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1812: GALLATIN TO MADISON. - Albert Gallatin, The Writings of Albert Gallatin, vol. 1 [1879]

Edition used:

The Writings of Albert Gallatin, ed. Henry Adams (Philadelphia: J.B. Lippincott, 1879). 3 vols.

Part of: The Writings of Albert Gallatin, 3 vols.

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GALLATIN TO MADISON.

[1812.]

Dear Sir,—

I never have from personal considerations interfered with appointments, but for once feel compelled to do it. It appears to me that Mr. Eustis has a rooted aversion for my friend Chrystie. He is one of the very few for whom all unite. The New York delegation was, in common with others, requested to recommend jointly. However discordant on other points, all the members present, with the exception of Mitchill, have recommended him for lieutenant-colonel. Mr. Eustis places him on the list only as major, and, without judging for himself, I had rather that he should not re-enter the army than not have the rank for which he is recommended. When from the want of agreement between the members it becomes necessary to nominate a less number than the State is entitled to, why reject an almost unanimous recommendation, and a man in whose favor the Vice-President and John Smith write? I could add more from my knowledge of the city of New York, where it will be a better received appointment than any other.

The reason why I feel on this occasion is because I apprehend that I am the innocent cause of Chrystie’s being obnoxious to Mr. Eustis. It cannot be concealed that the (Chrystie) is a favorite of General Wilkinson, and much attached to him. The enclosed letter, which I had suppressed, is a sufficient proof of it. And it was certainly owing to Mr. Chrystie’s connection with Mrs. G.’s family that Wilkinson first noticed him and took him in his family. That a young man of warm feelings should have gratitude for the kind treatment he thus received from the general was a natural consequence, and for which no one would at least impute blame. It is, however, the only cause of prejudice; and I will much regret that my friendship, instead of aiding him, should ultimately have produced such a contrary effect.

Pardon this intrusion; to which I will only add that, notwithstanding what I felt, I would not have made it had I not seen on the lists many names who are nominated for lieutenant-colonels and in every point of view are inferior to Chrystie.

Respectfully, your obedient servant.

GALLATIN TO EZEKIEL BACON, M. C.

Treasury Department, January 10, 1812.

Sir,—

In answer to the first inquiry of the Committee of Ways and Means, relative to the interest arising on the proposed loan of 1,200,000 dollars, necessary to supply the deficiency in the receipts of the year 1812, I beg leave to observe that that item was not included amongst the expenses of that year, because, the estimate being made with reference to the expenses alone, which had previously been authorized by law, and a considerable proportion of those on account of the public debt falling on the first day of the year, it would not have been necessary, in that view of the subject, to borrow that sum previous to that day, and the interest would not, therefore, have become a charge till the year 1813.

With respect to the second inquiry of the committee, it was certainly contemplated, in conformity with the recommendation of the President, whose expressions were adopted in the report, to raise a revenue “sufficient at least to defray the ordinary expenses of government and to pay the interest on the public debt, including that on new loans which may be authorized.” The sum of about nine millions of dollars was assumed as answering that description for the present, and the expression of “fixed revenue,” which had been used in reference to existing circumstances, was inadvertently applied to the case of war. It will undoubtedly be proper, as remarked by the committee, to provide annually an additional and gradually increasing revenue, sufficient to pay the interest on loans required in the event of war. If, therefore, the loan for the present year will, according to the suggestion of the committee, amount to ten millions of dollars, the receipts into the Treasury to be provided for the year 1813 should, on those data, amount to about 9,600,000 dollars.

The committee ask, in the next place, the best opinion which I am able to form of the probable amount of receipts from duties on tonnage and merchandise in the event of war.

As that amount will depend on the extent of the commerce between the United States and nations at peace with them, and on the number of the captures respectively made by our privateers and by the enemy, it is a matter of conjecture, and not a subject of calculation; for which reason it was stated in the report that the amount could not at present be determined. Considering the rigorous restrictions laid by France on the commerce of the United States with her own dominions and other countries under her influence, the dangers to which our commerce with the Baltic and with China will be exposed, the relations of England with Portugal and with Spain, and also that no inconsiderable part of the captures made by our privateers will be sent into foreign ports, a great defalcation in the receipts on duties on imported merchandise must be expected. The amount, under existing laws and circumstances, has, from correct data, been stated in the annual report at six millions of dollars. It would in my opinion be unsafe, in an estimate of ways and means intended to be relied on with certainty, to calculate, in the event of a war, on more than 2,500,000 dollars at the present rate of duties.

To the next inquiry of the committee, respecting the increase of those duties which is thought practicable and advisable, it is answered, without hesitation, that the rate of duties may, in the event of war, be doubled without danger or inconvenience. There will, in such an event, be less danger of smuggling at that rate than there is now with the existing duties. With that increase, the duties will still be much less on an average than those paid on importations in England, France, and most other countries. And they will be collected with more ease to government and less inconvenience to the people than could be devised to the same amount in any other manner.

A duty on imported salt might now be calculated on at least 3,500,000 bushels; but in the time of war cannot be estimated at more than two millions of bushels, producing, at the rate of twenty cents per bushel, $400,000.

The duties on tonnage and imported merchandise, including the former duty on salt, and doubling the rate of all others, would, according to that estimate, amount to$5,400,000
to which adding the proceeds of the sales of public lands, estimated, as by annual report, at600,000
makes an aggregate of$6,000,000
and leaves a deficiency of3,600,000
in order to complete the net revenue of$9,600,000
wanted for the service of 1813.

