The Life of George Washington, Vol. 4 (of 5)
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The secretary of the treasury proposed to assume these debts, and to
fund them in common with that which continued to be the proper debt of
the union.
The resolution which comprehended this principle of the report, was
vigorously opposed.
It was contended that the general government would acquire an undue
influence, and that the state governments would be annihilated by the
measure. Not only would all the influence of the public creditors be
thrown into the scale of the former, but it would absorb all the
powers of taxation, and leave to the latter only the shadow of a
government. This would probably terminate in rendering the state
governments useless, and would destroy the system so recently
established. The union, it was said, had been compared to a rope of
sand; but gentlemen were cautioned not to push things to the opposite
extreme. The attempt to strengthen it might be unsuccessful, and the
cord might be strained until it should break.
The constitutional authority of the federal government to assume the
debts of the states was questioned. Its powers, it was said, were
specified, and this was not among them.
The policy of the measure, as it affected merely the government of the
union, was controverted, and its justice was arraigned.
On the ground of policy it was objected, that the assumption would
impose on the United States a burden, the weight of which was
unascertained, and which would require an extension of taxation beyond
the limits which prudence would prescribe. An attempt to raise the
impost would be dangerous; and the excise added to it would not
produce funds adequate to the object. A tax on real estate must be
resorted to, objections to which had been made in every part of the
union. It would be more adviseable to leave this source of revenue
untouched in the hands of the state governments, who could apply to it
with more facility, with a better understanding of the subject, and
with less dissatisfaction to individuals, than could possibly be done
by the government of the United States.
There existed no necessity for taking up this burden. The state
creditors had not required it. There was no petition from them upon
the subject. There was not only no application from the states, but
there was reason to believe that they were seriously opposed to the
measure. Many of them would certainly view it with a jealous,--a
jaundiced eye. The convention of North Carolina, which adopted the
constitution, had proposed, as an amendment to it, to deprive congress
of the power of interfering between the respective states and their
creditors: and there could be no obligation to assume more than the
balances which on a final settlement would be found due to creditor
states.
That the debt by being thus accumulated would be perpetuated was also
an evil of real magnitude. Many of the states had already made
considerable progress in extinguishing their debts, and the process
might certainly be carried on more rapidly by them than by the union.
A public debt seemed to be considered by some as a public blessing;
but to this doctrine they were not converts. If, as they believed, a
public debt was a public evil, it would be enormously increased by
adding those of the states to that of the union.
The measure was unwise too as it would affect public credit. Such an
augmentation of the debt must inevitably depreciate its value; since
it was the character of paper, whatever denomination it might assume,
to diminish in value in proportion to the quantity in circulation.
It would also increase an evil which was already sensibly felt. The
state debts when assumed by the continent, would, as that of the union
had already done, accumulate in large cities; and the dissatisfaction
excited by the payment of taxes, would be increased by perceiving that
the money raised from the people flowed into the hands of a few
individuals. Still greater mischief was to be apprehended. A great
part of this additional debt would go into the hands of foreigners;
and the United States would be heavily burdened to pay an interest
which could not be expected to remain in the country.
The measure was unjust, because it was burdening those states which
had taxed themselves highly to discharge the claims of their
creditors, with the debts of those which had not made the same
exertions. It would delay the settlement of accounts between the
individual states and the United States; and the supporters of the
measure were openly charged with intending to defeat that settlement.
It was also said that, in its execution, the scheme would be found
extremely embarrassing, perhaps impracticable. The case of a partial
accession to the measure by the creditors, a case which would probably
occur, presented a difficulty for which no provision was made, and of
which no solution had been given. Should the creditors in some states
come into the system, and those in others refuse to change their
security, the government would be involved in perplexities from which
no means of extricating itself had been shown. Nor would it be
practicable to discriminate between the debts contracted for general
and for local objects.
In the course of the debate, severe allusions were made to the conduct
of particular states; and the opinions advanced in favour of the
measure, were ascribed to local interests.
