“By a plan of this kind, we should blend the advantages of a monarchy and a republic,” Hamilton had written in 1780. He even had proposed calling a convention to draft it.79 Now others were coming around to his point of view.
When the Annapolis meeting failed to attract delegates from enough states to proceed, and so could not achieve even its limited goals, Hamilton proposed that those present simply call for a second convention and go home. All told, the delegates met for only three days. Their closing resolution, drafted by Hamilton and approved by the delegates on September 14, urged their states to “use their endeavors to procure the concurrence of the other States, in the appointment of Commissioners, to meet at Philadelphia on the second Monday in May next, to take into consideration the situation of the United States, to devise such further provisions as shall appear to them necessary to render the constitution of the Federal Government adequate to the exigencies of the Union.”80 This proposed conclave, its proponents hoped, would be a true constitutional convention.
Some already charged that the Annapolis meeting could have attracted more delegates and achieved more results if Washington had participated, as he had for the Mount Vernon Compact. The challenge for nationalists now became getting him to Philadelphia in 1787 for the proposed grand convention.
1787 diagram of the main house at Mount Vernon and its west lawn and gardens.
CHAPTER 3
To Go or Not to Go
JOHN JAY WAS a conservative revolutionary with nationalist leanings and close ties to Washington. In his politics, Jay represented but one faction within the internecine labyrinth of New York society. At the time, no other state was more divided than New York. Those splits dated from the late 1600s, when British conquerors imposed their rule over the Dutch patroons who had already established themselves in Manhattan and the Hudson Valley. Attracted by a spectacular natural harbor, rich farmland, and ethnic diversity, immigrants from other European countries and colonies soon joined the mix. And so many settlers brought or imported African slaves that by 1700 New York had more blacks than any other northern colony. In the resulting scramble for position, money and power mattered most. As the fair-haired child of a union between the son of a rich merchant of French Huguenot descent and the daughter of New York City’s ethnically Dutch mayor, Jay had both. Educated at New York’s King’s College and trained in law, he was destined for a prominent role in society and government.
New York’s political divisions became readily apparent during the Revolutionary War when the city remained the last stronghold of British rule in the colonies, even as radical patriots under Governor George Clinton ruled in Poughkeepsie. The state’s delegation to the Continental Congress was so split, and its instructions were so indecisive, that it abstained on the epic vote for independence—the only delegation to do so. As a leading member of that divided delegation, Jay supported vigorous resistance to oppressive British laws but worked closely with Pennsylvania delegate John Dickinson to forestall a formal declaration of independence. Writing to John Adams, Jefferson would later recall of that historic time, “There you and I were together, and the Jays, and the Dickinsons, and the other anti-independents were arrayed against us. They cherished the monarchy of England; and we the rights of our countrymen.”1
Once the die was cast, however, Jay sided with the patriots even as his brother backed the British. Linked by marriage to the powerful and wealthy Livingston clan of New Jersey and New York, Jay was elected president of the Continental Congress in 1778 and secretary of foreign affairs for the Confederation Congress in 1784. Between holding these two quasi-executive posts, he served as an American ambassador in Europe and helped to negotiate the treaty ending the war.
Jay experienced the central government’s weakness firsthand while serving in all these positions. It particularly frustrated him as foreign affairs secretary. In dealing with Spain without an American army to strengthen his hand, for example, Jay was forced to concede closing the Mississippi River to American commerce in return for opening ports in the Spanish Caribbean—leading to charges that he had sacrificed the interests of western settlers to those of northeast shipowners. Further, he could not cajole Britain to abide by its treaty obligation to evacuate forts in the Northwest Territory so long as Congress remained powerless to force states and individuals to return property taken from Tories during the American Revolution as mandated by the same treaty. Indeed, some states continued to take Tory property after the war. To Jay—a devout Anglican by choice despite his French and Dutch Calvinist religious heritage—property rights, whether British or American, were sacrosanct.
Beyond his former loyalty to the British cross and crown, Jay’s gravest hesitation about the Revolutionary War was that, by overturning established authority, it might unleash leveling forces and lead to mob rule. Tall and thin with a high chin and hawk nose that made him appear to gaze down on others, Jay looked as much like an aristocrat as he acted. He increasingly felt that status imperiled by the rising tide of majority rule.
His every experience and instinct pushed Jay toward supporting a strong national government to right the situation. By 1786, with the rabble-rousing Clinton still ruling over New York, established property rights under assault from democratic factions in some states, and Congress unable to defend America’s place on the world’s stage, Jay grew ever more anxious for constitutional reform. He wrote to Jefferson in that year, “If faction should long bear down law and government, tyranny may raise its head, or the more sober part of the people might even think of a King.”2 Only a balanced national government with authority to protect property and project power could steer a republican middle course between democratic tyranny and monarchic rule, Jay believed.
And only George Washington, Jay thought, commanded sufficient popular respect to lead Americans to adopt and implement such a regime. Like other nationalists, he rallied around the General.
