The committee
adjourned
without eoming to any decision.
Hamilton - 1834 - Life on Hamilton - v2
26
THE LIFE OF
solemnly pledged to each other, and not revocable by any
without a breach of the general compact. 'Tis by such
expedients that nations whose resources are understood,
whose reputations and governments are erected on the
foundation of ages, are enabled to obtain a solid and ex-
tensive credit. Would it be reasonable in us to hope for
more easy terms, who have so recently assumed our rank
among the nations? Is it not to be expected, that indivi-
duals will be cautious in lending their money to a people
in our circumstances, and that they will at least require
the best security we can give V
Having adverted to the peculiar motives to remove the
existing prepossessions unfavourable to the public credit,
by means the most obvious and striking, he observed :--
"It was with these views congress determined on a
general fund; and the one they have recommended must,
upon a thorough examination, appear to have fewer incon-
veniences than any other.
* It has been remarked, as an essential part of the plan,
that the fund should depend on a single will. This will
not be the case, unless the collection, as well as the appro-
priation, is under the control of the United States; for it
is evident that, after the duty is agreed upon, it may in a
great measure be defeated by an ineffectual mode of levy-
ing it. The United States have a common interest in a
uniform and equally energetic collection; and not only
policy, but justice to all the parts of the Union, designates
the utility of lodging the power of making it where the
interest is common. Without this, it might in reality ope-
rate as a very unequal tax. "
The third objection was, "That by granting to congress
a power to collect moneys from the commerce of these
states indefinitely as to time and quantity, and for the ex-
penditure of which they are not to be accountable to the
states, they would become independent of their constitu-
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? HAMILTON.
27
ents; and so the proposed impost is repugnant to the liberty
of the United States. "
"Admitting the principle of this objection to be true, still
it ought to have no weight in the present case, because
there is no analogy between the principle and the fact.
"First--The fund proposed is sufficiently definite as to
time, because it is only coextensive with the existence of
the debt contracted, and to be contracted in the course of
the war. Congress are persuaded that it is as remote from
the intention of their constituents to perpetuate that debt,
as to extinguish it at once by'a faithless neglect of pro-
viding the means to fulfil the public engagements. Their
ability to discharge it in a moderate time, can as little be
doubted as their inclination; and the moment that debt
ceases, the duty, so far as respects the present provision,
ceases with it.
"The resolution recommending the duty, specifies the
object of it to be the discharge of the principal and interest
of the debts already contracted on the faith of the United
States for supporting the present war.
"Secondly--The rate per cent. is fixed, and it is not at
the option of the United States to increase it. Though
the product will vary according to the variations in trade,
yet, as there is this limitation of the rate, it cannot be pro-
perly said to be indefinite as to quantity.
"By the confederation, congress have an absolute discre-
tion in determining the quantum of revenue requisite for
the national expenditure. When this is done, nothing re-
mains for the states separately but the mode of raising. No
state can dispute the obligation to pay the sum demanded,
without a breach of the confederation; and when the
money comes into the treasury, the appropriation is the
exclusive province of the foederal government. This pro-
vision of the confederation, (without which it would be an
empty form,) comprehends in it the principle in its fullest
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? 28
THE LIFE OF
latitude, which the objection under consideration treats as
repugnant to the liberty of the United States; to wit, an
indefinite power of prescribing the quantity of money to
be raised, and of appropriating it when raised.
"If it be said that the states, individually, having the col-
lection in their own hands, may refuse a compliance with
exorbitant demands, the confederation will answer, that
this is a point of which they have no constitutional liberty
to judge. Such a refusal would be an exertion of power,
not of right; and the same power which could disregard
a requisition made on the authority of the confederation,
might at any time arrest the collection of the duty.
"The same kind of responsibility which exists with re-
spect to the expenditure of the money furnished in the
forms hitherto practised, would be equally applicable to
the revenue from the imports.
"The truth is, the security intended to the general liberty
in the confederation, consists in the frequent election and
in the rotation of the members of congress, by which there
is a constant and an effectual check upon them. This is
the security which the people in every state enjoy against
the usurpations of their internal governments; and it is
the true source of security in a representative republic.
The government so constituted, ought to have the means
necessary to answer the end of its institution. By weak-
ening its hands too much, it may be rendered incapable of
providing for the interior harmony or the exterior defence
of the state.
"The measure in question, if not within the letter, is
within the spirit of the confederation. Congress by that
are empowered to borrow money for the use of the United
States, and, by implication, to concert the means necessary
to accomplish the end. But without insisting on this ar-
gument, if the confederation has not made proper provi-
sion for the exigencies of the states, it will be at all times
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? HAMILTON.
29
the duty of congress to suggest further provisions; and
when their proposals are submitted to the unanimous con-
sent of the states, they can never be charged with exceed-
ing the bounds of their trust. Such a consent is the basis
and sanction of the confederation, which expressly, in the
thirteenth article, empowers congress to agree to and pre-
pare such additional provision.
"The remarks hitherto made, have had reference princi-
pally to the future prosecution of the war. There still
remains an interesting light in which the subject ought to
be viewed.
"The United States have already contracted a debt in
Europe and in this country, for which their faith is pledged.
The capital of this debt can only be discharged by de-
grees; but a fund for this purpose, and for paying the
interest annually, on every principle of policy and justice,
ought to be provided. The omission will be the deepest
ingratitude and cruelty to a large number of meritorious
individuals, who, in the most critical periods of the war,
have adventured their fortunes in support of our indepen-
dence. It would stamp the national character with indeli-
ble disgrace.
"An annual provision for the purpose will be too preca-
rious. If its continuance and application were certain, it
would not afford complete relief. With many, the regular
payment of interest, by occasional grants, would suffice;
but with many more it would not. These want the use
of the principal itself, and they have a right to it; but
since it is not in our power to pay off the principal, the
next expedient is to fund the debt, and render the evidences
of it negotiable.
"Besides the advantage to individuals from this arrange-
ment, the active stock of the nation would be increased by
the whole amount of the domestic debt, and of course, the
abilities of the community to contribute to the public
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? 30 THE LIFE OF
wants; the national credit would receive and stand here-
after on a secure basis. "
This was another object of the proposed duty.
The eligibility of this fund was next shown. "The'
principal thing," he said, "to be consulted for the ad-
vancement of commerce, is to promote exports; all im-
pediments to these, either by way of prohibition or by
increasing the prices of native commodities, decreasing by
that means their sale and consumption at foreign markets,
are injurious. Duties on exports have this operation.
Tor the same reasons, taxes on possessions and the articles
of our own growth and manufacture, whether in the form
of a land tax, excise, or any other, are more hurtful to trade
than import duties. But it was not to be inferred that the
whole revenue ought to be drawn from imports; all ex-
tremes are to be rejected. The chief thing to be attended
to is, that the weight of the taxes fall not too heavily in the
first instance upon particular parts of the community: a
judicious distribution to all kinds of taxable property, is a
first principle in taxation. "
The report closed with these impressive reflections, sug-
gested by the language of Rhode Island:--
"There is a happy mean between too much confidence
and excessive jealousy, in which the health and prosperity
of a state consist. Either extreme is a dangerous vice:
the first is a temptation to men in power to arrogate more
than they have a right to; the latter enervates govern-
ment, prevents system in the administration, defeats the
most salutary measures, breeds confusion in the state, dis-
gusts and discontents among the people, and may event-
ually prove as fatal to liberty as the opposite temper.
"It is certainly pernicious to leave any government in a
situation of responsibility disproportionate to its power.
