Chapter VIII: Part 8

Prompted by such reasons, I could be well content, that the advances made previously to the year 1778, were by some means or other brought into this account. By Mr Grand's accounts is appears, that Messrs Franklin, Deane and Lee, on the 1st of January, 1777, paid him five hundred thousand livres; on the 28th of April, other five hundred thousand livres; on the 4th of June, one million of livres; on the 3d of July, five hundred thousand livres; and on the 10th of October, other five hundred thousand livres; amounting in the whole to three millions of livres. I suppose, that these sums were received of private persons in like manner with those supplies, which were obtained through M. de Beaumarchais, and if so they will be payable in like manner with those supplies.

I have in a former letter estimated the yearly interest on Loan Office certificates, payable in France at two million livres, consequently taking in the months intervening between September and March, the total amount from September the 10th, 1777, to March the 1st, 1782, may be stated at nine million livres; which is just one half of the supplies granted for the years 1778, 1779, 1780, and 1781.

A resolution now before Congress will, I believe, direct that no more bills be drawn for this instant; but Mr Grand in his letter of the 4th of March, tells me he has paid six million two hundred and thirtynine thousand one hundred end eightysix livres, thirteen sous, four deniers, in sixteen thousand eight hundred and nineteen bills, from the 11th of February, 1779, to the 28th of January, 1782. His accounts are now translating, and when that is completed, I shall transmit them to the treasury, and I hope soon to have the accounts of the several loan officers in such a train of settlement, that all these matters may finally be wound up.

Should the Court grant six million livres more for the service of the current year, making twelve million livres in the whole, which to tell you the truth, I do expect, then the sum total in five years will be forty million livres, or eight million annually. And when the occasion of this grant is considered, the magnitude of the object, and the derangement of our finances, naturally to be expected in so great a revolution, I cannot think this sum is by any means very extraordinary. I believe with you most perfectly in the good dispositions of the Court, but I must request you to urge those dispositions into effect. I consider the six millions mentioned to me by the Minister here, and afterwards in your letters, as being at my disposal. The taxes come in so slowly, that I have been compelled and must continue to draw bills, but I shall avoid it as much as possible. In my letters of the 23d and 29th of May, of which I enclose copies, are contained my sentiments as to M. de Beaumarchais' demand. Indeed, if the sums paid to him and others for expenditures previous to the year 1778, and the amount of the interest money, of which the principal was also expended at that time, be deducted, the remaining sum will be considerably less than thirty millions.

I must entreat of you, Sir, that all the stores may be forwarded from Brest as soon as possible, and I shall hope that the Court will take measures to afford you the necessary transports, so that they may come under proper convoy. As to the cargo of the ship Marquis de Lafayette, it is true, that some of it has arrived here from neutral ports, but it is equally true that money was necessary to purchase it, and that money is quite as scarce as any other article. If, however, all the cargo of that ship was like some which I procured, the taking of her has been no great loss, for the clothing was too small to go on men's backs. The goods from Holland we still most anxiously expect. Would to God that they never had been purchased. Mr Gillon, however, is at length arrived, and I hope we shall have those matters, in which he was concerned, brought to some kind of settlement.

I have the honor to be, &c.

ROBERT MORRIS.

* * * * *

TO ALEXANDER HAMILTON.

Office of Finance, July 2d, 1782.

Sir,

I yesterday received your letter of the 17th of June, and am very happy to find that you have determined to accept the office I had the pleasure of offering to you.[8] I enclose the commission, instructions, &c. together with a bond for performance of the duties, which I must request you to fill up and execute, with some sufficient surety, and transmit.

[8] Receiver of the Continental taxes for the State of New
York.

The complaint you make of the system of taxation in New York, might, I believe, very justly be extended; for though it may be more defective in some than in others, it is, I fear, very far from perfect in any. I had already heard, that no part of the taxes were appropriated to Continental purposes, but I expect that the Legislature will, when they meet, make such appropriation, as well as lay new, and I hope productive taxes, for the purposes of paying what may remain of their quota.

It gives me a singular pleasure to find, that you have yourself pointed out one of the principal objects of your appointment. You will find that it is specified in the enclosure of the 15th of April. I do not conceive that any interview will be necessary, though I shall always be happy to see you, when your leisure and convenience will admit. In the meantime, I must request you to exert your talents in forwarding with your Legislature the views of Congress. Your former situation in the army, the present situation of that very army, your connexions in the State, your perfect knowledge of men and measures, and the abilities which Heaven has blest you with, will give you a fine opportunity to forward the public service, by convincing all who have claims on the justice of Congress, that those claims exist only by that hard necessity, which arises from the negligence of the States. When to this you shall superadd the conviction, that what remains of the war, being only a war of finance, solid arrangements of finance must necessarily terminate favorably, not only to our hopes but even to our wishes, then, Sir, the government will be disposed to lay, and the people to bear these burdens, which are necessary, and then the utility of your office and of the officer will be as manifest to others as at present to me.

