By making foreign Loans, the Community (as such) receive the same extensive Benefits which one Individual does in borrowing of another. This Country was always in the Practice of making such Loans. The Merchants in Europe trusted those of America. The American Merchants trusted the Country Storekeepers; and they the People at large. This advance of Credit may be Stated at not less than twenty Million of Dollars. And the Want of that Credit is one principle Reason of those Usurious Contracts mentioned above. These have been checked by the Institution of the Bank, but the Funds of that Corporation, not permitting those extensive Advances which the Views of different People require, the Price given for particular Accommodations of Money continues to be enormous; and that again Shews, that to make domestic Loans would be difficult if not impracticable. The Merchants not having now that extensive Credit in Europe which they formerly had, the obtaining such Credit by the Government, becomes in some Sort necessary. But there remains an Objection with many against foreign Loans, which (tho it arises from a superficial View of the Subject) has no little Influence. This is, that the Interest will form a Balance of Trade against us, and drain the Country of Specie; which is only saying in other Words, that it would be more convenient to receive Money as a Present, than as a Loan. For the Advantages derived by the Loan exist, notwithstanding the Payment of Interest. To shew this more clearly, a Case may be Stated which in this City is very familiar. An Island in the Delaware overflowed at high Water has, for a given Sum, suppose a thousand Pounds, been banked in, drained and made to produce by the Hay sold from it at Philadelphia a considerable Sum annually, for Instance two hundred Pounds. If the owner of such an Island had borrowed (in Philadelphia) the thousand Pounds to improve it, and given six per Cent Interest, he would have gained a net Revenue of one hundred and forty Pounds. This certainly would not be a Balance of Trade against his Island, nor the draining it of Specie. He would gain considerably, and the City of Philadelphia also would gain, by bringing to Market an increased Quantity of a necessary Article. In like manner, Money lent by the City of Amsterdam to clear the Forests of America, would be beneficial to both. Draining Marshes and bringing Forests under Culture are beneficial to the whole human Race, but most so to the Proprietor. But at any Rate, in a Country and in a situation like ours, to lighten the Weight of present Burthens (by Loans) must be good Policy. For as the Governments acquire more Stability, and the People more wealth, the former will be able to raise, and the latter to pay much greater Sums than can at present be expected.
What has been said on the general nature and Benefit of public Loans, as well as their particular Utility to this Country, contains more of Detail than is necessary for the United States in Congress, tho perhaps not enough for many of those to whose consideration this Subject must be Submitted. It may seem Superfluous to add that Credit is necessary to the obtaining of Loans. But among the many extraordinary Conceptions which have been produced, during the Present Revolution, it is neither the least prevalent, nor the least pernicious, that Foreigners will trust us with Millions, while our own Citizens will not trust us with a Shilling. Such an opinion must be unfounded and will appear to be false at the first Glance; Yet Men are (on some Occasions) so willing to deceive themselves, that the most flattering Expectations will be formed from the Acknowledgement of American Independance by the States General. But surely no reasonable Hope can be raised on that Circumstance, unless something more be done by ourselves. The Loans made to us hitherto, have either been by the Court of France, or on their Credit. The Government of the United Netherlands are so far from being able to lend, that they must borrow for themselves. The most therefore which can be asked from them, is to become Security for America to their own Subjects, but it cannot be expected that they will do this, untill they are assured, and convinced, that we will punctually pay. This follows necessarily from the Nature of their Government, and must be clearly seen by the Several States, as well as by Congress, if they only consider what Conduct they would pursue on a similar Occasion. Certainly Congress would not put themselves in a situation which might oblige them to call on the several States for Money to pay the Debts of a foreign Power. Since then no Aid is to be looked for from the Dutch Government, without giving them Sufficient Evidence of a Disposition and Ability to pay both the Principal and Interest of what we borrow; and since the same Evidence which would convince the Government, must convince the Individuals who compose it; Asking the Aid of Government must either be unnecessary or ineffectual. Ineffectual before the Measures taken to establish our Credit, and unnecessary afterwards.
We are therefore brought back to the Necessity of establishing public Credit. And this must be done at Home, before it can be extended abroad. The only Question which can remain, is with Respect to the Means. And here it must be remembered that a free Government whose natural offspring is public Credit, cannot have sustained a Loss of that Credit unless from particular Causes; and therefore those Causes must be investigated and removed, before the Effects will cease. When the continental Money was issued, a greater Confidence was shewn by America, than any other People ever exhibited. The general Promise of a Body not formed into, nor claiming to be a Government, was accepted as current coin, and it was not until long after an Excess of quantity had forced on Depreciation, that the Validity of these Promises was questioned. Even then the public Credit still existed in a Degree, nor was it finally lost untill March 1780, when an Idea was intertained that Government had committed Injustice. It is useless to enter into the Reasons for and against the Resolutions of that Period. They were adopted, and are now to be considered only in Relation to their Effects. These will not be altered by saying that the Resolutions were misunderstood; for in those Things which depend on public Opinion it is no matter (so far as consequences are concerned) how that opinion is influenced. Under present circumstances therefore, it may be considered as an uncontrovertible Proposition, that all paper Money ought to be absorped by Taxation (or otherwise) and destroyed before we can Expect our public Credit to be fully reestablished. For so long as there be any in Existence, the Holder will view it as a monument of national Perfidy.
