In speaking of the public debt hereafter, to avoid circumlocution I shall denominate the original debt of the UStates the general Debt & the separate debts of the respective States the particular Debts. As often as these terms occur they are to be understood in this sense.

The operation of these circumstances generated a variety of different sects holding different opinions. The parties in and out of Congress on the subject of a provision for the public debt may be thrown into five classes: I   Those who were for providing for the general debt exclusively of the particular debts on the basis of the subsisting contracts. II   Those who were for providing separately for the general debt on the principle of a discrimination between original holders and alienees. III   Those who were for providing separately for the general debt without that discrimination at arbitrary rates of interest inferior to the stipulated rules. IV   Those who were for providing for the general debt on the basis of the subsisting contracts and for assuming the particular debts upon an equal provision. V   Those who were for providing for the general debt at arbitrary rates of interest inferior to the stipulated rates and for assuming the stat⟨e⟩ debts upon an equal provision.2

The classes which embraced the greatest number of real partisans3 were the second and fifth. The second was subdivid⟨ed⟩ apparently at least, into those who advocated the taking the rate of interest stipulated in the contract as the standard of provision giving to the original holders what was witheld from the alienees—those who were for saving to the public what was withheld from the alienees. The last, though not in appearance, was in fact the most numerous. Indeed it may justly be doubted whether any of those who professed to advocate compensation to the original holders were even sincere in the proposition. But neither of the classes in either house of Congress was itself a majority for the general de⟨bt.⟩

Those who favoured a provision at lower than the stipulated rates of interest were influenced respectively by different motives some by a doubt of the ability of the Government to make a full provision, especi⟨ally⟩ with the assumption of the particular debts, others by an opinion that from the constitution the debt and what they called the alloy in it a rate of interest lower than that stipulated was most consistent with justice to the public, others from a spirit of mean and fraudulent parsimony which aimed at savings to the public per fas et nefas. These last were not distinguishable in their principle of action from those who advocated one species of discrimination. Collateral circumstances respecting the course of alininations locally and otherwise gave a different direction to their conduct.

It is easy to perceive that such a heretogenous mass of opinions not merely speculative but actuated by different interests and passions could not fail to produce much embarrassment to the person who was to devise the plan of a provision for the public debt—if he had been provident enough to sound the ground and probe the state of opinions.

It was proper for him to endeavour to unite two ingredients in his plan, intrinsic goodness [and] a reasonable probability of success.

It may be thought that the first was his only concern—that he ought to have devised such a plan as appeared to him absolutely the best leaving its adoption or rejection to the chance of events and to the responsibility of those whose province it was to decide.

But would not this have been to refine too much? If a plan had been offered too remote from the prevailing opinions—incapable of conciliating a sufficient number to constitute a majority—what would have been the consequences? The Minister would have been defeated in his first experiment. Before he had established any reputation for a knowlege of the business of his department, he might be sure that the blame of his ill-success would have fallen on his want of skill not upon the ignorance or perverseness of those who had rejected his plan. Placed in a back ground he would have lost confidence and influence. A retreat or the disgrace of remaining in office without weight or credit or an adequate prospect of being useful would have been his alternative. The public interest might have been still more injured. The public deliberations left without any rallying point would have been the more apt to be distracted between jarring incoherent and indigested projects and either to conclude nothing or to conclude on something manifestly contrary to the public interests. That this is a natural inference is proved by the diversity and still more by the crudity of the opinions which have been enumerated and by the zeal with which considerable men afterwards and since have maintained opinions which would disgrace pupils not yet out of the alphabet of political science.

Had a single session passed after the subject had been once seriously entered upon without some adequate provision for the debt the most injurious consequences were to have been expected.

With but a slight dawning of previous confidence, such a delay arising from the conflict of opinions after a public display of the very unsound and heretical notions which were entertained by too many would have excited something very like despair in the Creditors and would have thrown complete discredit on the debt. The value in the market would have sunk to almost nothing to the great prejudice of those who had lately through confidence in the new Government purchased at high prices. The fluctuation would have increased the dissatisfaction with the thing itself and by its influence upon opinion would have multiplied ten-fold the obstacles to a future provision on proper principles. The contagion of the opposite opinions maintained in the Legislature would have spread through the community fixing increasing and embittering the differences of opinion there which by reaction would have strengthened and confirmed the oppositions in the legislature. No mortal could foresee the result. A total failure to provide for the debt was possible. A provision for it on terms destructive of principle & replete with injustice to the creditors was the least ill result to have been anticipated.4

Those who from a horrible sentiment of injustice or the maniasm of false opinions regard the public debt with detestation as a nuisance and a curse and every creditor as a criminal5 those who would have delighted in the disgrace of a government they had resisted and vilified might have looked forward with malignant pleasure to this wreck of the public Debt. But every virtuous enlightened man would [have] foreseen in it the complicated mischief of ruined Credit—the prostration abroad and at home of the Character of the new Government—its possible subversion and with it that of the Union—and let it be added a severe blow to the general security of property.6

In hinting at the possible subversion of the Government, it may be proper to explain the foundation of this idea.7 The public Creditors, who consisted of various descriptions of men, a large proportion of them very meritorious and very influential had had a considerable agency in promoting the adoption of the new Constitution for this peculiar reason among the many weighty reasons which were common to them as citizens and proprietors that it exhibited the prospect of a Government able to do justice to their claims. Their disappointment and disgust quickened by the sensibility of private interest could but have been extreme. There was another class of men and a very weighty one who had had great share in the establishment of the constitution who though not personally interested in the debt considered the maxims of public credit as of the essence of good government, as intimately connected, by the anology and sympathy of principles, with the security of property in general, and as forming an inseparable portion of the great system of political order. These men from sentiment would have regarded their labours in supporting the constitution as in a great measure lost—they would have seen the disappointment of their hopes in the unwillingness of the government to do what they esteemed justice and to pursue what they called an honorable policy, and they would have regarded this failure as an augury ⟨of⟩ the continuance of the fatal system which had for some time prostrated the national honor interest and happiness. The disaffection of a part of these classes of men might have carried a considerable reinforcement to the enemies of the government. The lukewarmness of the residue would have left them a clearer stage to direct their assaults against it. The real failure to do right which often sinks the Governments, as well as individuals into merited contempt alienating many of its ablest friends while it would diminish its support would at the same time increase in a tenfold ratio the mass of unfavourable opinion towards it. And from the combination of these causes it would have been likely to have degenerated into a despicable impotence and after a lingering atrophy to have perished.

In pursuing too far the idea of absolute perfection in the plan to be proposed unaccommodated to circumstances the chance of an absolutely bad issue was infinitely enhanced, and of the evils connected with it.

Was this the course either of patriotism or true personal policy? It has been remarked that in the rejection of the plan which was proposed it was to be apprehended that public opinion would charge the fault upon the plan not upon the rejecters of it.

But it may be said that time and the experience of ill effects would have done justice and placed the blame at the proper door. Let it be so—would it not have been blameably selfish to have sought to secure reputation at the hazard of so great evils to the community? Was it not more fit by accommodation to circumstances within our limits to pursue a better chance of public good at the risk of an imputation that complete theoretic perfection had not been adhered to?

Would Time have pronounced a favourable sentence upon a different course? Would it not have said that goodness is often not an absolute but a relative term and that it was culpable refinement to have sacrificed the prospect of accomplishing what was substantially good to the impracticable attainment of what was deemed theoretically perfect?

I grant that the idea of accommodation was not to be carried so far as to sacrifice to it any essential principle. This is never justifiable. But with the restriction of not sacrificing principle was it not right and adviseable so to shape the course as to secure the best prospect of effecting the greatest possible good?

To me this appeared the path of policy and duty and I acted under the influence of that impression.8

Thus guided I resolved to give the following features to my plan.

First   To embrace in the provision, upon equal terms, the particular debts of the individual States as well as the general debt of the UStates.

2dly   To fund the whole by pledging for the payment of interest certain specified revenues adequate to the object to continue pledged until the redemption or reimbursement of the principal of the Debt.

3d   To provide in the first instance for the foreign part of the general debt in exact conformity with the contracts concerning it.9 To endeavour to effect a new more manageable and more convenient modification of the domestic part of the general debt with consent of the Creditors upon the ground of certain equivalents to be offered to them.

Fourthly   To take as the basis of the provision for the domestic part of the general debt the contracts with the Creditors as they stood at the time of the adoption of the new Constitution according to the then unrevoked acts and resolutions of the former Government except as to such alterations as they might on legal principles be pronounced to have undergone by voluntary acts and acquiescences of the creditors themselves; bottoming the provision on this principle that those contracts were to be fulfilled as far and as fast as was practicable & were not to be departed from without the free consent of the Creditors.

5thly   To provide for the arrears of interest which had accumulated upon the same terms with the principal constituting them a new Capital.

Sixthly   To endeavour to carry these ideas into effect by opening two loans on the terms proposed, one for the domestic part of the general debt, the sums subscribed thereto to be paid in the principal and arrears of interest of the old debt, another for the particular debts of the respective States, the sums subscribed thereto to be paid in the principal and arrears of interest of those debts.10

Sevently. To endeavour to establish it as a rule of administration that the creation of debt should always be accompanied with a provision for its extinguishment; and to apply the rule as far as it could be applicable to a new provision for an old debt by incorporating with it a fund for sinking the debt.

Eightly. As an incident to the whole, to provide for the final settlement of Accounts between the United & Individual States charging the latter with the sums assumed for them by the subscriptions in state-debt which should be made to the proposed loan and11

Let us now review under each head the reasonings which led to this plan and the means and modes of execution.

I. As to the uniting in the provision upon equal terms the particular debts of the several States with the general debt of the UStates.

It appeared to me that this measure would be conducive to the greatest degree of justice and was essential to policy.

I use a qualified and comparative mode of expression in the first case because from the past course and then existing state of things perfect justice was unattainable. The object consequently was to pursue such a plan as would procure the greatest practicable quantum of Justice.

The true rule for conducting the expences of the Revolution which established independence seems to have been this. That as the benefits to be derived from it would be individually equal to the citizens of every state so the burthens ought also to be individually equal among the citizens of all the states according to individual property and ability. That for this purpose all the expences of the war ought to have been defrayed out of a common Treasury supplied by contributions of all the individuals of the UStates, levied under the common authority according to equal rules, by loans either direct by borrowing or indirect and implied by emissions of paper money, operated upon the joint credit of the Union & by bringing into common stock all auxiliary or adventitious resources as waste lands confiscated property &c.

This was the true justice of the case and the true national ground—a ground which perhaps might well have been taken by those first assemblies of the Union convened by the direct commission of the people with plenary power to take care of the Nation but which was never but partially taken & was successively abandonned in compliance with the unnational demands of state claims—the aristocracy of state pretensions.

But instead of this course that which was pursued was a compound of incoherent principles. A part of the general expenditure was defrayed on the general credit of the UStates immediately by the emissions of bills of credit and by loans of individuals mediately by the contracts of various officers and Agents who obtained services & supplies on the credit of the Union and gave certain paper evidences of them. Another part was defrayed in consequence of requisitions upon the states of men money provisions and other articles of supply according to certain estimated or conjectural quotas to be raised & furnished by the states separately. A third part was defrayed by the spontaneous exertions of the states themselves for local defence for enterprises independently undertaken to annoy* the common enemy, divest him of acquisitions** or make acquisitions*** upon him. Each State enjoyed the exclusive benefit of its extra resources waste lands & confiscated property.* Geographical lines thus made a substantial difference in the condition of the citizens of one common country, engaged in a common cause.

It was impossible that such a state of things should not have led to very disproportionate exertions and contributions—should not have produced and left very unequal burthens on the citizens of different states. According to the temporary energy of the councils of each, according to their comparative degree of zeal in the common cause—according to the pressure of circumstances, the remoteness or proximity of danger, according to the peculiar character of the citizens of each state, according to a variety of contingent impulses—were the exertions of the several states—of course their contribution to the expences of the general defence.

Very different also was the care and accuracy of the different states in recording and preserving the evidences of their contributions. Some states kept an account of every thing, others only of those things which they had furnished upon regular author[iz]ation of the Union. Others kept very loose & imperfect accounts of any thing—and others lost by accidents of the war the records and vouchers which they had taken.

Add to all this the circumstances of the valuable aids which some states were able to derive more than others from auxiliary resources particularly of waste land & confiscated property—two obvious consequences will result.

First   that it was impossible that in the course of the War there could have been any proportional equality between the exertions contributions and burthens of the citizens of the different States.*

Secondly   that it was impossible by any after adjustment to restore the equilibrium & produce retrospective equality.

All then that could be rationally aimed at was to pursue such a course as promised most certainly the greatest degree of Justice.

The option lay between three modes of proceeding.

One—To refer the obtaining of ultimate justice to a final settlement of Accounts between the United and Individual States upon the best and most equitable principles which were practicable and to provide for the ballances which would be established in favour of certain states by that settlement.

