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The example set by Massachusetts was quickly ter, simple evidences of debt due by the governimitated by the other colonies. Pennsylvania con ment: and may, as such, in the first stage of its trived to keep her paper nearly on a level with silver operation, be compared to the forced loans which the iu value : but the notes of the other colonies depre. potentates of Europe have at times extracted from ciated greatly, and in 1747 Massachusetts paid the their subjects. As a forced currency, it may be greater part of her public debis with the one tenth compared to the base coin which the same potenpart of the money for which her paper bills had tates have issued in other seasons of difficulty. It been granted.
can be justified (if it can be justified at all) only on It was quite natural that this easy way of supply, the plea of state necessity-a plea never to be ading the colonial governments with such funds as mitted without close examination. they wanted, should afterwards be resorted to as a It is difficult to believe that a people, so devoted means of making money plenty in every man's as the Americans of that day were to the cause of pocket. Whenever a cry arose of scarci:y of mo. liberty, would have scrupled about paying the neney, all the governments had to do, was to issue cessary expenses of the war. But they were taught more paper.
by some of their leading men that taxation was Our limits will not permit us to describe the per- quite unnecessary, and that paper money would sup: nicious effects this system had on the morals of the ply every financial want. It is reported that when coinmunity, and, through their morals, on their in- a proposition was made in congress, to establish dustry and wealth. It opened to many individuals a regular revenue system, one member exclaimed, another way of growing rich, besides the old fash- “ Do you think, gentlemen, that I will consent to ioned way of hard work and close economy. It load my constituents with taxes, when we can send substituted speculation for industry: and produced to our printer, and get a wagon load of money, one infinitely more evil in the colonies than was occa- quire of which will pay for the whole!" sioned by any of the restrictions imposed by the The best, if not the only excuse, for the policy British government on their commerce and manu which was pursued, is, perhaps, to be found in the factures. It was nevertheless persisted in, because opinion then prevalent, that money was something the speculating part of society, who are always the which derived its value from the authority of gomost active, and generally the most powerful, found vernment. In no other way can we apologise for their interest promoted by it.
the acts which imposed severe penalties on those During the revolutionary war, this mode of who refused to exchange their merchandise for paraising a revenue was resorted to, because it was per, and which in some instances even outlawed ihe the easiest. The advances made at the Treasury supposed offender. of the United States in continental money, in old Our ancestors were lavish of their blood in deand new emissions, are estimated as follows: fence of their rights. If it was from any wish to
save their treasure, that they preferred defraying Old Emission.
New Emission. In 1776, $20,064,666 66
the expenses of the war through the means of paper
money, rather than by regular taxation, they did 26,426,333 01
not succeed in their object. As a mode of raising 1778,
66, 965,269 34 1779, 149,703,356 77
revenue, the paper money might be compared to a 1780, 82,908,320 47
expenses of collecting which were ten times 1781, 11,408,095 00
as great as the sums brought into the 'treasury.
The benefit the government derived from it was in $357,476,541 45 $2,070,485 80
no way commensurate with the burdens it imposed
on the people. Till the issues of paper exceeded $9,000,000, there The tories having, from the beginning of the was not, according to the concurrent testimony of contest, litile confidence in continental money, the Mr. Jefferson and Mr. Paine, any sensible deprecia- principal loss fell on the friends of independence. tion. Bilt, in January 1777, one year and five “ The generous patriotic spirits,” says an eye witmonths after the first emission, the depreciation ness, " suffered the injury: the avaricious and idle was, as is slated by Pelatiah Webster, about derived benefit from the confusion.” “ We have twenty-five per cent, one dollar and a quarter of suffered more from this,” says the same eye witness, continental money being equal to one dollar of hard “than from every other cause of calamity: it has money. In March of that year, the exchange of killed more men, pervaded and corrupted the continental for hard money, was as 2 to 1. In July choicest interests of our country more, and done 3 to 1. In December 4 to 1. In the year 1778, it more injustice than even the arms and artifices of fluctuated from 4 to 1 to 6 for 1. In January 1779, our enemies.” it rose to 7, 8, and 9 to 1. By April it
The first recommendation of congress to the by December 45. At the close of the year 1780, it states, to raise money by a tax, appears to have was 100 to 1. In the latter end of February 1781, been made on the 14th of January 1777: but this it rose to 120; in March, to 135; in April, to 200. was in so indefinite a manner, without any sums be. In May it rose from 200 to 500, and on the 31st of ing mentioned, or quota specified, that it had little that mooth ceased to circulate as money: but was or no effect. On the 22d of November in the same afterwards bought on speculation, at from 400 to 1, year, congress recommended to the states to raise to 1000 to 1.
five million dollars in the course of the year 1778, This continental money was, in its true charac and to pay the same in quarterly instalments. In
this recommendation, the quota of each state was April 1783, 53,394 100,000 46,606 specified, and in consequence thereof, some small Oct.