I am, with respect, &c.

ROBERT MORRIS.

* * * * *

TO M. JOLIE DE FLEURY.

Office of Finance, July 6th, 1782.

Sir,

I have received the letter which you did me the honor to write in February last. It gives me very particular pleasure to find that my operations are approved by a gentleman whose talents and situation conspire together in giving the means and the power of forming a proper judgment. I receive, Sir, with so much greater satisfaction your promise to concur in promoting the success of my measures, as I persuade myself that a true Frenchman must deeply interest himself in the present American Revolution.

The indissoluble bands which unite our sovereigns, have connected the success of that revolution with the glory of the King, and the interests of his subjects. Being therefore alike prompted by that animated zeal and attachment to your prince which forms a beautiful trait in the French character, and by your own benevolence, you cannot but pursue the road which leads to the establishment of our independence. It is by these motives, Sir, that you are assured of my confidence. I shall take the liberty to lay before you my arrangements, as soon as they can be completed, in order that you may possess the views of my administration.

I have the honor to be, with perfect esteem and respect,
ROBERT MORRIS.

* * * * *

TO MR GRAND.

Office of Finance, July 5th, 1782.

Sir,

I have received your several favors of the 2d of February and 4th of March last, together with the accounts accompanying the latter. I am sorry to find the funds we have in Europe are so deeply anticipated. This circumstance introduces a degree of hesitancy and doubtfulness into my measures, which is alike disagreeable and pernicious. I hope, therefore, that all the old accounts will soon be wound up and finally closed; and then in future I shall possess a full view of what is in my power. With respect to any arrangements with the Court of Spain, I incline to think that they will be necessary, for I persuade myself that money negotiations through Havana might be performed to equal, if not greater advantage, by private channels.

I am, Sir, with respect and esteem, &c.

ROBERT MORRIS.

* * * * *

TO THE GOVERNOR OF MARYLAND.

Office of Finance, July 9th, 1782.

Sir,

I have not been until this moment favored with your letter in Council of the 5th. I pray that you will accept and present to the Council my sincere thanks for your attention to the public service. Your offer to pay for the transportation of clothing to the southern army, gives me an additional reason to believe that a sense of the public distresses will always operate a desire to relieve them. To go into detail of those distresses, is at all times dangerous, and indeed it would be impracticable, for they are so numerous that all my time would be insufficient for the purpose. The publications made by the receivers in the several States, will however carry a conviction of them, to every man of sense end reflection.

It is my constant endeavor to administer the little aid which is afforded to the best advantage; and I am in hourly apprehensions from the dilatoriness which has been shown by almost all the States, in granting the supplies required by Congress. No proposition can be clearer than this, that the salvation of our country must depend upon such grants; and it will be a matter of wonder for future generations, how a people who once showed such enthusiastic ardor, should at the moment when it is within their grasp, put everything to the hazard, by omitting to make the little exertion that remains. Yet such is the fact.

I shall rely on receiving considerable supplies of money from Maryland in the course of the present month; and shall, in consequence, make engagements for transporting the clothing and stores to the southern army, and for other services equally pressing and essential. That you will be obliged to sell the property of the State, at less than you suppose it to be worth, I had long foreseen, and am thoroughly convinced of. That is one among the very many objections against raising specific taxes; but you may depend that the longer they are kept on hand, the greater will be the loss. The people must be undeceived, and the sales of such property will have a tendency to produce that effect. They will at length, I hope, open their eyes, and be convinced of a truth which all history and experience bear witness to, namely, that the true art of governing is to simplify the operations of government.

Permit me, Sir, before I close this letter, to press upon your consideration the state of public affairs. Every operation is, at present, supported by credit, and that credit has long hung but by a thread. Unless the States give speedy and effectual aid, that thread must break. It would long since have broken, and scenes of military pillage, waste, murmuring, extravagance and confusion would again have been opened, if I had not for some time declined all expenditure, except what was necessary merely to feed the army. If, under such circumstances, the enemy has made offensive operations, you may easily guess the consequences. Your State will, I hope, contribute amply to provide against them. Should anything happen, the fault will not lie at the door of Congress or of their servants.

With perfect esteem and respect, &c.

ROBERT MORRIS.

* * * * *

TO JAMES LOVELL OF MASSACHUSETTS.

Office of Finance, July 10th, 1782.

