less with the farmers and planters of the South, and the payment to them of a bonus had the air of endorsing their craftiness. This intolerance of speculation, therefore, drove large numbers of the people into opposition to those who placed the public credit above everything. The speculators consisted chiefly of city people and financiers who controlled the newspapers and had alliances with many of the influential persons of the time, including some members of Congress. Owing to their persistent advocacy of Hamilton's plan, the Republicans charged that they were corruptly selfish.*

James Jackson was altogether hostile to the funding system, and on January 28, 1790, when the report was under consideration, he said:

"Since this report has been read in this House, a spirit of havoc, speculation, and ruin has arisen, and been cherished by people who [because they lived in New York] had access to the information the report contained that would have made a

Hastings blush to have been connected with, though long inured to preying on the vitals of his fellowmen. Three vessels, sir, have sailed within a fortnight freighted with speculation; they are intended to purchase up the State and other securities in the hands of the uninformed though honest citizens of North Carolina, South Carolina and Georgia." +

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Florence, Genoa, Venice, Spain, France, and England as instances where funded debts had brought ruin or misery to a country, causing it to decline greatly.*

Scott then expressed the opinion that the United States debtors were not bound to pay the domestic creditors the face value of their certificates of debt, because the original holders had parted with them at 2s. 6d. in the pound. †

By thus paying in full, the nation would not be rewarding generously its original creditors - the men who had furnished the sinews of war when the country most needed their aidbut would merely be enriching a horde of assignees who had purchased the certificates at an enormous discount and who had used their superior knowledge of the Secretary's plans to mulct the public (the original holders) of thousands of dollars rightfully belonging to them. Even though the domestic debt were reduced twothirds, these hungry speculators these public vipers - would still make a handsome profit upon their investment. Scott therefore introduced an amendment requiring a re

tude which so vile a conduct displays." On February 9, Jackson made another speech, in which he cited

cessfully opposed by Sherman, Ames and others, this was thrown out by the House.

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On February 11 Madison rose and in an eloquent speech admitted, on the one hand, that the public faith could be kept inviolable only by paying these certificates at their face value and, on the other hand, declared himself impressed by the palpable inequity of giving to speculators all the benefit of a public sacrifice. He therefore proposed that the resolution be amended so that the present holder of assignable paper should be paid the price it had borne in the market at the time the discussion began and that the difference between that sum and par be paid to the original creditor. This measure was supported by all who opposed Hamilton's plan *

But Madison's plan was entirely impractical; its very suggestion repelled the Secretary's friends whose sense of public faith and honor did not admit the casuistry of a debtor playing the part of arbiter among his own creditors and dishonoring his own paper for the sake of rewarding former holders. Nor could the opponents be satisfied with the plan, the plain device of which was to lighten

#

Hunt, Life of Madison, pp. 181-182; Gay, Life of Madison, p. 154 et seq.; McMaster, vol. i., p. 576; Annals of Congress, 1st Congress, vol. ii., pp. 1191, 1205-1412, 1417-1448. See also his letter to Jefferson, February 14, Madison's Works (Congress ed.), vol. i., p. 507. He says: "My idea is that there should be no interference of the public in favour of the public either as to principal or interest, but that the highest market price only should be allowed to the purchasers and the balance be applied to solace the original sufferers, whose claims were not in conscience extinguished by a forced payment in depreciated certificates."

the public burden and decrease taxation.* The debate was long and spirited, and on February 22, when the question was put, the amendment was rejected by a vote of 36 to 13.†

When the subject of State debts came up, the proposition "seemed to unchain all those fierce passions which a high respect for the government and for those who administered it, had in a great measure restrained." This was due chiefly to the fact that the State debts were very unequal. Those of Massachusetts and South Carolina amounted to more than $10,500,000, while the other debts were estimated at between $14,000,000 and $15,000,000. The debt of Connecticut also was large, and, as the total of the three amounted to about half the entire debt, these States were deeply interested in the ultimate outcome of the debate. South Carolina was the

Schouler, United States, vol. i., pp. 148-149. McMaster, p. 578; Gordy, Political History of the United States, vol. i., pp. 120-121. Benton, in his Abridgment of Debates (vol. i., p. 228), says: "The motion of Mr. Madison was lost, and with it the largest door was opened to the pillage of original creditors, the plunder of the public treasury, and the corruption of Congress, which the history of any government has ever seen. The immediate mischief was some thirty millions; it was only the beginning. Assignees of claims have since been the great suitors of Congress; purchasing for a trifle, and upon speculation; pursuing the recovery by indirect means; taking no denial; and gaining at the end what was scouted at the start. It has given rise to a new profession; a new industrial pursuit ; still more industrious by night than by day; hunting up claims; pressing them upon Congress; and by organization, skill, perseverance, appliances, and seductions, carrying through the most unfounded demands."

only one that had not asked for assumption.* In January, 1790, the Legislature of that State instructed its representatives in Congress to urge the assumption of its debt by the nation, arguing that it had been incurred in consequence of the war between the United States and Great Britain. In speaking of Massachusetts, Fisher Ames said that South Carolina had purchased the first ammunition used at Lexington and Bunker Hill and that the cost of this was now a State debt. Virginia, however, had sold some of her Kentucky lands and had issued funding securities at a depreciated rate; thus she had greatly reduced her debt and had promptly met her annual interest charges. North Carolina and Georgia also had greatly reduced their obligations, and naturally these States opposed assumption because, having met a large part of their own indebtedness, they would have to bear a big share of the national burden when the debts of the other States were paid. The debts of Maryland and New Hampshire were small, and they were naturally against assumption. Middle States were divided. Pennsylvania interests split upon the issue, while New York and New Jersey supported Hamilton.‡

The

The accounts were so confused that in some cases it was impossible to ascertain the exact amount expended for

* Tucker, Life of Jefferson, vol. i., p. 319 et seq. Bassett, Federalist System, p. 34; Dewey, Financial History, pp. 92-93.