164,781 164,781 sums were raised and paid by some of the states Jan. 1, 1784, the debt was discharged. within the year 1778: others made some remittances,
The third column shows the amount advanced long afterwards, when continental money was as 20 to 1: but great part of the sum was never paid by the bank, beyond what was paid in by the at all.
government. For part of what was advanced, the At different times in 1779, calls were made on
state of Pennsylvania appears to have been security. the states for 60 millions to be paid in that year:
It is not possible to ascertain with certainty the and 135 millions to be paid in 1780, and six millions expenses of the revolutionary war. The following annually for 18 years, to commence with 1780, as a
is an abstract of an estimate made in 1790, by the fund for sinking loans, and emissions, and paying Register of the Treasury, and furnished to a com
mittee of congress. interest. The dependence was still on continental money, and the system of taxation was merely to
The estimated amount of the expenditures of support the credit of the paper, by reducing the
1775 and 1776, is, in specie, $20,064,666 66 quantity in circulation. None of these requisitions
24,986,646 85 had the effect intended: nor was it till after conti
24,287,438 26 nental money had ceased to circulate, that the states
10,794,620 65 would, to any extent, draw directly on the real
3,000,000 00 resources of the country. When it was found im
1,942,465 30 possible to depend any longer on paper issues,
3,632,745 85 very strong exertions were made to obtain money
3,226,583 45 from the states, by a tax levied on polls and estates ToNov. 1, 1784
548,525 63 in the old and usual way, and such conviction of the necessity of public supplies generally took place; Forming a total amount of that considerable sums were oblained in this way.
$92,485,693 15 The loans which were negotiated in Europe, were of essential service. The following is an account year are valued at the average rate of the exchange
In this estimate the issues of paper for each of those negotiated in France, omitting fractions of for hard money in that year. dollars, and reckoning five livres eight sols to the
It is exclusive of certain debts of the United dollar.
States, which were incurred at various periods for 1778, February 6, Cash re
the support of the war, and which, the Register of ceived from sundry indi
the Treasury said, should be taken into a general viduals up to this day,
view of the expense thereof, viz. including a loan from the Livres. Dollars. Army debt, upon commissioners' cerFarmers-General, 3,000,000 555,555 tificates,
$11,080,576 01 Loan by the Court of
For supplies furnished by the citizens France, for this year, 3,000,000 555,555 of the several states, and for which 1779, Loan for this year, 1,000,000 185,185 certificates were issued by the com1780, Loan,
3,723,625 20 1781, Loan,
4,000,000 740,740 For supplies furnished in the quarSubsidy from the Court
ter-master, commissary, hospital, of France,
6,000,000 1,111,111 clothing, and marine departments, 1782, Loan,
1,159, 170 05 1713, Loan,
6,000,000 1,111,111 For supplies, on accounts settled at
the treasury, and for which cer33,000,000 6,111,108 tificates were issued by the regisBesides a loan to the amount of 1,851,851 dollars, the foreign expenditures, civil,
744,638 49 negotiated in Holland in 1781: some other loans
military, naval, and contingencies, · from Holland: and a small loan from Spain. Some assistance was derived from the Bank of
amount, by computation, to the North America. This institution went into opera. The expenditures of the several
5,000,000 00 the 7th January 1782on capital
states, from the commencement of 250,000 dollars in specie, supplied by government,
the war to the establishment of and 70,000 subscribed by individuals. The accounts
peace, cannot be stated with any of the government and the bank, from that time
degree of certainty. But the United to the end of the war, stood as follows, agreeably to
States have granted certain sums a statement made by Mr. Morris, in the Pennsyl
for the relief of the several states, vania legislature, in 1785.
to be funded by the general gove
ernment, therefore, estimate the
252,918 400,000 147,082 Oct.
253,394 400,000 146,606 Estimated expense of the war, specie, $135,193,703 00 Jan.