Sir,

I have received your favors of the 24th and 27th of June. The conduct of the States is very alarming, and has given me much serious apprehension. A want of knowledge or of zeal among those who compose the several Legislatures, produces misfortunes which their constituents must feel, although they do not themselves appear to be aware of them. Had permanent funds been established on which to borrow money, in all human probability our credit would have been such, as that a considerable part of every year's expenditure might have been obtained in that way. The advantages of such a measure are self evident. If we suppose the states at war possessed of equal force and resources, the one of them enjoying credit, which the other wants, the efforts would be so unequal, that the nation in credit might compel her antagonist to ask peace in a very short period.

In America we have disdained to profit by experience, and therefore are reduced to the sad necessity of bearing the whole burden of the war at the present moment, when least able to bear it. Still, however, I had hoped, by making anticipations on the taxes, to lay a foundation for more extensive credit; and at length to recover that useful confidence, which has been too carelessly squandered away. But in fixing the first stone of this useful edifice, I am disappointed by finding that after taxes are laid, and in the moment when I expect to feel the benefits, the collection is postponed unto a future day. I shall not dwell longer on this disagreeable topic. I deeply feel and sincerely lament the consequences, which you may rely on it are far more pernicious even in the article of expense than any person is aware of; besides other things which are of equal, and may perhaps, be of greater importance.

I find by examining the sums I have drawn on you for, that you can find no great difficulty in making the payments by sales of the bills. I would advise you, immediately on the receipt of this, to employ a good broker to sell all the bills you have, at a price to be fixed between you, leaving it optional in the party, to pay either specie, bank notes, or my notes, and give from a week to a fortnight credit to good hands. The price will, I suppose, be high if sold in this manner, and you will doubtless obtain a preference in the sales over others. When you open this business it must be transacted speedily by letting your broker make the sales, and take the promisory notes from the parties. The effects of this plan will be as follows; people knowing that the notes are at a discount, will readily, I suppose, make purchases on such conditions; and if they do, you will thereby raise them to par, and command a considerable sum in specie, for I know there are very few now in your country, and therefore when they come to be bought up and looked for, their value will rise; and I presume that taxation will then come in to aid their farther circulation.

I am, Sir, with great respect, &c.

ROBERT MORRIS.

* * * * *

TO THE GOVERNOR OF MARYLAND.

Office of Finance, July 29th, 1782.

Sir,

I have now before me your two favors of the 12th instant. You will find my answers as well in a former letter, as in the enclosed circular. For what remains I must only declare to you my regret at finding your prospects so gloomy. The idea that taxes cannot be raised because of the want of specie, is very general, indeed it is almost universal, and yet nothing can be more ill-founded. If the people be put in the necessity of procuring specie, they will procure it. They can if they will. Tobacco may not sell at one moment, grain at another, or cattle at a third; but there are some articles such as horses, which will sell at all times. The mischief is, that when a purchaser offers, the party not being under a necessity of selling, insists on a higher price than the other can afford to give. Thus the commerce is turned away to another quarter. Nothing but the necessity of getting money will bring men in general to lower their prices. When this is done purchasers will offer in abundance, and thus it will be found, that the tax instead of lessening will increase the quantity of specie. But so long as the want of it can be pleaded successfully against taxes, so long that want will continue. And then all that remains to consider is, whether the army can be maintained by such a plea. The States, Sir, must give money, or the army must disband.

I have the honor to be, &c.

ROBERT MORRIS.

* * * * *

TO THE PRESIDENT OF CONGRESS.

Office of Finance, July 29th, 1782.

Sir,

The reference which Congress were pleased to make of a remonstrance and petition from Blair Mc Clenaghan and others, has induced me to pray their indulgence while I go somewhat at large into the subject of that remonstrance.

The propriety and utility of public loans have been subjects of much controversy. Those who find themselves saddled with the debts of a preceding generation, naturally exclaim against loans; and it must be confessed, that when such debts are accumulated by negligence, folly or profusion, the complaint is well founded. But it would be equally so against taxes, when wasted in the same way. The difference is, that the weight of taxes being more sensible, the waste occasions greater clamor, and is therefore more speedily remedied. But it will appear, that the eventual evils, which posterity must sustain from heavy taxes are greater than from loans. Hence may be deduced this conclusion, that in governments liable to a vicious administration, it would be better to raise the current expense by taxes; but where an honest and wise appropriation of money prevails, it is highly advantageous to take the benefit of loans. Taxation to a certain point, is not only proper but useful, because by stimulating the industry of individuals, it increases the wealth of the community. But when taxes go so far as to entrench on the subsistence of the people, they have become burdensome and oppressive. The expenditure of money ought in such case to be, if possible, avoided; if unavoidable, it will be most wise to have recourse to loans.