On the basis of annual loans of ten millions of dollars during the continuance of the war (which is the sum assumed by the committee, and which, considering the expenses already voted by Congress, is not more than will be wanted), and estimating at the lowest rate the interest on the loan of 1813, the deficiency for 1814, to be provided for by other resources, will amount to 4,200,000 dollars. The expenses of assessment and collection, and incidental losses on the internal taxes, from the proceeds of which this deficiency must be supplied, may be estimated at 15 per cent. In order to produce a net revenue of $4,200,000 the gross amount of taxes must, therefore, be near five millions of dollars. As the taxes which may be organized during the present session of Congress will not become due till the ensuing year, and as it is sufficiently ascertained from universal experience that taxes will not produce their full nominal amount in the first year they are in operation, it may be relied on that a gross amount of five millions, intended to produce a net revenue of 4,200,000 dollars, will not yield that sum until the year 1814, nor produce in 1813 more than 3,600,000 dollars. Five millions of dollars will, therefore, be assumed as the gross amount of taxes, including the expenses of assessment and collection and the incidental losses, necessary to be raised at this time. That sum is calculated to cover the interest on the loans of ten millions a year, wanted for the service of the years 1812 and 1813; leaving the selection of the additional taxes, which may hereafter be necessary to provide for the interest of subsequent loans, to be made according to the experience which will be afforded by those two years.

Before I proceed to answer the inquiry of the committee respecting a selection of the internal taxes now necessary, permit me to observe that it was stated in the annual report of December 10, 1808, that “no internal taxes, either direct or indirect, were contemplated, even in the case of hostilities carried against the two great belligerent powers.” An assertion which renders it necessary to show that the prospect then held out was not deceptive, and why it has not been realized.

The balance in the Treasury amounted at that time to near fourteen millions of dollars. But aware that that surplus would in a short time be expended, and having stated that the revenue was daily decreasing, it was in the same report proposed “that all the existing duties should be doubled on importations subsequent to the first day of January, 1809.” As the net revenue accrued from customs during the three years 1809, 1810, and 1811 has, without any increase of duties, exceeded $26,000,000, it follows that if the measure then submitted had been adopted we should, after making a large deduction for any supposed diminution of consumption arising from the proposed increase, have had at this time about twenty millions of dollars on hand,—a sum greater than the net amount of the proposed internal taxes for four years.

In proportion as the ability to borrow is diminished the necessity of resorting to taxation is increased. It is therefore also proper to observe that at that time the subject of the renewal of the charter of the Bank of the United States had been referred by the Senate to the Secretary of the Treasury, nor had any symptom appeared from which its absolute dissolution without any substitute could have then been anticipated. The renewal in some shape, and on a more extensive scale, was confidently relied on, and accordingly, in the report made during the same session to the Senate, the propriety of increasing the capital of the bank to $30,000,000 was submitted, with the condition that that institution should, if required, be obliged to lend one-half of its capital to the United States. The amount thus loaned might, without any inconvenience, have been increased to twenty millions; and with $20,000,000 in hand, and loans being secured for $20,000,000 more, without any increase of the stock of the public debt at market, internal taxation would have been unnecessary for at least four years of war, nor any other resource been wanted than an additional annual loan of five millions,—a sum sufficiently moderate to be obtained from individuals and on favorable terms.

These observations are made only in reference to the finances and resources of the general government. Considerations of a different nature have on both these subjects produced a different result, which makes a resort to internal taxes now necessary, and will render loans more difficult to obtain, and their terms less favorable. But the resources of the country remain the same, and, if promptly and earnestly brought into action, will be found amply sufficient to meet the present emergency. With respect to internal taxes, the whole amount to be raised is so moderate, when compared either with the population and wealth of the United States or with the burdens laid on European nations by their governments, that no doubt exists of the ability or will of the people to pay without any real inconvenience, and with cheerfulness, the proposed war taxes. For it is still hoped that the ordinary peace revenue of the United States will be sufficient to reimburse, within a reasonable period, the loans obtained during the war, and that neither a perpetual and increasing public debt nor a permanent system of ever-progressing taxation shall be entailed on the nation. These evils cannot, however, be otherwise avoided than by the speedy organization of a certain revenue. Delays in that respect, and a reliance on indefinite loans to defray the war expenditure, the ordinary expenses of government, and the interest on the loans themselves, would be equally unsafe and ruinous,—would in a short time injure public credit, impair the national resources, and ultimately render much heavier and perpetual taxes absolutely necessary.

Of the gross amount of $5,000,000, to be now provided according to the preceding estimates by internal taxation, it is respectfully proposed that 3,000,000 should be raised by a direct tax and 2,000,000 by indirect taxes.

The sum of 3,000,000 will not, considering the increase of population, be a much greater direct tax than that of 2,000,000 voted in the year 1798. To this permit me to add another view of the subject:

The direct taxes laid by the several States during the last years of the Revolutionary war were generally more heavy than could be paid with convenience; but during the years 1785 to 1789 an annual direct tax of more than $200,000 ($205,189) was raised in Pennsylvania, which was not oppressive, and was paid with great punctuality. The increase of population of that State between the years 1787-1812 is in the ratio of about 4 to 9. A tax of $450,000 payable in the year 1813 is not higher in proportion to population alone, and without regard even to the still greater increase of wealth and of circulating medium, than a tax of $200,000 was in the year 1787. But the quota of Pennsylvania on a tax of $3,000,000 will (counting Orleans as a State) hardly exceed $365,000. The proposed tax will therefore, so far as relates to Pennsylvania, be near 20 per cent. lighter, in proportion to the respective population, than that paid during the years 1785 to 1789.

The rule of apportionment prescribed by the Constitution operates with perhaps as much equality as is practicable in relation to States not materially differing in wealth and situation. It may therefore be inferred that a direct tax which is not greater than Pennsylvania can pay with facility will not press heavily upon any of the other Atlantic States. It is only in reference to the Western States that the constitutional rule of apportionment according to the respective number of inhabitants in each State may be supposed to be unequal. Being at a greater distance from a market, and having, on account of the recent date of their settlements, less accumulated capital, it is certainly true that they cannot, in proportion to their population, pay as much or with the same facility as the Atlantic States. Two considerations will, however, much diminish the weight, if they do not altogether obviate that objection:

1. Of the articles actually consumed in the Western States there are two of general consumption on which duties are laid or proposed to be laid, and on which, being articles produced in those States, they will pay nothing, or less than the Atlantic States. On salt they will pay nothing, as the whole quantity consumed there is of domestic origin; and this observation affords an argument in favor of the restoration of the duty on that article, since it will tend to equalize the operation of the direct tax. A considerable part of the sugar those States consume—nearly 7,000,000 of pounds—is also the produce of the maple, and pays no duty. And in time of war it is probable that the residue of their consumption will, in a great degree, consist of New Orleans sugar, also duty free.

