Assumption of the State Debts
[22 April 1790]
The sixth resolution (see headnote to speech of 20 Apr.) was amended and approved on 21 April. The seventh resolution, “that immediate provision ought to be made for the present debt of the United States; and that the faith of government ought to be pledged to make provision, at their next session, for so much of the debts of the respective States, as shall have been subscribed upon any of the terms expressed in the last resolution,” was then considered. Sherman offered an amendment to the resolution which provided for the assumption of a proportion of the state debts with the remainder to be left until a final settlement of state accounts. Southern members and Scott of Pennsylvania spoke against the motion. Wadsworth, Sherman’s Connecticut colleague, declared that if there was no assumption “there will be a general clamor through all the eastern states against the national government.” Sherman quoted several passages from the Constitution which he said favored assumption (N.Y. Daily Gazette, 22, 26, and 27 Apr. 1790).
Mr. Madison. It is not without much reluctance that I trouble the committee with any observations on a subject which has been so long under discussion, and may be thought to be entirely exhausted. I must refer for my apology to the uncommon perseverance with which the advocates for an assumption adhere to their object, notwithstanding the difficulties which oppose it. On the supposition that the measure in question were ever so eligible, if it could be so modified as to be acceptable to the general sense of the government, and of its constituents at large, every member ought I think to be struck with the impropriety of pressing a matter of such peculiar importance and delicacy, by a bare majority.
The proposition now under debate is liable to all the objections to the former one, as well as to the many others that have been stated against it. From the explanation given by the gentleman from Connecticut, it is evident that this proposition may in the result assume the shape of the original one. It may therefore be fairly combated by all those arguments that were brought either against the original proposition, or against the very objectionable manner in which the blanks are proposed to be filled up.
I am not insensible that an assumption of the state debts is under certain aspects, a measure not unworthy of a favorable attention. If it had not at least plausible recommendations, I do not think it could have obtained so respectable a patronage here: I am sure it would not have originated in the quarter which proposed it. But, Sir, it is a question that must be considered and reconsidered in all its various points of view, and the more it has already been investigated, the more objections have multiplied, and the more solid they have appeared. The arguments used in favor of the measure have been supposed weighty, but, Sir, I consider them as unsupported. It has been contended that the state debts are in their nature debts of the United States; that they were only from different offices, and have borne a different denomination, but that in justice they are the debts of the United States, and that the individual creditors can of right claim payment of the same from the general government.
I deny the principle, Sir, and I think it is disproved by the arguments of the gentlemen themselves. If the debts of the particular states be nothing more than the debts of the United States under another denomination, and if we are bound to provide for them precisely as for the debts of the United States, let gentlemen consider whether they are not bound to view them in this light wherever they may be found. If they are debts of the United States in the hands of individual citizens, for the same reason that the other debts in private hands are debts of the United States, must they not be debts of the United States also when in the treasuries of the different states?
Will gentlemen say that what are called the state debts ought to be viewed in that light when in the hands of citizens, and that this quality forsakes them the moment they are received into a state treasury. If they wish to preserve consistency in their reasoning, they must say, either that the debts are dissimilar in the hands of private citizens, or that they are similar in the hands of the states.
The debts of the particular states cannot in any point of view be considered as actual debts of the United States; and the United States are not bound by any past requisition, or any resolutions now existing to assume them, till the accounts are settled and the balances ascertained. We have been told, sir, not only that the assumption of the state debts by the United States is a matter of right on the part of the states, and a matter of obligation on the part of the United States, but likewise that it is equitable; nay, that it is a matter of necessity.