Loans may be of two kinds, either domestic or foreign. The relative advantages and disadvantages of each, as well as those which are common to both, will deserve attention. Reasonings of this kind, as they depend on rules of arithmetic, are best understood by numerical positions. For the purposes of elucidation, therefore, it may be supposed that the annual tax of any particular husbandman were fifteen pounds, so that (the whole being regularly consumed in payment of taxes) he would be no richer at the end of the war, than he was at the beginning. It is at the same time notorious, that the profits made by husbandmen, on funds which they borrowed were very considerable. In many instances their plantations, as well as the cattle and family utensils, have been purchased on credit, and the bonds given for both have shortly been paid by sales of produce. It is, therefore, no exaggeration to state the profits at twelve per cent. The enormous usury, which people in trade have been induced to pay, and which will presently be noticed, demonstrates that the profits made by the other professions, are equal to those of the husbandman.

The instance, therefore, taken from that which is the most numerous class of citizens, will form no improper standard for the whole. Let it then be farther supposed in the case already stated, that the party should annually borrow the sum of ten pounds at six per cent, to pay part of the tax of fifteen pounds. On this sum then he would make a profit of twentyfour shillings, and have to pay an interest of twelve shillings. The enclosed calculation will show, that in ten years he would be indebted one hundred pounds, but his additional improvements would be worth near one hundred and fifty, and his net revenue be increased near twelve, after deducting the interest of his debt. Whereas if he had not borrowed, his revenue, as has been already observed, would have continued the same. This mode of reasoning might be pursued farther, but what has been said is sufficient to show, that he would have made a considerable advantage from the yearly loan. If it be supposed, that every person in the community made such a loan, a similar advantage would arise to the community. And lastly, if it be supposed, that the government were to make a loan and ask so much less in taxes, the same advantage would be derived. Hence, also, may be deduced this position, that in a society where the average profits of stock are double the interest at which money can be obtained, every public loan for necessary expenditures, provides a fund in the aggregate of national wealth equal to the discharge of its own interest.

Were it possible that a society should exist, in which every member would of his own accord industriously pursue the increase of national property, without waste or extravagance, the public wealth would be impaired by every species of taxation. But there never was, and unless human nature should change, there never will be such a society. In any given number of men, there always will be some who are idle, and some who are extravagant. In every society also there must be some taxes, because the necessity of supporting government and defending the State always exists. To do these on the cheapest terms is wise, and when it is considered how much men are disposed to indolence and profusion it will appear, that even if those demands did not require the whole of what could be raised, still it would be wise to carry taxation to a certain amount, and expend what should remain after providing for the support of government and the national defence, in works of public utility, such as the opening of roads and navigation. For taxes operate two ways towards the increase of national wealth. First, they stimulate industry to provide the means of payment. Secondly, they encourage economy, so far as to avoid the purchase of unnecessary things, and keep money in readiness for the tax gatherers. Experience shows, that those exertions of industry and economy grow by degrees into habit. But in order that taxation may have these good effects, the sum which every man is to pay and the period of payment, should be certain and unavoidable.

This digression opens the way to a comparison between foreign and domestic loans. If the loan be domestic, money must be diverted from those channels in which it would otherwise have flowed; and, therefore, either the public must give better terms than individuals, or there must be money enough to supply the wants of both. In the latter case, if the public did not borrow, the quantity of money would exceed the demand, and the interest would be lowered; borrowing by the public, therefore, would keep up the rate of interest; which brings the latter case within the reason of the former. If the public out bid individuals, those individuals are deprived of the means of extending their industry; so that no case of a domestic loan can well be supposed where some public loss will not arise to counterbalance the public gain, except where the creditor spares from his consumption to lend to the government, which operates a national economy. It is, however, an advantage peculiar to domestic loans, that they give stability to government, by combining together the interests of the monied men for its support; and, consequently, in this country a domestic debt would greatly contribute to that union, which seems not to have been sufficiently attended to or provided for in forming the national compact. Domestic loans are also useful, from the farther consideration, that as taxes fall heavy on the lower orders of the community, the relief obtained for them by such loans more than counterbalances the loss sustained by those who would have borrowed money to extend their commerce or tillage. Neither is it a refinement to observe, that since a plenty of money and consequent ease of obtaining it, induce men to engage in speculations, which are often unprofitable, the check which these receive is not injurious, while the relief obtained by the poor is highly beneficial.

By making foreign loans, the community, as such, receive the same extensive benefits, which one individual does in borrowing of another. This country was always in the practice of making such loans. The merchants in Europe trusted those in America. The American merchants trusted the country store-keepers, and they the people at large. This advance of credit may be stated at not less than twenty millions of dollars. And the want of that credit now is one principal reason of those usurious contracts mentioned above. These have been checked by the institution of the bank, but the funds of that corporation not permitting those extensive advances, which the views of different people require, the price given for particular accommodations of money continues to be enormous; and that again shows, that to make domestic loans would be difficult, if not impracticable. The merchants not having now that extensive credit in Europe, which they formerly had, the obtaining such credit by government becomes in some sort necessary.