53,394 100,000 46,606
66 1782, 66 1782, 66 1783,
6 24 3
brown sugar loaf sugar other sugars
do do do do do
In April 1783, the debt of the United States
common Bohea tea, per lb. (exclusive of the state debts) was estimated at
other teas $42,000,375, and the annual interest at $2,415,916.
pepper As the war had been brought to a close, it became necessary for congress to provide permanent funds for paying the interest. It had been foreseen by many, as Mr. Pitkin remarks, that this could not be
molasses, per gall. done, unless congress had the power to regulate the
cocoa and other coffee
do commerce of the country, or at least, were vested and upon all other goods a duty of five per cent ad with a power to levy duties on imports. By the articles of confederation, this power was not dele valorem, at time and place of importation: with a gated to them, but remained in the respective plied to any other purpose, than the discharge of
proviso that none of the said duties slıould be apStates, which had the right of laying and collecting the interest and principal of the debts contracted on such duties on imports as they judged proper for the faith of the United States for the support of the their own benefit. Congress could only recommend to the states the propriety and necessity of war, agreeably to the resolution of the 16th of Dedelegating to them this power for the benefit of all. cember last, nor be continued for a longer term Accordingly, as early as the 3d day of July 1781, posed duties would raise an annual sum of 915,956
than 25 years.” It was calculated that the prothe several states, “as indispensably necessary, that dollars, which would fall short of paying the interthey vest a power in congress, to levy, for the use
est of the debt, about one million and a half of dol. of the United States, a duty of five per cent ad va
lars. Congress, therefore, at the same time, recomlorem, upon all goods, wares, and merchandize of mended to the states “ to establish for a time limited foreign growth and manufacture, which may be
to 25 years, and to appropriate to the discharge of imported into any of the said 'states, from any the interest and principal of the debt, substantial foreign port, island, or plantation, after the first of May 1781,” with the exception of certain articles. judge convenient, for supplying their respective They also resolved, at the same time, that the portions of 1,500,000 dollars annually, exclusive of moneys arising from the said duties, be appropri- the aforementioned duties.” ated to the discharge of the principal and interest
This system was not to take effect, until acceded of the debts already contracted, or which may be
to by all the states, but when adopted by all, was contracted, on the faith of the United States, for to be a mutual compact, irrevocable by one or more, supporting the war, and that the said duties be without the concurrence of the whole, or a majority continued until the said debts be fully and finally induce its adoption, an appeal was made to the
of the United States in congress assembled. To discharged.” The journals of the old congress show, that this resolution, in the opinion of some
states by congress, in an an able address, in which members of that body, was not sufficiently extensive. they urged the propriety and justice of making A substitute was, therefore, proposed, couched in
some provision, for the payment of the interest, at more general terms, declaring it to be " indispen- least, of a debt which was the price of their indesably necessary, that the United States in congress pendence. From year to year this appeal was re. assembled, should be vested with a right of super. peated: but, though it could not be denied, that in intending the commercial regulations of every state, the claims of the public creditors, these propositions
justice some provision should be made to satisfy . that none may take place, which may be partial or contrary to the common interest; and that they were not agreed to by all the states in such a manshould be vested with the exclusive right of levying her as to take effect. The opposition to them did duties upon all imported articles." This substi not originate exclusively in a solicitude to preserve tute was negatived, and the resolution which the prerogatives of the states. It was in part owing passed, was not accepted by the states.
to what Judge Marshall calls “ " an unreasonable On the 18th of April 1783, congress again urged suspicion, which grew out of an opinion, that on the several states to establish some permanent funds commercial subjects, the interests of the different for the payment of the debts of the United States. parts of the union conflicted with each other." For this purpose, by a resolution of that date, they January 1786, there was paid into the public trea
From the first of November 1784 to the first of recommended to the states, cessary to the restoration of public credit, and to sury only 482,897 dollars 99 cents. Happily, a loan the punctual discharge of the public debts, to invest had been negotiated in Holland, after the iermina. the United States in congress assembled, with a
the the power to levy for the use of the United States, the foreign debt was partly paid. following duties upon goods imported into the said
In a report made to Congress by the Board of states, from any foreign port, island, or plantation. that the requisitions upon the states, for the pay . Upon all rum of Jamaica proof, per gall. 4-90ths of ment of the interest of the domestic debt, in the a dollar.
years 1782, 1784, 5 and 6, amounted to the sum of other spirituous liquors
do $6,279,376 27, and the Board says, “ It is with re, Madeira wines
do gret we are constrained to observe, that to the 31st other wines
do of March last, the aggregate payments on account
3 12 6
of the requisitions, do not appear from any docu- simmons, a member from Pennsylvania, offered an ments in the Treasury Office, to exceed the sum amendment to the original resolution, greatly enof
$1,003,725 57 larging the catalogae of enumerated articles. Leaving a balance of no less than 5,275,6 50 60 “ Among those,” he said, " which were contained
in the list, he wished to subjoin to that in posses. $6,279,376 27 sion of the committee, were some calculated to en.
