In the reign of King William, 1706, the policy of the English Parliament laid the foundation of what is called their national debt; but the sum was inconsiderable; it little exceeded £5,000,000 sterling; the example then set has been closely followed. In 1711, it amounted to £9,177,769 sterling, during the wars in the reign of Queen Anne; since that, the capital of the debt of Great Britain amounted, in 1777, to about £136,000,000 sterling; and to such a pitch has the spirit of funding and borrowing been carried in that country, that in 1786, their national debt had increased to £230,000,000 sterling; a burden which the most sanguine mind can never contemplate they will ever be relieved from. If future difficulties should involve that nation still further, what must be the consequence? The same effect must be produced that has taken place in other nations; it must either bring on a national bankruptcy, or annihilate her existence as an independent empire. Hence, I contend that a funding system in this country will be highly dangerous to the welfare of the Republic; it may, for a moment, raise our credit, and increase our circulation by multiplying a new species of currency; but it must hereafter settle upon our posterity a burden which they can neither bear nor relieve themselves from. It will establish a precedent in America that may, and in all probability will, be pursued by the Sovereign authority, until it brings upon us that ruin which it has never failed to bring, or is inevitably bringing upon all the nations of the earth who have had the temerity to make the experiment. Let us take warning by the errors of Europe, and guard against the introduction of a system followed by calamities so universal. Though our present debt be but a few millions, in the course of a single century it may be multiplied to an extent we dare not think of; for my part, I would rather have direct taxes imposed at once; which, in the course of a few years, would annihilate the principal of our debt. A few years' exertion in this way will save our posterity from a load of annual interest, amounting to the fifth, or perhaps the half of the sum we are now under engage

[FEBRUARY, 1790.

culating medium of the country, by means of its transferable quality; but this is denied by the best informed men. The funding of the debt will occasion enormous taxes for the payment of the interest. These taxes will bear heavily, both on agriculture and commerce. It will be charging the active and industrious citizen, who pays his share of the taxes, to pay the indolent and idle creditor who receives them, to be spent and wasted in the course of the year, without any hope of a future reproduction; for the new capital which they acquire must have existed in the country before, and must have been employed, as all capitals are, in maintaining productive labor. Thus the honest and hard-working part of the community will promote the ease and luxury of men of wealth; such a system may benefit large cities, like Philadelphia and New York, but the remote parts of the continent will not feel the invigorating warmth of the American treasury; in the proportion that it benefits the one, it will depress another.

But let me return to the question; does it not require, Mr. Chairman, I say again, that we should ascertain the debt we owe, before we proceed any further in the business? If gentlemen deny this, let me bring forward the old argument: North Carolina has acceded to the Union; she is a State of no inconsiderable importance; she has an equal right to a voice on this important busi ness with any State in the Union; but she is not represented here, while we are funding the debts not of ten or eleven States only, but a debt in which she must participate according to her proportion of representation; she may urge that we have no right to assume or transfer her particular debt from her own on to other shoulders; at least, after the declaration she has made, there is a delicacy in doing it without her presence. Things like these, pressed, without allowing time for deliberation, may justly give umbrage to all who are concerned for the independent privileges and sovereignty of the societies confederated under this Government; it may rouse the spirit of discord, and sound the alarm, at a time when unanimity or mutual forbearance is so requisite. But why, Mr. Chairman, should we hasten on Will all the States be satisfied that Congress this business of funding? Are our debts ascer- should assume their debts under a pretext tained? The report of the Secretary of the easing them, when it must be well known that Treasury proposes that we should not only fund the General Government will thus have it in its the debts that are ascertained, but the unliquida-power to call upon them to discharge the obliga ted and unsettled debts due from the Continent; tion, in an evil day, when they are unprepared? nor does the plan stop here; it proposes that we We know nothing of the future circumstances should assume the payment of the State debts- which may take place, or how far this Govern debts to us totally unknown. Many of the States, ment may attempt to depress or injure individual sir, have not yet ascertained what they owe; and States; we ought to guard, with the greatest if we do not know the amount of what we owe, degree of caution, against every danger of this or are to be indebted, shall we establish funds? nature. Shall we put our hands into the pockets of our constituents, and appropriate moneys for uses we are undetermined of? But more especially shall we do this, when, in doing it, it is indisputably certain, that the incumbrance will more than exceed all the benefits and conveniences? Gentlemen may come forward, perhaps, and tell me, that funding the public debt will increase the cir

ments to pay.