But there remains an objection with many against foreign loans, which (though it arises from a superficial view of the subject) has no little influence. This is, that the interest will form a balance of trade against us, and drain the country of specie; which is only saying in other words, that it would be more convenient to receive money as a present, than as a loan; for the advantages derived by the loan exist, notwithstanding the payment of interest. To show this more clearly, a case may be stated, which in this city is very familiar. An Island in the Delaware overflowed at high water has for a given sum, suppose a thousand pounds, been banked in, drained, and made to produce, by the hay sold from it at Philadelphia, a considerable sum annually; for instance, two hundred pounds. If the owner of such an Island had borrowed in Philadelphia the thousand pounds to improve it, and given six per cent interest, he would have gained a net revenue of one hundred and forty pounds. This certainly would not be a balance of trade against his Island, nor the draining it of specie. He would gain considerably, and the city of Philadelphia also would gain, by bringing to market an increased quantity of a necessary article.

In like manner money lent by the city of Amsterdam to clear the forests of America would be beneficial to both. Draining marshes and bringing forests under culture, are beneficial to the whole human race, but most to the proprietor. But at any rate, in a country and in a situation like ours, to lighten the weight of present burdens must be good policy by loans. For as the governments acquire more stability, and the people more wealth, the former will be able to raise, and the latter to pay, much greater sums than can at present be expected.

What has been said on the general nature and benefit of public loans, as well as their particular utility to this country, contains more of detail than is necessary for the United States in Congress, though perhaps not enough for many of those to whose consideration this subject must be submitted. It may seem superfluous to add, that credit is necessary to the obtaining of loans. But among the many extraordinary conceptions which have been produced during the present revolution, it is neither the least prevalent nor the least pernicious, that foreigners will trust us with millions, while our own citizens will not trust us with a shilling. Such an opinion must be unfounded, and will appear to be false at the first glance; yet men are, on some occasions, so willing to deceive themselves, that the most, flattering expectations will be formed from the acknowledgement of American independence by the States-General. But surely no reasonable hope can be raised on that circumstance, unless something more be done by ourselves. The loans made to us hitherto, have either been by the Court of France, or on their credit. The government of the United Netherlands are so far from being able to lend, that they must borrow for themselves. The most, therefore, that can be asked from them, is to become security for America to their own subjects; but it cannot be expected that they will do this, until they are assured and convinced that we will punctually pay. This follows necessarily from the nature of their government, and must be clearly seen by the several States as well as by Congress, if they only consider what conduct they would pursue on a similar occasion. Certainly Congress would not put themselves in a situation, which might oblige them to call on the several States for money to pay the debts of a foreign power. Since then no aid is to be looked for from the Dutch government, without giving them sufficient evidence of a disposition and ability to pay both principal and interest of what we borrow; and since the same evidence which would convince the government must convince the individuals that compose it, asking the aid of government must either be unnecessary or ineffectual. Ineffectual before the measures are taken to establish our credit, and unnecessary afterwards.

We are, therefore, brought back to the necessity of establishing public credit; and this must be done at home before it can be extended abroad. The only question which can remain, is with respect to the means. And here it must be remembered, that a free government whose natural offspring is public credit, cannot have sustained a loss of that credit, unless from particular causes, and therefore those causes must be investigated and removed, before the effects will cease. When the continental money was issued, a greater confidence was shown by America than any other people ever exhibited. The general promise of a body not formed into, nor claiming to be a government, was accepted as current coin; and it was not until long after an excess of quantity had forced on depreciation, that the validity of these promises was questioned. Even then the public credit still existed in a degree, nor was it finally lost until March, 1780, when an idea was entertained that government had committed injustice. It is useless to enter into the reasons for and against the resolutions of that period. They were adopted, and are now to be considered only in relation to their effects. These will not be altered by saying that the resolutions were misunderstood, for in those things which depend on public opinion, it is no matter, (so far as consequences are concerned,) how that opinion is influenced. Under present circumstances, therefore, it may be considered as an incontrovertible proposition, that all paper money ought to be absorbed by taxation, or otherwise, and destroyed before we can expect our public credit to be fully reestablished; for so long as there be any in existence, the holder will view it as a monument of national perfidy.

But this alone would be taking only a small step in the important business of establishing national credit. There are a great many individuals in the United States, who trusted the public in the hour of distress, and who are impoverished, and even ruined by the confidence they reposed. There are others whose property has been wrested from them by force to support the war, and to whom certificates have been given in lieu of it, which are entirely useless. I need no inspiration to show that justice establishes a nation. Neither are the principles of religion necessary to evince that political injustice will receive political chastisement. Religious men will cherish these maxims in proportion to the additional force they derive from divine revelation. But our own experience will show, that from a defect of justice this nation is not established, and that her want of honesty is severely punished by her want of credit. To this want of credit must be attributed the weight of taxation for the support of the war, and the continuance of that weight by the continuance of the war.