2. A considerable portion of the direct taxes in those States is laid on lands owned by persons residing in other States, and will not fall on the inhabitants. It appears by a late official statement that more than two-thirds of the land tax of the State of Ohio are raised on lands owned by non-residents. The portion of the quota of that State on the United States direct tax, which will be payable by its inhabitants, will, for that reason alone, be reduced to one-third part of the nominal amount of such quota. And although the proportion may not be the same in the other Western States, it is well known that a similar result, though not perhaps to the same extent, will take place in all.

From every view which has been taken of the subject, it satisfactorily appears that the proposed amount of 3,000,000 is moderate, and cannot be productive of any real inconvenience, provided that the objects on which the tax shall be assessed be properly selected.

A direct tax may be assessed either on the whole amount of the property or income of the people, or on certain specific objects selected for that purpose. The first mode may, on abstract principles, be considered as most correct; and a tax laid in case of selection on the same articles in all the States, as was done in the direct tax of 1798, is recommended by its uniformity, and supported by respectable authority. It is nevertheless believed that the systems of taxation respectively adopted by the several States, matured, modified, and improved as they have been by long experience, will generally be found to be best adapted to the local situation and circumstances of each State; and they are certainly most congenial with the feelings and habits of the people. It is, therefore, proposed that the direct tax should be laid and assessed in each State upon the same objects of taxation on which the direct taxes levied under the authority of the State are laid and assessed.

The attempt made under the former direct tax of the United States to equalize the tax, by authorizing a board of commissioners in each State to correct the valuations made by the local assessors, was attended with considerable expense and productive of great delay. In order to obviate this inconvenience, it is proposed that the quota assigned to each State, according to the rule prescribed by the Constitution, should be apportioned by law amongst the several counties, towns, or other subdivisions of each State, adopting in each State where a State tax is now levied the apportionment of the State tax, whether that be an absolute quota fixed by a previous State law on the county or town, or whether it be only the amount which shall appear to have been last laid on such county by the operation of the general State laws imposing a direct tax; making the apportionment in the States where no State tax is now levied, according to the best information and materials which can be obtained; and authorizing the States respectively to alter the apportionment thus made by law at any time previous to the day fixed by law for assessing the United States tax on individuals. The whole process of assessment will thereby be reduced to that of assessing the quota of each county, town, or other subdivision on the land and inhabitants of such subdivision. It will be as simple, and may be effected as promptly and with as little expense, as the assessment of a county tax; and, the objects of taxation being the same, it may be still more facilitated by authorizing an adoption of the State assessment on individuals, whenever it can be obtained from the proper authority.

With respect to indirect taxes, it does not appear necessary to resort to any other than those which had been formerly levied by the United States. As they were in operation during several years, their defects, and the modifications and improvements of which they are susceptible, are better understood than new taxes could be. With some alterations they may produce the amount now wanted; and it does not appear that any other equally productive could be substituted with any real advantage. The gross amount of those taxes in the year 1801 was near one million of dollars. They would, according to the increase of population and without any augmentation in their rate, yield now near 1,400,000 dollars. An average increase of about 50 per cent. in the rate would produce the intended gross amount of two millions. But it is believed that that increase ought not to be the same in all those taxes, and that some are susceptible of greater augmentation or extension than others.

1. Duties on domestic spirits distilled.—There is not any more eligible object of taxation than ardent spirits; but the mode of taxation is liable to strong objections, particularly with respect to persons who are not professional manufacturers, and who only occasionally distil the produce of their farms. It is therefore proposed that the duties on the quantity of spirits distilled should be levied only on spirits distilled from foreign materials, at the rate of ten cents per gallon distilled; and on other distilleries employing stills the aggregate of which shall contain more than four hundred gallons, at the rate of three cents per gallon distilled; and that instead of a duty on the spirits, or of licenses in proportion to the time employed, all other distillers should only pay an annual tax of five dollars for each still solely employed in the distillation of fruit, and of fifteen dollars for each still otherwise employed. This tax may also, still, without reference to time, be made to vary according to the size of the stills. At those rates this class of duties is estimated to produce at most 400,000 dollars; and it is intended in that case that another duty should be levied on the same article, in the shape of licenses to retailers. By the adoption of that mode the expenses of collection will be considerably diminished, penalties for not entering stills will be unnecessary, and they will be confined, with respect to country stills, to the case of clandestine distilling without paying the tax.

2. Duties on refined sugar.—A duty double of that heretofore laid, viz., at the rate of four cents per pound, is estimated to produce 200,000 dollars. The drawback both of that duty and of that on the importation of the raw material to be allowed.

3. Licenses to retailers.—These are believed to be susceptible of considerable and very proper augmentation and extension. The following rates are estimated to produce 700,000 dollars:

For a license to retail wines,$20
For a license to retail spirits generally,20
For a license to retail domestic spirits only,15
For a license to retail any other species of foreign merchandise,10

Tavern-keepers licensed under the authority of any State, and not living in any city, town, village, or within five miles thereof, to be excepted. Every other person who sells wines, foreign spirits, or foreign merchandise, otherwise than in the vessel or package of importation, or, in the case of dry goods, otherwise than by the piece, and every person who sells domestic spirits in less quantity than thirty gallons, to be considered as a retailer.

4. Duties on sales at auction.—These confined to the sales of articles of foreign produce or manufacture, and at the same rate as heretofore, may produce about 50,000 dollars.

5. Duties upon carriages for the conveyance of persons.—Those duties, adding at the rate of fifty per cent. on the duties formerly raised, are estimated to produce 150,000 dollars.

6. Stamp duties.—An association of ideas which connects those duties with the attempt of Great Britain to tax America, and which might with equal propriety attach odium to the duty on the importation of tea, has rendered their name in some degree unpopular. The great extension of post-roads and the facility of distribution have, however, removed the most substantial objection to which they were liable. They do not appear to be more inconvenient than any other internal tax, and the expenses of collection are less than on any other, being only a commission on the sale and the cost of paper and stamping. At the same rate as heretofore, with the exception of bank-notes, on which an increase appears proper (with an option to the banks to pay part of their dividends in lieu thereof), they are estimated to produce 500,000 dollars.

