The Examination Number II, [21 December 1801]
The Examination.1
Number II.
[New York, December 21, 1801]
The next most prominent feature in the Message, is the proposal to abandon at once all the internal revenue of the country. The motives avowed for this astonishing scheme, are that “there is reasonable ground of confidence that this part of the revenue may now be safely dispensed with—that the remaining sources will be sufficient to provide for the support of government, to pay the interest of the public debt, and to discharge the principal in shorter periods than the laws or the general expectation had contemplated—and that though wars and untoward events might change this prospect of things, and call for expences which the impost could not meet—yet that sound principles would not justify our taxing the industry of our fellow citizens to accumulate treasure for wars to happen we know not when, and which might not perhaps happen but from the temptations offered by that treasure.”2
If we allow these to be more than ostensible motives, we shall be driven to ascribe this conduct to a deficiency of intellect, and to an ignorance of our financial arrangements, greater than could have been suspected: if but ostensible, it is then impossible to trace the suggestion to any other source than the culpable desire of gaining or securing popularity at an immediate expence of public utility, equivalent, on a pecuniary scale to a million3 of dollars annually; and at the greater expence of a very serious invasion of our system of public credit.
That these at least, are the certain consequences of the measure, shall be demonstrated by arguments which are believed to be unanswerable.
To do this the more effectually, it is necessary to premise, that some of the revenues now proposed to be relinquished, are with every solemnity of law pledged for paying the interest and redeeming the principal of our public debt, foreign and domestic. As to the interest, and such parts of the principal, as by the original constitution of the debt, are payable by annual instalments, the appropriation is absolute. As to the residue it is qualified. On the 3d of March 1795, was passed an act of Congress which forms a main pillar in the fabric of our public credit4—which, maturing and perfecting the establishment of a Sinking Fund,5 endeavors with peculiar solicitude to render it adequate, effectual and inviolable: by the 8th section of this act it is provided, “That all surplusses of the revenue, which shall remain at the end of any year, and which at the next session of Congress shall not be otherwise appropriated or reserved by law, shall ipso facto become a part of the Sinking Fund.” This fund, by other provisions of the same act, is vested in commissioners in trust, to be applied to the redemption of the debt, by reimbursement or by purchase, until the whole shall be extinguished: and the faith of the United States is expressly engaged, that the monies which are to constitute the fund shall inviolably remain so appropriated and vested, until the redemption of the debt shall be completely effected.6
The simple statement of these provisions goes far to confirm the character which we have given to the proposition. But a distinct examination of the reasons by which it is supported, will, when taken in connection with those provisions, place beyond doubt, its absurd and pernicious tendency.
The first inducement offered for relinquishing the internal revenue, is a reasonable ground of confidence that it may safely be dispensed with.
When it is considered that we are in the very crisis of an important change of situation;7 passing from a state in which neutrality had procured to our commerce and to the revenue depending on it, a great artificial increase—with good reason to look for a diminution, and without satisfactory data to enable us to fix the extent of this dimunition: can any thing be more rash, more empirical, than voluntarily to abandon a valuable and growing branch of income of which we are already in possession? Can it be said that merely “a reasonable ground of confidence” is a sufficient warrant for so important a surrender? Surely we ought to have been told that there was at least a moral certainty of the fact. But even this would not have been deemed enough by a prudent statesman. Nothing less than experimental certainty ought to have been relied upon. There was no pressure of circumstances making it proper to precipitate the measure. It would have been ridiculous to pretend that the burden is so heavy as to demand immediate relief, and without this incentive to relinquishment, experience ought undoubtedly to have been taken as the only fit and sure guide.
Not only is it problematical what the present duties on imports8 will, for succeeding years produce; but it is in a degree questionable, whether it may not be found necessary to reduce the rates. That they are now high when compared with the commercial capital of our country is not to be denied, and whether they may not be found too high for a beneficial course of our trade, is yet to be decided by experiment. The latter augmentations of the rates of duty,9 were made at times and under circumstances in the situations of this and of other countries, which forbid us to regard past experience as conclusive on the point.
Should it be said in answer, that the revenues can hereafter be renewed, if on trial it shall be found that they have been prematurely abandoned, the decisive reply is, that this is to invert the natural order of just reasoning. Were it now the question, whether such revenues should be created in anticipation of a possible deficiency, the correct answer would be, let experiment first ascertain the necessity: as they already exist, on a question to abolish them, the answer equally ought to be, let experience first shew them to be unnecessary.
