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• The Speech of Albert Gallatin, a Representative From the County of Fayette, In the House of Representatives of the General Assembly of Pennsylvania, [january 3, 1795,] On the Important Question Touching the Validity of the Elections Held In the Four We
• A Sketch of the Finances of the United States.
• Introduction to the Collection of Laws, Treaties, and Other Documents Having Operation and Respect to the Public Lands.
• Considerations On the Currency and Banking System of the United States.
• Suggestions On the Banks and Currency of the Several United States, In Reference Principally to the Suspension of Specie Payments.
• The Oregon Question.
• Appendix.: War Expenses.
• Peace With Mexico.
• Appendix.: the Gallatin Genealogy. Extrait Du Regître Des Affaires Des Particuliers De La République De Genève

A SKETCH OF THE FINANCES OF THE UNITED STATES.

BY ALBERT GALLATIN.

ADVERTISEMENT.

The Editor of the following pages conceives it his duty to inform the public that they have been published in the absence of their Author; he has, however, paid particular care to the examination of the proof-sheets, and trusts that the work will be accurate and correct.

He also conceives it his duty to suggest that the Author is in no shape concerned in the emoluments of the publication. The copyright was generously bestowed upon the Editor, and it is entirely for his benefit and at his expense that these sheets are presented to the world.

The Editor.

November 12, 1796.

SECTION I.

OF THE REVENUES OF THE UNITED STATES.

Congress, by the Constitution of the United States, have power to lay and collect taxes, duties, imposts, and excises, subject, however, to the following restrictions: 1st. All duties, imposts, and excises must be uniform throughout the United States. 2d. No capitation or other direct tax can be laid, unless the same be apportioned among the several States according to their respective numbers, which numbers are determined by adding to the whole number of free persons three-fifths of all slaves. An enumeration of the inhabitants of the Union has accordingly been made in the year 1791 (see statement No. 1), and a new one is directed, by the Constitution, to be made within every subsequent term of ten years. 3d. No tax or duty can be laid on articles exported from any State; from whence it seems to result that, whenever an internal duty is laid upon the manufacture of any article, it must not extend beyond the home consumption of that article, and an equivalent drawback must be allowed on its exportation.

The power of laying duties on tonnage and imports belongs exclusively to the government of the Union. The several States are also precluded from laying duties on exports; they have within their respective jurisdictions a concurrent power with Congress to lay any internal taxes, duties, and excises. But they seem to be virtually precluded from laying duties upon the manufacturers of any article, the consumption of which they may wish to tax; for as they cannot lay any duty on the importation, within the State, of any article, a tax upon their own manufacture would have no other tendency but to destroy it. Whenever, therefore, a State shall resort to duties upon consumable commodities, they must be laid not on the manufacturers, but on the retailers or consumers of the commodity.

The United States have, heretofore, raised a revenue by those duties and taxes only which they have conceived to fall within the description of indirect taxes. A controversy, indeed, has taken place on the subject of a tax laid upon the owner of every carriage used for the conveyance of persons, which, by some, was deemed to be a direct tax. One of the most important consequences flowing from the principle of a Constitution binding the different branches of government has been, in some instances, not a limitation of the powers of government, but a transfer of those powers from the legislative to the judiciary department. For the judges have exercised in all doubtful cases the authority to explain the Constitution, as they explain the laws, and to decide, even in cases of taxation, whether a law was constitutional or not, valid or a dead letter. Their decision on the carriage-tax, which was brought before them by the refusal of an individual to pay, accorded with the opinion of the Legislature. A less vague expression than that of “direct” might have been used in the Constitution; as it now stands, it is difficult to affix to it any precise and determinate meaning. The word, in itself, does not express a positive or absolute qualification, but only the relation of a subject to another. The Constitution mentions only one of the subjects, but does not say in relation to what other subject taxes are to be considered as direct. The direct tax is that which falls directly,—but upon what? On the person who pays it? On the article taxed? On that general fund intended to be taxed? The Constitution is silent on that head. Nor has the word any general acceptation or technical meaning. It is used, by different writers, and even by the same writers, in different parts of their writings, in a variety of senses, according to that view of the subject they were taking.

The most generally received opinion, however, is, that by direct taxes in the Constitution, those are meant which are raised on the capital or revenue of the people; by indirect, such as are raised on their expense. As that opinion is in itself rational, and conformable to the decision which has taken place on the subject of the carriage-tax, and as it appears important, for the sake of preventing future controversies, which may be not more fatal to the revenue than to the tranquillity of the Union, that a fixed interpretation should be generally adopted, it will not be improper to corroborate it by quoting the author from whom the idea seems to have been borrowed. Dr. Smith (Wealth of Nations, Book v., Chap. 2) says: “The private revenue of individuals arises ultimately from three different sources,—rent, profit, and wages. Every tax must finally be paid from some one or other of those three different sorts of revenue, or from all of them indifferently.” After having treated separately of those taxes which it is intended should fall upon some one or other of the different sorts of revenue, he continues: “The taxes which it is intended should fall indifferently upon every different species of revenue, are capitation taxes and taxes upon consumable commodities. These must be paid indifferently from whatever revenue the contributors may possess.” And, after having treated of capitation taxes, he finally says: “The impossibility of taxing the people in proportion to their revenue by any capitation seems to have given occasion to the invention of taxes upon consumable commodities. The State, not knowing how to tax directly and proportionably the revenue of its subjects, endeavors to tax it indirectly by taxing their expense, which it is supposed will in most cases be nearly in proportion to their revenue. Their expense is taxed by taxing the consumable commodities upon which it is laid out.” The remarkable coincidence of the clause of the Constitution with this passage in using the word “capitation” as a generic expression, including the different species of direct taxes, an acceptation of the word peculiar, it is believed, to Dr. Smith, leaves little doubt that the framers of the one had the other in view at the time, and that they, as well as he, by direct taxes, meant those paid directly from and falling immediately on the revenue; and by indirect, those which are paid indirectly out of the revenue by falling immediately upon the expense. It has, indeed, been held by some that “direct taxes” meant solely that tax which is laid upon the whole property or revenue of persons, to the exclusion of any tax which may be laid upon any species of property or revenue. An opinion equally unsupported by the vulgar or any appropriate sense of the word itself, and contradictory to the very clause of the Constitution, which, instead of admitting only one kind of direct tax, expressly recognizes several species by using the words “capitation or other direct tax,” and “direct taxes.”

Should those considerations be thought correct, it results that all taxes laid upon property which commonly afford a revenue to the owner (whether such property be in itself productive or not) in proportion to its value, are direct; a class which will include taxes upon lands, houses, stock, and labor; all of which, therefore, must, when laid, be apportioned among the States according to the rule prescribed by the Constitution.

The present revenues of the United States arise from

1st. External duties on tonnage and imports.

2d. Internal duties on domestic distilled spirits, on snuff and refined sugar manufactured within the United States, on sales at auction, on retailers of wines and foreign spirits, and on carriages used for the conveyance of persons.

3d. Postage of letters.

4th. Dividends on the shares owned by the United States in the stock of the Bank of the United States.

OF DUTIES ON TONNAGE AND IMPORTS.

The statement No. II. exhibits the yearly amount from the establishment of the present government to the first day of January, 1795, of the revenue arising from those duties, of the deductions for drawbacks, bounties, and expenses of collection, of the actual receipts in the Treasury, and of the balances outstanding. The accounts for the year 1795 are not yet published, but the actual receipts, on account of those duties, amounted for that year to dollars 5,588,961. The total amount of receipts from the first of August, 1789, when the duties were first laid, to the first of January, 1796, is dollars 22,755,998.

The duties on tonnage are, upon vessels of the United States, six cents, and upon foreign vessels fifty cents per ton. The tonnage of American vessels entered into the United States (including coasting and fishing vessels) amounted, in the year 1790, to 486,890 tons; in the year 1792, to 567,698 tons; in the year 1794, to 745,595 tons. The tonnage of foreign vessels during the same years amounted respectively to 250,746, 244,278, and 84,521 tons; of which Great Britain owned in the same years respectively 216,914, 206,065, and 37,058 tons. The amount of duties has decreased in proportion to the increase of the American tonnage. In 1792 they amounted to near 160,000 dollars; in 1794 they hardly exceeded 80,000. The great diminution of foreign tonnage being chiefly owing to the present European war, it is probable that it will again increase on the return of peace; and those duties may, therefore, be fairly stated as a permanent revenue of dollars 100,000.

Having mentioned the American tonnage entered in the United States and paying duty, it is proper to add that that amount includes the repeated voyages, in each year, of all vessels employed in a foreign trade; and that the actual American tonnage, at the close of the year 1794, was 628,618 tons; 438,863 whereof were employed in the foreign trade, 162,579 in the coasting trade, and 27,176 in the whale and cod fisheries: which, at the rate of six men for every hundred tons employed in the foreign and coasting trade, and of twelve men for every hundred tons employed in the fisheries, would make an aggregate of near forty thousand seamen. It must, however, be observed that this account of tonnage includes a great number of American vessels detained in foreign countries, and that a considerable deduction in the amount both of vessels and of seamen, which, for want of proper materials, cannot be calculated, has been the consequence of the depredations committed on our commerce by the belligerent, or rather by one of the belligerent, powers.

The duties on imports constitute by far the greater proportion of the whole amount of the revenues of the Union; they have been increased from time to time to their present rate, and the last law for that purpose being in operation only from the first of July, 1794, the accounts for that year and the receipts for the year 1795 do not afford sufficient data whereupon to ground a correct estimate of the permanent revenue to be derived from that source. As all the duties paid on any article are repaid upon the re-exportation of the same, except one per centum on the amount of the said duties, the greatest difficulty in forming an estimate arises from the unusually large quantities of West India produce which have lately been imported into the United States. The duties which have been either paid or secured on the whole quantity constitute a part of the receipts of the Treasury, or of the gross amount of revenue exhibited in the official statements, although a large proportion must be repaid, in the shape of drawbacks, upon the re-exportation of whatever has been imported beyond the demand of the country. Until better materials can be obtained, the following estimate, calculated on what, from a comparison of the importations and re-exportations for the four last years, appears to be the present average rate of the annual consumption of the dutied articles, is offered, less as an accurate statement than as an attempt to class the different branches of this revenue:

From which gross amount must be deducted the expenses paid out of the same, in order to obtain the net revenue. These, strictly speaking, are only the expenses of collection charged to the revenue, and amounting to 220,000 dollars, which, therefore, leaves a net revenue of 5,810,000 dollars. But as there are some bounties to the fisheries, which, although in fact they are expenditures, are not paid out of the Treasury, but are discharged by the collectors of customs, it has been usual to deduct them also from the gross amount of revenue, instead of charging them as an expenditure to the net revenue. Exclusively of the bounties of 18 cents per barrel of pickled fish, and of 15 cents per barrel of salted provisions, exported, which may be considered merely as a drawback of the duty upon the salt used in preserving the same (which bounties, on our present rate of exportation of those articles, may be estimated at 34,000 dollars), an allowance from one to two dollars and an half per ton is made to vessels employed in the cod fisheries, in lieu of drawback upon the exportation of dried fish. Those allowances amount to about 90,000 dollars, and as the quantity of dried fish exported does not exceed 400,000 quintals, a drawback of the actual duties paid on the salt used in preserving the same would not exceed 50,000 dollars,1 and the remaining 40,000 dollars are not a drawback, but an actual bounty upon the fisheries. This last sum deducted from the above-stated sum of 5,810,000 dollars leaves for the net revenue, on the principles upon which it is usually settled at the Treasury, 5,770,000 dollars.

The expenses of collection, payable out of the revenue, and consisting of salaries and commissions, have been stated at 220,000 dollars; but to these must be added the amount of fees paid by individuals, which are not charged to the revenue. These may be estimated at 80,000 dollars, which, added to the above sum of 220,000 dollars, form an aggregate of 300,000 dollars for the total expense of collecting the duties on imports and tonnage. That sum of 300,000 dollars upon a gross revenue of dollars 6,110,000 (by adding the 80,000 dollars fees to the sum of 6,030,000 dollars herebefore stated as the total amount of gross revenue on tonnage and imports) makes the expense of collection something less than 5 per cent. on the gross sum paid by the people.

The duty on salt is the only one amongst those above mentioned which seems to have been objected to. It is not at present very heavily felt, and may even be deemed moderate when compared to the revenue raised on the same object in some other countries. Yet it is proper to observe that it is already higher in proportion to the value of the article than that paid upon any other, and that whatever impediment may exist in the way of its repeal, from the difficulty of finding a substitute for a tax already established, it would be equally unjust and impolitic to raise this above its present rate. So far as the article is consumed by man, it is a species of poll-tax, which falls equally upon every one, whether poor or rich; so far as it is consumed by cattle, it is a tax upon agriculture, and would prove pernicious was it ever increased so high as to check its use.

An examination of the importations for four years past affords satisfactory proofs that, notwithstanding the gradual increase of duties, they have been faithfully paid, and that the frauds so usually committed upon the fair trader and the public in countries where a large revenue is derived from customs have been comparatively few in the United States. The whole amount of fines and forfeitures incurred for a period of five years and an half for breaches of the laws of a revenue, which during the same time has produced to the Treasury a net sum of seventeen millions of dollars, does not much exceed 9000 dollars. There seems to be but one exception to that general conclusion. From a view of the importation of teas, it would seem that the consumption of hyson tea (after the proper deductions for re-exportation) in the years 1793 and 1794 was but one-half of the consumption of the years 1791 and 1792. The temptation offered by the high duty and by the small bulk of the article points out the true remedy, viz., a decrease of the duty.

The produce of duties on consumption naturally increases with population, and it might, on first view, be inferred that if the last doubles in the United States every 23 or 24 years, the first must receive a gradual proportionate increase of about three per cent. a year. Upon the same principle, it might be expected that those duties which in 1796 are supposed to produce a net revenue of 5,800,000 dollars would in the year 1801 yield about 6,700,000 dollars, or an increase of near 16 per cent. Some obvious considerations will, however, show the fallacy of that calculation.

The exports of the United States, in articles of their own growth or manufacture, are greater, in proportion to their population, than those of any other nation. After every deduction for re-exportation of imported articles, and for the extraordinary prices lately obtained for provisions, they may be valued at twenty millions of dollars at least. Those of France, with a population seven times as great as that of America, did not exceed, exclusively of the produce of their colonies, forty millions of dollars. There is good reason to believe that those of the actual growth or manufacture of Great Britain, with a population treble of ours, a superior industry, and an immense capital, although sometimes rated higher, cannot exceed fifty millions of dollars. The cause is well known to be the physical situation of the United States. Possessed of more land, in proportion to their numbers, than any European nation, their labor has been, in general, more advantageously applied to the cultivation of those lands, and to the raising large quantities of the produce of land, than it would have been to the manufactures. As, however, every further increase of population in many of the States diminishes the relative quantity of land and of produce raised, and promotes the establishment of manufactures, our exports of raw materials, our importations of those articles we can manufacture, and the revenue raised upon those articles, although all of them gradually augmenting, will, unless favored by accidental causes, increase in a ratio less than our population. Thus, although our numbers have doubled between the years 1770 and 1793, the quantity of exports is supposed to have increased only about fifty per cent. during the same period. A view of the exports of articles of our own growth or manufacture for the last six years showeth that upon an average, although the demand never was so great, the quantity exported has been nearly stationary. (See Statement No. III.)

The natural causes which may thus check the increase of our exports and of our revenue upon importations will not, however, diminish the progress of our wealth, and of our capacity of raising a proportionably large revenue from any other source. But another consideration, of greater importance for the present, must be attended to. The value of the exports of the two years 1794 and 1795 was 80,000,000 of dollars, and of the two years 1791 and 1792 did not amount to 40 millions. That prodigious augmentation cannot be viewed as permanent, unless owing to an increase of the quantity of articles of our own growth or manufactures that were exported. But it has already been stated that that quantity has received but a trifling addition, if any, since the former period. That increase is due to mere temporary causes, the first arising from an advanced price of perhaps forty per cent. upon the total amount of our exports beyond their usual value; the second, from our having become the carriers of a large proportion of the produce of some of the West India Islands. Those two items, both of which are owing to the present European war, constitute nearly one-half of the value of our exports for the two last years. A view of the statement No. III. will show that the total amount of our re-exportations of imported articles for those two years exceeded 25 millions of dollars. The profit made upon those articles, of which we have thus become the venders and the carriers, and the whole of the advanced price upon articles of our own growth, have been to us a sudden acquisition of wealth. Whilst it lasts we are enabled to pay for a larger quantity of foreign luxuries, we import more, we consume more, and the revenue receives a temporary increase. The return of peace, as it will diminish our profits, the value of our exports, and our ability of paying, will also diminish our consumption, our importation, and our revenue. It is not within the reach of calculation to conjecture how powerfully that cause will operate; but it is highly probable that for some years it will at least counterbalance, if it does not exceed, any increase to be derived from the gradual augmentation of our population.

OF INTERNAL DUTIES.

The duties on domestic distilled spirits, which when first laid, in the year 1791, were eleven cents per gallon upon spirits manufactured from foreign materials (molasses), and nine cents upon those manufactured from domestic materials (grain and fruit), are now ten and seven cents respectively upon the lowest proof of the two species, and rise as high as twenty-five and eighteen cents upon the highest proof. Country distillers, employed in distilling spirits from domestic materials, have the option to pay the above-mentioned duty, or to pay either a yearly duty of fifty-four cents or a monthly duty of ten cents for every gallon of the capacity of their stills.

The statement No. IV. exhibits the yearly amount of the revenue arising from those duties, so far as the accounts have been settled at the Treasury. The accounts for the half year 1791 and the year 1792 are settled for all the States,1 Pennsylvania and Kentucky excepted. For the subsequent years they are but very imperfectly settled, and that document throws no other light on the subject but by accurately stating the actual receipts in the Treasury and the drawbacks obtained for exportation. It thereby appears that the total sums paid by the supervisors, from the first of January, 1792, to the first of January, 1795, amount to dollars 820,738, and that the total amount of drawbacks paid during the same period upon the exportation of domestic distilled spirits amounted to dollars 268,121; deducting from this last sum that part of the drawbacks which is repaid on account of the duty upon the importation of the molasses (viz., three cents per gallon), will leave dollars 208,496 for the part of the drawbacks paid on account of the duty raised on the distillation itself. This last sum subtracted from the dollars 820,738 paid by the supervisors leaves, for the net receipts in the Treasury from that duty, dollars 612,241 for a period of three years, or something more than 200,000 dollars a year. The payments made in the Treasury by the supervisors for the year 1795 were dollars 337,255. But from that sum must be deducted the drawbacks, estimated at dollars, 26,666; the balance, consisting of about 310,000 dollars, includes the receipts on account, not only of the duties on distilled spirits, but also of all the other internal duties. These last are stated to have produced for the year ending on the 30th September, 1795, a gross revenue of dollars 170,000; but what proportion of the same had actually been paid in the Treasury before the 1st of January, 1796, and should therefore be deducted from the above 310,000 dollars in order to obtain the true receipts on account of distilled spirits for the year 1795, is not ascertained. The statement No. V., grounded partly on settled accounts and partly on estimates, showeth the yearly gross amount of the duties, after deducting the drawbacks which accrued from the 1st of July, 1791, to the 1st July, 1795, upon spirits distilled in cities, towns, and villages, and those distilled in the country. These last may, without any material error, be reckoned as being the amount of spirits distilled from domestic materials, the first as the amount of spirits distilled from foreign materials.