of

Under these impressions, sir, I am led to conclude, that it is becoming the wisdom of Congress to postpone the consideration of the remaining propositions. Let us endeavor to discover whether there is an absolute necessity for adopting a funding system or not. If there is no such necessity a short time will make it apparent; and let it be remembered what funds the United States possess

in the Western Territory. The disposal of those lands may perhaps supersede the necessity of establishing a permanent system of taxation. The Secretary of the Treasury is directed to report on this head to the House, and perhaps that report may show us that this property is likely to be more productive than we at present apprehend; these considerations induce me to wish that the further consideration be postponed for the present. Mr. SHERMAN.-The motion before the committee relates to the second resolution. The objects brought into view by the gentleman last up, are many of them unconnected with it, though they are severally objects of great importance. I think whatever doubts there may be with respect to the advantage or disadvantage of a public debt, we can none of us hesitate to decide that provision of some kind ought to be made for what we have already incurred. It is true, if we were about now to borrow money, it would be highly prudent to consider whether the anticipation would not be repaid by a speedy collection of taxes or duties to the amount; but when a debt is incurred beyond our present ability to discharge, we ought to make some provision for its gradual extinction, and, in the interim, pay punctually the interest; now, this resolution goes no further.

[H. of R.

follows the day. The only question that can come before us is, the mode of doing it.

With respect to that part of our debt which is yet unascertained, I would just beg leave to observe, that it is not our fault that it remains in an unsettled state; neither is it the fault of those who have brought in their accounts and had them liquidated. Hence, it appears to me extremely hard that we should refuse to provide for the payment of those to whom we acknowledge ourselves to be indebted, because there are others whose claims against us are not yet adjusted. The argument, therefore, which relates to this point, as well as that which relates to the Western Territory, will apply ten years hence as well as now, and form an eternal pretext for deferring the business.

Mr. JACKSON begged the committee would not understand him, that he was against paying the debts of the United States; he had no such object in view. The sinking fund alluded to by the gentleman from South Carolina, had not escaped his attention; but he very much doubted whether it ought to be relied on to effect the purpose he had in view. He believed sinking funds were generally considered as a kind of stand-by, or subsidiary fund, always at hand to be mortgaged when Some of the propositions which follow go fur-money was proposed to be raised on any exigency ther than this. They propose perpetual annuities, and talk of irredeemable stock. This is more than I am willing to agree to. I think it prudent for us to get out of debt as soon as we can; but then I do not suppose we can raise money enough to pay off the whole principal and interest in two, three, or ten years. If I am right in this, we ought to some mode of paying the interest in

to

agree the interim.

I

Mr. SMITH, of South Carolina. The report of the Secretary of the Treasury contains a proposition for the establishment of a sinking fund. wish the gentleman who brought forward the resolutions under consideration, had included that part of the system in his propositions, as it might have had a tendency to ease the mind of the honorable gentleman from Georgia, and to have shown him that the public debt is not intended to acquire the permanency which he dreads. If our present debt cannot be paid off at once, all that can be done is to provide such funds for its gradual extinction as will morally ensure the object.

The gentleman has contended that public funding is a public injury. I agree with him that funding a debt to a very great amount may be very injurious; yet funding a small debt is beneficial. But whether this is, or is not a fact, is not the object of our present inquiry; we are not in a situation to determine whether we will or will not have a public debt. We have it already, and it appears to me to be a matter of necessity that we should appropriate some funds for the payment of the interest upon it. When we consider the nature of the contract, for what it is we owe the money, and our ability to comply, it follows, of consequence, that we must pay; it follows as close as the shadow follows its substance; or as close as the night

of the State. He conceived the committee were precipitating the business, for the reason he before assigned. He would therefore endeavor to obtain their sense on this point, by moving that the committee rise.

This motion being seconded, it was put, and lost by a considerable majority.

Mr. STONE Supposed, that this resolution did not bring forward the question, whether we were to have a permanent funding system or not; it only est, and discharging the principal as fast as we proposed something for the payment of the intercould; but he would be glad to know what was the sense of the committee on this point.

Mr. BLAND inquired why there was a difference in the wording of the two first resolutions? It appeared to him to lead to that important question, whether the debts of the United States should be funded, on the principles of the report or not? If the gentleman who brought forward should be able to judge whether it would be prothe resolutions would explain his intention, he per to amend the resolution or not. It appeared to him to imply that a discrimination was intended, to prevent which it would be proper to change it, so as to read:

Resolved, That adequate provision ought to be made for fulfilling the engagements of the United States in respect to their domestic debt.

Why a discrimination should be made between foreigners and our own citizens, I am at a loss to account; perhaps the necessities of the United States may be urged as a reason: but have we inquired into our capacity to fulfil our engagements, generally or specially? It appears to me that we have voted unanimously to do justice to our foreign creditors, before we make any inquiry

H. OF R.]

Public Credit.

