Capitol Hill, 10 Jan. 1814.
A Proposition to the President of the United States.
Prompted by an unfeigned desire to promote the welfare of our common country, I presume respectfully to present for your consideration the outlines of a plan of finance, calculated—
To relieve the pressure of taxation;
To reduce or pay off the public debt; and,
To create a navy, sufficient to protect and sustain our maritime rights.
A wise administration will not fail to profit by the improvements of its enemies: I shall not therefore hesitate to adduce British practice in illustration of my views, but drawing upon the resources of those views without authorities at hand, I pretend not to specific accuracy, deeming it sufficient for my purpose to exhibit facts known to be substantially correct.
1st. The creation of a Board of Commissioners, at the seat of government, composed of characters distinguished for probity and financial knowledge; with salaries commensurate to their arduous duties, and such as would satisfy them for assiduously devoting their talents and industry in the application of funds committed to them for purchases, on the public account, of such stock as appears expedient to reduce or pay off: branches of this establishment to be located in each of the principal cities. This measure is considered of primary importance, as will be elucidated hereafter.
2dly. All future loans to be funded in perpetual annuities of 5 per cent. redeemable only by purchase as before provided for—and I have no doubt but that the effect thereof would, at no distant period, enable government to command any amount required by its exigencies, at par, for that rate, notwithstanding the interest now paid is about 50 per cent. beyond this supposition.
3dly. The regulator and soul of the system is to be found in a National Bank, to embrace a capital of 50 millions of dollars; whereof—
20/50 stand unalienably loaned to government at 3 per cent. per annum;
10/50 reserved for states in proportion to the representation in Congress, and invested by the direction of their several Legislatures; the remaining
20/50 reserved for individuals, and equally apportioned to Congressional districts, and let out by their representatives.
The cession of so extensive a prerogative, together with the collection of duties on import and tonnage, the notes being a legal tender for all public debts, will be but moderately compensated by the admission of government for 20 millions on the term prescribed; and it will be seen that the stock will be sought after with avidity at an advanced rate of premium.
The first impression of a perpetual burthen on posterity, is abhorrent to the mind; but the objection subsides when the matter is understood. The assignment of a limitation of time to loans, is proved by experience to be an inconvenient restriction, and consequently detrimental to the public interest. Whereas, in the former case, both parties being at liberty, the views of the holder are exalted, and the credit of the nation is enhanced.
State jealousies and the hostility of private banks against the proposed institution, are equally unreasonable and groundless—so far from being productive to them, of embarrassment or injury, their operations would be facilitated and their interests promoted by its effects—as in the fiscal so in the human body, whilst the former are assimilated to the veins, the latter may properly be styled the arteries and heart, distributing a due portion of salutary circulation to every part.
The business of banking flourishes beyond example, notwithstanding this immense national institution, and much is to be expected in a country whose chartered banks have obvious advantages over their private associations. As well might it be said that the commerce of a city would be destroyed by the introduction of a great capitalist. On the contrary, a community of banks, like the industrious operation of a community of individuals, naturally tends to aid and promote the general convenience and profit.
Suppose the Bank to yield a quarterly dividend of 2 per cent. or 8 per cent. per annum on its stock; government would thereby derive a clear revenue of one million per ann, which being successively applied would extinguish a capital of 5 per cent. annuities equal to 100 millions in 37 years, computing purchases at par, but in about half that time at the present price of stocks.
Many will assert that so vast a capital could not be employed, and consequently that the stock would depreciate, but such assertions can only grow out of sinister considerations, or want of information. Without taking into view the well known circumstances, that the ability to procure means, generates business and impels enterprize; the public securities would afford an ample scope for the investment of funds, even beyond its entire capital. As I conceive it to be perfectly demonstrable that a National Bank of 50 millions, could purchase 100 millions of public stock and extend commercial discount to the like amount, without circulating its paper for 25 millions, or half its capital—and I have no doubt but that I am warranted in saying, that whilst the existing Banks of the United States afford accommodations for 100 millions, the whole amount of paper in circulation does not exceed a fourth of that amount. It may be seen that when the engagements of the late Bank of the United States were near 20 millions, its issues including all its branches were but about 2 millions, and at no period of its existence did its notes in circulation approach to half its capital.