In support of the assumption, the debts of the states were traced to
their origin. America, it was said, had engaged in a war, the object
of which was equally interesting to every part of the union. It was
not the war of a particular state, but of the United States. It was
not the liberty and independence of a part, but of the whole, for
which they had contended, and which they had acquired. The cause was a
common cause. As brethren, the American people had consented to hazard
property and life in its defence. All the sums expended in the
attainment of this great object, whatever might be the authority under
which they were raised or appropriated, conduced to the same end.
Troops were raised, and military stores purchased, before congress
assumed the command of the army, or the control of the war. The
ammunition which repulsed the enemy at Bunker's Hill, was purchased by
Massachusetts; and formed a part of the debt of that state.
Nothing could be more erroneous than the principle which had been
assumed in argument, that the holders of securities issued by
individual states were to be considered merely as state creditors;--as
if the debt had been contracted on account of the particular state. It
was contracted on account of the union, in that common cause in which
all were equally interested.
From the complex nature of the political system which had been adopted
in America, the war was, in a great measure, carried on through the
agency of the state governments; and the debts were, in truth, the
debts of the union, for which the states had made themselves
responsible. Except the civil list, the whole state expenditure was in
the prosecution of the war; and the state taxes had undeniably
exceeded the provision for their civil list. The foundation for the
several classes of the debt was reviewed in detail; and it was
affirmed to be proved from the review, and from the books in the
public offices, that, in its origin, a great part of it, even in form,
and the whole, in fact, was equitably due from the continent. The
states individually possessing all the resources of the nation, became
responsible to certain descriptions of the public creditors. But they
were the agents of the continent in contracting the debt; and its
distribution among them for payment, arose from the division of
political power which existed under the old confederation. A new
arrangement of the system had taken place, and a power over the
resources of the nation was conferred on the general government. With
the funds, the debt also ought to be assumed. This investigation of
its origin demonstrated that the assumption was not the creation of a
new debt, but the reacknowledgment of liability for an old one, the
payment of which had devolved on those members of the system, who, at
the time, were alone capable of paying it. And thence was inferred,
not only the justice of the measure, but a complete refutation of the
arguments drawn from the constitution. If, in point of fact, the debt
was in its origin continental, and had been transferred to the states
for greater facility of payment, there could be no constitutional
objection to restoring its original and real character.
The great powers of war, of taxation, and of borrowing money, which
were vested in congress to pay the debts, and provide for the common
defence and general welfare of the United States, comprised that in
question. There could be no more doubt of their right to charge
themselves with the payment of a debt contracted in the past war, than
to borrow money for the prosecution of a future war. The impolicy of
leaving the public creditors to receive payment from different sources
was also strongly pressed; and the jealousy which would exist between
the creditors of the union and of the states, was considered as a
powerful argument in favour of giving them one common interest. This
jealousy, it was feared, might be carried so far, as even to create an
opposition to the laws of the union.
If the states should provide for their creditors, the same sum of
money must be collected from the people, as would be required if the
debt should be assumed; and it would probably be collected in a manner
more burdensome, than if one uniform system should be established. If
all should not make such provision, it would be unjust to leave the
soldier of one state unpaid, while the services of the man who fought
by his side were amply compensated; and, after having assumed the
funds, it would dishonour the general government to permit a creditor
for services rendered, or property advanced for the continent, to
remain unsatisfied, because his claim had been transferred to the
state, at a time when the state alone possessed the means of payment.
By the injured and neglected creditor, such an arrangement might
justly be considered as a disreputable artifice.
Instead of delaying, it was believed to be a measure which would
facilitate the settlement of accounts between the states. Its
advocates declared that they did not entertain, and never had
entertained any wish to procrastinate a settlement. On the contrary,
it was greatly desired by them. They had themselves brought forward
propositions for that purpose; and they invited their adversaries to
assist in improving the plan which had been introduced.