Even before the failed Annapolis Convention met in September 1786, Jay sent a desperate appeal to Washington begging him to emerge from his retirement long enough to back a more ambitious effort for constitutional reform than was already on the table. “Experience has pointed out Errors in our national Government, which call for Correction, and which threatened to blast the Fruit we expected from our ‘Tree of Liberty,’” Jay warned. Although the Annapolis Convention might do some good in commercial matters, he wrote in March 1786, “an opinion begins to prevail that a general convention for revising the articles of Confederation would be expedient. Whether the People are yet ripe for such a Measure, or whether the System proposed to be attained by it, is only to be expected from Calamity & Commotion, is difficult to ascertain.” To save “the Sovereignty and Independence which Providence has enabled You to be so greatly & gloriously instrumental in securing,” Jay implored in a calculated reference to Washington’s legacy, if a general convention is called, “I am fervent in my Wishes, that it may comport with the Line of Life you have marked out for yourself, to favor your country with your counsels on such an important & single occasion.”3
Washington surely knew that, to make a difference, he could not come out of retirement simply for a single occasion. If he participated in a general convention to reform the national constitution, he would have to see the matter through or watch it fail. Further, even Jay conceded that the time might not yet be ripe for constitutional reform, and Washington did not want to expend his political capital prematurely. Franklin, he worried, had done just that by agreeing to become Pennsylvania’s president in 1785, when its radically democratic constitution began running amok.4 Any successful effort to reform the national government likely would need the combined support of Washington and Franklin, its advocates realized, and could scarcely afford any diminution in either man’s prestige.
Thus, Washington put Jay off.
“I coincide perfectly in sentiments with you, my dear sir, that there are errors in our National Government which call for correction,” Washington replied to Jay in M
ay 1786, “but my fear is that the people are not yet sufficiently misled to retract from error!” Washington blamed the situation on ignorance among the people regarding the dangers to freedom and property from the excesses of democracy and wickedness by some who sought to take advantage of those excesses. “Ignorance & design are difficult to combat,” he wrote. “Out of these proceed illiberality, improper jealousies, and a train of evils which oftentimes, in republican governments, must be sorely felt before they can be removed.” Conceding that “something must be done, or the fabric must fall,” Washington remained uncertain if the time had come to act. “I scarcely know what opinion to entertain of a general Convention,” he cautioned Jay. “That it is necessary to revise, and amend the articles of Confederation, I entertain no doubt; but what may be the consequences of such an attempt is doubtful.”
Washington preferred to wait until the calamitous consequences of the current course became clear to all people of goodwill. “Virtue, I fear, has, in a great degree, taken its departure from our Land, and the want of disposition to do justice is the source of the national embarrassments,” he concluded.5
THE ANXIETY OVER CONSTITUTIONAL REFORM reflected in this exchange between an aristocratic New Yorker and a Virginia planter betrayed far more fundamental concerns than mere fears of losing the West, simple hopes for a national market economy, and plain desires to repay government creditors, though those issues certainly weighed heavily on both men. Their letters spoke in terms of calamity and commotion, loss of public virtue and disposition to do justice, and breakdown of the social fabric under the excesses of majority faction. Liberty itself was at risk, both men declared, much as it had been in 1776—but this time the threat came from within, which made it worse.
“Our affairs seem to lead to some crisis—some Revolution—something that I cannot foresee,” Jay wrote back to Washington. “I am uneasy and apprehensive—more so than during the War.”6 Everything secured in the war was at risk, he warned.
Unlike the crisis leading up to the Revolutionary War, which exploded with the Battles of Lexington and Concord and had a single foreign source, the angst that bubbled over in these letters had built gradually in reaction to a pattern of perceived domestic abuses. “We are going and doing wrong, and therefore I look to Evils and Calamities,” Jay wrote.7 Oversimplified into single words, some blamed “democracy” for the country’s woes; others blamed “debt.” Jay blamed both.
To finance the Revolutionary War, Congress and the states had run up massive foreign and domestic debts that now, with peace, were falling due. Although some states had less debt or more resources than others, all of them at least had the power to tax citizens and impose tariffs to finance past debts and fund current services. Congress did not. It lacked the means to pay even interest on its debt, much less repay principal.
During a period of nationalist ascendancy from 1781 to 1783, Congress made two attempts to get the general government’s fiscal house in order by passing measures to impose a 5 percent duty on imported goods—the first would have been collected by national agents; the second, in a concession to the states, would have been collected by state agents and transferred to Congress. Under the Articles of Confederation, however, all thirteen states needed to approve any national tax and neither plan gained universal assent. Congress was forced to rely on requisitions from the states, which often went unpaid.
In a 1786 letter to Jay, Washington lamented, “Requisitions are a perfect nihility where thirteen sovereign, independent, disunited States are in the habit of discussing & refusing compliance with them at their option.”8 Most of the nation’s war-related debts were owed to Americans, however, and represented the collective obligations of all the states. If Congress failed to repay them, then the states could step in to take care of their own citizens and, by doing so, supplant Congress in the hearts, minds, and wallets of their people.