By some it is assigned as a reason why our enemy procures its enormous supplies at so reduced a rate—the faith of her subjects in the government, and by others, that being so deeply involved they make further advances to prevent a National Bankruptcy—both of which are equally wide of the truth. There is perhaps no people in the world with less of political faith than the English, as is evidenced by the fluctuations of their funds; the rumor of a victory or defeat being sufficient to produce a rise or fall in their stocks equal to many millions, and the amount of the debt imposes no inducement or obligation upon its holders for additional loans, since they can at any moment during exchange hours convert it into money; and therein exists the important secret of their ability to borror ⟨1/5?⟩ lower, than our government; it is the facility with which the largest sums may be thus converted, chiefly by reason of the constant purchases of the commissioners of the sinking fund, & hence the public debt assumes the character, and performs the functions of a circulating medium, which with the issues of the national bank, and three hundred of private institutions, compose a circulation of 5000 millions of dollars, exceeding by 50 times that of the United States, in a territory of 1/20 our extent.
Unhappily for the interest of our country, the purchosers of public securities are mostly limited to a few individuals, chiefly foreigners, insomuch that the credit and wealth of this nation is sported with by a few foreigners, who reduce or enhance the stocks at pleasure, and derive enormous profits at its expense. To the difficulty of effecting sales, and the abarrassment of collecting the interest, in no small degree may be attributed the most destructive depression—but the constant purchases of commissioners for the public occount, would cure the evil, as doubtless the cause which produces such admirable effects in England, would operate to the like result in this country.
It is a marvellous circumstance, and well worthy of investigation, that when the debt of England was at 200 000,000l. their visible property was estimated at 1000,000,000l. and the aggragate of the revenue was at 9,000,000l. but when the debt had extended to 800,000,000l. their visible property had increased to 4000,000,000l. and their revenue to 70,000,000l. the increase of the debt being accompanied by a parallel increase of property and a more than rateable increase of revenue, less oppressive than at the former period, all petty sources of vexatious taxation having been abandoned.
The visible property of the United States has been estimated at 2500 millions of dollars, of which however three fifths is for uncultivated lands, a capital merely prospective, at present without animation, and with more propriety might we affix a value upon so much of the trackless ocean, but that the operation of the proposed system would immediately enhance the property of the country to a most incredible extent, I have not the smallest doubt; and therefore entreat of your Excellency to give it a share of your consideration, in the anticipation that you will perceive the expediency of a radical change in the Fiscal department of our government, and that by resorting to a source of revenue hitherto unexplored, the desiderata mentioned early in this address may be secured, by the magical influence of a plan which invisibly promotes the wealth of the public, and the happiness of individuals.
It is not wonderful that so few are disposed to penetrate the arcana of statiscal philosophy—it is a science abstruse and intricate, whose studies are dry, and uninteresting to most minds; but when it is considered that the power and prosperity of nations, so essentially depend on its cultivation, its neglect in the United States is deeply to be lamented—equal if not first in the diffusion of general literature, the liberal sciences, and mechanical arts, yet if all nations in the civilized world, we are perhaps most wanting in the knowledge of political economy.
The necessities of our enemies have stimulated them to the acme of exertion in the search of those mysteries, and their labors have not been unavailing; they have succeeded in discovering the philosopher’s stone, and by its use will ever retain their ascendency whilst the nations are ignorant of its attributes.
Being restored to the relations of peace and foreign commerce, the impost alone may be safely estimated to discharge all public engagements contracted anterior to the war, and in the course of a few years to provide for the complete support of an adequate naval force, without the aid of internal revenue—but should untoward events require other resources, an income tax would be the most eligible resort. Direct taxation oppresses the landed interest. Excises are unequal and odious, whilst a duty on private revenue is completely equitable, and susceptible of precise graduation to the wants of government.
I conclude these cursory remarks in the spirit which dictated their commencement, and if they should conduce to any useful end, or even shed a ray of lux in tenebris1 my design will have been accomplished.
Printed copy (Daily National Intelligencer, 24 Jan. 1814).
1. Lux in tenebris: light in darkness.