The settlement between the states, it was said, either would or would
not be made. Should it ever take place, it would remedy any
inequalities which might grow out of the assumption. Should it never
take place, the justice of the measure became the more apparent. That
the burdens in support of a common war, which from various causes had
devolved unequally on the states, ought to be apportioned among them,
was a truth too clear to be controverted; and this, if the settlement
should never be accomplished, could be effected only by the measure
now proposed. Indeed, in any event, it would be the only certain, as
well as only eligible plan. For how were the debtor states to be
compelled to pay the balances which should be found against them?
If the measure was recommended by considerations which rendered its
ultimate adoption inevitable, the present was clearly preferable to
any future time. It was desirable immediately to quiet the minds of
the public creditors by assuring them that justice would be done; to
simplify the forms of public debt; and to put an end to that
speculation which had been so much reprobated, and which could be
terminated only by giving the debt a real and permanent value.
That the assumption would impair the just influence of the states was
controverted with great strength of argument. The diffusive
representation in the state legislatures, the intimate connexion
between the representative and his constituents, the influence of the
state legislatures over the members of one branch of the national
legislature, the nature of the powers exercised by the state
governments which perpetually presented them to the people in a point
of view calculated to lay hold of the public affections, were
guarantees that the states would retain their due weight in the
political system, and that a debt was not necessary to the solidity or
duration of their power.
But the argument it was said proved too much. If a debt was now
essential to the preservation of state authority, it would always be
so. It must therefore never be extinguished, but must be perpetuated,
in order to secure the existence of the state governments. If, for
this purpose, it was indispensable that the expenses of the
revolutionary war should be borne by the states, it would not be less
indispensable that the expenses of future wars should be borne in the
same manner. Either the argument was unfounded, or the constitution
was wrong; and the powers of the sword and the purse ought not to have
been conferred on the government of the union. Whatever speculative
opinions might be entertained on this point, they were to administer
the government according to the principles of the constitution as it
was framed. But, it was added, if so much power follows the assumption
as the objection implies, is it not time to ask--is it safe to forbear
assuming? if the power is so dangerous, it will be so when exercised
by the states. If assuming tends to consolidation, is the reverse,
tending to disunion, a less weighty objection? if it is answered that
the non-assumption will not necessarily tend to disunion; neither, it
may be replied, does the assumption necessarily tend to consolidation.
It was not admitted that the assumption would tend to perpetuate the
debt. It could not be presumed that the general government would be
less willing than the local governments to discharge it; nor could it
be presumed that the means were less attainable by the former than the
latter.
It was not contended that a public debt was a public blessing. Whether
a debt was to be preferred to no debt was not the question. The debt
was already contracted: and the question, so far as policy might be
consulted, was, whether it was more for the public advantage to give
it such a form as would render it applicable to the purposes of a
circulating medium, or to leave it a mere subject of speculation,
incapable of being employed to any useful purpose. The debt was
admitted to be an evil; but it was an evil from which, if wisely
modified, some benefit might be extracted; and which, in its present
state, could have only a mischievous operation.
If the debt should be placed on adequate funds, its operation on
public credit could not be pernicious: in its present precarious
condition, there was much more to be apprehended in that respect.
To the objection that it would accumulate in large cities, it was
answered it would be a monied capital, and would be held by those who
chose to place money at interest; but by funding the debt, the present
possessors would be enabled to part with it at its nominal value,
instead of selling it at its present current rate. If it should centre
in the hands of foreigners, the sooner it was appreciated to its
proper standard, the greater quantity of specie would its transfer
bring into the United States.
To the injustice of charging those states which had made great
exertions for the payment of their debts with the burden properly
belonging to those which had not made such exertions, it was answered,
that every state must be considered as having exerted itself to the
utmost of its resources; and that if it could not, or would not make
provision for creditors to whom the union was equitably bound, the
argument in favour of an assumption was the stronger.
The arguments drawn from local interests were repelled, and retorted,
and a great degree of irritation was excited on both sides.
After a very animated discussion of several days, the question was
taken, and the resolution was carried by a small majority. Soon after
this decision, while the subject was pending before the house, the
delegates from North Carolina took their seats, and changed the
strength of parties. By a majority of two voices, the resolution was
recommitted; and, after a long and ardent debate, was negatived by the
same majority.