The conduct of the war is intrusted to congress, and the
public expectation turned upon them, without any compe-
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? HAMILTON. 31
M
tent means at their command to satisfy the important
trust. After the most full and solemn deliberation, under
a collective view of all the public difficulties, they recom-
mend a measure which appears to them the corner-stone
of the public safety; they see this measure suspended for
near two years--partially complied with by some of the
states, rejected by one of them, and in danger on that ac-
count to be frustrated; the public embarrassments every
day increasing; the dissatisfaction of the army growing
more serious, the other creditors of the public clamoring
for justice--both, irritated by the delay of measures for
their present relief or future security; the hopes of our
enemies encouraged to protract the war--the zeal of our
friends depressed by an appearance of remissness and want
of exertion on our part--congress harassed, the national
character suffering, and the national safety at the mercy
of events. "
Resolutions were appended to this report giving the
first public pledge of a determination to establish a sink-
ing FUND. *
On the following day, in pursuance of another report
from Hamilton, the deputation from Rhode Island was
directed to proceed as soon as possible.
While these efforts were made, a publication appeared
* Dec. 16th. --Whereas it is essential to justice and to the preservation of
public credit, that whenever a nation is obliged by the exigencies of public
affairs to contract a debt, proper funds should be established, not only for
paying the annual value or interest of the same, but for discharging the
principal within a reasonable period, by which a nation may avoid the evils
of an excessive accumulation of debt. Therefore resolved, That whenever
the nett produce of any funds recommended by congress and granted by the
states, for funding the debt already contracted, or for procuring further loans
for the support of the war, shall exceed the sum requisite for paying the in-
terest of the whole amount of the national debt which these states may owe
at the termination of the present war, the surplus of such grants shall form
a sinking fund, to be inviolably appropriated to the payment of the principal
of the said debt, and shall on no account be diverted to any other purpose. --
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THE LIFE OF
in a Boston gazette, which gave a false view of the state
of the negotiations for foreign loans, and intimated that
the danger to be apprehended was not embarrassment for
want of funds, but from contracting too large a debt.
This misrepresentation tended to impede all the exertions
to obtain a grant of permanent funds. After some in-
quiry, Howell, a member from Rhode Island, avowed
himself the author of it, and made a motion braving the
opinion of congress, which was entered upon the journal.
Aware of the importance of an official declaration of its
falsity, Hamilton offered a resolution, which was seconded
by Carroll, that congress having, in respect to the articles
of the confederation, admitted on its journals an entry of a
motion of Mr. Howell highly derogatory to the dignity
and honour of the United States, that a committee should
be appointed to report the measures respecting it. They
reported that a true state of the negotiations should be
transmitted to the governor of Rhode Island.
i The preceding address to that state, shows Hamilton's
purpose to endeavour to establish an adequate and compre-
hensive system of finance. This would have provided for
the state emissions, and state debts incurred for the com-
mon defence. An estimate which he had submitted to the
superintendent of finance, showed that the probable re-
ceipts from the impost would be insufficient. It was
necessary to increase the revenue; but before the assent
of the states could be obtained to this increase, discontents
And in order that the several states may have proper information of the state
of their finances, it is further resolved, That as soon as the public debt can
be liquidated, each state be annually furnished with the amount thereof, and
of the interest thereon; and also of the proceeds and disposition of the funds
provided for the redemption thereof. That the faith of the United States
be pledged for the observance of the foregoing resolution, and that if any
state shall think it necessary to make it a condition of their grants, the same
will be considered by congress as consistent with their resolution of the 3d
of February, seventeen hundred and eighty-one.
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? HAMILTON.
which existed as to late requisitions were to be removed.
With these views, he moved the appointment of a com-
mittee to report what further provision should be made
"for discharging the interest on the loan-office certificates
and other liquidated debts, and to revise the requisitions.
of the preceding and present year, and to report whether
the same ought to be continued or altered. "
The principal cause of the frequent collisions between
the states as to the apportionment of the public burdens,
proceeded from the failure to carry into effect the rule of
the confederation as to the ratio of contribution. That
rule contemplated an actual specific valuation of the lands
in each state granted and surveyed, with the buildings
and improvements. Objectionable as the rule was, the
federal articles had prescribed it. Feeling the obligation
of an effort to act upon it, Hamilton, on the sixth of
January, offered a resolution in " order to enable congress
to form an eventual plan towards carrying into execu-
tion" this article of the confederation. His view was, that
this valuation should be made by commissioners appointed
by and acting under the authority of the United States
upon uniform principles. This resolution, together with
those of the sixteenth of December, was referred to a
committee composed of a member from each state.
The following day the house took up another subject
connected with the fulfilment of the public faith. The
large amount of old continental bills held in the New-
England states, they having furnished the principal sup-
plies, created a strong interest in that part of the union
that some provision should be made for their redemption.
A memorial having this object had been presented to
the previous congress, which was referred to a grand
committee of that body. This committee reported that
specie certificates should be issued for these bills when
paid into the hands of the commissioners appointed to.
5
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THE LIFE OF
settle the accounts of the several states, and of individuals
thereof, to bear an interest of six per cent. from their
date, and to be provided for as other debts, if brought in
prior to the expiration of the year seventeen hundred and
eighty-three. It also proposed that the states which had not
sunk the proportions of the . continental money assigned to
them, be charged with the deficiency at the prescribed rate.
The rate was left in blank, to be filled up by the house.
The recent pledge introduced by Hamilton, of a deter-
mination to provide for the whole debt, probably induced
Massachusetts to call up this report, in the hope that these
bills would be embraced in such provision. Much opposi-
tion existed in the southern states to any redemption of
these emissions.
When this report was offered for consideration, North
Carolina moved its postponement. This motion being
lost, a proposition was offered, that it be recommended to
the several states to redeem their quotas of the old bills
upon principles consonant "with the most substantial
justice. " This proposition also failed; and it being thus
admitted, if redeemed at all, that they were a national
charge, Hamilton moved "that the blank in the report be
filled with the word' forty,'" the rate of depreciation con-
gress had established, but which composition he had cen-
sured as a violation of the public faith. This motion was
rejected. A subsequent effort was made to fix the ratio
at one for seventy-five, which was also rejected, some
votes being against it as an inexpedient departure from
the stipulated rate; others, because hostile to any provi-
sion. * The effort to redeem them was abandoned.
? The following statement is found in the report of the debates on this
subject, Madison Papers, vol. 1, page 226, by James Madison.
"December 7th. --No congress The grand committee met again on the
business of the old paper emissions, and agreed to the plan reported by the
sub-committee in pursuance of Mr. Fitzsimmons's motion, viz. : that the out-
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? HAMILTON.
35
While the preliminary measures of finance were de-
pending, the dangers which had been apprehended from
the discontents of the army occurred, and Hamilton's ser-
standing bills should be taken up, and certificates issued in place thereof at
the rate of one real dollar for nominal ones, and that the surpluses re-
deemed by particular states should be credited to them at the same rate. Mr.
Carroll alone dissented to the plan, alleging that a law of Maryland was ad-
verse to it, which he considered as equipollent to an instruction. For rilling
up the blank, several rates were proposed. First, 1 for 40; on which the
votes were, no; except Mr. Howell. Second, 1 for 75, no; Mr. White and
Mr. Howell, aye. Third, 1 for 100, no; Mr. Hamilton and Mr. Fitzsim-
mnns, aye. Fourth, 1 for 150, no; Mr. Fitzsimmons, aye. The reasons
urged in favour of 1 for 40, were--first, an adherence to public faith; secondly,
that the depreciation of the certificates would reduce the rate sufficiently low,
they being now negotiated at the rate of 3 or 4 for 1. The reason for 1 for
75, was, that the bills passed at that rate when they were called in, in the
'eastern states ; for 1 for 100, that as popular ideas were opposed to the stipu-
lated rate, and as adopting the current rate might hurt the credit of other
securities, which derived their value from an opinion that they would be
strictly redeemed, it was best to take an arbitrary rate, leaning to the side
of liberality; for 1 for 150, that this was the medium depreciation when the
circulation ceased. The opposition to these several rates came from the south-
ern delegates, in some of whose states none, in others but little, had been re-
deemed, and in all of which the depreciation had been much greater. On
this side it was observed by Mr. Madison, that the states which had redeemed
a surplus, or even their quotas, had not done it within the period fixed by
congress, but in the last stages of depreciation, and, in a great degree, even
after the money had ceased to circulate; that since the supposed cessa-
tion, the money had generally changed hands at a value far below any rate
that had been named; that the principle established by the plan of the 18th
of March, 1780, with respect to the money in question, was, that the holder
of it should receive the value at which it was current, and at which it was
presumed he had received it; that a different rule adopted with regard to the
same money in different stages of its downfall, would give general dissatisfac-
tion.
