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the sums subscribed, to receive in payment certificates of debt held by public creditors. It was proposed, that for every hundred dollars subscribed payable in debt, interest as well as principal, the subscriber should have two-thirds funded on a yearly interest of six per cent., the current rate, (the capital to be redeemable at the pleasure of the government by the payment of the principal,) and should receive the other third in lands of the western territory at their actual value; or, instead of the lands, to have, at the end of ten years, $26,88 funded at the same rate of interest.

Another proposal was, to have the whole sum funded at a yearly interest of four per cent., irredeemable by any payment exceeding five dollars annually on the hundred, for both principal and interest; and as a compensation for the reduction of interest, $ 15,80 on every hundred, payable in land.

There were still other propositions, one of which was, the payment of subscriptions in annuitics, on different plans.

An argument of the secretary in favor of funding the debt was, that the provision of a permanent fund for its payment would, by establishing the public credit, enable the government in any emergency, to procure the means of supplying the public necessity. It was said also, that the fluctuation and insecurity incident to an unfunded debt, rendered it a mere commodity, and a precarious one; and being only an object of speculation, the money thus employed was so much diverted from more useful purposes; and thus contributed to the scarcity of money. Whereas, it was well known, that in countries in which the national debt was properly funded, and an object of confidence, it served most of the purposes of money. Such, he believed, would be the result in America, and the capital thus created, “ would invigorate all the operations of agriculture, manufactures, and commerce."

The proposition to restrict the government to the payment of so small sumg annually toward redeeming the capital of the debt, was intended as an inducement to creditors to consent to the arrangement. The rate of interest was then six per cent.; but it was presumed that, when the public credit should have become firmly established, the government would be able to borrow money at greatly reduced rates; and creditors would be compelled to receive either these low rates of interest, or the payment of the capital. By the proposed arrangement, creditors would be assured, for a long and certain period, a fixed rate of interest, at six per cent., as an equivalent for the reduction of the principal, or the postponement of the interest on a part of it. As creditors were left free to accept or reject the terms offered, those who should not subscribe, were to receive a dividend of the surplus that should remain in the treasury after paying

the interest of the loans. But as the funds to be provided were not expected to produce at present more than four per cent on the whole debt, only that rate of interest was to be paid. By thus reducing either the principal or the rate of interest, a revenue might be provided sufficient to meet the increased demand upon the treasury caused by the adoption of the proposed measure. For this purpose, the secretary recommended an increase of duties on wines, spirits, tea, and coffee, and an excise tax on home distilled spirits.

“This celebrated report,” says Judge Marshall, “which has been the fruitful theme of extravagant praise and bitter censure, merits the more attention, because in the measures which were founded on it, originated the first regular and systematic opposition to the principles on which the affairs of the union were administered."

A great diversity of opinion on this subject prevailed in the house. Hostility to funding systems generally was declared. It was also contended that the United States were not bound to pay the domestic creditors the full amount expressed in their certificates of debt, because the original holders, by parting with them at two shillings and six-pence in the pound, had fixed the value of their claims, and a motion was made, proposing a re-settlement of the debt.

To this proposition it was objected, that creditors had a right to place confidence in the government for the discharge of debts acknowledged to be due according to settlements already made. For a legislature to reduce an ascertained debt, was pronounced unjust, and subversive of every principle on which public contracts are founded. The motion

was lost.

Mr. Madison proposed to pay the present holders of certificates the highest price which the debt had borne in the market, and the original holders the residue. It was urged in favor of this proposition, that the original debt was to have been paid in gold and silver ; but the creditor had been compelled to take paper at a great loss, in consequence of the default of the debtor, who ought not to take advantage of his default. By paying him the average price at which the debt had been sold, and the original holder the remainder, equal justice would be done to both.

It was said, in reply, that to require the present holders to relinquish a part of their claim, for which they had paid a valuable consideration, would be a violation of contracts, and therefore unconstitutional. It was not the business of the legislature to inquire into private transactions between individuals. If the original creditor had an equitable claim on the present holder, its adjustment belonged to the judicial courts. The misfortune of those who had been obliged, from necessity, to part with their securities, was admitted; but congress could not afford redress. Purchasers had placed greater confidence in the government than the original holder, and had run a risk in purchasing the paper : they were therefore justly entitled to the full amount of their claims. The interests of the community were promoted by making a public debt transferable; but interference by the government in cases of transfer, would destroy confidence in public engagements. Besides, certificates had passed through several hands, and intermediate purchasers had often suffered as much as the original holder ; but for them no relief was proposed. After considerable farther debate, the question was taken, and the amendment proposed by Mr. Madison was rejected, thirty. six to thirteen.

The proposition to assume the debts of the states, was the subject of greater controversy, and a more excited debate, than any other contained

in the report.

