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1790.] THE FOREIGN AND DOMESTIC DEBT.

55

gagements, owing to the want of a sovereign legislature having the sole and exclusive power of laying duties upon imports, and thus providing adequate resources, that the debt had swollen, through arrears of interest, to upwards of fifty-four millions. Of this amount nearly eight millions were due to France, between three and four millions to private lenders in Holland, and about two hundred and fifty thousand in Spain; making, altogether, nearly twelve millions due abroad. The debt contracted at home amounted to upwards of forty-two millions, and was due, originally, to officers and soldiers of the revolutionary war, who had risked their lives for the cause; farmers who had furnished supplies for the public service, or whose property had been assumed for it; capitalists who, in critical periods of the war, had adventured their fortunes in support of their country's independence. The domestic debt, therefore, could not have had a more sacred and patriotic origin; but, in the long delay of national justice, the paper which represented these outstanding claims, had sunk to less than a sixth of its nominal value, and the larger portion of it had been parted with at that depreciated rate, either in the course of trade, or to speculative purchasers, who were willing to take the risk of eventual payment, however little their confidence seemed to be warranted, at the time, by the pecuniary condition and prospects of the country.

The debt, when thus transferred, lost its commanding appeal to patriotic sympathy; but remained as obligatory in the eye of justice. In public newspapers, however, and in private circles, the propriety of a discrimination between the assignees and the original

holders of the public securities, was freely discussed. Beside the foreign and domestic debt of the federal government, the States, individually, were involved in liabilities contracted for the common cause, to an aggregate amount of about twenty-five millions of dollars; of which, more than one-half was due from three of them: Massachusetts and South Carolina each owing more than five millions, and Virginia more than three and a half. The reputation and the well-being of the government were, therefore, at stake upon the issue of some plan to retrieve the national credit, and establish it upon a firm and secure foundation.

The Secretary of the Treasury (Mr. Hamilton), it will be remembered, had been directed by Congress to prepare such a plan during its recess. In the one thus prepared, he asserted what none were disposed to question, the propriety of paying the foreign debt according to its terms. He asserted, also, the equal validity of the original claims of the American creditors of the government; whether those creditors were the original holders of its certificates or subsequent purchasers of them at a depreciated value. The idea of any distinction between them, which some were inclined to advance, he repudiated as alike unjust, impolitic, and impracticable. He urged, moreover, the assumption, by the general government, of the separate debts of the States, contracted for the common cause, and that a like provision should be made for their payment as for the payment of those of the Union. They were all contracted in the struggle for national independence, not for the independence of any particular part. No more money would be required for their discharge as federal, than as

1790.]

HAMILTON S PLAN.

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State debts. Money could be raised more readily by the federal government than by the States, and all clashing and jealousy between State and federal debtors would thus be prevented. A reason, also, which, no doubt, had great weight with him, though he did not bring it under consideration in his report, for fear, probably, of offending the jealousy of State sovereignty, dormant, but not extinct, was, that it would tend to unite the States financially, as they were united politically, and strengthen the central government by rallying capitalists around it; subjecting them to its influence, and rendering them agents of its will. He recommended, therefore, that the entire mass of debt be funded; the Union made responsible for it, and taxes imposed for its liquidation. He suggested, moreover, the expediency, for the greater security of the debt and punctuality in the payment of interest, that the domestic creditors submit to an abatement of accruing interest.

The plan was reported to the House by Mr. Hamilton, the 14th of January, but did not undergo consideration until the 8th of February, when it was opposed with great earnestness, especially the point of assuming the State debts; as tending to consolidation, as giving an undue influence to the general government, and as being of doubtful constitutionality. This financial union of the States was reprobated, not only on the floor of Congress, but in different parts of the Union, as fraught with political evil. The Northern and Eastern States generally favored the plan, as did also South Carolina, but Virginia manifested a determined opposition. The measure, however, passed, in Committee of the Whole, on the 9th of March, by a vote of 31 to 26.

The funding of the State debts was supposed to benefit, materially, the Northern States, in which was the entire capital of the country; yet, South Carolina voted for the assumption. The fact is, opinions were honestly divided on the subject. The great majority were aiming to do their duty-to do what was right; but their disagreement was the result of real difficulties incident to the intricate and complicated problem with which they had to deal.

A letter from Washington's monitory friend, Dr. Stuart of Virginia (dated March 15th), spoke with alarm of the jealous belief growing up in that quarter, that the Northern and Eastern States were combining to pursue their own exclusive interests. Many, he observed, who had heretofore been warm supporters of the government, were changing their sentiments, from a conviction of the impracticability of union with States whose interests were so dissimilar.

Washington had little sympathy with these sectional jealousies; and the noble language in which he rebukes them, cannot be too largely cited. "I am sorry," observes he, "such jealousies as you speak of, should be gaining ground and poisoning the minds of the southern people; but, admit the fact which is alleged as the cause of them, and give it full scope, does it amount to more than was known to every man of information before, at, and since the adoption of the Constitution? Was it not always believed that there are some points which peculiarly interest the Eastern States? And did any one who reads human nature, and more especially the character of the eastern people, conceive that they would not pursue them steadily, by a combi

1790.] WASHINGTON ON SECTIONAL JEALOUSIES. 59

nation of their force? Are there not other points which equally concern the Southern States? If these States are less tenacious of their interest, or if, while the Eastern move in a solid phalanx to effect their views, the Southern are always divided, which of the two is most to be blamed? That there is a diversity of interests in the Union, none has denied. That this is

the case, also, in every State, is equally certain; and that it even extends to the counties of individual States, can be as readily proved. Instance the southern and northern parts of Virginia, the upper and lower parts of South Carolina. Have not the interests of these always been at variance? Witness the county of Fairfax. Have not the interests of the people of that county varied, or the inhabitants been taught to believe so? These are well-known truths, and yet it did not follow that separation was to result from the disagreement.

"To constitute a dispute, there must be two parties. To understand it well, both parties, and all the circumstances must be fully heard; and, to accommodate differences, temper and mutual forbearance are requisite. Common danger brought the States into confederacy, and on their union our safety and importance depend. A spirit of accommodation was the basis of the present Constitution. Can it be expected, then, that the southern or eastern parts of the empire will succeed in all their measures ? Certainly not. But I will readily grant that more points will be carried by the latter than the former, and for the reason which has been mentioned; namely, that in all great national questions, they move in unison, whilst the others are divided. But I ask again, which is most blameworthy, those who see and

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