Schouler, United States, vol. i., p. 150.

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war purposes. The obligations varied greatly in the several States. In Massachusetts, for example, half-pay notes had been issued to the widows and orphans of deceased officers, as well as certificates for the interest due on them. In Connecticut the debt consisted of notes payable to the army, notes issued by the assembly for mounting the dragoons and for special purposes, certificates for interest on the State debt, State bills emitted in 1780, unpaid balances of orders payable from a specific tax, new notes issued in place of old notes reloaned, pay-table orders, etc. In New York the debt was composed of bills of credit, certificates for the payment of levies and militia, certificates for money loaned by individuals, horse notes, claims on forfeited estates, notes issued for pay and for depreciation of pay and pension. In New Jersey certificates were given for depreciation of pay, and the county commissioners had issued certificates

for military services. In Virginia was the army debt, balances due foreign creditors, loan-office certificates for paper money funded, and numerous land warrants. The South Carolina debt had been reduced to a more systematic form and consisted of principal, special indents, and a foreign debt. In other States the indebtedness had been spread out in many ways which almost defied disentanglement.*

*Bolles, Financial History, pp. 26-27. See also the statement of money received from or

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Naturally, therefore, when the subject came under discussion, comparisons were made and passions were aroused which never ought to have made their appearance in Congress. Those who favored the assumption of the State debts argued that it was a measure of justice as well as of policy and was just, not only with regard to the creditors themselves, but to the States as well.* It was said that these debts had been incurred for supplies furnished, services rendered and loans made for the benefit of the Nation as a whole, and not for the particular benefit of individual States. From this viewpoint, therefore, the United States should regard the State debts equally as binding as those which were direct national claims. In some cases, as already mentioned, the States had been able to liquidate a portion of this debt, while others were destitute of resources or perhaps had been burdened with a larger debt and were unable to make adequate provision. Hence, if a creditor chanced to live in a large State abounding in wealth and resources, with perhaps a comparatively small debt, he was more likely to be paid than another equally meritorious creditor who, living in a small State which, being desti

paid to the States in American State Papers, Finance, vol. i., pp. 52–62.

For more extended discussions of the subject, see Pitkin, Civil and Political History, vol. ii., pp. 341-344; Marshall, Life of Washington, vol. ii., pp. 183-189; Tucker, Life of Jefferson, vol. i., pp. 325-328; Benton, Abridgment of Debates, vol. i., pp. 190-201, 216-221: McMaster, United States, vol. i., p. 579 et seq.

tute of resources, might be able to pay him little or nothing. It was considered only just to all the States, since only in this way would each bear its proportion of the expenses incurred in a common aim. It was contended also that, as the Constitution had transferred to Congress the funds on which the States had relied to pay their debts, it was only just that these debts be paid by Congress.*

Regarding the policy of the measure, it was said that, unless the National government should pay these debts, the efforts of the States to do so would necessarily create an interference between the general and State governments in their revenue systems, since, the United States having the exclusive power to lay imposts, the majority of the States must resort to excise and direct taxes. As the debts of the States were very unequal, this would result in an inequality in taxation. Thus, the greatest burdens would be thrown upon those States

Washington was heartily in favor of assumption. He believed that as the debts had been incurred in a common cause they should be assumed by the common government. The argument that assumption was unfair because some of the States got more out of it than others, had little weight with him. Some of the States had also been called upon to undergo greater hardships and sufferings than the others, yet all had shared equally in the freedom that had been won. He saw also that the measure was more than the mere payment of certain stated amounts to certain individuals; it was a national measure which meant that when the interests of the whole people were involved there were no State or sectional lines. See Lodge, George Washington. vol. ii., pp. 105-106. See also Sparks' ed. of Washington's Writings, vol. x., p. 98; Irving, Life of Washington, vol. v., pp. 61-63.

whose exertions had been greatest in behalf of the Revolutionary cause. As a consequence, jealousy and dissatisfaction would spring up. If a direct tax were laid, the landed interest would be compelled to bear the greater part of the burden, and this would result in a rapid migration to the West and a resulting depopulation of the East. If the States resorted to an excise on foreign and domestic goods, smuggling would become prevalent, and thus the revenue of the United States would be materially affected. It was urged that it would be less expensive to collect the same amount of taxes under one general government than under a number, and that by having the general management of all revenues in their hands, Congress would be better able to promote domestic industries and improvements in all sections of the country. The advocates of this measure contended also that the difference in the State debts was not the result of greater exertion on the part of one State, but that the debts of some of the States had been reduced materially by the avails of confiscated property and the returns from territorial acquisitions.

The opponents replied that under no consideration could the State debts be termed National debts and that the

United States was under no obligation whatever to discharge any part of them, save the balance which on final settlement might be found due to several States. They maintained that a

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public debt was a public evil, and that the assumption of the State debts would tend not only to perpetuate the evil, but to increase it. They said the United States and the several States, coöperating, could more easily and much sooner discharge a debt of eighty millions than the United States alone, and that, after the general government had exhausted every means in their power, other sources of revenue would still remain to the individual States. It was urged, further, that some of the States were hostile to excise and others to direct taxes; that no general system of taxation could be devised which would be satisfactory to all concerned. The difference in the amounts of the State debts also aroused much opposition to assumption. The Anti-Federalists said that it would be unjust to compel them to contribute to the payment of the debts of the delinquent States. Jefferson said: