at the end of ten years twenty-six dollars and CHAP. IV. eighty-eight cents funded at the like interest and 1790 rate of redemption.

In addition to these propositions, the creditors were to have an option of vesting their money in annuities on different plans; and it was also recommended to open a loan at five per cent for ten millions of dollars, payable one half in specie, and the other half in the debt, irredeemable by any payment exceeding six dollars per annum both of principal and interest.

By way of experiment was also proposed, a tontine on principles stated in the report.

From proposing to fund the whole debt immediately at the current rate of interest, the secretary was restrained by the opinion," that although such a provision might not exceed the abilities of the country, it would require the extension of taxation to a degree, and to objects which the true interest of the creditors themselves would forbid. It was therefore to be hoped and expected, that they would cheerfully concur in such modifications of their claims, on fair and equitable principles, as would facilitate to the government an arrangement substantial, durable, and satisfactory to the community. Exigencies might ere long arise which would call for resources greatly beyond what was now deemed sufficient for the current service; and should the faculties of the country be exhausted or even strained to provide for the public debt, there could be less reliance on the sacredness of the provision.

CHAP. IV. "But while he yielded to the force of these 1790. considerations, he did not lose sight of those fun

damental principles of good faith which dictate that every practicable exertion ought to be made, scrupulously to fulfil the engagements of govern. ment; that no change in the rights of its creditors ought to be attempted without their voluntary consent; and that this consent ought to be voluntary in fact, as well as in name. Consequently, that every proposal of a change ought to be in the shape of an appeal to their reason and to their interest, not to their necessities. To this end it was requisite that a fair equivalent should be offered, for what might be asked to be given up, and unquestionable security for the remainder." This fair equivalent for the proposed reduction of interest was he thought offered in the relinquishment of the power to redeem the whole debt at pleasure.

That a free judgment might be exercised by the holders of public securities in accepting or rejecting the terms offered by the government, provision was made in the report for paying to non subscribing creditors, a dividend of the surplus which should remain in the treasury after paying the interest of the proposed loans: but as the funds immediately to be provided, were cal. culated to produce only four per cent on the entire debt, the dividend, for the present, was not to exceed that rate of interest.

To enable the treasury to support this increased demand upon it, an augmentation of the duties on imported wines, spirits, tea, and coffee, was

proposed, and a duty on home made spirits was CHAP. IV. also recommended.

This celebrated report, which has been alike the fruitful theme of extravagant praise and bitter censure, merits the more attention, because in the measures which were founded on it, originated the first regular and systematic opposition to the principles on which the affairs of the union were administered.

On the 28th of January, this subject was taken up; and after some animadversions on the speculations in the public debt to which the report, it was said, had already given birth, the business was postponed until the eighth of February, when it was again brought forward.

1790.

Debate

Several resolutions affirmative of the principles contained in the report, were moved by Mr. thereon, Fitzsimmons. To the first, which respected a provision for the foreign debt, the house agreed without a dissenting voice. The second, in favour of appropriating permanent funds for payment of the interest on the domestic debt, and for the gradual redemption of the principal, gave rise to a very animated debate.

Mr. Jackson declared his hostility to funding systems generally. To prove their pernicious influence, he appealed to the history of Florence, Genoa, and Great Britain; and, contending that the subject ought to be deferred until North Carolina should be represented, moved, that the committee should rise. This question being decided in the negative, Mr. Scott declared the opinion that the United States were not bound to 1 i

VOL. V.

1790.

CHAP. IV. pay the domestic creditors the sums specified in the certificates of debt in their possession. He supported this opinion by urging, not that the public had received less value than was expressed on the face of the paper which had been issued, but that those to whom it had been delivered, by parting with it at two shillings and six pence in the pound, had themselves fixed the value of their claims, and had manifested their willingness to add to their other sacrifices this deduction from their demand upon the nation. He therefore moved to amend the resolution before the committee so as to require a resettlement of the debt.

The amendment was opposed by Mr. Boudinot Mr. Lawrence, Mr. Ames, Mr. Sherman, Mr. Hartley and Mr. Goodhue. They stated at large the terms on which the debt had been contracted, and urged the confidence which the creditors had a right to place in the government for its discharge according to settlements already made, and acknowledgments already given. The idea that the legislative body could diminish an ascertained debt was reprobated with great force, as being at the same time unjust, impolitic, and subversive of every principle on which public contracts are founded. The evidences of debt possessed by the creditors of the United States were considered as public bonds, for the redemption of which the property and the labour of the people were pledged.

After the debate had been protracted to some length, the question was taken on Mr. Scott's amendment, and it passed in the negative.

Mr. Madison then rose, and, in an eloquent CHAP. IV. speech replete with argument, proposed an amend- 1790. ment to the resolution, the effect of which was to discriminate between the public creditors, so as to pay the present holder of assignable paper the highest price it had borne in the market, and give the residue to the person with whom the debt was originally contracted. Where the original creditor had never parted with his claim, he was to receive the whole sum acknowledged to be due on the face of the certificate.

This motion was supported by Mr. Jackson, Mr. White, Mr. Moore, Mr. Page, Mr. Stone, Mr. Scott and Mr. Seney.

It was opposed with great earnestness and strength of argument, by Mr. Sedgewic, Mr. Lawrence, Mr. Smith of South Carolina, Mr. Ames, Mr. Gerry, Mr. Boudinot, Mr. Wadsworth, Mr. Goodhue, Mr. Hartley, Mr. Bland, Mr. Benson, Mr. Burke and Mr. Livermore.

The argument was ably supported on both sides, was long, animated and interesting. At length the question was put, and the amendment was rejected by a great majority.

This discussion attracted a large portion of the public attention. The proposition was new and interesting. That the debt ought to be diminished for the public advantage, was an opinion which had frequently been advanced, and which had gained many advocates. But a reduction from the claims of its present holders for the benefit of those who had sold their rights, was a measure which saved nothing to the public purse, and was