It has been said that the United States are invested with the resources of the particular states, and that therefore they are bound to provide for the debts of those states. I think I may safely rest the issue of this question on a question of fact, Whether the states most urgent in this business are incapacitated from providing for their debts by the establishment of the present constitution? If gentlemen assert that to be the case, I think it is incumbent upon them to prove, either that the resources which they have given up would exceed their quota of the federal requisitions, or that the use of these resources by the general government will throw a disproportioned burthen upon that particular part of the community. Let us consider, sir, what is the ratio in which the states, in their individual capacity, ought to bear the debts of the United States, and what is the ratio in which they will contribute under the taxes that it is proposed to levy. The only evidence by which we can guide ourselves in this enquiry is a statement from the several custom houses. I believe indeed, that such a statement may not be conclusive. I think it is imperfect; at the same time it is the best guide in our reach, and probably it will be sufficient to illustrate the present argument. The state of New-Hampshire, according to this statement, will contribute about one hundredth part of what will be contributed by the whole. Her ratio of contribution according to her representation would be nearly about one twentieth. Here then, in fact, is a saving of four fifths to that state. The state may then take this saving and apply it to the purpose of discharging her domestic debt; she is relieved in that proportion, and therefore in that proportion she is more able to provide for her state debt under the new constitution than under the old one.
The state of Connecticut will contribute about one thirty-eighth; her proper quota would be about one thirteenth. Here then is a saving of two-thirds to the state of Connecticut; and in that proportion is her situation better under the new Constitution than the old. Taking the States eastward of New-York altogether, that the gentlemen say are rendered incapable of bearing the burthen of the state debts, by the adoption of the new constitution; I say, take the whole together, and they will contribute about a sixth only; whereas they would have had to contribute a fourth, if this constitution had not been established, and they had paid their part of the debt of the United States. In my apprehension, then, sir, as the payment of the state debts cannot be claimed as a matter of right, neither can such payment be called for on the principles of equity, or what is most of all urged, necessity. But we are told that policy is also in favor of the measure. A gentleman from Massachusetts has said, that the people of Massachusetts never would submit to a rejection of the measure; that it will create a spirit of opposition to the government; in short, that it will endanger the union itself. I confess that these are consequences that would be dreadful to me, if I could suppose they would really take place, and that evils of greater magnitude would not ensue from an adoption of the measure. It is my opinion, sir, that if the refusal to assume the state debts would produce dangerous consequences to the union from the discontents that it is apprehended will grow out of the measure, much more have we to fear from an assumption, particularly if hazarded by a small majority. Sir, if we could ascertain the opinions of our constituents, individually, I believe we should find four fifths of the citizens of the United States against the assumption; I believe we should find more; I believe I speak within bounds when I say, that those who would be for an assumption would not amount to one-fifth; this is indeed probable conjecture only. But on the other hand, let me ask, what evidence have we that there will be any great disappointment or discontents from a non-assumption? The legislature of the state of New-Hampshire have lately been in session; have they asked for this assumption? No; on the contrary, tho’ they have not instructed their delegates to vote against it, it appears that it was thought of, and that the bulk of the members disapproved of it. The legislature of Massachusetts have been in session; they were apprized that this matter was under consideration, and yet there has been no declaration from them, as far as I know, that can induce us to believe they wish for it; on the contrary, it would appear from the measures they have taken to provide for the payment of their state debt, that they had proceeded on a supposition that an assumption would not take place. With respect to several other states, their legislatures have also been in session, and none of them, except South-Carolina, have made any declaration on the subject. If we are to disregard that species of evidence, and to look back to the expectations of the people, I do not think that there is a single indication that this measure was ever thought of by our constituents. Sir, I may safely say, it was never expected by the generality of them.
It has been said, too, that policy recommends the measure. It has been repeated that if the assumption does not take place, no part of the revenues drawn from the Union at large will return to the distant parts of it. Sir, I thought this argument had been set aside sometime since. The very reverse will happen. The state debts have begun already to travel towards the central parts of the Union, and to such an amount as to make it probable, that if they are provided for by us, nearly the whole will follow. Should this be the case, I believe such disadvantages will ensue as will prove the measure very impolitic. In proportion as the whole money contributed in the way of taxes shall center near the government, or in a particular part of the Union, you increase the evil of discordant interests and local jealousies which is already too much felt. But, perhaps, this is not the worst consequence to be apprehended. I conceive that a very great part of the proper debt of the United States will go into the hands of foreigners, and that we shall be heavily burdened in paying an interest to them which cannot be expected to remain in the country; and in proportion as you increase the debt of the United States you will increase this evil.
