[Philadelphia, September 5, 1792]
For the National Gazette.
Certain Treasury Documents were lately published for the information of the community, without any precise designation of the purpose for which they were published. They were left to speak for themselves, with only a short introduction, denominating them “Authentic documents respecting the progress which has been made by the present government of the United States, towards extinguishing the debts contracted under the former government.” A writer in this Gazette of Saturday last, under the signature of Mercator, has tho’t fit to come forward, and, assigning what he conceives to be the object of the publication, endeavors to shew, that the contrary of what was intended, is true.
What right had Mercator to suppose, that any thing more was intended, than simply to inform the public, that besides a punctual payment of the interest on the debt, from the period, at which measures were matured to begin that payment, a considerable sum of the capital of the Debt has been extinguished, and that a fu[r]ther sum will be extinguished by a provision already made?—leaving them to this very natural inference, which will be drawn by every candid mind, that the Government has been as attentive as circumstances would permit, at so early a period, to the extinguishment of the debt.
But admitting Mercator to be right in his suggestion of the object, it is to be presumed, that a liberal construction of all circumstances will justify this position, that the present Government has reduced the debt of the former Government to the extent expressed in the documents which have been published. This will result, if it shall appear that provision was made for the interest, as early as was reasonably practicable. To have paid the interest from that period, and to have sunk so much of the capital in addition, is in fair construction, to have reduced the debt to the extent of the capital sunk.
When Mercator undertook to suppose an object, which was not declared, he ought to have taken care to be better informed and more accurate. When he undertook to state an account with the treasury department, he ought not only to have selected just items, to have adverted to dates, times and possibilities, but he ought to have stated the whole account.
This he has not done; on the contrary he has both misrepresented and suppressed facts. He has shewn, in the true spirit of a certain junto (who not content with the large share of power they have in the government, are incessantly laboring to monopolize the whole of its power, and to banish from it every man who is not subservient to their preposterous and all-grasping views) that he has been far more solicitous to arraign, than to manifest the truth—to take away, than to afford consolation to the people of the United States.
The following particulars are proofs of his want both of accuracy and candor.
First. He charges to the treasury department arrears of interest, which accrued prior to its existence, that is, from the first of August 1789; whereas the department was not instituted till the 2d of September, nor organized till about the 13th, when, I am informed the Secretary of the Treasury entered upon the duties of his office.
Secondly. He takes as the standard of his calculation, the whole amount of the annual interest on the whole amount of the public debt, as it exists under the present funding system, including all the arrears of interest made principal, and the 21,500,000 dollars of assumed debt—whereas the arrears which did actually accumulate to the end of the year 1790, were only on the principal of the foreign and domestic debt, and fall short more than a million of dollars of the sum he states.
These simple facts prove the fallacy of his statement.
But the principle, upon which he proceeds, is not less absurd, than his calculations are fallacious.
With as much propriety might an executor be charged with increasing the debts of his testator, by suffering the arrears of interest on his bonds and notes to accumulate while he was collecting, arranging and disposing of the effects; to discharge the debts of the estate; as the present government, or if the phrase is preferred, the present treasury department, may be charged with those arrearages, which unavoidably accrued, during the preparatory measures for bringing the resources of the public estate into activity. With as much reason might it be charged with the 13,000,000 of interest, which accumulated under the imbecile system, the old confederation, to which, if not to worse,—a dissolution of the Union!—the designs of the junto evidently point, or tend.
When, proceeding upon grounds so loose and unjust, Mercator makes the extraordinary declaration, that the secretary of the treasury “has produced an actual addition to the public debt of more than one million and a half of dollars,” is it not palpable, that in the most malignant spirit of party, he is endeavouring to destroy the public confidence in that officer, no matter how unfair the means, as one link in the chain of measures by which the domineering aims of his party are to be effected, or the cause of confusion promoted? Is it not clear that in the language and conceptions of Mercator, to provide for a debt, and to “produce” it, amount to the same thing?
To form a still better estimate of the spirit by which he is actuated, let there be a review of some leading facts.
Congress met under the present government on the first of April, 1789.2 To put it in motion they had a vast and very arduous work before them. This was of course a primary object; a provision for the debt a secondary one. It was natural then that the first session should have been exhausted in organizing the government, and that a systematic provision for the debt should be postponed, as in fact it was, to the second session. A temporary and partial provision of revenue only was accordingly made, by very moderate duties of impost, far short of an adequate fund for the support of government, and the payment of the interest on the debt, to take effect on the first of August, 1789;3 which was as early as the law could be promulgated throughout the union, and the subordinate executive arrangements made for carrying it into execution.