But how can they be unnecessary? Let us grant that the remaining sources will be equal to the purposes enumerated in the Message, does it follow that it will not still be wise to retain the internal revenue? Is it not desirable that government should have it in its power to discharge the debt faster than may have been contemplated? Is not this a felicity in our situation which ought to be improved? A precious item in the public fortune which ought not rashly to be squandered? But it is not even true that the laws have exclusively contemplated a definite period for the ultimate redemption of the entire debt. They have only made a determinate provision for its extinguishment, at all events, within a given term of years;10 but, anxious to shorten the period, they, in the clause which has been quoted respecting the surplusses of revenue, have made an auxiliary provision for the purpose of abridging that term. The Message, while it goes to impair the efficacy of the principal provision, proposes formally to renounce the auxiliary, and thus to disappoint the provident care of the laws to accelerate the discharge of the debt.
How reconcileable is this with the wanton and unjust clamours heretofore vented against those who projected and established our present system of public credit; charging them with a design to perpetuate the debt under the pretext that a public debt was a public blessing?11 It is not to be forgotten, that in these clamours Mr. Jefferson liberally participated!12 Now, it seems, the tone is entirely changed. The past administrations who had so long been calumniated by the imputation of that pernicious design, are of a sudden discovered to have done too much for the speedy discharge of the debt, and its duration is to be prolonged by throwing away a part of the fund destined for its prompt redemption. Wonderful union of consistency and wisdom!
Before we yield our approbation to the proposal, we ought to have a guarrantee for the continuance of our peace, long enough to give effect to the leisurely opperation of that residue of the fund, which it is intended to retain: else war, which never fails to bring with it an accumulation of debt, may intervene, and we may then rapidly hasten to that period when the exigencies of government may render it necessary to appropriate too large a portion of the earnings of labor. To guard against so unfortunate a result, towards which there is always too great a tendency in the affairs of nations, our past administrations have evinced a deep foresight, and exercised a truly patriotic care. Unhappy will it be, if any succeeding projector shall be permitted to frustrate their salutary plan.
It has been seen that the Message anticipates and attempts to answer objections to the dereliction of revenue: the answer is, that “sound principles will not permit us to tax the industry of our citizens to accumulate treasure for wars to happen we know not when, and which might not perhaps happen but for the temptations offered by that treasure.” Unless, however, the accumulation of treasure be the necessary consequence of retaining the revenue, this argument is evidently futile. But the President had only to open our statute book to learn, that this consequence is chimerical. All future surpluses of revenue, being already eventually appropriated to the discharge of the public debt, it follows that till the whole debt shall have been extinguished, there could be no accumulation of treasure—no spoil from that source to tempt the rapacity of a greedy invader. Here we fix the charge of ignorance of our financial arrangements: to which there can be no alternative but a deliberate design to delude the people. Between the two, let the worshippers of the Idol make their option.
Lucius Crassus.
New-York Evening Post, December 21, 1801.
1. For background to this document, see the introductory note to “The Examination Number I,” December 17, 1801.
2. H is quoting from Thomas Jefferson’s first annual message to Congress on December 8, 1801. For the text of this message, see “The Examination Number I, December 17, 1801, note 1.
3. At this point in the pamphlet in which this and other issues of “The Examination” appeared, H added a footnote which reads: “This is taken as a round number. The present nett product, including the duties on stamps, seems to be between eight and nine hundred thousand. Very speedily, by the natural progress of the country, they would amount to a million, and soon after exceed it. A million therefore is a moderate ratio” (The Examination of the President’s Message, 11).
4. “An Act making further provision for the support of Public Credit, and for the redemption of the Public Debt” ( 433–38). See the introductory note to “Report on a Plan for the Further Support of Public Credit,” January 16, 1795.
5. The sinking fund was authorized by “An Act making Provision for the Reduction of the Public Debt” ( 186–87 [August 12, 1790]). See also “Report Relative to a Provision for the Support of Public Credit,” January 9, 1790.
6. Section 9 of “An Act making further provision for the support of Public Credit, and for the redemption of the Public Debt’ reads: “And be it further enacted, That as well the monies which shall accrue to the said sinking fund, by virtue of the provisions of this act, as those which shall have accrued to the same, by virtue of the provisions of any former act or acts, shall be under the direction and management of the commissioners of the sinking fund, or the officers designated in and by the second section of the act, intituled ‘An act making provision for the reduction of the public debt,’ passed the twelfth day of August, one thousand seven hundred and ninety, and their successors in office; and shall be, and continue appropriated to the said fund, until the whole of the present debt of the United States, foreign and domestic, funded and unfunded, including future loans, which may be made for reimbursing or redeeming any instalments or parts of principal of the said debt, shall be reimbursed and redeemed; and shall be, and are hereby declared to be vested in the said commissioners, in trust, to be applied, according to the provisions of the aforesaid act of the eighth day of May, in the year one thousand seven hundred and ninety-two, and of this act, to the reimbursement and redemption of the said debt, and redeemed. And the faith of the United States is hereby pledged, that the monies or funds aforesaid, shall inviolably remain, and be appropriated and vested, as aforesaid, to be applied to the said reimbursement and redemption, in manner aforesaid, until the same shall be fully and completely effected’ ( 435).
