Mr. Madison. The motion which yesterday I laid on the table,1 upon reflection I find to be out of order, as the principle was involved in the proposition, made by my colleague, (Mr. White) and decided against by the committee; I therefore withdraw it: But, I give notice that I mean hereafter to submit to the consideration of the committee, another variation of the plan, which may be thought more consistent with sound policy; at the same time, I am persuaded it will have a conciliatory tendency. One great objection to the original proposition is, that by taking up the debts of the several states, as you find them now, you do great injustice to those states, who have, by their exertions, discharged the greatest part of the equal debts contracted during the late war: By this means compelling them, after having done their duty, to contribute to those states who have not equally done their duty: Now, my idea is, that instead of considering the debts as they are found at this moment, we contemplate them as in the state they existed at the close of the late war; and where it is discovered that a state has extinguished her debt since the peace, the state shall, in all such cases, stand in the place of the original creditor, then there will result some degree of equality; all will be benefited in due proportion: This will give the proposition such an appearance of equality and liberality, as will do more to reconcile it, if any thing can be supposed to reconcile it, to all the states, than any thing I have yet heard suggested; but as the present is not the proper place to which such an amendment will apply, I shall delay making the motion for the present.

Mr. Madison. I conceive it now to be necessary to bring before the committee the fourth alteration in the proposition for assuming the state debts, which I suggested when I was up before—it is as follows:

“Resolved, That the amount of the debts actually paid by any state to its creditors, since the   day of   shall be credited and paid to such state, on the same terms as shall be provided in the case of individuals.”1

In filling up the blanks, I propose to contemplate the debts as they stood at the termination of the late war; if the exertions of the respective states were, at that period, equal, and it is presumable they were, this will be doing justice to those, who, by superior exertions since, have extinguished a considerable part of the capital, and will consequently lessen the inequality which may be charged on the original proposition. I believe it is not liable to any objection which does not lie with greater force against the original proposition. The whole subject is very delicate, and perhaps cannot be made universally agreeable; but I think this amendment will free it from many of the evils which gentlemen apprehend.

Mr. Madison. When I was up before, I explained my ideas in general terms: I supposed the assumption of the state debts, on any principle, would be liable to strong objections, some of the objections are of a political nature, and some on principles of œconomy. The operation of it will, undoubtedly, be unfavorable to some states, in both respects; the distant states especially: There is no other way to obviate these objections, than by making our measures subservient to the ultimate settlement of the accounts between the United States and individual states, as in this alone can equality be found: So far then, as this object is kept in view, it may have my approbation; but on no other condition.

I wish the gentleman had stated his objections to my motion in a determinate manner, because it might then have been discovered upon what principles it is wrong; but for my own part, I do not see any thing he could urge against it, but what would lie with greater force against the proposed assumption.

A great inequality must take place, if the existing debts only are assumed; this cannot fail of giving umbrage to a great proportion of the citizens of the United States; but the displeasure may be lessened as you lessen the inequality, and the evil will be rendered more supportable.

It was observed, that by transforming the debts into continental debts, it would circulate the revenue pretty generally, in the respective states in which it was collected—the amendment will do this more effectually; and if any thing can compensate the states for the taxes which the general government must lay, in case of the assumption, it will be that the revenue is absorbed by the citizens of the states within whose limits it was collected; but it has been demonstrated that the consequences would be the reverse; the moment you transform the state into continental debts, they will pursue the same course—they will flow to the centre of the union, and the distant states will receive no regular returns in the form of interest for the sums collected at the extremes of the continent. This will operate as a very powerful objection, and can only be counteracted by adopting the present motion, which will throw into the state treasuries certain annual returns, to be distributed again among the citizens of the state. I do not suppose that the amendment would make the measure perfectly agreeable; but I think it would render it less unpalatable, and tend to give some degree of satisfaction—to this end are directed all my efforts; if any person says they appear to him in any other light, I shall not attempt to answer him in any other manner than by appealing to the general import of my conduct, both within and without these walls, for the rectitude of my intentions.