I am of opinion also that the measure is not politic, because, if the public debt is a public evil, an assumption of the state debts will enormously increase, and, perhaps, perpetuate it. It is my idea, Sir, that the United States and the several states could discharge a debt of eighty millions with greater ease and in less time than the United States alone could do it. I found my opinion on this consideration, that after the United States shall have resorted to every means of taxation within their power, there will still remain resources from which monies may be raised by the states. Nay, I will go farther, and illustrate the remark by adding, that after a state shall have extended its power of taxation to every object falling under general laws, there would still remain resources from which further taxes might be drawn within subdivisions of it, by the subordinate authorities of the state. But Sir, when we consider, that in some parts of the Union there is an unconquerable aversion to direct taxes, at least, if laid, by the general government; that in other parts an equal aversion to excises prevails; how will the United States, so circumscribed as to the field of taxation, be able to draw forth such resources as are contemplated by the advocates of an assumption?
It has been asserted that it would be politic to assume the state debts, because it would add strength to the national government. There is no man more anxious for the success of the government than I am, and no one who will join more heartily in curing its defects; but I wish these defects to be remedied by additional constitutional powers, if they should be found necessary. This is the only proper, effectual, and permanent remedy.
Several gentlemen, Sir, have gone into another field of argument in favor of this measure. It has been said, that the constitution itself requires the assumption. One of my colleagues has asked a very proper question. If as we have been told, the assumption originated in the convention, why were not words inserted that would have incorporated and made the state debts part of the debts of the United States? Sir, if there was a majority who disapproved of the measure, certainly no argument can be drawn from this source; if there was a majority who approved of it, but thought it inexpedient to make it a part of the constitution, they must have been restrained by a fear that it might produce dissentions and render the success of their plan doubtful. I do recollect that such a measure was proposed, and, if my memory does not deceive me, the very gentleman* who now appeals to the constitution in support of his argument, disrelished the measure at that time, and assigned for a reason, that it would administer relief perhaps exactly in proportion as the states had been deficient in making exertions.1 It has been also remarked, that the constitution having been established for obtaining perfect justice, it cannot be carried into effect unless full justice is done on this subject, or in other words, unless the state debts are assumed. Sir, if we are to take these words in their full extent, we must not stop merely with securing justice to the creditors of the government, we should also endeavour to secure justice to every private creditor whatever. The gentleman says, that, by the constitution, all debts that existed against the United States at the time of the adoption of the constitution are to be as valid now as they were before its adoption.
What was the situation of the state debts before the adoption of the constitution? Was it understood that they were a part of the debt of the United States, any further than there might be found a balance on a final settlement. Was it ever supposed that they were to be thrown into one common mass, and that the states should be called on collectively to provide for them? What would have been thought of such a proposition? Would it have been considered as consistent with equity? Would it have been tho’t constitutional? I am persuaded if such a proposition had been made in the old Congress it never would have found a second; and for this reason, that the debts of the particular states were never considered as the debts of the United States. In whatever light we view the question, it appears to me that the arguments urged in support of it, are themselves unsupportable.
Much has been said of the situation of particular states in case these debts should not be assumed. Much, indeed, has been said of the distresses and exertions of Massachusetts; but if we are to be governed by enquiries of this sort we must extend them to every part of the Union, and we shall then find that an assumption will give as much dissatisfaction and work as much injustice to a majority of the states as a non-assumption may disappoint the citizens of Massachusetts. I do not wish to go into local enquiries, but the present subject seems in its nature to make them in some degree unavoidable. The conduct of gentlemen on the other side, at least renders the task on this indispensable. What would be the operations of the measure with respect to Virginia? It will not be denied that Virginia sacrificed as much during the war, in one shape or another, and contributed as much to the common defence of the states as any among them, certainly as much as Massachusetts. These are facts that can in time be proved. Since the peace, that state has made great exertions to comply with the requisitions of Congress: I might say, Sir, that she was almost unequalled in her exertions. Her specie payments into the federal treasury since the peace exceed 600,000 dollars, whereas those of Massachusetts are only between 2 and 300,000 dollars. In indents Massachusetts has indeed paid most, but by no means in such proportion as to balance the difference in the specie payments. The exertions of Virginia to discharge the debt she involved herself in by the war, have also been very great; she is not behind any of the states—she is before most of them; there can be no doubt but that she has certainly discharged more of her debts than Massachusetts, and as little doubt in the opinion of the best informed, that whenever a final settlement shall take place that state will be found a creditor to the United States.