This proposition continued to be supported with a degree of
earnestness which its opponents termed pertinacious, but not a single
opinion was changed. It was brought forward in the new and less
exceptionable form of assuming specific sums from each state. Under
this modification of the principle, the extraordinary contributions of
particular states during the war, and their exertions since the peace,
might be regarded; and the objections to the measure, drawn from the
uncertainty of the sum to be assumed, would be removed. But these
alterations produced no change of sentiment; and the bill was sent up
to the senate with a provision for those creditors only whose
certificates of debt purported to be payable by the union.
In this state of things, the measure is understood to have derived aid
from another, which was of a nature strongly to interest particular
parts of the union.
From the month of June, 1783, when congress was driven from
Philadelphia by the mutiny of a part of the Pennsylvania line, the
necessity of selecting some place for a permanent residence, in which
the government of the union might exercise sufficient authority to
protect itself from violence and insult, had been generally
acknowledged. Scarcely any subject had occupied more time, or had more
agitated the members of the former congress than this.
[Sidenote: Bill for fixing the permanent seat of government.]
In December, 1784, an ordinance was passed for appointing
commissioners to purchase land on the Delaware, in the neighbourhood
of its falls, and to erect thereon the necessary public buildings for
the reception of congress, and the officers of government; but the
southern interest had been sufficiently strong to arrest the execution
of this ordinance by preventing an appropriation of funds, which
required the assent of nine states. Under the existing government,
this subject had received the early attention of congress; and many
different situations from the Delaware to the Potomac inclusive, had
been earnestly supported; but a majority of both houses had not
concurred in favour of any one place. With as little success, attempts
had been made to change the temporary residence of congress. Although
New York was obviously too far to the east, so many conflicting
interests were brought into operation whenever the subject was
touched, that no motion designating a more central place, could
succeed. At length, a compact respecting the temporary and permanent
seat of government was entered into between the friends of
Philadelphia, and the Potomac, stipulating that congress should
adjourn to and hold its sessions in Philadelphia, for ten years,
during which time, buildings for the accommodation of the government
should be erected at some place on the Potomac, to which the
government should remove at the expiration of the term. This compact
having united the representatives of Pennsylvania and Delaware with
the friends of the Potomac, in favour both of the temporary and
permanent residence which had been agreed on between them, a majority
was produced in favour of the two situations, and a bill which was
brought into the senate in conformity with this previous arrangement,
passed both houses by small majorities. This act was immediately
followed by an amendment to the bill then pending before the senate
for funding the debt of the union. The amendment was similar in
principle to that which had been unsuccessfully proposed in the house
of representatives. By its provisions, twenty-one millions five
hundred thousand dollars of the state debts were assumed in specified
proportions; and it was particularly enacted that no certificate
should be received from a state creditor which could be "ascertained
to have been issued for any purpose other than compensations and
expenditures for services or supplies towards the prosecution of the
late war, and the defence of the United States, or of some part
thereof, during the same."
When the question was taken in the house of representatives on this
amendment, two members representing districts on the Potomac, who, in
all the previous stages of the business, had voted against the
assumption, declared themselves in its favour; and thus the majority
was changed.[45]
[Footnote 45: It has ever been understood that these members
were, on principle, in favour of the assumption as modified
in the amendment made by the senate; but they withheld their
assent from it when originally proposed in the house of
representatives, in the opinion that the increase of the
national debt, added to the necessity of giving to the
departments of the national government a more central
residence. It is understood that a greater number would have
changed had it been necessary.]
Thus was a measure carried, which was supported and opposed with a
degree of zeal and earnestness not often manifested; and which
furnished presages, not to be mistaken, that the spirit with which the
opposite opinions had been maintained, would not yield, contentedly,
to the decision of a bare majority. This measure has constituted one
of the great grounds of accusation against the first administration of
the general government; and it is fair to acknowledge, that though, in
its progress, it derived no aid from the President, whose opinion
remained in his own bosom, it received the full approbation of his
judgment.