courage the productions of our country, and protect It has been impressively remarked by Dr Seybert, our infant manufactures, besides others' tending to " that it was the conviction that it was absolutely operate as sumptuary restrictions upon articles necessary that the power to regulate and control our which are often termed those of luxury." intercourse with foreign nations, should be confided Mr Madison having consented to subjoin the to congress alone, which principally induced the amendment proposed by Mr Fitzsimmons to the oripeople of the United States to call the convention ginal resolution, it was received by the committee; to revise the articles of confederation.” But, but in proceeding to fill up the blanks with the sum strong as the desire was to enter into commercial taxable on each article, it was soon perceived that treaties with foreign nations, to countervail the gentlemen had viewed the subject in very different navigation laws of Great Britain, and the monopo- lights. The tax on many articles was believed to lizing edicts of other governments, and to substi- press more heavily on some than on others; it was lute commercial regulations of a general nature for supposed, also, to favour the products of particular the partial and conflicting regulations of the differ- states; and no inconsiderable degree of watchfulness ent states, it is not likely that the present Federal was discovered, lest those which were more popuConstitution would have been adopted, if the ade- lous, and whose manufactures were in greater proquate revenue for satisfying the demands of the gress, should lay protecting duties whereby the public creditors could have been raised under the industry of one part of the Union would be enold articles of confederation. To protect persons couraged by premiums laid on the industry of anand property within its own limits, and to regulate other part. intercourse between its own citizens, each state Asier much discussion the bill was passed. government found itself quite competent. The ar Towards the close of the session, a report on a ticles of confederation which had carried them suc- petition which had been presented at an early pecessfully through one war, might be supposed suffi- riod by the creditors of the public residing in cient to carry them through other wars, if others Pennsylvania, was taken up in the House of Represhould occur. The evils which resulted from inade. sentatives. Many considerations rendered a postquate revenue and the want of a proper regulation ponement of this interesting subject necessary. But, of intercourse with foreign nations, concurred in two resolutions were passed, the one declaring inducing the call of the Federal Convention, and the " that the House considered an adequate provision adoption of the new constitution.
for the support of the public credit as a matter of As constituting the vital spring without which high importance to the national honour and prosthe action of government could not long be con- 'perity;" and the other directing "the secretary of tinued, the subject of revenue was, says Judge Mar- the treasury to prepare a plan for that purpose, and shall, taken up in the house of representatives, in to report the same to the House at its next meetthe first congress under the new constitution, as ing. soon as it could be introduced. The qualification On the 29th of September, congress adjourned to of ihe members was succeeded by a motion for the the first Monday in January 1790. Early in this house to resolve itself into a committee of the whole second session, the secretary of the treasury made on the state of the union: and in that committee a a report on public credit, with a plan for funding resolution was moved declaring the opinion that the domestic debt. He estimated the amount of certain duties ought to be levied on goods, wares, the public debt as follows: and merchandise, imported into the United States: The foreign debt (due to France, Holland, and and on the tonnage of vessels. This resolution was Spain) introduced by Mr. Madison of Virginia in a short Amount of the principal, $10,070,307 00 speech, in which he adverted to the numerous Arrears of interest, to the 31st claims upon the justice of government, and to the of Dec. 1789,
1,640,071 62 impotency which prevented the late congress of the United States from carrying into effect what was
11,710,378 62 considered the dictate of justice and policy.
The domestic debt, viz. As it was deemed important to complete a tem The principal of the liquidated porary system in time to embrace the spring im- part, bearing an interest of six per portations, Mr. Madison presented the scheme of centum,
$27,383,917 74 impost which had been recommended by the former The arrears of interest to the congress, and had already received the approbation 31st of December 1790,
13,030,168 20 of a majority of the states; to which he added a general proposition from himself, for a duty on
40,414,085 94 tonnage. By this scheme, specific duties were im The unliquidated part of the doposed on certain enumerated articles; and an ad mestic debt, which consisted chiefly valorem duty on those not enumerated. Mr Fitz- of the continental bills of credit,
was not ascertained, and was esti
Of which there had been redeem. niated at
2,000,000 00 ed by purchase, with the surplus The aggregate of the sums above
moneys in the treasury,
2,265,022 57 mentioned, consisting of the foreign and domestic debts, constituted the
Leaving for domestic debt, unredebts of the United States, and to
60,789,914 18 gether amounted to
$54,124, 464 56 To this was to be added the fo. The amount of the debe of the individual states, reign debt,
13,745,379 35 which the secretary proposed should be assumed by Unsubscribed debt,
1,561,175 14 the Union, was not ascertained : he estimated it at $25,000,000, principal and interest.
