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GALLATIN TO EZEKIEL BACON, M. C. - 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 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.