It thence appears that the yearly gross amount of duties upon domestic spirits distilled from foreign materials (continental rum) has decreased from 223,000 to 109,000 dollars; or that the consumption of that article has, within a period of four years, diminished from about two millions of gallons a year to about one million of gallons only. That decrease is owing to the situation of the West India Islands, from whence the molasses were usually imported. The average annual quantity imported in the year 1790 and 1791 was nearly 6,650,000 gallons. The quantity imported in the year 1794 did not amount to 3,500,000 gallons. It is impossible to form any conjecture on the future situation of the French West India colonies, and, of course, on the future extent of the manufacture in America. Whatever it may be, the revenue will not be affected by that circumstance, and it will produce no material change in the quantity of spirits consumed. Whilst the consumption of home-made rum was decreasing by one million of gallons, the importation and consumption of foreign spirits increased to an equal amount, viz., from 4,100,000 gallons, the average annual consumption of the years 1790, 1791, and 1792, to 5,100,000 gallons, the present average annual consumption. It is proper to add that this branch of the revenue appears to have been overrated before the duty was laid; as the estimate was predicated on a supposed consumption of 3,500,000 gallons, whilst it appears that notwithstanding the very great importations of molasses in the years 1790 and 1791, the quantity distilled for consumption during the year ending on the first of July, 1792, did not amount to 2,100,000 gallons.

The gross amount of duties upon spirits distilled from domestic materials for the year ending on the 1st of July, 1792, was only 66,000 dollars. The open opposition in one quarter, and the general unpopularity of the tax almost everywhere, prevented an early and complete organization. It has not yet extended to the States of Kentucky and Tennessee, and is susceptible of a further increase in the State of North Carolina and in some parts of South Carolina. It never was carried into full operation in any part of the State of Pennsylvania till very lately, and the advanced price of grain has generally checked the distillery. Yet the statement exhibits an amount of gross revenue of 160,000 dollars for the year ending on the 1st of July, 1795. The increase it may receive from its general extension and complete organization may be estimated at 30,000 dollars more. The gross amount, therefore, of the revenue arising from the duties on spirits distilled both from foreign and domestic materials will be stated at 299,000 dollars (although for the year ending on the 1st of July, 1795, it was only 269,000), from which must be deducted the expenses of collection.

The statement No. VI. exhibits in detail the gross amount of the revenue derived from the duties on spirits distilled both from foreign and domestic materials, for the year ending on the last day of June, 1795, the deductions to be made for the expenses of collection and the net revenue remaining. The gross revenue stated as per above at 269,000 dollars, the expenses at 70,000 dollars, or 26 per cent. on the gross amount of revenue, and the net revenue at 199,000 dollars. There are no materials from whence the expenses of collection for the preceding years can be accurately calculated. Those for that year are grounded upon an official statement laid before Congress during the last session. It appeared by that document that all the internal duties are collected by 16 supervisors, 22 inspectors, 236 collectors (14 of whom are also officers of the revenue of impost and tonnage), and 63 auxiliary officers,—in all 337; and that the whole amount of expenses of collection, calculated on the actual gross amount of revenue for the year ending on the last of June, 1795 (except in the case of spirits distilled from domestic materials, the duties whereon are estimated at 218,000 dollars instead of 160,000), is nearly 85,000 dollars. Deducting from this sum the compensations now allowed by law for the collection of the five other internal duties and the additional expense of collecting the extra sixty thousand dollars estimated in the document beyond the actual amount of the revenue on domestic distilled spirits, leaves the amount of expenses as above stated, viz., 70,000 dollars. Should the revenue receive the increase above mentioned of 30,000 dollars on spirits distilled from domestic materials, the expenses of collection would amount to 76,000 dollars on the gross revenue heretofore stated of 299,000 dollars, that is to say, 25⅓ per cent., and leave a net revenue of dollars 223,000.

Those calculations are made as if the duties on spirits were collected alone, a mode which is adopted to show the true situation of that revenue considered in itself, and also because it is a permanent one, whilst the other five new duties are temporary, and will expire in 1801. The compensation now allowed by law for the collection of these does not exceed 4 per cent. upon the whole; but it is believed that, were they collected alone and independent of those on spirits, the expense would be about 7½ per cent. A part, therefore, of the present expense of collecting all the internal duties may be viewed as common to both classes; as each, separately, would cost more to collect than they now do. Taking this into consideration, and, on the other hand, adding to the expenses those of the office of the commissioner of the revenue which are not included in the above aggregate, would reduce the present expense of collecting the duties on domestic spirits to about 24½ per cent. instead of 25⅓ per cent. on the gross revenue.

The duty upon spirits distilled from domestic materials, being collected upon a very large number of manufactures scattered over an extensive and, in a great degree, thinly-settled country, costs much more than that which is raised on spirits distilled from molasses; this last manufacture being carried on by a few individuals on a large scale, and almost solely in a few seaports. From a comparison of the revenue collected in Rhode Island and Massachusetts, whose distilleries, especially in the first-mentioned State, are almost exclusively employed in the distillation of molasses, with the expense attending the collection of the same, it results that the total expense of collecting the gross revenue of 109,000 dollars raised on spirits distilled from foreign materials amounts to 16,000, that is to say, to 14½ per cent., and leaves a net revenue of 93,000 dollars. The expense of collecting the gross revenue raised upon spirits distilled from domestic materials amounts, therefore, for the year ending on the last of June, 1795, to 54,000 dollars on the gross sum of 160,000, that is to say, to near 34 per cent., leaving a net revenue of 106,000 dollars; and, on the supposition of the contemplated increase of 30,000 dollars, may amount to 60,000 dollars upon the gross sum of 190,000, that is to say, to 31½ per cent., leaving a net revenue of 130,000 dollars, which, added to the net revenue of 93,000 on spirits distilled from foreign materials, form the above-stated aggregate of 223,000 dollars. If the expense of collecting the duties on spirits distilled from domestic materials is contemplated, as connected with that of collecting all the other internal duties, it will appear to be, upon the principles of the calculation of the last paragraph, something more than 30 per cent instead of 31½.

It requires no argument to show that a tax the collection of which costs more than 30 per cent. is a bad one, and no doubt could remain of the propriety of repealing it and substituting any other in its stead, was it not viewed as connected with the impost upon imported spirits. It must be recollected that the revenue derived from these amounts to near one million and a half of dollars; and there can be no doubt that it would be, in some degree, affected by a total exoneration of the tax now paid on the domestic manufacture. It may therefore be more advisable, under the present circumstances, to modify the most exceptionable part of the law,—that which relates to spirits distilled from domestic materials. The most eligible mode of doing it that has been suggested is to lay a moderate monthly or yearly duty on stills, proportionate to their capacity, repealing altogether the option now given by law to pay in proportion to the quantity distilled. It is believed that the following valuable purposes will be answered by that change. The difficulty of discovering the quantity of spirits manufactured naturally causes evasions of the duty equally injurious to the revenue, to the fair trader, and to the morals of the people. A premium, indeed, seems to be offered by the present law to those who shall violate their oaths; a temptation perhaps too strong to be always resisted by all the individuals of the numerous class of people to whom it is presented. To prevent those evasions it becomes necessary to create a number of officers proportionate to the extent of territory, to the number of manufacturers, and to the duties to be performed by those officers; to invest them with extensive powers, and to subject the manufacturer to a vexatious but necessary inquisition. But it is very easy to know whether a man does distil or not, however difficult it may be to find out what quantity of spirits he does distil. The number of officers need, therefore, be comparatively few; the duties and the time employed by those whom it will be necessary to keep will be considerably lessened. Every distiller feels interested that the duty be paid by all; on the present plan he can by no means check the frauds committed by others; on the plan proposed he will contribute to secure the public against them. In every point of view the expense of collection will be diminished: evasions of the duty will become almost impossible, and the distiller, after having paid for his license, will be liberated from the visits of the officers and from the duty now imposed on all, however inconvenient to many, of keeping correct books and accounts. The only objection to the adoption of this mode (which is now before Congress) is a fear of its being unequal. It will fall more heavily upon small stills, which are commonly owned by men of less capital and used in less advantageous situations. This, however, may be remedied by making the duty something less, in proportion to their capacity, upon stills under a certain dimension. It may be further observed that, however improper and dangerous it may be for government to pass laws with a view of giving a certain direction to industry and capital, it cannot be doubted that the effects of a provision which tended gradually and without any injury to the property now vested in that species of property to diminish the immense number of small distilleries would prove favorable to the general wealth and to the morals of the community. The same quantity of labor produces perhaps a double quantity of spirits in large than in small distilleries; and if these may sometimes fall under the favorable denomination of family manufactures, that advantage is more than counterbalanced by their becoming the tippling-houses of every neighborhood where they prevail. Such provision in this last point of view, a desire of checking the consumption of spirits, would prove far more effectual than a high duty. Six millions two hundred thousand gallons of spirits distilled, either in the United States or abroad, from foreign materials, and near four millions of gallons1 distilled from grain and fruit, offer the enormous and lamentable aggregate of ten millions of gallons of spirits annually consumed by the inhabitants of the United States. This consumption has not received any decrease from the high duty of 25 cents per gallon laid on the lowest proof of imported spirits; and it must be well remembered that the object of government in laying these and other duties on spirits was not to check the use, but to raise money; and that if experience was to show that they become prohibitory and diminish the consumption, an attempt to lower them, in order to encourage that consumption and to increase the revenue, would probably follow.

The duty upon retailers of wines and foreign spirits consists of five dollars a year for a license to retail either, and must be paid by all persons (other than tavern-keepers and apothecaries) selling wines in less quantities than thirty gallons, or spirits in less quantities than twenty gallons. Its produce for the year ending on the last of September, 1795, is stated at 54,731 dollars; but, on account of sundry imperfect statements, may be fairly estimated at 60,000 dollars, the expenses of collection at 2½ per cent., or 1500 dollars, and the net revenue at dollars 58,500.

The object of a duty upon the retailers of any article of consumption which is already taxed is to increase that tax; but, by dividing it, to diminish the temptation of smuggling and the evasions of the duty. The duties upon the importation of wines and spirits amount to nearly 2,000,000 dollars. The 60,000 dollars added by way of license make only an additional three per cent. on the duty, not one per cent. on the article. It does not seem that so trifling an addition, less than one cent. per gallon upon articles which pay at least twenty-five, could possibly encourage smuggling. As the duty upon licenses falls in a very unequal manner, being indiscriminately paid by all retailers, whether they sell much or little, and operates partly as a tax upon consumption and partly as a premium to large retailers, it appears that the sum which it now yields would be more justly and as conveniently raised upon the importation of the article. This revenue, however, may be rendered more productive by increasing its rate in such a manner as to equalize the duty.

The duty upon sales at auction, which varies from a quarter to a half per cent., is stated to have yielded, for the same year, 31,290 dollars, and, on account of imperfect statements, may be estimated at 35,000 dollars, the expenses of collection at two and a half per cent., or 875 dollars, the net revenue at about dollars 34,000. This duty falls almost entirely upon the same articles which pay a duty upon importation, with this difference, that the one falls equally upon the consumer, and the other, in the most unequal manner, on the importer or some other dealer who finds himself compelled to raise money. Its productiveness must chiefly depend on the fidelity of the auctioneers themselves, and the most trifling addition to the duty paid on importation would supply its room.

The duty of two cents per pound upon sugar refined within the United States is stated to have yielded, for the same year, 33,812 dollars; but on account of imperfect statements may be estimated, after deducting drawbacks, at 40,000 dollars, the expenses of collection at 5 per cent., or 2000 dollars, and the net revenue at dolls. 38,000. The manufacturers, assisted by the high duty upon the importation of the article, supply the whole consumption of the United States.

The tax upon snuff manufactured within the United States was first laid on the quantity manufactured, at the rate of eight cents per pound, and during the six months ending on the last day of March, 1795, while it remained in that shape, is stated to have yielded only 2400 dollars; in which account, however, are not included the returns for the first survey of Pennsylvania and for the State of Delaware, which pay about one-half of the duty. From the first of April, 1795, the tax has been laid on the mills employed in the manufacture, and is stated, for the six following months, to have produced 7112 dollars; but on account of deficient statements may be estimated for one year at about 20,000 dollars. But during the same period the drawbacks allowed, at the rate of six cents per pound, seem to have exceeded the amount of gross revenue. From the first of April, 1795, to the 23d of February, 1796, there were exported from the port of Philadelphia alone 237,000 lbs., and, from the shipments then going on, there is little doubt that the quantity exported from that port for the whole year, ending on the first of April, 1796, amounted to 350,000 lbs.; the drawbacks whereon would form a sum of 21,000 dollars. The exportation from the other ports is not published, but it would probably swell the sum beyond 25,000 dollars. The quantity exported was even increasing, for of the above 237,000 lbs. only 75,000 were exported during the first six months, and 162,000 during the five last. In fact, snuff was manufactured for exportation for the sake of the drawback, which operated as a bounty. An alteration in a revenue law, which thus drained the Treasury instead of yielding a revenue, became necessary. The difficulty of rendering the duty equal, on account of the great difference in the relative situation and powers of the mills, the consequent complaints of the small manufacturers, the necessity of allowing a drawback upon the exportation of an article both of the growth and of the manufacture of the United States,1 the impossibility of fixing a drawback on the quantity of the article proportionate to the duty laid on the machinery employed in manufacturing that article, together with the evasions stated to have taken place by hand-mills employed in vaults, where the noise could not be heard, determined Congress, during last session, to suspend the law for one year. As the suspension may continue, and as, unless an entirely new plan is proposed and adopted, this duty cannot yield anything, it cannot at present be counted amongst the productive branches of revenue.

The yearly duty upon carriages used for the conveyance of persons, which at first was from one to ten dollars, according to the species of carriages, is stated to have yielded for the year 1794-1795 the sum of 41,400 dollars. But some returns are not included in that statement; the controversy occasioned by the tax has probably rendered it less productive, and the duties have been increased about 50 per cent. during the last session of Congress. The produce of this duty may therefore be stated at 60,000 dollars, the expenses of collection at 3000 dollars, or 5 per cent., and the net revenue at dollars 57,000.

The controversy just alluded to has already been mentioned. This tax differs from others upon consumable commodities, 1stly, in that it is not paid once for all, but yearly, being laid on the use and not on the consumption properly so called; and, 2dly, because it is paid immediately by the person on whom it finally falls, instead of falling upon him indirectly through the medium of a tax upon the manufacturer,—circumstances which give it the appearance of a direct tax. If, however, the principles upon which a definition of direct taxes has been attempted are correct, this tax will be found to be indirect, as it falls altogether upon an article of expense and not of revenue. For in the only instance where a carriage affords a revenue to the owner, viz., when it is kept for hire, the tax is not paid by him, but by those who consume, who use, who hire the carriage. In that it essentially differs from a tax upon houses, which it has been thought in some particulars to resemble. A house, indeed, is not a productive article in itself; it is an object of expense and not of revenue to him who enjoys it; but it is not less an article of revenue to the owner; and as, except in a few particular cases, the demand for houses regulates the rent and cannot be affected by the tax, this almost universally actually falls upon the owner and not upon the tenant, upon the revenue and not upon the expense. The duty upon stills, proposed as a substitute in toto for that upon spirits distilled, might, perhaps, upon a first view, be deemed a direct tax, as falling upon a productive article; but in this case the still is only used as the means of ascertaining the quantum of duty, and the tax does not fall on the profits of the distiller, on his revenue, but on the consumer of the spirits distilled, on his expense. A tax upon all articles of visible property, assessed in proportion to its value, or to the rent derived from it, and which would include stills, would, however, it seems, be a direct tax. A want of precision in the expression itself, and the difficulty of distinguishing, in all cases, articles of revenue from articles of expense, render it, however, perhaps impossible always to ascertain whether a tax is direct or not; and it will be more prudent in practice to raise, as direct and indirect taxes respectively, only such as clearly come within that denomination under which the Legislature of the Union shall class them, and to leave those of a doubtful nature to the individual States.

The statement No. VII. exhibits a view of all the internal duties for the year 1794-1795; the gross revenue amounting to 425,700 dollars, the expense of collection to 76,650 dollars, or 18 per cent., and the net revenue to 349,050 dollars.

The statement No. VIII. exhibits a view of the same revenue, according to its probable productiveness hereafter. The gross revenue is there stated at 494,000 dollars, the expenses of collection at 83,375 dollars, or 17 per cent., and the net revenue at 410,625 dollars. The permanent revenue from internal duties will, therefore, be estimated at . . . dollars 410,000

OF DUTIES ON POSTAGE.

The statement No. IX., which exhibits a view of this branch of the revenue, requires no explanation. The gross amount is yearly increasing, and the greatest part of the surplus is commonly appropriated in extending the benefits of the institution through those parts where a scattered population could not support the expense. It still leaves a net revenue of about dollars 30,000. The expenses of institution cannot be considered as charges of collection; they are not a tax upon the people, but only the payment of a highly beneficial and necessary public undertaking for which the community should have to pay, whether it was done by individuals or government. In this particular this revenue essentially differs from what is raised by taxes, and for this reason has not been classed with the internal duties.

OF THE DIVIDENDS ON BANK STOCK.

The United States hold five thousand shares of the stock of the Bank of the United States, which have cost them, at 400 dollars a share, a sum of 2,000,000 dollars. This sum they borrowed from the bank itself at the rate of six per cent. a year, and had on the 1st of January, 1795, discharged 600,000 dollars of that loan. But, as they were enabled to make that payment only by contracting new loans, the actual revenue under this head consists only of the difference between the interest paid by government upon the loan and the dividend received upon the bank stock, which, at the average rate of a dividend of 8 per cent. a year, might be estimated at about 40,000 dollars a year. As, however, in the account of expenditures, the whole amount of yearly interest payable on that, as well as on all other loans, will be charged, this branch of revenue is here set down at its nominal amount of dollars 160,000.

RECAPITULATION OF THE REVENUES OF THE UNITED STATES.

SECTION II.

OF THE EXPENSES OF THE UNITED STATES.

Of the Receipts and Expenditures to the 1st January, 1796.