A second: 17 to exonerate all the states from Debt by the assumption of the still existing debts and to abandon a settlement as impracticable on certain and equitable principles.

Another: To exonerate the states from debt by the assumption of their still existing debts; to charge each with the sums assumed upon its account—and to attempt an ultimate equalization by the settlement of Accounts.

The first & second plan[s] were those contrasted by official propositions & deliberations & will be considered together by way of comparison with each other: first with regard to Justice & secondly with regard to policy.

The first plan, which was that vehemently insisted upon, by those who opposed the assumption of the State Debts appeared to me liable to some conclusive objections on the score of justice.

1   It would have left certain states greatly indebted, deprived of the most easy & productive sources of revenue by the occupation of them in a provision for the general debt, to struggle for an indefinite and uncertain period with a heavier load of debt than they were able to bear depending for relief on the precarious issue, of a final settlement of Accounts and a provision for the ballances.

2   It was uncertain in the nature of the thing and so considered by all parties not only when a settlement could be effected but whether any settlement would ever be practicable. The peace took place in 1783. In 1790 very little more than the formal measures of settlement had been devised and scarcely any impression made on the business.

III   It was altogether a chapter of accidents whether a settlement would bring the expected and the just relief. From the circumstances which have been mentioned a settlement must have been of necessity an artificial and arbitrary thing. It was impossible for any to be made on truly equitable or satisfactory principles. The greatest portion of human intellect & justice was unequal to it because Adequate data were wanting. Some states would have credits where others from the manner of keeping their accounts would be without the corresponding credits for similar objects. Thus bounties for engaging men were in particular States regularly brought into account & vouched, in others furnished at the expence of classes no accounts were kept. Some states from the system of management would have much larger credits for a given quantum of service and supply than others. Thus purchases at exorbitant prices procured in some stations what coertion at regulated moderate prices procured in others. Some states from the imperfect mode of keeping their accounts & from the loss of vouchers would either have too much or too little credit. Either stricter rules of evidence must be pursued which would exclude too much or looser rules must be admitted which would admit too much. These suggest sufficient and yet only a part of the causes which rendered a just settlement impracticable.

In such a posture of things consequently it might well have happened that an indebted state18 well entitled to relief by a ballance in its favour might have been disappointed by the issue of the settlement.

Not to assume the State Debts therefore was to leave the greatly indebted states to totter under a burthen to which they were unequal in the indefinite expectation of a settlement and to involve a possibility that they might never obtain relief either from the total failure of a settlement on account of the difficulties attending it or from not receiving their just dues by the embarrassment that unavoidably rendered a settlement artificial and arbitrary.

The reference therefore to a settlement as the sole rule of justice without an assumption of the state debts was not likely to afford either such prompt or such certain justice as might be looked for from the immediate assumption of the State Debts.

The objection to this reasoning was that it takes it for granted that the greatly indebted States were not so through want of good management or exertion and were intitled to eventual relief but the contrary of this presumption might have been the fact.19

There were good grounds for the conclusion that the States most indebted were so from meritorious causes, from their exertions in the common cause, and not from extravagance in the first instance a want of effort to extricate themselves in the second.20

The States most involved in debt in proportion to their resources were Sh Carolina Georgia to the South Massachusettes Connecticut & Rhode Island to the North.

South Carolina and Georgia it is well known had next to New York had been the principal theatres of the War. Though the metropolis of New York was during almost the whole of the War in the hands of the enemy there were very few parts of it which at some period or other were not exposed to his ravages—yet it never was so completely overrun or so intirely a victim as were the States of South Carolina & Georgia. It is known that they were temporarily conquered.

Besides as the principal military operations in the Southern Quarter were late in the War when the declension of the paper money disabled Congress from affording equal succour and their remoteness from the States of the greatest pecuniary resources prevented them from deriving equal aid from their neighbours—they were of course left to sustain on their own shoulders a greater part of the weight of the War than had been borne by other states—while the seats of it.21

Besides exhausting all the means of Credit they were subjected a great part of the time to the military coertion of our own army as well as to the depredations22 of the enemy. What in other cases had been an extraordinary and momentary expedient was there an ordinary resource—the principle mean for a considerable time of carrying on the war. They were literally consumed23 by the War. The whole moveable property of the States was taken by the enemy or thrown into the public lap. Besides this the State Governments from the same circumstance of remoteness were more ostensible in that quarter. More of the effort was in their immediate account. The consequence was that a less proportion of the supplies drawn from the Country were taken to the immediate account of the UStates by their officers & Agents and upon their acknowlegements or certificates—consequently a greater proportion of the expence assumed the shape of State Debt.

The consequence was that the particular debts of South Carolina & Georgia especially the former were comparitively speaking swelled to an enormous amount.

To face them they had but slender resources. The degree to which they had been exhausted & ravaged by the war left them in a situation to require bounties rather than to struggle with heavy Debts. The population of either of them was not great. Georgia may be considered as in its infancy. She claims a la[r]ge tract of Waste land but besides the counter claim of the UStates it had not been in her power from the situation of her frontiers with regard to the Indians to turn them to great account.24 She had indeed paralized a great proportion of her debt by means far from justifiable, but she was unable to provide even for the residue.

South Carolina had no auxiliary resource except what she had derived from confiscated property, which a spirit of liberality that does her honor on the return of peace prevented her turning to much account and which at best was a very inadequate resource compared with her burthens. It was manifestly impossible for her to face efficaciously the interest upon her debt much more to make any impression in the principal. In attempts to provide for the Interest Taxation had been carried in South Carolina to a length not short of any State except Massachusettes & perhaps Connecticu[t.] The inability of S C & G to provide for their debts was increased by the considerable debts which their individuals owed to foreigners.

From this sketch of various circumstances of general notoriety Sceptism itself cannot doubt that South Carolina had contracted her debt most meritoriously that her sufferings had only been equalled by her efforts that she was unable to struggle unassisted with her debt that she was chargeable with no deficiency of effort to face it since the peace and that she was equitably intitled to relief from the UStates. But her situation with regard to the regularity of her accounts & the evidence for authenticating her claims rendered it peculiarly problematical whether she would ever find relief in a general settlement of Accounts.25

Rhode Island had also contracted her debt meritoriously. A considerable part of her small territory had been for a great part of the war in the possession of the enemy. She kept for her population respectable forces in the field throughout the war, and had uniformly manifested a useful & laudable zeal. Her resources were slender. Taxes upon a population of   26 were all she could pretend to—no waste land and none or very little confiscated property.27

Her debt was considerable; tis evident that if she was to provide for it the means must come from the UStates and there was every presumption that she was intitled to this aid. It is true that she had in a great measure disincumbered herself by means which will be an indelible stain in her annals.28 But the individuals who were the victims had not the less claim upon the justice of their country. The assumption has promoted this justice & has enabled & induced the State to come forward with more equitable arrangements in their favour.

The pretensions of Massachusettes & Connecticut with regard to their Debt were of the most meritorious complexion. As a general position each state may justly claim the praise of a laudable spirit of exertion in the defences of their common liberty but there were certainly marked differences in the degrees. Abstracting the impulse of being the immediate seat of the war Massachusettes & Connecticut especially Massachusettes stood preeminent for steady constant and efficient exertions immediately conducing to the great object of the war—not to collateral acquisitions & partial advantages. Massachusettes in particular might justly be denominated the Atlas of the Union uniformly zealous uniformly vigorous.29

The records of the Treasury & War Department witness by their results the great exertions of these States in men money and other supplies.30

The situation in which I myself was placed during the war gave me then an opportunity of appreciating the efforts of these different States in the results. The impression on my mind was decisive in the spirit of what I have asserted. In how many critical periods of the War were the forces of those States the sinews and and muscles of the War? Let the records beforementioned declare. Let the memories of those who charged with the chief direction of our military affairs had the best Opportunities of observing pronounce.

No well informed man then doubted the fact. Subsequent examination the evidence of official records confirm the Truth. (See appendix Page I).31

While the efforts of these States during the War are incontestably ascertained they are chargeable with no want of exertion since to exonerate themselves from Debt.

Taxation in connecticut embraced every object and was carried as far [as] it could be done without absolutely oppressing individuals. Instead of a few scattered examples of Excise every article of consumption in Connecticut was excised.

In Massachusettes Taxation was carried still farther even to a degree too burthernsome for the comfortable condition of the Citizens. This may have been partly owing to that unskilfulness which was the common attribute of the State administration of Finance; but it was still more owing to the real weight of the Taxes. The insurrection32 was in a great degree the offspring of this pressure.

These states had no material auxiliary resources. The moderation of fortunes had left them without much aid from confiscated property. They had claims to Waste land but that of Connecticut has issued in a very unimportant acquisition.33 That of Massachusettes has fared better but her acquisition would have done little towards extinguishment of her debt.34 Connecticut without any seaport of Consequence not only could not derive resource from this Circumstance but had been tributary to her more fortunate neighbours.

There was therefore a priori satisfactory evidence that these overburthened States had a just claim of relief from the UStates & if we may take the settlement of Accounts as evidence, the ancipation has been fully justified by the event. For not only the sums assumed for them have been covered but they have had considerable ballances reputed in their favour.

It will strengthen the argument for the superior justice of the assumption plan, to remark that the Debts of the States represented the great mass of State effort during the War. Not much had been done by taxation. Credit had been the principal engine.

Another objection on the score of justice which was strenuously urged against the plan of assuming was that certain States by vigorous efforts had considerably reduced their particular Debts while others had made little impression on them. It was therefore unequal to assume their debt in this unequal State.

It has been already shewn that this difference as far as it may be founded in fact was owing to adventitious advantages and therefore in point of substantial justice the states which had absorbed less of their debt had not the less equitable Title to relief. I recur to the example of New York. This state by large possessions of Waste land, by a great deal of confiscated property, by not providing for payment of interest on her debt whereby its value was kept low to the great injury of the Creditors was able to absorb a considerable proportion of her debt. Connecticut without these advantages was able to do much less—though her citizens were burthened with a much more considerable effort in contributions. Was it therefore inequitable as between these states that Connecticut should find relief in an assumption? Surely it was not. Again if a settlement of accounts which was a part of the plan of Assumption was to be relied upon, any inequality created by the assumption would be rectified by the settlement. If no equitable settlement was to be relied upon then the observation returned—the indebted States however much intitled to it would then be deprived of eventual justice & relief & there was a greater probability of justice in relieving them by an assumption than in leaving them to struggle indefinitely with their actual burthens.

Supposing no settlement & that without a settlement there was a chance of injustice either way then there was another solid & pla[i]n ground of calculation & precedence.

Either an equitable settlement of accounts would take place or it would not—if it did not, the greatly indebted States without an assumption would certainly fail of justice and due relief; if it did, with an assumption, the settlement would remedy any inequality which might have been occasioned by it and restore equilibrium. An assumption and a settlement on right principles would ensure justice—no assumption & no settlement would ensure injustice. It was to be feared a settlement might not take effect. It was precarious and contingent. An assumption of course gave the greatest certainty of Justice, by an assumption or equalization of the condition of Individuals. Pursuing mature impressions this must be deemed of more consequence than any thing which regarded the states in their corporate or collective capacities.

The most simple and satisfactory notion of Justice was to secure that individuals of the same Nation who had contended in the same cause for the same object their common liberty should at the end of the contest find themselves on an equal footing as to burthens arising from the contest.

Nothing could be more revolting than that the citizens of one state should live at ease free from Taxes and the citizens of a neighbouring State be overburthened with taxes growing out of a war which had given equal political advantages to the Citizens of both States.

This condition of things previous to the assumption was remarkably exempli[fi]ed between New York & Massachusettes and between New York & Connecticut. The citizens of New York scarcely paid any taxes those of Massachusettes & Connecticut were heavily burthened. A like comparison though different in degree might be extended to other States.

The relative conditions of States depended on many artificial circumstances. These circumstances might forever have stood in the way of that equality of condition among citizens which was35 infinitely the most important consideration and the most desireable attainmt. The measure which went most directly and certainly to this object was to be preferred. The assumption was such a measure.

By taking all the Debts upon the Union to be paid out of common Treasury defrayed by common contribution according to general rules the citizens of every State were on an equal footing. State provisions produced inequality from the inequality of their debts from the inequality of adventitious resources from the inequality of permanent abilities.

Justice among Individuals was better promoted in another sense. The New Government had given to the US the exclusive possession of the branch of Revenue which for a considerable time to come in this country is likely to be most productive. Had the Governmt of the U S confined itself to a provision for the general Debt—the proprietors of the particular Debts would in several States have been not only in a very unequal but in a very bad situation. Thus forms would have superseded substance. Men who had contributed their services and property to the support of the common cause at the instance of a State Government would have fared worse than those who have done the same thing at the instance of the General Government. Did this comport with any rational and true scheme of justice which preferred natural to artificial consideration? (Distinction between fed one the means for equality among states others among individuals).