Recapitulation.
Direct tax, gross amount,$3,000,000
Duties on spirits, and licenses to distillers, gross amount,$400,000
Refined sugar, gross amount,200,000
Retailers’ licenses, gross amount,700,000
Sales at auction, gross amount,50,000
Duties on carriages, gross amount,150,000
Stamp duties, gross amount,500,000
2,000,000
Total gross amount,$5,000,000
Deduct expenses of assessment and collection and losses, estimated at 15 per centum,750,000
Net amount estimated for 1814,$4,250,000
But are not estimated to yield, in 1813, more than$3,600,000

Most of the internal taxes have been estimated at their maximum; but it is hoped that any defalcation from the estimated amount will be compensated by a diminution in the expenses of collection, which have also been computed at the highest rate.

For the superintendence of those taxes, both direct and indirect, it appears indispensable that the office of commissioner of the revenue should be re-established. For their collection the former offices of supervisor and inspector are believed to have been unnecessary and injurious links in the system, and that the expense will be diminished, and the collection and accountability better secured, by the division of the States into convenient collection districts, and by the appointment of a collector to each district, who will pay into the Treasury, and be immediately accountable to that Department, in the same manner as the collectors of customs. This arrangement, the greater amount to be collected, and the simplification in the objects and mode of taxation will, it is hoped, reduce in a short time the expenses of collection of the indirect taxes to 7½ instead of 13 per centum, which they formerly cost when brought to their highest degree of improvement. In estimating the charges on the direct tax at 15 per cent., 5 per cent. have been allowed for the assessment, 5 per cent. for the collection, and 5 per cent. for losses. This last item is principally on account of losses on unseated lands, and on some remote districts of country, and is not susceptible of much reduction. That for assessment may be lessened in those States where the objects of taxation do not require an annual valuation, or where the State or county assessments may be used. The expense of collection proper may be also in some degree lessened in cities and populous districts, and by uniting it with that of the internal taxes. It is, however, necessary that the compensation of the collectors be sufficient to command the services of men properly qualified, and in every respect worthy of the trust.

In performing the ungracious task of pointing out new objects of taxation, those have been submitted which appeared sufficiently productive and least oppressive. The objections to which each, including the increase of duties on importations, is liable have not been stated; not because I was insensible of them, but because no substitute of any importance was perceived which was not still more objectionable. Every tax being in some degree an evil, is therefore liable to some objection, and every one taken singly may for that reason be easily combated. But if the necessity of an additional revenue be admitted, the objections afford no argument why the tax proposed should be rejected, unless another less inconvenient be substituted. The necessity of such an addition to the revenue has in the course of this letter been strongly urged, because it was strongly felt; but with respect to the taxes proposed, the selection is submitted with diffidence, and it will be highly gratifying that some more eligible may be devised.

The last inquiry of the committee relates principally to the terms on which loans amounting to at least ten millions of dollars per annum may be obtained, and to the plan proper to be adopted for the reimbursement of such loans.

The terms on which annual loans to that amount may be obtained can be ascertained only by experiment. Government has never since its organization obtained considerable loans within the United States at the rate of six per cent. per year, except from the Bank of the United States; and these on a capital of ten millions never amounted to seven millions in the whole. In proportion to the amount wanted for the service of the year, and to the increase of stock of the public debt at market, the terms must naturally become less favorable. It must also be recollected that in addition to the sum wanted to defray the extraordinary expenses of the war, an annual loan equal to the annual reimbursement of the six per cent. and deferred stocks prescribed by law will also be required. This, together with the reimbursement of the residue of the converted stock, amounting to 565,000 dollars, will for this year amount, as has been stated in the annual report, to 2,135,000 dollars. As the interest on the existing debt is included in the “current expenses,” the loan necessary for the reimbursement of the six per cent. and deferred stocks will for each subsequent year amount only to 1,570,000 dollars. The loans for those sums will indeed create no addition to the amount of the debt, but will nevertheless increase the total sum to be annually borrowed. It must also be observed that if the price of stocks should sink below par, the commissioners of the sinking fund are bound by the existing laws to apply the residue of the annual appropriation of eight millions a year to the purchase of stock, and that residue will this year amount to 3,640,000 dollars, which in that case must also be borrowed. It is a view of those several considerations which has created an apprehension that loans to such large amount might not perhaps be obtained on as favorable terms as under other circumstances, and with the powerful assistance of a national bank, had been formerly anticipated. The same view of the subject has most forcibly impressed a conviction of the necessity of an additional revenue. For if further loans be also resorted to for defraying the ordinary expenses and the interest, they must, if at all practicable, be obtained on the most ruinous terms. Excluding that idea, and embracing only the loans which are absolutely necessary, it appears to me more prudent not to limit the rate of interest by law. A discretionary power in that respect is, so far as relates to the Executive, altogether ineligible; but it is preferable to the risk of leaving the public service unprovided for. It is also for the same reason requisite that the loans may be made irredeemable for a term not less than ten years.

In a former communication to the Committee of Ways and Means, it was suggested that “Treasury notes,” bearing interest, might to a certain extent be issued, and to that extent diminish the amount to be directly borrowed. The advantage they would have would result from their becoming a part of the circulating medium, and taking, to a certain degree, the place of bank-notes. It is evident, however, that for the same reason the issue must be moderate, and never exceed the amount which may circulate without depreciation.

The loans necessary for the present year are, 1st, a sum equal to that which may during the year be reimbursed on account of the principal of the debt; 2dly, the amount of expenses which have been or may be authorized by Congress and are not included in the annual estimates.

The first sum will certainly amount to 2,135,000 dollars, and may be greater if the stock should sink below par.

The second sum cannot yet be stated, since the extent of the expenses which may be authorized is not yet ascertained, and as the estimates for the additional army already authorized have not yet been received by the Treasury Department.