It is, therefore, with the greatest propriety, your petitioners already mentioned, have stated in their Memorial, that both policy and justice require a solid provision for funding the public debts. It is with pleasure, Sir, that I see this numerous, meritorious, and oppressed, body of men who are creditors of the public, beginning to exert themselves for the obtaining of justice. I hope they may succeed, not only because I wish well to so righteous a pursuit, but because their success will be the great ground work of a credit, that will carry us safely through the present just, important, and necessary war; which will combine us closely together on the conclusion of a peace, which will always give to the supreme representative of America, a means of acting for the general defence on sudden emergencies, and which will of consequence procure the third of these great objects, for which we contend, _peace, liberty, and safety_.

Such, Sir, are the cogent principles, by which we are called to provide solid funds for the national debt. Already Congress have adopted a plan for liquidating all past accounts, and if the States shall make the necessary grants of revenue, what remains will be a simple executive operation, which will presently be explained. But however powerful the reasons in favor of such grants, over and above those principles of moral justice, which none, however exalted, can part from with impunity, still there are men, who, influenced by penurious selfishness, will complain of the expense, and who will assert the impossibility of sustaining it. On this occasion the sensations with respect to borrowing are reversed. All would be content to relieve themselves by loan from the weight of taxes, but many are unwilling to take up as they ought the weight of debt. Yet this must be done before the other can happen; and it is not so great but that we should find immediate relief by assuming it, even if _it were a foreign debt_. I say if it were a _foreign_ debt, because I shall attempt to show, first, that being a _domestic debt_, to fund it will cost the community nothing, and secondly, that it will produce, on the contrary, a considerable advantage.

And as to the first point, one observation will suffice. The expenditure has been made, and a part of the community have sustained it. If the debt were to be paid by a single effort of taxation, it could only create a transfer of property from one individual to another, and the aggregate wealth of the whole community would be precisely the same. But since nothing more is attempted than merely to fund the debt, by providing for the interest at six per cent, the question of ability is resolved to the single point, whether it is easier for a _part of the people_ to pay one hundred dollars, than for the _whole people_ to pay six dollars. It is equally clear, though not equally evident, that a considerable advantage would be produced by funding our debts, over and above what has been already mentioned as the consequence of national credit.

The advantage is threefold. First, many persons by being creditors of the public are deprived of those funds, which are necessary to the full exercise of their skill and industry. Consequently the community are deprived of the benefits, which would result from that exercise, whereas if these debts, which are in a manner dead, were brought back to existence, monied men would purchase them up, though perhaps at a considerable discount, and thereby restore to the public many useful members, who are now entirely lost, and extend the operations of many more to considerable advantage. For although not one additional shilling would be by this means brought in, yet by distributing property into those hands, which could render it most productive, the revenues would be increased, while the original stock continued the same. Secondly, many foreigners who make speculations to this country, would, instead of ordering back remittances, direct much of the proceeds of their cargoes to be invested in our public funds, which, according to principles already established, would produce a clear advantage, with the addition, from peculiar circumstances, that it would supply the want of credit to the mercantile part of society. The last but not least advantage is, that in restoring ease, harmony, and confidence, not only the government (being more respectable) would be more respected, and consequently better obeyed, but the mutual dealings among men on private credit would be facilitated. The horrors which agitate people's minds, from an apprehension of depreciating paper would be done away. The secret hoards would be unlocked. In the same moment the necessity of money would be lessened, and the quantity increased. By these means the collection of taxes would be facilitated, and thus instead of being obliged to give valuable produce for useless minerals, that produce would purchase the things we stand in need of, and we should obtain a sufficient circulating medium, by giving the people what they have always a right to demand, solid assurance in the integrity of their rulers.

The next consideration, which offers is the amount of public debt, and every good American must lament that confusion in public affairs, which renders an accurate state of it unattainable. But it must continue to be so until accounts at home and abroad be fully adjusted. The enclosed is an estimate, furnished by the Controller of the Treasury; from which it appears, that there is, already an acknowledged debt bearing interest, to the amount of more than twelve millions of dollars. On a part of this also there is a large arrearage of interest, and there is a very considerable debt unsettled, the evidence of which exists in various certificates, given for property applied to the public service. This service, including pay due to the army previous to the present year, cannot be estimated at less than between seven and eight millions. Our debt to his Most Christian Majesty, is above five millions. The nearest guess, therefore, which can be made at the sum total, is from twentyfive to twentyseven millions of dollars; and if to this we add what it may be necessary to borrow for the year 1783, the amount will be, with interest, by the time proper revenues are obtained, considerably above thirty millions. Of course the interest will be between eighteen hundred thousand and two millions of dollars.