It would have been the more hard unjust and unnatural because a great proportion of the State Debts had been originally contracted immediately with the UStates and afterwards transferred to the particular States. Such were the depreciation of pay.36

A still greater part was contracted in virtue of the requisitions of Congress upon the states in which cases it was more reasonable to consider them as agents than as principals.

To resume. The superiority of the plan of a joint provision over that of a separate provision in the view of justice consists in this—

That supposing a final equitable settlement of accounts between the states either plan would produce eventual justice.37

But the plan of assumption was most likely to expedite justice by the immediate relief which it gave to the overburthened States.

That setting aside the supposition of a final equitable settlement of accounts—the plan of assumption contained the best chance of success by giving relief to the overburthened States who would otherwise have remained without it though from known circumstances there was a moral certainty of their being entittled to it.

That the assumption in every event better consulted justice by conducing to equalize in the first instance the burthen of citizens of the same country arising from a contest in a common cause and by securing a simultaneous and equal provision for creditors who had equal merits & who otherwise would have fared inequally.

These are the principle considerations that relate to justice—in the view of policy the argument is still more conclusive in favor of assumption.

The theory of our constitution with respect to taxation is perhaps a new example in the world—that is to say a concurrent and coordinate authority in one general head and in thirteen (now fifteen) distinct members of a confederacy united under that head to impose in detail upon all individual and upon all taxable objects.

Yet experience had demonstrated that a power in the general head to tax the states only in their collective capacities, that is by the system of requisitions was a system of imbecility and injustice—imbecility because it did not produce to the common Treasury the requisite supplies—injustice because the separate efforts of the states under such a system were and from the nature of things would ever be unequal and consequently their contributions disproportionate.

Hence all those who agreed in the necessity of a Union of the States under a common head felt and acknowleged that a change in the plan was an essential feature in a new arrangement of the constitution of general government.

But though agreed in this general principle, they were not equally agreed in the application of the rule. Some were for a general & paramount power of taxation in the National Government and either a subordinate, or a limited by being confined to particular objects, power of taxation in the State Governments. Some were for a division of the power of taxation giving certain branches of it exclusively to the general Government and other branches of it exclusively to the State Governments—others were for a general concurrent power of taxation in the Fœderal & State Governments.

The two first opinions equally presupposed a great difficulty of execution and danger of collision in a concurrent power of taxation and sought to avoid it by different means. The last seems to have considered that difficulty and danger as less formi[d]able than the embarrassments which belonged to either of the other schemes. And this opinion was adopted by the Convention except with regard to the duties of imposts and Tonnage which for cogent and obvious [reasons] was impractible and was exclusively vested in the Fœderal head.

This course was relatively to the existing state of things the wisest. The subordination of the state power of taxation to that of the general government or the confining it to particular objects would probably have been an insuperable obstacle to the adoption of the constitution. The division of the power between the Union and the States could not have been regulated upon any plan which would not either have left the General Government more restricted than was compatible with a due provision for the exigencies of the Union or would have so confined the State Governments as would have been equally an impediment to the success of the Constitution. Besides that a truly eligible division which consulted all the cases possible by the general principles of the constitution was intrinsically very difficult if not impracticable.

But though it is admitted that the course pursued by the Convention was the most expedient—yet it is not the less true that the plan involved inherent and great difficulties. It may not unaptly be styled the Gordian Knot of our political situation.

To me there appeared but one way of untying or severing it, which was in practice to leave the states under as little necessity as possible of exercising the power of taxation. The narrowness of the limits of its exercise on one side left the field more free and unembarrassed to the other and avoided essentially the interference, and collisions to be apprehended inherent in38 the plan of concurrent jurisdiction.

Thus to give a clear field to the Government of the UStates was so manifestly founded in good policy that the time must come when a man of sense would blush to dispute it.

It was essential to give effect to the objects of the Union. As to the past the General Government was to provide for the debts which the War that accomplished our Revolution had left upon us. These were to the debts which the same events had left upon the states individually as 5 to 2 nearly. The amount of the general debt foreign and Domestic was   39 Millions.

For the future, the general Government besides providing for the expences of its civil administration which from obvious causes would unavoidably exceed that of the State Government and for a variety of other objects tedious to enumerate or define was charged with the care of the common defence.

Reason and experience teach that the great mass of expence in every country proceeds from War. Our experience has already belied the reveries of those Dreamers or Imposters who were wont to weaken the argument arising from this source by promising to this country a perpetual exemption from war.   years out of   40 of the existence of our frontiers have exhibited a state of desolating and expensive hostility. How narrowly have we thus far escaped a war with a great European power? Who can say how long we shall before we may be compelled to defend our independence against some one of the great competitors still engaged in that theatre.

The violent passions which have agitated the apostles of perpetual peace and which were so near forcing our political ship upon the rock of war which at this moment still impel her41 to the same ruinous point are the mirrors in which they may read the refutation of their silly predictions and the certainty that our nation is enough exposed to the chances of War to render a clear stage for commanding all our resources of taxation indispensable. Besides actual War & danger of still greater we have already experienced a domestic Insurrection42 in which more than a million has been expended.

Without an assumption of the State Debts which produced this effect the first war with an European Power would have convinced us of the inelig[ib]leness of our situation of the weakness and embarrassment incident to fifteen or perhaps to 50 different systems of finance.

The foundation of this observation is obvious. Different states would have and actually have different predilections and prejudices on the subject of taxation. Some incline more to Excises or taxes on articles of consumption than to taxes on real estate. Others favour the latter more than the former. In some stamp duties are not ill thought of—in others they are odious.

Suppose, what was the natural and probable effect of such a diversity of opinion, the states being left to make separate provisions for their particular debts had bottomed their provisions on different objects of Revenue—that some had occupied the most productive objects of excise—that others had had recourse to taxes on real estate—that some had preferred to either duties on stamps—that a fourth class had sought the needed Revenue from duties on the alienation of certain kinds of property—and that a fifth class had derived its provision from general assessments of real & personal estate. These with duties on imports & exposts from which they are excluded & poll taxes which are the scourge of any society comprise all the important branches of Revenue. Suppose as would have been the case if fair provisions had been made that in each case the taxes had been carried as far [as] could be done without oppression or overburthening the object or the person—what would have been the situation of the general Government in case the breaking out of a war had called for great resources?

In all but direct taxes the Constitution enjoins uniformity. Reason and principle enjoin it with respect to all taxes laid by the same Government upon the same Society. What was to be done? Revenue could not be had from excises because the principal objects were already burthened by certain States as much as they could conveniently bear & to lay additional burthens would be equally ruinous to industry & to persons. Indeed excessive accumulation prevents collection & defeats the end.

Similar reasons would be obstacles as to all the other great branches of Revenue because different states had previously occupied them all to the convenient extent. The hand of the General Government would thus have been arrested43 and the greatest part of the resources of the community would have been tied up incapable of being brought into action for the common exigencies of the Nation.

Will it be said that the General Government might still have laid the taxes on such objects as appeared to it proper leaving the states to change their ground and adopt others? Who would wish to have seen the necessity of so violent an expedient or who could calculate the consequences of it?

Is it certain that a state would have thus complaisantly changed a ground to which it had been led by the coincidence of its predilections and prejudices? If it had mortgaged the particular revenues for its debt, is it certain that it would have been able to change its ground justly & satisfactory[il]y? Is [it] not too probable that perseverance complaint controversy between the general head & its members dissatisfaction in the community & weakness of measures would have been the effects of such an experiment.44

No one can doubt the dangers and inconveniences of such a situation: No sound mind but must think it a great recommendation of a measure that it tended to obviate so perilous and so inauspicious a situation.

An inference has been drawn that without the assumption and with separate provisions for the State-Debts the chief part of the resources of the community would have been tied up incapable of being brought into action for the public necessities. Let this be still more particularly illustrated.

Suppose Massachusetts had provided for her particular debt by excises. It is certain from the magnitude of her debt that to make the provision adequate in this way would have required excises to be extended as far as was practicable. Suppose Connecticut to have provided for her debt by stamp duties and duties on alienation of property which carried to any extent not oppressive would not have been more than an adequate fund for her debt. Suppose South Carolina to have rested her debt on taxes and assessments upon real and personal estate which in any admissible extent would probably have been inadequate to her debt.

It would follow that the UStates could not touch either of those great branches of taxation which form the great trunk of taxation because they had been preoccupied in those three states as far as the subject in each case would permit and therefore additions would be insupportable to the citizens and incapable of collection & because Congress could not by the constitution or upon principle touch those branches in some states without extending it to all.

It would thence follow that computing Massachusettes Connecticut & South Carolina as   of the Union   45 of the resources of taxation from all the great branches except duties on imports would remain unoccupied and inapplicable to the public exigencies—except as will be presently mentioned.

It may be said that the occupation of the several branches of revenue in the way which has been stated is merely suppositious. It might not have happened—a more partial & at the same time a more various distribution might have left a freer stage to the UStates.

The possibility of what has been stated in theory is a conclusive argument for prefering a plan which avoided it. But more than this it is probable and from circumstances was in a great degree unavoidable that what has been supposed should have been substantially realized in practice. The modes of thinking in particular States and the magnitude of their debts would have naturally led to it. And as far as the states in their provision had recourse to different objects though not to the full extent—so far the evil would have existed & would have been an obstacle to a due provision for the public necessities.

But besides this it would be impossible to the state Governts to command efficaciously one principal source of taxation that of Excises—because of the competition of industry, where they were not laid &c.

The only paliative for this paralitic state of things was requisitions upon the states to be raised in their own way. No man conversant with the effects of this system during the war of our revolution, who saw its impotent and unequal operation—who is a friend to vigour in the government of his Country who has an enlighened desire to see it in a state to vindicate efficaciously its honor & interests—who wishes the reign of equal justice by equal effort among the states and their citizens—no such man but would deplore that this system should ever be again the principal reliance of the national Government.

But it might be expected to be even more impotent under the present Government than under the Confederation. There the system of requisitions had a constitutional basis. Requisitions were the mode indicated by the articles of confederation for supplying the general Treasury & it was natural that their obligation should be so much the more respected.

But under the present Government there is no authority for obtaining revenue in that way. A contrary supposition has crept in from that provision of the constitution which regulates that “direct taxes shall be apportioned among the States according to their respective numbers.” But the true meaning of this is that when Congress are about to raise revenue by their own authority upon those objects which are contemplated as the objects of direct taxation the proportional measure of the quantum of the tax to be levied in each state must be the numbers of such State. It is a mere rule for the exercise of the general power to taxation vested in Congress as to the article of direct taxes. It does not authorise the calling upon a state to raise such a quota of money by its own authority and in its own way. This would be to change taxation by Congress into taxation by the States, direct taxes into taxes of any discription which it might appear adviseable to a state to substitute.

Requisitions are then unknown to our present constitution. They would amount therefore to mere recommendations, a compliance with which would be purely gratuitous and voluntary in theory as well as in fact. What could be expected from such a system?

This position alone condemns any plan which would or might have left the UStates dependent on the resource of requisitions for carrying on a War. It is against every principle of sound reasoning or constitutional or practical policy to leave the administration in a condition to depend not on legal and obligatory provisions but on such as are gratuitous & voluntary. This is to arbitrate not to govern.

Perhaps the force of these reasonings may be thought to be diminished by the reflection that the debts of the States were temporary impediments which might be expected to cease within a certain period?

But who could say when they would cease? It was certain that if fairly provided for the evil would have lasted a very considerable time. And it was uncertain how soon a war might render it embarrassing to the finances & dangerous to the safety of the country.

The certain length of duration & the greatness of the probable mischief were sufficient reasons for removing the cause when it could so well be done.

It will be argued hereafter that the duration of all the Debts both general and particular supposing a fair provision was likely to have been much greater on the plan of separate than on that of joint provision.

It was observed by way of objection to the assumption of the State Debts that this division of the business would facilitate a provision for the whole debt of the country general and particular; that the resource of imposts would alone enable Congress to provide for the general debt while the states separately could more conveniently employ other resources for the particular debts and that together they could not only better provide for the interest of the debt but for the speedy extinguishments of the principal. This was in truth the most plausible argument which was used against the assumption.

In some of its aspects it was not without foundation and in contemplating the plan to be proposed did not escape very serious reflection and examination.

It appeared to me well founded in this important view—that leaving a provision for the general debt within the compass of duties on imposts and disembarrassing Congress from the necessity of resorting to other & less agreeable modes of taxation, it avoided to expose the Government in its infancy & before it had engaged in its favour habit and opinion to the clamour and unpopularity which was to be feared from the resort to other means. To avoid this inconvenience had many charms for the person who was to propose a plan. It seemed to have much less risk for his reputation & quiet.