The committee adjourned without eoming to any decision. "
On the 18th March, 1780, congress resolved that the bills in circulation
should be redeemed at the rate of 40 for 1 Spanish milled dollar. To allow a
less equivalent, was a breach of the public faith. The object of the foregoing
statement is, to represent Hamilton as voting in favour of this breach of faith;
but the statement is incorrect in all its parts.
The transaction is represented. as having occurred on the 7th of December,
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vices were placed in a conspicuous light by his efforts to
render justice to his fellow-soldiers.
Near the close of the preceding autumn, the main army,
and not on the 7th of January, the actual date of the occurrence as appears
by the journals, vol. 4, page 141. To give colour to this alteration of the date,
it is represented as having taken place in grand committee, and not in the house.
That grand committee was elected by the preceding congress,* and was
composed of Duane, Dyer, Fitzsimmons, Gilman, Hanson, Howell, Jackson,
Lee, McKean, Telfair, Williamson, and Witherspoon. Hamilton was not a
member of it; consequently, he could not have given the vote imputed to
him by Madison, nor any other vote.
The report of this committee came before congress on the 7th January, the
amount in blank; a motion was made to postpone its consideration. Hamil-
ton and Madison both voted against the motion for a postponement, which
was lost. It was then moved that the several states should redeem on prin-
ciples "of the most substantial justice. " Hamilton and Madison both voted
against this motion. Hamilton then moved to nil up the report with 40 for
1--Madison voted against it; a motion was then made of 75 for 1--Hamil-
ton and Madison both against it. No vote is given of 100 or of 150 for 1,
as stated by Madison.
The purport of these several votes was this. In voting not to postpone,
Hamilton evinced his determination to fulfil a public engagement. In voting
not to refer the provision to the states, he voted from the same motive. In
proposing 40 for 1, he voted from the same motive. In voting against 75 for
1, he voted upon the consideration stated by him in his letter to Robert
Morris, previously referred to, vol. 1, page 360:--" I have chosen the reso-
lution of March, '80, as a standard; we ought not on any account to raise
the value of the old paper higher than 40 to 1, for this will give it about the
degree of value that is most salutary, at the same time that it would avoid
a second breach of faith, which would cause a violent death to all future
credit. " He also voted on the 21st December previous, to certify certain
pledges as " debts, at 1 dollar in specie for every 40 dollars of rach pledges,"
in which Madison concurred.
Madison voting in the negative throughout, voted not to redeem the conti.
nental paper at any rate; assigning as one reason," that the principle estab-
lished by the plan of the 18th March, 1780, was, that the holder should receive
the value at which it was current, and at which it was presumed he had re-
ceived it, and that the same principle ought to govern in the different stages
of its downfall. This was not the fact; 40 for 1, was the stipulated rate,
below which no depreciation was to take place.
? 4 J. C. 141.
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? HAMILTON.
37
which had previously been moved to Verplank's Point,
took up their winter-quarters among the woody hills in
the vicinity of Newburgh, a position in every relation the
most eligible that could have been selected. Their wants,
and the near approach of peace, increased their anxiety
for an adjustment of their accounts, and led the officers to
look with extreme solicitude to the establishment of sub-
stantial funds, adequate to the discharge of their half-pay
as it should become due.
Alarmed by information that there was a large party
hostile to their claims, combinations among them to resign
in a body, at stated periods, began to be formed. But
they were diverted from this purpose, and induced to pe-
tition congress.
In their petition they stated that shadows had been
offered to them, while the substance had been gleaned by
others; that they had borne all that they could bear; that
their property was expended, their private resources at
an end, and their friends wearied out and disgusted with
their incessant applications; that the soldiers had not re-
ceived more than one-fifth of their rations; that the ar-
rearages for their clothing in seventeen hundred and
seventy-seven, were paid in continental money, when the
dollar was worth only four pence, and that the accounts
for the subsequent years were unliquidated. After this
Not only is a reason that did not exist assigned for his own vote, but one
inconsistent with integrity is imputed to Hamilton for a vote he did not give.
Madison gave the vote Hamilton refused to give. The reason stated by
Madison to have been " urged in favour of" 40 for 1, the rate Hamilton
proposed, was, " an adherence to public faith. " The reason imputed to
Hamilton by Madijon for voting for 100 for 1, which Hamilton did not vote
for, was, that as popular ideas were opposed to the stipulated rate, and as
adopting the current rate might hurt the credit of other securities, which de-
rived their value from an opinion that they would be ttrietly redeemed, it
was best to take an arbitrary rate leaning to the side of popularity. " What
must be thought of such statements?
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THE LIFE OF
recapitulation of their wrongs, having asked for a supply
of money as soon as possible, they urged an immediate
adjustment of their dues; that a part should be paid, and
the remainder put on such a footing as would restore
cheerfulness to the army, revive confidence in the justice
and generosity of its constituents, and contribute to the
very desirable effect of re-establishing public credit. Ad-
verting, in fine, to the odious light in which the persons
entitled to half-pay were viewed, they proposed, in order
to prevent altercations and distinctions, to commute the
half-pay for full pay for a certain number of years, or for
a sum in gross.
To attain these objects, they appointed General McDou-
gal, Colonels Brooks and Ogden, a committee of corre-
spondence to repair to Philadelphia. The state of opinion
in congress was not such as to inspire confidence. The
jealous spirit which withheld from the confederation the
only means of restoring the public credit, and which, on
the return of peace, was not unwilling to abandon or to
dissolve the union, had been strongly evinced as to the
claims of the army.
Aware of the difficulties to be encountered, it has been
seen that Hamilton had been foremost to induce the refu-
sal of all partial favours to any particular body of officers,
had urged the necessity of avoiding discriminations be-
tween different classes of creditors, and had succeeded in
postponing various applications for relief, the grant of
which must have engendered discontent.
The army memorial was referred to a committee of
which he was chairman, and on the twenty-fifth of Janua-
ry a report was made by him.
It comprehended five articles:--Present pay--a settle-
ment of accounts of the arrearages of pay, and security
for what was due--a commutation of the half-pay for an
equivalent in gross--a settlement of the accounts of defi-
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? HAMILTON.
39
ciencies of rations and compensation, and a similar settle-
ment as to clothing and compensation.
As to the pay, this report directed the superintendent
of finance to make the payment requested, as soon as the
state of the finances would permit; as to the accounts,
that the states be called upon to complete the settlements
with their respective levies to the first of August, seven-
teen hundred and eighty,* and that settlement from that
period be made at the office of finance. As to security,
it declared that the troops of the United States, in com-
mon with all their creditors, have an undoubted right to
expect such security, and that congress will make every
effort in their power to obtain from the respective
states substantial funds, adequate to the object of
funding the whole debt of the United States, and will
enter upon an immediate and full consideration of the
nature of such funds, and the most likely mode of ob-
taining them.