8. In the document, “imposts.”
9. “An Act for laying a Duty on Goods, Wares, and Merchandises imported into the United States” ( 24–27 [July 4, 1789]) was amended by the following acts: “An Act laying additional Duties on Goods, Wares and Merchandise imported into the United States” ( 390–92 [June 7, 1794]); “An Act supplementary to the several acts imposing duties on goods, wares and merchandise imported into the United States” ( 411 [January 29, 1795]); “An Act for raising a further sum of money, by additional duties on certain articles imported, and for other purposes” ( 503–04 [March 3, 1797]); and “An Act laying an additional Duty on Salt imported into the United States, and for other purposes” ( 533–34 [July 8, 1797]); “An Act to continue in force ‘An Act laying an additional duty on Salt imported into the United States, and for other purposes’” ( 60–61 [May 7, 1800]); “An Act to lay additional duties on certain articles imported” ( 84–85 [May 13, 1800]).
For the first duties on domestic and foreign distilled spirits, see “An Act making further provision for the debts of the United States” ( 180–82 [August 10, 1790]). This act was amended by “An Act repealing, after the last day of June next, the duties heretofore laid upon Distilled Spirits imported from abroad, and laying others in their stead; and also upon Spirits distilled within the United States, and for appropriating the same” ( 199–214 [March 3, 1791]); “An Act concerning the Duties on Spirits distilled within the United States” ( 267–71 [May 8, 1792]); “An Act laying duties on licenses for selling Wines and foreign distilled spirituous liquors by retail’ ( 376–78 [June 5, 1794]); “An Act making further provision for securing and collecting the Duties on foreign and domestic distilled Spirits, Stills, Wines and Teas” ( 378–81 [June 5, 1794]); “An Act repealing in part, the ‘Act concerning the Duties on spirits distilled within the United States,’ passed the eighth of May, one thousand seven hundred and ninety-two; and imposing certain Duties on the capacity of Stills of a particular description” ( 504–05 [March 3, 1797]); “An Act to continue in force for a limited time, a part of an act intituled ‘An Act making further provision for securing and collecting the duties on foreign and domestic distilled spirits, stills, wines and teas’” ( 547 [April 7, 1798]).
10. See Sections 2, 3, 4, 13, 15 of “An Act making provision for the (payment of the) Debt of the United States” (1 Stat, 138–44 [August 4, 1790]); Section 4 of “An Act making Provision for the Reduction of the Public Debt” ( 186–87 [August 12, 1790]).
11. On April 30, 1781, H wrote to Robert Morris: “A national debt if it is not excessive will be to us a national blessing; it will be powerfull cement of our union. It will also create a necessity for keeping up taxation to a degree which without being oppressive, will be a spur to industry; remote as we are from Europe and shall be from danger, it were otherwise to be feard our popular maxims would incline us to too great parsimony and indulgence. We labour less now than any civilized nation of Europe, and a habit of labour in the people is as essential to the health and vigor of their minds and bodies as it is conducive to the welfare of the State. We ought not to Suffer our self-love to deceive us in a comparrison upon these points.”
In his “Report Relative to a Provision for the Support of Public Credit,” January 9, 1790, H wrote: “Persuaded as the Secretary is, that the proper funding of the present debt, will render it a national blessing: Yet he is so far from acceding to the position, in the latitude in which it is sometimes laid down, that ‘public debts are public benefits,’ a position inviting to prodigality, and liable to dangerous abuse,—that he ardently wishes to see it incorporated, as a fundamental maxim, in the system of public credit of the United States, that the creation of debt should always be accompanied with the means of extinguishment. This he regards as the true secret for rendering public credit immortal.”
12. On more than one occasion Jefferson had privately stated his opposition to H’s fiscal policies. See, for example, Jefferson to Edmund Randolph, February 3, 1794 (ALS, letterpress copy, Thomas Jefferson Papers, Library of Congress), and Jefferson to James Monroe, April 24, 1794 (ALS, letterpress copy, Thomas Jefferson Papers, Library of Congress). His best-known remarks on this subject, however, are in a long and sustained attack on H’s program in a letter to George Washington on September 9, 1792 (ALS, letterpress copy, Thomas Jefferson Papers, Library of Congress). In the course of this letter, Jefferson wrote: “… my whole correspondence while in France, & every word, letter, & act on the subject since my return, prove that no man is more ardently intent to see the public debt soon & sacredly paid off than I am. this exactly marks the difference between Colo. Hamilton’s views & mine, that I would wish the debt paid tomorrow; he wishes it never to be paid, but always to be a thing wherewith to corrupt & manage the legislature.”