Making the total debt,
76,096,468 67 Amount of the debts of the United States as by computation, exclusive of temporary loans, above,
$ 54,124,564 56 and of the amount due to the Bank of the United Of the debt proposed to be as
States, on account of subscription to the stock of sumed on account of the several
'that institution. states,
25,000,000 00 During the administration of Washington and
John Adams, every possible effort was made to reEstimated amount of debt in
duce the amount of the public debt. The duties on 1790,
$79, 124,464 56 imports were either increased or arranged in a new After a long and animated discussion, a bill was form, by seven different acts, between the 10th of passed, towards the close of the session, for funding August 1790 and the 13th of March 1800. The the domestic debt of the United States, and assum. duties on stills and domestic spirits were also ining $21,500,000 of the debts due by the several creased, or arranged in a new form by three differstates. The continental money was to be funded at ent acts. To these were added, at different times, the rate of one hundred dollars in the said bills for duties on auctions, on retailers of wines and spirits, one dollar in specie. "The certificates issued by the duties on stamps, on refined sugar, on snuff, and on register of the treasury, the paymaster-general, &c. carriages; and, finally, in 1798, a direct tax of two were to be funded at their nominal value.
millions was imposed on real estate. For every hundred dollars subscribed, new certi By an act of 1790, only $600,000 of the revenue ficates were ordered to be issued, purporting that derived from the permanent duties were reserved for the United States owed the holder thereof 866 663 defraying the proper expenses of government. All cents, bearing an interest of six per cent, payable the rest was appropriated to the payment of the in. quarterly; and certificates purporting that the Uni- terest of the public debt, and for the redemption of ted States owed the holder thereof $33 33} ceuts, at ihe principal. In subsequent years it was found six per cent interest, the payment of which interest necessary to increase the appropriation for deshould not commence till after the year 1800. For fraying the proper expenses of government; but, the arrears of interest, it was ordered that cer whenever this was done, additions were made to tificates should be issued bearing an interest of the duties on imported goods, or to the internal three per cent.
taxes, to keep the sinking fund unimpaired. Not.. In this way were constituted what are known as withstanding these efforis, the sinking fund did not the old six per cent, deferred six per cent, and three per become effective in reducing the amount of the pub. cent stocks.
lic debt, till the year 1801; for, though between the The assumed debt of the several states was funded first of January 1791, and the first of January 1800, by issuing six per cent certificates, for four-ninths old debis were paid to the amount of $8,164,232 84, of the amount; deferred six per cent certificates for new debts were, in the same period contracted, of two-ninths; and three per cent certificates for the the amount of $10,786, 100. remaining three-ninths.
The war with the Indians; the insurrection in To enable the government to pay the interest of western Pennsylvania, which it cost the governthe debt thus funded, an augmentation was made in ment $1,250,000 to suppress; the transactions with 1790, of the duties on imported wines, spirits and Algiers, which cost $1,500,000; the still greater coffee; and in the following session a duty was im- expenses incurred in the disputes with France, in posed on stills and domestic spirits.
1798 and 1799, and the compensation of upwards As many who were then holders of soldiers' cer- of $2,600,000 which it was found necessary to al. tificates and other evidences of debt, due ty the old low to British creditors, for losses occasioned by government, had purchased them at one-eighth or legal impediments to the collection of debts, con. one-tenth of their nominal value, 'the terms offered tracted prior to the peace of 1783, were so many by the new government must be regarded as havir extraordinary occasions of expense, which rendered been very favourable. The public creditors were an increase of the public debt in this period unanot slow in accepting the offer, and by the 31st of voidable. December 1794, there had been funded,
During nearly the whole of this time, our finanIn six per cents,
$29,046,730 62 cial affairs were more or less embarrassed. Money Deferred,
14,523,365 45 was, to the merchant, worth much more than the Three per cents,
19,484,840 68 legal rate of interest; and as there was little loan.
able capital in the country, the difficulty the go63,054,936 75 vernment found in borrowing was considerable. or