But on full & mature reflection I yielded without reserve to the conviction that the consideration just mentioned though not without weight was greatly outweighed by many other considerations and that in a personal view it would have been pusyllanimity & weakness to have stopped short of a provision for the aggregate debt of the Country. Some of the reasons which determined me have been anticipated.

1   The superior probability of Justice among the States and among the individuals composing them, including a greater certainty of relief to the overburthened States & their citizens and the advantage equalizing the condition of the citizens of all the states as to contribution which was incident to the plan of a joint provision.

2   The avoiding of the collisions to which fifteen different and comprehensive systems of finance connected with a separate provision for the states was subject.46

3   To leave the field of revenue more open to the US & thus secure to their Government for the general exigencies of the Union including defence & safety a more full & complete command of the resources of the Nation.47

These considerations were of themselves sufficient to outweigh that which has been stated by way of objection but I proceed to add others which concurred in determining my judgment.

1   The assumption would tend to consolidate and secure public credit.

This would happen from various causes

1   If it had not taken place there would have been a conflict of interests and feelings among the public creditors.

The Creditors of certain States from the impractica[bi]lity, admitting a disposition, of making for them a provision equal to that which was made for the Creditors of the UStates would naturally have felt jealousy and dissatisfaction. They would have considered it as unjust that their claims equally meritorious should be worse treated and the sensibility in certain cases would have been aggravated by the reflection that the most productive resources before exclusively enjoyed by the state Government and applied to their benefit had been diverted to the general Governmt and applied by it to the sole benefit of the natural creditors. This jealousy and dissatisfaction would have augmented the mass of dissatisfaction from other causes which would exist against an adequate provision for the general debt. The sources of such dissatisfaction have been stated and it was certain that enmity to the Government in some & the spirit of faction in others would make them engines for agitating the public mind. Such dissatisfactions, in a popular Government, especially tend to jeopardize the security of the public creditors, and consequently of the public Credit.

The assumption by uniting the interests of public Creditors of all descriptions was calculated to produce an opposite effect. It brought into the field an auxiliary to fortify the public opinion in opposition to the efforts of faction and of the antiproprietary spirit, in favour of a just and reasonable provision for the debt and for the support of credit.

These considerations to a mind which has been attentive to the progress of things since will have very particular weight.

The assumption would favour public credit in another sense by promoting and enabling a more adequate provision for the intire debt of the Country. This is in direct contradiction to one of the positions which the objection that was last stated contains. These are the reasons for a contrary opi[ni]on.

Some states especially Massachusettes Rhode Island Connecticut South Carolina and Georgia could not have made adequate provision for their respective debts. There is the ground of experience to assert that some states were not disposed to do it. From the co-operation of the two causes the debts of a large majority of the states would have remained without an adequate provision and would have been in danger of being frittered away by means inconsistent with the spirit of public Credit. While the UStates by assuming the state Debts and by laying open all the resources of taxation to the command of the general Government upon a uniform plan could for reasons already detailed make a more efficacious & complete provision for every part of the debt than could possibly have been done by separate provisions.

This may seem to have been a matter of no concern to the General Government. But the cause of credit and property is one and the same throughout the states. A blow to it in whatever state or in whatever form is a blow to it in every state and in every form. The intimacy of interest & connection between the states leads to an observance in one of what passes in another. Bad precedents influence as well as good. They are greedily looked up to and cited by men of loose principles who make them instruments of instilling doctrines and feelings hostile to morals property and credit. It may be averred as a maxim without danger of material error that there cannot be a violation of public principle in any state without spreading more or less an evil contagion in all.

It is known, that the relaxed conduct of the State Governments in regard to property & credit was one of the most serious diseases under which the body politic laboured prior to the adoption of our present constitution and was a material cause of that state of public opinion which led to its adoption.

The Constitution of the U States contained guards against this evil. Its provisions inhibit to the state Governments the  48 which had been great engines of violating property destroying confidence & credit and pro[pa]gating public dishonor & private distress.

In the practice of the Fœderal Government it was wise to second the spirit of those provisions. 1 by avoiding examples of those very practices which were meant to be guarded against in the states. 2dly. by removing as far as it could be constitutionally done out of the way of the States whatever would oblige or tempt to further tampering with faith credit & property.

The assumption was calculated to do this and it is not one of its least merits. It has served to prevent the reiteration of examples from necessity or choice which could not but have a malignant aspect towards the cause of public credit.49

It might be added that the national character abroad has been rescued from stains by the same measure. It was not easy for foreigners to distinguish accurately between the infractions of credit by the State Governments & by the general. More or less it was natural that some confusion of ideas should prevail & that the character of the country at large should suffer from the crookednesses of parts.

Another beneficial effect of the assumption favorable to public Credit was the placing of all the public funds of the country upon the same foundation. The price and steadiness or instability of the public funds are the barometers of public credit, and with due allowance for temporary circumstances, they mark and establish the state of public credit.

It cannot be doubted by a man acquainted with the subject that the fluctuations instability and precariousness of the value of property in funds in this country would have been very much in a ratio to the variety of kinds and of the foundations on which they rested—that it would have been incomparably greater upon the plan of fifteen different provisions at different rates by different authorities upon different principles than upon that of one provision upon one principle by one authority.50

It is observeable in the European Markets that the principles of the different species of funds afloat influence each other though perhaps the causes that affect some ought either not to affect others or to affect them differently. Few of the many who deal habitually or occasionally in the funds are able to appreciate accurately the causes of fluctuations & what ought to have been the consequences. The knowing ones take advantage of the fact and turn it to their own advantage commonly to the disadvantage of the less knowing & to the injury of public credit.

A great mass of precarious funds in the shape of State Debts could not have failed to injure & keep down the funds of the general Government by the influence of appearances by the quick & sudden division of money from one channel to another by the manœvres of Speculation by the distractions of public opinion.

There are some who reason so much a travers as to regard a low state of the funds as desireable because say they, it enables the Government to sink the debt the more speedily by purchases.

But they forget that the lowness of the funds is an argument of a bad state of credit & that the Nation which loses more by the greater purchase of foreigners at low prices than the Government gains by its purchases at those prices & the Government loses infinitely more by the higher premiums and interests which it must in that case give for new loans than it can gain in purchases of the bonds given for old loans at low prices. Let it be remembered that a bond given last year is as good as a bond given to day that borrowing by the Government is in fact only sending its bonds to market and if its old bonds are low its new bonds cannot be high. What would be thought of the policy of a merchant who should wish to see his notes at ten shillings in the pound?

Much clamour has been raised against the funding system on the score of speculation, how justly will be examined in a proper place, but what would have been the degree of it on the plan of so many different funds or stocks depending on so many different provisions? It is evident that it would have been multiplied tenfold. The legerdemain of speculation would have had full scope for its exertion.

To give as quickly as possible elevation & stability to the funds was a most important mean of raising & fixing public credit. The assumption, by equalizing the condition of every part of the public debt & placing every part on good and on equal security was one of the most effectual expedients for that purpose.

Another consequence of the assumption, contrary to what has been supposed & favourable to public credit, is that it facilitated a speedy honorable extinguishment of the debt.

This results from the superior efficacy of unity in the Financial system the superior & better command of the national resources as well from the reason assigned as from the probab[il]ity of greater skill & order in the arrangements of the general than the state Governments.

That plan which gave a more systematic & thorough command of every branch of national resources was evidently better adapted not only to the effectual payment of interest but to the speedy discharge of principal for the very reason that greater resources could be brought into action.

Certain states would have had to have to struggle endlessly with their debts—happy to be able to face even the interest. But the general Government was able to make & has already made a joint provision which would with due dispatch absorb the whole debt.51

I have annexed the epithet honorable to that of speedy, because certainly a more speedy extinguish[ment] could have been found in bankruptcy or fraud. There is too much cause to believe that those who favoured the intricate speckled system of State provisions secretly had an eye to this happy resource. Its evils in every sense have been delineated & no man who values his character will avow it—no sound politician will look with complacency towards it. It was of the justice & policy of the UStates to dispel so corrupting a poison from the body politic.

Besides the advantages to public safety and public credit consequences very favourable to the case and satisfaction of individuals were included in the assumption—of three kinds 1   lightening the burthens absolutely of all the Citizens of the UStates. 2   equalizing the condition as to burthens of the Citizens of one State with those of another. 3   bringing certain relief in the first instance to the over-indebted States & facilitating settlement of accounts. These are the incidents of the same superiority of faculty in the general Government to make a convenient provision for the whole debt.

It is curious fact which has not made its due impression that in every state the people have found relief from assumption while an incomparably better provision than before existed has been made for the state debts.

Let the citizens of Virginia be appealed to whether they have not in consequence of being exonerated from the necessity of providing for their debt been relieved in degree or kind from burthens which before pressed heavily upon them.52 They must answer the affirmitave. The same inquiry will find the same answers in every state. Men wonder at the lightness of their burthens and yet at the capacity of the Government to pay the interest of its debt to absorb a portion of the principal and to find extensive resources for defence against Indian Ravages.

The solution of the enigma is in the present Financial system of the Country intrinsically more energetic more orderly better directed and more uniform & comprehensive than could possibly have been the case with   53 different systems to provide for as many different loads of debt.

The effect of energy and system is to vulgar and feeble minds a kind of magic which they do not comprehend and thus they make false interpretation of the most obvious facts. The people of several parts of the state relieved and happy by the effects of the assumption execrate the measure with its authors to which they owe the blessing.

The equalizing the condition of the individual citizens of the several states by the generalizing of the provision is connected with this part of the subject. It has been already noticed in reference to the justice of procedure. It deserves particular attention in the view of policy.

It is impossible to imagine any thing more calculated to breed discontent, and between the citizens of the UStates mutual jealousy & animosity than the inequality of condition which without the assumption would have existed.54

When the citizens of Massachusettes or Connecticut bordering on New York felt themselves burthened with heavy taxes while their neighbours of New York paid scarcely any what must have been their sensations? How must they have been stung by the sense of so unjust an inequality? How must their envy and dissatisfaction have been excited? How much must this have tended to beget in them discontent with the Government under which they lived and from discontent to lead them to revolt?

Something of this actually took place. That spirit of dissatisfaction which produced the insurrection in Massachusettes55 was in all probabil[it]y promoted by a comparison which exhibited the people of that State as in a condition far worse than their neighbours.

If it be said that this effect was likely to be temporary—destined to cease upon a settlement of accounts which would bring relief to the overburthened States—

The remark before made recurs. A settlement at all was precarious and uncertain—whether it would bring relief even where it ought to do was still more precarious and uncertain. The reasons of this uncertainty have been.

Let us conceive what would have been the effect under the inequality of condition which has been stated either if a settlement had been long procrastinated56 or if having been made it did not bring relief to the much indebted States.

What would then have been the situation of the public mind in those states? Who can calculate the mischiefs which would have attended the disappointment or dispair of relief and the prospect of continuing indefinitely under such unequal loads?

It is a great recommendation of the assumption not only that it anticipated a relief which was indispensable and which might not have come from a settlement but that it facilitated a settlement and rendered a tolerable issue far more probable.

This position is thus explained.

The circumstances which have been enumerated rendered a settlement upon strict or systematic principles impracticable. Had the state-debts remained unassumed the nature of the settlement which might be made was proportionably important and imposed on the commissioners57 the duty of great rigour and exactness. The more this was the case the more difficult it was to come to any admissible or satisfactory result. Adherence to principle was likely on one side or on another to produce great mischiefs. Compromises and managements were essential.

The assumption of the State Debts by giving relief to the much indebted States rendered the issue & consequently the principles of the settlement less important. It allowed greater latitude to the Commissioners to deviate from rule to consult expediency to shape the result by a spirit of accommodation, and concession to circumstances. Hence a settlement become more practicable in proportion as it was less important.

I declare that I am not in the secret of the principles or maxims by which the Commissioners were governed but from what I do know of the State of things with a full conviction of there being as much disposition on their part of doing as much justice as possible, I can entertain no doubt that the settlement which they made was essentially artificial and the result of a thousand compromises of principle. No other settlement was possible and I believe none could ever have been made had not things been put upon a footing to unfetter the Commissioners.

Thus then it is one of the merits of the assumption that it facilitated a settlement of Accounts which all the states were desirous of & so has contributed to establish their harmony. And it is fortunate that it has so issued as to have produced relief to those States which notwithstanding the assumption was still left with considerable debts upon them.

This circumstances of their having remained such ballances may be urged as an objection to the reasonings in favour of the assumption. But to this two things are to be replied.

1   That my proposition to Congress embraced the intire debt of each state which would have given in the first instan⟨ce⟩ complete relief. The limitation by Congre⟨ss⟩ is not chargeable on my plan. It wa⟨s⟩ the effect of a compromise between the zealo⟨us⟩ friends of assumption & some who opposed or doub⟨ted⟩ and was dictated in some degree by a spirit of caution.58

But though by this limitation the relief was less complete in the first instance then was intended by my plan enough was done to obviate the principal mischiefs & to ensure th⟨at⟩ a State could not be oppressed by the peculiar burthen remaining upon it.