[FEBRUARY, 1790.

necessary supplies in any other way. And it is very well known, that those who sold goods or provisions for this circulating medium, raised their prices from six to ten shillings at least.

into our ability. By this, perhaps, we have deprived the domestic creditor of a full participation in what we are able to perform; if so, it may be a reason why we discriminate between them. Mr. FITZSIMONS said, that the circumstances of the foreign debt were such as left no choice in our power, according to the plan proposed by the Secretary of the Treasury; but we have it in our power, and are recommended to make a different arrangement with respect to the domestic debt. I stated, when I introduced the resolutions, that they were intended to bring the Secretary's plan fairly before the committee. This resolution is differently worded on that account; but it may be observed, that the foreign creditors are not here to make a contract with the people of the United States, but the domestic creditors are; and we may hold out a modification to them for their acceptance. With respect to the means by which we shall be enabled to pay the interest and principal of our debt, this resolution has nothing to do, it leaves it to the consideration of the committee; and every gentleman will be perfectly at liberty to propose and support such as he sup-hold the domestic debt by estimating it at its poses to be most suitable to our abilities.

There is another observation I would beg leave to make. The prices at which our supplies were procured were such, even in hard money, that it might be said specie had depreciated, or, what amounted to the same thing, the commodities were sold for more than their current price; in many cases, half the price would now purchase the same thing. If so, there is as much reason that we should now consider these public securities in a depreciated state, as every holder of them has considered them from that time to this. There was a period at which they were considered of no greater value than three or four shillings in the pound; at this day they are not at more than eight or ten. If this, then, is the case, why should Congress put it upon the same footing as the foreign debt, for which they received a hard dollar for every dollar they engaged to pay? Could any possible wrong be done to those who

them, I do not see how a difference can be made. By the resolutions of Congress, and from the face of the papers, it appears that they were transferable.

current value? I do not speak of those only who Mr. BLAND then proposed to substitute a reso-have speculated in certificates. With respect to lution respecting the domestic debt, similar to that adopted respecting the foreign debt, if it was in order. He thought it would decide the question, whether there should be a discrimination between the foreign and domestic creditor, and would leave the committee equally free with respect to the means that the one now before the House did.

Mr. LIVERMORE.-I do not clearly understand the import of the resolution before the committee. It seems worded rather in a doubtful manner. If it mean that funds ought to be appropriated for the payment of the interest and principal of the domestic debt, as the amount appears on the face of the certificates, I shall be totally against it; whether it pointedly carries that meaning or not, I cannot say.

For my part, I consider the foreign and domestic debt to carry with them very material distinctions. The one is not like a debt, while the other has all the true qualities of one. However gentlemen may think on this subject, there is a great difference between the merits of that debt which was lent the United States in real coin, by disinterested persons, not concerned or benefited by the Revolution, and at a low rate of interest, and those debts which have been accumulating upon the United States, at the rate of six per cent. interest, and which were not incurred for efficient money lent, but for depreciated paper, or services done at exorbitant rates, or for goods or provisions supplied at more than their real worth, by those who received all the benefits arising from our change of condition. It is within the knowledge of every gentleman, that a very considerable part of our domestic loan-office debt arose in this manner. It is well known that loan-office certificates were issued as a kind of circulating medium, when the United States were in such straits for cash that they could not raise the

but

It may be said, that there was some part of the domestic debt incurred by loans of hard money. There might be a small part lent in this way, it was very small indeed, compared with the whole of the domestic debt. It is in the memory of every gentleman, that, before the beginning of the Revolution, every State issued paper money; it answered the exigencies of Government in a considerable degree. The United States issued a currency of the same nature, which answered their purposes, except in some particular cases, and these were effected by loans of certain sums of hard money. If any distinctions are to be made among the domestic creditors, it ought to be made in favor of such only, and that in conse quence of the origin of the debt; while the great mass given for the depreciated paper, or provi sions sold at double prices, ought to be liquidated at its real value. I cannot think it injustice to reduce the interest on those debts. I should therefore be against passing this resolution, if it carries in it the idea of paying the principal and interest, according to the face of the well known, that a large proportion of this domestic debt was incurred for paper money lent. To be sure Congress acknowledged its value equal to its name;, but this was done on a principle of policy, in order to prevent the rapid depre ciation which was taking place. But money in this depreciated and depreciating state, ca hardly be said to be lent from a spirit of patriot ism; it was a mere speculation in public securi ties. They hoped, by putting their money in the loan-office, though in a depreciated state, to re ceive hard money for it by and by. I flatter myself this prediction will never be effected.

paper.