The deficit of 1,200,000 dollars (on the peace establishment) is not included as absolutely necessary, although its payment will, as stated in the annual report, leave in the Treasury a smaller balance than under existing circumstances is eligible.

It may be proper to repeat that so long as the public credit is preserved and a sufficient revenue is provided, no doubts are entertained of the possibility of procuring, on loan, the sums wanted to defray the extraordinary expenses of a war; and that the apprehensions expressed relate solely to the terms of the loans, to the rate of interest at which they can be obtained.

The reimbursement of the new debt which may be created must ultimately depend on the respective revenue and expenditure of the United States, after the restoration of peace. No artificial provisions, no appropriations or investments of particular funds in certain persons, no nominal sinking fund, however constructed, will ever reduce a public debt unless the net annual revenue shall exceed the aggregate of the annual expenses, including the interest on the debt. Those who create the debt can only estimate what the peace revenue and expenditure will be, and presume that the supposed surplus will be faithfully and perseveringly applied to the payment of the principal.

The current or peace expenses have been estimated at nine millions of dollars. Supposing the debt contracted during the war not to exceed fifty millions, and its annual interest to amount to three millions, the aggregate of the peace expenditure would be no more than twelve millions. And as the peace revenue of the United States may, at the existing rate of duties, be fairly estimated at fifteen millions, there would remain from the first outset a surplus of three millions of dollars applicable to the redemption of the debt. So far, therefore, as can now be foreseen, there is the strongest reason to believe that the debt thus contracted will be discharged with facility and as speedily as the terms of the loans will permit. Nor does any other plan in that respect appear necessary than to extend the application of the annual appropriation of eight millions, and which is amply sufficient for that purpose, to the payment of interest and reimbursement of the principal of the new debt. No doubt can be entertained of that mode being sufficiently efficacious, since by that plan alone forty-six millions of the public debt have been reimbursed during the last eleven years. If the national revenue exceeds the national expense, a simple appropriation for the payment of the principal of the debt and co-extensive with the object is sufficient, and will infallibly extinguish the debt. If the expense exceeds the revenue, the appropriation of any specific sum and the investment of the interest extinguished, or of any other fund, will prove altogether nugatory; and the national debt will, notwithstanding that apparatus, be annually increased by an amount equal to the deficit in the revenue.

The annual interest on the existing debt amounts to$2,220,000
and estimating the interest on the new debt at3,000,000
the sum which, on the annual appropriation of eight millions, would at the restoration of peace be applicable to the payment of principal is2,780,000
$8,000,000

—a sum somewhat less than the presumed surplus of three millions, as above stated, and which will be nearly sufficient to reimburse before the year 1823 the whole existing debt of the United States, with the exception of the three per cent. stock. The loans contracted during the war being made irredeemable for at least ten years, the first reimbursement would fall on that year; and the whole of the appropriation of eight millions, after deducting 485,000 dollars for the interest of the three per cent. stock, would thenceforth be applicable to the payment of the interest and principal of the new debt. The precise period of final extinguishment and the precise amount of annual payments will depend on the terms of the loans, and on the number of years for which it may be necessary to make each loan irredeemable. But this sketch is sufficient to show, 1st. That no inconvenience will arise in making the loans irredeemable for ten years, since there is not much probability that they could be sooner discharged. 2dly. That the appropriation of eight millions will be sufficient for their final reimbursement. 3dly. That that reimbursement and that of the whole debt of the United States (the three per cent. stock excepted) will probably be effected within fifteen years after the restoration of peace. It must always be remembered that those estimates are predicated on the supposition that an additional revenue to the amount already stated will be provided, and that the increase of debt during the war will not exceed fifty millions.

In answering the inquiries of the committee on subjects so intimately connected with the most important questions of national concern, it became an imperious duty to represent every circumstance precisely as it was or appeared to be, and without exaggerating or disguising any of the difficulties which must be encountered. To understand these to their full extent will afford the best means of overcoming them; and there is none which appears insurmountable or even discouraging. What appears to be of vital importance is, that the crisis should at once be met by the adoption of efficient measures which will with certainty provide means commensurate with the expense, and by preserving unimpaired, instead of abusing, that public credit on which the public resources so eminently depend, will enable the United States to persevere in the contest until an honorable peace shall have been obtained.

I have the honor to be, with great respect, sir, your obedient servant.

GALLATIN TO JEFFERSON.

Washington, 10th March, 1812.

Dear Sir,—

Mr. Correa, an interesting and learned Portuguese, who has lately arrived in the Constitution, and is recommended to us by Barlow, Humboldt, &c., has requested me to transmit to you the enclosed letter and work. He intends to pay you his respects in person this summer.

You have seen from your retreat that our hopes and endeavors to preserve peace during the present European contest have at last been frustrated. I am satisfied that domestic faction has prevented that happy result. But I hope nevertheless that our internal enemies and the ambitious intriguers who still attempt to disunite will ultimately be equally disappointed. I rely with great confidence on the good sense of the great mass of the people to support their own government in an unavoidable war, and to check the disordinate ambition of individuals. The discoveries made by Henry will have a salutary effect in annihilating the spirit of the Essex junto, and even on the new focus of opposition at Albany. Pennsylvania never was more firm or united. The South and the West cannot be shaken. With respect to the war, it is my wish, and it will be my endeavor, so far as I may have any agency, that the evils inseparable from it should, as far as practicable, be limited to its duration, and that at its end the United States may be burdened with the smallest possible quantity of debt, perpetual taxation, military establishments, and other corrupting or anti-republican habits or institutions.

Accept the assurances of my sincere and unalterable attachment and respect.

GALLATIN TO JOSEPH H. NICHOLSON.

Washington, 21st May, 1812.

Dear Sir,—

I am rejoiced to hear that you have succeeded in your cause; and I am not sorry to see that you have once more taken a share in politics. I wish you would write to Langdon, earnestly requesting him not to decline the nomination to the Vice-Presidency. Two or three men had committed themselves with Seaver, he with Gerry, and from complaisance to him several votes were given to Gerry by persons within my knowledge in favor of Langdon. I fear that the Massachusetts people will attempt to make him decline, under pretence that it will unite; and he is, I am told, anxious not to enter again in public life. But the fact that it would unite is not true. We want as much popularity as is attainable; and Mr. Langdon’s name is by far the most popular we can get. How beloved his person by all who know him I need not tell you. Gerry is, in both respects, the reverse; and I much fear that, if elected, he would give us as much trouble as our late Vice-President. If you think proper to write, do it immediately, as he will be called for an answer by the committee of correspondence.

