under consideration, and law itself “making provision for the public come to several resolutions thereupon, as follow: debt."

Resolved, That the term for receiving on loan that The proposition now before the Committee he part of the domestic debt of the United States which considered as unjust, as it would place some of yet remains unsubscribed, be extended to the first day

of the States which had made no exertions to dis

next, on the same terms as was provided by charge its debts, in a more eligible situation than the act making provision for the public debt of the Unithose which had made the greatest exertions to

ted States. effect that object. He denied that the first assump-ment of the interest on the unsubscribed part of the

Resolved, That provision ought to be made for paytion had been generally approved, or had been domestic debt of the United States, to the first day of acquiesced in, and adverted to the proceedings and resolutions of the State of Virginia on the on like terms as was provided by the act aforesaid.

one thousand seven hundred and ninetysubject; papers are on the table to show the truth

Resolved, That the term for receiving on loan that of what is now asserted: he added, that he was part of the debt of the individual States assumed by the sorry to find that no more attention had been paid United States, yet unsubscribed, be extended to the first to those papers. Mr. M. then noticed the state of day of next, on the same terms as is provided imports and exports from the several States, to by the act making provision for the public debt. show the unequal operation of the assumption as “Resolved, That a subscription for a farther loan in it affects those States, particularly Virginia, which the debts of the individual States be opened and conpays so great an over-proportion of the interest tinued to the first day of next, not to exceed in on the debts of some of the States.

the whole millions of dollars, in the proportions Mr. GERRY stated a variety of instances to show following: that is to say, (Here enumerating the several that the debts of the individual States were al- | States.] Provided, That the interest on such loan shall ways considered as founded ultimately on the not be payable before the day of

And faith of the Union; that the creditors had taken provided, That when the sum to be assumed for any the paper of the States on that idea; that the the evidences in which the same is made receivable, the

State shall not be subscribed by the holders of any of States were considered as agents for the United State shall not be entitled to receive interest on the States: and, on this principle, the contracts for

residue. supplies and services on a Continental account had been made, without which the war must have loans in State debt, be payable in such certificates, bills,

Resolved, That the subscriptions to the aforesaid ceased, and the subjugation of the United States notes, and evidences of debt whatsoever, as shall have have followed. Mr. G. remarked on the partiality been issued by the respective States, and by the several and evident injustice of leaving the possessors of Commissioners of Loans of the United States, on ac

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