In order to have a distinct and comprehensive view of the expenditures of the Union, it is necessary to consider at once, and without any reference either to the different funds or to the places where the moneys may have been received or paid, the whole of the disbursements and consequently of the receipts of the United States. The statement No. X. exhibits a view of those receipts and disbursements from the establishment of the present government to the 1st of January, 1796, distinguishing those under each year, except for the years 1789, 1790, and 1791, which, in the official documents, are generally blended together. The receipts are arranged under the following heads, viz.:

1. Moneys arising from balances of accounts which originated under the late government.

2. Revenue arranged under the different heads mentioned in the preceding section.

3. Incidental, consisting of sundry items which cannot properly be considered as a permanent revenue, viz., fines and forfeitures for crimes,1 fees on patents, sales of arms, and profits on sundry bills of exchange drawn for moneys remitted from America to Holland, and from Holland to America and to France.

4. Loans, distinguishing those effected in Amsterdan and Antwerp from those obtained in America, and, amongst these last, those obtained in anticipation of the revenues from all others.

The expenditures are arranged under the different heads of current expenditure, interest on the public debt, reduction of the public debt, and reimbursement of loans and subscription to the Bank of the United States; the current expenditure being classed under the heads of civil list, pensions and grants, military establishment, intercourse with foreign nations, and sundries, which last item, besides miscellaneous and contingent expenses, includes those attending the light-houses and the mint establishment. The statement marked (A) exhibits at one view the general results both of the receipts and expenditures.

It results from that document that, during the period of six years and a half, the expenditures have exceeded those receipts which arose from the revenues (including therein incidental receipts) of the present government by a sum of dols. 3,228,961. For during that time the aggregate of loans amounted to dollars 19,503,204, which, added to dollars 162,6391 received on account of balances due to the late government, form a total of dollars 19,665,843; whilst, on the other hand, the moneys applied to the reduction of the public debt amounted only to dollars 13,922,924, which, added to 2,000,000 dolls. subscribed to the Bank of the United States, and to dollars 513,958 balance remaining in cash on first of January, 1796, form a total of only dollars 16,436,882; the difference between which sum and the above-stated sum of dollars 19,665,843, received upon loans and old accounts, is equal to the above-mentioned excess of expenditures, viz., dollars 3,228,961. Or the aggregate of receipts arising from revenues and incidental sources amounts during that period to dols. 24,347,956, which sum is less than the total of current expenditures, including therein the interest and charges upon the public debt, amounting for the same period to dollars 27,576,918, by the same above-stated sum of dollars 3,228,961.

It must, however, be observed that this account includes only the moneys actually received in and paid out of the Treasury in America or the hands of the bankers of the United States in Holland. In order to have a correct view of the expense, it is necessary to take into consideration not only the quantity, but also the application, of the moneys stated, under the head of “reduction of public debt,” to have been applied to the purchase of that debt, as not only the nominal amount of the debt thus purchased is much larger, but even its real value exceeds the moneys thus applied.

The statement No. XI. exhibits a view of those purchases as made by the commissioners of the sinking fund. The total amount of moneys applied to purchases by them was dollars 1,618,936; the nominal amount of the different species of stock purchased by them, dollars 2,307,661; the real value of the said stock, estimating the six per cent. stock at par, the deferred stock at 75 per cent., and the three per cent. stock at 60 per cent., dollars 1,880,921; which last sum exceeds the amount of moneys applied to purchases by dollars 261,985; which reduces the excess of expenditures beyond receipts to dollars 2,966,975.

Several other considerations of less importance, but which might, however, affect in some degree that result, are omitted here; but those of a general nature will be taken notice of either in the course of this section or when the subject of the debts of the United States comes under view; and those which relate merely to details will be found, in the shape of notes, annexed to the statement No. X.

A deficiency caused by an excess of expenditures over the receipts must always be supplied by new loans, and create an increase of debt. It is commonly owing to the extraordinary expenses which attend a war, and although not the unavoidable, has with most nations been the usual result of every one in which they have been engaged during the present century. Great Britain and France, either unable or unwilling to draw from their subjects a revenue equal to the prodigious waste of money which attends modern wars, have uniformly supplied by loans the greatest part of that expense and raised taxes only to the amount of the interest of those loans. Such a system, managed with ability and supported by prosperity, may last for a long period of time. Its ruin may be accelerated by a general convulsion, or by any of those extraordinary events which considerably diminish the general resources, the commerce, the wealth, the annual income of a nation; but its natural existence seems to be limited only by the ability of raising a revenue in taxes equal to the interest payable upon the debt. But it has been unusual to see a nation so improvident as to suffer in times of peace and prosperity its expenses to exceed its revenue and its debt to increase. In France, where the prodigality and mismanagement of the government, united to an injudicious selection of taxes and to the exemptions claimed by some classes of the nation, had indeed produced such an effect, the consequences are but too well known.

There is, however, some apology to be made for the United States. A government in its infancy, with a heavy weight of debts, cannot, without oppression, raise at once from the people the same amount of taxes which, if laid gradually, would not be thought burdensome. It is, however, their duty under such circumstances to proportionate their expenses to their ability; and this was the case during the first years of the existence of the present government; for it will appear from the statement No. X. that no deficiency of revenue took place till the year 1792. It may also, perhaps, be said that, although we have not been engaged in the European war, the circumstances of that war and some domestic occurrences have necessarily involved us in some extroradinary expenses. Amongst these are usually reckoned the increase of the military establishment due to the Indian war, the naval armament, the fortifications of our harbors, the treaty with Algiers, and the expedition of the militia employed to suppress the western insurrection. It must, however, be remarked that the increase of the military establishment and the naval armament have not been considered by government itself as an extraordinary, but as a permanent, object of expense; for, notwithstanding the discontinuance of those causes which served as a pretence for both objects, the same number of effective men has been retained in the land service, and nearly the same annual expense is necessary to support our present naval establishment. The total expense of the naval armament incurred before the year 1796 amounts to 470,000 dollars; that of the fortifications only to 120,000; the moneys were voted in March, 1794, and by far the greatest part expended only in 1795. The expenses attending the conclusion of the treaty with Algiers are not yet fully ascertained, but may be estimated at 800,000 dollars; the money was voted, also, in March, 1794; a very inconsiderable part, if any, was raised before 1795, no part paid to Algiers till the latter part of the same year, and the payment not completed till 1796. It is, therefore, evident that the plea of urgency, so far as relates to those various objects, cannot avail; that a sufficient time elapsed between the originating of the expense and the application of the moneys to have raised an adequate revenue. Three hundred thousand dollars were appropriated in the same month (March, 1794) for the purpose of replenishing the public stores and magazines, making repairs, &c.; but it does not clearly appear from the official documents how much of that sum has been expended, or at what periods. The accounts of the militia employed to suppress the western insurrection are not yet published; but there were appropriated for that purpose by Congress 1,122,569 dollars for the expedition itself, and 100,682 dollars for the detachment of militia stationed there for some months after the return of the main army; both sums amounting together to 1,223,251 dollars. This, or at least the first-mentioned sum, is the only article which seems properly to fall under the head of extraordinary expenses. It was unforeseen, and, allowing it to have been necessary to that extent, must from its urgency have been incurred before a revenue could be raised to discharge it.

It is difficult to ascertain whether any of those expenses, permanent or extraordinary, might have been avoided; whether, although perhaps all in some degree useful, they were all necessary; for the decision of the question must, more than any other, depend upon opinion. In the opinion of the writer of these sheets, there are some which were unnecessary. Without laying any great stress upon what savings might have been made in the civil list and in some of the annuities and grants, which could not, at all events, amount to a very large sum, since the annual expense for both items is but about 450,000 dollars; without taking into view the 90,000 dollars already expended upon the mint establishment, without any apparent advantages having been derived from it, it will be sufficient to attend to some of the most important objects.

First. It will be demonstrated in the next section, which treats of the debts of the Union, that out of the sum of near 21,800,000 dollars, in debts of the individual States and balances due to the same, which have been assumed and funded by the Union, near 10,200,000 dollars have been assumed beyond the sums in those debts and balances, which it would have been necessary to fund in order to place the accounts of the Union and of the individual States in the same relative situation in which they now stand. The interest actually paid out of the Treasury upon that excess (exclusively of 700,000 dollars interest accrued and not paid, but funded, upon the balances due to the several States; which item makes an increase of debt instead of an article of expense), together with two per cent. paid on part of the principal on the 1st of January, 1796, amounts to dollars 1,198,202; which are an unnecessary expense, arising from an unnecessary assumption of debt, and which must continue till the debt itself is discharged.

Secondly. It is highly probable that the protection of the frontiers might have been effected with a less number of men, and the men in service supported with less expense; what might have been saved on this head cannot be calculated; the following data may, however, assist in forming some idea of it. The troops of the United States engaged on the frontiers, from the peace of 1783 to the year 1790, a period during which the inhabitants were as effectually protected as they have been since, did not exceed eight hundred men. When what has been called the Indian war began, the hostilities of the Indians were not greater than they had been before; they consisted of that petty warfare so cruel and distressing to the frontiers, but always experienced, both in peace and in war, from those tribes which are not nearly enclosed by the settlements, and which could be checked only by the possession of the posts on the Lakes. The number of soldiers had been previously nominally increased to twelve hundred men in April, 1790, and to two thousand one hundred in March, 1791. Another nominal increase took place in March, 1792, after General St. Clair’s defeat, which should have raised the army to 5200 men. A farther addition of near 800 artillerists was made in May, 1794. But it appears that the number of effective men never much exceeded three thousand. The annual expense, including the Indian Department, averaged 220,000 dollars during the three years 1789, 1790, and 1791 (which includes about 100,000 dollars extraordinary expense of General Harmar’s campaign in 1790, and a part of the expenses of the campaign of 1791, under General St. Clair). The annual expense during the years 1792 and 1793 exceeded 1,100,000 dollars, and during the years 1794 and 1795 (after deducting fortifications, expenses relative to the western insurrection, and extraordinary purchases of arms, &c.) averaged 1,750,000 dollars. The number of troops actually employed has increased in the ratio of four to one from the year 1790 to 1795; the expense in the ratio of eight to one.

Thirdly. The naval armament, which, on its present plan, seems to be rather an object of parade than of real utility, has already cost 470,000 dollars. To complete the six frigates first intended to be built would, according to the last estimate of the Secretary of War, have cost 1,142,160 dollars, manning and provisions not included. Whether it is proper for the United States at present to create a navy is a question equally delicate and important; but it would seem that, if it is to be determined in the affirmative, the same sum which is necessary for beginning six frigates and finishing three might have been more usefully applied in laying the foundation for a real navy by the purchases of timber, materials, &c., and by preparing all those things which time alone can procure.

Fourthly. The call of about 15,000 militia and the expenditure of twelve hundred thousand dollars for the purpose of suppressing mobs and riots committed but partially in a country which contains only 70,000 souls, must have been grounded upon mistaken ideas of the views, union, and strength of those concerned, and upon misrepresentations of the sentiments of a great proportion of the people there. It is believed that it will be admitted by every candid man employed in the expedition who had tolerable means of information that one-fifth part of the men and of the money were sufficient to obtain every ostensible object of the expedition.1

Whether, however, all or any of those expenses were necessary or not, it is certain that all of them might and should have been defrayed by raising a revenue coequal to the expense. It sometimes happens that, notwithstanding the care of the Legislature, a revenue will prove deficient, will yield less than had been expected: this, upon an average, has not been the case of the United States. Although all the internal duties have always fallen short of the sums expected from them, those upon imports have uniformly yielded considerably more than the estimate. But in many instances, although the object of expense was immediate, the revenue did not begin till some months after, and the intermediate expense must be supplied by an anticipation of the revenue.

The first and most undeniable evil which arises from anticipations is the additional expense caused by the interest to be paid for them. The total amount of interest paid for domestic loans for the year 1795, exclusively of that incurred for the subscription to the bank stock, was near 150,000 dollars; and to this must be added the premiums which must at times be paid in order to obtain the loans. Thus, eight hundred thousand dollars in six per cent. stock were borrowed in 1795, at par and as cash, from the Bank of the United States, for the purpose of completing the treaty with Algiers, which, it seems, have produced only 720,000 dollars in specie. If it be allowed, and there is no reason to doubt it, that no better mode of obtaining the money could be adopted, nothing can prove in a stronger manner the necessity of raising a revenue instead of recurring to loans. To give ten per cent. premium, and six per cent. interest on the nominal sum borrowed, in times of peace and unexampled prosperity, is equally ruinous and absurd.

It has been supposed by some that this was the only consequence of anticipating; and it has been urged that, provided a revenue originated at the same time with an object of expense, although that revenue did not become immediately productive (on account, as an instance, of the credits given to importers), yet, as a debt was contracted to government by those importers from the moment of importation, it might be set off against the anticipation made by government. Thus, although it be allowed that the receipts arising from revenues had fallen short of the expenses at the end of the year 1795 by a sum of three millions of dollars, and had caused an anticipation, a debt to an equal amount; yet it is insisted that the nominal revenue to the same date had exceeded the expenditure; that the bonds due by the merchants for the imposts, and which (after the deductions to which they were liable for drawbacks) may be estimated at four or five millions of dollars, were more than sufficient to counterbalance that anticipation. Supposing that those bonds were to be considered as a credit in favor of the public, and to be contrasted with the increase of debt, it still would be fallacious to contrast them with the expenditures. Whatever the nominal revenue may be, by whatever name it be called, it is not less evident that the expenses of one year can be defrayed only out of the actual receipts of the same year. Thus that part of the nominal revenue of 1795 which is not paid in the Treasury during that year, which consists of bonds payable in 1796, constitutes, in fact, the actual revenue, not of 1795, but of 1796. It cannot be applied to pay any part of the expenses of 1795; it cannot be applied to repay the anticipations made in 1795; it is barely sufficient to defray the current expenses of 1796; it is the revenue of 1796. Whenever a permanent expense is incurred, beginning with the first of January of one year, if the revenue appropriated to discharge the same does not become productive, does not bring money to the Treasury till the following year, a debt equal to the expense of that object for one year must be incurred; and it never can be discharged out of that revenue till after the expense itself has ceased. Thus, if an individual, in the year 1795, increases his revenue by an annuity of one hundred pounds, but payable only from the year 1796, and chooses at the same time to increase his expense to the same amount from the beginning of 1795, he must necessarily incur a debt of one hundred pounds, which debt, as long as he continues the same expense, never can be paid out of the annuity.

Should a self-evident truth have required additional proof, this received one during the last session of Congress. Anticipations had been obtained from the Bank of the United States to the amount of 3,800,000 dollars. The bank—and this may serve as a lesson to the friends of anticipations—requested that the whole should be paid to them during the year 1796. The money was due; they had a right to ask for it; they stood in need of it. Although the demand of the whole amount at once was unexpected, and was made at a time when it was well known that government could neither borrow the money in Europe nor raise it at once by taxes, yet it was necessary to pay it or to proclaim our inability. An assignment on that nominal revenue of 1795, which is represented as a debt due to government, would not do. That revenue, receivable in 1796, must pay the expenses of that year. The Legislature, in order not to be guilty of a breach of faith, in order to discharge the anticipations, were obliged not only to create a six per cent. stock irredeemable for twenty-four years, but to direct that one-half of that stock, and the whole of the shares held by the United States in the bank, should be sold at whatever price could be obtained.

Again; the idea that the bonds due by the importers are a credit in favor of the public, to be set off against any debt that may have been incurred by government, will, upon investigation, prove to be groundless. The debts due by the United States are due by the people of the United States, and can be discharged only out of the purse of the people of the United States. To whom are the bonds given by importers due? To the United States, to the people of the United States. True, and thence it is inferred that they should be deducted from the debt due by them. But by whom are those bonds due? By the importers? No; they are due by the consumers, by the people of the United States; and until those consumers, until the people of the United States shall have discharged them, shall actually have paid the amount of the duty to the importer and enabled him to pay the amount of his bond in the Treasury; until, in a word, the moneys are paid either to the collectors or to the Treasury, no part of the debt due by the people of the United States can be considered as discharged.

The account stands thus:

The only credit to be given is that part of the duties which, although not yet in the Treasury, has actually been paid by the people to the collectors. This sum cannot be taken under consideration when speaking merely of receipts and expenditures, but shall be credited when a calculation is made of the debts of the United States.

From these considerations, it follows that the duties accrued but not yet due to government are only a nominal account, ascertaining the amount and securing the payment of the moneys which shall actually be paid hereafter by the people; that any expense incurred in one year beyond the actual receipts of that year must necessarily be supplied by loans, and that the increase of debt thereby caused is not less real whether those loans are obtained for a longer or shorter period, whether they go by the name of funded debt or of anticipations. To conclude in the words of a justly celebrated writer, “In Great Britain the annual land and malt taxes are regularly anticipated every year. . . . The Bank of England generally advances, at an interest which since the revolution has varied from eight to three per cent., the sums for which those taxes are granted. . . . The only considerable branch of the public revenue which yet remains unmortgaged is thus regularly spent before it comes in. Like an improvident spendthrift, whose pressing occasions will not allow him to wait for the regular payment of his revenue, the state is in the constant practice of borrowing of its own factors and agents, and of paying interest for the use of its own money.”

Smith’s Wealth of Nations, Book v. Chap. 3d.

OF APPROPRIATIONS.

It is declared by the Constitution of the United States that “no money shall be drawn from the Treasury but in consequence of appropriations made by law.” Two things constitute the appropriation: 1st, the sum of money fixed for a certain expenditure; 2d, the fund out of which the money is to be paid. The executive officers can neither change the appropriation by applying money to an expense (although the object of that expense should have been authorized by law) for which no appropriation has been made, nor spend upon an authorized object of expense more than the sum appropriated, nor even that sum, unless the fund out of which it is payable is productive to that amount. Funds are classed and distinguished in relation either to receipts or to expenditures.

The general receipts of the United States have been divided into two classes: the moneys obtained upon loan in Holland, commonly denominated the foreign fund, and the moneys obtained in America, whether arising from taxes or loans, designated by the name of domestic fund. The statements No. XII. and XIII. are an abstract of the yearly receipts and disbursements already contained in the statement No. X., but distinguishing them, under each of those two funds, from the establishment of the present government to the 1st of January, 1796. The foreign fund was exclusively appropriated to pay, 1st, the interest due on the foreign debt before the year 1791; 2d, the instalment of the principal of the foreign debt and of the loan contracted in order to pay for the bank stock of the United States as the said instalments became due; 3d, the principal and interest of a debt due to certain foreign officers; and, 4thly, certain purchases of the domestic debt made by the commissioners of the sinking fund.1 The domestic fund was appropriated to discharge the interest due on the public debt after the year 1790, the current expenditures, the domestic loans obtained in anticipation of the revenues, certain unfunded debts contracted under the late government, and part of the purchases of domestic debt made by the commissioners of the sinking fund.