The remaining articles were referred to a sub-committee
of which Hamilton was a member; and after the interval
* By resolution of 12th August, 1780, the states were recommended to
make compensation for the depreciation of their pay; and from the first of
that month it was declared that the army should receive it in the new emis-
sions. It was therefore an express stipulation. Yet Madison states, "a
compromise was proposed by Hamilton, by substituting the last day of De-
cember, 1780," for the first of August, in compliance with an objection of
the eastern states.
The same principle was involved with that in the pledge of $40 for 1,
of the old emission, as to which the charge has been disproved. It is seen
that Hamilton's report was in conformity with this stipulation. How the
change to December occurred, does not appear; but the journals show that
Hamilton voted to reinstate August. * As this statement rests solely upon
the evidence of Madison, and is neither in accordance with the report nor
with this vote, its probability is more than questionable. --1 Mad. 278-9,
280.
? 4 J. C. 152
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of a day, that part of this report which promised substan-
tial and adequate funds, was considered.
The earliest known opinions of Hamilton indicate his
conviction that the command of the revenue should be
vested in congress, and that it should have the collection
of it. He had stated in "the Continentalist,"* as "the
great defect of the confederation, that it gives the United
States no property, or in other words, no revenue, nor the
means of acquiring it inherent in themselves, and inde-
pendent on the temporary pleasure of the different mem-
bers. "--" As power without revenue, in a political society,
was a name; while congress," he then said, "continue
altogether dependent on the occasional grants of the seve-
ral states, for the means of defraying the expenses of the
federal government, it can neither have dignity, vigour,
nor credit. Credit supposes specific and permanent funds
for the punctual payment of interest, with a moral cer-
tainty of the final redemption of the principal. This
credit being to be procured through congress, the funds
ought to be provided, declared, and vested in them. Had
we begun the practice of funding four years ago, we
should have avoided that depreciation of the currency,
which has been as pernicious to the morals as to the cre-
dit of the nation. " It has been seen that he at the same
time expressed the opinion, that congress should have the
appointment " of all officers of the customs, collectors of
taxes, and military officers of every rank, so as to create
in the interior of each state a mass of influence in favour
of the federal government. "
The period had now arrived when he was enabled, per-
sonally, to propose the adoption of a measure which he
had long contemplated--the establishment of a permanent
national revenue. Unfortunately, on the dayt when the
? August 4, 1781--No. 4.
t Jan. 27.
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? HAMILTON.
41
discussion of this subject commenced, the delegates from
Virginia laid before congress an act of their legislature,
repealing her grant of the power to raise an impost; a
repeal not dictated by temporary considerations, but mani-
festing a decided repugnance to the supremacy of the
national legislature over any part of the revenue.
It declared, "that the permitting any power other than
the general assembly of this commonwealth, to levy duties
or taxes upon the citizens of this state, within the same,
is injurious to its sovereignty, may prove destructive of the
rights and liberty of this people, and so far as congress
might exercise the same, is contravening the spirit of the
confederation. " Unpropitious as this procedure was, no
other resource existed, and the debate proceeded in a com-
mittee on " permanent funds. "
The first question to be decided was, whether if funds
were provided they were to be collected by the states, or,
as Hamilton had previo usly urged, should depend on " a
single will. " With a view to its decision, he offered the
following declaratory resolution:--" That it is the opinion
of congress that complete justice cannot be done to the
creditors of the United States, nor the restoration of pub-
lic credit be effected, nor the future exigencies of the war
be provided for, but by the establishment of permanent
and adequate funds, to operate generally throughout the
United States, to be collected by congress. "
The petition of the officers of the army had been heard
and answered; the memorial of the other public creditors
had not been replied to.
After the late act of Virginia repealing the impost, it
was particularly important that they should receive a
similar pledge of ultimate justice. Prompted by this con-
sideration, immediately after the introduction of this im-
portant resolution, Hamilton presented a report on the
memorial of Pennsylvania respecting the debts due to her
6
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THE LIFE OF
citizens. This report stated," that any attempts to pay any
of the past debts, would form so heavy a deduction from
the greatest revenue that could be raised as would totally
obstruct all present service, and that any present provision
should be confined to the interest of the public debts.
That such provision would offer eventual relief to the pub-
lic creditors, and enable them to support their share of the
public burdens without appropriating the whole revenue
which can be drawn from the people to a payment of debts,
and leaving thereby the public service unprovided for,
which would involve the ruin of all ranks, creditors and
others. That congress were and had long been deeply
impressed with the absolute necessity that speedy and
effectual measures should be taken, first to liquidate and
ascertain the public debts, and then to secure the payment
of the interest until the principal could be discharged.
Acts of congress were referred to as evidence of this
assertion. He added, that after a delay of two years,
Rhode Island had entirely refused its concurrence to the
impost, that Virginia had withdrawn its assent once given,
and that a third state had returned no answer.
The inability of congress to perform its engagements,
was stated to have resulted from the defective compliances
of the states during the war. Of the last requisition for
eight millions, only four hundred and twenty thousand dol-
lars had been collected. The proceeds of the foreign
loans* were stated, showing an available balance a little
* In vol. 1, page 273, of Madison's Debates, this passage is found:--
"In a late report, which had been drawn up by Mr. Hamilton, and made
to congress, in answer to a memorial from the legislature of Pennsylvania,
among other things showing the impossibility congress had been under of
paying their creditors, it was observed, that the aid afforded by the court of
France, had been appropriated by that court, at the time, to the immediate
use of the army. This clause was objected to as unnecessary, and as dis.
honourable to congress. The fact also was controverted. Mr. Hamilton
#
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? HAMILTON.
43
exceeding eight hundred thousand dollars; while to feed,
clothe, and pay the army, required nearly six millions.
The whole sum within the command of congress, was
and Mr. Fitzsimmons justified the expediency of retaining it, in order to
justify congress the more explicitly in failing to fulfil their engagements to
the public creditors. Mr. Wilson and Madison proposed to strike out the
words ' appropriated by France,' and substitute the words ' applied by con-
gress to the immediate and necessary support of the army. ' This proposi-
tion would have been readily approved, had it not appeared on examination,
that in one or two small instances, and particularly in the payment of the
balance due to Arthur Lee, Esq. , other applications had been made of the aid
in question. The report was finally recommitted. "
This is no less than a charge of stating an untruth, and justifying it on
the score of expediency, on the part of two gentlemen whose probity never
was suspected, and for the motive of justifying congress with the public
creditors. This minute is of the 24th of January. It speaks of a late report
made to congress. The journal of that date does not refer to this report, but
on the thirtieth of January it is given in full, as having been " agreed to as
follows. " A reason assigned by Madison why the clause thus objected to
was not stricken out, is, that there had been a diversion of the money in one
or two small instances. He adds, that it was recommitted. But if these
instances prevented this clause being expunged, if it had been originally in
the report, it must necessarily have been retained. On referring to this re-
port, " agreed to" by congress, no such clause can be found. Its language
is--" But according to the best accounts which can be obtained, the antici-
pations made in the funds for the year 1782 amounted, at the close of 1781,
to four millions of livres. For the service of that year, his most christian
majesty lent the United States 6,000,000 livres. "--4 J. C. 155.
But if it be assumed that the clause was there originally, and was
stricken out, the charge is unsupported. The journals, page 202, contain
the papers which Madison as chairman of a committee reported, and refer-
red to in an address of which he was the author. One of these papers, No.