And here, previous to the consideration of proper revenues for that amount, it may not be amiss to make a few general observations; the first of which is, that it would be injurious to the United States to obtain money in loans, without providing beforehand the necessary funds. For if those who are now so deeply engaged to support war, will not grant such funds to procure immediate relief, certainly those who come after them will not do it to pay a former debt. Remote objects, dependent on abstract reasoning, never influence the mind like immediate sensibility. It is, therefore, the province of wisdom to direct towards proper objects that sensibility, which is the only motive to action among the mass of mankind. Should we be able to get money from the Dutch, without first providing funds, which is more than doubtful; and should the several States neglect afterwards making provision to perform the engagements of Congress, which is more than probable, the credit of the United States abroad would be ruined forever. Very serious discussions also might be raised among foreign powers, and our creditors might have recourse to arms, we might dishonorably be compelled to do what dishonestly we had left undone.

Secondly, the idea, which many entertain, of soliciting loans abroad to pay the interest of domestic debts, is pregnant with its own destruction. If the States were to grant revenues sufficient only to pay the interest of present debts, we might, perhaps, obtain new credit upon a general opinion of our justice, though that is far from certain. But when we omit paying by taxes the interest of debts already contracted, and ask to borrow for the purpose, making the same promises to obtain the new loans, which had already been made to obtain the old, we shall surely be disappointed.

Thirdly, it will be necessary, not only that revenues be granted, but that those revenues be amply sufficient for the purpose, because (as will presently appear) a deficiency would be highly pernicious, while an excess would be not only unprejudicial, but very advantageous. To perceive this with all necessary clearness, it must be remembered that the revenues asked for on this occasion must be appropriated to the purposes for which they are asked, and in like manner the sums required for current expenditures must be appropriated to the current service. If then the former be deficient the latter cannot be brought in to supply the deficiencies, and of course the public credit would be impaired; but should there be an excess of revenue it could be applied in payment of a part of the debt immediately, and in such case, if the credits should have depreciated they would be raised to par, the offer of payment would induce creditors to lower the interest. Thus in either case, the means of making new loans on good terms would be extended, and the necessity of asking more revenues obviated.

Lastly, the revenues ought to be of such a nature, as naturally and necessarily to increase, for creditors will have a greater confidence when they have a clear prospect of being repaid, and the people will always be desirous to see a like prospect of relief from the taxes. Besides which, it will be necessary to incur some considerable expense after the war, in making necessary establishments for a permanent naval force, and it will always be least objectionable to borrow for that purpose on funds already established.

The requisition of a five per cent impost, made on the 3d of February, 1781, has not yet been complied with by the State of Rhode Island; but as there is reason to believe that their compliance is not far off, this revenue may be considered as being already granted. It will, however, be very inadequate to the purposes intended. If goods be imported and prizes introduced to the amount of twelve millions annually, the five per cent would be six hundred thousand, from which at least one sixth must be deducted, as well for the cost of collection as for the various defalcations which will necessarily happen, and which it is unnecessary to enumerate. It is not safe, therefore, to estimate this revenue at more than half a million of dollars, for, though it may produce more, yet probably it will not produce so much. It was in consequence of this, that on the 27th day of last February, I took the liberty to submit the propriety of asking the States for a land tax of one dollar for every hundred acres of land, a poll tax of one dollar on all freemen and all male slaves between sixteen and sixty, (excepting such as are in the federal army, and such as are by wounds or otherwise rendered unfit for service) and an excise of one eighth of a dollar per gallon, on all distilled spirituous liquors. Each of these may be estimated at half a million, and should the product be equal to the estimation, the sum total of revenues for funding the public debts, would be equal to two millions. What has been the fate of these propositions I know not, but I will beg leave, on this occasion, not only to renew them, but also to state some reasons in their favor, and answer some objections against them.

And first, as to a land tax. The advantages of it are, that it can be reduced to a certainty as to the amount and time. That no extraordinary means are necessary to ascertain it, and that land being the ultimate object of human avarice, and that species of permanent property, which peculiarly belongs to a country as neither to be removed or concealed, it stands foremost for the object of taxation, and ought most particularly to be burdened with those debts, which have been incurred by defending the freedom of its inhabitants. But besides these general reasons, there are some which are in a manner peculiar to this country. The land of America may, as to the proprietors be divided into two kinds; that which belongs to the great landholders, and that which is owned and occupied by the industrious cultivators. This latter class of citizens, is, generally speaking, the most numerous and most valuable part of a community. The artisan may, under any government, minister to the luxuries of the rich, and the rich may, under any government, obtain the luxuries they covet. But the free husbandman is the natural guardian of his country's freedom. A land tax will probably, at the first mention, startle this order of men; but it can only be from the want of reflection, or the delusion must be kept up by the artifice of others. To him who cultivates from one to five hundred acres, a dollar per hundred is a trifling object, but to him who owns a hundred thousand it is important. Yet a large proportion of America is the property of great landholders, they monopolise it without cultivation; they are, for the most part, at no expense either of money or personal service to defend it, and keeping the price higher by monopoly than otherwise it would be, they impede the settlement and culture of the country. A land tax, therefore, would have the salutary operation of an agrarian law without the iniquity. It would relieve the indigent, and aggrandize the State by bringing property into the hands of those who would use it for the benefit of society.