It appears by the statement that on the last day of December, 1792, there was a balance in favor of the foreign fund of dollars 3,453,992; that is to say, the moneys received from foreign loans to that day exceeded, by that sum, the expenses for which they were exclusively appropriated. On the same day there was a balance against the domestic fund of dollars 856,308; that is to say, that the expenses, to the discharge of which this fund was appropriated, had exceeded, by that sum, the actual receipts arising from the revenues, which constituted that fund. The balance of dollars 3,453,992 in favor of the foreign fund consisted of the following items: 1st, dollars 1,814,239 yet unexpended and in the hands of our bankers in Holland; 2d, dollars 783,444 also unexpended, but in America, and constituting the whole balance of cash in the Treasury on that day; and, 3dly, dollars 856,308 applied to cover the deficiency of the domestic fund; that is to say, that not only the whole of the moneys in hand, whether in Holland or in the Treasury, arose from foreign loans, but that more than 850,000 dollars, arising from the same source, had been actually expended and applied to discharge a class of expenditures for which they were not appropriated. It was this transaction which gave rise to the following motion, made in the House of Representatives in February, 1793, viz.: “Resolved, That the Secretary of the Treasury has violated the law passed the 4th of August, 1790, making appropriations of certain moneys authorized to be borrowed by the same law, in the following particulars, to wit: 1st, by applying a certain portion of the principal borrowed to the payment of the interest falling due upon that principal, which was not authorized by that or any other law, &c.” Although it is now demonstrated by the official statements (from which the statements No. XII. and XIII. are abstracted) that that resolution was strictly and literally true, it was at that time negatived by a large majority.

That transaction, however, was, to a certain degree, rather a want of form than a substantial violation of the appropriation law, and arose from this circumstance. It has been mentioned that a part of the domestic fund, as well as a part of the foreign fund, was appropriated to the making certain purchases of the domestic debt, and together constituted the sinking fund. The part of the domestic fund appropriated for that purpose consisted of the surplus of the nominal revenue arising from duties on imports and tonnage, to the end of the year 1790, beyond the specific appropriations charged to the same. But as that surplus consisted almost entirely of that part of the nominal revenue of 1790, which was payable only in 1791 and 1792, which constituted in fact a part of the receipt or actual revenue of those years, and was necessary to discharge the expenses and especially the interest on the public debt payable in 1791 (since a part of the nominal revenue of 1791, being receivable only in 1792, could not be applied to discharge the expenses of 1791), it was enacted by a law that “such reservations should be made of the said surplus as might be necessary to make good the payment of interest payable in 1791, in case of deficiency in the amount of the receipts into the Treasury during that year on account of duties on imports and tonnage accruing after the year 1790.” Thus that surplus, which was found to consist of dollars 1,374,656, was applicable either to purchases of the debt or to payment of the interest due in 1791. But the foreign fund, a part of which might be united to the said surplus in constituting the sinking fund, was in no case to be united or substituted to that surplus in the other application to which this was liable, viz., the payment of interest due in 1791. The contingency foreseen by the Act of Congress took place; the receipts during 1791 on account of the duties accruing that year were not sufficient to discharge the current expenses and the interest payable that year, and a part of the surplus above mentioned became necessary for that purpose, and was applied to that object to a certain amount. But no more than dollars 416,885 of that surplus were employed in that manner, the remaining dollars 957,770 having been applied to the sinking fund, to purchases of the domestic debt. The deficiency of dollars 856,308 in the domestic fund which arose, in the year 1792, from that cause, was supplied by borrowing the same from the foreign fund. The surplus of revenue of 1790 which was applicable, either to pay the interest on the public debt or to purchases of the principal, was applied to this last purpose, and the foreign fund, which was solely applicable to redeem only the principal, was applied to pay the interest. Although the word “applied” is used, it must be observed that so far as the moneys arising from foreign loans and from the said surplus were at the same time in the Treasury, as they were not kept apart, but constituted an aggregate mass, any application of those moneys might have been carried to the account of either of the two funds, and that the illegality of the act did not there consist in expending the moneys wrongfully, but in carrying the expenditure to a wrong account. It appears, however, that some part of the application of the surplus of 1790 to the sinking fund was not merely a matter of account, but an actual expenditure; for 350,000 dollars had actually been vested in the sinking fund before any moneys arising from foreign loans had been received in the Treasury. Upon the whole, the transaction was illegal, but no otherwise criminal than as it was illegal. If there was any blame due for having begun the purchases of public debt before moneys had been drawn from Holland, and when, therefore, they must be paid out of moneys which, it was well known, were wanting for another purpose, on the other hand, the result of the purchases made at that period was useful by accelerating the raising of the price of stock to its nominal value.

From the end of the year 1792 to the end of the year 1795, although the gross amount of receipts has fallen short of the gross amount of expenses, yet as the deficiency has been supplied by anticipations, by domestic loans, which make part of the domestic fund, this fund has been enabled by degrees to repay the foreign fund; but even to the first of January, 1796, almost the whole of the moneys in hand, stated as balance of cash in the Treasury, has consisted of moneys belonging to this last-mentioned fund and arising from foreign loans.

Considering the funds in relation to the expenditures, they may at present be viewed as being three in number,—the sinking, the surplus, and the general fund.

The sinking fund till the month of March, 1795, consisted of, 1stly, the surplus of the revenue of 1790, of which dollars 957,770 have actually been received by the commissioners.

2dly. Part of the moneys arising from foreign loans, of which dollars 434,901 have actually been received by the commissioners.

3dly. The interest payable on the different species of stock purchased by the commissioners, which is still paid to them, and by them was, till March, 1795, applied to new purchases.

4thly. The interest upon any species of domestic debt which, through any means whatever, had been discharged by the United States.

The two principal items under this head are, 1st, the debt heretofore due to foreign officers, which has been partly discharged out of the moneys arising from foreign loans, and the balance of which is considered as being already paid, the moneys now in the Treasury which arise from foreign loans being appropriated for its payment; and, 2d, the certificates of domestic debt paid by the State of Pennsylvania for a tract of land (situate on the Lake Erie, including Presquisle, and commonly called “the Triangle”) purchased by that State from the United States, under the late government. It does not appear from the official statements how a sum of dollars 34,753, which, in addition to these two last items, is also vested in the sinking fund, has been redeemed. It is, however, presumable that a part may have been paid by some individuals in discharge of old debts, and that a part, being commutation for half-pay granted to the officers of the late army, has been returned by them in order to become entitled to a pension.

The general view of the receipts, purchases, and situation of that sinking fund to that epoch are exhibited in the statement No. XI. The interest payable yearly to the commissioners from all those sources amounted, before the 1st of January, 1796, to dollars 88,242, and after the year 1800 will amount to dollars 143,995.

By an Act passed the 3d of March, 1795, all payments of the principal of any part of the public debt are to be made by the sinking fund; there have been vested in the commissioners of the same, in addition to the interest already payable to them:

Firstly, the excess of the dividends accruing on the bank stock belonging to the United States, over the interest annually payable on any part remaining unpaid, of the loan of 2,000,000 dollars contracted for the purpose of paying the purchase-money of the said bank stock; secondly, so much of the duties on tonnage, imports, and spirits distilled within the United States as, together with the dividends aforesaid and the interest payable to the commissioners on the principal of the public debt already redeemed, or which shall be hereafter reimbursed, will be sufficient to reimburse yearly so much as may be rightfully reimbursed on the principal of that part of the domestic debt which bears an interest of six per cent., excluding that part which shall stand to the credit of the commissioners;1 thirdly, all moneys received on account of debts due to the United States by reason of any matter prior to their present Constitution; fourthly, the net proceeds of the sales of lands belonging to the United States; fifthly, all surpluses of the revenues of the United States remaining at the end of any calendar year beyond the amount of appropriations charged on the same, and not otherwise appropriated during the session of Congress next thereafter.

The sums vested under the two first heads are of course appropriated to the redemption of the six per cent. and deferred stocks, which thereby are converted from a perpetual six per cent. annuity into an eight per cent. annuity for twenty-three years or thereabout;1 the other sums to the reimbursement of all the other debts of the Union; and the whole of the said moneys or funds is vested in the commissioners until the final redemption of the whole of the public debt, the three per cent. stock excepted, be completed.

The general fund, which embraces all the revenues, except such sums as are specifically appropriated to the sinking fund, is charged with all expenses other than those relating to the payment of the principal of any part of the public debt.

Whenever, at the end of two years after the expiration of the calendar year in which any specific appropriation shall have been made, it shall happen that the sum thus appropriated is larger than the sum actually expended for that object, the excess (except when the appropriation is for payment of interest or principal of the public debt) is, by virtue of an Act passed in March, 1795, to be carried to a new account, to be denominated “the surplus fund.” Although the appropriations may exceed the expenses, and the differences or excesses may thus be carried to the account of that fund, it is evident that it will be merely nominal so long as the expenses shall exceed the receipts.

The general fund is in fact subdivided into as many distinct funds or accounts as there are specific appropriations. A detail of these, which presents a number of balances of unsatisfied appropriations, would be useless. It will be sufficient to remark that the appropriations relative to the payment of interest on public debt are permanent, and cannot, therefore, be altered without an Act of the Legislature, and that those which relate to the civil list and military establishment are made from year to year, and require, therefore, once a year the consent of every branch of the Legislature to be renewed. This is the defensive control retained by each branch, and which may, at all times, enable either to check, by that power over the purse, any dangerous encroachment or attempt to encroach of any of the others. There is nothing, however, in the Constitution which prevents Congress from making permanent appropriations in relation to the civil list; but, in order to guard against any possible danger from a standing army, it is expressly provided by that Constitution that no appropriation of money to that use shall be for a longer term than two years.

The appropriations heretofore made for the military establishment have been subdivided into a number of separate heads, making specific and distinct appropriations for the pay of the army, for its subsistence, for clothing, for the ordnance department, for the quartermaster department, for the Indian department, for the defensive protection of the frontiers, and for the several other heads of service; and it was supposed that the moneys thus distinctly appropriated were respectively applied to the specific objects for which they were appropriated. It, however, appears, by a letter of the Secretary of the Treasury of May, 1796, that by far the greatest part of the expenditures for the military department are found by experience to be unsusceptible of that particular distribution which is observed in the issues of moneys appropriated for other objects; and that appropriations for military purposes ought to be considered as general grants of such sums as the public service is found to require, to be issued according to exigencies and applied and accounted for pursuant to law.

It would seem that if those appropriations are considered by the Treasury Department as general, of which grants, to be issued according to exigencies, that or some other executive department is to judge, and if, therefore, the moneys specifically appropriated to one head of service are applied to another head, they are not applied and accounted for pursuant, but contrary, to law. Such a mode is undoubtedly liable to great abuses; it deceives the Legislature, who, when appropriating one hundred thousand dollars for the defensive protection of the frontiers, did not think that the Treasury would assume a power to apply them to the quartermaster or any other department. It deprives the Legislature from any control, not only over the distribution of the moneys amongst the several heads of service, but even over the total sum to be expended. For the million and a half of dollars appropriated for the annual support of six thousand men, the nominal establishment, may be spent in the same time, and in fact has actually been expended within fourteen months for the 3500 men who constituted the effective establishment. The same abuse has, for a considerable time, prevailed in England, where it has, at several periods, been taken notice of, and did lately produce a motion of impeachment against the Ministers.

On the other hand, it is impossible for the Legislature to foresee, in all its details, the necessary application of moneys, and a reasonable discretion should be allowed to the proper executive department. The most proper way would perhaps be not to enter into so many details, not to make specific appropriations for every distinct head of service, but to divide the general appropriation under a few general heads only, allowing thereby a sufficient latitude to the executive officers of government, but confining them strictly, in the expenditure under each of those general heads, to the sum appropriated by law.

Another irregularity has once taken place upon an extraordinary occasion. Although the President of the United States was authorized to call out the militia in order to suppress insurrections, no moneys were appropriated for that service. When the western insurrection took place, until Congress had covered the expenditures of the expedition by an appropriation made only on the 31st of December, 1794, the expenses were defrayed out of the moneys appropriated for the military establishment. Yet even the principle by which the specific appropriations for the several objects of the military establishment have been considered as a general grant for the whole could not authorize the application of a part of that grant to the expenses of that expedition. No farther discretion has been claimed by virtue of that principle than that of indistinctly applying the whole sum appropriated by law to any of the objects enumerated and specified under distinct heads in the law itself. But, as the militia called out to suppress an insurrection make no part of the military establishment, the expenses attending such a call were not amongst the various objects enumerated in the law making appropriations for the military establishment; the only item applicable to militia being expressly confined to the defensive protection of the frontiers. The moneys drawn from the Treasury on that occasion were paid out of a fund appropriated for other and distinct purposes; they were not drawn agreeable to the Constitution, in consequence of any appropriation made by law. It might be a defect in the law authorizing the expense not to have provided the means; but that defect should have been remedied by the only competent authority, by convening Congress. The necessity of the measure may in the mind of the Executive have superseded every other consideration. The popularity of the transaction may have thrown a veil over its illegality. But it should by no means be drawn hereafter as a precedent.

Of the Present Expenses of the United States.

The estimate No. XIV. exhibits the probable receipts and expenditures of the United States for the year 1796. The receipts arising from other sources than loans, and amounting to dollars 6,398,242, differ from the estimate of the permanent revenues of the Union given in the preceding section, and there rated at 6,370,000 dollars, because, 1st, the internal duties are rated in the estimate of permanent revenues at 410,000 dollars, on account of a supposed increase, which, however, will be but partly felt during the present year; and they are therefore rated at only 350,000 dollars in the estimate No. XIV.; and, 2dly, to the receipts of the present year are added dollars 88,242, being the interest now payable to the commissioners of the sinking fund upon that part of the domestic debt heretofore redeemed; this interest constitutes in reality no part of the revenues of the Union, being only a diminution of expenditure; but it must be added to the receipts, the interest payable on the domestic debt being, in the estimate of expenditures, calculated as if no part had yet been redeemed.

The expenditures are calculated upon the appropriations made by Congress during the last session, with the addition of a balance remaining unexpended for fortifications from last year, and which will probably be expended during the course of 1796. They amount (exclusively of the five millions of dollars which fall due this year upon the domestic loans and the debt due in Holland, and which are provided for by a new loan to the same amount) to dollars 7,069,312, leaving a deficiency of dollars 671,069 to be supplied by new anticipations. It must be observed that in those expenditures is included the payment to be made in part of the principal of the six per cent. stock, and amounting to dollars 640,733. Whence it results that the public debt will not probably increase much during the year 1796; the only material changes which will take place being to substitute a debt of five millions of dollars, irredeemable for a number of years, to a debt of the same amount, but consisting of anticipations and instalments now due, and to contract a new debt of about 700,000 dollars, whilst an old one (being part of the six per cent. stock) to nearly the same amount shall be paid off.

As the estimate No. XIV. contains several extraordinary expenses applicable to the year 1796, the following is added as being nearly the amount of the permanent expenses of the Union on their present scale:

The permanent revenue has in the preceding section been rated at 6,370,000 dollars (after paying the bounties to the fisheries), and exceeds the above estimate of permanent expenditure by a sum of about 60,000 dollars. But the expenses of the year 1797 will be greater than the estimate by a sum of 80,000 dollars, being a premium which falls due that year on the Dutch debt; and from and after the year 1800 the expenses will be increased by the annuity of eight per cent., payable from that period upon the deferred stock.

That annuity (including in the amount of deferred stock the unfunded as well as the funded part of the debt), after deducting dollars 55,753, the interest payable on that part of the deferred stock heretofore redeemed and vested in the sinking fund, amounts to dollars 1,116,878. From whence it results that from and after the year 1800 there will be an additional annual expense of more than eleven hundred thousand dollars, which must be provided for by additional revenues. Nor must it be forgotten that the sum of 50,000 dollars, set down in the above estimate for contingencies, will not be sufficient to discharge any of those extraordinary expenses which unforeseen circumstances may occasion, and which in some shape or other have taken place every year under the present government. It is, however, to be hoped that a sum sufficient to provide for those contingencies may, by economy and reductions, be in future saved upon the naval and military establishments.

SECTION III.

OF THE DEBTS OF THE UNITED STATES.

Origin, Progress, and Present State of the Debt.

From the beginning of the Revolution, which gave birth to the United States, till the year 1781, they were united by no other tie than common danger, and the authority of Congress had no other foundation than common consent. Yet this body, supported only by common opinion, proclaimed the independence, levied armies, borrowed moneys, and carried on the war. The Articles of Confederation, adopted in 1781, did not give them any efficient power; for although they were authorized by that instrument to make requisitions of money from the several States, yet they were not vested with any coercive power to raise money either from delinquent States or from individuals. How far the United States, had they even had a government clothed with sufficient authority, might have been able to carry on the war without contracting a debt is a matter of doubt. For not only they must recur to extraordinary resources in order to oppose the formidable enemy they had to encounter, but it is well known that the beginning of a revolution was a most unfavorable moment to raise any considerable taxes. The expenses of the war were defrayed by paper money, by advances made by the several States, and by loans contracted by Congress.

The paper money was issued by Congress for the purpose either of discharging contracts or of purchasing supplies. When issued for the last purpose, it is evident that it could not buy more than it was worth. But whenever it was issued in order to pay debts contracted before, and had depreciated in its value from the time when the contract was entered into, the difference was lost by the creditor and gained by the Union. In the case, however, of the pay of the army, the several States, on the recommendation of Congress, made up the difference to the officers and soldiers according to a certain scale of depreciation. This army depreciation, therefore, whether actually paid by the States, or whether, as was mostly the case, discharged only by creating a stock bearing interest, was amongst the advances made by the several States. The whole of the paper, for whatever purpose issued, was finally redeemed either by taxes or by loans. When redeemed by taxes, as those were exclusively raised by the several States, it became one of the advances made by them. But, however redeemed, the depreciation of the paper from the time of its issuing to its final redemption operated as a tax upon the people, and defrayed a part of the expenses of the war. For, even where it was redeemed by loans, Congress declared the Union to be indebted not for the nominal amount, but for the real value of the paper at the time it was lent to the public; which value was fixed also by a scale of depreciation and rather in favor of the creditor, as the paper was in no case valued at less than forty for one. A part of the paper remained unredeemed at the close of the war, and has been funded, at the rate of one hundred for one, under the present government. It is hardly necessary to add that those arbitrary measures, which operated in so unequal and unjust a manner, can be justified only by the necessity of the case.

The advances made by the several States, exclusively of the army depreciation and of paper money, consisted chiefly of supplies in kind and of the pay of the militia respectively employed by them; the regular army being principally paid by the United States. Those advances were defrayed by the several States, either by taxes or by contracting debts. The sums advanced by each, and the proportion those sums respectively bore to the debts contracted by each, varied with their situation during the war, their resources, and their exertions. It was necessary, in order to apportion that burden, to calculate the advances made by each, and to adopt some uniform rule that should fix the proportion that each should have paid. The rule adopted by the Articles of Confederation, viz., a valuation of all the cultivated lands and houses, was difficult in practice and never carried into effect. The rule according to which the accounts have been finally adjusted is the census of the inhabitants of the United States made in 1791, which has operated in an unequal manner, since the increase of population of the different States has been very unequal since the termination of the war. What part of those advances should have been considered as a debt of the Union will be taken into consideration when the measures adopted on that subject by the present government are examined. The total amount of the advances actually made by the several States, as fixed by the final settlement of accounts, is not known, it having been thought prudent not to publish it; nor has the proportion of those advances, which at the close of the war consisted in debts, been ascertained.