It would be most regular that the scrip should issue in the names of the subscribers; but if the bank has no objection, I do not perceive any on the part of the Treasury that it should come out in your name as attorney-in-fact for the subscribers.

James writes to me that Mr. Bouchard is dangerously sick. If not compelled by other reasons, you had better wait a few days, which will decide his fate, before you begin your journey.

Truly yours.

GALLATIN TO LANGDON CHEVES, Chairman of Ways and Means.

Treasury Department, 10th June, 1812.

Sir,—

I had the honor to receive your letter of yesterday, asking whether, in my opinion, the Non-Importation Act may not be so modified, or partially suspended, as to afford a revenue equivalent to the estimated amount of the internal taxes, additional tonnage duty, and diminution of drawbacks; and, in such event, whether the last-mentioned objects of revenue may not, for the present, be dispensed with?

All the estimates of revenue which have been transmitted during this session, having necessarily been made in conformity with the existing laws, were predicated on the supposed absolute prohibition of British produce and manufactures. These, in ordinary times, amounted to more than one-half of the foreign merchandise consumed in the United States. The actual exclusion of the greater part of the articles of our own growth from France, Holland, and Germany, the consequent nullity of our commerce with those countries, and the conquest by Great Britain of their colonies, still more lessens the proportion of foreign articles which may be imported from other countries than the British dominions.

It is therefore evident that the amount of duties on importations will be more than doubled in the event of a suspension of the Non-Importation, and that they will, whilst that suspension continues, afford a revenue at least equivalent to the estimated amount of the proposed direct tax, internal duties, additional tonnage, and diminution of drawbacks. All these may be dispensed with, so long as the suspension continues, provided that the contemplated increase of one hundred per cent. on the duties on importations shall take place.

It is not believed that the result would be materially affected by a modification or partial instead of an absolute suspension of the Non-Importation. For the amount of importations would be principally regulated by the amount of American funds already in England, and by the subsequent consumption of American produce in Great Britain, Spain, and Portugal, and the British West Indies respectively. If a discrimination be thought eligible, it would seem that the articles entitled to preference are colonial produce, particularly rum, coarse woollens, middle-price cotton goods, Irish linens, earthen and glass ware, hardware, and manufactures of steel, tin, brass, and copper. Fine cloths, muslins, plain cotton goods, manufactures of silk, hemp, flax (with the above exception), and leather, paper, hats, shoes, and millinery may either be altogether supplied by domestic manufactures or dispensed with.

The annual importations of British, colonial, and domestic produce and manufactures could not be estimated at less than thirty-five millions of dollars. Supposing (on the same grounds on which the other estimates of duties on importation in time of war were made) that the war and other restrictions should reduce the amount to one-half, the proposed double duties collected on the residue would produce a net revenue of at least five millions of dollars, and greater, therefore, than all the proposed internal taxes and duties and additional tonnage duty.

Permit me, however, to observe, with respect to this last duty, that, so far as relates to foreign vessels, the proposed addition appears necessary, and is hardly sufficient to compensate the great advantages which war will give them over American vessels in the American commerce.

It is proper to add that all the bills for laying and collecting the direct tax and internal duties have been prepared in conformity with the former request of the committee, so that the whole subject may be taken up at this or any other time without any delay on the part of the Treasury. The only detail on which the information is not as complete as might be desired is that of the quotas of the direct tax intended to be laid on the several counties in each State. It is also believed that the system has been prepared in such manner that it may be organized and all the taxes be in full operation in the month of April next, provided the laws are enacted before the commencement of the year 1813.

I have the honor to be, with great respect, sir, your obedient servant.

MONROE TO GALLATIN.

June 1, 1812.

* * * * * * * * * *

I am convinced that it is very important to attempt at present the maritime war only. I fear, however, that difficulty will be experienced in the committee, which may extend itself to the gentlemen, or some of them at least, at Mrs. Dawson’s. To prevent this it is important that an early communication should take place with Mr. Crawford. Cannot you see him this morning, before you come to the President’s, to confer with and explain to him the policy of the plan preferred? I am so engaged in preparing papers that I cannot, or would not ask it of you.

Sincerely yours.

GALLATIN TO MADISON.

[June, 1812.]

Dear Sir,—

I believe the weekly arrivals from foreign ports will for the coming four weeks average from one to one and a half million dollars a week. To protect these and our coasting vessels, whilst the British have still an inferior force on our coasts, appears to me of primary importance. I think that orders to that effect, ordering them to cruise accordingly, ought to have been sent yesterday, and that, at all events, not one day longer ought to be lost.

Respectfully.

I will wait on you to-morrow at one o’clock.

GALLATIN TO LANGDON CHEVES.

June 23, 1812.

Sir,—

The Non-Importation Acts forbid two things, viz.: 1st, the importation of British merchandise; 2d, the importation of any merchandise whatever from the dominions of Great Britain. The bill reported to the House suspends the operation of the first prohibition, but not of the second. This is intended, it is presumed, to prevent direct importations from Great Britain in neutral vessels. That regulation will, it is believed, have no other effect but to enhance the freight, and thereby make us pay dearer for the merchandise. But, supposing that exception to be generally proper, its application to the adjacent British provinces will be injurious. It is our interest now to draw from Canada all the furs and merchandise belonging to our citizens. Their exportation may be forbidden by the British; but, if permitted by them, their importation into the United States will continue to be forbidden. If this be not intended, the bill should be amended by inserting in the first section, after the words “Great Britain,” the words “or of goods, wares, and merchandise from the British provinces adjacent to the United States,” or words to that effect. Or a third section, specially providing for the case, may be introduced. It seems to me that, even if the bill were rejected, that provision is due to our citizens, who should be permitted, if they can, to snatch their property from the enemy’s hands. That property, in England, runs no great risk; but, in a colonial government, may be seized by the mere act of the governor. Smuggling, also, is much more dangerous from that quarter than by sea.