IV. , is a letter from the French ambassador at Philadelphia, dated March
15, 1783. It commences thus--" Sir: I have the satisfaction to inform you,
that his majesty procures for the United States a loan of six millions, to be
employed in the war department during the course of the current year. "
"The Count de Vergennes informs me, sir, that the six millions are lent to
the United States in the same manner, and under the same conditions, with
the sum which was lent last year. " "I have had the honour to inform you,
air, that this money is lent to the United States to enable them to carry on
the war. The wisdom of congress will determine according to circum-
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THE LIFE OF
solemnly pledged to each other, and not revocable by any
without a breach of the general compact. 'Tis by such
expedients that nations whose resources are understood,
whose reputations and governments are erected on the
foundation of ages, are enabled to obtain a solid and ex-
tensive credit. Would it be reasonable in us to hope for
more easy terms, who have so recently assumed our rank
among the nations? Is it not to be expected, that indivi-
duals will be cautious in lending their money to a people
in our circumstances, and that they will at least require
the best security we can give V
Having adverted to the peculiar motives to remove the
existing prepossessions unfavourable to the public credit,
by means the most obvious and striking, he observed :--
"It was with these views congress determined on a
general fund; and the one they have recommended must,
upon a thorough examination, appear to have fewer incon-
veniences than any other.
* It has been remarked, as an essential part of the plan,
that the fund should depend on a single will. This will
not be the case, unless the collection, as well as the appro-
priation, is under the control of the United States; for it
is evident that, after the duty is agreed upon, it may in a
great measure be defeated by an ineffectual mode of levy-
ing it. The United States have a common interest in a
uniform and equally energetic collection; and not only
policy, but justice to all the parts of the Union, designates
the utility of lodging the power of making it where the
interest is common. Without this, it might in reality ope-
rate as a very unequal tax. "
The third objection was, "That by granting to congress
a power to collect moneys from the commerce of these
states indefinitely as to time and quantity, and for the ex-
penditure of which they are not to be accountable to the
states, they would become independent of their constitu-
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? HAMILTON.
27
ents; and so the proposed impost is repugnant to the liberty
of the United States. "
"Admitting the principle of this objection to be true, still
it ought to have no weight in the present case, because
there is no analogy between the principle and the fact.
"First--The fund proposed is sufficiently definite as to
time, because it is only coextensive with the existence of
the debt contracted, and to be contracted in the course of
the war. Congress are persuaded that it is as remote from
the intention of their constituents to perpetuate that debt,
as to extinguish it at once by'a faithless neglect of pro-
viding the means to fulfil the public engagements. Their
ability to discharge it in a moderate time, can as little be
doubted as their inclination; and the moment that debt
ceases, the duty, so far as respects the present provision,
ceases with it.
"The resolution recommending the duty, specifies the
object of it to be the discharge of the principal and interest
of the debts already contracted on the faith of the United
States for supporting the present war.
"Secondly--The rate per cent. is fixed, and it is not at
the option of the United States to increase it. Though
the product will vary according to the variations in trade,
yet, as there is this limitation of the rate, it cannot be pro-
perly said to be indefinite as to quantity.
"By the confederation, congress have an absolute discre-
tion in determining the quantum of revenue requisite for
the national expenditure. When this is done, nothing re-
mains for the states separately but the mode of raising. No
state can dispute the obligation to pay the sum demanded,
without a breach of the confederation; and when the
money comes into the treasury, the appropriation is the
exclusive province of the foederal government. This pro-
vision of the confederation, (without which it would be an
empty form,) comprehends in it the principle in its fullest
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latitude, which the objection under consideration treats as
repugnant to the liberty of the United States; to wit, an
indefinite power of prescribing the quantity of money to
be raised, and of appropriating it when raised.
"If it be said that the states, individually, having the col-
lection in their own hands, may refuse a compliance with
exorbitant demands, the confederation will answer, that
this is a point of which they have no constitutional liberty
to judge. Such a refusal would be an exertion of power,
not of right; and the same power which could disregard
a requisition made on the authority of the confederation,
might at any time arrest the collection of the duty.
"The same kind of responsibility which exists with re-
spect to the expenditure of the money furnished in the
forms hitherto practised, would be equally applicable to
the revenue from the imports.
"The truth is, the security intended to the general liberty
in the confederation, consists in the frequent election and
in the rotation of the members of congress, by which there
is a constant and an effectual check upon them. This is
the security which the people in every state enjoy against
the usurpations of their internal governments; and it is
the true source of security in a representative republic.
The government so constituted, ought to have the means
necessary to answer the end of its institution. By weak-
ening its hands too much, it may be rendered incapable of
providing for the interior harmony or the exterior defence
of the state.
"The measure in question, if not within the letter, is
within the spirit of the confederation. Congress by that
are empowered to borrow money for the use of the United
States, and, by implication, to concert the means necessary
to accomplish the end. But without insisting on this ar-
gument, if the confederation has not made proper provi-
sion for the exigencies of the states, it will be at all times
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? HAMILTON.
29
the duty of congress to suggest further provisions; and
when their proposals are submitted to the unanimous con-
sent of the states, they can never be charged with exceed-
ing the bounds of their trust. Such a consent is the basis
and sanction of the confederation, which expressly, in the
thirteenth article, empowers congress to agree to and pre-
pare such additional provision.
"The remarks hitherto made, have had reference princi-
pally to the future prosecution of the war. There still
remains an interesting light in which the subject ought to
be viewed.
"The United States have already contracted a debt in
Europe and in this country, for which their faith is pledged.
The capital of this debt can only be discharged by de-
grees; but a fund for this purpose, and for paying the
interest annually, on every principle of policy and justice,
ought to be provided. The omission will be the deepest
ingratitude and cruelty to a large number of meritorious
individuals, who, in the most critical periods of the war,
have adventured their fortunes in support of our indepen-
dence. It would stamp the national character with indeli-
ble disgrace.
"An annual provision for the purpose will be too preca-
rious. If its continuance and application were certain, it
would not afford complete relief. With many, the regular
payment of interest, by occasional grants, would suffice;
but with many more it would not. These want the use
of the principal itself, and they have a right to it; but
since it is not in our power to pay off the principal, the
next expedient is to fund the debt, and render the evidences
of it negotiable.
"Besides the advantage to individuals from this arrange-
ment, the active stock of the nation would be increased by
the whole amount of the domestic debt, and of course, the
abilities of the community to contribute to the public
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? 30 THE LIFE OF
wants; the national credit would receive and stand here-
after on a secure basis. "
This was another object of the proposed duty.
The eligibility of this fund was next shown. "The'
principal thing," he said, "to be consulted for the ad-
vancement of commerce, is to promote exports; all im-
pediments to these, either by way of prohibition or by
increasing the prices of native commodities, decreasing by
that means their sale and consumption at foreign markets,
are injurious. Duties on exports have this operation.
Tor the same reasons, taxes on possessions and the articles
of our own growth and manufacture, whether in the form
of a land tax, excise, or any other, are more hurtful to trade
than import duties. But it was not to be inferred that the
whole revenue ought to be drawn from imports; all ex-
tremes are to be rejected. The chief thing to be attended
to is, that the weight of the taxes fall not too heavily in the
first instance upon particular parts of the community: a
judicious distribution to all kinds of taxable property, is a
first principle in taxation. "
The report closed with these impressive reflections, sug-
gested by the language of Rhode Island:--
"There is a happy mean between too much confidence
and excessive jealousy, in which the health and prosperity
of a state consist. Either extreme is a dangerous vice:
the first is a temptation to men in power to arrogate more
than they have a right to; the latter enervates govern-
ment, prevents system in the administration, defeats the
most salutary measures, breeds confusion in the state, dis-
gusts and discontents among the people, and may event-
ually prove as fatal to liberty as the opposite temper.
"It is certainly pernicious to leave any government in a
situation of responsibility disproportionate to its power.
