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Chap. iv. ment would not distrust itself, nor suppose that 1790. it was distrusted by others. Into its ability, not its will, were they to inquire. This inquiry was not to be confined to the ability of the people to pay, nor to the constitutional power of the legislature to tax. On habit did the exercise of this power greatly depend, and the habit of paying taxes was of slow growth in every country. Experience alone could ascertain the productivehess of taxes, could teach the government the form in which they might most conveniently be imposed, and how far it was practicable and prudent to go. A new tax is more grievous than an old one; for people form their habits of living on the permanent state of things, and habit renders the burden not only less obnoxious, but less oppressive also. From these premises it was inferred, that congress did not yet possess its entire capacity to form sufficient funds, nor complete evidence to satisfy the creditors that they would be sufficient to perform literally the engagements with which the government was charged. The funds must be sufficient, otherwise it would be in vain to pledge them; and known to be sufficient, otherwise they would not be trusted. Any insecurity in this respect would continue the evil of a debt fluctuating in its value, and would injure the creditors by the diminished price of their paper in the market. It was to the interest of both parties, since the debt existed, to give it a high and fixed exchangeable value, so that it would answer the purposes of the precious metals. This could only be effected by the provision of funds which, in fact, and in the public opinion, were adequate to the sums with which they were charged. Gentlemen Chap.iv, might say and believe that the taxes would pro- ~i79o7~ duce a sum adequate to the payment of six per centum on the whole debt; but the requisite confidence could not be placed in these calculations; there would remain a degree of doubt respecting them, which would be alike unfriendly to the interests of the public and of the creditor. But admitting the taxes to be so productive as to secure the punctual payment of the interest, it ought not to be forgotten that a valuable and operative part of the plan was a sinking fund. This would raise the value of stock in the market by adding to the number of purchasers; and by gradually diminishing the debt itself, would increase the security of the residue. It was an object alike important to the government and to its creditors; and for its attainment, something might be relinquished by each.

But if by draining the sources of taxation, the sum produced should even be sufficient to pay the whole interest of the debt, and to provide also a sinking fund, was it consistent with prudence for a nation to pledge its funds to the extent of its capacity? contingent expenses could not be avoided. By these, the confidence in the funds might be impaired; and by a war, the whole system of public credit might be destroyed. If the public burdens were such as to justify these apprehensions, they would be entertained; and the existence of such suspicions would affect the price of stock. To the creditors themselves it was a question of fair calculation, how far their Vol. v. Mm

Chap. iv. interests would be promoted by such a change of 1790. the terms of the contract, as would indeed diminish the nominal amount of their claims, but would increase their security. These considerations being taken into view, it was prudent in the United States to offer, and in their creditors to accept such reasonable arrangements respecting the debt, as the circumstances of the government required. But if these circumstances required a diminution of the present burden, justice and good faith demanded that a real equivalent should be offered for that portion of claim on the public which was to be surrendered. The system now brought forward presented this equivalent. In its composition were to be found principles greatly to be desired by the creditor, without being injurious to the state.

As the contract now stood, there was no obligation to pledge permanent funds for the payment of the interest, and the gradual extinguishment of the principal. The nation was indeed bound to make an annual provision for the interest, and to discharge the principal as soon as its circumstances would admit. But between such an annual provision, and a permanent security coextensive with the debt itself, not depending on the various contingencies which might influence the legislature in the course of events, there was a difference which would materially affect the price of the article. Of the truth of this proposition, the low rate at which the securities of those states sold in the market which had regularly paid the interest, was considered as conclusive evidence. The advantage, therefore, which the creditor would Chap. iv. derive from the increased value of his capital, ~1790. would compensate for the diminution of his interest. While this operation was a great advantage to the creditors, it was more than merely not injurious, it was really beneficial to the United States. The sooner the price of the debt in market could, without an increase of burden, be raised to its nominal value, the sooner would it become a useful medium of circulation; the sooner would that pernicious speculation which was so much reprobated be terminated; and the greater sum in specie would it command to the present holders.

The permanence of the debt was also a quality which gave it value to the creditor, without increasing the burdens of the nation. In times of peace, the rate of interest had always fallen, and it was for the holder of public securities to decide, whether he would prefer a higher interest for a short time, or a lower interest secured for a long time.

On this point, many observations were made in support of the opinion, that the principle under discussion would, in the opinion of the creditor, add to the value of the debt.

That the whole system taken together would be beneficial to the United States, was a proposition susceptible of such complete demonstration, that no difficulty could be apprehended respecting this part of the argument.

By the modifications of the debt which were connected with thepropositionunderconsideration, the United States would save thirteen millions of Chap. iv. dollars. For this certain gain they gave a principal, 1790. which, without adding to the weight of the remaining burden, was really advantageous to the community in some respects, as it would contribute to raise the price of stock so as to convert an object of pernicious speculation into a valuable and active capital. The objection is that this whole capital is not redeemable at the will of the legislature. But making the debt redeemable, will not redeem it. Nor will making it irredeemable be a real restraint on the present or probable capacity of the public to redeem. It will probably not prolong the evil of a public debt a single day. All the money that can be provided for paying it off may still be employed in its discharge, because until the debt shall rise above par, there will be no difficulty in redeeming it by purchase. This will be advantageous to the creditor, because buying at the market price will raise the value of the article. The right without the means to redeem is worth nothing; and every probability is in favour of the opinion, that the public will long be at liberty to employ all its means. Thirteen millions will be already redeemed. Perhaps the exertions of thirteen years would not sink as large a sum: and perhaps in twenty years the reduced rate of interest would not be such as to raise the capital above par, and render it necessary to suspend purchases. But should the fact be otherwise, still the proposition reserved to the government the power to redeem gradually, and it was not probable that it would be found convenient to use this power, should it be possessed, more exten

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