Thomas Jefferson’s Second Opinion on a New Foreign Loan
[Philadelphia] June 17. 1793.
I cannot see my way clear in the case on which the President has been pleased to ask my opinion,1 but by recurring to these leading questions.
Of the 7,898,999.88 D. borrowed, or rather of the 7,545,912. D. nett proceeds thereof, how much has been applied to the payment of the foreign, & purchase of the general, debt?
To the balance thereof, which should be on hand, & the 2. millions of florins was borrowing, is any & what addition necessary, for the same objects, for the years 1793. 1794?
The statement furnished by the Secretary of the treasury does not answer these questions. It only shews what has been done with somewhat less than 3. millions, out of near 8. millions of Dollars which have been borrowed: & in so doing it takes credit for two sums which are not to come out of this fund, & therefore not to be left in the account. They are the following.
1. a sum of 284,901.89 D. expended in purchases of the public debt. In the general Report of the trustees of the Sinking fund, made to Congress the 23d of Feb. last & printed, it appears page 29. that the whole amount of monies laid out by them was 1,302,407.64 D. from which were to be deducted, as is mentioned in the note there subjoined, the purchases made out of the interest fund (then about 50,000. D. as well as I recollect.) call the sum paid then 1,252,407.64 D.2 By the Treasury report, pa. 38. (new edition) it appears that the surplus of domestic revenue to the end of 1790. appropriated to this object was 1,374,656.40 D. and page 34. that the monies drawn from Europe, on account of the foreign loans, were not the instrument of these purchases:3 & in some part, to which I am not able just now to turn, I recollect pretty certainly that it is said these purchases were actually carried to account, as was proper, against the Domestic surplus. consequently they are not to be allowed in the foreign account also. Or, if allowed in this, the sum will then be due from the Surplus account, & so must lesson the sum to be borrowed for the Sinking fund, which amounts to the same.
2. The 1st instalment due to the bank 200,000 D. Though the first payment of the subscription of the U.S. to the bank might have been made, in the first instant, out of the foreign monies, to be immediately repaid to them by the money borrowed of the bank, yet this useless formality was avoided, & it was a mere operation of the pen on paper, without the displacement of a single dollar. see Reports pa. 12. and, in any event, the final reimbursement was never to be made out of the foreign fund, which was appropriated solely to the paiment of the foreign, & purchase of the general debt.4
These two sums therefore of 284,901.89 D. & 200,000. D. are to be added to the balance of 565,484.28 D. subject to future disposition, & will make 1,050,386.17 D. actually here, & still to be applied to the proper appropriation.
However, this account, as before observed, being only of a part of the monies borrowed, no judgment can be formed from it of the expediency of borrowing more: nor should I have stopped to make a criticism on it, but to shew why no such sums, as the two abovementioned, were inserted in the general account sketched for the President June 5. I must add that the miscellaneous sum of 49,400. D. in this account, is probably covered by some other articles of that, as far as it is chargeable on this fund, because that account, under one form or another, takes up all the articles chargeable on this fund, which had appeared in the printed Reports.
I must therefore proceed to renew my statement of June 5. inserting therein the 1st instalment of the Dutch loan of 404,040.40. D. payable this month, which not having been mentioned in any of the Reports heretofore published, was not inserted in my statement.5 I will add a like sum for the year 1794. because I think we should now prepare for the whole of that year.
As the Secretary of the treasury does not seem to contemplate the furnishing any fixed sum for the Sinking fund, I shall leave that article out of the account. The President can easily add to it’s result any sum he may decide to have furnished that fund. The account, so corrected, will stand thus.