The depreciation of the paper money and that part of the advances made by the several States, which did not consist of debts, were, in fact, the only taxes raised upon the people during the war. The other expenses were defrayed either by individuals who advanced their capital or their services—and this constituted the domestic debt of the United States and of the individual States—or by loans obtained in Europe, which constituted the foreign debt of the United States.1

The domestic debt contracted by the United States consisted of the debt due to the army [for arrearages of pay and for five years’ pay given to the officers in commutation of the half-pay for life which had been promised to them], of supplies of different species purchased on credit, of loans (chiefly in paper money) obtained in America, and of the remnant of paper money yet in circulation. The principal exceeded thirty millions of dollars; the arrearages of interest to the 1st of January, 1784, might be estimated at five millions and a half of dollars; the principal and interest at about thirty-five millions and a half of dollars.

The foreign debt, almost solely due to France, amounted to about six millions and a half of dollars. The whole of the debt, foreign and domestic, to about forty-two millions of dollars.

From the 1st of January, 1784, to the 1st of January, 1790, the principal of the domestic debt was reduced by sales of land, which amounted to about 1,100,000 dollars; but, in the mean while, the interest accrued was near ten millions of dollars, of which about six millions remained unpaid.

During the same period the greatest part of the interest on the foreign debt accumulated to an amount of about 1,700,000 dollars; and a new debt was contracted in Holland of 3,600,000 dollars. The whole debt, foreign and domestic, increased, therefore, during those six years by a sum exceeding ten millions of dollars.

It must, however, be observed that, for a part of the interest on the domestic debt stated as unpaid, a new species of certificates, called “Indents,” had been issued by Congress, which, being accepted by the creditors, seems to have discharged the Union from any further claims on that head. For those indents became thereby a charge against the several States, and would have been absorbed in requisitions, had not the adoption of the present government, by putting an end to those requisitions, rendered it an act of justice to provide for the outstanding indents.

On the increase of debt which took place during those six years it may be also remarked that the convention which framed the present Constitution, having published it in 1787, and its final adoption having become exceedingly probable in the beginning of 1788, the several States were from that time still more remiss in paying their requisitions, and that the first Congress under the new Constitution having met in March, 1789, it could not be expected that they should raise sufficient revenues during that year. The years 1788 and 1789 may, therefore, be considered as that period between the two governments during which nothing could be done towards the payment of the debt. Finally, although during that period the government of the Union was altogether inefficient, that of the several States was sufficiently strong to enable many of them to discharge considerable parts of their individual debts.

The preceding estimates of the debt are far from being correct, and are meant merely to give a general idea of its origin and progress till the 1st of January, 1790, viz., ten months after the present government was in operation. The following is a statement of the debts of the Union on that day:

The foreign debt consisted of three items, viz.: the debt due to France, the debt due to Spain, and the debt due to Holland.

The principal of the French debt, together with the arrears of interest to the 31st December, 1789, amounted, as appears by the statement No. XVI., to dollars 7,895,300.

The principal of the Spanish debt amounted to dollars 174,011; the arrears of interest to the 31st December, 1789, to dollars 67,670, making altogether dollars 241,681.

The principal of the Dutch debt amounted to 3,600,000 dollars; but, exclusively of the yearly interest payable on the same, there were a number of premiums and gratifications, payable at different periods, on one of the loans. Those premiums, which amounted to 657,500 guilders, equal to 263,000 dollars, have sometimes been considered as an additional interest, sometimes as part of the principal. Viewing them as principal, their value, as they did not bear any interest, must be estimated upon the principle of an irregular short annuity. Calculating them according to the several periods at which they were respectively payable, and at the rate of six per cent. compound interest, they were worth dollars 171,175; and the whole amount of the Dutch debt was therefore dollars 3,771,175.

Those three items, which constituted the foreign debt, formed an aggregate of dols. 11,908,158.

The apparent amount of the principal of the domestic debt was dollars 29,158,764, and that of the arrears of interest to the 1st of January, 1790, might be estimated at nearly dollars1 11,493,858, making altogether 40,652,622 dollars. But from that sum must be deducted, 1stly, the debt due to foreign officers, amounting, with arrears of interest, to dollars 209,426, which will be stated hereafter; and, 2dly, a sum of dollars 186,393, consisting of debts due to the United States and recovered after the year 1789, but arising from contracts made under the late government [as stated under the heads of “debt paid by Pennsylvania,” and “sundry debts redeemed,” in the view of the sinking fund, No. XI.]. This reduces the principal of the domestic debt to dollars 28,858,180, and the arrears of interest to dollars 11,398,621, making altogether dollars 40,256,802.

The principal of the debt due to foreign officers amounted to dollars 186,988, the arrears of interest to the 1st of January, 1790, to dollars 11,219, making altogether dols. 198,317.

There were besides several arrears and claims against the late government, which have since been discharged in specie at the Treasury. The whole amount of these paid before the 1st of January, 1796, as nearly as may be distinguished from the official statements, and including (upon those which might bear interest) interest to the respective dates of payment, is dollars 450,395.

All those different sums which constituted the whole of the debt (both foreign and domestic) of the United States on the 1st of January, 1790, make an aggregate of dollars 52,813,673.

No opposition was made in the first Congress, that met under the present government, to provide for payment of interest upon all those species of debt, except so far as related to the domestic debt. The length of time that had elapsed since the debt had been contracted without any efficient measure being taken either to discharge interest or principal, had sunk its market price to about one-eighth part of its nominal value. That depreciation, compared to that of the paper money, had impressed upon many a belief that it might be discharged in the same manner as the paper; that is to say, by not paying it. A great number of the original holders, of the soldiers who had performed the actual services, of the citizens who had actually furnished the supplies, had, many from necessity and some from want of confidence, sold the evidences of the debt at that low price. Sympathy for these, and the unpopularity that attached to the purchasers, created a strong difference of opinion as to the measures to be taken on that head. Two propositions, one of which, by directing a new settlement of accounts, aimed to annihilate the greatest part of the debt, and the other went on the ground of paying to the purchasers only the real value they had given, and to the original holders the difference between that and the nominal value of the debt, were both rejected by a large majority. It was finally agreed to refund all the arrears of interest, including the indents in circulation, at three per cent., and the principal (including the outstanding paper money at the rate of one hundred for one) at six per cent.; suspending, however, for ten years the payment of interest upon one-third of the principal, and, in exchange for that suspension, attaching to the debt a condition which was supposed to enhance its value; that is to say, limiting the power which the public had to pay the whole of the principal whenever they pleased to only eight per cent. in each year, including both principal and interest upon the original capital. Thus the principal of the domestic debt was divided into two species, both bearing six per cent. interest, both convertible at the pleasure of Congress into an annuity of eight per cent. and of about 23 years, and irredeemable in any other way; but one (which has generally preserved the denomination of six per cent. stock, and which, consisting of two-thirds of the whole, amounted to dollars 19,242,157) bearing interest from the 1st of January, 1791, and the other (known under the name of deferred stock, and amounting to dollars 9,616,023) bearing interest only from after the year 1800. As the interest began to be paid only in the year 1791, that which accrued during the year 1790 created a farther increase of debt of 1,680,000 dollars, and swelled the amount of arrears, funded at the rate of three per cent., to dollars 13,078,621.1 The arrears upon the debt due to foreign officers were discharged in specie instead of being funded.

But although the measures which related to the domestic debt were adopted by a very large majority, and seem, so far as can be judged from the rapid appreciation of the debt even prior to its being funded, to have been supported in a great degree by public opinion; another proposition, made in relation to the debts due by the individual States, met with a much stronger opposition, and was even in the first instance rejected by the House of Representatives. It has already been stated that the advances made by the several States had varied according to their respective circumstances, and that their accounts had not been settled at the time of the adoption of the present government. Supposing those advances to be ascertained and those accounts to be adjusted, a difficulty would arise as to the mode of making a final and satisfactory settlement. For the adjustment of accounts would only show that some States had advanced more and some others less than their quota or proportion; that these, who might be called “debtor States,” were indebted to the other States in certain sums. But the difficulty was, how to oblige those debtor States to pay to the others; the power of making requisitions from the States having ceased with the Articles of Confederation, and Congress being bound by the present Constitution to raise no taxes except either in an uniform way or in proportion to the population of the respective States. The only mode that seemed practicable was for the Union to pay to the creditor States at least such balances as would be found due to them, or even so much more as should, as far as possible, equalize the accounts without increasing too much the debt; and that payment might be made either by funding those balances in favor of the States themselves, or by assuming a certain proportion of the debts owing to individuals by those creditor States. But it was unexpectedly proposed, without waiting for the adjustment of the accounts, without knowing which of the States had really advanced more than their proportion, without examining whether the debts they then owed arose from the greatness of their exertions during the war, or from their remissness in paying taxes; it was proposed that the Union should at once, indiscriminately, assume the payment of all the debts then due by the several States in their individual capacity. A measure so little expected, even by the creditors of those States, that the evidences of the debts of some of them had not appreciated in value since the establishment of the present government, although, as has been remarked, the expectation that the proper debt of the Union must be paid had raised the market price of the evidences of that debt to four times what it was when the Constitution was adopted.

This proposition was finally adopted, with the following modifications: First. Instead of funding the arrears of interest at 3 per cent. and the principal at 6 per cent., one-third of the whole of both the principal and arrears of interest to the 1st of January, 1792, was funded at three per cent.; two-thirds of the remaining two-thirds were funded at 6 per cent., bearing interest from the year 1792, and the other third of the said two-thirds was funded also at 6 per cent., bearing interest from after the year 1800. Secondly. The interest for the year 1791 was not paid, as it was on the domestic debt, but funded; and the interest on three and six per cent. stocks paid only from the year 1792, that is to say, one year later than upon the domestic debt. Thirdly. The total amount of the debts of the individual States, and the proportion of the debts of each State to be thus funded, were limited to a certain sum fixed at random, each State trying to make the best possible bargain. The sums actually funded by virtue of that assumption amount to dollars 18,271,814; which have produced dollars 8,120,836 6 per cent. stock, dollars 4,060,417 deferred stock, and dollars 6,090,560 3 per cent. stock.

It was provided at the same time that the sums thus assumed for each State should respectively be charged to those States in their accounts, and that the balances which upon a final settlement should be found due to the creditor States should be funded in their favor. The accounts have accordingly been settled by three commissioners vested by law with full and conclusive powers to that effect. Those commissioners have declared the aggregate of the balances due to certain States, including interest to the 1st of January, 1790, to amount to dollars 3,517,584; and the aggregate of balances due by certain other States to amount also to the same sum. The balances thus due to certain States have been funded in their favor, and have produced 2,345,056 dollars in six per cent. stock, and 1,172,528 dollars in deferred stock. The interest which accrued on the six per cent. stock from the 1st of January, 1790, to the first of January, 1795, amounting to dollars 703,516, was not paid, but funded at three per cent. The six per cent. and deferred stocks, created both by the assumption and by the funding of balances, were, like those produced by the domestic debt, declared to be convertible into an annuity of 8 per cent. and of 23 years and some months, and irredeemably in any other way.

Two reasons seem to have influenced the measure of assuming the State debts before a settlement of accounts had taken place: firstly, the impatience of those States who labored under a heavy weight of debt, and who seem to have been apprehensive either that they might not be found creditor to so large an amount as the sums assumed for them, or that if they did not obtain immediate relief justice might afterwards be denied to them; secondly, an idea that government would be strengthened by rendering all the creditors of the individual States dependent upon the Union. And to these was added a suggestion that it was more easy for the general government than for the several States to discharge those debts.

The States, however, who had the largest debts to pay were found in the issue to be the greatest creditor States, and would therefore have experienced the same relief had they waited till a final settlement had taken place. Experience has also shown that the additional debt laid upon the Union by the assumption, so far from strengthening government, has created more discontent and more uneasiness than any other measure; and this not only on account of the additional taxes which have thereby been rendered necessary, but chiefly because a fear did thence arise that there were some influential characters whose wish was to increase and perpetuate the debt, and because, from a variety of circumstances, suspicions have been entertained that private interest and speculation were amongst the most powerful causes of the measure. Finally, although it may, upon a superficial view, have appeared a matter of indifference whether the money necessary to discharge that debt was raised from the people of the United States by the general government or by the individual States, yet the difficulty experienced by the government of the Union to increase their revenue by any internal duties, the rapid progress heretofore made by several States in redeeming their debts, and the present situation of those States whose debts (on account of their being found debtor States) would not have been assumed, clearly prove that a considerable part of the additional debt thus assumed by the Union would have probably, had no assumption taken place, been discharged by this time by the exertions of the individual States. What that additional debt amounts to will now be shown.

In order to form a correct idea of the effect of the measure, it is necessary to ascertain exactly, first, what is the present relative situation of the accounts of the States; and, secondly, how much debt it would have been necessary to assume or to fund after the settlement of accounts in order not perfectly to equalize the accounts, but to bring them exactly to the same situation in which they now are.

First. By funding the aggregate of balances which have been found due to the creditor States, and at the same time by not recovering from the debtor States the balances due by them, it is true that the different States have been put on a more equal footing than they were before; but the accounts are not yet finally settled, and there are now new balances due from and to certain States. For, although by funding the balances the debt due to the creditor States may appear to have been paid, yet, as that debt was due to them not by the Union, but by the debtor States only, and as the debt is thus paid not by the debtor States, but by the Union, the creditor States and those States which owed little or nothing are made (as part of the Union) to pay themselves a part of the debt. Thus their aggregate of funded balances must be considered as a tax laid upon the Union, as a charge to be paid by the several States, and therefore to be credited to them respectively in the same manner as other advances made by them have been. Dividing that aggregate amongst the several States in proportion to their Federal numbers as ascertained by the census of 1791, the quota thus falling on each State being respectively carried to the credit of each and compared with the balance which was before due by or to each State, will ascertain the balance now due by or to each State. By that process, which is exhibited in the 3d, 4th, 5th, 6th, and 7th columns of the statement No. XV., it appears that the aggregate of balances respectively due to and from certain States now amounts to dollars 2,450,390; and it must be recollected that in order to come to that result the United States have assumed and funded a debt of dollars 22,492,888.

Secondly. A process nearly similar to the one just now mentioned will show what balances should have been found against or in favor of the several States if no assumption had taken place. The effect of the assumption on the accounts and on the final balances returned by the commissioners has been to debit each State respectively with the amount assumed for that State, and to credit each State with the proportion or quota of that State (the said proportion being determined by the federal numbers of the State) of the aggregate sum assumed by the Union. As both the federal numbers of and the sum assumed for each State are known, the amount of the debit and credit created by the assumption against and for each State is also ascertained, and nothing more is necessary in order to find what result should have taken place had there been no assumption than to take away from the accounts (or, which is the same thing, from the result of those accounts as expressed by the balances returned by the commissioners) the debit and credit thus ascertained. The 2d, 8th, 9th, and 10th columns of the statement No. XV. exhibit the details of that process, from whence it appears that the aggregate of the balances which would have been found due to or from the several States had no assumption taken place amounts to dollars 8,047,300. The next step is to find how much it would then have been necessary either to assume or to fund in order to reduce that aggregate of balances to the sum of dollars 2,450,390, which has been stated to be the true amount of balances now due to and from the several States. Another process, nearly similar to the preceding, and which is exhibited in the 11th, 12th, 13th, and 14th columns of the statement No. XV., showeth that in order to obtain that result it would have been necessary to assume State debts, or to fund balances in favor of the creditor States, as might have best suited their convenience, only to the amount of dollars 11,609,259, instead of the dollars 22,492,888 which have been assumed and funded. Thus, had the United States waited to assume State debts till the accounts had been finally settled, instead of assuming at random before a settlement had taken place, the very same result which now exists might have been effected, the accounts of the Union with the individual States might have been placed in the same relative situation in which they now stand by assuming eleven millions instead of twenty-two. The additional and unnecessary debt created by that fatal measure amounts, therefore, to dollars 10,883,628.1

It will further appear, from an inspection of the same statement No. XV., that those States which labored under the heaviest burden of debts would have in a great degree been relieved; for the amount which in that case should have been respectively assumed for the States of Massachusetts, Rhode Island, Connecticut, and South Carolina is dols. 3,843,573, 299,892, 1,528,042, and 4,603,853; on the other hand, the States of Pennsylvania and Maryland, for which about 1,300,000 dollars have been assumed, would have been placed in a better relative situation had that plan, by which nothing would have been assumed for them, taken place; and they were so far able and willing to pay their own debts that they gave more to their creditors than was offered to them by Congress. The same ability and willingness existed in New York, for which about 1,200,000 dollars were assumed, and which was, in the issue, found to be a debtor State to the amount of more than 1,700,000 dollars.

The debt having thus been funded, it became important, chiefly on account of the speculations of foreigners, to raise its price as soon as possible to its nominal value. This was accelerated by the establishment of the sinking fund and of the bank. The purchases made by the commissioners of the sinking fund, partly with moneys borrowed in Europe and partly with the domestic revenues, as stated in statement No. XI., have already been mentioned.

The nominal capital of the bank incorporated by Congress in 1791 consisted of ten millions of dollars, two millions of which were subscribed by the United States, but borrowed by them from the bank itself at an interest of six per cent. and payable in ten yearly instalments of two hundred thousand dollars each. Of the remaining eight millions subscribed by individuals, only one-fourth part was payable in cash, and the other three-fourths in six per cent. stock. Thus a demand was created for six millions of dollars in that species of stock, which, added to one million of dollars in different species purchased in the same year (1791) by the commissioners of the sinking fund, was sufficient to raise the price of the whole debt, consisting of six per cent. stock, to its nominal value. It operated farther, indeed, than was desirable; for private speculators, excited by the rapidity of the appreciation, launched with so little caution in the business that, after an artificial rise had taken place through their means, the stock within less than two months sunk again from 25 per cent. advance to its nominal value.

The establishment of the bank was also beneficial in some other points of view. The accommodations which government receives from that institution in almost all its financial operations are not only useful when resorted to with moderation, but under our present system and in our situation may be deemed necessary. Nor can any person doubt that, like all other banks, this is of great commercial utility, by bringing into circulation moneys which otherwise would remain inactive, and especially by increasing the rapidity of the circulation. Banks, indeed, are perhaps still more useful for this purpose in America than in Europe. There the different nations may be considered as one great commercial people, who can easily relieve each other’s temporary wants of money; whilst here the sudden drains of specie, to which we are as liable as any other commercial nation, to which we are perhaps, on account of our extensive trade to the East Indies, more exposed than most of them, cannot, by reason of our great distance, be replaced within any short period from the redundance in any quarter of Europe.