It is

lent

H. OF R.J

cannot.

with me in one respect, that we are judges to de- pledged. Instead of being judges, or arbitrators, termine matters of right and equity. We are, in on this occasion, we are parties to the contract; fact, as a court of law: can we propose to decide nor is our case varied by the dissolution of the old with wisdom, whether the claims are just or not, Confederacy, because the existing Constitution until the claims are exhibited? I presume we has expressly recognised the engagements made I am clear for going into the considera- under the former. All debts contracted before tion of a resolve of the kind now before us, when the adoption of this Constitution shall be as valid these doubts are removed from my mind. Ra- against the United States, under this Governtionally, I cannot consider in what manner the ment, as under the Confederation. Now is the debt can be paid, until these points are settled. moment to establish the principle; if the ConstiPerhaps the resolutions might be worded in such tution admits the borrowing of money, or paying a way as to give all the credit to the public secu- for supplies, to be a contract, we are one of the rities, which they could derive from a more pre- parties to this contract, and all idea of being arbicise funding system, while, at the same time, suf-ters must vanish. We cannot judge in our own ficient room should be left for settling the great points which I have in contemplation.

cause.

The case will now stand clear: we owe a debt I have no idea, Mr. Chairman, that these secu- contracted for a valuable consideration. The rities can be raised to their nomínal value by the evidences of our debt are in the hands of our most explicit vote of this House. I do not be- creditors, and we are called upon to discharge lieve they can acquire that stability which some them; if we have it in our power, we ought to gentlemen imagine. I am led to view the sub-consider ourselves bound to do it, on every prinject in this light from experience. I have seen, ciple of honor, of justice, and of policy. But as within a few days, a warrant from the Treasury we have not the ability to pay the whole off, nor for one hundred dollars, payable in the month of perhaps, the whole interest, we must endeavor to March, which was sold for eighty dollars cash. make such a modification as will enable us to satHere was a loss of one-fifth upon a note of which isfy every one. Not that this modification shall neither the seller nor buyer could suppose punc- take place without the consent of the creditors; tual payment would be refused. Now, if this is this would be improper and unjust. Each party the case with public debts of a certain nature, we is as much to be consulted on this occasion, as it cannot reasonably expect that funding our debts was at the time of the first contract. If, then. will raise the public securities to any thing near Congress is bound by the first contract, no gentletheir nominal value. Indeed, I believe it would man can say we are judges. If we are parties. have very little effect upon them. Men in busi- what would be the decision before a court of jus ness would give little more for a certificate draw- tice? The creditor produces my bond, by which ing four dollars per cent. per annum, than they I have bound myself to pay a hundred dollars; I would now. Supposing, then, the public credit cannot gainsay the fact; no man is allowed to will be unaffected in a great degree by the pre-plead that he has made a bad bargain, and that, sent measure, I would propose to take time for at other times, he could have purchased what he the purpose of ascertaining the justice of these got of the creditor at half the sum he was forced claims. I will, therefore, move to amend the re- to allow him. The inquiry with the judges solution now before us, by adding these words: not whether the debtor made a good bargain or "as soon as the same is ascertained and duly not, but whether he did it fairly and voluntarily, liquidated." We are in the same predicament if we fairly and honestly received the quid pro quo; we are bound, as parties to the honest performance of the contract, to discharge the debt; otherwise, what avails the clause in the Constitution, declaring all debts contracted, and engagements enter ed into, before its adoption, to be as valid against the present Government as they were under the old Confederation? The debt was bona fide con tracted; it was acknowledged by the United States; and the creditor received a certificate as the evidence of his debt. It is immaterial to us what he did with it. I confess, if the original holder was to come forward, and say that he had been robbed of such evidence, we ought not to pay it until the point was ascertained in a court of justice.

Mr. BOUDINOT.I am glad to see gentlemen bring into view principles on which to determine the great question before us; because, when they are once established, they will enable us to proceed with certainty to a decision. If the principles brought forward by the honorable gentleman from Pennsylvania are just, his arguments are of great weight; but if, on consideration, we shall find that the principles are unjust, then I presume, however cogent the system of reasoning he has founded thereon, it will not prevail.

He supposes we sit here as judges to determine the different claims of the creditors of the United States. If we are in that predicament, I agree we ought not to proceed but on full evidence and hearing of those claims. But I have never hitherto been led to consider Congress in this light, nor can I now consider them in any such point of view. I consider the Congress, who entered into these engagements, as complete representatives of the United States, and, in their political capacity, authorized, by the articles of Confederation, to contract the debts for which our public faith is

I can by no means consider the Congress of the United States judges on this occasion. We are not called upon as arbiters; our creditors justly consider us as parties, and call upon us for the payment of what we acknowledge to be due. They require at our hands the discharge of the engag ment, of which they present the written evidenc