But this alone would be taking only a Small Step in the important Business of establishing national Credit. There are a great Number of Individuals in the United States, who trusted the Public in the Hour of Distress, and who are impoverished, and even ruined by the Confidence they reposed. There are others, whose Property has been wrested from them by Force to Support the War, and to whom Certificates have been given in lieu of it which are entirely useless. It needed not Inspiration to shew, that Justice establisheth a Nation, neither are the Principles of Religion necessary to evince, that political Injustice will receive political Chastizement. Religious Men will cherish these Maxims in proportion to the additional Force they derive from divine Revelation. But our own Experience will Shew, that from a Defect of justice this Nation is not established; and that her Want of Honesty is severely punished by the Want of Credit. To this Want of Credit must be attributed the Weight of Taxation for Support of the War, and the Continuance of that Weight by Continuance of the War. It is therefore with the greatest Propriety your Petitioners already mentioned have stated in their Memorial, that both Policy and Justice require a solid Provision for funding the public Debts. It is with Pleasure Sir that I see this numerous, meritorious and oppressed Body of Men, who are Creditors of the public, begining to exert themselves for the obtaining of Justice. I hope they may succeed, not only because I wish well to a righteous Pursuit, but because this Success will be the great Ground work of a Credit which will carry us safely thro the present just, important and necessary War, which will combine us closely together on the Conclusion of a Peace, which will always give to the Supreme Representative of America a Means of acting for the general Defence on Sudden Emergencies, and which will, of consequence, procure the Third of those great Objects for which we contend, Peace, Liberty, and Safety.
Such Sir are the cogent Principles by which we are called
on to provide solid Funds for the national Debt. Already Congress have adopted a Plan for liquidating all past Accounts; and if the States shall make the necessary Grants of Revenue, what remains will be a simple executive Operation which will presently be explained. But however powerful the Reasons in favor of such Grants, over and above those Principles of moral Justice which none, however exalted, can part from with Impunity, still there are Men who (influenced by penurious selfishness) will grumble at the Expence, and who will assert the impossibility of sustaining it. On this Occasion the Sensations with Respect to borrowing are reversed. All would be content to relieve themselves, by Loan, from the Weight of Taxes, but many are unwilling to take up, as they ought, the Weight of Debt. Yet this must be done, before the other can happen, and it is not so great but that we Should find immediate Releif by assuming it, even if it were a foreign Debt. I say if it were a foreign Debt, because I shall attempt to shew, first that being a domestic Debt, to fund it will cost the Community Nothing and secondly that it will produce (on the Contrary) a considerable Advantage. And as to the first Point, one Observation will Suffice. The Expenditure, has been made, and a Part of the Community have sustained it. If the Debt were to be paid, by a single Effort of Taxation; it could only create a Transfer of Property from one Individual to another, and the agregate Wealth of the Whole Community would be precisely the same. But since Nothing more is attempted than merely to fund the Debt by providing for the Interest (at six per Cent) The Question of Ability is resolved to this single Point, whether it is easier for a Part of the people to pay one hundred Dollars, than for the whole People to pay six Dollars. It is equally clear, tho’ not equally evident, that a considerable Advantage would be produced, by funding our Debts, over and above what has been already mentioned, as the Consequence of National Credit. This Advantage is threefold. First, many Persons by being Creditors of the Public, are deprived of those Funds which are necessary to the full Exercise of their Skill and Industry. Consequently the Community are deprived of the Benefits which would result from that Exercise, whereas if these Debts which are in a manner dead, were brought back to existence, monied men would purchase them up (tho perhaps at a considerable Discount) and thereby restore to the Public many useful Members who are now entirely lost; and extend the Operations of many more to considerable Advantage. For altho not one additional Shilling would be, by this Means, brought in; yet by distributing Property into those Hands which could render it most productive, the Revenue would be increased, while the original Stock continued the Same. Secondly, many Foreigners who make Speculations to this Country would, instead of ordering back Remittances, direct much of the Proceeds of their Cargoes to be invested in our public Funds; which, according to Principles already established, would produce a clear Advantage, with this Addition (from peculiar Circumstances) that it would Supply the Want of Credit to the mercantile Part of Society. The last, but not least, Advantage is, that in restoring Ease, Harmony and Confidence, not only the Government (being more respectable) would be more respected, and consequently better obeyed; but the mutual Dealings among Men, on private Credit, would be facilitated. The Horrors which agitate People’s Minds, from an Apprehension of depreciating Paper, would be done away. The secret Hoards would be unlocked. In the same Moment, the Necessity of Money would be lessened, and the Quantity increased. By these Means the Collection of Taxes would be facilitated, and thus, instead of being Obliged to give valuable Produce for useless Minerals, that Produce would purchase the Things we stand in need of, and we should obtain a sufficient circulating Medium, by giving the People what they have always a Right to Demand, solid Assurance in the Integrity of their Rulers.