In opposition to this part of the plan, it was said, that the creditors of the states had not applied to congress for the measure; and it was presumed that they were satisfied with what the states had done for them, and did not wish to exchange their state securities for those of the general government. The task of providing for the real debts of the union was sufficiently arduous, and the assumption of more debts might disenable the government from doing justice to its real creditors. It was said, too, that the debts of the states had not yet been ascertained, and it would be imprudent to assume them until it should be known what were the balances due them from the union, as the augmentation of the debt might impose a burden which would require taxation to a dangerous extent. The states could more effectually, and with less dissatisfaction to the people, provide for the payment of their debts, than the general government. The assumption would be unjust also, as the consumers of foreign articles would bear the whole expense of the war, except the very trifling revenues to be derived from postage and excise on distilled spirits. It would be unjust to those states which had already taxed themselves heavily to discharge their debts, as they would be obliged to bear an equal share of the burden with others which had made little exertion to diminish theirs. It was objected, too, that if the general government was made to pay all the debts, it must have all the revenue, which was, in effect, to have all the power. This would give too much importance to the federal government, and lessen the importance of the state gov. ernments, and lead to too close a consolidation of the union. Besides, the measure did not appear to be constitutional, no power having been granted to the general government to assume the debts of the states.

It was farther objected, that by the proposed augmentation of the debt of the union, it would be perpetuated. A public debt was not a public

blessing, as some seemed to think, but an evil; and to increase it by adding to it the debts of the states, would increase the evil, and impair the public credit; it was the character of paper to diminish in value, in proportion to the quantity in circulation. These debts, too, if assumed by the union, would, as the continental debt had already done, accumulate in the larger cities, and in the hands of foreigners; and the greater portion of the money for which the people were taxed, would go out of the country.

It was urged also, that a portion of the state debts had been contracted for purposes strictly local; and it was impossible to distinguish these debts, in all cases, from those contracted for general objects. The creditors in some states might come into the measure, while in others they refused: this would render it difficult, if not impossible, to carry the system into effect. Nor was it probable that any general system of internal taxation would be acceptable to all the states. Each state, therefore, ought to be left free to adopt such a system of revenue as it should deem best adapted to its circumstances.

In favor of assumption it was said, that one body could more efficiently draw forth the resources of the union than many. These debts must be paid, either by the general government or by the respective states; and it could be done with greater ease and facility, and with less expense, under one general uniform system. Some states derived their revenue from excise ; and if, as was contemplated by the proposed plan, excises should be laid by the general government also, there would be a clashing of the two systems. To the objection, that the amount of the states had not been ascertained, it was announced that it had been ascertained not to exceed twenty-five millions; and congress might be restricted to that amount. It had been said, that the merits of particular claims was not known. They had been proved to the satisfaction of the states, and that was a sufficient guarantee of their justice. If it was for the true interest of the United States and of the claimants, to adopt the measure, it was unnecessary to wait for applications. If the creditors chose to change their state securities for those of the United States, the states surely could have no objection: they had nothing to do with the transaction. When the domestic debt should be funded, the most productive revenues would be taken away from the states and their ability to pay would be lessened; and the state creditors would prefer the paper of the United States, which would be better provided for. But if any state creditors should refuse to subscribe, let the states receive the money from the general government, and pay it over to their creditors.

To the alleged injustice of throwing the burden upon the consumers of foreign articles, it was replied, that all classes of inhabitants were consumers of foreign goods; and the rich families consumed much more than the poor. It had been said to be unjust to tax states that had made great exertions to pay their debts, equally with those that had not. To this it was answered, that every state must be considered to have exerted itself to the extent of its resources; and whether it was unable or unwilling to do justice to its creditors, the union was equally bound to assume its debts.

To the argument that this measure would lessen the influence of the state governments, it was replied, that congress, as well as the state legislatures, derived their authority from the people, who could apply the remedy to the abuse of power by their representatives.

It was said farther, in favor of assumption, that the war had been one in which the states had made common cause. Its object had been the liberty and independence, not of any particular state, but of all the states; and the debts of the states had not been contracted for their individual benefit, but for the benefit of the union, and to promote a cause in which all the states had an equal interest. For the means of payment, the states had relied upon imposts, which constituted their principal fund. By the constitution their power over imposts had been assumed by the federal government, which ought now to assume their debts. The measure was also constitutional. The confederation authorized congress to raise money; but congress not being able to do it directly or immediately, did it mediately through the state governments : hence, these debts, having been contracted in compliance with the requisitions of congress, were to be considered the debts of the union.

Creditors of the states and those of the United States ought to be placed upon the same footing. Some states, possessing greater resources, might make ample provision for the payment of their debts; while others, having less means and a larger debt, might be unable to do their creditors justice. The states, deprived of the power to lay imposts, must have recourse to direct taxes and excises. These, on account of the inequality of their debts, would be very unequal in the different states. Direct taxation would fall most heavily upon the landed interest, and encourage emigration to states less burdened with taxes. The aggregate amount to be collected from the people was the same, whether the debts were assumed or not; and, not only could the collection be made more economically under one uniform system, but the national government, having the sole management of the revenues, could more effectually promote the various branches of domestic industry.

The friends of assumption denied that they considered "a public debt a public blessing ;" they admitted it to be an evil. The debt had been already contracted; and they desired now to mitigate the evil. They believed it better policy to give it a form in which it would sub