The assistance to be received from the bank may, however, be abused both by government and by individuals; and it has certainly been abused by government. Instead of raising sufficient revenues, or abstaining from expenses, they have, as has already been observed, recurred too freely to loans and anticipations; have, in some instances, paid too dear for them; and now, from the demand made by the bank of the whole of the debt due them by the public, they find themselves in the same situation with an individual who has too freely made use of discounts and from whom they are suddenly withdrawn. The fear of those abuses, an apprehension, which perhaps has in some degree and in some instances been justified, that the bank might become a political engine in the hands of government, and a conviction with many that Congress had not, by the Constitution, a power to incorporate any public bodies, created a serious opposition to this measure, and has left many enemies to the institution.

Until the year 1795 no other provision was made for the redemption of the domestic debt (including therein the assumed debt) than that of the occasional purchases by the commissioners of the sinking fund. By an Act passed in that year the six per cent. and deferred stock have both been converted into short annuities of eight per cent., beginning from the year 1795 for the six per cent., and from the year 1801 for the deferred stock; and the faith of the Union is now pledged to pay those eight per cent., which will extinguish the six per cent. debt in the year 1818, and the deferred debt in the year 1824. The first payment of dollars 515,972 on the six per cent. stock was accordingly made on the 1st of January. This sum added to dollars 2,307,661 in different species of stock redeemed by purchases makes an aggregate of dollars 2,823,634 extinguished on the domestic and assumed debt, and left the amount of six per cent. stock, on the 1st of January, 1796, dollars 28,284,260, that of deferred stock dollars 13,960,984, and that of three per cent. stock dollars 19,360,838, making altogether dollars1 61,606,083.

Of the debt due to foreign officers, dollars 122,333 have been paid out of moneys borrowed in Europe, leaving the amount of that debt on the 1st of January, 1796, dollars 75,984.

The debt to France may be considered as extinguished. The greatest part, viz., dollars 5,870,400, have been paid with moneys borrowed in Holland; and that part of the debt which was not yet demandable has been commuted into two new species of domestic stock, bearing interest at 5½ and 4½ per cent., and redeemable at pleasure. The inconvenience experienced by the United States in being obliged to pay in Europe the interest and instalments of the principal of the whole of the foreign debt induced them, in 1795, to offer to the holders of that debt to exchange it for a species of stock redeemable at the pleasure of government, and payable, both principal and interest, in America, but bearing respectively one-half per cent. interest more than the debt then due. France was the only foreign creditor who accepted that proposal. The amount of 5½ per cent. stock thereby created is 1,848,900 dollars, and that of 4½ per cent. stock 176,000 dollars. The statement No. XVI. exhibits the situation of that debt on the 1st of January, 1790, and the manner in which it has been extinguished.

The Spanish debt, amounting to dollars 241,681, one million two hundred thousand dollars of the principal of the debt contracted by the late government in Holland, 124,000 dollars of the premiums due on the same debt, and 600,000 dollars of the debt due to the bank for the subscription to the bank stock, have also been paid out of moneys borrowed in Holland. Those sums, together with the dollars 450,395 unfunded debts heretofore stated, have been discharged in specie, constitute the whole of the payments made by the present government before the 1st of January, 1796, in part of the principal of the public debt.

The balance of the principal of the old debt due to Holland amounts to 2,400,000 dollars; the premiums still due on the same to 139,000 dollars, which, calculated on the same principle of a short, irregular annuity above mentioned, are worth dollars 104,400. These two sums added to 9,400,000 dollars, which have been borrowed by the present government in Amsterdam and Antwerp, constitute the present foreign debt, amounting, on the 1st of January, 1796, to dollars 11,904,400.

That debt bears an interest that varies from 4 to 5 per cent., and is payable by instalments, as appears in detail by the statement No. XVII.

The debts contracted by the present government in America consisted on the 1st of January, 1796, of 3,800,000 dollars in anticipations, 1,400,000 dollars still due on the bank stock loan, and 1,000,000 dollars borrowed to defray the expenses attending the intercourse with foreign nations and principally applied to the purpose of effecting a treaty with Algiers. These sums, amounting altogether to 6,200,000 dollars, were all due to the Bank of the United States, excepting only 200,000 dollars due to the Bank of New York. Out of this sum, 4,600,000 dollars (to wit, the 3,800,000 dollars anticipations, 400,000 dollars part of the bank stock loan and making the two instalments due thereon for the year 1795 and 1796, and 400,000 dollars part of the million of dollars loan obtained for foreign intercourse) were demandable during the year 1796, and the remaining 1,600,000 were payable after that year in five yearly instalments, the three first of 400,000 dollars, and the two last of 200,000 dollars each. The Bank of the United States having demanded the payment of the 4,400,000 which were due to them and payable in the year 1796, Congress were obliged, in order to provide for the payment of that debt, and also of the 200,000 dollars due to the Bank of New York, and of an instalment of 400,000 dollars on the Holland debt, which fell due during the year 1796, to open the five million dollars loan which has been mentioned in the preceding section. By the terms of that loan they offer to give, for the moneys borrowed, a stock bearing six per cent. interest and irredeemable for 24 years. Whether this loan will be filled, or whether it will be necessary for the commissioners of the sinking fund to sell a part of that stock under par or a part of the bank stock belonging to the United States, according to the powers vested in them for that purpose, is not ascertained.

The statement marked (B) exhibits two comparative views of the public debt on the first days of January, 1790 and 1796, respectively.

The first is grounded upon a supposition that the State debts assumed by the Union (including therein the balances funded in favor of the creditor States) were actually debts due by the United States. The nominal amount of the debt is stated, on the first of January, 1790 (after deducting the cash in hand on that day, and the old debts due to the Union, which have been since recovered), at dollars 72,613,254, and on the first of January, 1796 (after making a similar deduction for the cash in the Treasury or in the hands of the collectors and for the bank stock belonging to the United States), at dollars 78,697,410, and the increase of debt during those six years at dollars 6,084,155.

This increase of debt arises, 1stly, from the excess of expenditures over the revenues received; and, 2dly, from such parts of the interest accrued on the debt since the 1st of January, 1790, as have been funded instead of being paid.

The excess of expenditures beyond the revenues received has been stated at dollars 3,228,961, but is liable to the following deductions:

First. The excess of the nominal amount of the stock purchased by the commissioners of the sinking fund beyond the amount of moneys applied to purchases, which excess amounts to dollars 688,725. (See statement No. XI.)

Secondly. The premiums paid on the old Dutch debt, which are not set down in the account of expenditures as a payment in part of the principal, but as one of the annual charges on the debt. It has already been stated that, calculating those premiums on the principle of a short annuity, they were worth on the first of January, 1790, dollars 171,175, and on the first of January, 1796, dollars 104,400. The difference between those two sums is dollars 66,775, and must be considered as a reduction of the debt.

Thirdly. The moneys which, although not yet regularly passed in the accounts of the Treasury, had actually been collected from the people on the 1st of January, 1796, being then either informally paid in the Treasury or in the hands of the collectors, are also an actual payment by the people, and must be considered, when contrasted with the public debt, as a set-off, being either cash in hand or a real debt due to the public by the collectors. The amount of moneys in that situation on the 1st of January, 1796, may be estimated at about 600,000 dollars.

These three sums, amounting together to dollars 1,355,501, which, deducted from the sum of dollars 3,228,961, hereabove stated as the excess of the expenditures beyond the revenues received, leaves dollars 1,873,459.

The interest which has accrued during those six years without being paid, and has been funded, consists of three items:

1st. The interest upon the proper domestic debt which remained unpaid during the year 1790, and, being funded at three per cent., created an increase of debt equal thereto, and which has been before estimated at 1,680,000 dollars.

2dly. The interest upon the assumed debt which remained unpaid during the years 1790 and 1791, and, being also funded (one-third at three per cent., four-ninths at six per cent., and two-ninth parts also at six per cent., but in deferred stock), has created an increase of debt equal thereto. As the principal and interest of that debt were blended together when funded, it is only by estimation that the principal and interest accruing thereon can be valued. Supposing, which is thought not to be far from the truth, that five-sixths of the assumption consisted of principal, two years’ interest on that principal (which, on that supposition, would amount to dollars 15,226,489) would be equal to dollars 1,827,178.

3dly. The interest which accrued for five years upon the balances funded in favor of the creditor States, viz., from the 1st of January, 1790, to the 1st of January, 1795, has also been funded at three per cent. instead of being paid, and has created another increase of debt amounting to dollars 703,516.

These three items amount together to dollars 4,210,695, which being added to the above-stated sum of dollars 1,873,459 (being the excess of expenditures over the revenues, after making the proper deduction) give for the whole increase of debt dollars 6,084,155, the same sum which is stated in the first view of the statement (B).

This view of the subject being grounded on a supposition that the debts assumed for the different States and the balances funded in favor of certain States were proper debts of the Union, no account is taken of the balances due by the debtor States, which, if due on the 1st of January, 1796, were also due on the 1st day of January, 1790. If, however, those balances, together with interest from after the year 1789, ever happen to be recovered from the debtor States, then the interest paid by those States upon those balances will be an equal set-off against the increase of debt arising from the interest funded upon the balances of the creditor States, and above stated in the third item of increase of debt arising from interest unpaid.

For the same reason it would be improper to take into consideration the effect which would have resulted upon the settlement of the accounts of the States, had the interest which accrued upon the assumed debt during the year 1790 and 1791 been paid instead of being funded. It is true that that interest (which has been stated as the 2d item of increase of debt arising from interest unpaid) was charged to the several States, being part of the assumption in the settlement of accounts, and therefore changed the result which otherwise would have taken place in the final balances if it had not been charged. But it would have been equally just to charge that interest to the several States in case it had been paid in specie by the Union instead of being funded. For, in fact, it should not have been charged to the several States; for the commissioners appointed to settle the accounts were directed by law to strike the balance due to each State on the 31st of December, 1789, by calculating the interest to that day upon the respective debits and credits of the accounts of the said States. The provision which at the same time directed that the whole of the debts respectively assumed for the several States, and therefore including interest thereon to the 31st of December, 1791, should be charged to the said States, was perfectedly contradictory to the general law, and has rendered the whole transaction irregular and the final settlement incorrect.

In order, however, to give every possible view of the subject, the effect produced upon the final balances found in favor of and against certain States, by having charged to the said States respectively the interest accrued on the assumed debts during the years 1790 and 1791, is exhibited in the last columns of the statement No. XV. From thence it appears that if that interest had not been charged, the aggregate of the balances due to the creditor States and which would have been funded would have amounted to dols. 3,904,351 (still upon the same supposition that the interest for those two years amounted, as hereabove estimated, to dollars 1,827,178), instead of 3,517,584 dollars, which have been returned by the commissioners; making, therefore, a difference of dollars 386,767.

Upon that increase of debt it is proper to remark that, the present government having been organized only in 1789, it might have been found difficult, especially after the assumption of the State debts had been agreed upon, to provide at once a revenue sufficient to pay the interest upon the whole debt, which accounts for the non-payment and consequent funding of a part of that which fell due during the years 1790 and 1791. Although it was practicable to pay a part of it with that surplus of the revenue of 1790 which was applied to purchases of the public debt, the propriety of having preferred this last application is not disputed. Yet when taking an account of the progress of the debt, as whatever part has been redeemed is a deduction from its present amount, and as no part of the principal would have been redeemed had the whole interest for 1790 and 1791 been paid, it is evident that, in order to have a correct idea of the whole, the increase of debt which arises from that non-payment must be taken into consideration.

If, instead of taking the nominal amount of the debts, their supposed real value is estimated, it will be found that, estimating the six per cent. and deferred1 stocks at par, the three per cent. stock at sixty per cent. (or 12 shillings in the pound), and the bank stock belonging to the United States at 25 per cent. advance, the increase of debt upon this view of the subject is only dollars 4,591,869.

The second view of the subject, as exhibited in the statement (B), is grounded upon the principle already established, that the State debts were not due by the Union, and that it would have been sufficient, for the sake of equalizing the accounts between the different States, to assume an aggregate of only dollars 11,609,259; which last sum is therefore stated as the only part of the State debts and balances in favor of the creditor States actually due by the Union on the 1st day of January, 1790. The nominal amount of the whole debt on that day is upon that principle only dollars 64,260,294; and the nominal increase of debt during the six years amounts to dollars 14,437,115.

Effects of the Public Debt, and Resources applicable to its Extinguishment.

Almost all the expenses of government, but especially that species which most usually engenders a public debt, viz., the expenses of war, are a destruction of the capital employed to defray them. The labor of the men employed in the public service, had it been applied in the pursuits of private industry, would not only have supported them, but probably afforded them some reward beyond mere sustenance, and therefore would have produced an excess beyond their consumption, an addition to the national wealth, an increase of the capital of the community. The whole of their labor, however useful and necessary it may be, being totally unproductive, not only the community is deprived of that increase of capital which otherwise would have taken place, but their consumption, together with all that waste which necessarily attends the most economically managed war, must be supplied out of the resources of the community at large, out of some capital which is annihilated by being applied to that purpose. This evil, an evil of the first magnitude, is the consequence of the expenditure itself, and not of the means by which that expenditure is discharged. The capital, whether it has been raised by taxes or by loans, is destroyed on account of its being applied to an unproductive purpose; and that destruction of capital is to be charged to the object of expense, to the war, and not to the public debt which is commonly contracted for supplying the expense, for procuring the capital thus devoted to destruction. In that point of view, the only evil which arises from a habit of recurring to loans is that, by facilitating the means of raising capital, it tends to enlarge the scale of expenses, it encourages unnecessary ones; it thus indirectly promotes a greater destruction of capital than would otherwise have taken place.

If it was possible, however, to defray the expenses of a war by applying thereto a capital which would at all events have been consumed, it is evident that such a mode would in a great degree repair the evils occasioned by the war. This effect is produced to a certain extent by taxes, which always fall in part upon such parts of the revenue of the nation as would have been consumed in as unproductive a way as the expenses of the war itself. But loans uniformly are supplied not by a revenue which would have been expended, but by a capital which was before that time employed to some useful and productive purposes. To support a war, to defray any kind of public expense by taxes, is to do it by the resources of economy, by retrenching the consumption of individuals, the consumption of the nation. To defray it by loans is the mode of the spendthrift; it is irretrievably to destroy the principal rather than to diminish our immediate consumption and enjoyments. But this evil is the consequence of contracting and not of funding a debt.

When the first measures of the present government in relation to the public debt were adopted, seven years had elapsed since the conclusion of the war. It was that war which had consumed the capital of the nation; it was during, or at least in consequence of, that war that the debt had been contracted. The most sensible evils which usually accompany a public debt had preceded by many years the provisions made for the American debt; they were already in a great measure cured by the exertions of private industry. The funding of the debt was therefore attended with no immediate evil, except that arising from the taxes necessary to pay the interest. But was that measure productive of any positive good?

It has been said that it had created a large productive capital which did not exist before. How this could have been effected does not appear. The owners of the debt have in their possession certificates, bonds given by the community, but if they are richer than they were before they had obtained that security for a regular payment of interest, the community who gave the bonds are certainly the poorer. If those certificates of debt are a capital more to the holders, they are a capital less to the debtors; and the nation is exactly, in that point of view, in the same situation in which they were before; with this difference, however, that the taxes necessary to pay the interest tend in part to prevent an accumulation of capital, fall perhaps in some degree upon the necessaries of the industrious part of the community, to a certain extent oppress and impoverish the nation, are paid but in part out of a revenue which would at all events have been consumed, whilst their whole amount is consumed by the holders of the debt. There is no more capital created by those certificates, by those bonds, than would be created if a number of individuals were, in consequence of any contract, to be indebted to other members of the community and to give them their bonds to an amount equal to that of the public debt. If a holder of the public debt sells his certificates to another member of the community, he acquires indeed a capital, but he does not create it. The purchaser must pay it with a capital previously existing in the country. A public debt does not increase the existing amount of cultivated lands, of houses, of consumable commodities; it makes not the smallest addition either to the wealth or to the annual labor of a nation. It does not appear that it can in any way be an additional national capital, unless it be supposed to operate, like money, as the means of facilitating exchanges; unless it be supposed to supply the place of a circulating medium.

Supposing that to be the case, it would not be to a larger amount than the demand of the country for that medium; and as the amount of the debt is much greater than the quantity of circulating specie required, it follows that only a part of it could be employed to that purpose, and that whenever a greater part was put in circulation than was required by the actual demand, its price would sink, and it could no longer answer the very purpose to which it was designed. In fact, the paper money of the banks and the increase of circulation they produce are in general fully sufficient for the demands of the country. Whenever, from some sudden drains of specie, or from that most common evil in America, “over-trading,” a greater demand for specie takes place, one of the first effects is to sink the price of the public debt. So far from adding to the capital of a nation, it would seem that a nation must have a large capital in order to support the price of a public debt, in order to give to that price that fixture which is an essential requisite to render it a proper substitute for a circulating medium. It is well known that that part of the capital of the Bank of the United States which consists of public stock does not answer to that institution the purpose of a capital in specie, of a circulating medium; that it does not enable them to increase their discounts. Although the evidences of the debt may occasionally and when at a fixed price answer the purposes of money, yet generally, and whenever variations take place in that price, it becomes an article of barter, an object of speculation, calls for, instead of giving, additional supplies of money, and is well known upon many occasions to have caused some of the greatest distresses which the mercantile world has experienced.

But although the funding of the American debt neither could nor did create any additional capital, yet it became the means of drawing to America a foreign capital to a large amount. It may be seen by the statement (B) that the foreign debt properly so called, that is to say, the debt immediately consisting of moneys borrowed abroad, and upon which the interest must be paid in Europe, amounts at this time to about the same sum which it did when the present government was established. But very large sums in the present domestic debt of the United States are owned by foreigners residing in Europe. The two millions of dollars, five and half and four and half per cent. stocks, created in order to extinguish the debt due to France, are principally held by foreigners. A large amount of the original domestic debt was purchased by citizens of Holland before it had raised to its nominal value; and from that time it has been usual for merchants to make remittances to Europe in public stock. The government of the United States alone have remitted during the year 1795 near one million and a half of dollars in six per cent stock. Thus America has received from foreigners a capital of several millions of dollars, which has appeared in the light of a great acquisition of wealth, which has had some dazzling temporary effect, but which has been an acquisition of wealth to the speculators in stock alone, and not to the nation. For the nation owes to foreigners those millions; the nation must yearly pay to Europe the interest of those millions, and it cannot get rid of the payment of that interest and of the taxes necessary to pay it until it shall have returned to Europe not only the capital received by America, but a capital equal to the nominal amount of the public stock purchased by Europe.