If, during the war, she has made as great exertions, and has suffered as much as any of the states; if she has since the peace paid her full proportion of the supplies to the federal treasury, at the same time exerting herself to the utmost to discharge her state debt, and if finally she will probably be found to be in advance to the union, and would therefore if justice could at once be done, be now entitled to a reimbursement—what must be said by the citizens of that State, if instead of a reimbursement, they are called upon to make further advances. Sir, I may add here, that their contributions to the federal treasury, under the proposed system of revenue will exceed the ratio by which they would contribute, by taxes laid in proportion to their representation. I do not wish to extend this investigation any farther than has been already done; but were I to do it, the evidence would be more striking, that the payments from those parts of the union that would receive least benefit from the assumption, would be greater than from those that would receive the immediate benefit of it.
One of my colleagues seems to be of opinion that the measure will be favorable to the interest of Virginia;2 but he seems to me to have grounded his opinion on the erroneous supposition, that the proposed plan will embrace the whole of the debts as they existed at the close of the war, or that the state of Virginia will contribute less, on the plan of deriving revenue from consumption, than she would if derived according to the constitutional ratio. I believe, on the contrary, that if the assumption should take place as originally proposed, that there would be a claim on Virginia for five millions, whereas if there is no assumption, her citizens will have to provide for about three millions only; and thus, instead of bearing her proper burden, which is about one seventh, she would have to bear a burden in the ratio of one fifth. He seems to think that his own particular district would be benefited by this measure; but if he be right in his other opinion, that that part of the state will consume more than the other parts, he will find, sir, that instead of relieving his constituents, compared with the rest of the state, that he would still more augment their burthens; so that it would come to this at last, that the state would have to pay five millions, instead of three—and that the particular part of the state he represents, instead of paying their proportion of three millions, would have to pay more than their proportion of five. I admit, however, that he is the most proper judge on that subject. But the citizens of Virginia would not only be called upon when already in advance, and to an amount beyond their proper ratio, but in a mode that is peculiarly obnoxious to them—I mean that of excise. Sir, the people of that state are as averse to excises as those of any other state can be to direct taxes, and in my own judgment with far more reason, where the article excised is not by some peculiarity free from the common objections. Excises are unequal with respect to different parts of the union: they are also unequal to various parts of the same state. This mode of collection gives arbitrary powers to the collectors, and exposes our citizens to vexatious searches. It opens a door to frauds and perjuries that tend equally to vitiate the morals of the people, and to defeat the public revenue. Besides, sir, excises are more expensive in the collection than other kind of taxes. The collection of the excise in Great Britain costs 10 per cent. That of her direct taxes is computed at 3 per cent, only. I will not positively say that a similar disproportion in the expence of collecting would be incurred in this country; but in some parts of it I am sure that the expence of excises would be greatest, and on some articles in view, would, if the collection were made at all, exceed the revenue obtained from it.
