James Madison Papers

To James Madison from William Bingham, 17 June 1789

From William Bingham

Philada June 17th 1789

Dear sir,

I observe by the public Prints, that the Bill for the Establishment of the Impost has returned from the Senate, with considerable Reduction of the Duties on Several Specified Articles.

I will not undertake to Scrutinize the Reasons that have urged the Amendments.

But, as the Bill is now before the House of Representatives, I will take the Liberty of commenting on that part of it, which limits its Operation to Seven Years.

My principal Objection arises from the injurious Tendency it will have on public Credit, whose support Should claim So devotid an Attachment, on the part of the United States.

For, whilst other Nations are in the practice of mortgaging their Revenues to the public Creditors, by Specific Appropriations, to pay the Interest, we must follow their footsteps, or by offering a less Substantial Security, Submit to the Consequences of having our public funds depreciated. This will tend in a great measure to raise the market Rate of Interest, of which the public funds are generally the Index—whereas it appears to me very expedient to endeavor, from the Operations of Government, to lower the Interest, which would furnish Opportunities of borrowing Money on Such Terms, as would enable the Public to extinguish Part of the Capital of the Debt, if the Creditors would not agree to a Reduction of their Interest. This financial Manœuvre has been practiced in England various Times, with success, & Interest brought down from 6 to 3 ⅌ %.

If this Reasoning is just, it becomes an Object of the most important Consequence, for every Government to engage the Confidence of the public Creditors by pledging every security that it has the power of offering. G Britain, in the famous Act of 1787 which consolidated the Duties of Customs & Excise, Set apart a Sufficient Portion of their Produce to pay the Interest of the public Debt, before any Money could be issued for any other Purposes whatsoever.1

The Difference betwixt the value of the unfunded Debt of G Britain, which is floating in the Market, & has no Specific Appropriations for its Support, & that which is funded on productive Revenues, is always very considerable.

It appears therefore to me, that the Funds should be at least coextensive with the Engagements they are meant to relieve.

The Jealousy of the House of Representatives on the subject of a perpetual Revenue Law is very natural, from the Character of that Body as constituting the democratic Branch, & possessing exclusively the Power of originating Money Bills. But, it is not found that in England, Laws for the Creation of Revenue, commensurate in their Duration with the Necessity that gave Birth to them, have ever been attended with injurious Consequences.

On the Contrary, they have had a Tendency to establish public Credit on a permanent Footing, which, in its Consequences has So increased the Capital Stock of the Country, as to furnish Sufficient funds for the most extensive Operations of Industry, & Views of national Aggrandizement.

You will pardon the Trouble I occasion by the Perusal of these few Reflections;

RC (DLC). Docketed by JM. Closing words and signature clipped.

1Bingham referred to 27 Geo. III, chap. 13, “An Act for repealing the several Duties of Customs and Excise …” (Statutes at Large [1789 ed.], XV, 260–347). See J. E. D. Binney, British Public Finance and Administration, 1774–92 (Oxford, 1958), pp. 109–10.

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