The conduct of the war is intrusted to congress, and the
public expectation turned upon them, without any compe-
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? HAMILTON. 31
M
tent means at their command to satisfy the important
trust. After the most full and solemn deliberation, under
a collective view of all the public difficulties, they recom-
mend a measure which appears to them the corner-stone
of the public safety; they see this measure suspended for
near two years--partially complied with by some of the
states, rejected by one of them, and in danger on that ac-
count to be frustrated; the public embarrassments every
day increasing; the dissatisfaction of the army growing
more serious, the other creditors of the public clamoring
for justice--both, irritated by the delay of measures for
their present relief or future security; the hopes of our
enemies encouraged to protract the war--the zeal of our
friends depressed by an appearance of remissness and want
of exertion on our part--congress harassed, the national
character suffering, and the national safety at the mercy
of events. "
Resolutions were appended to this report giving the
first public pledge of a determination to establish a sink-
ing FUND. *
On the following day, in pursuance of another report
from Hamilton, the deputation from Rhode Island was
directed to proceed as soon as possible.
While these efforts were made, a publication appeared
* Dec. 16th. --Whereas it is essential to justice and to the preservation of
public credit, that whenever a nation is obliged by the exigencies of public
affairs to contract a debt, proper funds should be established, not only for
paying the annual value or interest of the same, but for discharging the
principal within a reasonable period, by which a nation may avoid the evils
of an excessive accumulation of debt. Therefore resolved, That whenever
the nett produce of any funds recommended by congress and granted by the
states, for funding the debt already contracted, or for procuring further loans
for the support of the war, shall exceed the sum requisite for paying the in-
terest of the whole amount of the national debt which these states may owe
at the termination of the present war, the surplus of such grants shall form
a sinking fund, to be inviolably appropriated to the payment of the principal
of the said debt, and shall on no account be diverted to any other purpose. --
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THE LIFE OF
in a Boston gazette, which gave a false view of the state
of the negotiations for foreign loans, and intimated that
the danger to be apprehended was not embarrassment for
want of funds, but from contracting too large a debt.
This misrepresentation tended to impede all the exertions
to obtain a grant of permanent funds. After some in-
quiry, Howell, a member from Rhode Island, avowed
himself the author of it, and made a motion braving the
opinion of congress, which was entered upon the journal.
Aware of the importance of an official declaration of its
falsity, Hamilton offered a resolution, which was seconded
by Carroll, that congress having, in respect to the articles
of the confederation, admitted on its journals an entry of a
motion of Mr. Howell highly derogatory to the dignity
and honour of the United States, that a committee should
be appointed to report the measures respecting it. They
reported that a true state of the negotiations should be
transmitted to the governor of Rhode Island.
i The preceding address to that state, shows Hamilton's
purpose to endeavour to establish an adequate and compre-
hensive system of finance. This would have provided for
the state emissions, and state debts incurred for the com-
mon defence. An estimate which he had submitted to the
superintendent of finance, showed that the probable re-
ceipts from the impost would be insufficient. It was
necessary to increase the revenue; but before the assent
of the states could be obtained to this increase, discontents
And in order that the several states may have proper information of the state
of their finances, it is further resolved, That as soon as the public debt can
be liquidated, each state be annually furnished with the amount thereof, and
of the interest thereon; and also of the proceeds and disposition of the funds
provided for the redemption thereof. That the faith of the United States
be pledged for the observance of the foregoing resolution, and that if any
state shall think it necessary to make it a condition of their grants, the same
will be considered by congress as consistent with their resolution of the 3d
of February, seventeen hundred and eighty-one.
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? HAMILTON.
which existed as to late requisitions were to be removed.
With these views, he moved the appointment of a com-
mittee to report what further provision should be made
"for discharging the interest on the loan-office certificates
and other liquidated debts, and to revise the requisitions.
of the preceding and present year, and to report whether
the same ought to be continued or altered. "
The principal cause of the frequent collisions between
the states as to the apportionment of the public burdens,
proceeded from the failure to carry into effect the rule of
the confederation as to the ratio of contribution. That
rule contemplated an actual specific valuation of the lands
in each state granted and surveyed, with the buildings
and improvements. Objectionable as the rule was, the
federal articles had prescribed it. Feeling the obligation
of an effort to act upon it, Hamilton, on the sixth of
January, offered a resolution in " order to enable congress
to form an eventual plan towards carrying into execu-
tion" this article of the confederation. His view was, that
this valuation should be made by commissioners appointed
by and acting under the authority of the United States
upon uniform principles. This resolution, together with
those of the sixteenth of December, was referred to a
committee composed of a member from each state.
The following day the house took up another subject
connected with the fulfilment of the public faith. The
large amount of old continental bills held in the New-
England states, they having furnished the principal sup-
plies, created a strong interest in that part of the union
that some provision should be made for their redemption.
A memorial having this object had been presented to
the previous congress, which was referred to a grand
committee of that body. This committee reported that
specie certificates should be issued for these bills when
paid into the hands of the commissioners appointed to.
5
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THE LIFE OF
settle the accounts of the several states, and of individuals
thereof, to bear an interest of six per cent. from their
date, and to be provided for as other debts, if brought in
prior to the expiration of the year seventeen hundred and
eighty-three. It also proposed that the states which had not
sunk the proportions of the . continental money assigned to
them, be charged with the deficiency at the prescribed rate.
The rate was left in blank, to be filled up by the house.
The recent pledge introduced by Hamilton, of a deter-
mination to provide for the whole debt, probably induced
Massachusetts to call up this report, in the hope that these
bills would be embraced in such provision. Much opposi-
tion existed in the southern states to any redemption of
these emissions.
When this report was offered for consideration, North
Carolina moved its postponement. This motion being
lost, a proposition was offered, that it be recommended to
the several states to redeem their quotas of the old bills
upon principles consonant "with the most substantial
justice. " This proposition also failed; and it being thus
admitted, if redeemed at all, that they were a national
charge, Hamilton moved "that the blank in the report be
filled with the word' forty,'" the rate of depreciation con-
gress had established, but which composition he had cen-
sured as a violation of the public faith. This motion was
rejected. A subsequent effort was made to fix the ratio
at one for seventy-five, which was also rejected, some
votes being against it as an inexpedient departure from
the stipulated rate; others, because hostile to any provi-
sion. * The effort to redeem them was abandoned.
? The following statement is found in the report of the debates on this
subject, Madison Papers, vol. 1, page 226, by James Madison.
"December 7th. --No congress The grand committee met again on the
business of the old paper emissions, and agreed to the plan reported by the
sub-committee in pursuance of Mr. Fitzsimmons's motion, viz. : that the out-
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? HAMILTON.
35
While the preliminary measures of finance were de-
pending, the dangers which had been apprehended from
the discontents of the army occurred, and Hamilton's ser-
standing bills should be taken up, and certificates issued in place thereof at
the rate of one real dollar for nominal ones, and that the surpluses re-
deemed by particular states should be credited to them at the same rate. Mr.
Carroll alone dissented to the plan, alleging that a law of Maryland was ad-
verse to it, which he considered as equipollent to an instruction. For rilling
up the blank, several rates were proposed. First, 1 for 40; on which the
votes were, no; except Mr. Howell. Second, 1 for 75, no; Mr. White and
Mr. Howell, aye. Third, 1 for 100, no; Mr. Hamilton and Mr. Fitzsim-
mnns, aye. Fourth, 1 for 150, no; Mr. Fitzsimmons, aye. The reasons
urged in favour of 1 for 40, were--first, an adherence to public faith; secondly,
that the depreciation of the certificates would reduce the rate sufficiently low,
they being now negotiated at the rate of 3 or 4 for 1. The reason for 1 for
75, was, that the bills passed at that rate when they were called in, in the
'eastern states ; for 1 for 100, that as popular ideas were opposed to the stipu-
lated rate, and as adopting the current rate might hurt the credit of other
securities, which derived their value from an opinion that they would be
strictly redeemed, it was best to take an arbitrary rate, leaning to the side
of liberality; for 1 for 150, that this was the medium depreciation when the
circulation ceased. The opposition to these several rates came from the south-
ern delegates, in some of whose states none, in others but little, had been re-
deemed, and in all of which the depreciation had been much greater. On
this side it was observed by Mr. Madison, that the states which had redeemed
a surplus, or even their quotas, had not done it within the period fixed by
congress, but in the last stages of depreciation, and, in a great degree, even
after the money had ceased to circulate; that since the supposed cessa-
tion, the money had generally changed hands at a value far below any rate
that had been named; that the principle established by the plan of the 18th
of March, 1780, with respect to the money in question, was, that the holder
of it should receive the value at which it was current, and at which it was
presumed he had received it; that a different rule adopted with regard to the
same money in different stages of its downfall, would give general dissatisfac-
tion.