The objections against such a tax are twofold; first, that it is unequal, and secondly, that it is high. To obviate the inequality, some have proposed an estimate of the value of different kinds of lands. But this would be improper; because, first, it would be attended with great delay, expense, and inconvenience. Secondly, it would be uncertain, and therefore improper, particularly when considered as a fund for public debts. Thirdly, there is no reason to believe, that any estimate would be just, and even if it were, it must be annually varied, or else come within the force of the objection as strongly as ever; the former would cost more than the tax, and the latter would not afford the remedy asked for. Lastly, such valuations would operate as a tax upon industry, and promote that land monopoly, which every wise government will study to repress. But further, the true remedy for any inequality will be obtained in the apportioning other taxes, of which there will always be enough to equalize this; besides, the tax being permanent and fixed, it is considered in the price of land on every transfer of property, and that produces a degree of equality, which no valuation could possibly arrive at.

In a word, if exact numerical proportion be sought after in taxes, there would be no end to the search. Not only might a poll tax be objected to, as too heavy on the poor and too light on the rich, but when that objection was obviated the physical differences in the human frame would alone be as endless a source of contention, as the different qualities of land. The second objection, that the tax is too high, is equally futile with the former. Land which is so little worth, that the owner will not pay annually one penny per acre for the defence of it, ought to belong to the society by whom the expense of defending it is defrayed. But the truth is, that this objection arises from and is enforced by those men who can very well bear the expense, but who wish to shift it from themselves to others. I shall close this subject by adding, that as such a tax would, besides the benefits to be derived from the object of it, have the farther advantage of encouraging settlements and population, this would redound not only to the national good, but even to the particular good of the landholders themselves.

With respect to the poll tax, there are many objections against it, but in some of the States a more considerable poll tax already exists without inconvenience. The objections are principally drawn from Europe, by men who do not consider that a difference of circumstances makes a material difference in the nature of political operations. In some parts of Europe, where nine tenths of the people are exhausted by continual labor, to procure bad clothing and worse food, this tax would be extremely oppressive; but in America, where three days of labor produce sustenance for a week, it is not unreasonable to ask two days out of a year as a contribution to the payment of public debts. Such a tax will, on the rich, be next to nothing; on the middling ranks it will be of very little consequence; and it cannot affect the poor, because such of them as are unable to labor will fall within the exception proposed. In fact the situation of America differs so widely from that of Europe as to the matter now under consideration, that hardly any maxim which applies to one will be alike applicable to the other. Labor is in such demand among us, that the tax will fall on the consumer. An able bodied man who demands one hundred dollars to go into military service for three years, cannot be oppressed by the annual payment of one dollar while not in that service. This tax, also, will have the good effect of placing before the eyes of Congress the numbers of men in the several States; an information always important to government.

The excise proposed is liable to no other objection than what may be made against the mode of collection, but it is conceived that this may be such as can produce no ill consequences. Excise laws exist and have long existed in the several States. Of all taxes, those on the consumption of articles are most agreeable, because being mingled with the price, they are less sensible to the people; and without entering into a discussion with which speculative men have amused themselves, on the advantages and disadvantages of this species of taxation, it may be boldly affirmed, that no inconvenience can arise from laying a heavy tax on the use of ardent spirits. These have always been equally prejudicial to the constitutions and morals of the people. The tax will be a means of compelling vice to support the cause of virtue, and like the poll tax, will draw from the idle and dissolute, that contribution to the public service which they will not otherwise make.

Having said thus much on the propriety of these taxes, I shall pray leave to assure you of my ready acquiescence in the choice of any others, which may be more agreeable to the United States in Congress, praying them nevertheless to consider, that as the situation of the respective States is widely different, it will be wise to adopt a variety of taxes, because by that means the consent of all will be more readily obtained, than if such are chosen as will fall heavy only on particular States.

The next object is the collection, which, for the most obvious reasons ought to be by authority derived from the United States. The collection of a land tax, as has been above observed, will be very simple. That of the poll may be equally so, because certificates of the payment may annually be issued to the collectors, and they be bound to return the certificates or the money, and empowered to compel a payment by every man not possessed of a certificate. If in addition to this, those who travel from one State to another be obliged to take out and pay for a new certificate in each State, that would operate a useful regulation of police; and a slight distinction between those and the common certificates would still preserve their utility in numbering the people.