It has been stated, that the treasury department began to be in activity on the 13th of September. Congress adjourned on the 29th of that month, after having instructed the secretary of the treasury to report concerning the debt at the ensuing session. It is to be recollected that without an order of the house that officer can propose nothing.
’Tis evident then, that there was no responsibility on the side of that department, for the accumulation of interest on the debt until at earliest the second session, which began on the 7th of January, 1790.4
On Thursday, the 14th of January, the secretary of the treasury submitted to the House of Representatives, according to order, the plan of a provision for the public debt,5 comprehending an additional provision of revenue for the purpose of facing the interest. But it was not till the 4th of August, that the principles of a provision for the debt were determined by law,6 nor till the 10th of the same month, that a supplementary fund was established for paying the interest upon it;7 and from considerations of an obvious nature, the commencement of this fund in operation was deferred to the first of January following.
Here again ’tis manifest, that there was no responsibility in the treasury department, for the accumulation of interest up to the period from which it has been punctually paid, namely, the first of January, 1791; because it was not in the power of that department to have accelerated a provision for it. Nor will any blame justly light upon Congress for the moderate delay which ensued. It was their duty to bestow much deliberation upon the subject. Much difference of opinion, much lengthy discussion, a considerable loss of time, were to be expected in relation to a subject so momentous, so perplexing, touching so differently so many chords of passion and interest.
The law providing for the debt having passed—the secretary of the treasury immediately seized the opportunity which was afforded, by an unappropriated surplus of revenue to the end of the year 1790, to make an impression on the debt. He proposed, that it should be applied to purchases of the debt, at its market prices, which was agreed to by Congress, and has been carried into execution as far as circumstances have hitherto permitted.
This was certainly the best application that could have been made of the fund. It was equally the interest of the government and of the public creditors:—Of the government, because it was a clear gain of all the difference between the sum of specie paid and the sum of debt redeemed, which is already 514,891 dollars and 69 cents, and will be more when the remaining sum appropriated comes to be applied to further purchases; because it was a clear saving to the nation of all the difference in price which was paid by foreigners in their purchases, in consequence of the competition of the government, in the market, as a purchaser. It is well known to every well informed man, that the rapid appreciation of the debt was materially owing to that circumstance, and of course the saving to the nation by it has been very considerable. The measure in question was equally beneficial to the public creditors—because if the fund applied to purchases had been apportioned among them in payment of interest, it would have been a mere pittance; but applied as it was, it gave a rapid spring to the whole value of their stock.
As it is therefore proved, that the treasury department is chargeable with no delay with regard to a provision for the debt, occasioning an unnecessary accumulation of interest; in a question of merit, respecting that department, which Mercator has raised, it will follow, that the department on account of the operations which have been advised by it, has an unbalanced claim of merit with the community.
1st. For all that has been or shall be saved by purchases of the public debt at the market prices.
2d. For all that has been saved to the nation for the more advanced prices given by foreigners in their purchases of the debt.
But there are other items of importance to be placed on the same side of the account.
1st. The saving resulting from the reduced rate on the new loans made for paying off the foreign debt.
2d. The positive gain of 1,000,000 of dollars by the institution of the Bank of the United States. The stock of the Bank being at an advance of 50 per cent, it is clear, that the government, by having become a proprietor to the extent of 2,000,000 of dollars, has by this single operation made an actual nett profit of 1,000,000 of dollars; that is, it can get three millions for what will have cost it only two.
I add nothing for any saving, which has accrued from the particular modification of the domestic debt, for two reasons; one because the subject being more complicated would require more illustration, and the other because the plan adopted by the legislature, though having the leading features of that proposed by the Treasury Department, differs from it in some material respects; a strong refutation of the idea, so industriously inculcated, that the plans of that department are implicitly followed by the legislature; and a decisive proof, that they have had no more weight than they ought to have had, that is to say than they were intitled to, from their intrinsic reasonableness in the unbiassed and independent judgment of majorities in the two houses on Congress. The result of what has been said is this—that provision was made for paying the interest of the debt as early as could reasonably have been expected—that no negligence having happened, the arrears of interest which accumulated in the interval are properly a part of the debts of the former government and consequently that the sums which appear to have been absorbed are so much of the debts of the old Government extinguished by the new.
Mercator brings as a proof, that the public debt has increased and is increasing, “what he terms the present amount and encreasing weight of the duties of impost and excise.” Let facts decide the soundness of this logic. In the last session of Congress, the only excise duty which exists, was reduced upon an average fifteen per cent.8 The only addition which was then made to the imposts was for carrying on the Indian war,9 and by avoiding recourse to permanent loans for that purpose, to avoid an increase of the debt. How then can that, which was done to avoid an increase of debt, be a proof that it has increased?
[Philadelphia] National Gazette, September 5, 1792.