The committee adjourned without eoming to any decision. "
On the 18th March, 1780, congress resolved that the bills in circulation
should be redeemed at the rate of 40 for 1 Spanish milled dollar. To allow a
less equivalent, was a breach of the public faith. The object of the foregoing
statement is, to represent Hamilton as voting in favour of this breach of faith;
but the statement is incorrect in all its parts.
The transaction is represented. as having occurred on the 7th of December,
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vices were placed in a conspicuous light by his efforts to
render justice to his fellow-soldiers.
Near the close of the preceding autumn, the main army,
and not on the 7th of January, the actual date of the occurrence as appears
by the journals, vol. 4, page 141. To give colour to this alteration of the date,
it is represented as having taken place in grand committee, and not in the house.
That grand committee was elected by the preceding congress,* and was
composed of Duane, Dyer, Fitzsimmons, Gilman, Hanson, Howell, Jackson,
Lee, McKean, Telfair, Williamson, and Witherspoon. Hamilton was not a
member of it; consequently, he could not have given the vote imputed to
him by Madison, nor any other vote.
The report of this committee came before congress on the 7th January, the
amount in blank; a motion was made to postpone its consideration. Hamil-
ton and Madison both voted against the motion for a postponement, which
was lost. It was then moved that the several states should redeem on prin-
ciples "of the most substantial justice. " Hamilton and Madison both voted
against this motion. Hamilton then moved to nil up the report with 40 for
1--Madison voted against it; a motion was then made of 75 for 1--Hamil-
ton and Madison both against it. No vote is given of 100 or of 150 for 1,
as stated by Madison.
The purport of these several votes was this. In voting not to postpone,
Hamilton evinced his determination to fulfil a public engagement. In voting
not to refer the provision to the states, he voted from the same motive. In
proposing 40 for 1, he voted from the same motive. In voting against 75 for
1, he voted upon the consideration stated by him in his letter to Robert
Morris, previously referred to, vol. 1, page 360:--" I have chosen the reso-
lution of March, '80, as a standard; we ought not on any account to raise
the value of the old paper higher than 40 to 1, for this will give it about the
degree of value that is most salutary, at the same time that it would avoid
a second breach of faith, which would cause a violent death to all future
credit. " He also voted on the 21st December previous, to certify certain
pledges as " debts, at 1 dollar in specie for every 40 dollars of rach pledges,"
in which Madison concurred.
Madison voting in the negative throughout, voted not to redeem the conti.
nental paper at any rate; assigning as one reason," that the principle estab-
lished by the plan of the 18th March, 1780, was, that the holder should receive
the value at which it was current, and at which it was presumed he had re-
ceived it, and that the same principle ought to govern in the different stages
of its downfall. This was not the fact; 40 for 1, was the stipulated rate,
below which no depreciation was to take place.
? 4 J. C. 141.
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? HAMILTON.
37
which had previously been moved to Verplank's Point,
took up their winter-quarters among the woody hills in
the vicinity of Newburgh, a position in every relation the
most eligible that could have been selected. Their wants,
and the near approach of peace, increased their anxiety
for an adjustment of their accounts, and led the officers to
look with extreme solicitude to the establishment of sub-
stantial funds, adequate to the discharge of their half-pay
as it should become due.
Alarmed by information that there was a large party
hostile to their claims, combinations among them to resign
in a body, at stated periods, began to be formed. But
they were diverted from this purpose, and induced to pe-
tition congress.
In their petition they stated that shadows had been
offered to them, while the substance had been gleaned by
others; that they had borne all that they could bear; that
their property was expended, their private resources at
an end, and their friends wearied out and disgusted with
their incessant applications; that the soldiers had not re-
ceived more than one-fifth of their rations; that the ar-
rearages for their clothing in seventeen hundred and
seventy-seven, were paid in continental money, when the
dollar was worth only four pence, and that the accounts
for the subsequent years were unliquidated. After this
Not only is a reason that did not exist assigned for his own vote, but one
inconsistent with integrity is imputed to Hamilton for a vote he did not give.
Madison gave the vote Hamilton refused to give. The reason stated by
Madison to have been " urged in favour of" 40 for 1, the rate Hamilton
proposed, was, " an adherence to public faith. " The reason imputed to
Hamilton by Madijon for voting for 100 for 1, which Hamilton did not vote
for, was, that as popular ideas were opposed to the stipulated rate, and as
adopting the current rate might hurt the credit of other securities, which de-
rived their value from an opinion that they would be ttrietly redeemed, it
was best to take an arbitrary rate leaning to the side of popularity. " What
must be thought of such statements?
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recapitulation of their wrongs, having asked for a supply
of money as soon as possible, they urged an immediate
adjustment of their dues; that a part should be paid, and
the remainder put on such a footing as would restore
cheerfulness to the army, revive confidence in the justice
and generosity of its constituents, and contribute to the
very desirable effect of re-establishing public credit. Ad-
verting, in fine, to the odious light in which the persons
entitled to half-pay were viewed, they proposed, in order
to prevent altercations and distinctions, to commute the
half-pay for full pay for a certain number of years, or for
a sum in gross.
To attain these objects, they appointed General McDou-
gal, Colonels Brooks and Ogden, a committee of corre-
spondence to repair to Philadelphia. The state of opinion
in congress was not such as to inspire confidence. The
jealous spirit which withheld from the confederation the
only means of restoring the public credit, and which, on
the return of peace, was not unwilling to abandon or to
dissolve the union, had been strongly evinced as to the
claims of the army.
Aware of the difficulties to be encountered, it has been
seen that Hamilton had been foremost to induce the refu-
sal of all partial favours to any particular body of officers,
had urged the necessity of avoiding discriminations be-
tween different classes of creditors, and had succeeded in
postponing various applications for relief, the grant of
which must have engendered discontent.
The army memorial was referred to a committee of
which he was chairman, and on the twenty-fifth of Janua-
ry a report was made by him.
It comprehended five articles:--Present pay--a settle-
ment of accounts of the arrearages of pay, and security
for what was due--a commutation of the half-pay for an
equivalent in gross--a settlement of the accounts of defi-
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? HAMILTON.
39
ciencies of rations and compensation, and a similar settle-
ment as to clothing and compensation.
As to the pay, this report directed the superintendent
of finance to make the payment requested, as soon as the
state of the finances would permit; as to the accounts,
that the states be called upon to complete the settlements
with their respective levies to the first of August, seven-
teen hundred and eighty,* and that settlement from that
period be made at the office of finance. As to security,
it declared that the troops of the United States, in com-
mon with all their creditors, have an undoubted right to
expect such security, and that congress will make every
effort in their power to obtain from the respective
states substantial funds, adequate to the object of
funding the whole debt of the United States, and will
enter upon an immediate and full consideration of the
nature of such funds, and the most likely mode of ob-
taining them.