The title of the bill does not agree with the enacting clause.

Respectfully, your obedient servant.

GALLATIN TO MADISON.

Philadelphia, 21st July, 1812.

Dear Sir,—

It is said that the consulship of Lisbon is vacant. If so, permit me to recommend with more than common earnestness Pemberton Hutchinson, the son of my former friend, Dr. Hutchinson. The name is dear to every Republican in this State, both in city and country. And I am assured that the son, by his talents and standing, deserves the appointment. In one respect he has an advantage,—that of being already on the spot, connected with one of the most respectable houses in this city.

I had not intended to write until I could give you some account of my success, but, understanding that one of the Mifflins goes by to-day’s stage to Washington to solicit the office, would not let the mail go without writing in favor of Hutchinson, for whose appointment I feel truly anxious.

We have arrived here safe, and intend to proceed to New York as soon as I have done what can be effected here with respect to money.

Mrs. G. presents her best respects to Mrs. Madison.

Do you still want volunteers? I could easily have set the thing going here.

Respectfully, your obedient servant.

MADISON TO GALLATIN.

Washington, August 8, 1812.

Dear Sir,—

The communications from the British government, lately received through Baker, are of a curious character. They promise that the orders in council would cease on the 1st August, with a right reserved to renew them in May next, in case the conduct of France and of the United States should require it, and particularly in case the Non-Importation Act should not be repealed within fourteen days after a notification of the actual repeal should be made to this government. The communication was so informal that it was not only not in writing, but not permitted by Baker to be taken down in his presence by Mr. Graham. It is not improbable that the vessel was despatched in consequence of the notice from Foster by the May packet (referred to in his despatches lately found on board the Tulip), that war would be declared, and in the hope that the expectation of a repeal of the orders thus authorized would arrest the declaration. In the mean time they would have an opportunity of learning the issue in Congress, and might govern themselves by it. Baker professes, however, to expect another arrival immediately, making a further and more particular communication on the subject, and that it will contain the act of repeal. He states also that the British authorities at Halifax, with the sanction of Foster, are willing to fix a day in concert with this government after which all captures at sea are to be hung up in the courts for the final decision of the two governments; this arrangement to be accompanied by a suspension of military operations in Canada, which Foster has advised the government there to propose to the adverse commander. It may be inferred from the whole that the British Cabinet is in some agitation, and that it is believed at Halifax that the road to peace cannot be made too short, whilst they are careful to effect it by a bargain as safe and advantageous as possible. Perhaps it may be a ruse only to exhibit that side as anxious to stop hostilities, and throw on ours the foreseen rejection of the proposal.

The latest information from Hull is in the last National Intelligencer. He finds it necessary to prepare heavy cannon (24’s) and mortars in order to take Malden without a bloody storm. He allowed himself two weeks to make the preparation. A reinforcement is ordered to him from the Ohio. He seems to have severed the Indians from their allies for the present. But without a conspicuous success in his military progress there is reason to apprehend an extensive combination against the frontiers of Ohio and all the neighboring Territories. Should he be able to descend upon Niagara and an adequate co-operation be there afforded, our prospect as to Upper Canada may be good enough. But what is to be done with respect to the expedition against Montreal? The enlistments for the regular army fall short of the most moderate calculation. The Volunteer Act is extremely unproductive. And even the militia detachments are either obstructed by the disaffected governors or chilled by the Federal spirit diffused throughout the region most convenient to the theatre. I see nothing better than to draw on this resource as far as the detachments consist of volunteers, who, it may be presumed, will cross the line without raising constitutional or legal questions. An experiment must, if possible, be made for cutting off all British communications with the Indians. If this cannot be done by occupying Montreal, is it impossible to do it by some other operation that will put the communication through the Utiwas under our control? The Secretary of State is on a visit to his farm. He will be back in the course of this week; when I must follow his example. I am much worn down, and feel the approach of my bilious visitor on tide-water. I have also some very pressing calls for my presence on my farm.

Accept my affectionate respects.

It is the wish of Baker that his communications may be regarded as confidential, till more definite and formal ones shall arrive.

If you have an opportunity, obtain from J. Lewis information leading to a use of the ports of Hayti for our cruisers. Perhaps he would be a good missionary for that purpose.

MADISON TO GALLATIN.

Washington, August 15, 1812.

Dear Sir,—

I have just received your favor of the 13th. I had proposed to set out for Virginia on Friday, and am very glad to learn that you will be with us before that takes place. I expect Mr. Monroe every moment; and Mr. Pinkney being within call, I shall be able to decide with the best advantage the several important questions on hand. Previous to the account of the loss of Michilimackinac, orders had gone for a reinforcement to Hull of 1500 men from Kentucky and Ohio. It is a little strange that no official communication of the revoking order has yet arrived from Great Britain, the order being dated on the 23d of June, and so many motives urging an immediate transmission of it. The solicitude on this point appeared from the hasty communication through Halifax before the measure was reduced to its due form. From debates in Parliament of the 18th and 19th of June, there must have been a sudden transition from the conditional suspension to the shape finally given to the Act. Maury writes from Liverpool (June 26) that shipments were taking place, without hesitation, of goods to an unexampled amount for the United States. It will be an unexampled instance of mercantile incaution if passports be not obtained, to be good in the event of war. The state of things which produced the revocation of the orders would insure the granting them if insisted on. Enclosed is the new Chancellor of the Exchequer’s budget, with an interesting view on the subject by Huskisson.

Affectionate respects.

MADISON TO GALLATIN.

[August, 1812.]

The command of the Lakes is obviously of the greatest importance, and has always so appeared. I am glad to find it not too late to have that of Ontario. There must have been some mistake as to the effort to obtain it. It does not appear that any application, such as is intimated, has been made to the Navy Department. Mr. Hamilton has much confidence in Lieutenant Wolsey, and says that he shall be furnished with what he wants under orders which will be issued. Affectionate respects.

We set off to-morrow morning early; the probability of high waters stopped us to-day.