Sir, there has been an argument of another kind advanced in support of the assumption. Gentlemen have thought it a matter of consequence that not only justice should be done, but that the condition of the people should be equalized; that no invidious comparisons might be made between the inhabitants of one state, and those of another, and that no oppressions or embarrassments should force the people to emigrate from one state to another. It would be a comfortable reflection, if every part of the union could be assimilated in this instance; but, sir, I think we have no authority to sacrifice essential considerations to obtain these advantages. Nor do I know that we should obtain them by assuming the state debts. Supposing that measure to be adopted, let us reflect what would be the situation of the different parts of the Union. I do not, at this moment, consider the question as it respects justice, right, or general policy, but in reference merely to the particular consequence of equalizing the circumstances of the people. Let us take a view, comparatively, of the people of the United States. Massachusetts owes a debt of several millions. The public debt, when you come to analyze it, at least where it is due to citizens and not to foreigners, is a debt from one part of the people to the other. The government is the collector from the pockets of the debtors to pay it into the hands of the creditors. If, sir, the state debts should be assumed, Massachusetts will then get rid of her embarrassments; but what would be the situation of Virginia? Besides her public debt, I believe that her citizens owe, one to another, debts, in amount, equal to the whole public debt of Massachusetts, perhaps I might say to the amount of both the public and private debts of that state.3 In addition to all this, the people of Virginia are indebted to foreigners to a greater amount than the whole debt of Massachusetts.4 Sir, I firmly believe that though Virginia is less oppressed with public debt than Massachusetts, yet when we take a view of all the difficulties she labors under, and weigh them against those of Massachusetts, it will be found that Virginia ought to be relieved herself instead of being expected to relieve others.
But, supposing all objections of another nature to be laid aside, I freely confess that after a more minute examination into the subject, I am much inclined to doubt whether the assumption can possibly be carried into execution. Difficulties are continually arising when I survey this question, for which I can find no solution, without departing from every principle by which we ought to be guided. It never yet has been shewn in what manner a remedy could be provided for a partial subscription. Suppose the state creditors were part of them to subscribe and part to refuse. Suppose those of one state subscribe, and those of another should not. Again, Sir, by what method will you discriminate the debts that come under the definition, from those that will be excluded by it? Where will you invest this important discretionary power. I really think that great difficulties will be found before this can be effected. There is another objection too, to which I have never heard a satisfactory answer, although it has been repeatedly urged by a member from Georgia. There are debts existing in some of the states that do not bear interest, that have got into circulation without any title to it, and have been received by the present holders without any other expectation than that in some reasonable time the principal would be paid. Would it, Sir, be proper or necessary to consider these as debts of the Union, bearing interest, or to provide for the immediate funding of them? But there is a case, in my opinion, far more difficult, I mean the paper money issued to redeem the state debts. The state of North-Carolina has taken up its certificates with these paper bills. They are not proposed to be included in the assumption. They are clearly excluded by the present motion, yet they are as much a state debt to be sunk by taxes as certificates, and the taxes may as much interfere with those of other states. Some of the states, Sir, have not only assumed the debts recommended by Congress for making up the depreciation to the army, but they have gone further and have made up the depreciation, where it was not recommended. Other states have not done this. The debts existing in some states I take it for granted comprehend these depreciation notes. Would it not be unjust to call on those states that have not made this provision for their army that other states have done, would it not be hard to call upon those officers and soldiers who have not received this additional compensation, to pay it to those of other states, who have? I would not here be understood to censure the states that made this compensation; I rather commend them for it. It is a proof of their magnanimity and justice that does them honor, but at the same time this does not alter the nature of the objection. In some states, in order to reward the army, they have done it by several aids that do not constitute any part of the state debts. In some of the states there are debts still unliquidated. If you declare that, when liquidated, they shall be assumed, you afford a temptation that has been hitherto cautiously avoided, that of making the states less exact in the settlement of their accounts. I do not find that any gentleman has proposed, on the contrary most of them seem to have rejected, the idea of making provision at this session for fulfilling the engagement in case we enter into an assumption. I think it would be a powerful and unanswerable objection against assuming the state debts at this time, that we do not see or are not prepared to decide on the means of providing for them. There is not a more important and fundamental principle in legislation, than that the ways and means ought always to face the public engagements; that our appropriations should ever go hand in hand with our promises. To say that the United States should be answerable for twenty-five millions of dollars without knowing whether the ways and means can be provided, and without knowing whether those who are to succeed us will think with us on the subject, would be rash and unjustifiable. Sir, in my opinion, it would be hazarding the public faith in a manner contrary to every idea of prudence. It is very true, Sir, that a variety of funds have been proposed, yet they are nothing more than mere suggestions, and tho’ I think they are as good as could be expected in the time, I really believe that some of them, at least, if they can be carried into execution at all, will disappoint the calculations on which they are founded.
