mined to pay in full. In respect to the domestic federal debt two opinions prevailed. Hamilton was for liquidating this also to the last copper. But these securities had mostly changed hands since issue, so that dollar for dollar payment would not advantage original holders but only speculators. As soon as Hamilton's recommendation became public this class of paper rose from about fifteen cents per dollar to fifty cents, and enterprising New York firms hurried their couriers, relay horses, and swift packets to remote parts of the Union to buy it up. Madison, supported by a strong party, proposed, therefore, to pay only original debtors at par, allowing secondary holders barely the highest market value previous to the opening of the question in Congress. He was overruled, however, and this part of the debt, too, was ordered paid according to its literal terms.

Even the motion that the United States should assume and discharge the state debts finally prevailed, though against most violent and resolute opposition. This came especially from Virginia, who had gone far in the payment of her own war debt, and thought it unjust to have to help the delinquent States. Her objection was strengthened by the fact that most of the debt was owned in the North. The victory was secured by what is now termed a "deal," northern votes being promised in favor of a southern location for the national capital, in return for enough southern votes to pass the bill assuming state debts.

These gigantic measures had origin in the mind of Hamilton. To many they appeared and appear

to-day like a grand government job. But they worked well, laying the foundation of our national credit. Interest arrears and back instalments of the foreign debt were to be paid at once with the proceeds of a fresh loan, supplemented by income from customs and tonnage. The remaining debt was to be refunded. Federal stocks shot up in value, moneyed interests became attached to the Government, and the nation began to be looked to as a more reliable bulwark of sound finance than any of the States.

III. The Excise.-Unexpectedly productive as the tariff had proved, public income still fell short of what these vast operations required. Direct taxation or a higher tariff being out of the question, Hamilton proposed, and Congress voted, an excise on spirits, from nine to twenty-five cents a gallon if from grain, from eleven to thirty if from imported material, as molasses. Excise was a hated form of tax, and this measure awakened great opposition in Maryland, Virginia, North Carolina, and New England, and most of all in Pennsylvania, in whose western counties distilling was the staple industry.

Here, far from the seats of power, even the state government had asserted itself little. The general Government was defied. A meeting in Washington County voted to regard as an enemy any person taking office under the excise law. September 6, 1791, a revenue officer was tarred and feathered. Other such cases followed. Secret societies were formed to oppose the law. Whippings and even

murders resulted. At last there was a veritable reign of terror. The President proceeded slowly

but with firmness, accounting this a good opportunity vividly to reveal to the people the might of the new Government. Militia and volunteers were called out, who arrived in the rebellious districts in November, 1794. Happily, their presence sufficed. The opposition faded away before them, not a shot being fired on either side.

IV. The Bank.-The Secretary of the Treasury pleaded for a United States Bank as not only profitable to Government but indispensable to the proper administration of the national finances. Congress acquiesced, yet with so violent hostility on the part of many that before approving the Charter Act Washington required the written opinions of his official advisers. Jefferson powerfully opposed such an institution as unconstitutional, his acute argument being the arsenal whence close constructionists have gotten their weapons ever since. Randolph sided with Jefferson, Knox with Hamilton. The President at last signed, agreeing with Hamilton in the view that Congress, being the agent of a sovereignty, is not, within any sphere of action constitutionally open to it, shut up to specific or enumerated modes of attaining its ends, but has choice among all those that nations customarily use. The Supreme Court has proceeded on this doctrine ever since. The bank proved vastly advantageous. Three-fourths of every private subscription to its stock had to be in government paper, which raised this to par, while it naturally became the interest of all stockholders to maintain and increase the stability and credit of the Government.

CHAPTER IV.

RELATIONS WITH ENGLAND

IN 1789 France adopted a constitution. Provoked at this, the friends of absolute monarchy withdrew from France, and incited the other powers of Europe to interpose in effort to restore to Louis XVI. his lost power. The result was that Louis lost his head as well as his power, and that France became a republic. War with all Europe followed, which elevated that matchless military genius, Napoleon Bonaparte, first to the head of France's armies, then to her throne, to be toppled thence in 1814, partly by his own indiscretions, partly by the forces combined against him.

From the beginning to the end of this revolutionary period abroad, European politics determined American politics, home as well as foreign, causing dangerous embarrassment and complications. War having in February, 1793, been declared by England and France against each other, what attitude the United States should assume toward each became a pressing question. Washington's proclamation of neutrality, April 22, 1793, in effect, though not so meant, annulled our treaty of 1778 with France, which bound us to certain armed services to that monarchy in case of a rupt

Washington's

ure between her and England. paper alleged that "the duty and interests of the United States " required impartiality, and assumed "to declare the disposition of the United States to observe" this.

"The proclamation," wrote Jefferson, "was in truth a most unfortunate error. It wounds the popular feelings by a seeming indifference to the cause of liberty. And it seems to violate the form and spirit of the Constitution by making the executive magistrate the organ of the disposition''the duty' and 'the interest' of the nation in relation to war and peace-subjects appropriated to other departments of the Government."

"On one side," says Mr. Rives, in his "Life of Madison," "the people saw a power which had but lately carried war and desolation, fire and sword, through their own country, and, since the peace, had not ceased to act toward them in the old spirit of unkindness, jealousy, arrogance, and injustice; on the other an ally who had rendered them the most generous assistance in war, had evinced the most cordial dispositions for a liberal and mutually beneficial intercourse in peace, and was now set upon by an unholy league of the monarchical powers of Europe, to overwhelm and destroy her, for her desire to establish institutions congenial to those of America."

The more sagacious opponents of the administration believed true policy as well as true honesty to demand rigid and pronounced adherence to the letter of the French treaty. They were convinced from the outset that France would vanquish her