GALLATIN TO MADISON.

Sunday Evening, October 11, 1812.

Dear Sir,—

The exchange of places which you suggested would, in my opinion, have a most salutary effect on the conduct of the war; but, on mature reflection, I apprehend that it would not satisfy public opinion, and would be more liable to criticism than almost any other course that would be adopted.

Respectfully yours.

GALLATIN TO MADISON.

MEMORANDA.

Endorsed 1813 [1812], autumn, previous to meeting of Congress.

Mr. Armstrong’s letter.

1. Preference to be given to contracts for supplying the army with provisions.—This is so indubitable that how any hesitation on the subject could take place is not easily understood. That branch of military expenditure is the only one (pay excepted) which is well administered and under a good accountability. If it was practicable to extend the same system (of contracts) to other branches, the advantage would be immediately felt. But where the practice exists and has answered, it should not entirely be changed. The contracts are not yet made for any important quarters, and ought without hesitation to be promptly entered into.

2. Recruiting service.—Its immediate organization is absolutely necessary, and there is no time to be lost. We will otherwise be without the requisite number of men in April next. To organize and to act without delay is indispensable. The increase of pay may be relied on. An increase of officers for that service and their distribution are the points to be attended to and decided. The increase, either by increasing the number of regiments (diminishing the number of men in proportion in each regiment) or the addition of a recruiting company or of some supernumerary officers to each regiment, might, whichever principle be adopted, be arranged in all its details in half a day. The selection of persons to fill the new appointments is more difficult, and on that account to be attended to at once. If this subject be not immediately attended to, it will be February before the recruiting parties are properly and actively employed.

3. Local force.—Unless the measure be general, it may be objectionable to raise it for New York alone. The only objection which I can perceive to the general plan is that it may at this moment impede the recruiting service. Perhaps to have a law only at the end of the session, and not to act on it till the other recruiting service is nearly over, would be most eligible.

Next year, revenue and expenses.

The expenses are:

1.For civil list, miscellaneous, diplomatic,$1,500,000
2.For public debt, including all necessary demands, of which 3 millions for Treasury notes, }8,000,000
3.Army alone, as per present estimate, and Indian Department,13,396,000
4.Navy, as it now stands,4,926,000
$27,822,000
Add deficiency in militia appropriation for this year,1,000,000
$28,822,000

The resources are:

1.Revenue estimated for the whole,$12,000,000
2.Treasury notes to replace those which will be reimbursed, }$3,000,000
3.Loan,14,000,000
17,000,000
$29,000,000

But we must add to war estimate:

1.Increase of pay and officers,$1,500,000
2.Volunteers and militia, at least2,500,000
$4,000,000
And to the naval estimate, building 4 74’s and 6 frigates,3,000,000
$7,000,000
which, added to the above14,000,000
would make 1813 loan$21,000,000

I think a loan to that amount to be altogether unattainable. From banks we can expect little or nothing, as they have already lent nearly to the full extent of their faculties. All that I could obtain this year from individual subscriptions does not exceed 3,200,000 dollars. There are but two practicable ways of diminishing the expenditure: 1, by confining it to necessary objects; 2, by introducing perfect system and suppressing abuses in the necessary branches.

1. In the War Department, to reduce the calls for militia, and above all to keep the control over those calls and other contingent expenses; in the navy, to diminish greatly the number of gunboats, and to strike off all supernumerary midshipmen, pursers, sailing-masters, and other unnecessary officers.

2. System requires skill in forming and decision in executing. Both the preparing and executing such plans must rest almost exclusively with the heads of the Departments. I have no doubt that knowledge and talents would save several millions, and the necessary business be better done.

GALLATIN TO MADISON.

November 1, 1812.

Dear Sir,—

I send the two paragraphs. I believe the whole to be sufficiently distinct, with the exception, perhaps, of the last sentence of the first paragraph. If the forfeitures are not remitted at all, there will be considerable injustice, great discontent, and 8 to 10 millions of dollars put in the pocket of the collectors. If they are altogether remitted, the importers will make unreasonable profits, and there will be equal and as well-founded dissatisfaction. To attempt to discriminate between cases will be an invidious and endless task. I think that the best and most equitable mode will be to authorize a remission of all the forfeitures of American property, on condition that the importers will lend to government a sum equal to the prime cost. With respect to British property, a sequestration seems the most eligible mode.

The object of the sentence alluded to is to indicate this course or any other modification answering the same purpose, which may appear more eligible or prove more palatable.

Respectfully, your obedient servant.

GALLATIN TO MADISON.

December 12, 1812.

Dear Sir,—

In support of the suggestions heretofore made against permitting General Armstrong to raise a volunteer force on different principles from those recognized by law and adopted elsewhere, I enclose three advertisements from the late New York papers.

Whilst such improper encouragement is given for a local force it will be impossible to recruit for the army or for general purposes; and the general object of providing an efficient offensive force will be sacrificed to a local object. This mode also destroys the general plan of a local force, which is founded on the practicability of raising men to be paid only when employed, or in proportion to their time of service. But here full pay, &c., are promised for local services not to exceed five or eight days in each month. This does indubitably secure, at an enormous expense, for General A. all the force he wishes; but every other consideration, of economy, uniformity, and even of the recruiting service, is sacrificed to that sole object.

Respectfully, your obedient servant.

GALLATIN TO JEFFERSON.

Washington, 18th December, 1812.

Dear Sir,—

There is not now any vacant office of receiver of public moneys in the Mississippi Territory. There was a vacancy last spring, which was filled before the end of the last session of Congress.

The series of misfortunes experienced this year in our military land operations exceeds all anticipations made even by those who had least confidence in our inexperienced officers and undisciplined men. I believe that General Dearborn has done all that was in his power. The conduct of Hull, Rensselaer, and Smyth cannot be accounted for on any rational principle. It is to be hoped that Mr. Eustis’s resignation will open brighter prospects. For although those three disasters cannot with justice be ascribed to him, yet his incapacity and the total want of confidence in him were felt through every ramification of the public service. To find a successor qualified, popular, and willing to accept is extremely difficult.

With sincere attachment and respect.