The remaining articles were referred to a sub-committee
of which Hamilton was a member; and after the interval
* By resolution of 12th August, 1780, the states were recommended to
make compensation for the depreciation of their pay; and from the first of
that month it was declared that the army should receive it in the new emis-
sions. It was therefore an express stipulation. Yet Madison states, "a
compromise was proposed by Hamilton, by substituting the last day of De-
cember, 1780," for the first of August, in compliance with an objection of
the eastern states.
The same principle was involved with that in the pledge of $40 for 1,
of the old emission, as to which the charge has been disproved. It is seen
that Hamilton's report was in conformity with this stipulation. How the
change to December occurred, does not appear; but the journals show that
Hamilton voted to reinstate August. * As this statement rests solely upon
the evidence of Madison, and is neither in accordance with the report nor
with this vote, its probability is more than questionable. --1 Mad. 278-9,
280.
? 4 J. C. 152
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of a day, that part of this report which promised substan-
tial and adequate funds, was considered.
The earliest known opinions of Hamilton indicate his
conviction that the command of the revenue should be
vested in congress, and that it should have the collection
of it. He had stated in "the Continentalist,"* as "the
great defect of the confederation, that it gives the United
States no property, or in other words, no revenue, nor the
means of acquiring it inherent in themselves, and inde-
pendent on the temporary pleasure of the different mem-
bers. "--" As power without revenue, in a political society,
was a name; while congress," he then said, "continue
altogether dependent on the occasional grants of the seve-
ral states, for the means of defraying the expenses of the
federal government, it can neither have dignity, vigour,
nor credit. Credit supposes specific and permanent funds
for the punctual payment of interest, with a moral cer-
tainty of the final redemption of the principal. This
credit being to be procured through congress, the funds
ought to be provided, declared, and vested in them. Had
we begun the practice of funding four years ago, we
should have avoided that depreciation of the currency,
which has been as pernicious to the morals as to the cre-
dit of the nation. " It has been seen that he at the same
time expressed the opinion, that congress should have the
appointment " of all officers of the customs, collectors of
taxes, and military officers of every rank, so as to create
in the interior of each state a mass of influence in favour
of the federal government. "
The period had now arrived when he was enabled, per-
sonally, to propose the adoption of a measure which he
had long contemplated--the establishment of a permanent
national revenue. Unfortunately, on the dayt when the
? August 4, 1781--No. 4.
t Jan. 27.
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? HAMILTON.
41
discussion of this subject commenced, the delegates from
Virginia laid before congress an act of their legislature,
repealing her grant of the power to raise an impost; a
repeal not dictated by temporary considerations, but mani-
festing a decided repugnance to the supremacy of the
national legislature over any part of the revenue.
It declared, "that the permitting any power other than
the general assembly of this commonwealth, to levy duties
or taxes upon the citizens of this state, within the same,
is injurious to its sovereignty, may prove destructive of the
rights and liberty of this people, and so far as congress
might exercise the same, is contravening the spirit of the
confederation. " Unpropitious as this procedure was, no
other resource existed, and the debate proceeded in a com-
mittee on " permanent funds. "
The first question to be decided was, whether if funds
were provided they were to be collected by the states, or,
as Hamilton had previo usly urged, should depend on " a
single will. " With a view to its decision, he offered the
following declaratory resolution:--" That it is the opinion
of congress that complete justice cannot be done to the
creditors of the United States, nor the restoration of pub-
lic credit be effected, nor the future exigencies of the war
be provided for, but by the establishment of permanent
and adequate funds, to operate generally throughout the
United States, to be collected by congress. "
The petition of the officers of the army had been heard
and answered; the memorial of the other public creditors
had not been replied to.
After the late act of Virginia repealing the impost, it
was particularly important that they should receive a
similar pledge of ultimate justice. Prompted by this con-
sideration, immediately after the introduction of this im-
portant resolution, Hamilton presented a report on the
memorial of Pennsylvania respecting the debts due to her
6
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THE LIFE OF
citizens. This report stated," that any attempts to pay any
of the past debts, would form so heavy a deduction from
the greatest revenue that could be raised as would totally
obstruct all present service, and that any present provision
should be confined to the interest of the public debts.
That such provision would offer eventual relief to the pub-
lic creditors, and enable them to support their share of the
public burdens without appropriating the whole revenue
which can be drawn from the people to a payment of debts,
and leaving thereby the public service unprovided for,
which would involve the ruin of all ranks, creditors and
others. That congress were and had long been deeply
impressed with the absolute necessity that speedy and
effectual measures should be taken, first to liquidate and
ascertain the public debts, and then to secure the payment
of the interest until the principal could be discharged.
Acts of congress were referred to as evidence of this
assertion. He added, that after a delay of two years,
Rhode Island had entirely refused its concurrence to the
impost, that Virginia had withdrawn its assent once given,
and that a third state had returned no answer.
The inability of congress to perform its engagements,
was stated to have resulted from the defective compliances
of the states during the war. Of the last requisition for
eight millions, only four hundred and twenty thousand dol-
lars had been collected. The proceeds of the foreign
loans* were stated, showing an available balance a little
* In vol. 1, page 273, of Madison's Debates, this passage is found:--
"In a late report, which had been drawn up by Mr. Hamilton, and made
to congress, in answer to a memorial from the legislature of Pennsylvania,
among other things showing the impossibility congress had been under of
paying their creditors, it was observed, that the aid afforded by the court of
France, had been appropriated by that court, at the time, to the immediate
use of the army. This clause was objected to as unnecessary, and as dis.
honourable to congress. The fact also was controverted. Mr. Hamilton
#
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? HAMILTON.
43
exceeding eight hundred thousand dollars; while to feed,
clothe, and pay the army, required nearly six millions.
The whole sum within the command of congress, was
and Mr. Fitzsimmons justified the expediency of retaining it, in order to
justify congress the more explicitly in failing to fulfil their engagements to
the public creditors. Mr. Wilson and Madison proposed to strike out the
words ' appropriated by France,' and substitute the words ' applied by con-
gress to the immediate and necessary support of the army. ' This proposi-
tion would have been readily approved, had it not appeared on examination,
that in one or two small instances, and particularly in the payment of the
balance due to Arthur Lee, Esq. , other applications had been made of the aid
in question. The report was finally recommitted. "
This is no less than a charge of stating an untruth, and justifying it on
the score of expediency, on the part of two gentlemen whose probity never
was suspected, and for the motive of justifying congress with the public
creditors. This minute is of the 24th of January. It speaks of a late report
made to congress. The journal of that date does not refer to this report, but
on the thirtieth of January it is given in full, as having been " agreed to as
follows. " A reason assigned by Madison why the clause thus objected to
was not stricken out, is, that there had been a diversion of the money in one
or two small instances. He adds, that it was recommitted. But if these
instances prevented this clause being expunged, if it had been originally in
the report, it must necessarily have been retained. On referring to this re-
port, " agreed to" by congress, no such clause can be found. Its language
is--" But according to the best accounts which can be obtained, the antici-
pations made in the funds for the year 1782 amounted, at the close of 1781,
to four millions of livres. For the service of that year, his most christian
majesty lent the United States 6,000,000 livres. "--4 J. C. 155.
But if it be assumed that the clause was there originally, and was
stricken out, the charge is unsupported. The journals, page 202, contain
the papers which Madison as chairman of a committee reported, and refer-
red to in an address of which he was the author. One of these papers, No.
IV. , is a letter from the French ambassador at Philadelphia, dated March
15, 1783. It commences thus--" Sir: I have the satisfaction to inform you,
that his majesty procures for the United States a loan of six millions, to be
employed in the war department during the course of the current year. "
"The Count de Vergennes informs me, sir, that the six millions are lent to
the United States in the same manner, and under the same conditions, with
the sum which was lent last year. " "I have had the honour to inform you,
air, that this money is lent to the United States to enable them to carry on
the war. The wisdom of congress will determine according to circum-
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