If it be insisted that the sales of stock to Europeans, being nothing more than a certain mode of borrowing money in Europe, are advantageous to America, since we have so much demand for capital and can employ it in so profitable a way, still two circumstances must concur in rendering borrowing useful,—a low rate of interest and a proper application of the capital borrowed. The rate of interest, as it depends upon the price obtained for the stock, is uncertain. Yet it must be recollected that the purchases by foreigners began at a very early period, and that during the six years that have elapsed since the funding system was proposed, the six per cent. stock has not been at par or above par more than eighteen months, viz., from the latter end of July, 1791, to the beginning of January, 1793. The probability is that we pay from 7 to 8 per cent. on the capital which we have thus borrowed. Had, however, the whole of that capital been applied to productive purposes, it would have enabled the nation to pay the interest, high as it was, and perhaps to make some profit. But it cannot be denied that a small proportion, indeed, has been so applied as to increase the cultivation and improvement of lands, the erection of manufactures, the annual income of the nation. Acquired suddenly by individuals, that capital has been applied in the same manner as every other sudden acquisition of wealth; it has enabled those individuals to consume, to spend more, and they have consumed and spent extravagantly. Taking in the great number of elegant houses which have been built within a few years in all the large cities, and which, however convenient to the inhabitants, afford no additional revenue to the nation, it may be asserted that the greater part of the capital thus drawn from Europe for purchases of stock has been actually consumed, without leaving in its stead any other productive capital, and that as the nation still owes the whole, it has been impoverished even by the only consequence of the funding system that has made any temporary addition to the apparent wealth of the country. That wealth is, in a great degree, consumed and destroyed, and the whole debt remains to be paid. Still it is not astonishing that those who have been thus enabled to consume that capital should not have attended much to the manner in which it was to be replaced and repaid by the nation, and should have finally persuaded themselves and many others that the funding of the debt was a real and permanent increase of the national capital, a national acquisition of wealth.

Let it not be supposed that any of those reflections are intended to convey a censure on that part of the funding system which provided for the payment of the interest of the proper debt of the United States. They are designed merely to show that the propriety of that measure must have depended solely on its justice. Whether the debt had been funded on the plan of discrimination in favor of the original holders of those who had performed the services, or, as has been the case, in favor of the purchasers of certificates, the general effects would have been nearly the same; and unless the American government had chosen to forfeit every claim to common honesty, it must necessarily provide for discharging the principal or paying the interest to one or the other of two descriptions of persons.

Whatever difference of opinion may heretofore have existed on that subject, on the propriety of paying those who had purchased the debt so much under its value, it now exists no more, it has ceased with the cause; for all the present owners have, or may be supposed to have, purchased the debt at the market price, which, since it has been funded, has been obtained for it. The solemn obligations, superadded by the present government to those contracted before, never can be set aside without the most flagrant and pernicious breach of public faith and of national morality.

If the public debt is not an additional national capital, no other disadvantage can result from its extinction except the increase of taxes necessary for that purpose, and the annual loss which will be suffered by replacing to Europe the capital borrowed there, either under the denomination of foreign debt or by the sales of domestic debt. So far as the taxes necessary for that purpose will check consumption, the capital to be thus repaid abroad will be supplied by economy, and its payment will in no shape whatever impoverish the country. So far as those taxes will fall, not on that portion of the annual revenue which would have been consumed, but on that part which would have been saved and have become an addition to the permanent wealth of the nation, so far the progress of the country will, in a certain degree, be checked by the withdrawing and paying the capital due to Europe. To do this too suddenly would certainly be injurious to the community. But any evil that may arise from a gradual extinction of the debt, from a gradual repayment of the capital borrowed in Europe, will be more than counterbalanced by the natural progress of America, will free us from the payment of interest upon that capital, and will, at the same time, strengthen the bonds of our Union and give additional vigor and respectability to the nation.

It may have been supposed by some that the debt, by rendering the creditors dependent on government, gave it an additional stability. But it should be recollected that although an artificial interest is thereby created, which may at times give an useful support, it may at some future period lend its assistance to bad measures and to a bad administration. So far as that interest is artificial, so far as it is distinct from the general interest, it may perhaps act against that general interest and become as pernicious as it is supposed to have been useful. At all events, who can doubt that the jealousies, the apprehensions, the discontents excited by the public debt have been more injurious to our domestic peace, have gone farther to weaken our real union, than any other internal cause? It is a lamentable truth that the Americans, although bound together by a stronger government, are less united in sentiment than they were eight years ago. Every source of discontent, every permanent cause of taxation which can be removed, adds to the strength of the Union and to the stability of its government.

But, in regard to our strength and consequent respectability and independence in relation to other nations, as speedy an extinction of the debt as circumstances will admit becomes indispensable. As there is not the smallest probability that we ever shall be involved in any war except in self-defence, and as the exhausted situation of all the European nations seems to warrant, at the conclusion of the present war, a continuance of peace for at least ten or twelve years, we should by all means improve that period to discharge the heaviest part of our debt. It requires no argument to prove, it is a self-evident truth, that, in a political point of view at least, every nation is enfeebled by a public debt. Spain, once the first power of Europe,—Spain, with her extensive and rich possessions, Holland, notwithstanding her immense commerce, still feel the effects of the debts they began to contract two centuries ago, and their present political weakness stands as a monument of the unavoidable consequences of that fatal system. Yet what are those instances when compared with that of France, where the public debt, although once discharged by the assistance of a national bankruptcy, has at last overwhelmed government itself! The debt of Great Britain, which began at a later period than that of any of those three nations, has not yet produced such visible effects. The unexampled prosperity of that country has heretofore been sufficient to support its strength and to increase its wealth, notwithstanding the weight of that burden. Yet the revenue now necessary to discharge the interest annually payable on that debt and to support the peace establishment of that nation, that is to say, the annual revenue now raised by taxes in Great Britain, would, if unencumbered, discharge the yearly expenses even of the war in which she is now engaged.

The sum necessary to pay the annuity and interest on the debt of the United States constitutes more than two-thirds of their yearly expenditure; and it is presumable that we would not be much exposed to the wanton attacks, depredations, or insults of any nation was it not known that our revenue and resources are palsied by an annual defalcation of five millions of dollars. It does not seem that any possible object of expense, without even excepting the creation of a navy, can be so eminently useful in adding to our external security and respectability as that which, by paying the principal of our debt, will give us the command of an unimpaired revenue, and enable us to dispose, if necessary, of all our resources.

A circumstance which seems to render this still more requisite in America, is the difficulty for the United States of raising moneys by loans, except in time of profound peace. It is well known that the great demand for capital in America, the usual high market rate for interest, the peculiar circumstances of the country, render it nearly impossible to borrow any large sums at home; and experience has lately proved that the circumstance of an European war, even though we ourselves were not engaged, was sufficient to prevent us from any farther loan in Europe. Hence it results that as we cannot in case of any emergency put much reliance on that resource, we should during our state of peace and prosperity hasten to disencumber our domestic resources. We have, indeed, severely felt the obligation of repaying during the present European war the anticipation at home and the instalments of the foreign debt abroad. We have thereby been compelled to borrow on the most disadvantageous terms, to contract the obligation of paying an interest of at least six per cent. for 24 years, and to remit to Europe stock purchased at par, and which will probably sell there under its nominal value. These considerations, supported, it is believed, by the general opinion of the people of America, forcibly point out the necessity of an immediate recourse to our domestic resources, of an immediate increase of revenue.

It has already been shown that our present receipts are hardly adequate to our present expenditure; in fact, that we have heretofore made only a nominal provision for paying the principal of any part of our debt. For although (supposing the present receipts to be equal to the present rate of expenditure) it may be said that we have provided for the yearly payment of 2 per cent. on the principal of our six per cent. debt bearing a present interest, yet we have not made any provision whatever for the payment of the annuity payable after the year 1800 on the deferred stock. Indeed, the interest (exclusively of the additional 2 per cent.) payable on this stock exceeds the yearly payment of 2 per cent. upon the six per cent. stock; and the fact is that our present revenue is not even sufficient to pay after the year 1800 the interest on our debt. Our faith is now pledged to pay from after that year an annuity of 8 per cent. upon both stocks; and whatever difference of opinion may exist upon the extinguishment of other parts of the debt, it is necessary to increase our revenue from after that year by a sum sufficient to discharge that annuity, which has already been stated at about 1,100,000 dollars.

This increase will enable the United States to extinguish the whole of the six per cent. stock by the year 1818, and the whole of the deferred stock by the year 1824. No farther provision seems necessary on that part of the debt, which amounts to about forty-two millions of dollars, except the very important one to find the additional revenue of 1,100,000 dollars.

The parts of the debt which will remain unprovided for are:

1st. The foreign debt, which on the 1st of January, 1796, consisted of about twelve millions of dollars, but which, by the payment of the instalment that falls due during the year 1796, and has been provided for by the five million loan, will be reduced to about 11,600,000 dollars.

2dly. The five and a half per cent. and four and a half per cent. stocks, amounting to about 2,000,000 dollars.

3dly. The instalments due after the year 1796 to the bank, and not provided for by the five million loan, amounting to 1,600,000 dollars.

4thly. The anticipations necessary during the years 1796 and 1797 (exclusively of the loans that may be requisite to pay any part of the principal of the debt), estimated at 800,000 dollars.

5thly. The new five million loan, which, being irredeemable for twenty-three years, cannot be extinguished except by purchases.

6thly. The three per cent. stock, amounting to about 19,300,000 dollars, which, on account of its low rate of interest, is not susceptible of any extinguishment, except by purchases or by a new modification of the debt.

Those different sums somewhat exceed forty millions of dollars; but the four first items, which seem alone to be the object of redemption by an application of revenue, amount altogether to sixteen millions of dollars. They are all, the five and half per cent. and four and half per cent. stocks excepted, payable by instalments due before the year 1810; and although the amount of the yearly payable instalments is not equal every year, yet as some of the Dutch loans may, according to the terms of the contract, be discharged by government as much earlier as they please, the total sum to be paid each year may be so equalized and modified as to render the discharge of the whole practicable before the year 1810, with an uniform revenue. It is proposed to make provision for that payment during that period by an additional revenue, and as it is not possible that any new revenue, even if raised by Congress at their next session, can be productive before the year 1798, the term proposed for the redemption of those sixteen millions will be twelve years from the first of January, 1798, to the first of January, 1810.

The interest payable on those sixteen millions may, when calculating the revenue necessary to discharge the principal, be estimated at an average of about five per cent. A debt of sixteen millions, bearing an interest of five per cent., will be discharged in twelve years by a revenue somewhat exceeding one million of dollars. But as the eleven hundred thousand dollars necessary to pay the annuity on the deferred stock will not be wanted till the year 1801 for that purpose, and, if raised from the year 1798, may in the mean while be applied to discharge three millions and a half of the debt of sixteen millions; this, being thus reduced to twelve millions and a half, will be discharged in twelve years by a revenue of about 800,000 dollars. This sum added to the 1,100,000 dollars, which are at all events necessary to pay the annuity on the deferred stock, form an aggregate of 1,900,000 dollars, the revenue necessary to be raised for twelve years.

Through the means of that revenue not only sixteen millions of the debt shall have been redeemed, but an annuity equal to about 780,000 dollars, the interest payable thereon, will be liberated and form an actual addition to our present revenue. If during the same period the resources to be derived from the lands of the United States, which will next be taken under consideration, are applied to the three per cent. stock so as to liberate an annuity of 320,000 dollars, these two sums will be sufficient to pay the annuity on the deferred stock, and the whole of the additional revenue of 1,900,000 dollars may cease after the year 1809. On the other hand, if only the 1,100,000 dollars are raised from the year 1801, that additional revenue must continue till the year 1824. The difference between raising what must at all events be raised, to wit, 1,100,000 dollars, only from after the year 1800, putting off the increase of taxes and revenue to the last moment, and raising 1,900,000 dollars from the year 1798, consists in the difference between taxes of 1,100,000 dollars for twenty-four years and taxes of 1,900,000 dollars for twelve years; or (as 1,100,000 dollars must by both plans be raised for twelve years) it consists in the difference between immediate taxes of 800,000 dollars for twelve years and taxes of 1,100,000 dollars also for twelve years, but beginning twelve years hence. Supposing the country to be so fast progressing in prosperity that 1,100,000 dollars of taxes will not be more heavy twelve years hence than 800,000 dollars now are, still the sole advantage which arises from a postponement is present enjoyment, and putting off a burden which must necessarily come at that time. The loss is manifest; for although the same burden must then be borne, the debt remains unpaid. Should we not raise that revenue at present, to a momentary relief we shall have sacrificed sixteen millions of dollars, we shall have lost the present time, we shall have lost an almost certain period of peace and prosperity; and although we cannot command future events, we shall have to encounter them at that time as unprovided and as enfeebled as we now are.

Independent of any additional revenue to be raised by taxes, the lands of the United States will afford another resource. Those now at the disposal of Congress do not amount to ten millions of acres; but the quantity might be enlarged without any difficulty was there any real demand for more. Lands are so much more valuable to us than to the Indians, that whenever they are actually wanted we may afford to pay for them a much higher price than they ever do ask. The actual demand, which must regulate the price that may be obtained by Congress for the lands belonging to the public, is determined itself by the increase of population and by the direction of emigrations. Lands of good quality and in actual demand for settlers will fetch about four dollars per acre, payable in about five years by instalments. If sold upon shorter terms of credit, or in large tracts, the persons who settle the lands and can afford to give the highest price are generally excluded from the competition, and the lands will only bring such a price as will leave to the purchaser (who is to sell again to settlers) the usual profit upon capital employed in similar speculations. Should the lands be sold before there is an actual demand by settlers, they will bring a price proportionably less as the prospect of settlement may be farther distant. Congress have directed their lands to be sold partly in small and partly in large tracts; one half of the purchase-money to be paid at the time of sale, and the other half within one year after; no lands to be sold under two dollars per acre. The credit is so short that the class of people who usually begin settlements will be nearly altogether excluded. The provision which fixes the price at two dollars at least will exclude, to a certain degree, the speculators. And the sales will probably fall short of the actual yearly demand for settlers and be confined to the very best tracts.

About ten thousand families migrate every year to the westward of the Alleghany Mountains. Although all of them cannot purchase lands, all of them increase the demand for land, as they enable those who can purchase to cultivate more and therefore to purchase more. Of those ten thousand families, three-fourths at least will be fixed in the States of Tennessee, Kentucky, Virginia, and Pennsylvania, and in those parts of the North-West Territory already ceded by the United States and by Virginia. The yearly migration to the lands of the United States will be probably about 2600 families; the yearly actual demand for lands may vary from 500,000 to one million of acres. Although various circumstances render it impossible to form any tolerably correct conjecture on the amount of sales, it is not probable that, on the plan which has been adopted, they will upon an average exceed 250,000 acres, yielding a revenue of 500,000 dollars. The first year, on account of the great demand for the valuable low lands on the Ohio and other rivers, will perhaps be more productive than the succeeding ones.

The lands may be applied in two ways to the payment of the debt, either indirectly or immediately: indirectly, by selling the lands for the best price that can be obtained, and applying the moneys to the redemption of the debt; immediately, by inducing the holders of some species of debt to exchange it for lands, by making the price of lands payable in certificates of debt of that species. By the first mode it is probable that a higher price will be obtained for the lands, as they will only be sold from time to time as they rise in value, and as some advantages must be given to the holders of the debt to induce them to make the exchange. But, on the other hand, the second mode will secure a proper application of the proceeds of the land; the land itself will pay the debt without coming into the Treasury in the shape of money, which, upon the first emergency, might be applied to some other purposes. Another peculiar advantage would arise if the land was immediately applied to the extinguishment of the debt bearing an interest of three per cent. Was a redemption of this debt to be attempted by purchases, it would necessarily raise its price beyond its usual market price and beyond what it is supposed to be really worth. It would, therefore, require so much larger a sum for its redemption. Supposing that stock to be worth sixty per cent. upon its nominal value when six per cent. stock is at par, the 19,300,000 dollars now existing are worth only something more than eleven millions and a half of dollars. But although the lands should bring that money, it would undoubtedly require a greater sum to purchase the whole of the stock. A variety of plans might be formed for a commutation of that stock into lands. The following sketch is offered merely to show in what manner the operation might be effected.

Let the lands, after they shall have been surveyed, be divided into ten large lots of 960,000 acres each, as equal in quality and value as the nature of the case will admit; and each of the said large lots be subdivided into townships, and these into tracts of 640 acres. Let then a subscription be opened for the sale of the large lots successively, beginning with the most valuable; each purchaser to subscribe for at least a tract of 640 acres; the price of the subscription to be two dollars per acre, with interest at the rate of three per cent. a year from the time of the sale, payable in any species of stock of the United States at its nominal value; with liberty to the purchaser to discharge the debt in specie at the rate of one dollar and a half per acre; one-tenth part of the purchase-money to be paid at the time of the subscription, and the remainder part in nine yearly instalments, or sooner, at the option of the purchaser: possession of the land to be given immediately, but the land to remain mortgaged in security for the purchase-money. As soon as the subscription to one of the large lots is filled, let the subscribers draw lot for their respective shares, under such modifications as will secure to subscribers for one township, or quarter of a township, the whole in one tract.

The most weighty objection against this plan is, perhaps, the lottery and speculation to which it will give rise; yet it will be found difficult to devise any plan for the sale of lands and for the redemption of the public debt which will not, in some degree, be liable to the same objection. The number of acres, price, interest, time of payment, &c., in the above have been inserted merely for the sake of conveying clearer ideas; but they should be considered as blanks that can be filled only upon an investigation of all the details of the subject.

The advantages for the public, supposing the whole of the subscription to be filled, would be the certainty of the redemption of the whole debt bearing an interest of three per cent. and an immediate liberation of the annuity of 580,000 dollars necessary to pay the interest thereon, since the interest payable for the land would always be equal to the interest payable on the three per cent. stock in circulation.1 This sum might, therefore, be applied in part of the additional revenue of 800,000 dollars wanted to extinguish the debt of sixteen millions; I say of the 800,000 dollars, for it could not be applied in part of the 1,100,000 dollars necessary to pay the annuity on the deferred stock, the faith of the Union being pledged to discharge that annuity out of the revenues of the Union, and to apply, in addition to it, the proceeds of the public lands towards the extinguishment of the public debt. Thus, if that subscription was to be filled, the lands would in twelve years extinguish both the debt bearing three per cent. interest and a great part of the above-mentioned sixteen millions of dollars; it being necessary to add (for that purpose and exclusively of the 1,100,000 dollars requisite to pay the annuity on the deferred stock) only a yearly revenue of 220,000 dollars for those twelve years. Those advantages would more than counterbalance to the public the advantages offered to the subscribers by the low rate of the lands.

