From Oliver Wolcott, Junior1
New York Nov. 29. 1789.
The principles of a plan for adjusting the accounts of the sevral States with the United States, which by your permission, I submit to your consideration is founded on these Ideas that I believe it will appear from an examination of the Acts of Congress, that
All the requisitions upon the States for money contain the following conditions.
1st. That the sums required, shall not be considered as the real proportions of the States.
2nd. That the actual payments into the public Treasury shall be credited, with an Interest at six per Cent, Annum untill the period of final adjustment.
3d. That all balances due to or from the several States on the final adjustment of their accounts, shall be equalised by subsequent requisitions of Congress.
It is presumed that no requisitions will in future be made upon the States, and that the payment of past requisitions, will not be inforced. The United States will probably provide funds & pay their debts under regulations to be devised and executed by the authority of the Union and past experience of the difficulty & perplexity of adjusting Accots. between powerful communities, will prevent them from suffering any Law to pass, which can possibly occasion a new account to be opened with a State. The object of a settlement with the States, is not therefore to find what sum are due on the past requisitions, but to ascertain whether some members of the Union, have not contributed more than their proportions of the sums actually paid into the public Treasury. It is easy to conceive that all the States may be Debtors to the United States on the requisitions of Congress and at the same time that one or even twelve of the States may be Creditors to each other, or to the United States in various proportions, for payments made within a given period. As it would be productive of endless contention for Congress to adjust the accounts in such a manner, that some States, would be made Debtors to other States, and as it is taken for granted that no attempt will be made to equalise old balances, by new requisitions; it follows, that the particular States, must be considered as Creditors to the United States, for all such sums as they have expended for the common defence, or paid into the general Treasury above their proportions of the aggregate of the sum actually expended or advanced.
Indeed the terms of the requisitions prove, that the payments by the several States, are to be regarded as Loans on Interest, subject to a deduction by the rate established in the eighth article of the Confederation.
The method for effecting a settlement which I have been able to devise would be this—
To Credit the particular States, for all payments & advances made by them according to some liberal & equitable scale & consider the whole Credits as forming the aggregate of a Loan to the United States.
To these Credits, all advances from the general Treasury & all debts of the States, which may be assumed by the Union ought to be opposed. The result would be that balances would appear in favour of each of the States which would be subject to a charge for their several equitable proportions of the common expence.
To ascertain these proportions will be a work of great difficulty. If the obstacles to undertaking this business, are insurmountable, the settlements with the States ought to be abandoned; for an apportionment of this expence is equally necessary to a settlement upon any principle. I conceive that the objections which would be made by the States to the mode I propose, would be less effectual than to any other, for if the settlements are so made as to occasion Debits against the States, their opposition may be successful as they can refuse to pay. Whereas if the settlements are so regulated as to produce Credits which will constitute a part of the public Debt, no opposition can be successfull which does not produce a subversion of the government.
The more fully to illustrate my Ideas, I have stated an Accot. of balances2 which is founded on a supposition that the requisition of Congress of the 22d. of Nov. 1777,3 contains the principles of a just apportionment of the public expence, & that it will appear that the states of R. Island. North Carolina & Georgia, have contributed, the smallest sums, in proportion to their ability, compared with the other States—and equal sums in proportion to their ability, when compared with each other. In this account balances are stated to be due to ten States, but as much uncertainty will arrise both in liquidating the expenditures & ascertaining the proportions of the States, it is probable that no balances will be declard except in cases where the inequality of the contributions is very apparent and as those balances will only consist of the excess of actual payments, compared with the rule for ascertaining the ability of the States to pay, there is no reason to expect that any of those balances, would be so great, as to excite discontent between the States, or inconveniently increase the public Debt.
As it cannot be presumed that any State, will have occasion for the sums which they have advanced, before it will suit with the convenience of the United States to discharge and as some influence may be derived to the general Government from an interest on the part of the State Legislatures to support the measures of the Union, it appears to be expedient that the balances credited to the States, should bear Interest like other public Debts, but that no alienation or transfer should be permitted.
The balance which would remain after the proportions were charged would constitute Debts due from the U States which ought to be placed on Interest and paid in the same manner as the domestic Debt of the Union except that the balances ought not to be permitted to be transferred.
I have the honour to be very respectfully, sir, your obed serv
Hon Alexander Hamilton
Secy of the Treasy
ADfs, Connecticut Historical Society, Hartford.
1. A note at the end of this letter in Wolcott’s writing reads: “This letter was redrafted and some small alterations were made before it was sent to Colo Hamilton.”
2. See enclosure.
3. The resolution to which Wolcott is referring reads as follows:
“Resolved, That it be most earnestly recommended to the respective states to raise in the course of the year 1778, commencing on the first day of January next, by quarterly payments, the sum of five millions of dollars, by taxes, to be levied on the inhabitants of the respective states, in the proportions following, viz.
|Rhode Island & Providence Plantations||100,000|
“That the sum so assessed and to be raised shall not be considered as the proportion of any State, but being paid into the treasury shall be placed to their respective credit, bearing an interest of six per cent. per annum, from the time of payment until the quotas shall be finally ascertained and adjusted by the Congress of the United States, agreeable to the confederation hereafter to be adopted and ratified by the several states. And if it shall then appear that any State is assessed more than its just quota of the said tax, it shall continue to receive interest on the surplus, and if less it shall be charged with interest on the deficiency, until by a future tax such surplus or deficiency shall be properly adjusted.” (JCC description begins Journals of the Continental Congress, 1774–1789 (Washington, 1904–1937). description ends , IX, 955.)