CHAP. IV. sessed great and pressing claims upon their atten 1790. tion. That neglect under which the creditors of the public had been permitted to languish could not fail to cast an imputation on the American republics, which had been sincerely lamented by the wisest among those who administered the former government. The earnest and eloquent appeals of that government to the states attest the sincerity and zeal with which a majority of congress sought the means of rescuing the nation from the disgrace which follows injustice; and the total disregard with which those appeals were heard, afforded a cogent argument in favour of that revolution which the wisdom of America had with difficulty effected. The power to comply substantially with the engagements of the United States being at length conferred on those who were bound by them, it was confidently expected by the advocates of the constitution that their country would retrieve its reputation, and that its fame would no longer be tarnished with the blots which stain a faithless people.

Report of the Secretary of

On the 9th of January, a letter from the secrethe treasury tary of the treasury to the speaker of the house of the support representatives was read, stating that in obedience

of a plan for

of publie credit.

to the resolution of the 21st of September, he had prepared a plan for the support of public credit, which he was ready to report when the house should be pleased to receive it; and after a short debate in which the personal attendance of the secretary for the purpose of making explanations was insisted on by some, and objected to by others,

it was resolved that the report should be received CHAP. IV. in writing on the succeeding thursday.

Availing himself of the latitude afforded by the terms of the resolution under which he acted, the secretary had introduced into his report an able and comprehensive argument elucidating and supporting the principles it contained. With great strength and perspicuity, he displayed the political advantages of public credit, and, "the complicated variety of mischiefs which proceed from a neglect of the maxims which uphold it. Public credit could only be maintained by good faith, by a punctual performance of contracts;" and "good faith was recommended not only by the strongest inducements of political expediency, but was enforced by considerations of still greater authority. There are arguments for it which rest on the immutable principles of moral obligation. And in proportion as the mind is disposed to contemplate in the order of Providence, an intimate connexion between public virtue and public happiness, will be its repugnancy to a violation of those principles.

"This reflection," he said, "derived additional strength from the nature of the debt of the United States. It was the price of liberty. The faith of America had been repeatedly pledged for it, and with solemnities that gave peculiar force to the obligation."

While such a provision for the public debt as would give it a permanent and real value was imperiously required by every principle of good faith and moral justice; and was recommended

1790.

CHAP. IV. by the ability it would confer on the government 1790. in times of calamity to anticipate the future

resources of the nation, congress was also invited to the measure by the beneficial influence it would have on all classes of the community. "The fluctuation and insecurity incident to an unfounded debt rendered it a mere commodity, and a precarious one. As such, being only an object of particular speculation, all the money applied to it was so much diverted from the more useful channels of circulation, for which the thing itself afforded no substitute. So that in fact, one serious inconvenience of an unfunded debt was, that it contributed to the scarcity of money;" but, "it was a well known fact, that in countries in which the national debt was properly funded, and an object of established confidence, it answered most of the purposes of money. The same thing would in all probability happen in America under the like circumstances." This he contended, would invigorate all the operations of agriculture, manufactures, and commerce.

After supporting with a great variety of arguments the justice and the policy of an adequate provision for the public debt, the secretary proceeded to discuss the principles on which it should be made.

"It was agreed he said by all, that the foreign debt should be provided for according to the precise terms of the contract. It was to be regretted that with respect to the domestic debt, the same unanimity of sentiment did not prevail."

The first point on which the public appeared CHAP. IV. to be divided, involved the question, "whether a 1790. discrimination ought not to be made between original holders of the public securities, and present possessors by purchase." After reviewing the arguments generally urged in its support, the secretary declared himself against this discrimination. He deemed it "equally unjust and impolitic; highly injurious even to the original holders of public securities, and ruinous to public credit." To the arguments with which he enforced these opinions, he added the authority of the government of the union. From the circular address of congress to the states of the 26th of April 1783, accompanying their revenue system of the 18th of the same month, passages were selected indicating unequivocally, that in the view of that body the original creditors, and those who had become so by assignment, had equal claims upon

the nation.

After reasoning at great length against a discrimination between the different creditors of the union, the secretary proceeded to examine whether a difference ought to be permitted to remain between them and the creditors of individual states. "Both descriptions of debt were contracted for the same objects, and were in the main the same. Indeed a great part of the particular debts of the states had arisen from assumptions by them on account of the union; and it was most equitable that there should be the same measure of retribution for all. There were many reasons, some of which were stated, for believing that this would

CHAP. IV. not be the case, unless the state debts should be 1790. assumed by the nation.

In addition to the injustice of favouring one class of creditors more than another which was equally meritorious, many arguments were urged in support of the policy of distributing to all with an equal hand from the same source.

After an elaborate discussion of these and some other points connected with the subject, the secretary proposed that a loan should be opened to the full amount of the debt, as well of the particular states, as of the union.

The terms to be offered were,...

First... That for every hundred dollars subscribed payable in the debt, as well interest as principal, the subscriber should be entitled to have two thirds funded on a yearly interest of six per cent (the capital redeemable at the pleasure of government by the payment of the principal) and to receive the other third in lands of the western territory at their then actual value. Or...

Secondly...To have the whole sum funded at a yearly interest of four per cent irredeemable by any payment exceeding five dollars per annum both on account of principal and interest, and to receive as a compensation for the reduction of interest, fifteen dollars and eighty cents, payable in lands as in the preceding case. Or...

Thirdly... To have sixty-six and two thirds of a dollar funded at a yearly interest of six per cent, irredeemable also by any payment exceeding four dollars and two thirds of a dollar per annum on account both of principal and interest, and to have