The advantages to subscribers would be obvious. The average price of lands equal in situation and quality, but either settled or capable of being immediately settled, is now four dollars per acre. In all probability ten years, and at farthest fifteen, will settle the whole of the ten millions of acres offered for sale, or at least will raise the whole of it to what may be called the settlement price, an average of four dollars per acre. A part might now be sold above that price; a great proportion of the lands will attain it within a shorter period than ten years; the most remote situation will be worth it at the expiration of that time. And this must take place, according to the natural course of events, by the natural increase of population, without giving any farther trouble of management to the purchasers than that of selling the lands again to actual settlers. Those amongst the purchasers who will become settlers will affix that price to the land as soon as they improve it; and at the price they give will be enabled to pay three-fourths of the purchase-money out of the proceeds of the land itself. The land may therefore be considered as being, upon an average, worth four dollars per acre within eight years after the time of purchase; which, discounted at the rate of six per cent. compound interest, is equal to about two dollars and a half at the time of purchase. For this the subscribers will give, at most, one dollar and a half, bearing, in fact, only four per cent. interest, payable in nine years, and not worth much more than one dollar and a quarter at the time of purchase.

Although the success of a plan something similar to this may not be complete, yet so far as it will succeed, so far the extinguishment of the debt bearing an interest of three per cent. will be promoted, and so far the amount of the additional revenue necessary for the payment of the annuity on the deferred stock, and for the extinguishment of the above-mentioned debt of sixteen millions of dollars, may be diminished. The sources from which that additional revenue, whatever its amount may be, can be derived remain to be examined; still recollecting that at least 1,100,000 dollars must necessarily be raised, and that the ability of the United States to raise the highest required sum, viz., 1,900,000 dollars, cannot be denied.

This revenue may be raised either by indirect or direct taxes. A difficulty, inherent in the Constitution, will always render a recurrence to direct taxation the last resort of the general government. For, it being provided that such taxes shall be apportioned among the several States according to their respective population, those States who have a less extent of territory in proportion to their numbers will think themselves aggrieved by a species of tax which must reach their lands, not in the ratio of their value, but in that of the whole number of inhabitants.

Labor being the only source of wealth, the annual quantity and produce of labor was the best general rule which could be established for fixing the respective ability of paying taxes in the several States. Nor does it appear that any better criterion could have been adopted, in order to ascertain that annual produce of labor, than the number of inhabitants, making the same allowance with the Constitution by estimating the net produce of the labor of five slaves (after deducting that part necessary for their sustenance) equal to the net produce of the labor of three freemen. Yet that general rule, like all others, is liable to some exceptions. The labor of the same number of men may, according to the differences in the nature of their employment, in their skill and industry, in the government under which they live, in the quantity of active capital existing in the country, and in several other circumstances, vary in different countries. The labor of the inhabitants of Great Britain is certainly far more productive than the labor of the inhabitants of Poland, who are at least equal in number. It does not, however, appear that the differences existing in the respective circumstances of the several States are so great as to render the operation of the rule more unequal than the operation of most indirect taxes. Their government is similar, and the most sensible difference is, that the Southern States have a larger capital in land, and the Northern States have both more industry and a larger circulating capital. Hence it results that a tax merely on lands might perhaps bear more heavily on the landholders of the North than on those of the South; not but that a tract of land, without reference to its size, is usually equally productive in both places when cultivated by an equal number of persons; but because there is a less proportion of the inhabitants employed in the cultivation of land to the North than to the South. The operation of a tax merely on land might therefore be unequal on that description of persons in the several States, but not on the States themselves. A direct tax upon the whole property, although perhaps liable to still greater objections, would not, in that point of view, be unequal either on the States or on any particular description of people. And it is worthy of remark that, whatever inequality may result from the operation of direct taxes proceeding from the difference in the nature of the capital and in the application of the labor in the different States, as great a one, but operating in the very reverse, must result from indirect taxes on consumable commodities imported into the Union. For, if taxes on land, laid according to the rule prescribed by the Constitution, bear more heavily in some one quarter because the proportion of persons employed in the cultivation of lands is less there than in other parts of the Union, on the other hand the proportion of persons employed in manufactures in the same place must be greater.

The consumption, therefore, of imported manufactures, and the amount of duties paid on that consumption, will be proportionably less. If a land tax presses harder upon the landholders of the North, it is because the proportion of cultivators is less and that of manufacturers is greater than to the South. If the proportion of manufacturers is less to the South, the people there must consume a greater quantity of foreign goods and pay a larger proportion of the impost. By combining the two modes of taxation, a more equal effect will probably be produced than can be by either singly. This opinion is confirmed by the experience of all other nations; it is not believed that any instance can be adduced of a nation raising any considerable revenue without having resorted to direct taxation, to land taxes. Nor have these, when laid judiciously and with moderation, ever been complained of as unequal or oppressive. It is, however, proper to examine what additional resources can be derived from indirect taxes.

The duties upon importations are, of all others, those which seem best adapted to our situation. As we import more and manufacture less, in proportion to our consumption, than almost any other country, the impost must necessarily be far more productive than any internal duties on our own manufactures. The collection of the impost, being confined to a few seaports, requires but few officers and a small expense. The merchant is liable to no vexation from the officers except at the time of landing the goods and on board of his vessel; and he is always a man of sufficient information to understand thoroughly the duties required of him by the law, and to repel any attempt by the officer to oppress. In those particulars the manufacturers who pay internal duties are generally placed in a worse situation, for the act of manufacturing not being, like that of landing goods, the work of a day, but that of the whole year, it is necessary, in order to know the quantity manufactured, that the workshop of the manufacturer should be perpetually opened to the inquisitorial inspection of the collector. Nor must it be forgotten that, in America, the few extensive manufactures are carried on by a great number of persons, many of whom,1 from their situation in life, may often involuntarily omit some of the numerous duties prescribed by the most complex of all revenue laws, and are also more exposed to the oppressions of subaltern officers. Although few manufactures are yet carried on upon a large scale in the United States, yet a great proportion of the most essentially necessary articles are made at home, and the greater part of the importations may justly be termed luxuries, and are amongst the most proper objects of taxation. Thus the impost, at the same time that it possesses the same general advantages with other taxes upon consumption, is free of the most weighty inconveniences which may be objected to the other species; it is, in our present situation, of all others the most productive, the cheapest to collect, the least vexatious, and in general the least oppressive.

This resource has, therefore, been resorted to and carried already pretty generally as far as its own limits will permit. For there is a certain rate of duty beyond which the high temptation offered to smuggling or a diminution of consumption must necessarily decrease the revenue. It cannot be said that the present duties have, upon all those articles which are fit objects of taxation, been carried to the utmost extent of which they are susceptible. Perhaps a judicious selection may be made amongst the most bulky of those articles which now pay ten per cent. ad valorem, and the duty increased to the same rate paid upon printed cotton goods, viz., twelve and a half per cent perhaps sugar, which is now thought to pay the lowest duty amongst those articles charged with specific duties, might, without oppression, as it can without danger, be taxed half a cent. higher; perhaps some of the articles which now pay duties ad valorem might be classed amongst those paying specific duties, so as to be made to contribute something more to the revenue; perhaps the system is susceptible of some farther improvements. But it will be generally allowed that there would be a great risk of diminishing, instead of increasing, the revenue was any considerable extension of the impost to be attempted, and that it would be a large computation to suppose that 300,000 additional dollars could be raised in that manner. Yet it may be safely predicted that, unless recourse be had to direct taxes, the unavoidable consequence will be an undue and dangerous augmentation of the present duties on importation, amongst which the most oppressive, viz., an increase of that upon salt, is already contemplated.

The next class of indirect taxes are the internal duties on the use or consumption of consumable articles. The only tax which has been suggested, in addition to that on carriages, upon the use of anything is one upon horses; but it must be remembered that, in order to be an indirect tax, it should be confined to saddle-horses.1 For the horses employed in agriculture or in the transportation of merchandise are not an object of expense, but a productive capital, an object of revenue, an object of direct taxation only. It is presumable that a tax confined to saddle-horses would be difficult in its execution, liable to be evaded, and very unproductive.

The little success which taxes upon consumption, laid on the manufactures, have heretofore met with does not seem to afford much encouragement for similar attempts in future. Men who are earnestly wishing to derive new revenues from internal sources and by indirect taxes have not been able to suggest, in addition to those already liable to the excise, more than two American manufactures productive enough to be proper objects of taxation, that of leather and that of hats.

The manufacture of leather is, without doubt, one of the most extensive in the United States. It is presumed that a duty of ten per cent. on that article might, if duly collected, yield about 500,000 dollars. It is liable to two weighty objections: it is a tax which would, at least in the first instance, fall with nearly equal weight on every individual; it is properly a tax upon labor, always oppressive in its first operation, and the final effect of which cannot be calculated. In the next place, it does not seem practicable to raise the duty in any other mode than upon the tanner himself; and the manufacture in many parts of the Middle and almost universally in the Southern States is a family one, carried on by every planter and farmer. Its collection would therefore be expensive, and a great proportion of the duty evaded.

A tax upon hats would be less unequal and more easily collected; but, on the other hand, far less productive. It is believed that a duty of ten per cent. on this article would not in practice yield more than 100,000 dollars.

The last tax of indirect taxes includes all the duties laid upon a variety of transactions in life, which are commonly taxed by the operation of licenses or of stamps.1 Amongst these, law proceedings, transfers of property, and contracts or obligations for money are the most usual objects of taxation. Taxes upon law proceedings may deservedly be ranked amongst the most unequal, unjust, and oppressive. Those upon contracts in general, although always to a certain degree unequal, are, perhaps, liable to less objections than most other indirect taxes. Yet in America they could not, without injustice, be extended to all species of contracts. Transfers of all real property especially are so much more frequent in those parts of the Union which are newly settled, that a stamp duty upon them would be in proportion not to the wealth, but to the poverty, of the contributors. A necessity of limiting the number of species of contracts to be taxed would diminish the productiveness and increase the expense of collection; and as in mere contracts for money the only penalty attached to the omission of taking out a stamp depends on the subject-matter of the contract becoming a subject of discussion in a court of justice, the confidence of the parties in one another will sometimes, and their negligence often, tend to diminish the revenue. From those causes this class of duties has not been supposed to be likely to produce more than 150,000 dollars at most, and would not probably yield above 100,000.

It therefore appears that the only new indirect taxes that can be resorted to are an addition to the impost, an excise on leather and hats, and a stamp duty; all of which would not yield above one million of dollars, and would therefore fall short of the revenue wanted.1 Yet could a sufficient sum be raised by those means, the people of the United States may decide which would be most oppressive, these including an additional duty on salt, or a direct tax. The objection arising from a supposed inequality has already been noticed, and it must be farther observed that if some States have stronger objections against that species of taxation than others, they are generally those which have been mostly relieved, by the assumption of the State debts, from the heaviest individual burden. Had not that assumption taken place, the Union, indeed, might have proceeded to the extinguishment of their proper debt without wanting additional revenues and without resorting to direct taxation. But those States who were oppressed under the weight of their own debts must, in that case, have raised a larger revenue than will now be their proportion of a general tax. After having urged, as the most powerful argument in favor of the assumption, that it would liberate the resources of each State from local demands and enable the Union to use them all, it would seem unfair, at present, to refuse to the general government the command of the most productive internal branch of revenue. In fact, the very objections against that assumption which have been so much insisted upon must lose a great part of their strength if an adequate revenue is raised. They are mostly grounded upon the increase of the general debt and the greater difficulty for the Union effectually to command all the resources of the country. Give the Union that command, prove that its ability of paying the principal of the debt is not impaired by having assumed the State debts, and the measure will stand almost justified.

How far the lands belonging to the United States, the additional resources to be derived from indirect taxes, and the savings which may be effected in our present rate of expenditure, may reduce the amount of revenue to be raised by a direct tax, cannot be ascertained. But it cannot be supposed that even a tax of 1,600,000 dollars could be oppressive in the smallest degree. From the year 1785 to the year 1790, at a time when the situation of the United States was less prosperous than now, when their population, the quantity of cultivated land and of circulating capital, the annual income of the people, and their consequent ability to pay, may fairly be stated as inferior to what they now are, a tax was raised in Pennsylvania without oppression and paid with punctuality, the amount of which was nearly equal to the present proportion of that State of a Federal tax of 1,600,000 dollars.1 Perhaps it would not be amiss, in order to insure the greatest possible economy, to make all the payments of the interest and principal of the public debts out of the duties on imports, appropriating the surplus of those duties, the internal existing duties, and the new taxes, to the discharge of all the current expenditures, and especially of the military and naval establishments.

A direct tax imposed by the Union may be laid either uniformly on the same species of property in all the States, or upon that species in each State which has usually been directly taxed there. In favor of the last mode it may be said that it will altogether remove the inequality apprehended from a land tax, and, above all, that it will better accommodate to the habits and prejudices of each State. This last argument carries so much weight with it that the House of Representatives have directed the Secretary of the Treasury to prepare a plan upon that principle, to be laid before them at the ensuing session. The materials which will then be collected may enable Congress to form a final determination on the subject; and it is not the intention of this sketch to anticipate, by any remarks on details, the deliberations which must then take place. Yet, opinions having been expressed here upon most species of taxation, a general remark will also be added on the comparative merits of the two modes of laying direct taxes, without any reference to the local causes which may influence a final decision.

A direct tax is laid upon property in proportion either to its capital value or to the revenue it affords. It is, therefore, necessary not only to collect the tax, but previously to assess it; in other words, to estimate the value of the property or of the income derived from it. The collection of the tax itself is everywhere cheaper than that of any other tax, because the officers employed may always be temporary ones, there being no necessity, as in the case of indirect taxes, to keep a watch over the contributors. It costs less to collect in England and in France than any other species of tax. Even in Pennsylvania, where the system was complained of on account of its being expensive, the charges of collection were but five per cent. But the assessment must necessarily increase to a certain degree the expense, and this will vary according to the species of property taxed. Real property, being of a permanent nature, may be valued once in five or ten years without any great inequality resulting therefrom. The assessment of England, which, it is true, is now very unequal, has stood for near a century without variation. Personal property, perpetually shifting, requires a yearly valuation. But it is not only in the article of expenses in collecting that direct taxes upon real property possess a great comparative advantage. In order to assess, to estimate the capital or the income of an individual, that capital, that income, must be known. His real property is visible and can always be estimated with certainty. But the greatest part of his personal property may with propriety be denominated invisible. His capital employed in commerce, the debts which are due to him (from which must be deducted those he owes), his money, and even his stock in goods, must either be assessed according to his own declaration, or be estimated in an arbitrary manner. And when the tax is laid upon the revenue and not upon the capital of persons, when the profits of their industry are also to be calculated, it may truly be asserted that, was it not for the permanence of the vexations of excises, the most odious of these would be less oppressive, unequal, and unjust than a direct tax levied in that manner. Experience justifies those assertions. In England, where direct taxes fall almost exclusively upon lands and houses, they never have given cause to any just reason of complaint. In France, the taxes called personal, taille and capitation, which were laid with a regard to the conditions of persons, and assessed according to a conjectural proportion of fortunes, industry, and professions, were equally oppressive to the contributors and injurious to the nation. Although there are some species of personal property which may be estimated and taxed in a more certain and less arbitrary manner than others, yet it may be laid down as a general rule, liable only to local exceptions, that lands and houses are the proper objects of direct taxation, that almost every other species of property must be reached indirectly by taxes on consumption.

To conclude: the resources to which it appears that the Union should resort are those of the most general nature, leaving all the lesser, all the local subjects of taxation, to the individual States. There are at present but two species of wealth of a general nature in the United States, viz., lands and capital employed in commerce. It has already been stated that in proportion to our population we were one of the first commercial nations. It cannot be denied that we are by far the first agricultural nation. It must be acknowledged that we are not yet a manufacturing nation. Our capital in commerce is great; our capital in lands is immense; it can hardly be said that we yet have any capital in manufactures. Taxes must be raised from that fund which can afford to pay; taxes must be laid, even in the first instance, where capital does exist. The impost is productive, because our commerce is extensive; every effort, in our present situation, to raise a considerable revenue from our manufactures will prove abortive, because there is no capital there to pay it; because the income drawn from those manufactures which are proper objects of taxation is yet inconsiderable. The same taxes upon consumption, which in manufacturing countries are raised by excises, are in America very properly raised by impost.1 When the impost is carried as far as prudence will dictate, the great source of taxes upon consumption may, in this country, be considered as nearly exhausted, and the other general species of American capital, the other great branch of national revenue, lands, must be resorted to; must be made to contribute by direct taxation.

No. I.

Schedule of the Population of the United States in 1791.

The population of the North-West Territory, which is not included in the above, was not supposed to exceed, in 1791, a few thousand souls.

Of the 3,231,629 free persons, 3,173,922 were white, the 57,707 others were free negroes and persons of color.

The direct taxes and representation are in proportion to the federal numbers, which last are found by adding three-fifths of the slaves to the number of free persons.

No. II.

Statement of the Revenue arising from Duties on Imports and Tonnage.

No. III.

Abstract of the most Important Exports of the United States for Six Years, respectively ending on the 30th September of each Year.

No. IV.

Revenue arising from Duties on Domestic Distilled Spirits and Stills so far as the Accounts have been settled at the Treasury.

N.B.—Pennsylvania and Kentucky not included.

N.B.—Pennsylvania and Kentucky not included, but a partial payment of dollars 1594 made by Pennsylvania.

N.B.—Pennsylvania and Kentucky not included, but partial payment of dollars 6000 made by Pennsylvania; New Jersey and North Carolina settled only to 31st March, 1793, and Virginia to 30th June, 1793.

N.B.—Pennsylvania, Kentucky, New Jersey, North Carolina, Virginia, Delaware, and Maryland not included; but a partial payment of 500 dollars made by Pennsylvania. New York settled only to 30th June, 1794, and Rhode Island to 30th September, 1794. But dollars 24,531, part of the receipts in Treasury for this year, have been paid by Delaware, Maryland, New York, and Rhode Island, which are not credited to the supervisors, and may arise either from the duties here stated as outstanding or from those accrued during the periods not included in the account.

No. V.

Gross Amount of Duties upon Stills and Spirits Distilled within the United States for Four Years Respectively, ending on the Last Days of June, 1792, 1793, 1794, and 1795.

Note.—The drawbacks are, in the above, the amount paid by the collectors in each calendar year; those for 1795 being estimated. In statement No. IV. the whole amount of drawbacks is charged to this revenue; but in this statement only that part which properly belongs to it, viz., 11 cents for the first year and 10 cents for the others, the remaining 3 cents per gallon being in fact a drawback of the duty paid on the importation of molasses.

No. VI.

Estimate of the net amount of Duties upon Stills and Spirits distilled within the United States for the year ending on the last day of June, 1795.

No. VII.

Estimate of all the Internal Duties for one year, ending on the last day of June, 1795.

No. VIII.

Estimate of the annual revenue to be hereafter derived from all the Internal Duties.

No. IX.

Statement of the Revenue arising from the Postage of Letters.

No. X.

Statement of the Receipts and Expenditure, or Disbursements, from the Establishment of the present Government, in March, 1789, to the 1st day of January, 1796, including all the Receipts and Payments, whether made in Europe or America.

No. XI.

A View of the Sinking Fund to April, 1795.