Another advantage incident to the assumption was the preventing the depopulation of particular States.

Had the overburthened States remained so any considerable time while the citizens of other states were lightly taxed it could not but have promoted extremely emigration from the more to the less burthened states.

This dislocation of population from any violent cause or any extraordinary pressure on parts of the Union cannot but be regarded as a serious evil. It could not but disturb in some degree the general order the due course of industry the due circulation of public benefits.

One particular inconvenience would have been to have increased the inability and distress of the overburthened states by lessening the population from the labour of which the public resources were to be derived.

Another particular inconvenience might have [been] the transferring the population of the country from more to less beneficial situations in a national sense. No one has been more uniformly nor more intirely than myself in the system of giving a free course to the population & settlement of our interior Country and of securing to it by the best efforts of the Government the enjoyment of those collateral advantages on which its prosperity must depend. This in my opinion is preferable as the most natural policy and as that which will best secure & cement the unity of the empire. But with this policy adopted in my most unqualified manner, I am far from regarding it as wise to give or occasion any extraordinary impulse to a transfer of people from the settled to the unsettled parts of the country. This is to retard the progress in general improvement and to impair for a greater length of time the vigour of the Nation by scattering too widely and too sparsely the elements of resource and strength. It is to weaken govern [ment] by enlarging too rapidly the sphere of its action and weak[en]ing by stretching out the links of connection between the different parts

The true politican will content himself by seeing new settlements formed by the current of a redundant population—he will submit because it is unnatural would be fruitless and unwise to oppose even a greater transfer than the mere surplus by the attractions to emigration which new countries hold out—he will seek to tie the emigrants to the friends and brethren they have by a kind and liberal conduct of the Government towards them—by efficacious protection and by sincere persevering and energetic endeavours to obtain for them the free and full enjoyment of those rights & advantage which local situation requires. But he will not accelerate the transfer by accumulating artificial disadvantages on the already settled parts of the country—he will even endeavour to avoid this by removing such disadvantages if casual causes have produced them.

Such without reserve is my sincere view of this subject and I deem it no small recommendation of the assumption that it was a mild and equitable expedient for preventing a violent dislocation of the population of particular states.

It remains to mention one consideration which naturally occurred in the reflections upon the expediency of assuming the State Debts. This is its tendency to strengthen our infant Government by increasing the number of ligaments between the Government and the interests of Individuals.

I frankly acknowlege that this tendency as far as it appeared to be founded was not excluded from the calculation for my opinion has been and is that the true danger to our prosperity is not the overbearing strength of the Fœderal head but its weakness and imbecillity for preserving the union of the States and controuling the excentricities of State ambition and the explosions of factious passions. And a measure which consistently with the Constitution was likely to have the effect of strengthening the fabric would have recommended itself to me on that account.

But though this was the case, though I thought too that the assumption would have in several senses a temporary tendency of the kind alluded to and so far might serve as a prop to the Government in the infancy of its authority while there was yet a numerous party alive whose vanity and envy pledged them to opposition and before it had acquired the confirmations of habit & age—and though weight was given to the argument where it was thought most likely to have effect—Yet upon the whole it was the consideration upon which I relied least of all.59

It appeared to me in a considerable degree counterballanced by the suggestion of an objection which has been stated—the necessity which it imposed on the government of resorting early to unpalateable modes of taxation which jeopardized its popularity and gave a handle to its enemies to attack.60

It appeared to me also intitled to the less weight on the account stated because on the supposition that this Debt was to be extinguished within a moderate term of years—its influence must then be terminated and it had not pretensions to be considered as a permanent or lastly prop to the Government.

Besides that it was to be foreseen that successive transfers of considerable portions of the Debt to foreigners and accumulations at home would rapidly enough lessen the number of ligaments diminish the influence upon individuals and the taxes continuing perhaps invert the effect.

Had this then been the weightiest motive to the measure, it would never have received my patronage. The great inducements with me were those which have been previously enumerated and chiefly the giving simplicity & energy to the national finances the avoiding the collisions of multifarious & conflicting systems the securing to the Government for national exigencies the complete command of the national resources, the consolidation of public credit. These were the commanding motives and it is believed they were solid.

It is understood that a contrary course has been a principal cause of embarrassment in the U Netherlands. The separate debts of the different provinces have been an endless source of perplexity and financial embecil[it]y.61

But for the same reason that the effect of the assumption to strengthen the Government was a feeble or ambiguous motive—its importance as an objection in the view of those who fear the overbearing power of the general Government has been much exaggerated. What solid ground was there for all the declamation which has represented this measure as a premeditated plan for overthrowing the state Governments and consolidating the States into one? What room was there in a matter of so temporary & partial an operation for the dreadful alarms which were felt or affected?

The inconvenience of an early resort to modes of taxation which run counter to public prejudices has been mentioned. Its force was felt, but in addition to the reasons immediately connected with the measure which led to it, there were collateral ones which united to meet it.

The current of popularity immediately after the adoption of the Government run strongly in its favour. The immediate Chief Magistrate justly united in his person the full confidence and cordial regard of the Nation.

It was not to be doubted that intrigues to unpopularise the Government would go on that the passions incident to faction the natural disease of popular Governments would grow and multiply—that the rivalships of power would increase, and it was to be feared that greater difficulties might exist at a future day to introduce the most difficult species of revenues however necessary than might be experienced in the then stage of our affairs. The delay in establishing them might even be construed into an implied condemnation of them & might be rendered an argument against their future introduction. Even negative precedents in such cases are not without force. While the advantages of present situation facilitated the introduction of these revenues at the time; the obstacles that might be afterwards created rendered it adviseable to occupy the ground and to avoid by anticipating difficulties. The Presidency of the actual chief Magistrate was a more favourable period than was likely in a short time to return to establish points favourable to just and necessary efficiency of the Government.

Besides that it would probably have been in the long run an unwise calculation even of popularity for the Government to have omitted the measure of assumption. A weak and embarrassed Government never fails to be unpopular. It attaches to itself the disrespect incident to weakness—and unable to promote the public passions its impotencies are its crimes. Without the assumption, the Government would have been for a long time at least under all the entanglements and imbecilities of a complicated clashing & disordered system of Finance.

The foregoing considerations appeared to me decisive for proposing an assumption of the State Debts. Experience has not led me to repent the measures. And I believe it will more & more recommend it even to its enemies. In the course of the remarks which have been made the considerations which combated the mode of proceeding with regard to assumption namely an intire assumption of the State Debts and a dereliction of the settlement of accounts have been anticipated. The state of public opinion was an insuperable obstacle. Almost every state flattered itself with being a Creditor & imagined a particular interest in a settlement. The renunciation of it would consequently have destroyed the confidence and disturbed the harmony of the States. Else it would undoubtedly have been the best policy & as good justice to have renounced it. There was no ground of procedure more likely to promote mutual justice & convenience than to assume as a principle that each state in the War had exerted itself to the extent of its faculties—that the subsisting debts were to be paid out of a common Treasury & that ill retrospection & reliquidation between the states was to be abandonned. But this great & liberal measure was impossible. All parties accordingly concurred in demanding a settlement.

The course of the argument has stated & replied to all the objections to the assumption except one. This is that it has tended to increase the mass of the Debt.

This observation has frequently been so managed as to infuse into the minds of many a vague confused conception that the public Debt of the Country has been augmented in mass to the extent of the aggregate sum of State Debts assumed. But it were absurd to attempt a refutation of this idea. It is self-evident that the Assumption in this respect did nothing more than transfer the particular debts to the Union. It united fourteen sums in one and charged them upon one responsibility, that of the Union, insted of leaving them to exist separately chargeable on the separate responsibilities of the Union and the Individual states. The debt of the Union was increased but the debts of the several members of it were proportionably decreased. The mass of public Debt consequently remained the same, on the infallible evidence of a mathematical axiom that a whole cannot be greater than its parts.

But the objection has had a more particular signification. It has amounted to this that the debts of the States have been twice provided for once to the Individual Creditors who held evidences of State debts & once to the States in whose favour ballances were found at the settlement.

This objection like most others from the same quarter has been presented in a shape so general inexplicit and naked of explanation that it is not easy even to comprehend much less to answer it. It probably turns on a sophism or error which supposes the same item of service or supply twice represented once in the evidence or voucher given by the State to the person who served or supplied and once in the account of the State as a charge against the UStates.

But this supposition of double representation overlooks the material fact that by the plan of settlement according to the assumption the sums assumed by the US to individuals are charged to the state which incurred them and so ballance & extinguish the correlative charge for the service or supply which was the origin of the Debt.

Moreover it is manifest in point of result that the objection can have little if any foundation.

The aggregate of the sums assumed for the States was   62 Dollars.

The whole ballances found in favour of the Creditor-States & which ballances are formed by a deduction out of the mass of State charges of the sums assumed and to be paid for the States amount to no more than   63 thus distributed.64

But it is known & appears from official documents that after the operation of the assumption there remained Upon   65 a debt exceeding   Upon

Making together

Thus then the sum assumed being   and the sum remaining on the enumerated States being   the Total of State Debts was not less than   .

The provision made for State Debts embraces the sum assumed to Individuals.

the ballances to Creditor States

Consequently66

For it ought to be taken for granted in the calculation & indeed is known to be the fact that the funds in the Creditor States derive from the U States, for their ballances are applied to their remaining debts to Individuals.

Taking it for granted that the principles of settlement were right and that the ballances of debtor States which exactly ballance those of Creditor States are to be collected it seems to be impossible ⟨- -⟩ thing—either that the mass of debt can have been increased or its distribution among the Debtor⟨s⟩ improperly carried by the assumption.

Tis as to [the] last particular ⟨that⟩ there may be the most question on the supposition either of an erroneous or inadequate settlement or the non collection of Debtor ballances.

But on the supposition of an erroneous settlement, it is impossible to calculate what was the effect of the assumption whether to promote or produce a wrong distribution.

The original situation of the accounts was in all respects such that it cannot be pronounced what effect any new ingredient produced. It was much matter of chance amidst the inevitable compromises of principle. It can only be pronounced with reasonable assurances that the effect was not likely to have been very material in any direction. And the effect whatever ⟨it⟩ might be was not chargeable on ⟨the⟩ intrinsic nature ⟨of⟩ the ⟨——⟩ of assumption but on the ⟨accurate ——⟩ state of ⟨account⟩.

As to the non collection of the ballances of Debtor States, the ultimate distribution would probably have been more inequitable without than with the assumption. For but for the deductions made on accot of the sums assumed there would be larger ballances both to Creditor & Debtor States, & the non collection of the latter would have increased the inequality ⟨——————⟩ if non collected ⟨——⟩ situation of67

The second feature of the plan as stated was to fund the intire debt foreign and domestic original and assumed.

The funding of the Debt has been unexpectedly the theme of much declamation and invective. A confusion of ideas has been attempted to be produced among the ignorant. The funding with the assumption have been sometimes treated as the creation of the Debt; at others the funding has been represented as its perpetuation, as a direct attempt to fasten the burthen irrevocably about the necks of the people. A particular ingredient in the plan proposed, the rendering the debt redeemable only in certain proportions has been pressed in to reinforce this argument & to prove the iniquitous tendency of the plan.

The circumstance of qualified redeemability will be spoken of hereafter. Remarks here will be confined to the mere funding of the Debt.

The Revolution which gave us independence and secured us liberty left upon the country as the price of it a considerable Debt partly contracted by the UStates in their joint capacity partly by the individual states in their separate capacities.

What was to be done with the debt? Was it to be wiped off with a sponge or was it to be provided for?

The first idea[s] were the extreme of political profligacy and folly. Governments like individuals have burthens which ought to be deemed sacred, else they become mere engines of violence oppression extortion, and misery. Adieu to the security of property adieu to the security of liberty. Nothing is then safe—all our favourite notions of national & constitutional rights vanish. Every thing is brought to a question of power; right is anathematized excommunicated and banished.

In the code of moral and political obligations that of paying debts holds a prominent place. Tried by the test of utility there is perhaps none of greater force or extent. Without it, no borrowing nor lending; no selling or purchasing upon time—no credit private or public; consequently a more cramped and less prosperous agriculture, fewer and more imperfect mechanic & other industrial arts less and more embarrassed commerce, an immense contraction of national resource and strength. A most active power in the whole scheme of national happiness would be destroyed. A vast void would be created. Every thing would languish and wither.

No one will be hardy enough directly to dispute these positions or advocate the horrid doctrine of applying the sponge, but it was seen to lurk beneath some very insidious suggestions, often reiterated and urged with earnestness and exageration.

The debt has a great deal of alloy in it—a great part of it had been produced for no adequate value. To pay it therefore involved injustice and injury to the public.