So that it appears there would be a balance in the hands of this trust, at the close of 1794. of 499,393,84 D. were no monies to be furnished in the mean time to the Sinking fund. but should the President determine to furnish that with the 900,000. D. proposed in my statement of June 5. then a loan would be necessary for about 400,000. D. say in near round numbers 1,000,000 of guilders, in addition to the 2. millions now borrowing. I am, individually, of opinion that the sum ought to be furnished to the Sinking fund, & consequently that an additional loan, to this extent, should be made, considering the subject in a legal point of view only.6
The reasons in favor of the extension are
The apprehension of the extension of our war to other Indian nations, & perhaps to Europe itself.7
The disability this might produce to borrow at all: (this is, in my judgment, a weighty consideration.)
The possibility that the government of France may become so settled, as that we may hazard the anticipation of payments, & so avoid dead interest.
The reasons against it are
The possibility that France may continue, for some time yet, so unsettled as to render an anticipation of payments hazardous:
The risk of losing the Capital borrowed by a successful invasion of the country of deposit, if it be left in Europe; or by an extension of the bankruptcies now shaking the most solid houses, & when & where they will end, we know not:
The loss of interest on the dead sum, if the sum itself be safe:
The execution of a power for one object, which was given to be executed but for a very different one:
The commitment of the President, on this account, to events, or to the criticisms of those, who tho’ the measure should be perfectly wise, may misjudge it through error or passion:
The apprehension that the head of the department means to provide idle money to be lodged in the banks ready for the corruption of the next legislature, as it is believed the late ones were corrupted, by gratifying particular members with vast discounts for objects of speculation.
I confess that the last reasons have most weight with me.
ADS, owned (1959) by Martin Weiner, Clifton, New Jersey; ADS (letterpress copy of the privately owned ADS), DLC: Jefferson Papers; ADS (letterpress copy), DLC: Jefferson Papers. The original of the second letterpress copy has not been identified.
1. In his letter to Jefferson of 16 June, GW asked him to review a report from Alexander Hamilton on a proposed new foreign loan of three million florins. For previous criticism of this proposal, see Jefferson’s First Opinion on a New Foreign Loan, 5 June 1793, which was enclosed in Jefferson’s letter to GW of that date. Hamilton’s latest report on the loan was enclosed in his letter to GW of 15 June 1793.
2. For the published version of the report that the commissioners of the sinking fund presented to the House of Representatives on 25 Feb. 1793, see Report of the Board of Trustees of the Sinking Fund: Containing Their Journals, and a Statement of the Purchases Made Since Their Last Report to Congress. Published by Order of the House of Representatives (Philadelphia: Childs and Swaine, 1793). See also ASP, Finance, description begins Walter Lowrie et al., eds. American State Papers. Documents, Legislative and Executive, of the Congress of the United States. 38 vols. Washington, D.C., Gales and Seaton, 1832–61. description ends 1:234–48.
3. Jefferson is referring to Communications from the Secretary of the Treasury, to the House of Representatives of the United States. Printed Agreeably to a Resolution of the House, of the 2d of March 1793 (Philadelphia: John Fenno, 1793).
4. A notation on the margin at this point reads, “but see act 1793. c. 69. & qu?” This notation refers to section 2 of “An Act making appropriations for certain purposes therein expressed,” 9 June 1793 (1 Stat description begins Richard Peters, ed. The Public Statutes at Large of the United States of America, from the Organization of the Government in 1789, to March 3, 1845 . . .. 8 vols. Boston, 1845-67. description ends ., 394–95). It does not appear on either letterpress copy.
5. See Jefferson’s First Opinion on a New Foreign Loan, 5 June, enclosed in his letter to GW of that date.
6. The following paragraph appears at this point only on the second letterpress copy: “It remains then to see whether, under any other point of view, the loan should be extended still 2. millions further.”
7. Although the United States was attempting to negotiate a peaceful settlement with hostile Indians in the Northwest Territory, the U.S. Army was simultaneously preparing for war (Henry Knox to Tobias Lear, 5 June, n.1, and to GW, 7 June, and notes). On problems in the Southwest Territory, where a war with the Indians could possibly lead to a war with Spain, see Knox to Lear, 15 June, n.1.