I cannot finish my observations on this subject, sir, without adverting to one particular, which I would wish gentlemen to attend to, not so much for our sakes as their own. I would recommend to them no longer to assume a pre-eminence over us in the nationality of their motives; and that they would forbear those frequent assertions, that if the state debts are not provided for, the federal debts shall also go unprovided for; nay, that if the state debts are not assumed, the union will be endangered. Sir, I am persuaded that if the gentlemen knew the motives that govern us, they would blush at such intemperate as well as inconsistent language. I am sure that if they knew the emotions with which it is heard, they would at least see the inutility of it. I hope, sir, that whatever may be the decision on this question of assumption, that patriotism and every other noble and generous motive will lead the minority to acquiesce in measures which will tend to establish public credit by a due provision for the public engagements.5
N.Y. Daily Advertiser, 26 Apr. 1790 (reprinted in Gazette of the U.S., 19 May 1790; also reported fully in N.Y. Daily Gazette, 27 Apr. 1790). The Daily Advertiser has a fuller report of JM’s speech, but the Daily Gazette has a more complete account of the debates of 21 and 22 Apr. on Sherman’s motion. The Gazette of the U.S. omits all but JM’s speech. According to one observer, JM spoke for “more than one hour” (Henry Wynkoop to Reading Beattie, 22 Apr. 1790, Pa. Mag. Hist. and Biog., XXXVIII , 194).
1. On 18 Aug. 1787 the Federal Convention agreed to John Rutledge’s motion that a grand committee “consider the necessity and expediency” of assuming the state debts. The committee reported such a provision on 21 Aug., but it was silently dropped the next day. According to JM’s notes for 18 Aug., Sherman “thought it would be better to authorize the Legislature to assume the State debts, than to say positively it should be done. He considered the measure as just and that it would have a good effect to say something about the Matter” (Farrand, Records, II, 327–28, 355–56, 377).
2. Bland was the only member of the Virginia delegation in favor of assumption. In a speech on 30 Mar., he argued that it would prove beneficial to Virginia.
3. The succinct report in the Daily Gazette gives a clearer idea of JM’s point: “A public debt is, in fact, a debt from one part of the citizens to the other part; it resolves itself into private debts, the government being the collector for the parties. In this point of view the debts of Virginia are far greater than those of Massachusetts, and the inequality would be increased by the proposed assumption.” See the corresponding passage in JM’s notes for this speech, where he writes: “—public debt—a private debt.”
4. At this point in his speech, according to the Daily Gazette, JM remarked that Virginia’s British debts amounted to no less than £1,500,000, a figure he also mentions in his notes.
5. Angered by JM’s assertions that Virginia had made advances for the common defense beyond its quota, Ames on 23 Apr. moved that the secretary of war prepare a statement of the troops and ordnance stores furnished by each state during the war. A “warm debate” ensued on this and other motions made in consequence of Ames’s, which suspended further discussion of Sherman’s proposal to assume a proportion of the state debts. The House eventually agreed to Ames’s motion, with an amendment by Bland ordering the commissioners for settling accounts to draw up an abstract of the individual state claims against the U.S. Gerry’s motion, which directed the secretary of the treasury to report all payments by the states to the federal treasury since the commencement of the war, also passed, as did one by JM calling for a statement of the unliquidated state claims against the U.S. (N.Y. Daily Gazette, 27 Apr. 1790; Gazette of the U.S., 24 Apr. 1790; DHFC description begins Linda Grant De Pauw et al., eds., Documentary History of the First Federal Congress of the United States of America (3 vols. to date; Baltimore, 1972—). description ends , III, 377–78).