The real state of the fact which is the basis of this suggestion shall be discussed in another place. Here it shall be taken for granted that it was well founded.

But what were the causes? The bad arrangements & delinquencies of Government itself, the infidelity of its own agents, the enhancements of price from the demand and scarcity incident to a long and exhausting war, the embarrassments & risks to individuals from a depreciating currency, the eventual hazard insperable from a state of Revolution. These were the essential causes of the alloy, if any, in the Debt?

Was any one or all of them a good plea to the Government not to pay? Was it just that the whole debt should be cancelled because a fifteenth or a tenth or a fifth of it had been contracted without adequate consideration? Was it equitable that those persons who had yielded their personal services—lent their money and parted with their property to the government upon fair and reasonable compensation of values, should lose their rights because others may have extorted or imposed, because the disorders in the public arrangements had prevented proper liquidations of accounts and had let in unfounded claims, because the infidelity of the governments own Agents had produced dilapidations & had emitted evidences of debt without value or for little value? Was it reasonable to object to compensations & allowances predicated upon a state of war, revolution discredit and hazard, because they were not agreeable to a standard adjusted by a state of peace established government credit & safety?

An individual may plead duress & compulsion as an objection to the performance of his engagements but this is impossible to a Government. Individuals cannot exercise over it that species of controul which may be denominated compulsive. It may oppress but it cannot be oppressed. Circumstances which according to the laws enable individuals to demand high prices for their property are never arguments of compulsion to vitiate the contract.

Where would an objection of this kind lead? War, insurrection, every great disturbance of the Social order, is apt to augment price. Is there constantly on the return of peace and order to be a revision and reliquidation or a rejection of the contracts? How long would Governments under such a system obtain any succours but by exaction & violence in similar emergencies?68

Another weapon indirectly used against a provision for the debt was the alienations of it at low value &c.

But how could this supersede the obligation of the Government to pay or provide? The Government had received the benefit of the services, loans, or supplies which were the consideration of its contracts. These contracts were in their constitution alienable and assignable. The proprietors had a full right to part with them at any value they pleased or even to give them away. What was it to the Government how they disposed of them? By what rule of reason law or right was the government dispensed, by alienations provident or improvident of the original proprietors, from paying its debts and performing its engagements?

It is evident that the only colorable question which could be raised was not whether the debt should be provided for, but for whose benefit the provision should accrue, that of the original proprietors or of their alienees, a question which will be examined in another place.

The obligation to provide for the Debts for the benefit of those who were best intitled was indisputable. No arguments can enforce it. No man who has the least regard for his reputation will hazard a denial of it.

But anonymous publications have by insinuations attempted to raise doubts and prejudices. Not the mode merely of providing has been attacked, but by implication any provision whatever. The Debt itself has been sometimes treated by vague expressions as a nuisance as a morbid excrescence in the body politic, as the creature of a wicked combination to create a monied aristocracy & undermine the republican system. A debt created by that very Revolution which gave us this Republican system has been artfully presented in these odious colours to the dislikes of a spirit of Jealousy and Avarice, and those who were disposed to uphold the integrity and credit of the Nation have been exhibited as conspirators against Democratic principles. It is afflicting that there should be a State of public information opinion or feeling which should encourage any man to attempt to trafic for popularity by means so absurd and so base. If they could succeed we must renounce those pretensions to intelligence and light as a people which we claim hitherto on such just grounds. We must soon after renounce that Republican system of which these men affect to be so fond.

The plainest maxims of common sense and common honesty establish that our Governments had no option but to make a fair provision for the Debt. Justice, true policy, character credit interest all spoke on this head a uniform and unequivocal language. Not to have listened to it would have been to have prostrated every thing respectable among nations. It would have been an act of suicide in the Government at the very commencement of its existence.69 It would not have strangled the serpents which threatened but it would have strangled itself.

The only possible question was about the nature of the provision. And to this point indeed were confined all the questions formally raised, though indirectly it has been endeavoured to excite prejudices in the public mind against the debt itself & consequently against all provision for it.

But among the questions raised as to the nature of the provision, I neither recollect nor can trace that among the legislative parties while the subject was under discussion there was any party against the principle of funding the debt as contradistinguished from other modes of providing.

Indeed but three options occurred—to pay off the principal & interest at once which was impossible, to provide annually for the interest and occasionally for reimbursing as much of the principal as the public resources permitted—to fund the Debt, or in other words to pledge specified and adequate funds for the regular payment of interest till the principal was reimbursed and as an auxiliary measure to constitute & pledge adequate funds for the reimbursement of the principal.

The last was conformable to the sense of America repeatedly and solemly expressed. Different acts of Congress under the old Confederation embrace and enforce the propriety of this measure & frequently with una [ni]mity.70 The states separately had all sanctioned it. The objectors were a few solitary individuals neither numerous nor significant enough by weight of talents or character to form a party.

In proposing therefore to fund the debt I considered myself not only as pursuing the true principles of credit & the true policy of the case, but the uniform general sense of the Union.

I had heared no lisp from any description of men in the national legislature of an objection to this idea and accordingly as before observed when the plan proposed was under discussion there appeared none in opposition to it.

The clamours therefore which have been subsequently raised on this head and patronised more or less directly by a whole party are not less strong indications of the disingenuousness of party spirit than of an immaturity of ideas on the subject of public Credit.

The substance of the argument against Funding Systems is that by facilitating Credit they encourage enterprises which produce expence by furnishing in credit a substitute for revenue; they prevent the raising as much as might be raised cotemporarily with the causes of expence to avoid the unpopularity of laying new taxes and in both ways occasion a tendency to run in debt consequently a progressive accumulation of debt and its perpetuation; at least till it is crushed beneath the load of its own enormous weight.71

An analysis72 of this argument proves that it turns upon the abuses of a thing intrinsically good.

A prosperous state of agriculture commerce and manufactures nourishes and begets opulence, resource, and strength. These by inspiring a consciousness of power never fail to beget in the councils of nations under whatever form of Government a sentiment of superiority, pride ambition insolence. These dispositions lead directly to War and consequently to expences and to all the calamities which march in the train of War. Shall we therefore reprobate and reject improvements in agriculture commerce and manufactures?

Again the same causes leading to opulence, increasing the means of enjoyment naturally sharpen the appetite for it, and so promote luxury extravagance dissipation effeminacy disorders in the moral and political system convulsions revolutions the overthrow of nations and empires. Shall we therefore on this account renounce improvements in Agriculture commerce and manufactures?

Again: Science learning and knowlege promote those inventions, discoveries and improvements which accelerate the progress of labour and industry and with it the accumulation of that opulence which is the parent of so many pleasures & pains, so many blessings and calamities. Shall we therefore on this account explode Science Learning & Knowlege?

Again: True liberty by protecting the exertions of talents and industry and securing to them their justly acquired fruits, tends more powerfully than any other cause to augment the mass of national wealth and to produce the mischiefs of opulence. Shall we therefore on this account proscribe Liberty also?

What good in fine shall we retain? Tis the portion of man assigned to him by the eternal allotment of Providence that every good he enjoys, shall be alloyed with ills, that every source of his bliss shall be a source of his affliction—except Virtue alone, the only unmixed good which is permitted to his temporal Condition.

But shall we on this account forego every advantage which we are fitted to enjoy? Shall we put in practice the horrid system of the detistable Robespierre. Shall we make war upon Science & its professors? Shall we destroy the arts useful as well as pleasurable? Shall we73 make knowlege a crime ignorance a qualification? Shall we lay in ruins our towns and deform the face of our fields. Shall we enchain the human mind & blunt all its energies under the withering influences of privation & the benumbing strokes of Terror? Shall we substitute the unmingled misery of a gloomy and destructive despotism to the alternate sunshine & storms of Liberty? Shall we exchange Science Civilization &c.

The very objection to funding systems makes their panygeric—“they facilitate credit”—they give energy solidity and extent to the Credit of a Nation—They enable it in great and dangerous emergencies to obtain readily and copiously the supplies of money of which it stands in need for its defence safety and the preservation or advancement of its interests—They enable it to do this too without crushing the people beneath the weight of intolerable taxes, without taking from industry the resources necessary for its vigorous prosecution, without emptying all the property of individuals into the public lap, without subverting the foundations of social order.

Indeed War in the modern system of it offers but two options—Credit or the devastation of private property. Tis impossible merely with that portion of the income of the community which can be spared from the wants conveniences & industrious pursuits of individuals to force the expences of a serious War during its progress. There must be anticipation by Credit, or there must be a violent usurpation of private property. The State must trench upon the Capital instead of the Revenue of the People and thus every war would involve a temporary ruin.

Tis the signal merit of a vigorous system of national credit that it enables a Government to support war without violating property destroying industry or interfering unreasonably with individual enjoyments. The citizens retain their Capital to carry on their several businesses and a due proportion of its produce for obtaining their usual comforts. Agriculture Commerce & manufactures may receive some Check but they receive no serious wound. Their stamina remain, and, on peace returning, they quickly resume their wonted elasticity. War by the use of Credit becomes less a scourge loses a great portion of its calamity.74

Will it be said that equal Credit may be established without funding systems? Then I answer, the objection made to those systems will apply to that mode whatever it is by which this equal credit is obtained. Tis Credit which giving extraordinary resources to Government encourages to enterprises that produce expence and which furnishing a substitute for revenue relaxes the efforts of taxation and prevents the raising for the current expenditure as much as might be raised in this way. However that Credit is acquired the same consequences follow, the same evils ensue.

Will it be said that without funding systems not an equal but a competent credit might be secured? I answer by asking what is this competent Credit? Is it the power of obtaining by loans all that the State may want for extraordinary exigencies more than it can conveniently and without oppression or disorder raise on the citizens? If any thing less it is plainly not enough, and if it is this it is as much as funding systems effect. The how much in each case to be obtained in loans beyond what can be conveniently raised in taxes depends on the pressure of the occasion and the opinion of the legislature of the day. And this opinion will be affected by the temper of the times, the degree of popular favour or disfavour towards the object of expence, & the genius of the Government.75

Thus it appears that the great objection to funding systems resolves itself into an objection to Credit in the abstract, and if listened to drives us to the alternative of a mean surrender of our rights and interests to every enterprising invader or to the oppression of the citizens and destruction of Capital & Industry in every war in which we should be engaged and in the end, from the insupportableness of that situation, to the same surrender of our rights and interests.

Indeed as far as it is the attribute of funding systems to invigorate Credit, it is their tendency in an important particular to diminish Debt.* This relates to the lower or higher rate of interest at which money is borrowed according to the state of Credit. A Government which borrows 100 Dollars at three percent owes in fact a less debt than a Government which is obliged to borrow the same sum at five per Cent. Interest is always a part of the debt and it is self evident that the ultimate discharge of one which bears five ⅌ Ct will exhaust more money or income than that of one which only bears 3 ⅌ Ct. This principle runs through all the public operations in which Credit is concerned and the difference in the result of the public expenditures and consequently its debts, from a perfect or imperfect state of Credit is immense.

Every State ought to aim at rendering its credit, that is its faculty77 to borrow, commensurate with the utmost extent of the lending faculties of the community and of all others who can have access to its loans. Tis then that it puts itself in a condition to exercise the greatest portion of strength of which it is capable and has its destiny most completely in its own hands. Tis then that the various departments of its industry are liable to the least disturbance & proceed with the most steady & vigorous motion. Tis then that it is able to supply all its wants not only in the most effectual manner but at the cheapest rate. An ignorance which benights the political world and disputes the first principles of Administration is requisite to bring this position for a moment into question. The principle, on which such a question could be founded, would equally combat every institution that promotes the perfection of the Social organisation, for this perfection in all its shapes by giving a consciousness of strength & resource & inspiring pride tends to ambitious pursuits to war expence & debt.78

On this question as on most others evils are traced to a wrong source. Funding systems as the engines of Credit are blamed for the Wars expences and debts of nations? Do these evils prevail less in countries where either those systems do not exist or where they exist partially and imperfectly. Great Britain is the country where they exist in most energy. Her wars have no doubt been frequent her expences great and her debts are vast. But is not this, with due allowance for difference of circumstances, the description of all the great Powers of Europe?

France Spain Austria Russia Prussia—Are they not as frequently at War as Great Britain and as often of their own choice? Have not their expences compared with their means and the state of Society been as great? Have they not all except Prussia heavy Debts?

The Debt of France brought about her Revolution. Financial embarrassments led to those steps which led to the overthrow of the Government and to all the terrible scenes which have followed.79

Let us then say as the truth is, not that funding systems produce wars expences & debts, but that the ambition, avarice revenge and injustice of man produce them. The seeds of war are sown thickly in the human breast. It is astonishing, after the experience of its having deluged the world with calamities for so many ages with how much precipitancy and levity nations still rush to arms against each other.80

Besides what we see abroad, what have we recently witnessed among ourselves? Never was a thing more manifest than that our true policy lay in cultivating peace with scrupulous care. Never had a nation a stronger interest so to do. Yet how many were there who directly and indirectly raised and joined in the cry of War. Sympathy with one nation animosity against another, made it infinitely difficult for the Government to steer a course calculated to avoid being implicated in the Vulcano which shook & overwhelmed Europe. Vague speculations about the cause of Liberty seconded by angry passions had like to have plunged this young country, just recovering from the effects of the long and desolating war which confirmed its revolution, just emerging from a state little short of anarchy, just beginning to establish system and order; to revive credit & confidence into an abyss of war confusion and distress.

