Alexander Hamilton Papers
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The Vindication No. II: Second Version, [May–August 1792]

Second Version3

[Philadelphia, May–August, 1792]

Of all the measures of the Government, that which has been most bitterly inveighed against is the Funding System contained in the Act making provision for the Debt of the United States.4 As well for this reason, as on account of its superior importance, the objections which have been made to it are intitled to an examination in the first place.

It is a curious phœnomenon in political history (not easy to be parallelled) that a measure which has elevated the credit of the country from a state of absolute prostration to a state of exalted preeminence should bring upon the authors of it reprobation and censure.5 It is certainly what in the ordinary course of human affairs they could not have anticipated—they are even not chargeable with arrogance if they indulged from it the hope of credit & applause—and if the clamours which have been raised have truly proceeded as the clamourers assure us from patriotic motives, it must be confessed that they have the additional merit of Novelty and singularity. There must be something original in the passions as well as in the ideas of the sect to which they are attributable. It will be hardly possible not to believe that some mysterious work of political regeneration has begun to make its way in the world and that all those who have not been the subjects of it are in a state of pitiable darkness and error.

The two first points which in considering the funding system present themselves to attention are the existence and the composition of the Debt funded.

A person, who unacquainted with the fact should learn the history of our debt from the declamations with which certain news papers are perpetually charged would be led to suppose that it is the mere creature of the present government, for the purpose of burthening the people with taxes and producing an artificial and corrupt influence over them. He would at least take it for granted that it had been contracted in the pursuit of some wanton or vain project of ambition or glory. He would scarcely be able to conceive that every part of it was the relict of a War which had given independence and preserved liberty to the Country; that the present Government found it as it is in point of magnitude (except as to the diminutions made by itself) and has done nothing more than to bring under a regular regimen and provision what was before a scattered and heterogeneous mass.

And yet this is the simple and exact state of the business. The whole of the Debt embraced by the provisions of the funding system consisted of the unextinguished principal and arrears of interest of the debt which had been contracted by the UStates in the course of the late War with Great Britain and which remains uncancelled and the principal and arrears of interest of the separate debts of the respective States contracted during the same period; which remained outstanding and unsatisfied; relating to sources and supplies for carrying on the War. Nothing more was done by that system, than to incorporate these two species of debt into one mass, and to make for the whole one general comprehensive provision.

There is therefore no Arithmetic no logic by which it can be shewn that the Funding system has augmented the aggregate of the debt of the Country. The sum total is manifestly the same; though the parts which were before divided are not united.

There is consequently no color for an assertion, that the System in question either created any new debt or made any addition to the old. And it follows that the collective burthen upon the people of the UStates must have been as great without as with the union of the different portions and descriptions of the Debt. The only difference can be that without it that burthen would have been otherwise distributed and would have fallen with unequal weight instead of being equally borne as it now is.

These conclusions which have been drawn respecting the new increase of the Debt proceed upon the presumption that every part of the public debt as well that of the States individually as that of the UStates was to have been honestly paid. If there is any fallacy in this supposition the inferences may be erroneous; but the error would imply the disgrace of the United States or of parts of them; a disgrace from which every man of true honor and genuine patriotism will be happy to see them rescued.

When we hear the epithets “vile matter” “corrupt mass” bestowed upon the public Debt and the owners of it indiscriminately maligned as the harpies and vultures of the community, there is ground to suspect that those who hold the language though they may not dare to avow it contemplate a more summary process for getting rid of debts than that of paying them. Indeed Charity itself cannot avoid concluding from the language and conduct of some men (and some of them of no inconsiderable importance) that in their vocabularies creditor and enemy are synonimous terms and that they have a laudable antipathy against every man to whom they owe money either as individuals or as members of the Society.

It has been said, that the sum of the Debt, to be ultimately provided for, has been artificially increased by the plan for the settlement of Accounts between the United & Individual States. This point will be most properly the subject of a distinct examination; as the Act for the settlement of accounts6 is a distinct one from that which establishes the funding system. It will appear upon examination that there is no foundation for the assertion and moreover that the plan which has been adopted by the present Government for the settlement of Accounts is essentially a recapitulation of that which was adopted under the Confederation;7 and which established principles which were not only equitable in themselves but could not have been reversed without an infraction of the public faith.

3ADf, Hamilton Papers, Library of Congress.

41 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 138–44 (August 4, 1790).

5In the margin opposite this sentence H wrote the words “obloquy & reprobation.”

6“An Act to provide more effectually for the settlement of the Accounts between the United States and the individual States” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 178–79 [August 5, 1790]).

7For a discussion of the development of the policy for the settlement of state accounts under the Confederation, see E. James Ferguson, The Power of the Purse (Chapel Hill, 1961), 203–19.

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