A bill, at length, passed both houses, funding the debt upon
principles which lessened considerably the weight of the public
burdens, and was entirely satisfactory to the public creditors. The
proceeds of the sales of the lands lying in the western territory,
and, by a subsequent act of the same session, the surplus product of
the revenue after satisfying the appropriations which were charged
upon it, with the addition of two millions, which the President was
authorized to borrow at five per centum, constituted a sinking fund to
be applied to the reduction of the debt.
The effect of this measure was great and rapid. The public paper
suddenly rose, and was for a short time above par. The immense wealth
which individuals acquired by this unexpected appreciation, could not
be viewed with indifference. Those who participated in its advantages,
regarded the author of a system to which they were so greatly
indebted, with an enthusiasm of attachment to which scarcely any
limits were assigned. To many others, this adventitious collection of
wealth in particular hands, was a subject rather of chagrin than of
pleasure; and the reputation which the success of his plans gave to
the secretary of the treasury, was not contemplated with unconcern. As
if the debt had been created by the existing government, not by a war
which gave liberty and independence to the United States, its being
funded was ascribed by many, not to a sense of justice, and to a
liberal and enlightened policy, but to the desire of bestowing on the
government an artificial strength, by the creation of a monied
interest which would be subservient to its will.
The effects produced by giving the debt a permanent value, justified
the predictions of those whose anticipations had been most favourable.
The sudden increase of monied capital derived from it, invigorated
commerce, and gave a new stimulus to agriculture.
About this time, there was a great and visible improvement in the
circumstances of the people. Although the funding system was certainly
not inoperative in producing this improvement, it can not be justly
ascribed to any single cause. Progressive industry had gradually
repaired the losses sustained by the war; and the influence of the
constitution on habits of thinking and acting, though silent, was
considerable. In depriving the states of the power to impair the
obligation of contracts, or to make any thing but gold and silver a
tender in payment of debts, the conviction was impressed on that
portion of society which had looked to the government for relief from
embarrassment, that personal exertions alone could free them from
difficulties; and an increased degree of industry and economy was the
natural consequence of this opinion.
[Sidenote: Adjournment of congress.]
On the 12th of August, after an arduous session, congress adjourned,
to meet in Philadelphia the first Monday in the following December.
While the discussions in the national legislature related to subjects,
and were conducted in a temper, well calculated to rouse the active
spirit of party, the external relations of the United States wore an
aspect not perfectly serene. To the hostile temper manifested by the
Indians on the western and southern frontiers, an increased degree of
importance was given by the apprehension that their discontents were
fomented by the intrigues of Britain and of Spain. From Canada, the
Indians of the north-west were understood to be furnished with the
means of prosecuting a war which they were stimulated to continue;
and, to the influence of the governor of the Floridas had been partly
attributed the failure of the negotiation with the Creeks. That this
influence would still be exerted to prevent a friendly intercourse
with that nation was firmly believed; and it was feared that Spain
might take a part in the open hostilities threatened by the irritable
dispositions of individuals in both countries. From the intimate
connexion subsisting between the members of the house of Bourbon, this
event was peculiarly deprecated; and the means of avoiding it were
sought with solicitude. These considerations determined the President
to make another effort at negotiation; but, to preserve the respect of
these savages for the United States, it was at the same time resolved
that the agent to be employed should visit the country on other
pretexts, and should carry a letter of introduction to M'Gillivray,
blending with other subjects a strong representation of the miseries
which a war with the United States would bring upon his people; and an
earnest exhortation to repair with the chiefs of his nation to the
seat of the federal government, in order to effect a solid and
satisfactory peace. Colonel Willett was selected for this service; and
he acquitted himself so well of the duty assigned to him, as to induce
the chiefs of the nation, with M'Gillivray at their head, to repair to
New York, where negotiations were opened which terminated in a treaty
of peace,[46] signed on the 7th day of August.[47]