James Madison Papers

Assumption of the State Debts, [24 February] 1790

Assumption of the State Debts

[24 February 1790]

After the defeat of JM’s discrimination amendment, the second and third resolutions proposed by FitzSimons (on 8 February) were approved. The fourth resolution, “That the debts of the respective states ought, with the consent of the creditors, to be assumed and provided for by the United States,” had been under consideration for two days.

Mr. Madison Observed, on the measure, that the principle of it is in favor of the United States, so far as it may tend to bring about a final settlement and payment of all the accounts between the United States and the individual states. I believe this to be, however, a work of amazing difficulty, though not absolutely impossible. If it should be accomplished, it must go at least, perhaps, hand in hand with the secretary’s plan; and if it can be accomplished, it will do more honor to the revolution in our government than almost any other measure.

I acknowledge that I cannot subscribe to all the reasons which some gentlemen urge. I am far from thinking that the assumption of the state debts will be the means of keeping the debts dispersed throughout the states. The assumption of those debts will give them, immediately, the character of debts of the United States; they will be embarked in the same bottom; they will take the same course, and, of consequence, will arrive at the same place where it is acknowledged the domestic debts of the United States has, by degrees, assembled. Whether they will remain in this place, or flow out of the United States altogether, is a question which time will decide. I look myself for such a revolution of the debt as will place the greatest part of it in foreign hands.

Neither do I subscribe to the opinion of the gentleman from Maryland, (Mr. Stone) That the United States can raise more revenue by the exercise of a sole authority, than by the concurrent operation of the general and state governments.1 There are, I conceive, objects of taxation of three kinds: The first is, that which can only be operated upon by the United States: The second, which can be operated upon by the United States and individual states jointly: and, in the last place, such as can be best operated upon by the individual states only. An impost or excise can be best regulated by the sole authority of the United States. Some taxes can be collected by the two governments without any interference: The land tax generally falls under this description. But, in some particular cases, the local authority alone can make the proper provision. I conclude, therefore, that the authority of the United States and individual states, taken together, will draw more revenue than either can separately draw from the same sources.

But if we can accomplish the great object of doing full justice in so complicated a case, perhaps it will reward us for all the difficulties and sacrifices we shall be compelled to make; but, in order to accomplish it, we must go much further than the proposition on the table.

Some gentlemen have made the passage of this resolution a condition of providing for the acknowledged debt of the United States. I think this a preposterous condition, and the language improper to be held, after the decision which has taken place. In priority of time and obligation, we ought to provide for the acknowledged debt. Before we determine to enter into a new obligation, we should see how far we are able to discharge those positively due by us. The connection between these resolutions is not such as to require or justify the condition. The plan itself, of the secretary, draws a distinction between the two debts.

If we are to make a common stock of the debts of the states, not yet discharged, it can only be justified by securing provision for those which are discharged; with this view, therefore, I will now move to add to the resolution, these words, “that effectual provision be, at the same time, made for liquidating and crediting, to the states, the whole of their expenditures during the war, as the same hath been or may be stated for the purpose; and, in such liquidation, the best evidence shall be received that the nature of the case will permit.”

It may be said that this is a superfluous condition; because there is a board in existence charged with the trust: But, sir, their power does not reach the great object contemplated. The limitation act has already barred a great number of equitable claims of one state; perhaps there are other states in the same predicament. I do not know whether the power of the board has a latitude sufficient to receive such evidence as the nature of the case will permit; and if adequate provision is not made on this head, a great deal more injustice will be done than by a refusal to assume the state debts.

I hope I shall be excused for connecting these provisions; because I think it impossible to separate them, in justice or propriety. If, by providing for the first, we can secure a provision for the latter, we may do great honor to the councils of America, and establish its character for equity and justice.

If we do not wish to decide precipitately on the question, I shall be content to delay it; and, perhaps gentlemen may be impressed with the propriety of doing so till they take a view of the funds which are in contemplation; and see how effective and adequate they are likely to prove.2

Cong. Register description begins Thomas Lloyd, comp., The Congressional Register; or, History of the Proceedings and Debates of the First House of Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4). description ends , IV, 18–20 (also reported in N.Y. Daily Gazette, 2 Mar. 1790).

1According to the N.Y. Daily Gazette, JM attributed this opinion to Sherman, an attribution in keeping with Sherman’s support of assumption. Stone strenuously opposed assumption.

2After JM spoke, White stated his opinion “that the assumption should not take place until the settlement had taken place.” JM then remarked that he “only wished to lay down general principles, in the manner the other resolutions did, so as not to let the final settlement depend upon any subsequent provision of congress; the particular regulations might be detailed whenever the subject was thrown into the form of a bill.”

[24 February 1790]

Laurance asked whether JM’s “proposition was intended to open the door to receive the claims of the states, or whether it was to be so extensive as to allow every person to exhibit his claim who had been already excluded, and support it with the best evidence the nature of the case would permit.”

Mr. Madison Had in view to allow claims already settled by the states a further time to be exhibited. Virginia had been abridged of some just claims, by the act of limitation; he wished, therefore, to permit them, and all others in a like situation, to be brought forward, and credited on the same principles, as adopted by the old congress.

He also thought, that the assumption of the unpaid state debts was inseparably connected with those that were discharged by the states. If this is not done, what is the consequence? The citizens of a state will be burthened, in proportion as their state has made exertions to discharge its obligations; for instance—if one state had paid the whole of her debt, and another paid none, if you assume the unpaid without the paid, the state which has already paid off what it owed will be burthened to pay the debts of the other. No doubt we shall be governed by principles of equity in making our final settlement; but, in the interim, we should sustain an unequal and unjust burthen.

Cong. Register description begins Thomas Lloyd, comp., The Congressional Register; or, History of the Proceedings and Debates of the First House of Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4). description ends , IV, 21. JM made some further brief remarks on the subject.

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