After all the experience which has been had upon the point shall we still charge upon funding systems evils which are truly chargeable upon the bad and turbulent passions of the human mind?81

Peruse the hystory of Europe from its earliest period, were wars less frequent or pernicious before the system of credit was introduced than they have been since? They were more frequent and more destructive though perhaps not of as long duration at one time.82

But they did not equally produce debt. This is true, yet it remains to compare the evils of debt with those which resulted from the antecedent system of War—the devastations and extortions the oppressions and derangements of industry in all its branches, and it remains to consider whether expedients may not be devised which may preserve to nations the advantages of Credit & avoid essentially its evils. If this shall be practicable the argument in favour of the system of Credit has no counterpoise and becomes altogether conclusive.83

Credit may be called a new power in the mechanism of national affairs. It is a great and a very useful one but the art of regulating it properly, as is the case with every new and great contrivance, has been till lately imperfectly understood. The rule of making cotemporary provision for the extinguishment of principal as well as for the payment of interest in the art of contracting new debt is the desideratum—the true panacea.

But this like most others is not an absolute but a relative question. If it were even admitted that the system of anticipation by Credit is in the abstract a bad one, it will not follow that it can be renounced by any one nation, while nations in general continue to use it. It is so immense a power in the affairs of war that a nation without credit would be in great danger of falling a victim in the first war with a power possessing a vigorous and flourishing credit.

What astonishing efforts has Credit enabled Great Britain to make? What astonishing efforts does it enable her at this very moment to continue. What true Englishman, whatever may be his opinion of the merits and wisdom of the contest in which his country is engaged does not rejoice that she is able to employ so powerful instrument of Warfare. However he may wish for peace he will reflect that there must be two parties to the pacification and that it is possible the enemy may either be unwilling to make peace or only willing to make it on terms too disadvantageous & humiliating. He must therefore cherish the national Credit as an engine by which war, if inevitable, can be maintained, and by which from that very possibility a better peace can be secured.

It is remarkable too that Great Britain the only power which has uniformly cultivated an enlightened and exact plan of national credit at a juncture so critical as the present continues to uphold the various branches of her commerce & industry in great energy and prosperity, and will in the end tax her adversarary in exchange for the products of her industry with a large proportion of the expences of the actual War.

The commerce and manufactures of France are so prostraited that this consequence cannot but follow. For some years to come after peace she must be customer to G Britain for vast supplies.

But let us still return too & keep in view this very material point already stated. Tis Credit in general, not funding systems in particular against which the objections made as far as they have foundation lie. However obtained it leads to exactly the same consequences which are charged on funding systems, which are no otherwise answerable for those consequences than as they are means of Credit.

Any provision therefore for our Revolution-Debt which from its justice and efficiency would have given satisfaction and inspired confidence would equally have conferred national credit and would have been equally liable to the evils of an abuse of Credit.

The dilemma was either to make & continue a just and adequate provision for the debt till it was discharged and thereby establish Credit and incur the chances of the evils incident to its abuse; or not to make a just and adequate provision for the debt and so commit national injustice incur national dishonor and disgrace, and it may be added shake and weaken the foundations of property and social security.

Thus we may discard from the examination of the subject the general question whether the system of Credit (and as a mean of credit the funding of Debts) is a salutary or a pernicious system. It could only with propriety arise with regard to the policy of the Government in future cases, that is how far it would or would not in future emergencies resort to anticipations by credit or find immediate resources in cotemporary contributions of the community and in the spoils of War. It could never be properly raised as to a debt previously contracted. The objections to a system of Credit could never with an honest man justify a moments hesitation about the obligation & propriety of a just and efficacious provision for a debt previously incurred either from a real necessity or from a past neglect of the Government to attend duly to the impolicy of employing credit and of contracting Debt.

A Government which does not rest on the basis of justice rests on that of force. There is no middle ground. Establish that a Government may decline a provision for its debts, though able to make it, and you overthrow all public morality, you unhinge all the principles that must preserve the limits of free constitutions—you have anarchy, despotism or, what you please, but you have no just or regular Government.

In all questions about the advantages or disadvantages of national Credit, or in similar questions, which it has been seen may be raised (and it may be added have been raised), with respect to all the sources of social happiness and national prosperity—the difference between the true politician and the political-empyric is this: The latter will either attempt to travel out of human nature and introduce institutuions and projects for which man is not fitted and which perish in the imbecility of their own conception & structure, or without proposing or attempting any substitute they content themselves with exposing and declaming against the ill sides of things and with puzzling & embrassing every practicable scheme of administration which is adopted. The last indeed is the most usual because the easiest course and it embraces in its practice all those hunters after popularity who knowing better make a traffic of the weak sides of the human understanding and passions.

The true politican on the contrary takes human nature (and human society its aggregate) as he finds it, a compound of good and ill qualities of good and ill tendencies—endued with powers and actuated by passions and propensities which blend enjoyment with suffering and make the causes of welfare the causes of misfortune.

With this view of human nature he will not attempt to warp or distort it from its natural direction—he will not attempt to promote its happiness by means to which it is not suited, he will not reject the employment of the means which constitute its bliss because they necessarily involve alloy and danger; but he will seek to promote his action according to the byass of his nature, to lead him to the developpement of his energies according to the scope of his passions, and erecting the social organisation on this basis, he will favour all those institutions and plans which tend to make men happy according to their natural bent, which multiply the sources of individual enjoyment and increase those of national resource and strength—taking care to infuse in each case all the ingredients which can be devised as preventives or correctives of the evil which is the eternal concomitant of temporal blessing.

Thus: observing the immense importance of Credit to the strength and security of nations, he will endeavour to obtain it for his own country in its highest perfection by the most efficient means; yet not overlooking the abuses to which like all other good things it is liable he will seek to guard against them, by promoting a spirit of true national œconomy, by pursuing steadily, especially in a country which has no need of external acquisition, the maxims of justice moderation and peace and by endeavouring to establish as far as human inconstancey allows certain fixed principles in the administration of the finances calculated to secure efficaciously the extinguishment of debt as fast at least as the probable exigencies of the nation is likely to occasion the contracting of it.

These, I can truly say, are the principles which have regulated every part of my conduct in my late office.

And as a first step to this great result, I proposed the funding of the public Debt.

The quality of funding appeared to me essential in the plan of providing for different reasons.84

1   First it appeared to me adviseable that the nature of the provision should be such as to give satisfaction and confidence, by inspiring an opinion of security, to the Creditors. This was important not only as it regarded their advantage but as it regarded the public interest. The material credit was intimately connected with that satisfaction & confidence. They tended besides to produce another important effect which will be noticed hereafter.

2   It was desireable to guard the Government and the Creditors against the danger of inconstancy in the public Councils. The debt being once funded it would require the concurrence of both branches of the legislature and of the President or of two thirds of both branches overruling the opposition of the President to shake the provision. Of this there was a moral impossibility, at least the highest degree of improbability. To make a provision annually would require the like concurrence in its favour, of course would be continually liable to be defeated by improper views in either of the branches or departments. Whoever has attended to the course of our public Councils and to the dispositions which have been manifested by a powerful party in them must be sensible that danger in this case was not ideal. There was good ground to apprehend that the accidental result of a single election and the accidental prevalency of ill humours in parts of the community might violate the justice and prostrate the Credit of the Nation.

It is the part of wisdom in a Government as well as in an individual to guard against its own infirmities; and having taken beforehand a comprehensive view of its duty and interest to tie itself down by every constitutional precaution to the steady pursuit of them.

3   It appeared important to give all practicable solidity & stability to the funds or Stock which constituted the debt. The funding of the Debt was essential to this end. This is but an inference from the preceding remarks. It was to result from obviating the danger of fluctuating councils concerning the debt from the satisfaction & confidence of the creditors arising from an opinion of security, from the constant estimation in which that opinion of security would cause it to be holden not only by the Creditors but by all other classes of the community & by foreigners.

One effect of this was to accelerate the period which would terminate an irregular and excessive spirit of speculation in the funds. It is evident that this must have been in proportion to the causes calculated to produce fluctuation in the public opinion with regard to the value of the funds. Insecurity, the chance of the provision being interrupted or deteriorated, occuring at every new period of making it, was a more fruitful source than any other of that fluctuation of opinion. The degree of this being always incalculable would have given the utmost scope to imagination to the arts and intrigues of Stock-jobbers and must have kept the funds constantly an object of the most gambling speculation.85

The moment opinion, regulated by experience, had liquidated the value of the funds, speculation would be confined within the limits necessary to give them due activity & value. The immutability of the provision by furnishing better data of calculation as well as giving security would hasten that moment & once arrived it would continue. The funds in this state would become as they ought to be an object of ordinary and temperate speculation like any other article whether of commerce manufactures or agriculture, while on the opposite plan they would be as long as they existed a mere game of chance & a subject of the most gambling speculation.

It may be remarked that it is now a considerable time since the public Stock has reached the desireable point & put an end to the excessive spirit of speculation. This has been for some time past far more active, even to intemperateness in other pursuits, in trading adventures and in lands. And it is curious to observe how little clamour there is against the spirit of speculation in its present direction; though it were not difficult to demonstrate that it is not less extravagant or pernicious in the shape of land-jobbing than in that of Stock-jobbing. But many of the noisy Patriots who were not in condition to be stock-jobbers, are land-jobbers, and have a becoming tenderness for this species of extravagance. And virtuous sensible men lamenting the partial ills of all over-driven speculation know at the same time that they are inseparable from the spirit & freedom of Commerce & that the cure must result from the disease.

Another important effect of funding the Debt was the quick appreciation of the funds from the same opinion of security. This was calculated to save immense sums to the Country. Foreigners else would have become the proprietors of the Stock at great under-values to the loss of millions to the holders and to the Country. The loss to the holders is perceived at once but the loss to the country though an obvious consequence has not been equally palpable to all.

But a little reflection & combination must make it evident to the meanest capacity. If the sale of any article is made at an under value by one citizen to another of the same country what one loses the other gains—and [the] country containing within its own bosom the gainer as well as the loser is neither the richer nor the poorer by the operation. It possesses exactly the same property which it had before the bargain between its two citizens. But when the citizen of one country sells to the citizen of another Country residing abroad any article at an under-value a more valuable thing goes out of the Country in exchange for a less valuable thing which is brought into [it]—and the state whose citizen is the seller loses in exact proportion to the difference of value of the things exchanged whether commodity for commodity or commodity for money—that is the state loses exactly what its citizen loses by the disadvantageous sale.

It has been imagined however that if our debt had not been funded, its precariousness would have been a security against transfers to foreigners. But waving the observation, that this precariousness which it is supposed would deter foreigners would imply a depreciation and discredit of the funds and consequently a bad state of national credit, it may be replied that the effect expected from it would not have been realized.

Foreigners who possessed redundant capitals would still have devoted a part of them to play in those precarious Stocks, to buy and to sell again. And though permanent transfers of the Stock might not have taken place in the same degree; yet it is probable more property of the Country in another shape might have been extracted by the force of this gambling capital acting upon the occasional necessities & sporting with the occasional confidences of our citizens.

Another expedient has been mentioned for preventing alienations and consequently loss by alienations to foreigners. This was to forbid the alienations to foreigners in other words, to render them incapable of holding the Debt.

But this expedient was inadmissible and would have been ineffectual.

1   The original debt was alienable without restriction and foreigners had actually become the bona [fide] proprietors of a considerable sum of it which they had an indisputable title to a provision for & it was not easy in many cases to distinguish between past & future acquisition, without danger of interfering with rights already acquired.

2   The original debt being in its constitution alienable without restriction, which was an ingredient of value to the holder, it could not have been taken away without breach of contract, unless with his consent upon an equivalent, and this would have increased the embarrassment of such a modification of the Debt with consent of the creditors as would consist with the contract & with the immediate requisite accommodation of the Government.

3   It was ineligible as calculated to diminish the value of the Stock. All restraints upon alienanation by fettering the free use and circulation of an article of property naturally lessen its value. As far as foreign Capital could have been excluded from the Stock Market the effect would have been sensible upon it. It is evident that the value of an article must depend materially on the quantity of Capital employed in its negotiations; and it is known that foreign has formed & must have formed a considerable portion of that which was employed on the funds.