Mr. Madison. The gentleman from Massachusetts says, that my objections to the assumption goes against funding altogether. I believe funding, in any shape, to be an evil; but it is an evil we are obliged to submit to in one case, but not in another. I did not concur to the second and third propositions because I thought them beneficial, but because I thought we were under an indispensable obligation to provide, in the best manner we were able, for the performance of our engagements; but with respect to the state debts, I feel no such obligation; the cases are widely different.

The original proposition does not draw any distinction between those debts of the states which were contracted for the general or particular defence, or those contracted for private purposes; neither have I made any distinction in the amendment—presuming, that if the first can be adopted, the latter may, with equal ease, be assented to; and nothing can be urged particularly against the last. It is said that the amendment will increase the amount of the debt—no doubt it will be a considerable addition; but then I do not conceive this furnishes any more an argument against it than it does against the assumption of the debts in the hands of individuals; yet, at the same time, the satisfaction it will give the public at large, will more than overbalance the inconvenience arising from the increase of the debt.

I admit that there will some inequality, arise; but is there not a much greater inequality attached to the original proposition? I venture to say, so far as can be determined from probability, that some states, which will ultimately be creditors of the United States, will be called upon to pay much more than the states which have not made equal exertions. As we cannot altogether avoid the inequality, I think it prudent to attempt to lessen it. Unless something of the kind is adopted, I think the progress of the business will meet with considerable delay, perhaps it may miscarry altogether. Few states, I apprehend, will be willing to incur a load of debt, for which there is not a pressing necessity, and rely upon the final settlement of accounts to obtain redress: Nay, the gentleman from Massachusetts, (Mr. Gerry) who is now so arduous in pressing the business, urged, the other day, some strong arguments against extending indulgence to delinquent states, at the expence of the states which had complied with the requisitions of the late congress; if it was improper to allow a state to take advantage of its delinquency in neglecting to pay its quota of indents, surely it is as improper to permit them to benefit by neglecting the proper exertions to pay their debts: Upon the whole, I conclude, the amendment would tend to equalize the burthen, and by making it more acceptable to our constituents, the good would counterbalance the evil.

Mr. Madison. The gentleman from New-York seems to suppose that the assumption of that part of the state debts, which has been redeemed since the peace, will impede the final settlement of the accounts; because it will diminish the desire of some states to bring that measure to a conclusion: Does then the ultimate settlement of the accounts depend on the disposition of particular states? If it does, there arises a necessity of assuming the whole, instead of a part only of these debts; because, if justice is never to be done, the inequality ought to be diminished as much as possible. If the settlement does not depend on any contingency, but will, as he has said, be accomplished in two years, there can be no necessity of adopting either the original proposition or amendment; because it is not contemplated to make provision for the payment of the state debts, until April 1792: The period by which it will be known, whether any thing, and what is due to each state respectively.

I am afraid, I confess, that notwithstanding every step which may be taken, there will be unforeseen difficulties in the final liquidation and adjustment of the accounts; and I am persuaded, if that measure should miscarry, the assumption of the existing state debts will work, indeed, an enormous injustice: If we can reduce that event to a moral certainty, and be sure that it will speedily take place, we may delay the assumption, with great propriety, until its accomplishment.

Mr. Madison. The gentleman from Massachusetts thinks my principle would go to cover all the debts contracted during the war: I ask, what is the intention of the gentlemen in favor of the assumption? What are their arguments? Do they not all go to such an assumption? And if we make such assumption, will any gentlemen contend that we ought to assume only the unpaid debts? Why shall we not assume the paid also? Has there been an argument adduced which favors the distinction?

With respect to refunding what a state has advanced, I have to remark, that refunding must any how take place, if Massachusetts and South-Carolina shall be found debtor states, which will undoubtedly be the case, when we consider the sums to be assumed on their account, they must eventually refund what is now advanced them: If there must be a refunding by some state, that objection will go for nothing.