The scheme was simple and the results potentially debilitating for the national government. In every state, Congress owed money to public creditors: persons holding bonds or other securities issued during the war for money, goods, or services. Many of these securities, which originally went to a large number of lenders, suppliers, and veterans, had passed into the hands of a small number of speculators, who purchased them at a discount. In turn, the states owed annual requisitions to Congress and public creditors owed taxes to their states.
So long as Congress was unable to pay public creditors, the states could accept national securities from their citizens as payment for state taxes and apply them at face value toward their requisitions. Congress was obligated to use most of its revenue for debt financing anyway. By inserting itself as a middleman between Congress and public creditors, a state could ensure that its requisitions went to its own citizens rather than being distributed among foreign and domestic public creditors generally. Of course, if states accepted securities at face value for tax payments, speculators who purchased them at discount would stand to gain. Those speculators and their allies in government became the principal supporters of the scheme in many states. For them, it was profitable; for the states, it was efficient; for Congress, it was disastrous.
Congress might object to states meeting their requisitions by offsetting debt obligations rather than remitting hard money, but it could do little about it since many states did not pay their full requisitions and specie was scarce. The power to tax is the power to rule, every nationalist knew. Without it, Congress had to take what it could get from the states, and it was rarely hard money. One reckoning put the total amount of cash turned over to Congress by the states during the period from October 1786 to March 1787 at $663, or a mere 2 percent of the August 1786 requisition.9
EVER SINCE THE WAR BEGAN, hard money in the form of internationally accepted gold and silver coins had been in short supply throughout the states. At the time, Americans relied on other countries for specie, with Spain’s gold dollar being especially popular. As these coins passed overseas to pay for imported goods and repay foreign loans, Congress tried to make up the deficit by printing paper dollars, called “Continentals,” but stopped in 1779 after their value collapsed. By 1781, a Continental was worth half a cent and even Congress refused to take them.10 During the war, state-issued paper money did not fare much better. Most suffered hyperinflation. People wanted hard money or paper backed by something of more certain value than a shaky government’s doubtful promises. The states moved in to fill this monetary vacuum.
The attack on Congress’s control over the national debt and money supply began in Pennsylvania, which had the country’s most democratic state constitution. Adopted in the revolutionary fervor of 1776, less than three months after the Declaration of Independence, Pennsylvania’s constitution abolished property qualifications for voting, established a one-house legislature with all seats elected annually, and gutted traditional checks and balances by having the state president, Supreme Executive Council, and judges appointed by the legislature for short terms and removable at will. More than in any other state, the people ruled in Pennsylvania—but they did so as a majority faction that was sensitive to shifts in popular opinion.
In 1782, when an all-but-bankrupt Congress stopped paying interest on its domestic debt, Pennsylvania began issuing state certificates of interest on that debt to public creditors in its state in place of the unpaid interest. It then credited these certificates toward its requisition instead of paying hard money to Congress. Once a certificate was issued, Congress no longer owed the interest covered by it, but Congress also stopped receiving the hard cash that it needed to pay its other creditors or fund ongoing operations. Further, until redeemed by the state, the certificates circulated as a form of paper money within Pennsylvania. This stimulated the cash-strapped local economy, which was depressed due to the lack of hard money and the collapse of other forms of paper money. The certificates retained value because Pennsylvania accepted them in payment of state taxes. As Pennsylvania’s Franklin famously observed during the
1780s, “in this world nothing can be said to be certain, except death and taxes.”11
Emboldened by Pennsylvania’s example, other states quickly adopted, adapted, or expanded on the scheme. New Hampshire and New Jersey began offering certificates or “revenue money” for unpaid interest within the year. By 1785, more than half the states had implemented some system of paying interest on their citizens’ national securities. Once this ball started rolling, it was hard to stop, especially since it aggrandized the states.
Congress tried twice to regain control of its own debt. In 1784, it offered its own paper certificates, or “indents,” in lieu of interest to public creditors, who then could redeem them through the states in payment of state taxes. Seeing nothing in this program for them, most states either refused to implement it or implemented it so poorly that it had little impact. A year later, Congress attempted to bar states from paying their requisitions with state interest certificates, but this backfired badly. Some states ignored the mandate; others, again led by Pennsylvania, got around it by calling in all or part of the national securities held by its citizens and exchanging them for state bonds that paid interest in the form of credits against state tax obligations. The states then fulfilled their requisitions by canceling the interest or principal owed by Congress on these securities.
By 1786, the states had assumed much of the total national debt, with Pennsylvania, New York, and Maryland alone holding nearly one-third of it. Congress was rapidly becoming irrelevant. By replacing state bonds for national securities, the loyalties of public creditors shifted from the nation to the states. And the flood of new state bonds, many of which were issued in small denominations and circulated almost like cash, addressed the urgent economic need for currency without involving Congress.
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