But in fact this exclusion would not have been taken place.86 Foreigners under the cover of citizens would have continued to speculate in the funds; but they would have given considerably less for them on account of the additional risk from the necessity of that cover, and it might have happened that fewer of those solid & discreet capitals who meant to hold would have engaged in the business and more of those who meant a temporary profit proportioned to the risk, and in the end the probability was that the price of Stock would have been much lower & less steady and that foreigners would have had much of the property either in the shape of Stock in trust or in equivalents resulting from the traffic in it as if there was not restriction & for a less compensation to the country. This has been exemplified in the case of our waste lands in those States which do not permit foreigners to hold.87

The only effect then of the restriction would have been to depreciate the Stock of the Country the thermometer of its credit without any counterballancing good.

Indeed if the exclusion of foreigners would have been effected cui bono? What harm is there that foreigners should speculate in our funds, if they give full value for them? Will not the money they give for the Stock employed in extending our commerce agriculture & manufactures roads canals & other ameliorations more than indemnify the Country for the interest which they will receive upon the Stock till the principal is reimbursed? In a country with so much improveable matter in a crude state as ours it cannot be doubted that Capital employed in those ways will incomparably more than repay the interest of the money employed.

But to overthrow this important consideration it is alleged that the money acquired by the sales of Stock to foreigners would not be employed on the objects which have been mentioned but would be dissipated in the enjoyments of luxury and extravagance and sent abroad again to pay for these objects to the loss pro tanto of the Country?

This suggestion was not founded in probab[il]ity nor has been warranted by the fact. It was true that a large increase of active Capital and augmentation of private fortunes would beget some augmentation of expence among individuals and that a portion of this expence would be laid out on foreign articles of luxury. But the proportion which this employment of the new Capital would bear to the part of it which would be employed on useful and profitable objects would be and has been inconsiderable. Whoever will impartially look around will see that the great body of the new Capital created by the Stock has been employed in extending commerce, agriculture, manufactures, and other improvements. Our own real navigation has been much increased. Our external commerce is carried on much more upon our own capitals than it was—our marine insurances in a much greater proportion are made by ourselves. Our manufactures are increased in number and carried on upon a larger scale. Settlements of our waste land are progressing with more vigour than at any former period. Our Cities and Towns are increasing rapidly by the addition of new and better houses. Canals are opening, bridges are building with more spirit & effect than was ever known at a former period. The value of lands has risen every where.

These circumstances (though other causes may have cooperated) it cannot be doubted by a well informed or candid man are imputable in a great degree to the increase of Capital in public Debt and they prove that the predictions of its dissipation in luxurious extravagances have not been verified. If a part has gone in that way this loss has not been considerable enough to impair the force of the argument. The universal vivification of the energies of industry has laid the foundation of benefits far greater than the interest to be paid to foreigners can counterballance as a disadvantage.

Indeed it is a question whether there has not been an incidental advantage equivalent to the incidental disadvantage of an increased expence in foreign articles. It is the restoration of Stock alienated to the Country by the emigration to it of foreign settlers with Capitals. It may be said that this advantage is foreign to the operation of the plan, it arises from other causes growing out of the state of Europe. But it is to be remembered that collateral facilities, when dispositions to a certain event exist, contribute to give them an effect which they would not have without those facilities. The convenient mode of transfering property to this Country, through the medium of our Stock in the markets of Europe, has materially promoted the imigration of persons possessed of Capital. And if our Government continues to operate in a manner which will mai[n]tain the confidence of foreigners it is a question whether the possession of large sums in our funds will not bring over most of the proprietors so as to reinvest the Country with the alienated Stock, and thus procure it a double compensation on foreign alienations.

A third important effect of giving solidity & stability to the Stock, by funding the Debt, was the rendering it useful as Capital. Those who may deny that it has even this tendency in defiance of the most manifest facts, cannot dispute that it must have it, if at all, in proportion to the security of the footing upon which it stands.

The opinion of it being a safe & substantial property is essential to that ready marketable quality which will render it expedient to invest unemployed monies in it till the opportunity of employment occurs and certain that it can be brought into action when the opportunity arrives.

To be certain of its operation as active Capital it is only necessary to consider that it is property which can almost at any moment be turned into money. All property is Capital, that which can quickly and at all times be converted into money is active capital. It is nearly the same thing as if the possessor had an equal sum of money on hand.

The profound and ingenious Hume thus describes its effects.88

Who doubts that a man who has in his desk 10000 Dollars in good bank Notes has that sum of active capital? Who doubts any more, though there be two steps in the process, that a man who has in his hand 10000 Dollars of the notes of Merchants of unquestionable solidity and Credit which he can at any moment discount at the Banks has an equal sum, bating the price of discount, of active Capital? Who can doubt any more that the possession of 10000 Dollars of funded Stock which he can readily carry into the market & sell for 10000 Dollars of these merchant’s or bank notes or gold & silver is equally possessor of so much of active Capital?

In this Country, where the sum of gold & silver the great organ of alienation & circulation, is comparitively more limited than in Europe, the certainty of an immediate conversion of Stock into money is not as great as in some of the great Stock markets of Europe, but the difference is not so material as to prevent the effect being substantially the same.

When the Stock is unfunded & precarious its saleableness89 is proportionably fluctuating and uncertain, so much so that it does not possess the quality of active Capital but inverts the effect by becoming a mere subject of gambling speculation. This was noticed in my first Report on the finances in these words (quote words)90

Some Theoretical Writers on Political œconomy have contested the effect of public funds as Capital.

Their objections and an answer to them are to be found in my Report on manufactures (recite in here verba)91

It may be useful to add some further illustrations—Trace the progress of a public Debt in a particular case.

The Government borrows of an individual 100 Dollars in specie, for which it gives its funded bonds. These hundred dollars are expended on some branch of the public service. Tis evident they are not annihilated, they only pass from the individual who lent to the individual or individuals to whom the Government has disbursed them. They continue in the hands of their new masters to perform their usual functions, as capital. But besides this the lender has the bonds of the Government for the sum lent. These from their negotiable and easily vendible nature can at any moment be applied by him to any useful or profitable undertaking which occurs; and thus the Credit of the Government produces a new & additional Capital equal to one hundred dollars the equivalent for the interest on that sum temporarily diverted from other employt. while passing into & out of the public coffers, which continues its instrumentality as a Capital while it remains not reimbursed.

When indeed the money borrowed by the Government is sent abroad to be expended the effect above described does not happen, unless the expenditure is for a purpose which brings a return. But this is a partial exception to the general rule.

It has been said that from the sum of the Debt acting as Capital is to be deducted the quantity of money actually employed in the negotiation of the funds. To conceive well of the immense disparity between the capital negotiated & the organ of negotiation, money, it may be useful to advert to the small quantity of specie in certain nations of immense capital in fixed & negotiable property. The specie of Great Britain for example is computed as from 15 to 20000000 Stg. How small a sum to be the organ of all the alienations of landed property, ships merchandize manufactures public funds and of insurance and other pecuniary negotiations.

The Capital value of its lands is esimated at   .92 The public funds amount to near   . The objects of foreign and domestic commerce including manufactures and other capital objects cannot be estimated at less than   . Yet the small sum of from 16 to 20 millions of specie is directly and indirectly the instrument of all the alienations of this prodigious mass. This gives us an idea of the vast activity of the power.

A simple concise and yet comprehensive view of the effect of the funds as capital is comprised in this exhibition of it. To the mass of active capital resulting from the property and credit of all the individuals of the nation is added another mass constituted on the joint credit of the whole Nation and existing in the shape of the Government Stock, which continues till that Stock is extinguished by redemption or reimbursement. Is it not evident that this throwing into the common Stock of individual operations the Credit of the Nation must increase & invigorate the powers of industrious enterprise?

See what a wonderful spectacle Great Britain exhibits. Observe the mature state of her agricultural improvements under auspices of large Capitals employed to that end. Consider the extent of her navigation and external Commerce. Note the huge & varied pile of her manufactures. See her factors and agents spread over the four quarters of the Globe doing a great part of the business of other nations by force of Capital. View the great extent of her marine insurances attracting to her a considerable portion of the profits of the Commerce of most other nations. View her in fine the Creditor of the World. Consider withal that her population does not exceed  93 that all the gold & silver she contains does probably fall short of 20 000000 Stg, then ask whether there be not a strong presumption that her public funds are a principal pillar of this astonishing edifice as her own men of business generally believe?

But another and a powerful motive to the funding of the Debt was that it would serve as one of the equivalents to be offered to induce the public Creditors to consent voluntarily to those modifications of their claims which the public accommodation required.

The Public Debt of this Country as I stated in my first report upon the finances was   .94 There was no obligation to do more than make provision annully for the Debt. The funding of it was no part of the original contract. This therefore superadded a material advantage for the Creditors to their primitive rights. The additional security was a reasonable ingredient of commutation to be proposed for something to be relinquished.*

Among individuals money lent for a length of time on personal security frequently carries a higher interest than if lent on real security. The change from one to the other would be a fair ground for a stipulation to lower the interest as the consideration. A Government need not fear imputations on its honor or loss of Credit, by regulating itself in its money concerns according to the rules which prevail among fair individuals.

The third feature of my plan was to provide in the first instance for the foreign part of the general Debt in exact conformity with the contracts concerning it.

The propriety of this has been uncontested and speaks for itself. It would have been highly inexpedient and would have exposed our credit abroad to have perplexed our creditors with any new propositions concerning their debts. Even the measure of endeavouring to transfer the foreign debt to a domestic foundation, which has been subsequently proposed upon equivalents to be given would have been premature till confidence had been inspired by an experience of the efficacy of the provision.

The fourth feature was “to take as the basis of the provision for the domestic part of the general debt the contracts with the Creditors as they stood at the time of the adoption of the new constitution according to the then unrevoked acts & resolutions of the former Government, except as to such alterations as they might on legal principles be pronounced to have undergone by voluntary acts, and acquiescences of the Creditors themselves; bottoming the provision on these principles, that those contracts were to be fulfilled as far and as fast as was practicable and were not to be departed from without the free consent of the Creditors.”96

To a man who thinks justly and feels rightly for the reputation of the Country of which he is a citizen, it is a humiliating reflection that it should be at all necessary to insist on the propriety of regulating the provision for the debt by the contracts concerning it.

The obligation to fulfil contracts is so fundamental a principle of private morality and social justice so essential a basis of national Credit that nothing less than the fact itself could induce a belief that the application of the rule to our public Debt could have been controverted by leaders of parties or by any considerable portion of the community. Yet in truth it has been controverted either avowedly or virtually by a great proportion of all parties; by declarations or propositions disclaiming the application of the principle or by the rejection of propositions necessary to give it effect.

The general proposition indeed which affirms the obligation of fulfilling contracts on Governments as well as individuals was of a nature which the most profligate politican was not shameless enough to deny.

But it has been contended that the case of our public debt was an extraordinary & peculiar case, justifying principles of national Justice and Policy a departure from common rules. The quantity of alloy in its original concoction, the extensive alienations at under-values the extreme point of depreciation for a certain period—the confused state of the debt by antecedent violations of contract & by the concession of partial advantages to particular descriptions of it—the impossibility of reinstating the primitive contracts which had been formerly violated—& the inequality of a full provision according to the new—All these were urged or espoused as reasons for an arbitrary provision for the Debt according to certain abstract notions of Equity & right.

It has been intimated that these heretics were divided into two principal classes one which advocated a provision for the debt on the ground of a discrimination between original holders & alienees, another which advocated an equal provision for all at some arbitrary rate of interest inferior to the stipulated rates.

The first was apparently at least subdivided into three lesser sects—one which contended for providing in favour of original holders according to the terms of the contract and in cases of alienation by a kind of composition or compromise between the original holders and alienees which in the course of the debate in Congress took the specific form of giving 10/ in the pound to one and the same to the other, another which contended for a full provision for original holders who had not alienated and for an inferior one to alienees without regarding the original holders who had alienated, a third for a reliquidation of the Debt making a full provision according to that reliquidation for original holders and an inferior one for alienees with or without regard to the creditors who alienated.97

The second general sect had also a diversity of opinions, some willing to allow a higher, some a lower rate of interest, some willing to fix the standard absolutely without compensations for the reduction others willing to give some kind of equivalent but to make the provision absolute & final leaving no option to the Creditors.98

The latter when the subject was under debate made no direct propositions but then and since they discovered their intentions in their conversations in endeavouring to pare down the provision proposed in my report and in resisting in subsequent cases a compliance with the contracts as to those Creditors who have not accepted the terms held out to them.

The former made a formal & passionate effort to substitute their scheme to that which was contained in the plan reported from the Treasury. It failed but it has laid the foundation of the great schism which has since prevailed.99

There never was a doubt that if the idea of the discrimination had obtained it would have resulted in a fraud on alienees without benefit to the alienors. A large proportion of those who supported the principle of discrimination clearly manifested that they meant to leave the difference in the public pocket.

The substance of the argument for a discrimination was this:100