The next Consideration which Offers, is the Amount of the public Debt, and every good American must lament that Confusion in public Affairs, which renders an accurate State of it unattainable. But it must continue to be so, until all accounts both at Home and abroad be finally adjusted. The enclosed is an Estimate furnished by the Comptroller of the Treasury, from which it appears that there is already an acknowledged Debt, bearing Interest, to the Amount of more than twelve Million of Dollars. On Part of this also there is a large arrearage of Interest, and there is a very considerable Debt unsetled, the Evidence whereof exists in various Certificates given for Property applied to the public Service. This (including Pay due to the army previous to the present Year) cannot be estimated at less than between seven and eight Millions. Our Debt to his most Christian Majesty is above five Millions. The nearest Guess therefore, which can be made at the Sum total, is from twenty five to twenty seven million of Dollars, and if to this we add what it may be necessary to borrow for the Year 1783 the Amount will be (with Interest) by the Time proper Revenues are obtained, considerably above thirty Millions. Of course the Interest will be between eighteen hundred Thousand and two Million Dollars. And here, previous to the Consideration of proper Revenues for that Amount, it may not be amiss to make a few general Observations. The first of which is, that it would be injurious to the United States to obtain Money on Loan without providing before hand the necessary Funds. For if those who are now so deeply engaged to Support the War, will not grant such Funds to procure immediate Relief, certainly those who come after them will not do it, to pay a former Debt. Remote Objects, dependent on abstract Reasoning, never influence the Mind like immediate Sensibility. It is therefore the Province of Wisdom to direct towards proper Objects that Sensibility which is the only Motive to Action among the Mass of Mankind. Should we be able to get Money from the Dutch, without first providing Funds, which is more than doubtful; and should the several States neglect, afterwards, making Provision to perform the Engagements of Congress, which is more than probable; the Credit of the United States, abroad, would be ruined for ever. Very Serious Discussions also might be raised among foreign Powers, our Creditors might have Recourse to arms, and we might dishonorably be compelled to do, what dishonestly we had left undone. Secondly, the Idea which many entertain of soliciting Loans abroad to pay the Interestdomestic Debts, is a Measure pregnant with it’s own Destruction. If the States were to grant Revenues sufficient only to pay the Interest of present Debts, we might perhaps obtain new Credit, upon a general Opinion of our Justice, tho’ that is far from certain. But when we omit paying, by Taxes, the Interest of Debts already contracted, and ask to borrow for the Purpose, making the same Promises to obtain the new Loans which had been already made to obtain the Old, we shall surely be disappointed. Thirdly, it will be necessary, not only that Revenues be granted, but that those Revenues be amply sufficient for the Purpose, because (as will presently appear) a Deficiency would be highly pernicious, while an Excess would be not only unprejudicial but very advantageous. To perceive this with all necessary Clearness, it must be remembered that the Revenues asked for on this Occasion must be appropriated to the Purposes for which they are asked, and in like Manner the Sums required for current Expenditure, must be appropriated to the current Service. If then the former be deficient, the latter cannot be brought in to Supply the Deficiencys and, of course, the public Credit would be impaired; but should there be an Excess of Revenue, it could be applied in Payment of a Part of the Debt immediately, and in such Case if the Credits should have depreciated, they would be raised to Par, and if already at Par, the Offer of Payment would induce Creditors to lower the Interest. Thus in either Case, the Means of making new Loans on good Terms would be extended, and the Necessity of asking more Revenues obviated. Lastly, these Revenues ought to be of such a Nature as naturally and necessarily to increase; for Creditors will have a greater Confidence when they have a clear Prospect of being repaid, and the People will always be desirious to see a like Prospect of Releif from the Taxes. Besides which, it will be necessary to incur some considerable Expence after the War in making necessary Establishments for a permanent naval Force, and it will always be least objectionable to borrow, for that Purpose, on Funds already established.