1. H’s “Civis” letter is the first of two essays. The second essay is entitled “Civis to Mercator” and is dated September 11, 1792.
“Civis” was written in reply to an article by “Mercator” which was printed in the National Gazette on September 1, 1792, and which was entitled “REMARKS on a late authentic Document, published by the Treasury Department, under the signature of Joseph Nourse, Register.” The “authentic document” on which “Mercator” was commenting is Nourse to H, August 24, 1792. The article by “Mercator” reads as follows:
“The object of this publication seems to be, to impress the public mind with a belief, that under the present administration of its fiscal concerns, the public debt has been actually reduced to the amount of 1,845,217 dols. and 42 cents; and that the sum of 397,024 dols. and 15 cents remains to be applied to the same object. That this is not the case, but that the public debt, instead of being diminished one farthing, has been really augmented to the amount of upwards of one million and a half dollars; since the present administration commenced, will I think manifestly appear by a reference to a few plain facts and documents not less authentic than the one signed by Mr. Nourse.
“The Secretary of the Treasury in a report to Congress, dated 23d January, 1792, states that the whole expenditures or demands against the government from the beginning of the year 1791, to the end of the year 1792, amounts to
|“That the amount of the nett product of the public revenues during the years 1791 & 1792 is||7,029,755.26|
|Leaving as a deficiency against the government||dols. 52,442.48|
|“It apears by Mr. Nourse’s document, that the whole amount of the revenues of the United States from the time the first impost law took effect, which was the 1st of August 1789, until the 31st Dec. 1790, was||dols. 3,026,070.65|
|“That the total demands upon that, agreeable to the appropriations made by Congress, exclusive of any interest on the public debt, was||1,687,194.81|
|Leaving a surplus in favour of the revenue, of||dols. 1,338,875.84|
“It appears too, from Mr. Nourse’s document, that the treasury department claims credit for having disposed of the said surplus of 1,338,875.84, so as to purchase and redeem to the amount of 1,845,217.42 of the public debt, and to have left 397,024 dollars and 15 cents to be applied to the same object. Be it so; I admit the fact in its fullest force—but what follows? That if the treasury claims credit for the use and whole amount of the revenue of the United States, from its commencement on the 1st of Aug. 1789, to the 31st of Dec. 1790, towards lessening the public credit; so it ought to be debited with the whole amount of the interest, that accrued on the public debt, during the same period, which by the treasury returns amounts to 4,036,359 dols. and 19 cents. I am aware that in objection to this it will be said, that agreeable to the act of Congress, no interest was payable on the public debt until January 1791. Granted; but what became of this interest? Has it been paid? No. Does it remain to be paid? Yes. Was it added to and made a part of the principal of the public debt, thereby encreasing that debt to the amount of 4,036,359 dols. and 19 cents, in addition to its former principal? Yes. Did not the Secretary of the Treasury himself propose that it should be so added? Yes. Is it not therefore an efficient act of his administration, and can he now claim credit with the public, upon the fallaciou[s] idea of having bona fide reduced the public debt upwards of two millions, when, as I have shewn above, he has produced an actual addition to the public debt of mor[e] than one million and a half of dollars?
“A simple state of the case with the Treasury department stands thus—
|“For the amount of interest which accrued on the public debt between the 1st of Aug. 1789, and 31st Dec. 1790||4,036,359.19|
|“For the deficiency of revenue to answer the demands of government in 1791, and 1792||52,442.4|
|“By the amount of public debt redeemed and discharged out of the surplus of the revenue arising between 1st Aug. 1789, and 31st Dec. 1790||1,845,217.42|
|“By balance of surplus remaining on hand of dollars 397,024.15, and which may probably redeem||500,000|
|“By a deficiency against the treasury department, since its establishment, which forms an actual addition to the public debt||1,743,584.25|
“That the facts and conclusions above mentioned are just, and that it is a sad and serious truth that the public debt has encreased, and is encreasing in the hands of its present administrators, is also manifest to two important classes of men in the community, I mean the Merchants and Farmers, by the present amount and encreasing weight of the duties of Impost and Excise.
Aug. 30. 1792.”
2. Although the opening of Congress was officially set for March 4, 1789, the House did not have a quorum until April 1, 1789, and the Senate did not have a quorum until April 6, 1789.
3. “An Act for laying a Duty on Goods, Wares and Merchandises imported into the United States” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 24–27 [July 4, 1789]).
4. Although Congress was scheduled to begin its second session on January 4, 1790, the Senate did not have a quorum until January 6 and the House did not have a quorum until January 7.
6. An Act making provision for the (payment of the) Debt of the United States” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 138–44).
8. “An Act concerning the Duties on Spirits distilled within the United States” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 267–71 [May 8, 1792]).