The Requisition of a five per Cent Impost, made on the third D
ay of February 1781, has not yet been complied with by the State of Rhode Island; but as there is Reason to beleive that their Compliance is not far off, this Revenue may be considered as being already granted. It will however be very inadequate to the Purposes intended. If Goods be imported and Prizes introduced to the Amount of twelve Millions annually, the five per Cent would be six hundred thousand, from which at least one sixth must be deducted, as well for the Cost of Collection, as for the various Defalcations which will necessarily happen, and which it is unnecessary to enumerate. It is not safe therefore to estimate this Revenue at more than half a Million of Dollars, for tho it may produce more, yet probably it will not produce so much. It was in Consequence of this that, on the twenty seventh Day of February last, I took the Liberty to Submit the Propriety of asking the States for a Land Tax of one Dollar for every hundred Acres of Land, a Poll Tax of one Dollar on all freemen, and all male Slaves between sixteen and sixty (excepting such as are in the federal Army, and such as are by Wounds or otherwise rendered unfit for Service) and an Excise of one eighth of [a] Dollar, per Gallon, on all distilled Spirituous Liquors. Each of these may be estimated at half a Million, and should the Product be equal to the estimation, the Sum total of Revenues for funding the public Debts, would be equal to two Millions. What has been the Fate of these Propositions I know not, but I will beg leave, on this Occasion, not only to renew them but also to state some Reasons in their favor, and answer some Objections against them.
And first, as to a Land Tax. The Advantages of it are, that it can be reduced to a Certainty as to the Amount and Time. That no extraordinary Means are necessary to ascertain it. And that Land, being the ultimate Object of human Avarice, and that particular Species of permanent Property which so peculiarly belongs to a Country as neither to be removed nor concealed, it stands foremost for the Object of Taxation; and ought most particularly to be burthened with those Debts which have been incurred by defending the Freedom of its Inhabitants. But besides these general Reasons, there are some which are in a Manner peculiar to this Country. The Land of America may, as to the Proprietors, be divided into two Kinds, that which belongs to the great Landholders and that which is owned and occupied by the industrious Cultivator. This latter Class of Citizens is, generally speaking, the most numerous and most valuable part of a Community. The Artisan may, under any Government minister to the Luxuries of the Rich, and the Rich may, under any Government, obtain the Luxuries they covet. But the free Husbandman is the natural Guardian of his Country’s Freedom. A Land Tax will probably, at the first mention, startle this Order of Men, but it can only be from the Want of Reflection, or the Delusion must be kept up by the Artifice of others. To him who cultivates from one to five hundred Acres, a Dollar per hundred is a trifling Object; but to him who owns an hundred Thousand it is important. Yet a large Proportion of America is the Property of great Landholders, they monopolize it without Cultivation; they are (for the most Part) at no Expence either of Money or personal Service to defend it; and, keeping the Price higher by Monopoly than otherwise it would be, they impede the Settlement and Culture of the Country. A Land Tax, therefore, would have the salutary Operation of an Agrarian Law, without the Iniquity. It would relieve the Indigent, and aggrandize the State, by bringing Property into the Hands of those who would use it for the Benefit of Society. The Objections against such a Tax are twofold, first that it is unequal, and secondly that it is too high. To obviate the Inequality, some have proposed an Estimate of the Value of different Kinds of Lands. But this would be improper, because first it would be attended with great Delay, Expence and Inconvenience. Secondly it would be uncertain, and therefore Improper, particularly when considered as a Fund for public Debts. Thirdly, there is no reason to beleive that any Estimate would be just; and even if it were, it must be annually varied or else come within the Force of the Objection as strongly as ever; the former would cost more than the Tax, and the latter would not afford the Remedy asked for. Lastly, such Valuations would operate as a Tax upon Industry, and promote that Land Monopoly which every wise Government will study to repress. But further, the true Remedy for any Inequality will be obtained in the Apportioning other Taxes, of which there will always be enough to equalize this. Besides, the Tax being permanent and fixed, it is considered in the Price of Land on every Transfer of Property, and that produces a Degree of Equality which no Valuation could possibly arrive at. In a word, if exact numerical Proportion be sought after in Taxes, there would be no End to the Search. Not only might a Poll Tax be objected to as too heavy on the Poor and too light on the rich, but when that Objection was obviated, the phisical Differences in the human Frame would alone be as endless a Source of Contention, as the different Qualities of Land. The second Objection that the Tax is too high, is equally futile with the former. Land which is so little worth that the Owner will not pay annually one Penny per Acre for the Defence of it, ought to belong to the Society by whom the Expence of defending it is defrayed. But the Truth is that this Objection arises from, and is enforced by, those Men who can very well bear the Expence, but who wish to shift it from themselves to others. I shall close this Subject by adding, that as such a Tax would, besides the Benefits to be derived from the Object of it, have the farther Advantage of encouraging Settlements and Population, This would redound, not only to the national Good, but even to the particular Good of the Land holders themselves.
Founding America: Documents from the Revolution to the Bill of Rights Page 25
